Economists Are Rethinking the Numbers on Inequality • Hacker News Board

Re: Economists Are Rethinking the Numbers on Inequality

#41

Post by logicchains » Wed, Dec 04, 2019, 2:53 PM UTC

SamBam wrote: post #27

joshklein wrote: post #17

Earlier quoted context omitted.

Inflation IS a tax on wealth. When done intentionally (by printing money), it’s called seigniorage.

If my wealth is in anything beyond cash -- say I own a huge hotel chain, or the largest retail company in the country -- how is inflation a tax on my wealth? My businesses will still be generating the same proportion of the economy as they were before.

If inflation causes the nominal value of your hotel chain to increase 2%, you have to pay capital gains tax on this nominal gain (at least in countries where capital gains tax is not adjusted for inflation), leaving you with less real value afterwards.

Re: Economists Are Rethinking the Numbers on Inequality

#42

Post by claudiawerner » Wed, Dec 04, 2019, 2:53 PM UTC

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 to mention that Piketty has a relatively soft list of proposals and research compared to the 'old guard' of critics of capital. The Economist's arguments against Piketty are only there because he's the most radical economist on capital's horizon. By presenting Piketty as radical on the issue of inequality, the arguments from modern, radical economists on every other aspect of capital are shut out. For example, beyond Piketty we have John Roemer, beyond Roemer we have Veneziani & Yoshihara, beyond them we have Fred Moseley, Andrew Kliman, Sekine, Itoh...

In other words, Piketty gets so much criticism because he's the least radical of a bunch of radical economists, and because of that, he hasn't left capital's horizon.

Re: Economists Are Rethinking the Numbers on Inequality

#43

Post by aguyfromnb » Wed, Dec 04, 2019, 2:55 PM UTC

logicchains wrote: post #22

aguyfromnb wrote: post #12

Earlier quoted context omitted.

> Interest rates are set by FED, who can print arbitrary amount of money out of thin air One interest rate is set by the Fed, which serves as a benchmark for other market rates. But it's a simple question: if I can borrow money at 3%, why would I borrow your money at 7% so you can earn a return? And if someone wants to lend me money at 3%, why is that "artificial"? > who can print arbitrary amount of money out of thi…

>Should we do pretend mining, like Bitcoin? Real mining seemed to work okay in past. American GDP grew faster in the 1800s under the gold standard (avg. 4%+) than any time after the creation of the federal reserve.

>Real mining seemed to work okay in past.

For the purpose of "creating money", it's a waste of resources.

>American GDP grew faster in the 1800s under the gold standard (avg. 4%+)

I don't want to go back to that period.

Re: Economists Are Rethinking the Numbers on Inequality

#44

Post by airstrike » Wed, Dec 04, 2019, 2:58 PM UTC

Measuring income inequality in the US without looking at outsized wage gains abroad feels remarkably inaccurate.

I'll copy-paste my reply to another thread from earlier this year:

> But, wages haven't improved in the last 40 years for the average person

...in the US.

Growing inequality in the US is driven by the fact that capital gains domestically have improved dramatically alongside wage gains abroad, while wage has been essentially stagnant within the US due to globalization / offshoring / outsourcing

The solution, in my humble immigrant opinion, is to train Americans to take on service jobs that cannot be easily automated / performed by cheap labor overseas. But that requires taking an honest look at the country's education system and neither side of the aisle seems to be able to do that without resorting to anger and vitriol

Re: Economists Are Rethinking the Numbers on Inequality

#45

Post by kaibee » Wed, Dec 04, 2019, 2:58 PM UTC

logicchains wrote: post #22

aguyfromnb wrote: post #12

Earlier quoted context omitted.

> Interest rates are set by FED, who can print arbitrary amount of money out of thin air One interest rate is set by the Fed, which serves as a benchmark for other market rates. But it's a simple question: if I can borrow money at 3%, why would I borrow your money at 7% so you can earn a return? And if someone wants to lend me money at 3%, why is that "artificial"? > who can print arbitrary amount of money out of thi…

>Should we do pretend mining, like Bitcoin? Real mining seemed to work okay in past. American GDP grew faster in the 1800s under the gold standard (avg. 4%+) than any time after the creation of the federal reserve.

> American GDP grew faster in the 1800s under the gold standard (avg. 4%+) than any time after the creation of the federal reserve.

Yes... during industrialization. Basically all countries experience rapid GDP growth during their industrialization. Even developing countries today get 4%+ GDP growth. Look at China's GDP growth in the last 50 years for a recent example.

Re: Economists Are Rethinking the Numbers on Inequality

#46

Post by tkyjonathan » Wed, Dec 04, 2019, 2:58 PM UTC

I would rather focus on reducing absolute poverty than reducing inequality (gini-coefficient).

Re: Economists Are Rethinking the Numbers on Inequality

#47

Post by dragonwriter » Wed, Dec 04, 2019, 2:59 PM UTC

joshklein wrote: post #17

hervature wrote: post #11

Earlier quoted context omitted.

I had a very different takeaway from Piketty's book. Namely, that inflation (primarily hyper inflation) has been the only force to reduce income inequality. For example, Jeff Bezos is much more affected than I am if the government decides to give everyone a $1B. Thus, governments looking to end income inequality shouldn't be afraid of high inflation.

Inflation IS a tax on wealth. When done intentionally (by printing money), it’s called seigniorage.

> Inflation IS a tax on wealth.

No, it's a “tax” on net holdings of the currency that is inflated.

That's not the same thing, as wealth in non-currency-denominated assets or assets denominated in a different currency aren't “taxed”.

Re: Economists Are Rethinking the Numbers on Inequality

#48

Post by aguyfromnb » Wed, Dec 04, 2019, 3:00 PM UTC

lordnacho wrote: post #36

aguyfromnb wrote: post #12

Earlier quoted context omitted.

> Interest rates are set by FED, who can print arbitrary amount of money out of thin air One interest rate is set by the Fed, which serves as a benchmark for other market rates. But it's a simple question: if I can borrow money at 3%, why would I borrow your money at 7% so you can earn a return? And if someone wants to lend me money at 3%, why is that "artificial"? > who can print arbitrary amount of money out of thi…

> One interest rate is set by the Fed, which serves as a benchmark for other market rates. This used to be true, but lately CBs are also buying bonds. That affects their supply/demand balance, which affects their price, which is another way of expressing the interest rate. Source: spent time trading bonds.

>but lately CBs are also buying bonds.

Monetary policy, and the setting of rates, is accomplished by the buying and selling of bonds in the open market by the Fed. They buy bonds and create money, or sell them to destroy it. This affects the amount of money "available" in the system, which affects interest rates.

Of course, this transmission mechanism isn't perfect.

Re: Economists Are Rethinking the Numbers on Inequality

#49

Post by tkyjonathan » Wed, Dec 04, 2019, 3:00 PM UTC

airstrike wrote: post #44

Measuring income inequality in the US without looking at outsized wage gains abroad feels remarkably inaccurate. I'll copy-paste my reply to another thread from earlier this year: > But, wages haven't improved in the last 40 years for the average person ...in the US. Growing inequality in the US is driven by the fact that capital gains domestically have improved dramatically alongside wage gains abroad , while wage h…

Could you point out the graph that shows that wages haven't improved in the last 40 years?

Re: Economists Are Rethinking the Numbers on Inequality

#50

Post by xorfish » Wed, Dec 04, 2019, 3:00 PM UTC

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 who earns 150'000 from labor.