This is a note I circulated to some colleagues.

I have pondered whether I should write a book on economic inequality in New Zealand following the research over the last six decades.

The difficulty is that there is no market for such a book. Sure, there is a thriving market for popular books on inequality which ignore and mangle the research (see below). The market for serious books is quite narrow in NZ. I cite A Shakeup Anyway, a very solid book about the university changes up to 1994, written by Ruth Butterworth and Nicholas Tarling. I’d have thought every academic would have bought and read it, but it did not sell well.

But second, when I returned to NZ, as reported in In Open Seas, ‘I chose to research distributional economics. It was a good choice and a bad choice. It was a good choice because not only was there so much to be done, it also opened up into virtually every field of economics ranging from macroeconomics and growth to social policy so I ended up working in all those fields too. But it was a bad choice because it was unfashionable, and I was often alone professionally. Economists tend to avoid distributional economics because it is difficult and because it is treacherous since one is always near value judgements.’

Unfortunately, because I was almost always alone, the putative book would be dominated by the ‘I’ word despite my natural propensity to suppress it (this email is not a good example).

The popular discussion on economic inequality is embarrassingly awful which one supposes is a consequence of economists not being involved in it (there are some notable exceptions, bless them). Most writers have a political agenda and selectively grab any data which seems to support it.

They have no understanding of the data they are using here is an incomplete list:

            There is common to label statistics poorly; one book even overlooked labelling graphs (the text was not really using them);

            Flows and stocks are often confused, particularly income and wealth;

            They frequently ignore the difference between people and households and between market and disposable income. Sometimes it is hard to work out what they are talking about;

            Typically they do not identify the population they are describing (like whether they including children, but also not reflecting on how to handle offshore ‘New Zealanders’, not to mention omitting key groups like the self-employed). Even the better ones can ignore cohort differences, which can be critical in the wealth distribution;

            It is usual to push the data past its limits (like ignoring measurement error and ignoring the difficulties involved in measuring the top and bottom tails of the distributions);

            Nor do they understand any summary measures they are using such as the Gini coefficient. (I was recently reviewing a book – by a Rogernome as it happened – which described an income inequality increase as ‘slight’ when it represents a doubling of the coefficient of variation of a log-normal distribution; there was no source for the data and no indication what it was actually measuring or the period involved);

            It is common to draw on overseas material which obviously does not apply to NZ. Proper international comparisons are erratic;

            There is a constant confusion between correlation and causation, while consideration of alternative explanations-hypotheses are ignored;

            Often the commentariat claim expertise in areas where they have no research publications.

Let me stop there. I can feel the internal tension rising, especially as I sorted out most of these issues in the 1970s, publishing them in 1983 in Income Distribution in NZ.

You will all be familiar with these sort of things for they are common throughout the economic commentariat in the areas you follow closely. The difficulty is that a scholar writing a book for the general public is bound to raise them and bore the pants of the average reader.

Let me end more constructively. As I have said, much of the public commentary has an agenda and grabs statistics that support it, ignoring that which does not fit the story being told. But there have been some econometricians who have been involved in careful measurement of some statistics (and one is ever so grateful to the SNZ statisticians for their steady accumulation of data). Yet there is a bigger task for an economist – to explain why the changes in the distributions (and, in some cases, to explain why there has not been changes).

That is the merit of Krugman. He is thinking like an economist, trying to model what is happening as a causal explanation. I am not sure he is always right – I’m not that knowledgeable about the US economy – but full marks for having a go. And salutations to Simon for working in the same spirit.

If we are really interested in the economic distributions, we should be investigating how the economic distributions are evolving. As I said at the beginning, it leads into virtually every field of economics ranging from macroeconomics and growth to social policy. You kind of become a nineteenth-century political economist using the instruments of twenty-first-century economics.

Kia ora, Brian.

PS. The last four decades of most of my published writings on distributional economics (research, reviews, columns) is here:

            This is a consolidated index, but only up to 2003. Perhaps I should update it (I have done more since):