How much are those numbers result from housing and, in particular, very expensive housing in some coastal cities like San Francisco?

On the one hand, for the bottom half of American families, housing really is the most important form of wealth, just because middle-class families tend not to invest in these elaborate financial instruments or invest their money in hedge funds or things like that. On the other hand, at the top, the housing wealth obviously is much higher, but also the wealth from other forms is also quite a bit higher than they are for those lower down in the income distribution. Housing isn’t as important at the top, given the top doesn’t invest heavily in equities and things like that.

So I don’t think that the wealth inequality story overall is just an artifact. For instance, you have a lot of wealthy people living in San Francisco and other places that have a high cost of living. It would still be pretty high, regardless, but the question begged by this is whether that’s a problem or not. What is the level of wealth inequality?

Again, I don’t know what I’m supposed to make of the statistics in the US. I guess I could compare them to other countries. So, for instance, in Sweden, the top 1 percent may own 20 percent of the wealth, though I don’t know off the top of my head. Yet, I feel that — among the same people who are angry that the top 1 percent owned 40 percent in the US — if that number was 1 percent owning only 20 percent, it would still seem like a lot and those people would still be really angry. So, what is the right number?

That’s exactly right. And the other way to think about it is, what if we had the golden days of 1979 before the evil President Reagan took office and before the Piketty/Saez inequality numbers start rising? There was a ton of wealth inequality, based the same way of measuring things, back in 1979. As you say, there’s a ton in Sweden, and if I remember right, I think the cross-national disparities in wealth inequality are not as great as the income inequality disparities between countries. So yeah, it’s really hard to know what the right number or what the just number would be for what share of wealth the top 1 percent should have.

The dominant economic narrative in the media, among politicians on the left, and the populist types on the right is that inequality has exploded, wages have gone nowhere in 40 years, and upward mobility is worse today than it was for our parents. We’ve already talked about inequality, but what about those other two pillars: wage stagnation and economic mobility?

To a remarkable extent, the whole narrative is really wrong. Our colleague, Michael Strain, has a great book out, The American Dream Is Not Dead, where he really focuses on earnings trends, for instance, since the early 1990s. And the story since then is really good, with wage increases since the bottom of the 1990s-recession rising by over a quarter at the median. Now, there’s sort of this lagged impression that men’s pay, for instance, has just done terribly for a long, long time. And it’s so interesting, because there was a period where men’s pay really did stagnate, but it was from roughly 1973 to roughly 1994. That is not the era that millennials or gen Z graduated into. In fact, it hit the boomers more than it hit generation X, even. And so that’s a narrative that just has never been updated. It was sort of propagated by a bunch of researchers 30 years ago, and people have just kind of continued talking that way.

For the economic mobility story, you can make a more plausible case for disappointment in two ways. The first way would be relative mobility — starting at the bottom and ending up at the middle or the top, regardless of what’s happening to everybody else — hasn’t gotten worse, but it also hasn’t gotten better. This is a pretty surprising result given how much poverty has fallen over the last 50 years. And then there’s this other way of looking at mobility called absolute mobility, which is essentially just: Are you better off than your parents were, regardless of where you started out? Raj Chetty’s research famously has shown that fewer and fewer people over time end up better off than their parents.

Well, that’s true. On the other hand, by my own estimates, and by Michael’s estimates too, something like 70 percent of the population still ends up better off than their parents. So this is not a dramatic decline to the point where everybody’s worse off. Second, there are real differences between having a bigger share of the population be better off than their parents, on the one hand, and just absolute levels of material comfort, on the other hand.

China has higher absolute mobility than the United States does, but I’m not sure any of us would trade places with the Chinese. Kids who grow up in the bottom fifth have much more upward absolute mobility in terms of being better off than their parents than people in the top fifth, but I don’t think many of us would choose to be raised in the bottom fifth rather than the top fifth. There was higher absolute mobility in 1945 than there is today, but how many of us would choose the living standards that folks in 1945 had?

So that’s the best case that you can make that things have gotten worse. And it’s just not a very strong case.

If we really want a lot of people moving up and down, people have to move down too, and the people at the top don’t want their kids to move down. So we don’t hear much about banning SAT prep courses or making it harder for people to get their kids great internships at their friend’s company, but what do you think we can or should do about that part of the mobility issue?

Yeah, I think that’s right. At the margin, I would say that there is a group of people at the top who started there and remain there and … let’s just say, it’s probably not the most economically efficient thing that they’re still there. And here, you can talk about things like legacy admissions, as Richard Reeves does, although the importance of that is a little overstated because, lots of times, those kids are have got great test scores anyway. There are other things that happen as well, like, say, a certain real estate developer hiring their children as consultants. So there are some ways at the margin that we can imagine reducing upward mobility from the top that are not necessarily controversial.

I tend to think about it a little bit differently, which is that if we had some world of truly equal opportunity — which we’ll never get this world, and we probably wouldn’t want this world, but if we did — you can imagine a world in which everybody was pushing their kids so hard to get ahead and to get one of those coveted top-fifth spots in adulthood that essentially we just boost outcomes for everybody. In that case, it becomes close to a coin flip who ends up in the top fifth, just because the competition to get there is so strong. And if the opportunity has been redistributed to the extent that it’s more equal than it is, you would then end up with greater downward mobility from the top and greater upward mobility from the bottom. Still, everybody would probably be better off by virtue of having a more competitive race there. In a lot of ways, that would be more economically efficient in terms of economic growth than the world we’ve got now.

You’ve just come over to AEI to be our director of poverty studies. So, what do you want people to understand about poverty in America and what we should be doing about it?

Yeah, I think there are a lot of blind spots, I would say on both the left and the right. I think, on the left and parts of the right, there’s not this appreciation for the extent to which we really have dramatically lowered poverty in the United States. There was a great paper put out by Richard Burkhauser and Kevin Corinth, among others, and they basically said, “All right, let’s take the 1963 poverty line that was drawn, which showed that 19.5 percent of the population was living under that line and therefore poor.” A fairly arbitrary line, but that’s what they found.

And what Rich and his coauthors do is they say, “Let’s fix these measurement problems that the official poverty measure has. And let’s see what happens to poverty today if you just take that line that was drawn in 1963 and you correctly measure inflation and income over the ensuing 60 years.” And when you do that, it turns out that about 2 percent of the population today lives below that line. So that’s a reduction from basically 20 percent of the population to 2 percent of the population. I don’t think people have really recognized this.