The private sector is first of all much larger than the public sector. The waste we see in that sector does not result from the fact that people spend their money carelessly. Mostly, it occurs because what one family must spend to achieve its goals often depends heavily on what other families spend.
Robert H. FrankMany decry rising inequality because it makes those who've fallen behind feel impoverished. But it's done much more than cause hurt feelings. It has also raised the real cost to middle-income families of achieving many basic goals. The process begins with the completely unremarkable fact that top earners have been spending at a substantially higher rate than before. They've been building bigger mansions, staging more elaborate weddings and coming-of-age parties for their kids, buying more and better of everything.
Robert H. FrankIf the search is for examples that contradict the predictions of standard economic models, a good rule of thumb is to start in France.
Robert H. FrankThe primary source of waste in government is that legislators are often under heavy pressure to vote for projects that will benefit their campaign contributors, even when those projects fail a simple cost-benefit test. But with the Supreme Court showing little interest in permitting tighter rules on campaign contributions in recent years, there is little reason to be optimistic that we'll start curbing this kind of waste any time soon.
Robert H. FrankFor the three decades after WWII, incomes grew at about 3 percent a year for people up and down the income ladder, but since then most income growth has occurred among the top quintile. And among that group, most of the income growth has occurred among the top 5 percent. The pattern repeats itself all the way up. Most of the growth among the top 5 percent has been among the top 1 percent, and most of the growth among that group has been among the top one-tenth of one percent.
Robert H. FrankIt is no exaggeration to say that rising inequality has driven many of the 99 percent into a financial ditch. It also helped spawn the housing bubble that gave us the financial crisis of 2008, the lingering effects of which have forced many OWS protesters to try to launch their careers in by far the most inhospitable labor market we've seen since the Great Depression. Even those recent graduates who manage to find jobs will suffer a lifelong penalty in reduced wages.
Robert H. Frank