A new anthology of essays reconsiders Thomas Piketty’s “Capital”

Lafayette · Aug 30, 2017

From the Economist: A new anthology of essays reconsiders Thomas Piketty’s “Capital” - excerpt:

“A MODERN Marx” was how The Economist described Thomas Piketty three years ago, when he was well on his way to selling more than 2m copies of “Capital in the Twenty-First Century”. It was meant as a compliment, mostly: as advice to take the analysis seriously, yet to treat the policy recommendations with caution. The book’s striking warning, of the creeping dominance of the very wealthy, looks as relevant as ever: as Donald Trump’s heirs mind his business empire, he works to repeal inheritance tax. But “Capital” changed the agenda of academic economics far less than it seemed it might. A new volume of essays reflecting on Mr Piketty’s book, published this month, prods economists to do better. It is not clear they can.

“After Piketty: The Agenda for Economics and Inequality” ... is a book by economists, for economists. In that it resembles “Capital” itself. Before he was an unlikely cultural icon, Mr Piketty was a respected empirical economist. He was best known as one of a group of scholars, among them Emmanuel Saez and Anthony Atkinson, who used tax data to track long-run inequality. In “Capital” these data became the basis for an ambitious theory of capitalism. Mr Piketty argued that wealth naturally accumulates and concentrates, so that familial riches are ever more critical to determining an individual’s success or failure in life. The extravagant inequality of the Gilded Age could return if no preventive action is taken.

Mr Piketty chose to compress his sweeping narrative into a compact economic model backed up by a few simple equations. The mathematical expression at the heart of his book is little more complicated than an emoji: r > g. It says that the rate of return on capital, r, has historically been greater than g, the growth rate of the economy. Why does this matter? It means, first, that the ratio of an economy’s wealth to its output tends to rise, which increases the relative economic power of wealth in society. Second, because the distribution of wealth is usually less equal than the distribution of income, faster growth in wealth than in GDP means a steady increase in inequality. Third, it implies that income from capital will grow as a share of income (and income from labour will fall). So being born rich (or marrying well) becomes a surer route to success than working hard or starting a firm. It is a recipe for social stagnation, and perhaps crisis.

No doubt, we can complain about many facets of Piketty's work. But its piercing evidence of the existence of massive Income Inequality in most modern economies is well worth noting.

And yet, we have those who refuse to acknowledge that fact. Living in France, where Piketty was well known, the French are not surprised that the rich are ... well, so rich. Even if taxation is so high, that the really French rich off-it to the US - where they pay no taxes on their Income to the French government. Unlike we Yanks who must pay taxes regardless of where we live in the world.

The attitude towards riches is key to understanding Income Inequality. In America, Wealth is a red-badge of courage for those who "made it". Work hard, do well, earn lotsa muney - and keep most of it. The US has the least burdensome taxation system on earth. Just see here for comparisons.

Which is THE problem. At the very same time that the rich are rolling in dough, 14% of the population below the Poverty Threshold (that's close to 40 million American men, women and children) are wondering from where their next meal is coming.

And those in the middle between the two extremes? We, the sheeple, pay the taxes that keep the wheels of government running. (Off to war, for the most part.)

Ahlevah · Aug 30, 2017

Lafayette said:
We, the sheeple, pay the taxes that keep the wheels of government running. (Off to war, for the most part.)

It's not the "sheeple" who keep the wheels of government running. It's rich people and deficit spending. In fact, about half of the population paid only 3% of federal income taxes (as of 2011), while the top 10% paid 68%. (How Much Do the Top 1 Percent Pay of All Taxes?)

And where was most of the money spent? On wealth-transfer programs (Medicaid, TANF, SSI, SNAP, Housing Choice Voucher program, Social Security, etc.):

Federal entitlements are driving this spending growth, having increased from less than half of total federal outlays just 20 years ago to nearly 62 percent in 2012. Three major programs—Medicare, Medicaid, and Social Security—dominate in size and growth, soaking up about 44 percent of the budget.

Federal Spending by the Numbers - 2012 | The Heritage Foundation

Lafayette · Aug 31, 2017

Ahlevah said:
It's not the "sheeple" who keep the wheels of government running. It's rich people and deficit spending. In fact, about half of the population paid only 3% of federal income taxes (as of 2011), while the top 10% paid 68%. (How Much Do the Top 1 Percent Pay of All Taxes?)

