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Economists Are Rethinking the Numbers on Inequality

economist.com

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Re: Economists Are Rethinking the Numbers on Inequality

#171

Post by pksdjfikkkkdsff »

ianleeclark wrote: post #155
pksdjfikkkkdsff wrote: post #141

Earlier quoted context omitted.

"Unfair capital advantage" Well, again, start accumulating capital, if it is such an unfair advantage. "I, too, am in favor of a 100% wealth tax upon death. No more freeloading failsons." I am absolute against such a thing, in fact I consider it an insane proposal. It seems one of the fundamental human rights should be people being allowed to provide for their children. People work to have successful children. It is…

> I am absolute against such a thing, in fact I consider it an insane proposal. 44 minutes ago > Whether it should be possible to be arbitrarily rich is another question. You were so close to getting it, what happened to you? > Well, again, start accumulating capital, if it is such an unfair advantage. Hey, person who can barely make it to get by and spends all of their income on subsistence-level living, why don't y…

"> Whether it should be possible to be arbitrarily rich is another question.

You were so close to getting it, what happened to you?"

There is a difference between limiting how rich anybody can get, and taking everything away from families if the head of family dies.

"Hey, person who can barely make it to get by and spends all of their income on subsistence-level living, why don't you just get more capital?"

How many such people even exist? If you barely make it, you should aim to improve your situation. Try to find a better job, try to learn skills that enable you to get a better job, and so on. Few people are really doomed to such a situation forever. And those who are, usually because of illness, need charitable help or insurance. It's a separate problem.

"everyone should be given a fair chance to make it--but what is fair, how is this decided, who enforces it?"

Well who do you want to decide what is fair?

I think markets are the best mechanism to establish fair prices. Other than that, you can establish some baseline - access to housing, food and education, so that people can try to make something out of their lives. It can be discussed. But certainly it doesn't mean fair has to be everybody has to have the exact same starting positions. It is not even possible, because not all parents are the same. If your parent is Paul Graham and he teaches you programming, you already have an advantage against other kids, even without economic resources.

"So it's perfectly acceptable when Coca Cola sends death squads to kill labor organizers."

Obviously not. I think you are being silly here. Basic laws still apply.

Re: Economists Are Rethinking the Numbers on Inequality

#172

Post by hervature »

FeloniousHam wrote: post #159
ianleeclark wrote: post #128

Earlier quoted context omitted.

> People starving, having no health care, low life expectancy, that sort of thing, are problems. Their neighbor having more money in the bank is not really a problem. Most people, when they critique wealth inequality, aren't critiquing their neighbors because most people in the same zip code are going to be at similar levels. When people critique wealth inequality, they're talking about the Koch brothers, or other pa…

> I, too, am in favor of a 100% wealth tax upon death. No more freeloading failsons. I am very far from an economic leftist, but the elimination of inheritance seems to me the fastest, fairest, path to equality of opportunity (the disposition of the confiscated assets is a separate argument). Tax the dead guy.

You're just incentivizing rich people to put all their assets in holdings companies and then giving their children ownership before they die. I wouldn't be surprised if this is how its done today.

Re: Economists Are Rethinking the Numbers on Inequality

#173

Post by sokoloff »

xorfish wrote: post #137
carlob wrote: post #131

Earlier quoted context omitted.

> Do they really outperform a basic index fund strategy? Any data on this? Yeah, Piketty's book. But of course the Norwegian government and Harvard administrators are just a bunch of idiots, they have billions of dollars to invest and didn't think of a basic index fund! Now they can save a lot of money firing whoever was managing it for them!

Most fund managers are very intelligent people, yet most of them fail to outperform a basic index fund. The Harvard endowement underperformed the sp500 by more than 3% annually for the last 10 years. So instead of a plus of 220% it produced a plus of about 130% over the same period. There is lots of data that shows that passive strategies outperform hedge fund and these university funds.

It might be sound strategy for an endowment to give up upside in the most raging of bull markets that we’ve ever seen in exchange for lower drawdown in down markets. A low beta portfolio underperformed (by definition) in 2009-2019.

I’m a staunch proponent of passive index investing so I suspect we largely agree on philosophy, but the mere fact that someone underperformed in the somewhat historically anomalous market we’ve enjoyed for the last decade is not conclusive that they clowned it, IMO. If they outperformed 2005-2008 or outperform in the next bear market, that would be evidence again full clown performance.

