Economists Are Rethinking the Numbers on Inequality • Hacker News Board

Re: Economists Are Rethinking the Numbers on Inequality

#101

Post by sooheon » Wed, Dec 04, 2019, 3:42 PM UTC

xorfish wrote: post #50

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> not on income or cap gains Why does it matter how it is taxed? If the capital returns 4% and is taxed at a 30% rate, you will have the same effect as if the capital is taxed at a rate of 1.15%. I think the biggest injustice is that return of capital isn't taxed at the same rate as income from labor. Someone who earns $100'000 from labor and $50'000 from return on capital should be taxed at the same rate as someone…

> I think the biggest injustice is that return of capital isn't taxed at the same rate as income from labor.

Almost there. One step further and you’ll realize the root injustice is that rent is taxed less than either returns to capital or labor.

Compensation for labor and returns to productive risk bearing or entrepreneurship should not be taxed. Rent seeking, where profit is guaranteed disproportionate to investment of labor or capital should be taxed out of existence.

It’s crucial to disambiguate land and capital (in the economic sense: https://en.m.wikipedia.org/wiki/Factor_payments) when speaking about concentration of wealth.

Re: Economists Are Rethinking the Numbers on Inequality

#102

Post by aqme28 » Wed, Dec 04, 2019, 3:42 PM UTC

xorfish wrote: post #50

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> not on income or cap gains Why does it matter how it is taxed? If the capital returns 4% and is taxed at a 30% rate, you will have the same effect as if the capital is taxed at a rate of 1.15%. I think the biggest injustice is that return of capital isn't taxed at the same rate as income from labor. Someone who earns $100'000 from labor and $50'000 from return on capital should be taxed at the same rate as someone…

Note: capital gains taxes are closer to around 15%, not 30%.

They're also only realized when they're liquidated, which makes a big difference.

Re: Economists Are Rethinking the Numbers on Inequality

#103

Post by rayiner » Wed, Dec 04, 2019, 3:43 PM UTC

bjornsing wrote: post #84

rayiner wrote: post #35

Earlier quoted context omitted.

> This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new These are not nitpicks. What you measure drastically changes the results. Piketty and Saez presented their own revision to their data in 2018 that shows starkly different results than the 2013 data everyone cites: http://gabriel-zucman.eu/files/PSZ2018QJE.pdf For examp…

INHO we should be looking much more at consumption and a lot less at income or (worst of all) assets. In what way does it matter that Warren Buffet has X times my income and Y times my assets, if he drives the same kind of car and lives in about the same kind of house? It means he has more power than me in a capitalistic system, sure. But is that really so wrong or unfair? I think it’s actually kind of a good thing:…

Note that a full consumption measure would also capture many aspects “power in a capitalist system.” E.g. lobbying spending.

Re: Economists Are Rethinking the Numbers on Inequality

#104

Post by sokoloff » Wed, Dec 04, 2019, 3:46 PM UTC

carlob wrote: post #89

xorfish wrote: post #78

Earlier quoted context omitted.

> Other than that Piketty argues that larger wealth means larger returns (per unit capital) and that is a very strong argument against a flat capital gains tax. But someone who earns more will also have a higher marginal tax rate. There is probably better risk tolerance once you have a net worth above e few months of expenses. But someone with $10M will be able to get the same risk adjusted return as someone who has…

> But someone who earns more will also have a higher marginal tax rate. Not currently on capital > But someone with $10M will be able to get the same risk adjusted return as someone who has a net worth of $100k. That's exactly what Piketty has shown to be false. If you look at stuff like endowments and sovereign funds you'll see gains that are nowhere near what's possible even for funds that have $100M in capital. Th…

Long term capital gains taxes in the US currently have a progressive (bracketed) structure.

They start at 0%, go to 15%, then 20%, then 23.8%.

Short term capital gains are taxed at ordinary income rates, which also has a progressive rate structure as GP claimed.

Re: Economists Are Rethinking the Numbers on Inequality

#105

Post by 60654 » Wed, Dec 04, 2019, 3:46 PM UTC

rayiner wrote: post #35

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new These are not nitpicks. What you measure drastically changes the results. Piketty and Saez presented their own revision to their data in 2018 that shows starkly different results than the 2013 data everyone cites: http://gabriel-zucman.eu/files/PSZ2018QJE.pdf For examp…

While I don't have the time to read the PSZ paper right now, I'll just point out that their introduction contradicts your post, that the results are starkly different. I'll just quote verbatim from p 557:

> Even after taxes and transfers, there has been close to zero growth for working-age adults in the bottom 50% of the distribution since 1980. The aggregate flow of individualized government transfers has increased,but these transfers are largely targeted to the elderly and the middle-class (individuals above the median and below the 90th percentile). Transfers that go to the bottom 50% of earners havenot been large enough to lift their incomes significantly."

> "... our data show a sharp divergence in the growth experienced by the bottom 50% versus the rest of the economy. The average pretax income of the bottom 50% of adults has stagnated at about $16,000 per adult (in constant 2014 dollars ...) . As a result, the bottom 50% income share has collapsed from about 20% in 1980 to 12% in 2014. In the meantime, the average pretax income of top 1% adults rose from $420,000 to about $1.3 million, and their income share increased from about 12% in the early 1980s to 20% in 2014. The two groups have essentially switched their income shares, with eight points of national income transferred from the bottom 50% to the top 1%. The top 1% income share is now almost twice as large as the bottom 50% share, a group that is by definition 50 times more numerous. In 1980, top 1% adults earned on average 27 times more than bottom 50% adults before tax, while they earn 81 times more today. Second, government redistribution has offset only a smallfraction of the increase in pretax inequality."

