I think you meant to say CapitalISM. 
Some would argue that globalization has hit the reset button on Kuznet’s curve. Others would point out that wages and productivity parted company in the 1980’s before globalization was a dominating force and it was the fall of unions that caused the separation of productivity and wages. Others think it was Reagan’s fault.
You are going to have to define what you mean by margins here. It has a common usage in economics and if I say something makes a difference at the margins, I am saying it makes a difference.
Japan from 1950’s to the 1990s was basically a command economy with the powerful ministries coordinating industrial activity. Of course over the long haul you are probably better off with a zillion decisions make by hundreds of millions of people because the cost of any one mistake is not likely to be catastrophic.
Of course that also means that we should probably do something about these megacorporations that have gross incomes higher than most countries in the world because a bad decision THRE can have dire consequences as well.
IIRC the average government employee is better educated than the average American largely because the low wage crap is all contracted out. I suppose its not really a valid subset but all the government regulators and attorneys I deal with make less than they could make in the private sector. Its a tradeoff for them. They don’t work as hard as they would in the private sector either. They are also relatively immune from competitive pressures (they still have to perform but they don’t need to worry about whether they can attract clients or if the firm is profitable).
Taxing and spending is not the Keynes prescription. Just the spending part and IIRC it was deficit spending.
If all the poor people live in the same areas shitty neighborhoods and the jobs are more evenly distributed across neighborhoods, then mobility helps.
You make Sweden sound like the national equivalent of an all inclusive resort while America is like Las Vegas where you have to at least win your airfare home or end up working at the Peppermint Rhino.
Sure the food is better at the best restaurants in Vegas but you don’t have to worry about eating at the all inclusive resort.
Some people are willing to take that risk for the opportunity to live like Sinatra.
Its the most fundamental flaw in Rawls’s philosophy. It doesn’t take risk tolerance into account.
What do you mean by middle class? I’d much rather make the median income in Sweden than the US. Disposable household and per capita income - Wikipedia
If by poverty, you mean the HHS poverty scale then you’re pretty much talking about people with really bad luck, getting sick, having a sick child, business failure, etc.
Yeah but the bidders may be in different places than the sellers.
Social security is entirely solvent forever into the future if we remove the cap.
Making college free or damn near close to it but don’t make it so easy to be a college or get into a college.
Well there is certainly a demand gap for labor, isn’t there?
Before I get to Damuri, let me just reiterate that the main problem with Piketty’s work seems to be what I was harping on earlier: he seeks to reduce inequality primarily by making the rich poorer. If we brought this logic into the realm of athletics, we would solve athletic inequality by breaking the kneecaps of the best runners and jumpers.
At the margins certainly means that it is making a difference. But the goal of those fighting inequality isn’t to just make a difference. I’ve never heard anyone say “Well, if our GINI was 10% lower, we’d be satisfied.”
It helps, but it doesn’t necessarily mean higher wages unless there was a mismatch between the employers you could reach and your skills. A person with no skills isn’t going to get a good job just because he can travel farther. Some people actually get the bright idea that where they live is the problem. When I worked for Pizza Hut we had about a dozen employees over the years who went from place to place, spending a year or two in each, always thinking the big opportunity was just around the corner. But when your only skill is that you can successfully deliver a pizza by car(and that’s more of a skill than many people have), then you’ll find that wherever you go that’s the best job you can get. Whether you’re in Miami, New York, or Paris, you’re probably going to deliver food.
It’s a third lower, and that’s before taxes are taken into account. Why would you want that?
Which is fine if you want to fundamentally change the nature of the program. It becomes just another welfare program once you do that. Everyone who spent any length of time making over the cap would get a lot less than they put in. This has big implications in places like New York, whose Congressmen tried to get a “donut hole” put in any attempt to raise the cap. Which of course won’t make SS completely solvent, because there’s a LOT of revenue in that donut hole.
Then why are we going to pass a law to import more of it?
Not a good analogy, since breaking Usain Bolt’s kneecaps would lead him to lose the race. All Piketty (and many of us) asks for is to make the distance that separates Bolt from the rest of his competitors a bit smaller. He’d still get the gold medal, just not by a huge margin.
Athough the analogy isn’t the strongest, Piketty’s solution to make Bolt win by less would still involve slowing him down, since that’s a lot easier than making slow runners faster.
But I have yet to hear a compelling argument for why this is a good idea. Making someone else poorer doesn’t make me richer.