Re: Economists Are Rethinking the Numbers on Inequality

#174

Post by onion2k »

tathougies wrote: post #135
onion2k wrote: post #109

Earlier quoted context omitted.

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 proble…

Of course the technology exists to bring food to the desert. Move to california if you think this is what the hold up is.

California has ports and airports and... roads. People stay in the same places for a long time. Try delivering fresh produce to nomadic Bedouin tribes in the Eastern Sahara and you might find it a little trickier.

Re: Economists Are Rethinking the Numbers on Inequality

#175

Post by pksdjfikkkkdsff »

SketchySeaBeast wrote: post #154
pksdjfikkkkdsff wrote: post #145

Earlier quoted context omitted.

He has been going at it consistently for many, many years now. He just happened to be lucky year after year? Most people don't even try, but it doesn't stop them from accusing people who put in the work and who take the risks from just being lucky.

The problem I think is that people attribute all of success to the sheer iron will and willingness to suffer of the individual, when that just isn't the case. Are you attributing all of Amazon's success to Bezos solely? If he left do you assume Amazon would immediately start to fail? Was it Bill Gates alone who kept Microsoft afloat? You have to consider luck, there's a ton of people in the world who put in the work…

Not everybody becomes a Billionaire, but most people with intelligence and skill amount to at least something. The luck factor is mitigated by people trying several things until they succeed. You throw out the hypothetical example of the talented people who didn't amount to anything, but how common is it really?

Would you also say Steve Jobs was merely lucky, and everybody else could have founded Apple? Perhaps people just don't know enough about what those CEOs do?

And of course at a basic level, it is always luck, because even being born, being healthy, the place where you are born, intelligence, and so on, are luck.

I think to assume people don't deserve stuff because they were lucky is rather backwards.

Imagine you had a brain tumor, and you need brain surgery. There is a surgeon who was very lucky - he was born white, male, to a wealthy family, so that he could afford to go to the best schools to become a really good brain surgeon.

Would you then say that guy doesn't deserve your money, because he was just lucky?`

I'd say that's just bullshit. It doesn't matter why or how he got his qualifications by luck, magic, whatever. What matters right now, what makes you willing to give him money, is that he can provide you with the best odds of a successful brain surgery.

You are welcome to pick a random poor person from the street to perform that surgery, for the sake of fairness. After all, it isn't their fault that they weren't able to afford the education to become a brain surgeon, right?

And if you say that brain surgeon should have to operate on you for free, that is exploitation, plain and simple. You dispose of his body. In the end he would be punished for becoming a brain surgeon, because people would feel entitled to his services and would make him work 20 hours a day, with no compensation.

Re: Economists Are Rethinking the Numbers on Inequality

#176

Post by rayiner »

CharlesColeman wrote: post #151
Matticus_Rex wrote: post #138

Earlier quoted context omitted.

I'm fairly well acquainted with the literature on this topic, and I think the opposite; the fact that most people don't understand why these "nitpicks" actually seriously undermine the premise and totally butcher the prescriptive suggestions makes it easy for readers to dismiss the criticism, especially in a general-interest publication. While there's a contrary effect for the skimming reader who just accepts that P&…

> I'm fairly well acquainted with the literature on this topic How so, exactly? > and I think the opposite; the fact that most people don't understand why these "nitpicks" actually seriously undermine the premise and totally butcher the prescriptive suggestions Personally, I'm inclined to withhold judgement until the dust settles, yay or nay. The topic is technically difficult, and there are a lot of actors with poli…

My biggest problem with Piketty & Saez's work is that it made pretty major economic policy prescriptions based on a model that was so simplistic that the result was borderline click-bait. And the end-result is that assertions have entered the political discourse ("the middle class's standard of living has been stagnant since the 1970s") that just aren't true.

Let's unpack that. If you want to quantify the middle class's standard of living, you have to look at:

1) Post-tax income. 2) Prices/product quality/ 3) Benefits/services. 4) The characteristics of the middle class (age, race, immigration status, household size, etc).

Piketty & Saez look at pre-tax income, apparently only because it's easy to assess via tax receipts. That overlooks data that's highly relevant to addressing deep and substantial policy questions. For example, consider what would happen if the U.S. and Mexico merged. Immediately afterward, median income in the U.S. would drop significantly. But nobody's standard of living would change. I.e. looking at the "median" fails to account for changes in who comprises the median. In the U.S. the immigrant share of the population has almost tripled from 1970 to 2017. Even if you've got a great economy that's good at integrating people and equalizing their incomes over time, it's probably not realistic to expect first generation immigrants as a group to have the same income as native born people. Looking at just pre-tax incomes completely masks that effect.

