Steven Kaplan on the Inequality and the Top 1%

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🗓️ 7 November 2011

⏱️ 66 minutes

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Summary

Steven Kaplan of the University of Chicago talks with EconTalk host Russ Roberts about the richest Americans and income inequality. Drawing on work with Joshua Rauh, Kaplan talks about the composition of the richest 1% and 1/10 of 1%--what proportions come from the financial sector, CEOs from non-financial corporations, athletes, lawyers and so on. Then he discusses how the incomes of these different groups have changed over time. Kaplan argues that these groups have increased their incomes by similar proportions, suggesting that a failure of corporate governance is not the explanation of rising CEO pay. The discussion closes with a discussion of the financial crisis and the compensation in the financial sector.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you. Today is November 1st, 2011, and my guest is Stephen Kaplan, the new
0:43.4	power family distinguished service professor of entrepreneurship and finance at the University
0:49.0	of Chicago's Booth School of Business. Steve, welcome to Econ Talk. Thank you. Good to be here.
0:55.5	Our topic for today is what might be called the super rich, what gets called sometimes the top
1:01.0	one percent. Sometimes we're going to look at the top one tenth of one percent, and we're going
1:06.2	to organize our conversation around a paper that we will link to that you've written with Joshua
1:11.1	Rao called Wall Street and Main Street. What contributes to the rise in the highest incomes?
1:16.9	It's published in the Review of Financial Studies in 2009. There's a lot of evidence that
1:22.2	the richest Americans are richer than the richest Americans of the past. I phrase it that way
1:28.0	because it is important to remember that in most of the recent discussions of inequality and
1:33.4	it's a very hot topic right now, we are typically not talking about the same people. So when people
1:39.3	say the top one percent have gotten richer, that does not mean that somebody in say 1980 necessarily
1:45.7	has learned who was in the top one percent is now making a lot more or has a bigger share than they
1:51.8	had in today than in 1980 because they're taking a snapshot, a slice in time of a segment of the
1:59.6	income distribution in 1980 versus today or today versus 1995. So that's a really important
2:06.6	distinction. I'm sure we'll blur it because of the nature of the English language, but I want
2:10.6	everybody who's listening to remember that that's what the data are literally measuring when we
2:16.9	usually are talking about the top one percent. There are data that look at the same people over time
	...

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