It does, but according to you ‘only at the margins’. Which in my point of view is good, but you obviously don’t agree 
Like I said before, if the best that can be done is to make the poor a little less poor, then not a whole lot has been accomplished. Rather than talking about inequality, we should be talking about poverty. But since fixing poverty is hard, it’s easier to just make the rich poorer and call it “justice”.
Only in the sense that the whole economy grows. As Robert Reich wrote in Beyond Outrage, “Shaquille O’Neill and I have an average height of six feet.”
But they don’t control it. It’s just something taken out of their paycheck by the company and paying off later – maybe.
Wrong analogy. We’re not talking about averages. What Piketty is saying is that if the return on capital is, say, 3% per year, but the return on labor is 2% per year, then over the years the wealth of the capital class will grow faster than the wealth of the labor class. But both classes are growing in wealth.
I think this is actually gets to one of the most fundamental disconnects between liberals and conservatives. Liberals seem very focused on the gap between rich and poor, while conservatives care only about absolute values. Personally, I don’t remotely care how rich the rich are getting. All I care about is whether my own personal circumstances are improving. I’d rather live in a country full of billionaires where the poor have an average income of $30,000, than in a country with no billionaires but with the poor having an average income of $15,000.
I don’t even understand why I should care about the ‘rich’, other than perhaps learning from them so I can become one. It makes no difference in my life if a billionaire has a 200 ft yacht - so long as he didn’t get that yacht by taking my own wealth. And in a capitalist society, that’s largely the case. The rich don’t get richer by exploiting the poor - they get rich by providing value to other people.
If you don’t think that’s the case, you have to convince me that you can come up with a plan that simultaneously prevents people from becoming ultra-wealthy while also improving the standard of living of the poor by more than what they’d get under a more laissez-faire approach.
So what? It’s still their money, and it still represents real wealth to them. And in many cases, they do control it. Lots of people in the middle class have 401(k)'s, and a significant portion of middle class wealth is real estate, which is capital that they absolutely control.
But again, what does control have to do with it? If the wealth is dispersed by government, the poor have no control over that either. In any event, the study is about the gap between wealth earned by capital vs wealth due to labor income. It has nothing to do with ‘control’.
Is there? Which labor? This is where aggregates start to break down. For macroeconomic analysis purposes, perhaps you can treat ‘labor’ as an aggregate (although I think that’s highly debatable). But when you’re looking at the unemployment rate, you absolutely have to look at not just ‘labor’, but the kinds of labor. The analysis gets a whole lot more complex.
For example, if the unemployment rate is due to a misalignment between what people are being trained for and what the market demands, no amount of ‘stimulus’ is going to fix that problem.
It looks to me like that’s really the case today. The high unemployment problem seems to have two or three main factors: Young people who are not qualified for the jobs that are available, and older people who are no longer productive in a changing economy.
In many fields there is not just full employment, there are shortages of labor. In some areas it can be very hard to find an electrician. Silicon Valley has thousands of job openings for engineers and software developers they can’t fill. In the meantime, the fastest-growing faculties in colleges are also the ones that have the highest unemployment rates and the lowest salaries. That’s a bizarre situation, and when you have distortions like that the only way to ‘solve’ the problem is to correct the distortions. It has nothing to do with fiscal policy.
Another factor in the current unemployment rate is the existence of ongoing government welfare for the unemployed. You’re subsidizing unemployment, and it should be no surprise that when you do that, you get more of it. Now, that subsidy may be necessary for many people, but that doesn’t change the fact that the subsidizing of unemployment will cause many people to stay unemployed or become unemployable because they stayed out of the workforce for too long.
Wonderful post, please post more.
Agreed. You’re the only one here who, to my knowledge, has admitted to reading the book yet they walked right over what you were saying. That struck me. It’s like people already have their preconceived notions that the book must be about income, when, you’re clearly saying it’s not, it’s about wealth. I also ordered the book, I can’t wait till I receive my copy.
- Honesty
And we also have to factor in things like health costs, and to make it perfectly fair, you have to include ALL the people in the US who can’t get health care at all except by going to the emergency room. Have fun with that!
I didn’t know the meritocracy thing was such a hallowed dream. So people really think the most intelligent, capable and wise set of men are rewarded with money and power? Like, really really? Even if you don’t follow news or politics, have you looked around the office? Since everyone here is supposed to be so smart I hope no one here has a net worth south a couple million. Should we put fences up to keep out the riff raff?
