Fluctuating Incomes and Riskiness
15 September 2006
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Paul Krugman concludes that the growth in year-to-year fluctuations in family income means that "[t]he economic riskiness of life has increased" ("Progress or Regress?" September 15). Not necessarily.
Imagine two occupations. The first offers steady work, week in and week out, and pays $40,000 each and every year. The work opportunities offered by the second occupation are less regular; workers in this second occupation earn $30,000 annually half the time and $70,000 annually the other half. Which occupation would you choose? Many people would choose the second - despite its greater year-to-year fluctuation in income - precisely because an average annual income of $50,000 means less economic riskiness than an average annual income of $40,000.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Paul Krugman concludes that the growth in year-to-year fluctuations in family income means that "[t]he economic riskiness of life has increased" ("Progress or Regress?" September 15). Not necessarily.
Imagine two occupations. The first offers steady work, week in and week out, and pays $40,000 each and every year. The work opportunities offered by the second occupation are less regular; workers in this second occupation earn $30,000 annually half the time and $70,000 annually the other half. Which occupation would you choose? Many people would choose the second - despite its greater year-to-year fluctuation in income - precisely because an average annual income of $50,000 means less economic riskiness than an average annual income of $40,000.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Wednesday May 23, 2007 at 2:49pm