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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

#191

Post by vanderZwan »

simonsarris wrote: post #136
taffer wrote: post #24

Earlier quoted context omitted.

> This Economist article points out some of the many small academic works that quibble over details with Piketty and Saez [...] that capital is a positive feedback loop in a way that labor is not Well the article mentions that: > Matthew Rognlie, now of Northwestern University, argued that the rise in America’s capital share was accounted for by growing returns to housing, not by the shares and bonds which are held d…

Yeah the most succinct criticism of Piketty is simple: The gains in r > g are almost exclusively down to housing, not other sources, and you can fix the housing problem without touching (and potentially cocking up) the rest of the economy if you wanted to. Instead, people want to take Piketty's conclusion, not look at where the r > g comes from, and then go on to fuss about with other things (like forms of wealth dis…

> which does not need massive economic intervention to solve, but something entirely different (relaxing of building laws, etc).

Nitpick: you're probably thinking of directly intervening with the economy through regulations and subsidies, but isn't disrupting the housing market technically going to be a massive economic intervention in practice? As in, kind of by definition?

Also, I'm not sure if it's actually that easy to change the laws surrounding housing in such a way that pushes back against wealth accumulation.

Re: Economists Are Rethinking the Numbers on Inequality

#192

Post by kofejnik »

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…

I don't see how luck invalidates my point; yes, you probably need luck to make big bucks, but that is just a part of the game. If you make so that no one can get seriously rich, "to prevent exploitation", congratulations, this is how you get Soviet Union, with Gulag and Golodomor and other stuff, but with oh so nice intentions, workers owning means of production, blah blah blah

Re: Economists Are Rethinking the Numbers on Inequality

#193

Post by AnimalMuppet »

jimbokun wrote: post #112
bjornsing wrote: post #84

Earlier quoted context omitted.

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:…

> INHO we should be looking much more at consumption and a lot less at income or (worst of all) assets. At what age can you retire? Can you afford education for yourself and your children? Can you afford the home in the district with the good schools? How much debt will you and your children be in after finishing college? What are the odds you go bankrupt from a medical incident, even with "insurance"? "Consumption"…

> Can you afford the home in the district with the good schools?

Let me pick on that one in particular. Let's suppose that we redistributed all the assets in the country evenly (never mind how). Doing so did not increase the number of homes in districts with good schools. So not everyone can have them, no matter how much money everyone has. Who's going to get those houses? Not everyone who has school-aged kids.

Or take college. Redistribute all the money, and it won't change the number of college classrooms. Who's going to get to go? Not everyone.

Same with beach houses. There are more people who want beach houses than there are beach houses. Redistribute all assets evenly, and it may change who has the beach houses, but it won't change the fact that more people want them than have them.

If everyone had the same amount of money, these things would still be allocated on the basis of who's willing to pay the most for them - that is, who's willing to give up the most other things in order to get that thing.

Remove money entirely, and these things will still be allocated somehow - by who gets luckiest in the lottery, or who has the best political connections, for example. There is no system that magically makes there be as many beach houses as there are people who want them. So there will always be the problem of how scarce resources are allocated.

Re: Economists Are Rethinking the Numbers on Inequality

#194

Post by kofejnik »

onion2k wrote: post #109
kofejnik wrote: post #94

Earlier quoted context omitted.

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 proble…

If everybody is forced to be average, what's the point of even trying? I'd probably noodle on my guitar all day and play Fallout, rather than work

Re: Economists Are Rethinking the Numbers on Inequality

#195

Post by AnimalMuppet »

aguyfromnb wrote: post #120
0x445442 wrote: post #72

Earlier quoted context omitted.

But your missing the key part. Sometimes if the Fed sets rates too low and there's not enough demand for the bonds the Fed buys the bonds thus keeping the interest rates artificially low.

> Sometimes if the Fed sets rates too low and there's not enough demand for the bonds the Fed buys the bonds thus keeping the interest rates artificially low. Yes, it's how the Fed conducts monetary policy. Can you name the last time that US treasuries were under-subscribed? Greek bonds have lower rates to US treasuries; which would you rather own? On a relative basis, how can one claim that US interest rates are "to…

> Can you name the last time that US treasuries were under-subscribed?

Yes, a couple of months ago.

Re: Economists Are Rethinking the Numbers on Inequality

#196

Post by hundt »

AnimalMuppet wrote: post #181
dcolkitt wrote: post #118

Earlier quoted context omitted.

