Why are climate scientists giving Scott Pruitt a hard time?
Saying what people want to hear does not make you a good researcher. They don't take him seriously for the same reason we don't take young-earth creationist researchers seriously. It's not good research.
Edit: I'm not an economist, and I'm not going to do justice to the criticisms (which aren't hard to find), but fine, here are links:
Sorry, but comparing Piketty to Pruitt is laughable. One is a distinguished professor of economics. The other is a businessman and lawyer who apparently knows nothing about science.
That's an appeal to authority. Pruitt's background is no more a measure of his qualifications to be a scientist than Michael Faraday's were.
We judge science based on testable theories and results, and the quality of the work done to make those results trustworthy. Pruitt may heavily flunk that part, but any intelligent person who doesn't can contribute to science, regardless of their background.
I posit that the argument I made uses the valid form: people who are established authorities on a given topic are more trustworthy when making claims about that topic, because they are more likely to be correct. Pruitt himself has proven the opposite to be true as well by being repeatedly wrong about science and rejecting scientifically established facts.
the fact that there is good-faith professional disagreement in the field of Economics does not indicate that Piketty is a charlatan in the same way that Scott Pruitt is a charlatan when it comes to climate science.
Piketty is a world class economist that presents rigorous arguments backed by very large amounts of empirical data. Scott Pruitt is a political hack paid to lie about climate science for the benefit of the fossil fuel industry. The fact that you conflate them says more about you than it does about Piketty or Pruitt.
I read Piketty's book, and some of the critical response. In my semi-educated opinion (I only have a Bachelor's in Economics), the criticisms failed to poke a hole in his main argument: that capitalism as a system is unegalitarian because it allows wealth to grow faster than economic output, resulting in increasing amounts of income inequality over time.
>>But perhaps the greatest rebuke of Piketty to be found among academic economics is not contained in any of these overt or veiled attacks on his scholarship and interpretation, but rather in the deafening silence that greets it, as well as inequality in general, in broad swathes of the field—even to this day.
The reason for this deafening silence is simple: the truth revealed by Piketty is inconvenient, and there are no easy solutions.
But does that make it "net" less egalitarian than other economic systems (in practice), after accounting for all of the other advantages of capitalism?
Kind of like Churchill's quote about how democracy is the worst form of government, except for all of the others that have been tried.
Maybe for now we can start walking a middle path and soften the blow of our current trajectory for a good chunk of displaced labor. Perhaps policymakers and institutional advisors can listen more to Piketty and start finding a path to stability in the medium term.
I have not seen a definition of capitalism which was not either contradictory, or which relied on sufficiently general abstractions (utility instead of profit, social contracts and monopolies on force instead of states).
The level of authoritarian control you would have to have over a society in order to prevent a system of government from forming would certainly itself qualify as a system of government. So free enterprise always generates some sort of governing actor, and any mandate that results is, by the transitive property, the result of free enterprise. Since all systems are ultimately the result of free enterprise and "rational" motives, it's hard to argue that "Capitalism" is anything but the trivial classifier, if it is well defined.
I'd argue that the successful policies that Americans incorrectly attributed to the "capitalism" were actually attributable to the sort of meta-philosophy of pragmatism. Which is the philosophy of not really having a philosophy, and never letting any belief become sacred (A philosophy which we certainly do not adhere to now).
Surely capitalism has to do with the existence of capitalists who don't do labor? If Walmart's shareholders couldn't extract all surplus income from the company, the Walton family wouldn't be making an entire country's worth of store owners' income for doing no work.
> I have not seen a definition of capitalism which was not either contradictory, or which relied on sufficiently general abstractions (utility instead of profit, social contracts and monopolies on force instead of states).
That's a very good point.
When we see people complaining about capitalism, these critics are essentially targeted at rule of law and the recognition of a right to private property, and how states don't simply confiscate private property held by those subjectively labeled as "the rich".
Indeed; I think people are out of ideas. "Right-thinking" people continue to believe in liberalizing economies, globalism and so on, and they've yet to come to terms with the backlash that's fueling people like Trump, UKIP / Brexit, Le Pen, and so on. There's no alternative idea on the horizon; we know socialism isn't very effective at much more than rent capture and corruption, and we know nationalism / protectionism ultimately makes economies non-competitive globally. But we don't have a solution to the problem of global capital chasing efficiency globally, and thereby hollowing out the middle of the income distribution in Western economies.
A lot of ideas have been discredited, or at least played out. But there's still a constituency for those ideas, and there will continue to be until the orthodox "elites" come to terms with what's going on.
(And they're not really elites; I count myself as one of them, as skilled developers are not at immediate risk of being outsourced and are not strongly bound to any one country. I'm still winning from the current economic system. But I can see that it can't continue, the majority won't stand for it.)
Isn't this just a problem of living in an efficient, globalised society? In an efficient global economy, most of the middle class won't be required, because frankly, most of those jobs are useless and shouldn't even exist in the first place.
We'll need the "low level" jobs, e.g. cleaners. Given the cost of automation, it's just not interesting enough to automate this. We'll also need the high level jobs, e.g. anything that requires significant (creative) thinking to some extent. Unique creative thought is probably the only thing that can't be automated at the moment.
Most traditional middle class jobs can easily be simplified / removed / etc. For each job that's created in software development, two traditional ones will disappear. We're optimising the world.
Tl;dr: Most people, imo, haven't realised the world is changing. The people voting Trump / UKIP / Brexit / Le Pen are (unless someone gives me a good argument) fools for thinking the people they elect can actually change things. I'm not saying they haven't been left behind, or there are no legit concerns, but to think these people can change things.. that's just ridiculous.
For example: I dare say Trump doesn't give a flying fuck about what he had to do to get elected. He picked out 5 or 10 focus groups that would give him the necessary votes to win, and focused on those. He won't deliver. He just wanted to be president.
Your comment assumes that Trump/Brexit/Le Pen voters are trying to "do something" with their votes. What if they're just trying to do as much damage as possible, knowing the system has it out for them?
> For example: I dare say Trump doesn't give a flying fuck about what he had to do to get elected. He picked out 5 or 10 focus groups that would give him the necessary votes to win, and focused on those. He won't deliver. He just wanted to be president.
It's weird that we tend to assume people are stupid or disingenuous when we disagree with them. Trump has been on the receiving end of a lot of that and in the case of economics it's easily debunked. He was a supporter of Ross Perot in the 90s, and nearly ran for Perot's Reform party. For those too young to remember, Perot's primary issue was protection for American jobs. The interesting is that, as international businessmen, both Perot and Trump were in more of a position to make money internationally than under the protectionist rules they pushed. When you realize that it looks a little less like self-interest.
There are many reasons to dislike Trump but it doesn't do any good to minimize him. In fact, it's counter-productive. You counter your opponent by really knowing him.
I had originally assumed that the Leave vote in the UK EU referendum was a protest against neoliberalism, but now I'm beginning to wonder. In a few weeks, voters in the UK will have the option of voting for a party (Labour) which now opposes neoliberalism, but it's well-behind in the opinion polls. Even if all the progressive votes (Labour, Lib Dems, SNP/Plaid Cymru, Greens) are aggregated, they're still outnumbered by the combined Tory and UKIP vote. I'm beginning to wonder if support for Brexit was mostly just xenophobia, but not many people like to admit to that.
The election at this point is about nationalism, and is being compounded by an Us-vs-Them narrative as played out (and played up) with the dinner debacle. People who wouldn't normally vote Tory will vote for May because they want to rally around what they perceive as a strong leader against the Other.
Obviously with the dinner debacle the EU side's motive was to inject some realism about the weakness of Britain's hand, but May played it the only way she could have.
Britain didn't learn the full lesson from World War II: that nationalism is actually a bad thing. Its approach to Europe has been wrong all throughout as a result, and it's compounded by being joined at the hip to US foreign policy.
But everywhere else in the world is growing economically, and the West is shrinking as a slice of the overall pie, and this will naturally add to the continuing decline in the US's ability to project its will. The EU is also about creating a larger centre of gravity able to negotiate as an equal to China and the US. It'll take some time for the UK to realize how lonely it is on the outside, especially as protectionism increases - fewer friendly ports on the open sea, and bigger sharks - it's not the best time to be setting sail alone.
Joining a group means taking some responsibility for its governance and good running. Too many politicians use Brussels as a scapegoat, rather than something they own a piece of. So in so far as continentalism refers to an agglomeration of different peoples trying to speak with one voice, like US, China, Russia, EU - the thing only works if people don't get too cynical about the centre.
I don't think there's much alternative to joining a larger political entity if you're geographically near one, given what we know about economic links and distances. A possible advantage of something like the EU is that it doesn't have a cohesive enough identity to think nationalistically and get into trouble that way.
> But we don't have a solution to the problem of global capital chasing efficiency globally, and thereby hollowing out the middle of the income distribution in Western economies.
It isn't a solvable problem, honestly, is the big secret no one really wants to admit.
Capitalism, by its nature, is going to chase efficiency globally regardless of what you do to prevent it. Technology, over time, is going to make this worse because it is easier to avoid inconvenient regulations by operating out of "friendly" countries as well as enabling automation that really only leaves "services" that pays very little for many people who used to have better options.
The truth is the Middle Class is going to shrink no matter what you do and you are going to basically end up with a very large gap of people making 6 figures (who can afford to hire people to handle things for them) and less skilled people who will be reduced to jobs servicing them that barely pay above minimum wage.
