Wealth at the top of the income distribution is skyrocketing, leading to growing inequality. This trend is especially pronounced in the United States. But much of the leading research on the topic isn’t coming from American economists.
A French economist, Thomas Piketty, wrote the blockbuster 2013 book Capital in the 21st Century about the growth of extreme wealth inequality; Piketty and (French) Berkeley colleague Emmanuel Saez co-authored a heavily quoted paper, “Income Inequality in the United States 1913-1998”; Saez has written exhaustively about the evolution of incomes of the top 1 percent, along with another (French) Berkeley colleague, Gabriel Zucman, who himself writes about how the top 1 percent hide their wealth offshore.
Those three are heavy hitters in the research on wealth inequality; other top scholars are also from Europe. There’s the British economist Anthony Atkinson at the London School of Economics, who has co-authored papers with Piketty and Saez; Nicholas Bloom, a British economist who writes about inequality at Stanford; Thomas Phillipon, a French economist at New York University who studies the financial industry and outsized compensation; Branko Milanovic, a Serbian economist at the City University of New York who published a book on the causes of inequality; and Stefanie Stantcheva, a French economist at Harvard who has co-authored papers on the top 1 percent and the effects of taxation with Saez and Piketty.
As these economists’ work has shown, inequality in America is much more severe than in Europe. So why aren’t American economists more preoccupied with wealth inequality?
One reason is the deep influence of the so-called Chicago school. The economics department at the University of Chicago has long been a leader in the field; it has garnered the most Nobel Prizes of any university economics department and a significant number of John Bates Clark medals in economics. But inequality has never been a priority for the Chicago school, to say the least. It has a strong libertarian bent, focusing on how to promote competition and economic growth and the benefits of a free market. “In general, the [American] economics profession has avoided the subject of class conflict. All issues of distribution have been regarded as less pertinent than ideas of growth,” Arthur Goldhammer, a senior affiliate at Harvard’s Center for European Studies who studies French and American politics and history, told me. “Distributive questions in economics just raise hostility, and ultimately, growth is the important issue.”
It may not be surprising, then, that in a 2013 issue of the Journal of Economic Perspectives dedicated to income inequality and the top 1 percent, it was Atkinson, Saez, Piketty, and Facundo Alvaredo of the Paris School of Economics who authored a paper on how the share of wealth going to the top has skyrocketed in America but not in European countries, while it was an American economist, N. Gregory Mankiw, who published a paper called simply “Defending the One Percent.”
To be sure, there are some American economists who are exceptions to the general pattern. James Galbraith, for instance, has extensive data sets about global inequality and wages over at the University of Texas Inequality Project. Other top American economists have published occasionally on inequality but have not focused their careers on it, Brad DeLong, a Berkeley economics professor (and economics blogger), told me. DeLong wrote a chapter on bequests and wealth inequality that Piketty has said was “influential,” according to DeLong, but “even at Berkeley, the American intellectual milieu was such that it wasn’t a natural direction to pursue further,” DeLong said. The economist Paul Krugman has written extensively about income inequality in The New York Times and elsewhere, but his research has focused on finance and international trade, for which he won a Nobel Prize.
Galbraith, for his part, says that he has found other American economists' interest in the topic lacking. He has found that in American economics, there’s one accepted explanation for the growth of inequality: that globalization and technology created a world in which high-skilled people did well and others did not. If you come along with a different set of ideas, he told me, “you find that it is not open to any discussion.” When he has looked to publish papers and data with other explanations for rising inequality, he finds there’s no proper journal open to it.
One of the most talked-about pieces of economic research in recent years is the Equality of Opportunity project, in which economists used tax data to track the likelihood that American children would move from one income bracket to another over the course of their lifetimes. The team behind it was mostly Americans, such as Lawrence Katz of Harvard and Raj Chetty of Stanford (who was born in India but immigrated as a child). But the focus of that project was on mobility—how to move people out of poverty—not on the growing gaps in wealth. Though the two topics are obviously related, it’s fitting that Americans have taken this approach: Mobility, after all, is central to the American idea, a land where anyone can rise to riches.
