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Praise for Robert Frank’s Falling Behind
“I’ve been a skeptic. Bob Frank is persistent. He’s beginning to convince me.”
Thomas C. Schelling, author of The Strategy of Conflict and 2005 Nobel Laureate in Economics
“In this century, distributional concerns will top the policy agenda. This masterful essay will change how you think about them.”
Paul Romer, Stanford University
“The arguments here are powerful and multidisciplinary. The crux is explaining how rising economic inequality causes harm to the middle class. . . . This is a gem of a book.”
Lee S. Friedman, Professor of Public Policy, University of California, Berkeley
“In this lively, provocative book filled with memorable new examples, Bob Frank goes beyond his previous work (Luxury Fever, Winner-Take-All Society, and Choosing the Right Pond) and clarifies that ‘falling behind’ is a consequence not of envy but rather of the simple fact that a person’s evaluation of his own possessions ‘depends always and everywhere on context’—an unconscious comparison with his neighbor’s possessions or with his own previous possessions.”
Laurence Seidman, Chaplin Tyler Professor of Economics, University of Delaware
Falling Behind
THE AARON WILDAVSKY FORUM FOR PUBLIC POLICY
Edited by Lee Friedman
This series is intended to sustain the intellectual excitement that Aaron Wildavsky created for scholars of public policy everywhere. The ideas in each volume are initially presented and discussed at a public lecture and forum held at the University of California.
AARON WILDAVSKY, 1930–1993
“Your prolific pen has brought real politics to the study of budgeting, to the analysis of myriad public policies, and to the discovery of the values underlying the political cultures by which peoples live. You have improved every institution with which you have been associated, notably Berkeley’s Graduate School of Public Policy, which as Founding Dean you quickened with your restless innovative energy. Advocate of freedom, mentor to policy analysts everywhere.” (Yale University, May 1993, from text granting the honorary degree of Doctor of Social Science)
1 Missing Persons: A Critique of Personhood in the Social Sciences, by Mary Douglas and Steven Ney
2 The Bridge over the Racial Divide: Rising Inequality and Coalition Politics, by William Julius Wilson
3 The New Public Management: Improving Research and Policy Dialogue, by Michael Barzelay
4 Falling Behind: How Rising Inequality Harms the Middle Class, by Robert H. Frank
5 Godly Republic: A Centrist Civic Blueprint for America’s Faith-Based Future, by John J. DiIulio, Jr.
6 Bounded Rationality and Politics, by Jonathan Bendor
7 Taxing the Poor: Doing Damage to the Truly Disadvantaged, by Katherine S. Newman and Rourke L. O’Brien
8 Changing Inequality, by Rebecca M. Blank
Falling Behind
How Rising Inequality
Harms the Middle Class
Robert H. Frank
WITH A NEW PREFACE
UNIVERSITY OF CALIFORNIA PRESS
BerkeleyLos AngelesLondon
University of California Press, one of the most distinguished university presses in the United States, enriches lives around die world by advancing scholarship in the humanities, social sciences, and natural sciences. Its activities are supported by the UC Press Foundation and by philanthropic contributions from individuals and institutions. For more information, visit www.ucpress.edu.
University of California Press
Berkeley and Los Angeles, California
University of California Press, Ltd.
London, England
© 2007, 2013 by The Regents of the University of California
ISBN 978-0-520-28052-6
eISBN 9780520957435
The Library of Congress has cataloged an earlier edition of this book as follows:
Library of Congress Cataloging-in-Publication Data
Frank, Robert H.
Falling behind : how rising inequality harms the middle class / Robert II. Frank
p.cm.
Includes bibliographical references and index.
ISBN 978-0-520-25188-5 (cloth : alk. paper)
ISBN 978-0-520-25252-3 (pbk. : alk. paper)
1. Middle class—United States—Economic conditions.2. Income distribution—United States.3. Consumption (Economics)—United States.4. Equality—Economic aspects—United States.I. Tide.
HT690.U6F732007
305-5’50973—dc22
2006026248
Manufactured in the United States of America
22 21 20 19 18 17 16 15 14 13
10 9 8 7 6 5 4 3 2 1
In keeping with a commitment to support environmentally responsible and sustainable printing practices, UC Press has printed this book on Rolland Enviro100, a 100% post-consumer fiber paper that is FSC certified, deinked, processed chlorine-free, and manufactured with renewable biogas energy. It is acid-free and EcoLogo certified.
CONTENTS
Preface to the 2013 Edition
Preface to the 2007 Edition
1. Introduction
2. Recent Changes in Income and Wealth Inequality
3. Inequality, Happiness, and Health
4. Envy or Context?
5. The Rising Cost of Adequate
6. Why Do We Care about Rank?
7. What Types of Consumption Are Most Sensitive to Context?
8. How Can Middle-Class Families Afford to Keep Up?
9. Smart for One, Dumb for All
10. Looking Ahead
11. Lessons for Public Policy
12. Reflections
Notes
References
Index
PREFACE TO THE 2013 EDITION
Falling Behind was first published in 2007. Its central thesis is that the rapid growth in income and wealth inequality that began in the early 1970s caused substantial economic damage to middle-income families.
I was grateful for the invitation from University of California Press to reflect on the basic message of Falling Behind in the light of events since then. Did the financial crisis and the ensuing Great Recession cast doubt on my thesis?
In a word, no. But it’s a fair question, since those events did upend the inequality trends at issue. Prior to the early 1970s, incomes had been growing at about the same rate for about three decades—slightly less than 3 percent annually—for families at all income levels. Between the early 1970s and 2007, however, almost all significant income gains in the United States were confined to the top quintile of the earnings distribution, and even those gains themselves were heavily concentrated among the top 1 percent.