People don't like "income redistribution" but that is the only way to actually solve the problem long term. It needs to be done in a way that working is still incentived but where those relatively low paying service jobs + the redistribution leaves people with the housing, food, and health care they need.
The reality is, the bottom 50% in most countries need about 20% of the national income to be happy...and in the US they are getting about 12%.
The problem is, right now, that is politically impossible outside of a handful of European countries.
From a problem-solving standpoint, I don't think the solutions are really that hard. I think some of them are downright easy. What's hard is getting anything done in the current environment. Perhaps that's what you meant, though.
In this comment I disagree with Piketty. It is written very rigorously, you must find a very careful deductive argument in it. (Otherwise it's useless.)
So, the rest of this comment makes a very dense argument, first using a proxy argument and then switching in the actual argument. The proxy argument is correct but probably you don't like reading it. So just get through it like bitter medicine.
So. Proxy argument. True statement:
Computers are inherently unegalitarian because smarter people get more utility out of them. You simply cannot give the same amount of utility to a dumber and a smarter person at the same capital cost.
So far you might be thinking "Huh? You're saying smarter people get more pleasure out of reading so the Internet is unequal? What the hell... Anyone can read, who cares if some people get more pleasure out of it and others less?"
But the problem is that nearly the same argument applies to startups and creating wealth. Instead of utility (personal pleasure from the Internet), you are now discussing "access to the wheels of capitalism".
Musk slept at the office and shared a computer. Sergey Brin is a Ukrainian immigrant.
The reason these people have unequal results is because computers are inherently not egalitarian: smart people just get more out of them.
You can't stop it, any more than you can stop smart people from getting more pleasure from reading. Can't be done. sorry.
Here is a question Piketty didn't ask: what percent of dynastic, billionaire wealth was created in a single generation in America?
Not addressed at all.
[EDIT: removed reference to more information than is contained here. This comment contains all of the information to understand my point.]
I think people downvote you because your post had a zombo.com feel to it - it talks on and on about how great and to the point it is, with the actual point being rather hard to find. My reading is that your whole argument is this paragraph:
> Here is a question Piketty didn't ask: what percent of dynastic, billionaire wealth was created in a single generation in America?
Your "argument" is not as profound as you think. Since humans have been on this earth, some are obviously more successful using technology than others. Also, some are better at communication than others..
Piketty's argument is based on the assumption that, broadly speaking, low income inequality is a desirable trait of a society, and does in fact spend some time going into detail how technology accelerates inequality. His analysis is on how to create a more sustainable society in light of this.
Here's my snarky interpretation. First, this is where a lot of people lose interest or get turned away:
> As a person who is extremely intelligent and eloquent, I am sure this post will be downvoted by my peers who are threatened by my conclusions and wit. In fact, I have a very cohesive argument, which I am about to show you. The argument will relate two things. You will then agree that my argument has merit, because it is very well made.
Then a few sentences hidden in the middle, long after people have written it off as a rambling diatribe:
> Capitalism, like a computer, is a tool, and the most intelligent and capable humans make the best use of tools for the most reward. I've heard of rags-to-riches stories. Therefore capitalism must rewards intelligence and capability, not accumulated capital.
Unfortunately these aren't susceptible to skimming to the end, because they're bookended with:
> This means Picketty is wrong and I've e-mailed him many times because my cause is just and righteous. In fact, the emails I wrote are an even more graceful and devastating critique than the argument I just gave you, with rigorous graphs and charts.
Thanks for the criticism. I've removed most of the bookends and reference to any external resource and left just the "few sentences hidden in the middle" which people can read or ignore. I don't think your summary of it is perfect, but close enough, you read me fine. thanks for the constructive feedback. (not sarcastic.)
I didn't downvote you, because I appreciate the effort you put in to your post. However, I think I have some insight into why your post has received some downvotes.
First, you're using some poorly defined terminology that seems to cater to your implicit biases. What, exactly, do you mean by "smart people" and "dumb people"?
Second, you have some arguments here that seem like non-sequiturs. What does it matter that Elon Musk slept at his office? Does a janitor get bonus points for sleeping in the broom closet instead of at his apartment?
Third, the doubt you're raising about self-made billionaires is off topic. That is an interesting phenomenon in it's own right but isn't something Piketty wrote about because it wasn't the topic of his research.
Fourth, your own personal correspondence with Piketty is irrelevant and a distraction. It signals (to us, I suppose) that you care a lot about this topic. The fact that you care a lot doesn't help make your arguments more persuasive.
Finally, the tone of your post here is filled with appeals to emotion, exasperation, and frustration. You're having trouble making cogent arguments because you seem to be heavily invested in your own feelings about this subject. Those feelings are fine, and natural, but they do not make for a cogent argument. There is no point in attempting to persuade others that you are correct by mentioning that you really care a lot and have a lot of emotional investment in the subject.
I cleared up one point of confusion by editing my original comment - I did not mean that my comment was bitter (it's not) but rather that the reality it describes is bitter.
I've read through your points and I don't feel it will be a productive use of our time to engage further.
However, I will make one last very brief summary in the most rigorous possible logical terms. If owning a computer gives unequal personal utility to people, then if everyone owns a personal computer, people will have unequal personal utility. The world won't be "fair."
Now if instead of "personal utility" you substitute "creation of wealth" and for the computer you substitute all of the wheels of American capitalism, you will see that if everyone has the same access, but due to differing skills and interests differing results, then the world will be unfair. There is no way to make it fair except by shutting off the wheels of capitalism (in the proxy argument, there is no way to make sure everyone has the same level of utility except by taking away everyone's computer). I'm sorry, this is a fully rigorous argument, not at all emotional, and I'm just not prepared to invest any more time in explaining it. I did my best. Sorry if we disagree.
We disagree because I find a flawed premise in your argument that undermines the entire rest of your conclusions. Capitalism is not equal access. Those who already have lots of capital have access to the tools of capitalism. Those who do not already have lots of capital have almost no access.
>Those who do not already have lots of capital have almost no access.
explain how the Russian immigrant Sergey Brin had "lots of capital" or how the South African immigrant Elon Musk had "lots of capital".
Yet they are billionaires. So what do we do about this unequal outcome? Turn off people's right to make startups without requiring any capital?
The simple fact is that while Marx wrote in the 19th century when you needed millions to start up a factory, today the cost for starting to create dynastic, millionaire or billionaire wealth is: $0. It has no capital cost. Of any kind. At east, in silicon valley.
what is to keep this from spreading in the future? What is Piketty's response?
In fact there is no such response. There is no way to stop unequal wealth except by taking people's computers away.
You state that you follow my argument but I don't believe you are able to follow it.
Can you agree with this statement please: If owning a purple rock gives people unequal utility (some people get great pleasure out of it while others do not) then if everyone owns a purple rock, people will have unequal purple rock-related utility under this world scenario. Please agree, it's quite specific and formal.
(I realize this is only the proxy argument.)
Now suppose our most important value were equality of outcome. What shall we do? We must measure people's utility, and somehow take from people who get greater utility from purple rocks, enough of their purple rocks, that they end up with the same net utility. So someone who gets huge utility from owning a purple rock might need to be given just a gram, whereas someone who gets almost no utility from it may need to be given a mountain.
Okay, now apply it to money. If someone gets huge capital out of almost capital, do you have to take it all away? If you took away 99.999% of Sergey Brin's capital away when he was founding Google, then today's $50 billion net worth that he has would be $50 billion * 0.001% = $500,000. Unfortunately, that is still too much - it's more than average.
So should he have had 99.9999% taken away, since taking away 99.999% does not lead to an equal outcome?
This is not a theoretical question. It's a practical question you must address. In 2017 there are no capital requirements of any kind that are necessary in order to create billions of dollars, dynastic-level wealth. Zero.
I am afraid you are not following my argument, and that's okay. You are simply wrong that "those who do not already have lots of capital have almost no access." It is similar to saying only a white male can become President. Why would you say that, when it's demonstrably false?
Since you are arguing from false facts, and also don't seem to follow my argument, this is not going to be a productive exchange. Sorry - I tried.
Sergey Brin was enrolled in an advanced PhD candidate program at a super-elite technology university. Brin's parents were highly educated academics. Brin himself was highly educated and was raised in an environment of middle-class affluence. This is not the story of a struggling immigrant who struggled to pay rent. Brin had a priviliged upbringing.
Elon Musk also had a middle class upbringing with highly educated parents who provided him with an affluent middle class childhood. He enrolled at elite universities (UPenn, NYU Wharton, Standford) where he started his career surrounded by wealth and access to capital.
Musk is an interesting case in particular in that luck and timing account for most of his initial capital. He started a website (Zip2.com) in the middle of the dotcom bubble and it was purchased from him $300 million. The site was acquired by Compaq in 1999 and ceased operations in 1999. The dotcom bubble burst less than one year later. The money from that sale positioned Musk as a member of the capitalist class and he leveraged the money and connections from that for all his future businesses. While he did, technically, bootstrap his career, it would be naive and foolish to ignore the element of luck involved here.
I'm having trouble taking you seriously because you choose such bad examples to make your points and ignore the obvious counter-examples. In short, the system just works differently for people of low socio-economic status. Musk and Brin were not of low socio-economic status. They started as very high status and ascended to become ultra-elite status.
