RALEIGH – Economist Alan Reynolds didn’t set out to write a book devastating the credibility of New York Times columnist Paul Krugman. Let’s just call it an unintended but welcome consequence.

What Reynolds, a senior fellow at the Cato Institute and former columnist for Forbes and Business Week, actually set out to produce was a handy primer on issues of income and wealth trends and disparities. He succeeded. Income And Wealth, published by Greenwood in 2006, deserves to be on the shelves of every economist, business or economics student, business journalist, and policy analyst in the country. That way, every time some special-interest group or headline-seeking politician screeches about “the rich getting richer and the poor getting poorer,” the “disappearing middle class,” and other such rot, owners of Income And Wealth could take the book down, flip to the relevant passage or glossary item, and know what definitions and data sets are being employed to concoct the claim.

Here are some key truths contained, along with the relevant citations and URLs, in Reynolds’ masterful work:

• Terms such as rich, poor, the middle class, family, household, tax filer, income, wealth, inflation, and mobility have varying definitions. Demagogues routinely fudge the distinctions or use the wrong terms, so never take their claims at face value. Always check to see what is really being talked about.

• Differences in age and hours worked explain a large share of apparent differences in household income. The top 20 percent of U.S. households in reported income have nearly six times as many full-time workers as the bottom 20 percent, because the quintiles are based on households of varying sizes and configurations, not individuals. Few households in the bottom 20 percent contain a single full-time worker, much less two. The poverty rate (a separate measure from the income distribution) for full-time workers was 1.8 percent in 2004.

• The share of U.S. households receiving between $30,000 and $50,000 in real income has, indeed, gone down over time, but that’s not evidence of a shrinking middle class. The middle class has simply enjoyed substantial gains in income. The share of families with real incomes less than $50,000 was more than 70 percent in the 1960s and is now down near 50 percent. The share receiving more than $75,000 went from 9 percent to nearly 30 percent.

• The real net financial worth of American households grew substantially from 1983 to 2004, measured either by the mean or median. Broadening assets to include non-financial capital such as college educations would further increase the gain in net worth among the majority of households.

• The worst measures of living standards are average wages. Those data mix earnings from full- and part-time workers and leave out benefits, transfers, and other income flows. The best measure is real consumption per person – what we spend, not what we report as income. By that measure, the average standard of living rose 74 percent from 1980 to 2004. Every quintile of the population gained during the period. The best statistical measure of consumption inequality is no higher today than it was in the mid-1980s, and didn’t increase much before that (and did so largely for technical reasons).

And now back to Paul Krugman. He’s not the melody line of Income And Wealth, but he always seems to show up in the chorus. That is, when it comes to misusing economic statistics, the most-frequent offender Reynolds cites is Krugman. He mixes up family and household data. He misinterprets data on the top 1 percent of income taxpayers and the average reported incomes of corporate CEOs and celebrities (who form a tiny fraction of that top 1 percent). He claims that “the average real income of the bottom 90 percent of American taxpayers actually fell” from 1973 to 2000, which bears no resemblance to the real data and is ludicrous besides (as I have written before, policy analysts who come up with such scary findings ought to apply their common sense as a fact-checker).

After reading Alan Reynolds’ book, it’s clear that there is no validity to the charge that the top 20 percent of Americans are excessively paid – with the possible exception of a certain Times columnist.

Hood is president of the John Locke Foundation.