stiglitz on inequality: have economics, sociology, and political science converged?

The newest issue of the Annals of the American Academy of Politics and Social Science is out and the theme is inequality, especially intergenerational mobility. Several pieces caught my eye, including a short reflection on Ken Prewitt highlighting how little we know about the influence of social science on policymaking (including the institutionalized production of data, about which I have written a little). Prewitt is much more optimistic than many scholars about the potential for scientific research, and even social science, to influence policymaking in the present moment.

Also in the issue is a talk given by Joseph Stiglitz on inequality in the United States. Stiglitz has been writing about inequality on and off for his entire career. This talk struck me for two reasons: first, for how much it highlights the rise of top incomes as the hallmark of increased inequality and second, for how Stiglitz (and by moderate extension, some subset of mainstream economists) sounds a lot like mainstream sociology and political science in his diagnosis of inequality.

On the first point, when Stiglitz turns to the data on contemporary inequality, he begins with Piketty and Saez’s findings on the rise of the 1%:

Income inequality is one of the most obvious indicators: in the United States, more than a fifth of all income goes to the top 1 percent. this is a level of income concentration that, until the 2000s, the united States had not experienced since before the great Depression. It is twice the proportion of a short 30 years ago. And it is getting worse. Since the so-called recovery began after the great recession of 2007–2009—in other words, since the U.S. economy returned to growth—95 percent of the gains in income have gone to the top 1 percent. even within the top 1 percent, there is inequality, with ultra-high income earners in the top 0.1 percent taking home some 11.3 percent of total income in 2012, some three to four times the number 30 years ago.

For those of us who have been following debates on inequality in the past few years, it’s not surprising to see the 1% findings given such pride of place, yet I am still struck by just how dominant this framing has become. Stiglitz goes on to talk about declining median wages for high school earners, wealth disparities, health disparities, and more. But the defining stylized fact of increasing inequality in the 2000s is the rise of the 1%.

Second, and related, is Stiglitz’s diagnosis of where inequality comes from. Stiglitz rejects arguments that pin increases in inequality on some kind of deterministic economic force. Inequality in France has remained roughly constant, it’s gone up some in Germany, and risen far more in the UK and the USA. Brazil’s inequality has actually declined (albeit from a high starting point). So what explains the patterns of inequality – and especially the big increases in inequality in the US – if not economics? Everything!

Every aspect of our economic, legal, and social frameworks helps to shape inequality: from the education system and how it is financed, to the health system, to tax laws, to our governing of bankruptcy, corporate governance, to the functioning of our financial system, to antitrust laws. In virtually every domain, the united States has made decisions that help to enrich the top at the expense of the rest.

This paragraph sounds like something straight out of Hacker and Pierson – or Hout et al.’s Inequality by Design! And Stiglitz is not alone – many of the economists with the biggest megaphones, including Paul Krugman and Thomas Piketty himself – make similar claims.* There are plenty of economists who take other positions, of course (who can forget N. Gregory Mankiw’s attempts to justify high top incomes). But we seem to be in a moment where sociologists’ and economists’ explanations of inequality are converging, or at least, finding significant common ground. For example, economic sociologists have long been interested in executive compensation and financial deregulation / financialization, two of the biggest trends underlying the rise of the 1% in the US.

Given this convergence, I wonder if there might be a way to use this moment to build a better dialog between economics and sociology – and especially economic sociology. What would that dialog look like?

*There’s a reading of Piketty’s Capital as arguing that increased inequality is inevitable. That reading is pretty clearly wrong – Piketty is arguing for a tendency towards inequality, and especially towards wealth accumulation in a small number of hands, that can be counteracted by either major world events or policy (especially tax policy). On the other hand, as Stiglitz notes, Piketty does show how high inequality has historical precedents, and that the era of low inequality in Europe and the US in the mid-20th century was more exceptional than the current moment. But just because the 1940s-1970s were historically unusual does not imply that inequality is destined to worsen.