And where was most of the money spent? On wealth-transfer programs (Medicaid, TANF, SSI, SNAP, Housing Choice Voucher program, Social Security, etc.):

The consequences of taxation in America are different from what you report, and they underline the unfairness of upper-Income earner's and their ultimate Net Worth.

Howzzat? Here's how.

Sources of taxation (US, from Pew Resarch here):

And, who pays most taxes? Yes, the rich and super-rich:

Also from Pew Research article:

All but the top-earning 20% of American families pay more in payroll taxes than in federal income taxes, according to a Treasury Department analysis.

Still, that analysis confirms that, after all federal taxes are factored in, the U.S. tax system as a whole is progressive. The top 0.1% of families pay the equivalent of 39.2% and the bottom 20% have negative tax rates (that is, they get more money back from the government in the form of refundable tax credits than they pay in taxes).

Of course, people can and will differ on whether any of this constitutes a “fair” tax system. Depending on their politics and personal situations, some would argue for a more steeply progressive structure, others for a flatter one.

You might feel content that the rich (who make the most money) should pay the most taxes. That seems obvious, but it is just a statistical fact. The question nonetheless remains: "Why should so few people be allowed to obtain so much Net After-tax Income that becomes Wealth???? AND, after subtracting Debt becomes Net Worth.

The result at that level of investigation reveals the following (from the research work reported here):

.

Yes, in terms of Net Worth (the end-point of accumulating riches), this is what is happening:
*80% of the American population is obtaining only 11% of all Net Worth, whilst
*20% of the American population is obtaining ...... 89% of all all Net Worth in the nation.

Please explain how that is fair and decent when that Net Worth is simply handed down from generation to generation to serve individuals who did no work a day in their lives to deserve it ...

PS: And please, no dreary cynicism of a response like "That's the way the cookie crumbles ..."

Ahlevah · Sep 2, 2017

Lafayette said:
You might feel content that the rich (who make the most money) should pay the most taxes. That seems obvious, but it is just a statistical fact. The question nonetheless remains: "Why should so few people be allowed to obtain so much Net After-tax Income that becomes Wealth???? AND, after subtracting Debt becomes Net Worth.

That's a verbose way of asking why should so few people be allowed to be rich. Well, who's limiting it (other than government)? How many billionaires did China have forty years ago? None? How many as of the end of 2017: according to Forbes magazine, China had 319 billionaires. Who determined that? The Minister of Wealth Distribution? No. Did the Chinese people get poorer during that period? Who could seriously argue that? Meanwhile, in spite of having among the largest oil reserves on the planet, Venezuelans are starving and the rich and middle class have fled. The smart ones started making plans to leave years ago, and you can bet they didn't beat a path to Cuba, where the only rich people are friends of the Castro regime while everyone else is equally poor (Rise of Chávez has wealthy Venezuelans fleeing to Florida). Somehow I think there's a lesson there.

Lafayette said:
Please explain how that is fair and decent when that Net Worth is simply handed down from generation to generation to serve individuals who did no work a day in their lives to deserve it ...

It's fair and decent that people aren't slaves and have a right to the fruits of their labor, i.e. a right to their property. Part of that right is having the ability to dispose of it as one sees fit. Part of disposing of it as one sees fit is giving it away if one so chooses, either while living or as an estate. In a nation where the rule of law is respected, the decedent will at least have known while he was still living that his property would likely be distributed according to his wishes. If he takes comfort in that, then that's fair because it was his property in the first place. Regardless, they won't have that problem in Venezuela anymore, since there's nothing left to redistribute (except for the property of Chavistas, who won't have to worry about developing a conscience and will just pass on their privilege to their progeny).

Lafayette · Sep 2, 2017

TAKE BIG-MUNEY OUT OF POLITICS

Ahlevah said:
It's fair and decent that people aren't slaves and have a right to the fruits of their labor, i.e. a right to their property. Part of that right is having the ability to dispose of it as one sees fit. Part of disposing of it as one sees fit is giving it away if one so chooses, either while living or as an estate.

Your arguments are self-serving. It's all "natural" is what you are saying.

A market-economy consists of two principle elements - Supply & Demand. We "workers" are the prime elements of both S&D. We work to produce the Supply of products, by which we obtain the incomes with which we (as shoppers) buy goods/services. Those are the basics of any market-economy.

