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Rising US Inequality: How We Got Here, Where We're Going

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Re: Rising US Inequality: How We Got Here, Where We're Going

#41

Post by RobertoG »

dnautics wrote: post #14

Of course, no mention of inflation, the policy choice which robs from the poor and gives to the rich. How does it rob from the poor? https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi... "when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts." In other words, inflation is a policy choice to combat sticky wages, which (if you think th…

The article tell us: "You had the same thing with the Industrial Revolution that concentrated more and more wealth into the hands of capital. "

So, your identification of causation with the end of the gold standard it's not at all clear.

In a way, inflation can be re-distributive because is good for the debtor and bad for the lender.

Maybe, is time to accept that wealth accumulates, money call money, and the leveler are wars and disasters or some kind of political action. In other words, the system is not stable.

Re: Rising US Inequality: How We Got Here, Where We're Going

#42

Post by nabla9 »

dnautics wrote: post #14

Of course, no mention of inflation, the policy choice which robs from the poor and gives to the rich. How does it rob from the poor? https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi... "when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts." In other words, inflation is a policy choice to combat sticky wages, which (if you think th…

> In other words, inflation is a policy choice to combat sticky wages, which (if you think that's a problem), the solution is to, apparently, screw labor by devaluing their wages from under them.

This is complete misunderstanding of how this works. Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.

Inflation or not, the wages reach equilibrium. You can't improve the aggregate sum of wages by deceasing inflation. If nominal wages are too high the equilibrium is found trough periods of unemployment. Small inflation keeps unemployment and friction in job markets in check.

Small inflation keeps income inequality in check.

https://www.cepweb.org/wp-content/uploads/2014/05/CEP_WP_Inf...

>Inflation and Income Inequality in Developed Economies

>We find a U-shaped link between long-run inflation and income inequality. Low inflation rates are associated with higher income inequality. As inflation goes up, inequality decreases, reaches a minimum with an inflation rate of about 13%, and then starts rising again

Re: Rising US Inequality: How We Got Here, Where We're Going

#43

Post by luckydata »

shados wrote: post #37
sokoloff wrote: post #4

“But the last 50 years have been terrible for people with lower skills. Adjusted for inflation, the average earnings of a man who didn’t go to college is lower now than it was 50 years ago. That’s unheard of.” How much of this effect is the vastly higher percentage of people who now go to college? If you line up 100 people by vague estimation of their likely earning potential in 1970 and do the same today, but now 2.…

It's like playing an MMORPG-style videogame where the developers keep raising the level cap. The higher the cap, the worse off people who are just starting are (and why in those games developers keep having to provide a "catch up mechanics", like a scroll to rush you to level cap, or making stuff easier to obtain. In the real world that's a lot harder to do though). Probably made worse by the vastly higher amount of…

In the real world those are called "redistributive policies" and work quite well, especially for the economy as a whole.

http://www.levyinstitute.org/publications/can-redistribution...

Re: Rising US Inequality: How We Got Here, Where We're Going

#44

Post by 0815test »

astazangasta wrote: post #36
asark wrote: post #19

Earlier quoted context omitted.

> For one, it contradicts the dogma that more trade is strictly beneficial. Ricardo's original idea was applicable with a narrow set of assumptions/conditions and didn't have much to say about who'd end up with the greater net wealth. I'm not sure how/why it was turned into a magical improve-any-economy law of nature.

Ricardo's mistake is not thinking about development; comparative advantage is optimal now, but a society that just makes coffee beans is going to lose in the end to the one that makes microchips because of the difference in how the economy and society develop over time.

This may have been a mistake by Ricardo, but not one that points towards less trade as optimal. Indeed, export-led development (implying more trade openness) is the one reliable way we know about of going from the "coffee beans" to the "microchips" stage of development.

Re: Rising US Inequality: How We Got Here, Where We're Going

#45

Post by rjkennedy98 »

lilsoso wrote: post #6

The credibility of the article is undermined by hyperbolic statements such as, "For a lot of children, when they’re 8 years old, it’s too late. If your parents aren’t engaged in the education system, in 10 years you’ll be competing in the labor market against people whose parents sent them to violin lessons and summer programs in the Dominican Republic. There’s inequality of opportunity." It's too late for "a lot of…

My brother is a med student on the south side of Chicago, and he has been tell me about how much of a real shock it is to see how far behind some of the children are even by age 8. This isn't a lack of summer camp. It is illiteracy, completely stunted intellectual development, that is so far behind, it is obvious at the age, the child has 0 chance of competing in the US economy.

Re: Rising US Inequality: How We Got Here, Where We're Going

#46

Post by ACow_Adonis »

deogeo wrote: post #30
cycrutchfield wrote: post #23

Earlier quoted context omitted.