You make another assumption that is flawed and unfounded, and makes it seem like you are arguing against a strawman. I do not assume that equality of outcome is desirable. There are some in the social justice left that believe this but I don't, and in fact very few Americans do (as can be seen by election results). I believe that sane policy must acknowledge that inequality of opportunity is an endemic problem in our society and that success in capitalism is based on opportunities, which are not distributed in a fair manner.
oh hey if your definition of capital included education (and the education and professions of one's family), luck, timing, and socioeconomic class then we're in complete agreement.
Let me state it for the record: in 2017 it's impossible to build great wealth without your updated definition of great capital. completely agreed.
as we're in agreement this conversation is over. nice chatting with you.
> Here is a question Piketty didn't ask: what percent of dynastic, billionaire wealth was created in a single generation in America? Not addressed at all. (And I read his book and wrote to him with my criticism, which he didn't reply to.)
Actually he has addressed this, and the answer is relatively little. Most wealth in the world is passed down from one generation to the next, growing at a rate faster than the economy in general. Many of the richest families in the world from centuries ago are still the richest families. Other than in small pockets of the world, like silicon valley, new money is pretty rare.
What's so hard about shifting the burden of tax from income to wealth? Week after week having 30% of your income taken away is what prevents a lot of people from ever getting ahead.
> What's so hard about shifting the burden of tax from income to wealth?
Well, there are a bunch of practical difficulties, beyond just political will.
First, "wealth" is much harder to cheaply and objectively quantify than cash income. The value is often very subjective, and changes over time and circumstance.
Even a lot of "what's it worth right now" statements are flimsy: A guy might have X stock in a company worth $Y, but it's only a "if things go right" $Y because if you try to sell it all at once you'll cause a panic among investors and get fairly little for it.
Lastly, it's much easier for people to hide their current wealth, when they have an incentive to lie about it and have years to do it in. You'd need a financial panopticon to make sure nobody's burying gold in their garden while telling the tax man they spent it all on expensive food.
Sure. But I want to correct you on one thing: the US median income is $52,000. While the marginal tax rate for that amount, when filing as a single, is 25%, the effective tax rate is only 19%. When filing jointly, it is 16%.
You don't reach 30% effective rate (single) until you make $500,000, at which point you're pretty well off. :)
True, but that ignores FICA, state income tax, city income tax (rare), sales tax, property tax, etc, etc. Granted, these aren't all income taxes, they have their own curves, etc, but still, paying an overall effective rate of 30% isn't that difficult.
For starters the fact that wealth is mostly illiquid. What happens when you slap a big tax bill on wealth is that either it cannot be paid and the owner needs to liquidate, and/or the wealth will move outside the country.
They're not. When The Economist agrees you have a point then you're pretty mainstream. True, some economists are nitpicking on his book because they don't like the conclusion, but the problem Picketty has identified is rarely denied.
I agree. Economists are definitely not giving Piketty the cold shoulder. He is a star in the field. His protege, Zucman, killed it on the job market.
There are definitely some economists who disagree with him, but if you go into any academic field and you'll find plenty of people disagreeing with the field's luminaries.
You don't get clicks for writing articles about [fellow] economists if you don't insult them for not having the same opinion and research focus as you, preferably without recourse to intellectual honesty. Piketty's Capital has more citations on Google Scholar than some of Friedman's better known papers that formed the basis of macroeconomics policy and arguments for half a century...
No doubt in 5-10 years when the fashionable economics theory du jour concerns debt or housing or tax incidence or technological progress - and large sections of the economics profession do respond - the author will be amongst those chastised for "ignoring" such pressing issues by not abandoning his interest in researching inequality to write papers focusing on Fashionable New Theory instead.
I don't think that all who disagree with Picketty's conclusions do so simply because they don't like them. Nor would I agree that all critiques are mere nitpicks. For example, here's an IMF working paper that conducts an empirical examination of Picketty's hypothesis: https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf
From the abstract:
In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.
I don't have a link to the actual academic article on it at the moment, but there are a variety of ways in which Picketty's science has been examined and found to be kind of bunk.
First, he made a lot of methodological errors, like using tax data as a proxy for income and then not adjusting for a change in tax treatment between one year and the next in the 1980s.
Second, more fundamentally, he's computing inequality without accounting for taxes and transfer payments, i.e. the things that we do to ameliorate inequality, e.g. food stamps, the EITC, and the entire Social Security, Medicare, Medicaid complex. I seem to recall that employer-paid benefits which are excluded from tax, like health insurance benefits, are also excluded.
At the high-level, in terms of big theoretical flaws, he posits this broad "when rate of return on capital exceeds the growth of the economy the rich just get richer" theory which is fine until the rich person dies, gives most of his assets away to charity, loses half of what's left to the death tax, and has more than one heir. People sometimes joke about how economists make a bunch of ridiculous assumptions in their models, and "people live for ever" is actually one of them, and it actually makes sense most of the time (because it usually doesn't affect what you're modelling), but this is the case where it affects what you're modelling.
This all started in 2014, so some of it may have been improved or corrected since then, but Picketty's popularity is still independent of any actual measure of facts or truths in the world. It's related to confirmation bias of the listener. This is why he is used in politics so much. (This isn't special or specially bad; it's why anything is, really. But see it for what it is and look to science rather than politicians for a fight on the facts.)
What's wrong with computing pre-transfer inequality? His thesis is about how the capitalist market distributes income and wealth. The fact that governments see the need to intervene and redistribute is a symptom of the inequality generated by the market.
Regarding your "big theoretical flaws" on intergenerational wealth dynamics, here's an entire chapter by Piketty and Zucman on the subject, confirming that their central hypothesis holds when taking inheritance into account: http://gabriel-zucman.eu/files/PikettyZucman2015.pdf
Very few economists I know of disagree with Piketty's conclusions. Everyone knows he's right. But it is a very inconvenient problem, and most economists and leaders have a vested interest in not solving it.
His observation is that inequality is raising in most western countries. (It does not increase globally.) His conclusion is that we should tax the rich more - which is not very original and many disagree with. Also, Piketty misses some of the root causes of inequality. He blames capitalism, when in fact the main driver is increasing age. The older people get, the more their income and wealth differs. As society ages, inequality increases. Furthermore, many western countries are importing inequality through immigration. When lots of poor enter a rich country, the inequality in that country goes up. Furthermore, divorces and being a single parent is a huge poverty risk in many western countries. To a certain extent, inequality is the price of liberally allowing divorces and children outside marriage.
So it is not that economists deny Piketty's observations, but they find his recipes to counter inequality overly simplistic.
Wealth increasing due to age is exactly the result of a system where accumulated capital is a tax-preffered method of wealth generation. Capitalism as practiced advantages anyone who has more wealth than another, and unchecked leads exactly to the kind of wealth inequality we see in the world right now.
> He blames capitalism, when in fact the main driver is increasing age.
Source? This sounds like a pet theory rather than anything substantiated, especially since there's plenty of evidence of inequality among younger people. (Or were you saying that people get richer as they get older? It's not clear.)
> To a certain extent, inequality is the price of liberally allowing divorces and children outside marriage.
Are you actually saying that, to fight inequality, we need to stigmatize divorce and extramarital sex more? Or are you just saying that inequality is an unavoidable consequence of allowing divorce, and there's no point trying to fix that?
Yes, it is a pet theory, but a substantiated one. We've looked into Piketty's ideas during a semester project when I did a master's in economics. Among other things, we found that Piketty's measure for inequality (the percentage of wealth that is held by the top 10%) correlates very well with median age in the US. (T-stat: 7.2, R-squared: 0.90). Yes, correlation does not imply causation, but it is a strong hint that there is a connection.
This may be a really dumb question(it's late and I'm writing this in bed)but wouldn't retirement savings and investments explain the age related bias? If so, do you propose getting rid of retirement planning?
I'm sure that age does exacerbate fiscal inequality, as the rich gather savings and the poor lose the ability to work. I'm not sure how you get from there to "capitalism isn't a substantial factor in inequality." It seems like you're cherrypicking the causes that we can't reasonably change, so as to justify ignoring the problem.
Capitalism certainly also plays a role here. However, I would argue that capitalism itself did not get worse in comparison to fifty years ago. Its the demographics that have changed. However, you are right that we cannot change demographics, so we might need to adjust capitalism. In fact, this argument might even be used to justify more government intervention than ever before, exactly because the situation has changed and the high level of economic freedom we had earlier might not be as healthy any more under these new circumstances. So the argument can go both ways.
Personal swipes are not welcome here, and we ban accounts that comment like this. Please (re)-read the site guidelines and follow them. That means posting civilly and substantively, or not at all.
> But it is a very inconvenient problem, and most economists and leaders have a vested interest in not solving it.
I don't have an opinion on the matter (haven't Piketty) but saying such things really is a conversation killer and makes me question your honesty. You are basically questioning the intellectual integrity of anyone who is critical to an idea you support. If you genuinely believe that, I urge you to get out of your bubble a bit!
Some thoughts: While working in finance I was able to talk to many people who's work was related to economics. Employees at banks and brokerages, governments and regulator bodies. Most had heard of Piketty, and many agreed with his basic premises (r>g, and all it entails). His reach actually surprised me.
But I also had contact with academics, and like the article said, it's not so much that academics are refuting Piketty, but that they simply aren't studying the same problems that he is talking about. From what I've been told, a lot of academic work in economics is focused on incredibly unique and specific problems. It isn't "fashionable" to be studying something so broad and perhaps abstract as inequality.
The most ardent fight against tyranny and overlords comes from aristocrats who wish to be equal - but just to each other, not to the common herd (thank you very much, goodbye my good man).