True. But housing is also tax-privileged in other ways. Most notable is the mortgage interest on federal income tax. More subtle is the fact that the value of the imputed rent from owning your own home is not taxed. I.e. if you rent your home to someone else, you pay income tax on the rent you collect. But if you "rent to yourself" by owning your own home, you don't pay tax on this implicit form of income.

I hate the "implicit income" viewpoint. If I own my own house, I do so because I already paid for it . That cost me more at that time than the person who's renting pays in rent. So why should my owning my house be considered "implicit income" because I don't have to pay rent? It should be considered money I've prepaid. And then there are similar situations. If I've paid off my car, is it implicit income because I don…

I don't think that's the assumption that it's based on. It's more like, when you own an asset, you get to benefit from the consumption of that asset.

You did not "prepay" for the consumption of that asset. You paid to own the asset, which entitles you to consume it while you own it, but the value you get from consuming it is not deducted from the resale value of the asset. Example: you buy a house in 2010 for $500,000 that would cost you $4,000 a month to rent. In 2012 you sell it for $500,000. During those two years you received $96,000 of value from owning the house. You are now $96,000 richer than if you had rented the house instead of buying it (minus expenses associated with the house, and opportunity costs of having your money tied up in the house).

It's true that the same reasoning applies to other assets. I would assume, but don't know, that the reason people don't talk about imputed income for other assets is that the amounts are just much smaller in most cases.

Re: Economists Are Rethinking the Numbers on Inequality

#197

Post by AnimalMuppet »

hundt wrote: post #196
AnimalMuppet wrote: post #181

Earlier quoted context omitted.

I hate the "implicit income" viewpoint. If I own my own house, I do so because I already paid for it . That cost me more at that time than the person who's renting pays in rent. So why should my owning my house be considered "implicit income" because I don't have to pay rent? It should be considered money I've prepaid. And then there are similar situations. If I've paid off my car, is it implicit income because I don…

I don't think that's the assumption that it's based on. It's more like, when you own an asset, you get to benefit from the consumption of that asset. You did not "prepay" for the consumption of that asset. You paid to own the asset, which entitles you to consume it while you own it, but the value you get from consuming it is not deducted from the resale value of the asset. Example: you buy a house in 2010 for $500,00…

Well, dcolkitt was talking about imputed income in the context of tax advantages. I assumed (perhaps wrongly) that the subtext was that people who own houses should be taxed on the "imputed income" as if it were real income. That raised my hackles - perhaps wrongly.

Still... there's something funny in the "imputed income" accounting. Let's say I buy a house for $500,000. I live in it. I don't pay rent, though the house would rent for $4000/month.

Or, let's say I buy the same house, but don't live in it. I live somewhere else instead, paying $4000/month in rent. But I also rent out the house I own, receiving $4000/month in rent for that house. My net is $0... except that I probably pay taxes on the $4000/month I receive. But if dcolkitt's point is not that should have to pay taxes on the "imputed income" of owning my house, then the "imputed income" is exactly offset by the "imputed foregone income" - I could have rented out the house, but I didn't.

Re: Economists Are Rethinking the Numbers on Inequality

#198

Post by xorfish »

sokoloff wrote: post #173
xorfish wrote: post #137

Earlier quoted context omitted.

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…

https://globalbetaadvisors.com/the-yale-myth-analyzing-the-p...

Endowements have mostly a negative alpha when using a 4 factor model.

Re: Economists Are Rethinking the Numbers on Inequality

#199

Post by cannabis_sam »

rguzman wrote: post #31
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…

it seems odd to dismiss papers that challenges Piketty's and Saez's conclusions as nitpicky. in complex systems the devil is most often in the details. and not only that, but the sort of project that Piketty took on has many potential methodological pitfalls. so, small details could actually mean a given premise or conclusion is invalid. how would you suggest someone go about assessing whether a paper is nitpicky vs…

Do you have any actual arguments or are you just trying to sow FUD? Cause you sound exactly like a concern troll. Not providing any substantial arguments against Piketty, just vaguely suggesting that there are problems with his argument, then changing the subject to what’s nitpicky or not..

Give us a concrete argument, and we can discuss if it’s nitpicky or not. What you are doing is leading people into the weeds, which only helps the people making a profit of the positive feedback loop you do not seem to want to discuss. I don’t think that’s your intention, but it is the result..

Re: Economists Are Rethinking the Numbers on Inequality

#200

Post by xorfish »

throwawayjava wrote: post #178
xorfish wrote: post #137

Earlier quoted context omitted.

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 cycl…

There return is worse than a passive portfolio with the se risk exposure.

https://globalbetaadvisors.com/the-yale-myth-analyzing-the-p...

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