Americans also tend to believe that those who are rich have earned it and earned the right to keep it; the nation has lower top tax rates than European nations. Political rhetoric often focuses on protecting rich people from lazy usurpers (think of the phrase ‘makers and takers’), and that shows up in economic thought. Those Americans writing about inequality (e.g. Galbraith, Richard B. Freeman, Jeffrey Williamson, to name a few) focus less on the rich and how much money they have, and more on labor markets, trade, and wage stagnation.
Perhaps the most well-known American economist to focus on inequality was Simon Kuznets (who was born in Belarus). Kuznets theorized in 1955 that inequality would first increase as a country developed, and then decrease over time.
Since Kuznets’ work, though, it has been European economists who have published some of the most well-known work on wealth inequality. A lot of the core work in the field has come out of the London School of Economics, where Piketty completed his Ph.D. “Class conflict is not taboo in Europe, and it was probably even less taboo in the U.K. than in France,” Marion Fourcade, a comparative sociologist at Berkeley, wrote to me in an email.
Why is class conflict more taboo in the United States, a nation dreamed up with at least a bit of rhetoric about throwing off the rigid class structure of Europe? Michael Zweig, an emeritus professor at SUNY Stony Brook, says that American economists haven’t always shied away from social problems like class and inequality. But during the second half of the 20th century, he says, class was “driven from the discipline,” Zweig says. This is largely because U.S. economists focused on the market, always the market.
“In the American economics profession, the scope of economics as a field has been reduced to a study of the market, as though the market was the same thing as the economy,” he told me.
This was perhaps driven, in part, by an appreciation of capitalism during the Cold War. In addition, intellectual work is often strongly shaped by the general social climate. In the 1970s and 1980s, Wall Street’s influence deeply shaped culture; the goal of making tons of money was accepted as normal, even valorized. In general, after World War II, the economics discipline shifted from an appreciation of the government’s role in the economy to a belief that government should stay out of it, Zweig says. Eventually, the issue of income inequality became a “backwater” in American economics, the Washington University of St. Louis professor Steven Fazzari told the New York Times.
French economists, on the other hand, “came out of a different intellectual tradition,” DeLong says. Fourcade has looked at the differences among economists from different countries. She says American economists are more business-oriented, while those in Europe are more policy-oriented. And economists who went to the school that educated Piketty (for his Master’s), Saez, and Zucman, the École Normale Supérieure (ENS), are a different breed entirely. ENS is traditionally a more left-leaning school than the blockbuster French institution, École Polytechnique. Polytechnique is more exclusive than ENS, but its students often go into state administration, and so focus on public and industrial-economics questions, she said. ENS students, on the other hand, tend to go into academia, and adopt a more multi-disciplinary approach in which even economics students study alongside people with backgrounds in philosophy, history, and sociology. That Piketty, et al., attended ENS means they were probably more interested in this broader-based approach.
“It says a lot when someone ‘chooses’ ENS over Polytechnique, like Piketty or Saez did,” she wrote, in an email.
For his part, Piketty wrote to me in an email that he was “very strongly influenced by the French tradition of historians and sociologists studying the long-run evolution of wages, prices, profits, and assets.” His work reconciles that history with that of American and British economists such as Kuznets who have studied long-term trends in income.
The focus of economists is relevant outside of academia. Economists study what’s happening in the world and develop approaches for how to address big problems like poverty and wealth inequality. Saez, for instance, has told me that he thinks it’s time to push up the top tax rate, and has argued in papers that raising taxes on the rich may be the best way to lessen income inequality in America. Zucman has advocated for a crackdown on tax havens that allow the wealthy to shield much of their money from governments. Piketty, along with Saez and Stantcheva, has said that the U.S. could raise its top tax rate significantly. So far, U.S. policymakers have been resistant to that type of argument. The people who serve as their advisors are, by and large, American. But what would happen if more economists followed the French school, in which inequality is an economic problem—one that deserves attention?