This article by Krugman is based on a study of growth in real per capita GDP compared to growth in median household income. The study shows one of the problems with using growth in real per capita GDP as a measure of well being. It uses the average as the measure of central tendency. If you were in a bar and Bill Gates walked into the bar, the average income per capita would skyrocket. That is one reason for using the median as the measure of central tendency. It would not be greatly affected by an outlier number such as Bill Gates's income. The graph shows that there has been a steady rise in real per capita GDP in the US. That is something that countries like to brag about. Median household income tended to rise along with per capita GDP until the mid 1970's. That suggests that the growth in income was evenly distributed. After the mid 1970's, however, the growth in per capita GDP continued its upward trend while growth in median household income flattened out. Average income was increasing because there were more folks like Bill Gates in the US with very high incomes. Median household income did not rise as fast because the median is not affected by the growth in income by very high income individuals like Bill Gates.
This was not the point of Krugman's article. He was making the point that there has been a dramatic shift in the distribution of income in the US and that we should be concerned about it. It is not simply envy of the rich that has inspired the OWS protests. His point is well taken. I felt that it was important to understand how statistics can be used to mislead the public. Conservatives use per capita GDP to show how well the US economy has done versus other countries. If median per capita income were used instead, the US would not look as good in comparison with countries with less income inequality. The US and France, for example, look pretty similar when median per capita GDP is used because it has lower income inequality than the US.
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