The Wealth and Income of the People of the United States

"This book is actually not very well known, even by economic historians. Willford King was a very influential economist in his time but he is largely forgotten. Part of why he is forgotten is because he was eclipsed by his successor at the National Bureau of Economic Research, Simon Kuznets, a Nobel prize-winning economist, and another reason he’s forgotten is he ended his life as a bit of a crank. He turned against the New Deal and was very bitter about the preeminence of Kuznets. But early on in 1915, King, who got his PhD at the University of Wisconsin, which was the white-hot centre of progressivism in the United States, wrote a book looking at income distribution based on the suggestion of his advisor Richard Ely, who was a very prominent progressive economist. It was the first reasonably accurate description of how income was distributed in the United States. You might ask, why was it only in 1915 that somebody did an extensive survey of income distribution in the United States? Questions of economic equality certainly were raised long before 1915, that’s true. But prior to the Progressive Era the perception was that what mattered was not income but wealth. That was a legacy of our agrarian economy. What mattered for farmers was not how much income they had – they didn’t really have income – what they had was land and the means to produce food for their families and food to bring to market. So what really mattered was your wealth, ie, your land. It took a long time to get used to the idea that America was not going to return to that agrarian ideal, that the Industrial Revolution, which the left initially saw as a horrible blight, had produced a new way of life. The Progressives really were the first ones who accepted that as a new reality and recognised that urban workers were not going to grow their own food, they were going to buy food for their families with the money that they earned working in factories. That’s why it took until the teens for someone to perform what one would think is the obvious task of measuring income distribution. So King wrote this book and he looked at income distribution and he found two things. One was that income distribution in the United States compared favourably with European countries. But the second thing that he found was that income distribution in the United States was fairly unequal. His numbers line up reasonably well with subsequent research that was done based on much more accurate data. King really had to cobble together his findings in all sorts of indirect ways but he got pretty close to an accurate description of income inequality in 1915, which was pretty high but nonetheless lower than it is today and lower than it would become right before the 1929 crash. Another thing about the Progressive era is that the Progressives worshipped the scientific method and they worshipped data. They were the ones who decided that there would be something called “social sciences” and they were very scientific in their orientation. King looked at state-level data and extrapolated. He took bits and pieces and did a lot of crosschecking. He did an incredibly thorough job parsing an enormous amount of data. He got pretty close to what Thomas Piketty and Emmanuel Saez were able to find in 2003 by reviewing a hundred years of IRS records. It’s worth reading to get a sense of the newness of looking at income distribution and to get a feel for what attitudes were towards this in 1915. King was nobody’s idea of a radical. He was anti-immigration, he believed in eugenics, but nonetheless he recognised that the famous 1% were pulling down a wildly disproportionate percentage of the nation’s income. Income inequality rose until World War I then it fell when the war was on. Wars are usually good for equality. The income inequality trend resumed after the war and lasted through the 1920s. It reached historic peaks in this period, even compared to today. Still, income inequality in 1929 was probably not as great as it was in the late 19th century, when the Industrial Revolution was really getting underway. But we don’t have especially good records that predate the teens. After the crash, during the Great Depression, incomes once again grew more equal and considerably more equal during World War II and through the 1950s."