Where it all goes wrong is in the actual functioning of the mechanism. Communism got it wrong when Marx argued that the "means of production " should belong to the government. But, he did know RIGHTLY from where the key problem was coming.

Owning the means of production gives corporations (and the individuals who own them) the right to set prices and therefore obtain profits. Nothing wrong with that, in principle. In fact, in the US, the result is awful. (See below.)

Worse yet, in a country like the US, where oligopolistic practices have been rampant since the the 1960s, companies have maneuvered to concentrate markets into a few major players as possible. Why? Silly question! More sales per major producer translates directly into more profit for them.

MY POINT?

And Federal market-oversight authorities have allowed them to do. Just have a look here for an idea of the length and breadth of oligopolies in America: What are some current examples of oligopolies? - excerpt:

Q: What are some current examples of oligopolies? (By Investopedia | Updated May 8, 2017)

A: Oligopolies are prevalent throughout the world and appear to be increasing ever so rapidly. Unlike a monopoly, where one corporation dominates a certain market, an oligopoly consists of a select few companies having significant influence over an industry. Oligopolies are noticeable in a multitude of markets. While these companies are considered competitors within the specific market, they tend to cooperate with each other to benefit as a whole, which can lead to higher prices for consumers.

Common Industries Overshadowed By Oligopolies
*Cable Television Services
*Entertainment Industries (Music and Film)
*Airline Industry
*Mass Media
*Pharmaceuticals
*Computer & Software Industry
*Cellular Phone Services
*Smart Phone and Computer Operating Systems
*Aluminum and Steel
*Oil and Gas
*Auto Industry

Specific Current Examples of Oligopolies
*National mass media and news outlets are a prime example of an oligopoly, with 90% of U.S. media outlets owned by six corporations: Walt Disney (DIS), Time Warner (TWX), CBS Corporation (CBS), Viacom (VIAB), NBC Universal, and Rupert Murdoch’s News Corporation (NWSA).
*Operating systems for smartphones and computers provide excellent examples of oligopolies. Apple iOS and Google *Android dominate smartphone operating systems, while computer operating systems are overshadowed by Apple and Windows.
*The auto industry is another example of an oligopoly, with the leading auto manufacturers in the United States being Ford (F), GMC, and Chrysler.
*While there are smaller cell phone service providers, the providers that tend to dominate the industry are Verizon (VZ), Sprint (S), AT&T (T), and T-Mobile (TMUS).
*The music entertainment industry is dominated by Universal Music Group, Sony, BMG, Warner and EMI Group.

It will need a major undertaking to break-up those oligopolies. And there's not a PotUS-candidate on earth that would dare do it for as long as it takes "mountains of money to get elected".

So, we must first change drastically the way our "representatives to governance" are elected.

Take BigMuney Out of Politics ... !

Lafayette · Sep 2, 2017

For Econ Students: Economics On-line, "Oligopoly"

Excerpt -

Defining and measuring oligopoly
An oligopoly is a market structure in which a few firms dominate. When a market is shared between a few firms, it is said to be highly concentrated. Although only a few firms dominate, it is possible that many small firms may also operate in the market. For example, major airlines like British Airways (BA) and Air France operate their routes with only a few close competitors, but there are also many small airlines catering for the holidaymaker or offering specialist services.

Lafayette · Sep 2, 2017

Ahlevah said:
It's not the "sheeple" who keep the wheels of government running. It's rich people and deficit spending. In fact, about half of the population paid only 3% of federal income taxes (as of 2011), while the top 10% paid 68%.

And where was most of the money spent? On wealth-transfer programs (Medicaid, TANF, SSI, SNAP, Housing Choice Voucher program, Social Security, etc.)

The above is "taxation prattle" that is ALWAYS the same response. What you (and yours) fail to realize is that oversight-responsibility of a market-economy is not JUST ABOUT THE MONEY. It is about fairness.

Paying taxes does not mean that you "own government" and therefore "participate". As a simple citizen and REGARDLESS OF HOW MUCH INCOME YOU MAKE OR TAXES YOU PAY, we all deserve fair-and-equitable treatment by our government.

And in the US, where taxation was deftly manipulated in the 1980s by Reckless Ronnie and his Replicants, that is NOT HAPPENING today. I've posted a hundred times the proof thereof. (See yet again here.)

My Point: Politics in America has been "gamed". Them (the richer) have outgamed us (the poorer). As regards markets, market-oligopolies, market-rules and especially the elections of those who make the rules ...