Similarly, marriage rates and household sizes are down significantly since 1970. Married couples make significantly more money than non-married individuals. The median marired couple in Michigan has an income of $80,000, which is 45% higher than the combined income of the median single woman and median single man: https://www.mlive.com/news/2017/09/michigans_median_income_i.... Looking at pre-tax household income overlooks that effect entirely.

There's a story in here somewhere. But Piketty and Saez's analysis doesn't actually tell us anything.

Re: Economists Are Rethinking the Numbers on Inequality

#177

Post by toyg »

Merrill wrote: post #160
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…

>that mid-20th-century laws that put brakes on this feedback loop have been removed; I don't believe that the purpose of mid-20th-century laws was to promote equality. Things were more equal then because: a) World Wars I & II destroyed huge amounts of capital, and b) fighting wars requires lots of money which requires raising taxes on people who can pay, since borrowing cannot fully fund general wars. Economics are c…

That’s definitely not the case in Europe. Socialist movements were on the verge of power in many countries before WWII, and actually ruled or heavily conditioned the political life all over the continent until the end of the Cold War. The war effort had been dealt with by the early ‘50s at the latest; the following 40 years were dominated by the fight for social and economic equality.

The war “helped” only in the sense that it often acted as a selection for the political classes in the following 20 years or so, in some cases literally (Italy and France).

Re: Economists Are Rethinking the Numbers on Inequality

#178

Post by throwawayjava »

xorfish wrote: post #137
carlob wrote: post #131

Earlier quoted context omitted.

> Do they really outperform a basic index fund strategy? Any data on this? Yeah, Piketty's book. But of course the Norwegian government and Harvard administrators are just a bunch of idiots, they have billions of dollars to invest and didn't think of a basic index fund! Now they can save a lot of money firing whoever was managing it for them!

Most fund managers are very intelligent people, yet most of them fail to outperform a basic index fund. The Harvard endowement underperformed the sp500 by more than 3% annually for the last 10 years. So instead of a plus of 220% it produced a plus of about 130% over the same period. There is lots of data that shows that passive strategies outperform hedge fund and these university funds.

Harvard is optimizing for a different objective than retail investors or even smaller endowments. It can afford to take less risk and get less return.

Lots of small colleges with 100MM endowments using a passive strategy will fail to survive the next deep recession. They need those returns to survive, so they have no choice but to accept the associated risk. But one deep down market without an associated counter cyclical uptick in enrollment numbers and they are dead. Ask any small private college CFO and they'll agree.

On the other hand, the public markets could lose all their value and Harvard would still be able to cover its operating expenses.

Harvard's goal is to survive for centuries. The goal of a college with a 100MM endowment is to make payroll during the next few school years.

Re: Economists Are Rethinking the Numbers on Inequality

#179

Post by thorwasdfasdf »

koheripbal wrote: post #121
el_cujo wrote: post #40

This is kind of a touchy subject. I feel like a lot of people would balk at the idea of the top 1% not doing better and better, not because they have any extra insight into the topic but because to say this seems like you're defending the ultra-rich (and by extension attacking everyone else). In reality, even if the rich aren't getting even richer at quite the rate we thought, it doesn't mean you really need to have…

Conflating the top 1% with the ultra-rich is another big problem. If we assume that most people achieve peak earning years between 45-50 years old, then about 30% of people end up in the top 1% at some point in their lives.

this is a huge problem because if you're in the top 1% then you're probably also living in the top 1% most costly cities and towns (at least in terms of housing cost). take into account the much higher taxes and you'd only be doing a tiny bit better than the average person nationwide.

Re: Economists Are Rethinking the Numbers on Inequality

#180

Post by downerending »

leto_ii wrote: post #13

A lot of this article reminded me of the techniques used by climate change deniers to sow doubt. Take for example the following: > Another correction concerns the tax reforms passed under Ronald Reagan in 1986. Apparent changes in top incomes around this reform account for about two-fifths of the total increase between 1962 and 2015 in the pre-tax incomes of the top 1% in Messrs Piketty and Saez’s estimates. Messrs A…

If an argument can't stand up to its opponents, it's not much of an argument.
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