The real problem is, while many complain about 'inequality' no one has consistently defined what 'equality' looks like in a way that can be replicable, implementable, or prescriptive.
What is this world in which income / wealth / opportunity is 'equal'? Is this a world we want to live in? What are the rules of this world? What steps need to be taken on the policy front to achieve this world? Are those steps that the anti-inequality elites are willing to undertake?
> There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.
Not that this actually answers your question... ;)
This is an excellent piece and does answer my question actually. People simply conflate fairness and equality and that seeps into the discourse because it makes for easy platitudinal soundbites. Of course, taken to its logical conclusion, equality looks like this[1]. No one actually wants that world.
My undergrad was primarily in Econ, and it was a pretty common saying that "Nobody is a Macroeconomist."
After Economics moved hard away from Political Economy and into Mathematics some time ago, that kind of broad economics is rare so not really considered the same way or has the same amount of academic discussion.
But why? Doesn't that shut out a range of economic theories from the discussion? Classic political economy and its critiques (Marx et al.) I feel are still relevant and useful. If they are not to be studied in economics, then where?
Sociology tends to have more differentiation in what sources are taken as 'canon'. You can probably still find Marxist sociologists, although the field has somewhat collapsed since the 80's.
That basic premise seems flawed to me for two reasons. First is that r is like a first deriative (of the asset value) and g as a second derivative (gdp being the first derivative of the total assets of a country, while gdp growth the seocnd), so they are not direcly copareable. The second is that r is very directly measurable, while the gdp and gdp growth have huge uncertainties and inconsistencies. Here's an example: the GDP of Bulgaria. In 1996 it was about $10BN, and in 2016 about $50BN. It grew in 20 years by 5, which means an annualized rate of 8.4%. However if you look at the historical gdp growth then the average for the last 20 years is about 1% (see [1] and [2]). Why the disconnect? I don't know, but if someone tells me that r>g because g is 1%, I take that with a grain of salt.
And in most of the years after 2008 it was well below 5%, with some years of negative growth. Also, during the period 1998-2008, the GDP increased from about $15BN to about $55BN, representing an annualized rate of about 14%.
I don't mean to come off as harsh, but your reasons are wrong. Piketty isn't some random guy who threw together some numbers and came up with a theory. His work is extensively researched and reviewed. He's thought of and responded to every objection you made. If you are interested in the topic then you should definitely read his book.
Take a look at your numbers again. You have made multiple mistakes. Your 8.4% annualized rate is wrong - You can't just take the start and end points to calculate an average. Plus, you are plugging quarterly data into yearly calculations.
Your whole argument is nothing more than the fallacy of argument from authority.
Researchers aren't flawless, and they do make mistakes, even in the very methodology they adopt. That's why peer review is a thing, and academia subjects their work to peer review.
Hell, there's a very good reason why the Royal Society's motto is "take nobody's word for it."
My greatest issue with Pinketty's work is that he fails to address the fact that compound growth is not commutative (meaning that it is always better to concentrate higher growth rates earlier on, and then benefit from then comparatively ”coast along” at lower growth rates thereafter). This means that average returns is quite senseless as a topic: one needs to take into account the temporal distribution thereof.
Dean Baker (warned of the housing bubble since 2002, "Bernie 2016") gave the best response to Piketty that I heard from a left-wing economist:
* Piketty's data is correct
* him collecting it was a harder feat than one might think
* attributing r>g to some unchangeable nature of capitalism is wrong because "capitalism is infinitely malleable" (every market is regulated somehow, things change a lot depending for instance on whether you do or don't have patents)
* Piketty's policy prescription (a global wealth tax) is unimplementable and harmful in the sense of getting all the attention instead of people focusing on his correct assessment that r>g and then on realistically implementable policies which could change this.
On the topic of that last point, Dr. Mazzucato proposes the alternative of greater licensing of government developed technology as a more realistic alternative in her book "The Entrepreneurial State". I wrote a summary here if you're curious: https://medium.com/@seanaubin/book-review-the-entrepreneuria...
Normalizing the concept of a wealth tax is productive even if it's unimplementable. The right has used the same approach by having think tanks promote flat consumption taxes and zero corporate tax rates.
If nothing else the absence of a theoretically desirable wealth tax serves as a justification for progressive income taxes and higher capital gains taxes.
A wealth tax isn't unimplementable because of political will but because a lot of assets are illiquid, hard to price, easy to hide, easy to move to another country (hence the call for a global tax, but what if a few countries defect?) or a combination.
As to approaches: "the left" if there is such a thing successfully campaigned for a full confiscation of property, a 100÷ wealth tax if you like, in huge chunks of the world - I don't see a weakness in persuasive ability there. Wasn't a great idea though. A smaller wealth tax is a better idea, but still not great. Baker who one can agree or disagree with has better policy ideas, or at least better thought-out and consistent ones IMO.
Piketty's idea that r > g leads to wealth inequality just makes me shrug. You can't really have it another way.
If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?
The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.
If I can grow my wealth more quickly than the nations output, I'm grabbing a bigger slice of the pie. The hope with capitalism is that I'm grabbing that pie because I've earned it and the market hopes I'll be able to steward that wealth.
So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?
There certainly is wealth inequality in the world, but it isn't actionable to blame it on r > g. It's more effective to look at things on a micro basis. Does this person have a child that is prohibiting them from saving? Why is the person being excluded from jobs? Do they have a proper education?
> The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.
Is that true? If I have capital wouldn't I want to allocate it for the best risk/return/effort. That my percentage of the pie is shrinking doesn't mean I would allocate my capital inefficently to accelerate that shrinkage.
For example, imagine today you had 1 million dollars. If interest rates were 0.1% would you say no to that risk free $1000 a year? I wouldn't. I would click that button. Perhaps it would encourage me to spend more but I wouldn't sit on cash.
I agree that it makes sense to allocate your capital efficiently.
A risk free 0.1% doesn't look like you're being an employer though.
It sounds like the rate that comes from your deposits at a bank (which lends your deposits to make money, which in some way most likely depends on them getting a higher rate of return on capital than growth in output)
Let's agree that you can't have it another way. But there are still huge questions attendant to that arrangement.
For example, should opportunity be unlimited, or is the prospect of earning enough for a very comfortable life sufficient motivation?
Or, how much are we willing to let families build dynastic wealth? Shouldn't wealthy people's children be expected to compete without a huge head start over the children of poor families?
Shrugging suggests to me that the conversation is over, but I think it's just beginning once we recognize that this is a fundamental economic force. How do we harness it as a society and pursue a just world?
For example, should opportunity be unlimited, or is the prospect of earning enough for a very comfortable life sufficient motivation?
One problem with this idea is that the factors that determine what's meant by a "very comfortable life" will necessarily have to be decided by politicians and bureaucrats and imposed by force. By distorting (if not entirely removing) the effects of economic competition, a system of that nature turns the problem of achieving material success into an almost-purely political one.
When people who don't actually create value are given excessive power over people who do, economic progress stops. We've seen the outcome in enough places, from the Soviet Union to modern-day Venezuela, that it almost seems inevitable: the rich still get richer, but the rising tide that's supposed to lift all the boats never seems to come in.
But what's being done in the West isn't working either? The rich (especially the 0.1%) have seen ludicrous spikes in growth whilst the middle class collapses.
The fact that we don't have riots in the streets means that the collapse of the middle class has been greatly exaggerated. Most people are better off in most material ways than they were in decades past, like it or not. Even if the numbers in their bank accounts aren't as large.
Are you claiming with your statement that riots in the street are the only mechanism for supplying meaningful evidence of a significant inequality between middle and upper classes?
No, I'm claiming that market economies are not zero-sum games, and that a number in somebody else's bank account isn't the best thing to focus on as you go through life.
That "number in somebody else's bank account" is meaningful. It represents a claim on a share of the world's resources. Those resources are essentially finite.
> Most people are better off in most material ways than they were in decades past
I see this sentiment a lot and I find it utterly meaningless.
The issue is not that people have higher or lower living standards than they have in the past, but that their share in economic prosperity is declining while the shares of a small few are skyrocketing.
That is a serious problem that will lead to a sort of modern feudal rentier society.
Hardly. It could be as simple as setting a high tax rate at some threshold of income. Not sure why you're jumping straight to central control of the economy as though it's the only option - it's the most extreme option among many.
All those poor slaves who were earning over $300,000 a year in the 1960s United States, and had to pay a 91% marginal tax rate on the extra.
It's entirely reasonable to debate the appropriateness of such rates, but claiming that "slavery" is even close to a legitimate comparison demonstrates a shocking disregard for the plight of actual slaves, both past and present.
No, not really. The abstract threat of force for acting as though you could possibly have or accomplish everything without having had the support of society is nothing like the very immediate threat of torture, rape, or death. They do happen to be on the same spectrum, which gives you only the barest excuse for such a callous view.
> If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?
The idea is that you consider yourself a smart and educated investor. Therefore, you are confident that even with r = g, your particular investment is wise and will yield a huge profit.
> So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?
You can get a rate of return that will consistently be higher than the growth of the economy by dumping your money into an index fund. I would consider that more like taking advantage of other people's work than "outperforming" anything.
How can it be a huge profit if r = g? You'd need to invest more in g to increase r by an equal amount.
