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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

#71

Post by leto_ii »

davedx wrote: post #53
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 an…

In the Netherlands (where I currently reside as well) I think this tax can easily be avoided by placing your assets in some sort of shell company. When the startup I used to work for IPO'd I was not surprised to find that most of the important stockholders were using such companies (presumably) to avoid being taxed on their hundreds of millions/billions of euros.

Re: Economists Are Rethinking the Numbers on Inequality

#72

Post by 0x445442 »

aguyfromnb wrote: post #20
citilife wrote: post #8

Earlier quoted context omitted.

> Interest rates are driven by the supply and demand of credit. Supply outstrips demand now. While that's somewhat true, its also largely dictated / controlled / heavily influenced by government. This means the overnight lending rate, U.S. bond rate, etc.

> This means the overnight lending rate, U.S. bond rate, etc. The overnight lending rate is set by the Fed, yes. Treasuries are sold in the market. Although an initial auction price is set, the rates will fluctuate based on demand for the bonds. I don't deny the Fed are a major influence on rates, as it's a major component of their mandate now. However, the market can "agree" or "disagree" with those rates and set co…

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.

Re: Economists Are Rethinking the Numbers on Inequality

#73

Post by tsimionescu »

tkyjonathan wrote: post #46

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

Unfortunately, you can't have a real democracy with too high income inequality, and it is hard to reduce absolute poverty if the poor don't have a political voice.

Re: Economists Are Rethinking the Numbers on Inequality

#74

Post by cjjuice »

Why when we talk about inequality we never talk about the tide of economic progress that capitalism produces.

If the rich get richer but the middle class has a better quality of life than what the rich had 200 years ago, is strict inequality still the only thing that matters?

Re: Economists Are Rethinking the Numbers on Inequality

#75

Post by ameister14 »

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…

>In essence this just says that it's possible the rich used to be overwhelmingly rich even before the Reagan era reforms, hence inequality might not have increased that much over the past decades. This is hardly comforting for the average person.

While that may not be comforting, it does cast doubt on the idea that inequality is the cause of all our ills.

Yes, it does smack of the science is not in yet argument - except that this is not climate change. Climate change's academic battle is essentially over. This one is not.

Re: Economists Are Rethinking the Numbers on Inequality

#76

Post by SketchySeaBeast »

pksdjfikkkkdsff wrote: post #63
SamBam wrote: post #19

Earlier quoted context omitted.

"Why doesn't everyone just get rich?"

Arguably, almost everybody in the Western world has gotten rich. Go visit a medieval castle sometime. The standards that now everybody has required an army of servants in the old days. It is just a hateful lie of the left to claim "being rich" is dependent on exploiting poor people.

That's silly - compared to cavemen, even workers in third world countries are "rich", being able to trade things for goods and services and not being required to hunt and gather. Inequality solved?

Re: Economists Are Rethinking the Numbers on Inequality

#77

Post by rayiner »

Marazan wrote: post #64
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 capital

But not the kind of capital people usually think about when railing about billionaires and wealth taxes.

Re: Economists Are Rethinking the Numbers on Inequality

#78

Post by xorfish »

carlob wrote: post #69
xorfish wrote: post #50

Earlier quoted context omitted.

> 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…

Before income tax, nobody had any idea about who was making what. Fast forward 100 years and we still have no idea about who holds how much capital. Even if you disagree on a universal wealth tax (just like we have for income) there is an argument to be made that it is important information to policymakers. Other than that Piketty argues that larger wealth means larger returns (per unit capital) and that is a very st…

> Other than that Piketty argues that larger wealth means larger returns (per unit capital) and that is a very strong argument against a flat capital gains tax.

But someone who earns more will also have a higher marginal tax rate.

There is probably better risk tolerance once you have a net worth above e few months of expenses. But someone with $10M will be able to get the same risk adjusted return as someone who has a net worth of $100k.

Re: Economists Are Rethinking the Numbers on Inequality

#79

Post by sooheon »

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…

Notice how your response is even less than a restatement of Piketty's thesis, just the observation that theoretically, it is possible that some papers have valid criticisms. Well yes, but which ones?

The article cites Smith, Zidar and Zwick who have tweaked Saez and Zucman's equations regarding top income growth. Assuming different weights and biases results in--surprise, slightly different outputs. But it's a matter of degree, not a reversal of direction. After a couple paragraphs of quibbling, the Economist admits as much with the conclusion: "Few dispute that wealth shares at the top have risen in America, nor that the increase is driven by fortunes at the very top, among people who really can be considered an elite. The question, instead, is by just how much."

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