It’s a comfortably warm day in New York, and 5-month old Sebastian and I have just returned from an early morning walk, where we engaged in one of life’s great pleasures – sitting the sun reading the Sunday New York Times (Sebastian didn’t last terribly long with reading, but was happily engaged for at least 10 minutes in slowly crumpling up a glossy souvenir picture of the 1999 Yankees),
What struck me today was another front page article by the Times that draws upon Thomas Piketty and Emmanuel Saez’s work on top income shares in the United States. This must be at least the tenth time the newspaper has drawn on the Piketty-Saez study, and this time they look at the richest 0.01% – melding the data with interviews with corporate scions who either take the view that the money is a reflection of their own unique skills, or that their earnings are a product of the society in which they live. Here’s a snippet:
Other very wealthy men in the new Gilded Age talk of themselves as having a flair for business not unlike Derek Jeterâ€™s â€œunique talentâ€ for baseball, as Leo J. Hindery Jr. put it. â€œI think there are people, including myself at certain times in my career,â€ Mr. Hindery said, â€œwho because of their uniqueness warrant whatever the market will bear.â€
He counts himself as a talented entrepreneur, having assembled from scratch a cable television sports network, the YES Network, that he sold in 1999 for $200 million. â€œJeter makes an unbelievable amount of money,â€ said Mr. Hindery, who now manages a private equity fund, â€œbut you look at him and you say, â€˜Wow, I cannot find another ballplayer with that same set of skills.â€™ â€
A legendary chief executive from an earlier era is similarly critical. He is Robert L. Crandall, 71, who as president and then chairman and chief executive, led American Airlines through the early years of deregulation and pioneered the development of the hub-and-spoke system for managing airline routes. He retired in 1997, never having made more than $5 million a year, in the days before upper-end incomes really took off.
He is speaking out now, he said, because he no longer has to worry that his â€œradical viewsâ€ might damage the reputation of American or that of the companies he served until recently as a director. The nationâ€™s corporate chiefs would be living far less affluent lives, Mr. Crandall said, if fate had put them in, say, Uzbekistan instead of the United States, â€œwhere they are the beneficiaries of a market system that rewards a few people in extraordinary ways and leaves others behind.â€
â€œThe way our society equalizes incomes,â€ he argued, â€œis through much higher taxes than we have today. There is no other way.â€
Part of the reason this fascinates me is that much of my own research at present is on top incomes, including a paper that puts together the various top incomes series from 13 developed countriesÂ into a comparable dataset, a paper on the effect of top incomes on health, and work in progress on the effect of top incomes on growth, top incomes andÂ savings, and the effect of top taxes on top income shares.