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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

#261

Post by TheOtherHobbes »

dangerlibrary wrote: post #233
rayiner wrote: post #176

Earlier quoted context omitted.

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 clas…

You are mixing up correlation and causation re: married couples.

Over the time period, married couples often had a single income.

Now working class married couples are just as likely to have a total of two to six jobs between them, but their real median income is still lower than it was when only one person was working.

There are no "nit picks" to debate. Refusing to acknowledge the destruction of financial stability for the working class and lower middle class in the US and certain other Western countries is simple denialism.

Re: Economists Are Rethinking the Numbers on Inequality

#262

Post by harryh »

hueving wrote: post #239
harryh wrote: post #162

Earlier quoted context omitted.

Property taxes are not wealth taxes, they are consumption taxes. You can easily tell this because a person who owns a home outright pays the same tax as someone who owns a similar home but has a large mortgage. These two people have different levels of wealth but pay the same tax. This is because their consumption is the same.

That's not how consumption taxes work: https://en.wikipedia.org/wiki/Consumption_tax A property tax takes effect without sales occurring, without the property being used, etc. There is no act of consumption to tax, other than simply existing. And before anyone argues that the use of the land is the consumption, that would only make sense if the value of the house wasn't taken into account as part of the property tax.…

It's not exactly the same as a sales tax that is paid all at once, but it's basically the same as the size of the tax scales with the size of the consumption rather than the size of one's wealth.

Re: Economists Are Rethinking the Numbers on Inequality

#263

Post by harryh »

rad88 wrote: post #237
harryh wrote: post #162

Earlier quoted context omitted.

Property taxes are not wealth taxes, they are consumption taxes. You can easily tell this because a person who owns a home outright pays the same tax as someone who owns a similar home but has a large mortgage. These two people have different levels of wealth but pay the same tax. This is because their consumption is the same.

The wealth difference is not as great as it seems, it's just the interest on the mortgage minus tax incentives and the opportunity cost of paying it off.

If I have a $1M house I can sell it and have $1M in cash.

If I have a $1M house and a $900k mortgage then I can sell it and only have $100k in cash.

Re: Economists Are Rethinking the Numbers on Inequality

#264

Post by TomMckenny »

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…

The two positions are not mutually exclusive: massive economic disruption allows laws intended to promote equality to suddenly succeed. Likely WWI & II made politically impossible things suddenly possible. For example, FDR's attempts at Keynesian intervention were either timid or blocked (like the National Recovery Act). During the war taxes could be used to massively raise employment (albeit making weapons) and prime the pumps for the post war era.

And it is difficult to identify the motivation behind every piece of legislation but the Roosevelt administration, Beveridge, LBJ and others often acted with the clear intent of creating greater equality. And, as I think you point out, did things that would have been impossible before the wars.

Re: Economists Are Rethinking the Numbers on Inequality

#265

Post by [deleted] »

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…

[deleted]

Re: Economists Are Rethinking the Numbers on Inequality

#266

Post by tolmasky »

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…

A key thing about the mid-century is that the actual manufacturing capabilities of most of the world (with the sole exception of the US basically) were completed destroyed by WWII. Britain and Germany were devastated. This means that in the 1950's the US was essentially acting as the sole industrial power at full strength serving the rest of the world. We were playing worldwide economics on easy mode: as if we were the only ones that had modern technology and fully functioning infrastructure, while all other countries wanted our goods. This is why it is bizarre to draw any conclusions about taxes or any other economic principles from this very unique period of time: you could probably put in place just about any law and still have the United States be ridiculously successful. We are now actually competing with other parts of the world.

Re: Economists Are Rethinking the Numbers on Inequality

#267

Post by ranie93 »

bhupy wrote: post #211
ranie93 wrote: post #205

Earlier quoted context omitted.

Without checking the figures, I can agree with the idea that a one-time seizement wouldn't assuage much. Certainly Bill Gates and his endeavors have created immense value for many. None of these points are being contested or purported in the "line of thinking" you mention (the letter I linked I assume?)

> None of these points are being contested or purported in the "line of thinking" you mention (the letter I linked I assume?) These points are being purported/contested here: "There is nothing worth celebrating about a world where inequality is so extreme that 58% of people are in poverty, while a few dozen billionaires have more than all of their wealth combined"

They're not, but its fine to read between the lines. The letter makes no allusions to seizing wealth or stating that immense wealth hasn't been created.

Re: Economists Are Rethinking the Numbers on Inequality

#268

Post by beerandt »

BurningFrog wrote: post #124
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…

Housing is rising in value because of regulatory capture. It's illegal to build competing housing in most major cities. Money is power, and the powerful make the regulations. So maybe regulation is really the positive feedback circuit?

Besides zoning laws and building codes, dodd-frank and similar financial regulation has made speculative building of single family homes nearly impossible, if you are not 100% self-financing.

Which itself is a capital feedback loop which requires a not insignificant minimum outlay to enter the market.

Re: Economists Are Rethinking the Numbers on Inequality

#269

Post by likpok »

darawk wrote: post #257
dangerlibrary wrote: post #233

Earlier quoted context omitted.

You are mixing up correlation and causation re: married couples.

The relationship is causal. Married couples are a household. Married couples consist of two people. Two people is more than one person. Two incomes is more than one income, etc. Even though all married households are not dual income, those that are shift up the mean for the rest. This is an artifact of measurement via 'household'.

You've missed rayiner's argument, which is that the household income is more than the sum of the median man and the median woman. That is: two married people make more than two single people.

There are a number of arguments you could make as to why (for example: married people tend older and so are farther in their careers), but it's not just "married households have two incomes and single households have one".

Re: Economists Are Rethinking the Numbers on Inequality

#270

Post by bhupy »

ranie93 wrote: post #267
bhupy wrote: post #211

Earlier quoted context omitted.

> None of these points are being contested or purported in the "line of thinking" you mention (the letter I linked I assume?) These points are being purported/contested here: "There is nothing worth celebrating about a world where inequality is so extreme that 58% of people are in poverty, while a few dozen billionaires have more than all of their wealth combined"

They're not, but its fine to read between the lines. The letter makes no allusions to seizing wealth or stating that immense wealth hasn't been created.

My point is that the more useful description of the problem is:

“There is nothing worth celebrating about a world where 58% of people are in poverty”.

The “inequality” and the presence of billionaires is a distraction from the real problem: poverty.

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