Maybe if you send Omar Little to collect.
The running leg break analogy doesn’t work because athletic prowess isn’t redistributable. If you work backward from that analogy someone might think you believe in social Darwinism and class essentialism, since then being rich is like being an elite athlete. It could be in some cases, like if you’re a math wiz or artistic genius, but on the whole?
There is a problem though. All the wealth in the world shared equally wouldn’t give us much. It’d be great if you’re in some third world shithole, not so much for us fat Westerners. And that’s not even taking into account so much of the world’s wealth is fake and just waiting for the next popping bubble to vanish into the electronic aether.
Not only that, but is Piketty saying we should close the gap, or simply stabilize it where it is? If his argument holds (and to continue this analogy) at this season’s races we would expect to see Bolt win by an even greater margin than he did last season. Would Piketty have us close that gap, or simply maintain it where it is (and does that even matter)?
The margins may be all we need to prevent crossing the event horizon of wealth disparity.
If you have 1000 burger flippers living in one neighborhood and only one burger joint in that neighborhood. The price of a burger flipper is going to be very low unless there is a way to get to the burger joints across town. Burger flippers aren’t going to get hired as engineers because they can get across town, they are going to get a job because they can get across town.
He might if the unskilled jobs are not within walking distance of where he lives.
After health care, child care, and education, I think I would be ahead in Sweden.
It wouldn’t change the fundamental nature of SS.
If you made an average $1.1 million/year for 35 years you would have paid in $2,170,000 more than the guy who made $100,000/year for 30 years.
You would receive about $150,000/year more in benefits than the guy who earned $100,000/year.
http://www.ssa.gov/pubs/EN-05-10070.pdf [WARNING PDF]
You would have to live to 80 to get you money back. The average life expectancy at retirement is 84-85, the life expectancy is probably higher for someone who has that kind of money. http://www.socialsecurity.gov/planners/lifeexpectancy.htm
You get a return if not a large one.
Unless its STEM labor, I don’t see why we should.
Is Picketty’s recommendation really just to shackle the wealthy? Because that is not what reviewers seem to think he is suggesting.
More labor unions might help. The correlation between productivity disappeared when unions were no longer able increase wages in line with productivity.
The way that capital and labor have been splitting value created has been pretty one sided for a few decades now.
The ones that don’t have jobs. Its not that complex. When the economy is humming there is a job for all these guys. Right now there isn’t.
You just asked if there was a demand gap and I quipped that there was a gap in the demand for labor. A jobs program can soak up that slack and firm up the labor market.
None of these are historically unique circumstances. When the economy is otherwise humming we have plenty of jobs for green college grads and old timers. They are neither useless nor obsolete. I don’t know if stimulus will jumpstart the economy but we can’t dismiss it out of hand can we?
What I fail to understand is why you have a problem with that. The more money you have, the less value it has. We aren’t talking about Sam Stone’s idea where the rich and the poor both fail. We’re talking about a system where the rich lose money they don’t need and the poor gain money they do need. That’s a good thing.
If you don’t agree with that, then there’s no reason to have a problem with income inequality in the first place.
But BigT, you can’t have ENOUGH money, ever, because money is essential to the most important thing that the wealthy do: dick-measuring. So you’ve got more money than you could possibly ever need to keep you and your family living a life of luxury. So what? Some OTHER GUY might have more than you! And that cannot stand!
Two problems with this logic. Well, three, but I imagine the third doesn’t matter much to non-libertarians:
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While I think we can agree that people making $1 million or more per year have more than they need, this is not true of people making $100,000-$500,000. Sure, they are better off than your average joe, by a lot, but high taxes really kneecap their lifestyles. A Swede in the top 10% isn’t even making $100,000 per year. Yet he faces high taxes. What is that doing to his lifestyle?
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The money isn’t getting to the poor. Most of it is just disappearing, creating lower incomes across the quintiles, except for the bottom. Everyone is made worse off so the bottom can be a little better off.
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Whether people need something is irrelevant. Our fundamental freedom is the right to pursue happiness. Warren Buffett has more money than he’ll ever need, but less than he wants. he has the right to make more and decide for himself how it will be distributed. Piketty and his supporters seem to handwave away that fundamental freedom.
I don’t have a problem with inequality. I have a problem with poverty. I get the impression that poverty doesn’t bother some people. What bothers them is that someone, somewhere, is making too much money.