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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

#51

Post by usefulcat »

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.

Only for wealth stored as currency. For debts, inflation effectively transfers money from lenders to borrowers by reducing the value of debts. Other things, for example stocks and real estate, are only nominally affected by inflation.

Re: Economists Are Rethinking the Numbers on Inequality

#52

Post by awrence »

logicchains wrote: post #38
xorfish wrote: post #33

Earlier quoted context omitted.

Only if the wealth is held in cash. Equities and real estate are a hedge against inflation.

In the US at least they're still still taxed for capital gains, but the capital gains tax doesn't account for inflation. So if there's 2% inflation that causes the value of your stocks to rise by 2%, that is taxed as a capital gain, so in real teams you have less money afterwards. Non-inflation-adjusted capital gains tax is essentially a wealth tax.

Fair point. But assumes Bezos doesn't loophole capital gains taxes to 0, which I could be wrong about but i feel like he does. That effect will also be maxed out to cap gains rates.

Re: Economists Are Rethinking the Numbers on Inequality

#53

Post by davedx »

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 and businesses to invest, which either means the wealthy people make more money, or they lose it. At the most it creates jobs. People on low salaries aren't really benefited.

Re: Economists Are Rethinking the Numbers on Inequality

#54

Post by [deleted] »

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…

[deleted]

Re: Economists Are Rethinking the Numbers on Inequality

#55

Post by travisporter »

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.

You would still have to prove to me that the rate of gold mining is the perfect tool to prevent inflation/grow the economy. Who knows if it may have grown faster or slower during that period without the gold standard.

Re: Economists Are Rethinking the Numbers on Inequality

#56

Post by airstrike »

tkyjonathan wrote: post #49
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?

It's an often-touted claim. In this particular instance I was replying to this comment: https://news.ycombinator.com/item?id=20384390

Re: Economists Are Rethinking the Numbers on Inequality

#57

Post by harimau777 »

_jal wrote: post #18
harimau777 wrote: post #10

It seems to me that income is in effect an abstraction of a person's social class. Therefore, I wonder if it might be more effective to look at the factors that actually separate different social classes. For example: What percentage of a population is self employed and/or employed in a role with significant autonomy? What percentage of a population owns their own house? Of those who own a house, how much control ove…

> It seems to me that income is in effect an abstraction of a person's social class. That's not how class works. There are multimillionaires running their own blue-collar businesses and farms whom a bankrupt real estate developer would look down on.

I think that actually supports my core point: income doesn't always map directly to a person's role in society.

Even if the 99% has roughly the same portion of the income that they did in the past they still might have less of the things that actually determine lifestyle such as autonomy.

Re: Economists Are Rethinking the Numbers on Inequality

#58

Post by el_cujo »

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…

Looking at your methodology critically is crucial to all fields of science though, as is changing your conclusions and interpretations as more findings come forward. Dismissing someone outright for challenging something that has become dogma is anti-scientific even if that dogma is based on facts. If it's actually true, then it will stand up to scrutiny.

Re: Economists Are Rethinking the Numbers on Inequality

#59

Post by thanatropism »

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…

> Capital is a feedback loop

Come off it, it’s not like this isn’t a staple of political economy since the 1800s or so.

A very charitable description of Piketty’s big ted talk of a book is that it suffers from the same flaws of classics like “A monetary history of the United States” by Friedman and Schwartz: it uses empirics as gargoyles, not as structural beams. It seems to be a great argument that’s backed by numbers — but whatever you make of it, the numbers are a distraction.

The cringe of it is that Piketty’s numbers are also fraudulent, as extensively documented by dozens upon dozens of important scholars.

Re: Economists Are Rethinking the Numbers on Inequality

#60

Post by eutropia »

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…

Taxing capital incentivizes putting it to work. If you only tax gains then people can endlessly horde wealth. Taxing the wealth itself makes hording unappealing... I think.
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