Unbound: How Inequality Constricts Our Economy and What We Can Do About It
by Heather Boushey 
Belknap Press, Harvard University Press, 2019

Every now and then, when an author has a problem they’re trying to solve they set out to investigate it, taking their readers along for the ride. It’s an old gimmick. The author starts by introducing the problem and providing a caricature of the conventional wisdom, or standard objections, they need to overcome. They take the reader from scholar to scholar, document experience on experience, and soon find that not only is the conventional wisdom wrong and objections feeble, the solutions were discovered on the journey. Perhaps the most grating example of this is the work by Lee Strobel, but there are many offenders, and it is presented in varying forms. One such example is Unbound: How Inequality Constricts Our Economy and What We Can Do About It, a new book by Heather Boushey, Executive Director and Chief Economist at the Washington Center for Equitable Growth and former Chief Economist on Hillary Clinton’s transition team.  

Early on, Boushey informs the reader what is about to happen to them: 

Drawing on interviews with top scholars steeped in the latest empirical evidence, this book presents strategies for delivering strong, stable, and broad-based growth. My purpose is to make sense of the emerging thinking in economics for those who seek to understand these new ideas but who are not embedded in the economics community – and especially for those who seek to take action based on the new conclusions these ideas lead us toward. 

Here we can already start to see the main issue with this gimmick: it assumes a degree of stupidity or ignorance on the part of the reader, a reader who is “not embedded in the economics community.” This assumption is of course obvious when we see straw men or dubious extrapolations, but it really comes through in the language of the book. For example, there is an abusive and repetitious use of adjectives just in case the reader doesn’t get the profundity and strength of the arguments presented. We are told about “top scholars,” “new data and evidence,” “cutting-edge research,” “cutting-edge scholarship,” “cutting-edge data and methods.” Worst of all, there are periodic pictures to clarify points. For example, there is one of building with two exits and a sign reading “corporate profits” on top. One exit has bags of money leaving toward an arrow reading “shareholders,” the other has coins leaving toward “workers.” Below the picture we are told “Corporate profits are high but they are being paid out to shareholders rather than going toward productive investments.” Just in case it wasn’t clear when you read it the first time in the text, or couldn’t grasp the picture. 

Before diving into the book’s arguments, we need to look at Boushey’s tendency to either strawman other points of view, or at least judge them by unfair standards. It is difficult to know where to start here because she manages to do it so often, on large and small matters. For example, she judges the Laffer Curve by the example of Kansas, the relationship between top tax rates and growth rates, as well as the cutting of “the top marginal tax rate and capital gains taxes” with federal budget deficits. One does not even have to agree with Laffer to see that these are poor standards (for example, it makes far more sense to look at tax-receipts than federal deficits). Additionally, she writes as if Laffer could not read his own curve: that is, it’s the Laffer curve, not the Laffer line, and tax rates might already be below the inflection point. We are then provided the anecdote: 

In 2013 I had lunch with Harvard University economic historian Claudia Goldin. . . “Has any historical research shown that [lowering the top marginal tax rates promote long-run growth], I asked her?” Her laughter shook the table enough that broth splashed over the edge of my ramen bowl. 

Empirical research has not always been kind of Laffer’s thesis. A swift and powerful argument could have been made against it. To present it so poorly, judge it by improper standards, and then laugh it off is a kind of dirty pool that is quite unnecessary. 

There are a number of more minor examples we could talk about – and their smallness is what makes them so telling and off-putting – however, there is one other we must mention. The avatar of the conventional view is not only a straw man, but a slander to past economists implying they weren’t dealing in reality. That is, the standard view is theoretical neoclassical economics which she characterizes as being a formalization of Adam Smith that takes “the theoretical logic of…[the] ‘invisible hand’ too far.” This “market fundamentalism” (a term with such a pejorative connotation it cannot be used objectively) rests on a “faith in the market” that allows economists to “defer to theory” because of “long-held assumptions” But don’t worry: 

This book is about a transformation now underway in economics that is thoroughly upending the conventional wisdom. . .It describes how economists across the profession are using new tools, such as new empirical techniques and big data, to describe what is actually happening in our economy.

These features are unfortunate. So much writing on inequality involves citing an array of statistics with frustrated incredulity. We are too seldom offered a standard by which to evaluate what exactly is too much inequality (a term, which taken on its own, is quite nebulous). Boushey’s book is an attempt to grapple with this, which we should welcome, but its issues start to overshadow any merit in the arguments. 

We will, however, take a moment to summarize those argument and the structure of the book. Boushey starts by writing that there has been a structural shift. Not only is income and wealth inequality rising, along with less economic mobility, it is coming at the expense of “strong, stable, and broadly-shared improvement in living standards” and atrophied political institutions. With this in mind, the book is divided into three sections, each bifurcated into two additional areas of concern. 

First, how inequality obstructs learning and human capital as well as skills, talent, and innovation. Learning and human capital focuses on early childhood education and access to resources, at all levels. Ending with an array of policy proposals from investment in childhood education and childcare, paid-family-leave programs, and “new rules governing work hours.” The second part focuses on the workplace and entrepreneurship. For example, how patent rates vary with parents income and grade school test scores. 

Second, how inequality subverts turns to public spending and market structure. Public spending of course relates to the first section, but here we have a focus on rent seeking, where businesses “wield political influence,” and issues with low taxes associated with a decrease in public spending. Market structure is concerned with monopoly and concentration in industry. 

Third, how inequality distorts the economy through the business cycle, which “skews investment away from products that would improve the lives of most in favor of those for the wealthy,” and investment. Investment relates to the business cycle because when downturns are more severe, those at the bottom struggle to recover, exacerbating inequality.   

Before we evaluate this, one more this ought to be pointed out. Despite the gimmick the book is following, and the associated issues, most of the scholars Boushey cites are top-notch economists, and very often their arguments are persuasive. For example, in the first chapter dealing with education, she draws heavily from Raj Chetty who is a terrific economist at Harvard. Additionally, his arguments about investment in childhood education and the possible effects that it would have on improving mobility are probably correct. Just because there is an issue with the framing of the book, doesn’t mean the arguments are all bad. 

This is not the place to parse the literature and research in this book, however we cannot help but observe that nearly all of her examples could go the other way: we could easily write the opposite book where the most effective way to have inequality obstruct is to send children to government schools, subsidize higher education through low interest government loans, and establish a government patent system granting temporary monopolies. What about subversion? Well, we are concerned about rent-seeking. The bigger the government, the more there is to buy, perhaps we ought to limit the government to general tasks and minimize this. And market concentration? We already mentioned patents, but Boushey covers Health Care which has been one of the most regulated and imposed upon markets in the economy. Removing government’s intervention and allowing market innovation to work might help here.

Perhaps this is too clever. Perhaps. And we cannot criticize Boushey for not adhering to a different political philosophy. But it goes to the point that not only does Boushey’s book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It, suffer from straw-manning other points of view, the individual “not embedded in the economics community” would walk away with a distorted view of the economics profession (past and present) and thinking the point was entirely settled. In other words, the defining feature of this gimmick is that the author takes the reader on a journey to solve a problem, a journey that was only ever going to go in one direction and end one way.

—David Murphy holds a Masters of Finance from the University of Minnesota.