The fact that you can consistently get higher growth in an index fund than GDP is just a symptom of r > g. It incentivizes you to save. But this simple example also ignores volatility in stocks, GDP can drop by 3% and index funds can drop by far more. Also is it really taking advantage of other peoples work if they go through a public offering and offer to sell you the stock of their own free will?
As I said, because you are such a brilliant investor!
Think of the economy as a casino and the investor as a gambler. The casino flips coins. You can bet $1 for heads or tails and if you guess right, you win $2.00.01. This is r > g. Clearly, it is nice to have dollars spare so you can bet in this casino. For the casino, it is not so nice.
In another casino you can also bet on coin flips, but you only get $2 for winning bets. On average, gamblers are neither winning nor losing money. This is r = g. Gamblers still continue to play because they think they have figured out how to get an edge.
In real world casinos, r < g but people still happily play.
And perhaps the game isn't coin flipping but something skill-based like chess played against other gamblers? I hope you see how r = g wouldn't stop investment money from flowing in the economy.
On average they are. However, if the game was skill based, like playing chess for money instead of coin flipping, then it would be easy for gamblers to get an edge by being skilled enough. If we consider investing more like playing chess than coin flipping, then in the r = g scenario, the economy would reward smart investors with huge profits. Dumb investors would lose all their money. As it should be.
So your analogy is smart chess players playing against stupid ones, but both players can only bet a dollar and win 2?
That scenario only "works" if you have a limitless supply of suckers.
Sooner instead of later the worse players will realize they need to be able to win more than a dollar to compensate for their risk. The result is an unvirtuous cycle where the bottom players keep dropping out because their odds are getting worse and worse.
Given that people happily play on in casinos where the odds are significantly worse than even, I think it is safe to rely on the universe providing us with an infinite supply of suckers.
Anyway, a fairer stock market wouldn't have to be a completely zero-sum game. It would just not have to be as heavily tilted in favor of the gambler/investor as it is today.
The smart people that go into a casino aren't expecting to come out ahead, they walk in knowing they're probably going to burn a couple hundred bucks. They also get to leave, which is why they're willing to play at worse odds for a short time. Given that, I don't think its safe for you to rely on an infinite supply of suckers.
What if they want to go to a different casino that gives them better odds, will you force them to stay? If they can't leave they'll figure out who they shouldn't play against because they'll lose. So now are you forcing them to play? Now you're either micromanaging which ones should play against each other to make sure nobody ends up broke, or you're actively forcing them into poverty.
> If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?
You can still spend the principal you made without having to be employed. If I understand correctly, r>g is about how much of new wealth is coming to labor vs rent on existing capital.
> So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?
You mean would I want capitalism to be different, or would I want a system that wasn't driven to inequality because it relied on capital returns to drive both the economic system and (due to fungibility of power) and the political system?
The first is a pointless question, the second, well, yeah. It's the fundamental problem with capitalism that led both socialist critics to identify and seek to overthrow it, and more moderate social democrats to seek to reform and moderate it.
> There certainly is wealth inequality in the world, but it isn't actionable to blame it on r > g.
Sure it's actionable, and if it's the true cause, no micro action is meaningful.
You may not like the actions that are implied by understanding the root cause, but that doesn't make it not actionable.
The idea that outperformance should be rewarded with wealth is fundamental to the idea of capitalism. It is well represented by the idea of r > g. Also, just because r > g, doesn't mean that the economy relies on capital returns. It means it relies on capital returns being able to outstrip increases in output.
If you want a system where r = g, you are requiring some sort of top down wealth allocation system to cap r, (a morally and legally supreme government...socialism?). I'll avoid that system.
If you think it's actionable perhaps you could suggest an action?
If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed? That's a pretty lame excuse, I'd feel bad saying that.
> The idea that outperformance should be rewarded with wealth is fundamental to the idea of capitalism. It is well represented by the idea of r > g.
No, the idea that aggregate performance should redound principally to the benefit of capital holders is fundamental to the idea of capitalism, and, yes, that pretty much implied that r > g leads to greater inequality under capitalism.
> If you think it's actionable perhaps you could suggest an action?
If the problem is fundamental to capitalism, the action to correct it is to move away from capitalism.
> If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed?
No, it means when I do something to momentarily alleviate the immediate problems of a homeless person, I know that unless I am also working to reform the fundamental politico-economic system to deal with the structural problem, I'm doing nothing more than putting a band-aid on a sucking chest wound.
r > g is not the problem, r > g is aggregate prosperity. Capitalism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
You're saying no, but our statements mean essentially the same thing. Aggregate performance rebounds to the benefit of capital holders because they are outperforming. For example, it is better to save and lend than it is to borrow, which is why interest rates exist.
I'm not disagreeing that r > g can lead to greater inequality under capitalism. The reason you can have inequality under capitalism is because you have the opportunity for outperformance. I don't want to live somewhere that opportunity doesn't exist. You can if you'd like.
How can you say that it's a problem fundamental to capitalism when I can look through history and say these things without a doubt:
Socialism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Autocracy is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Communism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Dictatorships are the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
It's not a fundamental problem of capitalism, it's a fundamental problem of society.
By doing something to alleviate their immediate problems do you mean help them get clothes for a job interview? Point out a way for them to learn a skill to get a job? Locate a homeless shelter for them to spend the night? The longer you take to reform the system, the guiltier you should feel for not simply helping the person with a comparatively more immediate solution: micro actions. All of a sudden micro actions are meaningful.
Your suggestion for an action on how to deal with the inequality of capitalism is to adopt... not capitalism? I think you're lacking important details on how to turn that into an action.
> The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.
This is interesting. Let's say there is a a r=g, to r is slightly less than g world. Then people would try to maximize employment & investing that income. Sortof double dipping. Am I thinking about that correctly?
Also, r<g doesn't mean that you're 'never' going to make more than the growth in output, right? Theoretically good stewards would outpace the market.
I thought the author would mention the new collection of essays After Piketty: The Agenda for Economics and Inequality, particularly since he is one of the editors.
As far as I can tell (I ran out of patience about halfway through), this is less a review of Capital than it is an attempt to brand Piketty part of a particular ideological lineage. It seems like for every sentence quoted from the book there's a couple of paragraphs name-dropping Marx, Aristotle, Malthus et. al..
Also:
> One begins to suspect that the typical leftist—most of the graver worries have come from there abouts, naturally, though not so very naturally considering the great payoff of “capitalism” for the working class—starts with a root conviction that capitalism is seriously defective. The conviction is acquired at age 16 years when the proto-leftist discovers poverty but has no intellectual tools to understand its source.
His work doesn't depend an a normative judgement that inequality is a bad thing. His work is an observation about how inequality works, not a judgement.
Your comment is a strange one, and I hear it a lot projected at Marxian-thinking people and economists too. In the case of Marx, he does not call inequality a bad thing, he says it is within the self-interest of the workers themselves to rise up against the system which produces the inequality; there is no moral judgment nor a decision on what is just - he states it as a fact from his research.
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[ 5.5 ms ] story [ 138 ms ] threadSaying what people want to hear does not make you a good researcher. They don't take him seriously for the same reason we don't take young-earth creationist researchers seriously. It's not good research.
Edit: I'm not an economist, and I'm not going to do justice to the criticisms (which aren't hard to find), but fine, here are links:
http://www.robertdkirkby.com/blog/2015/criticisms-of-piketty...
https://www.bloomberg.com/view/articles/2015-03-27/piketty-s...
... with a Nobel prize, to boot.
We judge science based on testable theories and results, and the quality of the work done to make those results trustworthy. Pruitt may heavily flunk that part, but any intelligent person who doesn't can contribute to science, regardless of their background.
Argument from authority is not always fallacious. Please read:
https://en.wikipedia.org/wiki/Argument_from_authority#Struct...
I posit that the argument I made uses the valid form: people who are established authorities on a given topic are more trustworthy when making claims about that topic, because they are more likely to be correct. Pruitt himself has proven the opposite to be true as well by being repeatedly wrong about science and rejecting scientifically established facts.
Piketty is a world class economist that presents rigorous arguments backed by very large amounts of empirical data. Scott Pruitt is a political hack paid to lie about climate science for the benefit of the fossil fuel industry. The fact that you conflate them says more about you than it does about Piketty or Pruitt.
>>But perhaps the greatest rebuke of Piketty to be found among academic economics is not contained in any of these overt or veiled attacks on his scholarship and interpretation, but rather in the deafening silence that greets it, as well as inequality in general, in broad swathes of the field—even to this day.
The reason for this deafening silence is simple: the truth revealed by Piketty is inconvenient, and there are no easy solutions.
Kind of like Churchill's quote about how democracy is the worst form of government, except for all of the others that have been tried.
I have not seen a definition of capitalism which was not either contradictory, or which relied on sufficiently general abstractions (utility instead of profit, social contracts and monopolies on force instead of states).
The level of authoritarian control you would have to have over a society in order to prevent a system of government from forming would certainly itself qualify as a system of government. So free enterprise always generates some sort of governing actor, and any mandate that results is, by the transitive property, the result of free enterprise. Since all systems are ultimately the result of free enterprise and "rational" motives, it's hard to argue that "Capitalism" is anything but the trivial classifier, if it is well defined.
I'd argue that the successful policies that Americans incorrectly attributed to the "capitalism" were actually attributable to the sort of meta-philosophy of pragmatism. Which is the philosophy of not really having a philosophy, and never letting any belief become sacred (A philosophy which we certainly do not adhere to now).
That's a very good point.
