Let them buy TeeVees

Oh, just a beautiful takedown by Barry Ritholtz of the recent piece of disingenuousness from Cox and Alm arguing that we should be looking at something called the "consumption gap" instead of the income gap when assessing inequality. The consumption gap is smaller, argues Cox and Alm, thus showing that inequality is not as great in this country. But their point is an unbelievably mundane one -- poor people spent more and save less than the rich as a percentage of their income.

The rest, including a secondary point about how po' folks get TeeVees nowdays, is just hoary. I'll let Barry take over from here.

This is, of course, classic economic misdirection.

What the authors are revealing here are not rising incomes or societal similarities of wealth. Rather, their data and cost discussion are about Technology adoption lifecycle (Joe M. Bohlen and George M. Beal, 1957), later refined in Everett M. Rogers' Diffusion of Innovations. New technologies and products come down in price over time, regardless of the state of economic equality in the broader society.

This is the oldest dodge in economics. That two Fed economists either fail to understand technology adoption cycles -- or worse, have chosen to willfully ignore it -- simply boggles the mind. If this is the best that Federal reserve researchers can produce, it does go a long way in explaining why our financial system is near crisis.

By the way, I love "economic misdirection" so much I'm starting a whole new label catagory for it.