Re: Economists Are Rethinking the Numbers on Inequality

#106

Post by xorfish » Wed, Dec 04, 2019, 3:47 PM UTC

carlob wrote: post #89

xorfish wrote: post #78

Earlier quoted context omitted.

> Other than that Piketty argues that larger wealth means larger returns (per unit capital) and that is a very strong argument against a flat capital gains tax. But someone who earns more will also have a higher marginal tax rate. There is probably better risk tolerance once you have a net worth above e few months of expenses. But someone with $10M will be able to get the same risk adjusted return as someone who has…

> But someone who earns more will also have a higher marginal tax rate. Not currently on capital > But someone with $10M will be able to get the same risk adjusted return as someone who has a net worth of $100k. That's exactly what Piketty has shown to be false. If you look at stuff like endowments and sovereign funds you'll see gains that are nowhere near what's possible even for funds that have $100M in capital. Th…

> Not currently on capital

I said in my comment that return on capital should be taxed the same as labor income.

> That's exactly what Piketty has shown to be false. If you look at stuff like endowments and sovereign funds you'll see gains that are nowhere near what's possible even for funds that have $100M in capital.

Do they really outperform a basic index fund strategy? Any data on this?

There isn't a market that offers better risk adjusted returns than than what is available with affordable index funds.

The only exception are probably the index funds of Dimensional Fund Advisors. They are only available to investors that have an approved financial advisor.

Re: Economists Are Rethinking the Numbers on Inequality

#107

Post by SketchySeaBeast » Wed, Dec 04, 2019, 3:49 PM UTC

kofejnik wrote: post #94

SketchySeaBeast wrote: post #76

Earlier quoted context omitted.

That's silly - compared to cavemen, even workers in third world countries are "rich", being able to trade things for goods and services and not being required to hunt and gather. Inequality solved?

yes, exactly; to have equality, you'll have to reduce everyone to the lower common denominator, which will be rather low Also, I don't see why exactly inequality is inherently bad. I'm poorer than Bezos, _and that is a good thing_. Pretty much like Steph Curry is better than me at basketball and so he should have a lot more ball possesion should we be playing on the same team, Bezos is much better than me in allocati…

> Bezos is much better than me in allocating resources, so he should have a lot more resources to play with.

How do you know that, though? Have you had the opportunity to be in the exact same place he was for the exact same time? Do you sincerely believe there aren't, in the billions of people on earth, someone with better resource allocation skills than Bezos? Having more money is not proof of ability.

Re: Economists Are Rethinking the Numbers on Inequality

#108

Post by rayiner » Wed, Dec 04, 2019, 3:49 PM UTC

davedx wrote: post #53

60654 wrote: post #7

This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez. But that's not anything new. The major points of their work, and especially of Piketty's monumental _Capital for the 21st century_ still stand: that capital is a positive feedback loop in a way that labor is not; that mid-20th-century laws that put brakes on this feedback loop have been removed; th…

> the only reasonable solution for this is a tax on owned capital (not on income or cap gains) and the political chances of this happening are slim Seems to be a cornerstone policy of multiple presidential candidates in the US at the moment. We have it in the Netherlands. I don't think it's that unlikely. Not sure how much it helps with inequality in the Netherlands though. If anything I think it stimulates people an…

Note that the Dutch wealth tax replaces their capital gains tax. It’s a tax on the assumed returns on capital assets. (Of course unlike a capital gains tax the wealth tax reaches unrealized gains. But the rate is also lower than a capital gains tax would be. It’s possible to come out ahead compared to a capital gains tax depending on your situation.)

Re: Economists Are Rethinking the Numbers on Inequality

#109

Post by onion2k » Wed, Dec 04, 2019, 3:50 PM UTC

kofejnik wrote: post #94

SketchySeaBeast wrote: post #76

Earlier quoted context omitted.

That's silly - compared to cavemen, even workers in third world countries are "rich", being able to trade things for goods and services and not being required to hunt and gather. Inequality solved?

yes, exactly; to have equality, you'll have to reduce everyone to the lower common denominator, which will be rather low Also, I don't see why exactly inequality is inherently bad. I'm poorer than Bezos, _and that is a good thing_. Pretty much like Steph Curry is better than me at basketball and so he should have a lot more ball possesion should we be playing on the same team, Bezos is much better than me in allocati…

to have equality, you'll have to reduce everyone to the lower common denominator, which will be rather low

Why must everyone go down to the lower common denominator? Wouldn't moving everyone to the average also be equality? For most middle-class Westerners that would be a reduction, but for most people on Earth that would very likely be a small improvement, and in some cases a significant improvement.

The real problem is that it's logistically impossible. Someone living in the middle of a desert just can't have access to the sort of food wealth and stable energy supply we have because the technologies to get those things to where they are don't really exist yet. That doesn't mean we shouldn't try to move everyone towards the average a bit though.

Re: Economists Are Rethinking the Numbers on Inequality

#110

Post by pksdjfikkkkdsff » Wed, Dec 04, 2019, 3:50 PM UTC

simoom22 wrote: post #81

pksdjfikkkkdsff wrote: post #63

Earlier quoted context omitted.

Arguably, almost everybody in the Western world has gotten rich. Go visit a medieval castle sometime. The standards that now everybody has required an army of servants in the old days. It is just a hateful lie of the left to claim "being rich" is dependent on exploiting poor people.

Are you saying poor people aren't exploited?

Presumably there are people who are being exploited in the world. But to claim in general poverty is a result of exploitation seems very questionable.

Start with basics. People live in the woods, with nothing. Some start building a hut from sticks, others don't. The ones living in huts suddenly are richer than the ones who don't, even though they haven't taken anything away from the ones who don't have huts.

And of the ones who don't have huts demand some of the huts from the people who built them, who is doing the exploiting?