When we see people complaining about capitalism, these critics are essentially targeted at rule of law and the recognition of a right to private property, and how states don't simply confiscate private property held by those subjectively labeled as "the rich".
http://www.politico.com/magazine/story/2014/06/the-pitchfork...
A lot of ideas have been discredited, or at least played out. But there's still a constituency for those ideas, and there will continue to be until the orthodox "elites" come to terms with what's going on.
(And they're not really elites; I count myself as one of them, as skilled developers are not at immediate risk of being outsourced and are not strongly bound to any one country. I'm still winning from the current economic system. But I can see that it can't continue, the majority won't stand for it.)
We'll need the "low level" jobs, e.g. cleaners. Given the cost of automation, it's just not interesting enough to automate this. We'll also need the high level jobs, e.g. anything that requires significant (creative) thinking to some extent. Unique creative thought is probably the only thing that can't be automated at the moment.
Most traditional middle class jobs can easily be simplified / removed / etc. For each job that's created in software development, two traditional ones will disappear. We're optimising the world.
Tl;dr: Most people, imo, haven't realised the world is changing. The people voting Trump / UKIP / Brexit / Le Pen are (unless someone gives me a good argument) fools for thinking the people they elect can actually change things. I'm not saying they haven't been left behind, or there are no legit concerns, but to think these people can change things.. that's just ridiculous.
For example: I dare say Trump doesn't give a flying fuck about what he had to do to get elected. He picked out 5 or 10 focus groups that would give him the necessary votes to win, and focused on those. He won't deliver. He just wanted to be president.
It's weird that we tend to assume people are stupid or disingenuous when we disagree with them. Trump has been on the receiving end of a lot of that and in the case of economics it's easily debunked. He was a supporter of Ross Perot in the 90s, and nearly ran for Perot's Reform party. For those too young to remember, Perot's primary issue was protection for American jobs. The interesting is that, as international businessmen, both Perot and Trump were in more of a position to make money internationally than under the protectionist rules they pushed. When you realize that it looks a little less like self-interest.
There are many reasons to dislike Trump but it doesn't do any good to minimize him. In fact, it's counter-productive. You counter your opponent by really knowing him.
Obviously with the dinner debacle the EU side's motive was to inject some realism about the weakness of Britain's hand, but May played it the only way she could have.
Britain didn't learn the full lesson from World War II: that nationalism is actually a bad thing. Its approach to Europe has been wrong all throughout as a result, and it's compounded by being joined at the hip to US foreign policy.
But everywhere else in the world is growing economically, and the West is shrinking as a slice of the overall pie, and this will naturally add to the continuing decline in the US's ability to project its will. The EU is also about creating a larger centre of gravity able to negotiate as an equal to China and the US. It'll take some time for the UK to realize how lonely it is on the outside, especially as protectionism increases - fewer friendly ports on the open sea, and bigger sharks - it's not the best time to be setting sail alone.
I don't think there's much alternative to joining a larger political entity if you're geographically near one, given what we know about economic links and distances. A possible advantage of something like the EU is that it doesn't have a cohesive enough identity to think nationalistically and get into trouble that way.
It isn't a solvable problem, honestly, is the big secret no one really wants to admit.
Capitalism, by its nature, is going to chase efficiency globally regardless of what you do to prevent it. Technology, over time, is going to make this worse because it is easier to avoid inconvenient regulations by operating out of "friendly" countries as well as enabling automation that really only leaves "services" that pays very little for many people who used to have better options.
The truth is the Middle Class is going to shrink no matter what you do and you are going to basically end up with a very large gap of people making 6 figures (who can afford to hire people to handle things for them) and less skilled people who will be reduced to jobs servicing them that barely pay above minimum wage.
People don't like "income redistribution" but that is the only way to actually solve the problem long term. It needs to be done in a way that working is still incentived but where those relatively low paying service jobs + the redistribution leaves people with the housing, food, and health care they need.
The reality is, the bottom 50% in most countries need about 20% of the national income to be happy...and in the US they are getting about 12%.
The problem is, right now, that is politically impossible outside of a handful of European countries.
From a problem-solving standpoint, I don't think the solutions are really that hard. I think some of them are downright easy. What's hard is getting anything done in the current environment. Perhaps that's what you meant, though.
So, the rest of this comment makes a very dense argument, first using a proxy argument and then switching in the actual argument. The proxy argument is correct but probably you don't like reading it. So just get through it like bitter medicine.
So. Proxy argument. True statement:
Computers are inherently unegalitarian because smarter people get more utility out of them. You simply cannot give the same amount of utility to a dumber and a smarter person at the same capital cost.
So far you might be thinking "Huh? You're saying smarter people get more pleasure out of reading so the Internet is unequal? What the hell... Anyone can read, who cares if some people get more pleasure out of it and others less?"
But the problem is that nearly the same argument applies to startups and creating wealth. Instead of utility (personal pleasure from the Internet), you are now discussing "access to the wheels of capitalism".
Musk slept at the office and shared a computer. Sergey Brin is a Ukrainian immigrant.
The reason these people have unequal results is because computers are inherently not egalitarian: smart people just get more out of them.
You can't stop it, any more than you can stop smart people from getting more pleasure from reading. Can't be done. sorry.
Here is a question Piketty didn't ask: what percent of dynastic, billionaire wealth was created in a single generation in America?
Not addressed at all.
[EDIT: removed reference to more information than is contained here. This comment contains all of the information to understand my point.]
> Here is a question Piketty didn't ask: what percent of dynastic, billionaire wealth was created in a single generation in America?
I think it's a fair point, IIRC it was also raised during EconTalk discussion with Piketty (http://www.econtalk.org/archives/2014/09/thomas_piketty.html).
Piketty's argument is based on the assumption that, broadly speaking, low income inequality is a desirable trait of a society, and does in fact spend some time going into detail how technology accelerates inequality. His analysis is on how to create a more sustainable society in light of this.
> As a person who is extremely intelligent and eloquent, I am sure this post will be downvoted by my peers who are threatened by my conclusions and wit. In fact, I have a very cohesive argument, which I am about to show you. The argument will relate two things. You will then agree that my argument has merit, because it is very well made.
Then a few sentences hidden in the middle, long after people have written it off as a rambling diatribe:
> Capitalism, like a computer, is a tool, and the most intelligent and capable humans make the best use of tools for the most reward. I've heard of rags-to-riches stories. Therefore capitalism must rewards intelligence and capability, not accumulated capital.
Unfortunately these aren't susceptible to skimming to the end, because they're bookended with:
> This means Picketty is wrong and I've e-mailed him many times because my cause is just and righteous. In fact, the emails I wrote are an even more graceful and devastating critique than the argument I just gave you, with rigorous graphs and charts.
First, you're using some poorly defined terminology that seems to cater to your implicit biases. What, exactly, do you mean by "smart people" and "dumb people"?
Second, you have some arguments here that seem like non-sequiturs. What does it matter that Elon Musk slept at his office? Does a janitor get bonus points for sleeping in the broom closet instead of at his apartment?
Third, the doubt you're raising about self-made billionaires is off topic. That is an interesting phenomenon in it's own right but isn't something Piketty wrote about because it wasn't the topic of his research.
Fourth, your own personal correspondence with Piketty is irrelevant and a distraction. It signals (to us, I suppose) that you care a lot about this topic. The fact that you care a lot doesn't help make your arguments more persuasive.
Finally, the tone of your post here is filled with appeals to emotion, exasperation, and frustration. You're having trouble making cogent arguments because you seem to be heavily invested in your own feelings about this subject. Those feelings are fine, and natural, but they do not make for a cogent argument. There is no point in attempting to persuade others that you are correct by mentioning that you really care a lot and have a lot of emotional investment in the subject.
I cleared up one point of confusion by editing my original comment - I did not mean that my comment was bitter (it's not) but rather that the reality it describes is bitter.
I've read through your points and I don't feel it will be a productive use of our time to engage further.
However, I will make one last very brief summary in the most rigorous possible logical terms. If owning a computer gives unequal personal utility to people, then if everyone owns a personal computer, people will have unequal personal utility. The world won't be "fair."
Now if instead of "personal utility" you substitute "creation of wealth" and for the computer you substitute all of the wheels of American capitalism, you will see that if everyone has the same access, but due to differing skills and interests differing results, then the world will be unfair. There is no way to make it fair except by shutting off the wheels of capitalism (in the proxy argument, there is no way to make sure everyone has the same level of utility except by taking away everyone's computer). I'm sorry, this is a fully rigorous argument, not at all emotional, and I'm just not prepared to invest any more time in explaining it. I did my best. Sorry if we disagree.
explain how the Russian immigrant Sergey Brin had "lots of capital" or how the South African immigrant Elon Musk had "lots of capital".
Yet they are billionaires. So what do we do about this unequal outcome? Turn off people's right to make startups without requiring any capital?
The simple fact is that while Marx wrote in the 19th century when you needed millions to start up a factory, today the cost for starting to create dynastic, millionaire or billionaire wealth is: $0. It has no capital cost. Of any kind. At east, in silicon valley.
what is to keep this from spreading in the future? What is Piketty's response?
In fact there is no such response. There is no way to stop unequal wealth except by taking people's computers away.
You state that you follow my argument but I don't believe you are able to follow it.
Can you agree with this statement please: If owning a purple rock gives people unequal utility (some people get great pleasure out of it while others do not) then if everyone owns a purple rock, people will have unequal purple rock-related utility under this world scenario. Please agree, it's quite specific and formal.