>For one, it contradicts the dogma that more trade is strictly beneficial. It is strictly beneficial, in aggregate. But in any situation, there are winners and there are losers. There are no decisions you can make where everybody wins. If you live in a first world country and your skill set is worse than somebody in the developing world, you’re going to have a bad time.

> But in any situation, there are winners and there are losers. The usually trotted-out theory of comparative advantage claims there are only winners.

again, only in the aggregate/ entity of measurement level.

I would argue anyone who says otherwise is either being disingenuous or doesn't actually understand economics.

That is not to say that is not trotted out frequently.

Also, to be fair, during my economics education they had this whole focus on modeling policies and finding optimizations where no one is worse off.

Of course, in the real world, that practically never happens... and there is an argument that the focus on efficient/competitive markets/ equilibria/rational agents is also a bit "wouldn't it be nice if the world was actually like this...", whereas in the real world only the most trivial goods/markets can vaguely be described as such...

Re: Rising US Inequality: How We Got Here, Where We're Going

#47

Post by moorhosj »

zebrafish wrote: post #35
maxxxxx wrote: post #15

Earlier quoted context omitted.

That doesn't explain why inequality within the US keeps growing. As a whole the country is doing well but somehow the benefits go a small number of people while everybody else is stagnating.

Sure it does. US consumer demand rises after WWII because of GI bill & repurposing of capital -> competition drives prices down -> Securities & Exchanges Act essentially mandates firms optimize for returns to capital as a fiduciary duty to shareholders -> producers look to countries where standards of living demand lower wages to maintain market positions -> US jobs decline but shareholder value grows -> wealth conce…

You kind of hand-waved 70 years of economic history/decisions. How does “US jobs decline” match with an historically low unemployment rate?

Re: Rising US Inequality: How We Got Here, Where We're Going

#48

Post by AndrewKemendo »

maxxxxx wrote: post #15
kazen44 wrote: post #5

Earlier quoted context omitted.

Also, how much of this effect is basically the rest of the world playing catch up in terms of economic production? China and the rest of Asia are magnitudes more competitive compared to 50 years ago. And prior to that US industry was unmatched thanks to the massive effects world war 2 had on the other, western industrialized nations.

That doesn't explain why inequality within the US keeps growing. As a whole the country is doing well but somehow the benefits go a small number of people while everybody else is stagnating.

It's explained somewhat in the article:

We’ve also had a combination of tax and regulatory policy that has encouraged capital formation and increasing returns to capital, so labor’s share of returns has decreased.

To add to that, capital is exponentially more portable than labor. With globalization, capital in the form of investments can move wherever it needs to to grow, it's borderless. Labor however, in order to grow wealth has to physically move. Remote jobs for basic labor doesn't exist - that's almost exclusively knowledge work.

So if you're a coal miner, your ability to create wealth is extremely limited to certain physical places. If you're a remote Java dev, you can code from anywhere and grow wealth much easier, but there is a serious time cost to switching work. If you're an investor and just need to drop money into an account, not only can you do it from anywhere, you can move things around more or less immediately with little (relative) cost.

It's about portability of the thing that is growing the wealth. Labor = slow, Capital = fast.

Re: Rising US Inequality: How We Got Here, Where We're Going

#49

Post by Kiro »

pjc50 wrote: post #27
car12 wrote: post #7

I wonder how much effect immigration has had on the matter of inequality. I'm going off these assumptions: -> Lesser immigration would've led to a higher GDP/capita figure for US. -> More resources to subsidize college and lesser cut-throat competition for jobs. -> Employers would be forced to pay higher wages and people would be more easily to retrain for different jobs. -> Bonus points: We can help Africa and South…

Huge assumptions there. And some significant work has gone into investigating the first and found it's the other way round: https://www.oecd-ilibrary.org/docserver/9789264288737-8-en.p... > We can help Africa and South american countries It would be a significant improvement if the US stopped "helping" South America. Allende would like a word.

The effect you're talking about is not instant. If you get a lot of asylum seekers in a short time your GDP/capita will take a hit until they've been integrated into society and become a net positive.

Re: Rising US Inequality: How We Got Here, Where We're Going

#50

Post by astazangasta »

0815test wrote: post #44
astazangasta wrote: post #36

Earlier quoted context omitted.

Ricardo's mistake is not thinking about development; comparative advantage is optimal now, but a society that just makes coffee beans is going to lose in the end to the one that makes microchips because of the difference in how the economy and society develop over time.

This may have been a mistake by Ricardo, but not one that points towards less trade as optimal. Indeed, export-led development (implying more trade openness) is the one reliable way we know about of going from the "coffee beans" to the "microchips" stage of development.

False, I recommend Ha-Joon Chang's writing on this subject. The US did not develop in a climate of trade openness, it used tariffs to protect its development. In fact no developed economy developed this way, all of them protected their industry until it was mature and ready to compete, had their governments invest in research and infrastructure and so on. If you have an example of a country that successfully developed through export led development and trade openness I would love to hear it.
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