Carefully omitting the fact that the economic notion of value is wealth-weighted (and you can march enough elephants through this loophole to wage a class war), drawing attention away from "rich people getting paid for being rich" dynamics by dividing out wealth wherever possible, inviting you to use averages where "rich get richer" hides "poor get poorer" -- it's a masterclass in propaganda. I have literally never in my life seen a more artful tapestry of deception than Econ 101.
In any case, this is also matter of historical record: the purge of left-wing thought from economics and politics at the end of the New Deal Era was loud and vicious. It didn't stop at ensuring capitalist principles got top billing, it scorched the earth until even the most earnest self-examination of capitalism's largest weakness was cause for cancellation. You bury it, or you wear the scarlet letter. Most chose to bury it, and here we are.
If anything, I think economists have grossly underestimated how large increasing levels of inequality have had such a corrosive effect on our social cohesion and political systems, and that obviously does have a huge impact on eventual economic outcomes. This societal/political breakdown is not something that economists usually model well.
I certainly think, that regardless of the underlying hard numbers, there's a very strong perception that life is getting harder for the average person, and that most of that is due to their money going towards things that they resent. Exactly how and what will vary from person to person and depend on their information diet and political leanings, but there's a big undercurrent of discontent with the status quo and a strong belief it's due to a relative few benefiting from it, and this especially jives poorly with any assertion that "actually, the numbers show most people are just fine!"
I would, if I had the time, like to dive deeper into this sentiment: there's a decent amount of evidence that people are better off, on average (and median, so not prone to distortion by the hyper wealthy), than ever before, and yet this isn't how the average person perceives it. What I don't know is whether this is because said evidence is wrong or misleading, because inequality matters more psychologically than the absolute wealth, whether expectations have simply grown above the growth in wealth, or whether it's because there's been a flattening of the curve where historically disadvantaged groups have gotten better off but advantaged groups have become worse off.
IANAE, but this sounds about as implausible as claiming that developers aren’t interested in building sustainable codebases
Worst code quality: AI devs
Best code quality: Game devs
LOL I just read something yesterday (possibly a tweet by Carmack?) that game devs optimize for public perception of their game and that is it. Certainly not long term maintainability unfortunately!
Economists disagree with Piketty about the causes of this inequality: that is true.
Economists agree with Piketty however about the extent of inequality, by and large. That is, no one is arguing "inequality isn't real" or even "inequality is decreasing."
So there is disagreement about what's causing the inequality, yes. But on what (to me) is the bigger question - is inequality real and increasing? - there is a consensus that it is.
It's all there in the historical record, and as a trend, it's huge.
"It is the mechanic and teaching assistant in the middle who have the best claim to having missed the party: median real income rose by 57% from 1990 to 2019. But that is still a healthy 1.6% per year—a far cry from the stagnation in median earnings that is sometimes alleged".
For the record, I think inheritance tax should be way higher, and allowing the value of money to outstrip the value of labor is a travesty, but it's important to keep in mind that people across the income spectrum are getting richer in real terms. It's better to be poor in America than median income in most countries.
The 57% growth is after inflation:
>>...median real income rose by 57% from 1990 to 2019.
('real' income means after inflation, 'nominal' income means before inflation.)
Again: These number are already adjusted for inflation.
Perhaps. So what? Their wealth/incomes were increasing much slower than worker productivity. Technological progress compensates for the massively increasing inequality to some extent.
Also other figures show that median and bottom 10th percentile incomes were almost completely stagnant between 1967 and 2014.
https://www.census.gov/library/visualizations/2015/demo/real...
Of course real median income increased massively (compared to previous decades) in the last 10 years but it's not clear yet how sustainable is that
I am NOT an economist, and wonder what you mean here? It feels contradictory to me, given a system that makes labor fungible with money.
I've armchair puzzled over this aspect of capitalism and human nature. It seems to me that we, as individuals in this system, most fundamentally want to be able to use capital to time-shift the fruits of our labor, i.e. for rainy days, retirement, and unforeseen events. We need to be able to convert labor to capital, hold it, then convert it back to gain benefits of someone else's labor later.
But it seems inherent that this ability to make labor and capital fungible will enable some to amass and wield much more capital than others. In a population with differing wages, lifestyles, life events, and appetites for risk, it seems inevitable that the integral of these net savings effects will be divergent.
If you introduce a "reset" or leveling function, it seems like it will contradict this stored labor feature. It pushes us back on the continuum towards living hand-to-mouth, since our stored efforts are diminished in the future. And, I think human nature is such that we will "optimize" to stop trying to store effort that we can't expect to get back...
Is this an inherent feature of economics (or of society)? Do we need a fiction of security and potential future wealth to motivate our contributions, yet eventually need discontinuity to terminate the outcomes of this fiction?
That part seems fine to me. The thing that feels intuitively "wrong" is that it's possible to amass money/capital way out of proportion to the amount of labor input.
The example of the "four hour work week" concept comes to mind, where the goal is explicitly to minimize the ratio of input labor to output capital. Why should 4 hours of my work now entitle me to, say, 40 (or 400, or 4000...) hours of someone else's work later?
I am also not an economist, so perhaps someone else can explain what other mechanism is working alongside your "labor is fungible with capital" that leads to this result, and whether it's a feature or a buy of the economic machine...
And eventually, once you have enough capital, your new job becomes managing your capital instead of whatever you did before. There's two ways to look at that. Your labor is research and planning of your own investments. Alternatively, you are "selling" capital to others who are seeking investments, and they are "buying" it with labor. But the same story as above holds true. The price of capital (in terms of labor) becomes what the market will bear rather than a minimized "cost plus" pricing.
This duality is what it means for labor and capital to be fungible, right?
Let's say you can get a risk-free 5% return on capital and the average wage for labor is $80k. If you have $1.6M, then you can generate $80k in income every year without lifting a finger and without diminishing your principle. The richer you are, the more "free income" you get. Very rich people never have to work and they still get richer faster than the average laborer working full time. That's bad for society.
This is not an inherent feature of capitalism. A progressive capital gains tax regime can correct this. There has to be some return on capital, because otherwise it would be impossible find investors and secure loans when you need it, but that return should not be enough to mean the rich don't have to work at all and still get richer. The travesty is that effective capital gains taxes are often lower than income taxes in America, making this problem especially pronounced.
Your "reset" concept sounds like a wealth tax, not a capital gains tax. Alas, I'm not an economist either, but I believe wealth taxes are much more controversial than capital gains taxes among economists.
Yes, but once income inceeases beyond starvation levels, relative deprivation predicts misery more than absolute deprivation, so in a relatively developed country, that's still a bad thing.
The extreme example is NYC where 1 in 3 spend more than 50% of their income on rent, and rent has appreciated there much faster than nationwide. So those people experiencing far higher inflation than the national average.
It's also pretty easy to overestimate how easy previous generations had it. It's called survivorship bias. This recent bout of inflation is bad, but it doesn't hold a candle to what happened in the 70s / 80s, which is still regarded as the good ole days by some
Well Piketty being wrong doesn't fit in many people's models either. Economists routinely do talk about inequality and I think it's intellectually dishonest to paint the whole field as wrong just because some parts of it don't agree with your pet theory.
To agree with the opposite views mean to disprove their thesis and career.