(I realize this is only the proxy argument.)
Now suppose our most important value were equality of outcome. What shall we do? We must measure people's utility, and somehow take from people who get greater utility from purple rocks, enough of their purple rocks, that they end up with the same net utility. So someone who gets huge utility from owning a purple rock might need to be given just a gram, whereas someone who gets almost no utility from it may need to be given a mountain.
Okay, now apply it to money. If someone gets huge capital out of almost capital, do you have to take it all away? If you took away 99.999% of Sergey Brin's capital away when he was founding Google, then today's $50 billion net worth that he has would be $50 billion * 0.001% = $500,000. Unfortunately, that is still too much - it's more than average.
So should he have had 99.9999% taken away, since taking away 99.999% does not lead to an equal outcome?
This is not a theoretical question. It's a practical question you must address. In 2017 there are no capital requirements of any kind that are necessary in order to create billions of dollars, dynastic-level wealth. Zero.
I am afraid you are not following my argument, and that's okay. You are simply wrong that "those who do not already have lots of capital have almost no access." It is similar to saying only a white male can become President. Why would you say that, when it's demonstrably false?
Since you are arguing from false facts, and also don't seem to follow my argument, this is not going to be a productive exchange. Sorry - I tried.
Elon Musk also had a middle class upbringing with highly educated parents who provided him with an affluent middle class childhood. He enrolled at elite universities (UPenn, NYU Wharton, Standford) where he started his career surrounded by wealth and access to capital.
Musk is an interesting case in particular in that luck and timing account for most of his initial capital. He started a website (Zip2.com) in the middle of the dotcom bubble and it was purchased from him $300 million. The site was acquired by Compaq in 1999 and ceased operations in 1999. The dotcom bubble burst less than one year later. The money from that sale positioned Musk as a member of the capitalist class and he leveraged the money and connections from that for all his future businesses. While he did, technically, bootstrap his career, it would be naive and foolish to ignore the element of luck involved here.
I'm having trouble taking you seriously because you choose such bad examples to make your points and ignore the obvious counter-examples. In short, the system just works differently for people of low socio-economic status. Musk and Brin were not of low socio-economic status. They started as very high status and ascended to become ultra-elite status.
You make another assumption that is flawed and unfounded, and makes it seem like you are arguing against a strawman. I do not assume that equality of outcome is desirable. There are some in the social justice left that believe this but I don't, and in fact very few Americans do (as can be seen by election results). I believe that sane policy must acknowledge that inequality of opportunity is an endemic problem in our society and that success in capitalism is based on opportunities, which are not distributed in a fair manner.
Let me state it for the record: in 2017 it's impossible to build great wealth without your updated definition of great capital. completely agreed.
as we're in agreement this conversation is over. nice chatting with you.
Actually he has addressed this, and the answer is relatively little. Most wealth in the world is passed down from one generation to the next, growing at a rate faster than the economy in general. Many of the richest families in the world from centuries ago are still the richest families. Other than in small pockets of the world, like silicon valley, new money is pretty rare.
What's so hard about shifting the burden of tax from income to wealth? Week after week having 30% of your income taken away is what prevents a lot of people from ever getting ahead.
Well, there are a bunch of practical difficulties, beyond just political will.
First, "wealth" is much harder to cheaply and objectively quantify than cash income. The value is often very subjective, and changes over time and circumstance.
Even a lot of "what's it worth right now" statements are flimsy: A guy might have X stock in a company worth $Y, but it's only a "if things go right" $Y because if you try to sell it all at once you'll cause a panic among investors and get fairly little for it.
Lastly, it's much easier for people to hide their current wealth, when they have an incentive to lie about it and have years to do it in. You'd need a financial panopticon to make sure nobody's burying gold in their garden while telling the tax man they spent it all on expensive food.
You don't reach 30% effective rate (single) until you make $500,000, at which point you're pretty well off. :)
There are definitely some economists who disagree with him, but if you go into any academic field and you'll find plenty of people disagreeing with the field's luminaries.
No doubt in 5-10 years when the fashionable economics theory du jour concerns debt or housing or tax incidence or technological progress - and large sections of the economics profession do respond - the author will be amongst those chastised for "ignoring" such pressing issues by not abandoning his interest in researching inequality to write papers focusing on Fashionable New Theory instead.
From the abstract:
In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.
First, he made a lot of methodological errors, like using tax data as a proxy for income and then not adjusting for a change in tax treatment between one year and the next in the 1980s.
Second, more fundamentally, he's computing inequality without accounting for taxes and transfer payments, i.e. the things that we do to ameliorate inequality, e.g. food stamps, the EITC, and the entire Social Security, Medicare, Medicaid complex. I seem to recall that employer-paid benefits which are excluded from tax, like health insurance benefits, are also excluded.
At the high-level, in terms of big theoretical flaws, he posits this broad "when rate of return on capital exceeds the growth of the economy the rich just get richer" theory which is fine until the rich person dies, gives most of his assets away to charity, loses half of what's left to the death tax, and has more than one heir. People sometimes joke about how economists make a bunch of ridiculous assumptions in their models, and "people live for ever" is actually one of them, and it actually makes sense most of the time (because it usually doesn't affect what you're modelling), but this is the case where it affects what you're modelling.
This all started in 2014, so some of it may have been improved or corrected since then, but Picketty's popularity is still independent of any actual measure of facts or truths in the world. It's related to confirmation bias of the listener. This is why he is used in politics so much. (This isn't special or specially bad; it's why anything is, really. But see it for what it is and look to science rather than politicians for a fight on the facts.)
Regarding your "big theoretical flaws" on intergenerational wealth dynamics, here's an entire chapter by Piketty and Zucman on the subject, confirming that their central hypothesis holds when taking inheritance into account: http://gabriel-zucman.eu/files/PikettyZucman2015.pdf
It seems to me that it's quite a crass methodological error to base an analysis on income distribution on ignoring how income is distributed.
So it is not that economists deny Piketty's observations, but they find his recipes to counter inequality overly simplistic.
And the solutions are simple, just uncomfortable for those who aren't poor.
You make it sound as if Zuckerberg was a Lovecraftian Great Old One. Wait a minute..!
Source? This sounds like a pet theory rather than anything substantiated, especially since there's plenty of evidence of inequality among younger people. (Or were you saying that people get richer as they get older? It's not clear.)
> To a certain extent, inequality is the price of liberally allowing divorces and children outside marriage.
Are you actually saying that, to fight inequality, we need to stigmatize divorce and extramarital sex more? Or are you just saying that inequality is an unavoidable consequence of allowing divorce, and there's no point trying to fix that?
Yes, it is a pet theory, but a substantiated one. We've looked into Piketty's ideas during a semester project when I did a master's in economics. Among other things, we found that Piketty's measure for inequality (the percentage of wealth that is held by the top 10%) correlates very well with median age in the US. (T-stat: 7.2, R-squared: 0.90). Yes, correlation does not imply causation, but it is a strong hint that there is a connection.
Sorry but I have to laugh at your absurd level of arrogance.
https://news.ycombinator.com/newsguidelines.html
https://news.ycombinator.com/newswelcome.html
I don't have an opinion on the matter (haven't Piketty) but saying such things really is a conversation killer and makes me question your honesty. You are basically questioning the intellectual integrity of anyone who is critical to an idea you support. If you genuinely believe that, I urge you to get out of your bubble a bit!
But I also had contact with academics, and like the article said, it's not so much that academics are refuting Piketty, but that they simply aren't studying the same problems that he is talking about. From what I've been told, a lot of academic work in economics is focused on incredibly unique and specific problems. It isn't "fashionable" to be studying something so broad and perhaps abstract as inequality.
I think it can be summarised as: Inequality has a marketing problem.
No one's buying equality. Those who can afford equality don't need it and those who need it can't afford it.
The most ardent fight against tyranny and overlords comes from aristocrats who wish to be equal - but just to each other, not to the common herd (thank you very much, goodbye my good man).
What is this world in which income / wealth / opportunity is 'equal'? Is this a world we want to live in? What are the rules of this world? What steps need to be taken on the policy front to achieve this world? Are those steps that the anti-inequality elites are willing to undertake?
The relevant chunk of the abstract:
> There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.
Not that this actually answers your question... ;)
[1]http://www.tnellen.com/cybereng/harrison.html
Not as much as a marketing problem, but has populist political organizations that use it to advance their superficial socialist causes.
After Economics moved hard away from Political Economy and into Mathematics some time ago, that kind of broad economics is rare so not really considered the same way or has the same amount of academic discussion.
They are moreso discussed in sociology and philosophy and to a limited extent graduate courses in economics.
I think it is more the fact that it isn't wise to study highly politicised topics until you gain some status.
[1] http://www.tradingeconomics.com/bulgaria/gdp [2] http://www.tradingeconomics.com/bulgaria/gdp-growth
They have annual data that makes more sense.
http://www.tradingeconomics.com/bulgaria/gdp-growth-annual
Take a look at your numbers again. You have made multiple mistakes. Your 8.4% annualized rate is wrong - You can't just take the start and end points to calculate an average. Plus, you are plugging quarterly data into yearly calculations.
Researchers aren't flawless, and they do make mistakes, even in the very methodology they adopt. That's why peer review is a thing, and academia subjects their work to peer review.
Hell, there's a very good reason why the Royal Society's motto is "take nobody's word for it."
* Piketty's data is correct
* him collecting it was a harder feat than one might think
* attributing r>g to some unchangeable nature of capitalism is wrong because "capitalism is infinitely malleable" (every market is regulated somehow, things change a lot depending for instance on whether you do or don't have patents)
* Piketty's policy prescription (a global wealth tax) is unimplementable and harmful in the sense of getting all the attention instead of people focusing on his correct assessment that r>g and then on realistically implementable policies which could change this.
If nothing else the absence of a theoretically desirable wealth tax serves as a justification for progressive income taxes and higher capital gains taxes.
A wealth tax isn't unimplementable because of political will but because a lot of assets are illiquid, hard to price, easy to hide, easy to move to another country (hence the call for a global tax, but what if a few countries defect?) or a combination.
As to approaches: "the left" if there is such a thing successfully campaigned for a full confiscation of property, a 100÷ wealth tax if you like, in huge chunks of the world - I don't see a weakness in persuasive ability there. Wasn't a great idea though. A smaller wealth tax is a better idea, but still not great. Baker who one can agree or disagree with has better policy ideas, or at least better thought-out and consistent ones IMO.
http://cepr.net/blogs/beat-the-press/nyt-invents-left-leanin...
https://theweek.com/articles/606698/why-are-bigshot-liberal-...
If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?
The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.
If I can grow my wealth more quickly than the nations output, I'm grabbing a bigger slice of the pie. The hope with capitalism is that I'm grabbing that pie because I've earned it and the market hopes I'll be able to steward that wealth.
So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?
There certainly is wealth inequality in the world, but it isn't actionable to blame it on r > g. It's more effective to look at things on a micro basis. Does this person have a child that is prohibiting them from saving? Why is the person being excluded from jobs? Do they have a proper education?
Less incentive. The epeen comparison factor is underrated by anyone who ignores game theory.
Off course since it is not a complete theory, it does not consider the above as major factors in wealth accumulation leading to inequality.
That said, each feeds into another.
Is that true? If I have capital wouldn't I want to allocate it for the best risk/return/effort. That my percentage of the pie is shrinking doesn't mean I would allocate my capital inefficently to accelerate that shrinkage.
For example, imagine today you had 1 million dollars. If interest rates were 0.1% would you say no to that risk free $1000 a year? I wouldn't. I would click that button. Perhaps it would encourage me to spend more but I wouldn't sit on cash.
A risk free 0.1% doesn't look like you're being an employer though.
It sounds like the rate that comes from your deposits at a bank (which lends your deposits to make money, which in some way most likely depends on them getting a higher rate of return on capital than growth in output)
For example, should opportunity be unlimited, or is the prospect of earning enough for a very comfortable life sufficient motivation?
Or, how much are we willing to let families build dynastic wealth? Shouldn't wealthy people's children be expected to compete without a huge head start over the children of poor families?
Shrugging suggests to me that the conversation is over, but I think it's just beginning once we recognize that this is a fundamental economic force. How do we harness it as a society and pursue a just world?
One problem with this idea is that the factors that determine what's meant by a "very comfortable life" will necessarily have to be decided by politicians and bureaucrats and imposed by force. By distorting (if not entirely removing) the effects of economic competition, a system of that nature turns the problem of achieving material success into an almost-purely political one.
When people who don't actually create value are given excessive power over people who do, economic progress stops. We've seen the outcome in enough places, from the Soviet Union to modern-day Venezuela, that it almost seems inevitable: the rich still get richer, but the rising tide that's supposed to lift all the boats never seems to come in.
Meanwhile, in Venezuela...
I see this sentiment a lot and I find it utterly meaningless.
The issue is not that people have higher or lower living standards than they have in the past, but that their share in economic prosperity is declining while the shares of a small few are skyrocketing.
That is a serious problem that will lead to a sort of modern feudal rentier society.
At some level of income confiscation, you're basically describing slavery.
It's entirely reasonable to debate the appropriateness of such rates, but claiming that "slavery" is even close to a legitimate comparison demonstrates a shocking disregard for the plight of actual slaves, both past and present.
Generally without such taxation such "personal money" gets frozen out of economy and competition as well gets distorted.
The rich have many more options to avoid the taxes as well.
The idea is that you consider yourself a smart and educated investor. Therefore, you are confident that even with r = g, your particular investment is wise and will yield a huge profit.
> So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?
You can get a rate of return that will consistently be higher than the growth of the economy by dumping your money into an index fund. I would consider that more like taking advantage of other people's work than "outperforming" anything.
The fact that you can consistently get higher growth in an index fund than GDP is just a symptom of r > g. It incentivizes you to save. But this simple example also ignores volatility in stocks, GDP can drop by 3% and index funds can drop by far more. Also is it really taking advantage of other peoples work if they go through a public offering and offer to sell you the stock of their own free will?
Think of the economy as a casino and the investor as a gambler. The casino flips coins. You can bet $1 for heads or tails and if you guess right, you win $2.00.01. This is r > g. Clearly, it is nice to have dollars spare so you can bet in this casino. For the casino, it is not so nice.
In another casino you can also bet on coin flips, but you only get $2 for winning bets. On average, gamblers are neither winning nor losing money. This is r = g. Gamblers still continue to play because they think they have figured out how to get an edge.
In real world casinos, r < g but people still happily play.
And perhaps the game isn't coin flipping but something skill-based like chess played against other gamblers? I hope you see how r = g wouldn't stop investment money from flowing in the economy.
That scenario only "works" if you have a limitless supply of suckers.
Sooner instead of later the worse players will realize they need to be able to win more than a dollar to compensate for their risk. The result is an unvirtuous cycle where the bottom players keep dropping out because their odds are getting worse and worse.
Anyway, a fairer stock market wouldn't have to be a completely zero-sum game. It would just not have to be as heavily tilted in favor of the gambler/investor as it is today.
What if they want to go to a different casino that gives them better odds, will you force them to stay? If they can't leave they'll figure out who they shouldn't play against because they'll lose. So now are you forcing them to play? Now you're either micromanaging which ones should play against each other to make sure nobody ends up broke, or you're actively forcing them into poverty.
Is this a casino you'd like to visit?
You can still spend the principal you made without having to be employed. If I understand correctly, r>g is about how much of new wealth is coming to labor vs rent on existing capital.
You mean would I want capitalism to be different, or would I want a system that wasn't driven to inequality because it relied on capital returns to drive both the economic system and (due to fungibility of power) and the political system?
The first is a pointless question, the second, well, yeah. It's the fundamental problem with capitalism that led both socialist critics to identify and seek to overthrow it, and more moderate social democrats to seek to reform and moderate it.
> There certainly is wealth inequality in the world, but it isn't actionable to blame it on r > g.
Sure it's actionable, and if it's the true cause, no micro action is meaningful.
You may not like the actions that are implied by understanding the root cause, but that doesn't make it not actionable.
If you want a system where r = g, you are requiring some sort of top down wealth allocation system to cap r, (a morally and legally supreme government...socialism?). I'll avoid that system.
If you think it's actionable perhaps you could suggest an action?
If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed? That's a pretty lame excuse, I'd feel bad saying that.
No, the idea that aggregate performance should redound principally to the benefit of capital holders is fundamental to the idea of capitalism, and, yes, that pretty much implied that r > g leads to greater inequality under capitalism.
> If you think it's actionable perhaps you could suggest an action?
If the problem is fundamental to capitalism, the action to correct it is to move away from capitalism.
> If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed?
No, it means when I do something to momentarily alleviate the immediate problems of a homeless person, I know that unless I am also working to reform the fundamental politico-economic system to deal with the structural problem, I'm doing nothing more than putting a band-aid on a sucking chest wound.
r > g is not the problem, r > g is aggregate prosperity. Capitalism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
You're saying no, but our statements mean essentially the same thing. Aggregate performance rebounds to the benefit of capital holders because they are outperforming. For example, it is better to save and lend than it is to borrow, which is why interest rates exist.
I'm not disagreeing that r > g can lead to greater inequality under capitalism. The reason you can have inequality under capitalism is because you have the opportunity for outperformance. I don't want to live somewhere that opportunity doesn't exist. You can if you'd like.
How can you say that it's a problem fundamental to capitalism when I can look through history and say these things without a doubt:
Socialism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Autocracy is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Communism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
Dictatorships are the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.
It's not a fundamental problem of capitalism, it's a fundamental problem of society.
By doing something to alleviate their immediate problems do you mean help them get clothes for a job interview? Point out a way for them to learn a skill to get a job? Locate a homeless shelter for them to spend the night? The longer you take to reform the system, the guiltier you should feel for not simply helping the person with a comparatively more immediate solution: micro actions. All of a sudden micro actions are meaningful.
Your suggestion for an action on how to deal with the inequality of capitalism is to adopt... not capitalism? I think you're lacking important details on how to turn that into an action.
This is interesting. Let's say there is a a r=g, to r is slightly less than g world. Then people would try to maximize employment & investing that income. Sortof double dipping. Am I thinking about that correctly?
Also, r<g doesn't mean that you're 'never' going to make more than the growth in output, right? Theoretically good stewards would outpace the market.
http://www.hup.harvard.edu/catalog.php?isbn=9780674504776
You should probably redact his name.
Also:
> One begins to suspect that the typical leftist—most of the graver worries have come from there abouts, naturally, though not so very naturally considering the great payoff of “capitalism” for the working class—starts with a root conviction that capitalism is seriously defective. The conviction is acquired at age 16 years when the proto-leftist discovers poverty but has no intellectual tools to understand its source.
Seriously?