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There are more issues here that could be discussed - particularly what is pointed out already in point 5, statistical quirks - but I'll stick to this one in p

There are more issues here that could be discussed - particularly what is pointed out already in point 5, statistical quirks - but I'll stick to this one in point 6 for now: "Another possibility is that the decline is more recent than we assume, and the result of slack in the labor market is due in large part to the recession." I haven't studied US data, but in my country (Finland), which is a small country dependent on trade, the impact of recession is exactly the opposite. Recession means that the labor share of income goes up, not down. Labor share of income has been in historically local highs at a time when life was very very bad (1992-1993): high unemployment, falling income, foreclosures. The labor share of income has gone down here, as well. But it's not because of more money going to capitalists. Their share has been essentially the same since 1970's (23-25%). In my country, the falling share of labor is almost entirely explained by the rising share of state: the proportion of taxes on production and imports has gone up by about 5 percentage points, from 10 % to 15% of national income. So the share of labor has gone down from ~67 % to ~60 %. I wrote this blog post three years ago but it's still quite valid: http://ptaipale.blogspot.fi/2012_08_01_archive.html http://ptaipale.blogspot.fi/2012_08_01_archive.html

collyw 11y ago
" Recession means that the labor share of income goes up, not down." I think that is the way a capitalist system is supposed to work. Unfortunately in the UK and the US at least, they have been throwing money at the problem in the form of quantative easing. This has almost certainly kept asset prices high (the UK is well overdue for a hous price crash), and I assume that it has the effects of keeping labor prices lower.
- tormeh 11y ago
  Nobody has ever explained to me, in a satisfying way, what's wrong with a helicopter drop. Edit: I mean helicopter drops in the original sense. That is, printing money and the giving it away unconditionally and equally to all flesh-and-blood citizens.
  - eronhp 11y ago
    It's basically the place you drop it, everybody agrees that we should drop it on the needy, but somehow we always drop it on the banks and the wealthy.
    - tormeh 11y ago
      That is conventional policy, yes, which is why helicopter drops are so exciting: unconditional and equal transfer to flesh-and-blood citizens create much-needed inflation without disproportionately favoring the rich.
  - adventured 11y ago
    You're debasing the currency that you're 'printing' to use in the helicopter drop. That means you're stealing purchasing power from anyone that uses eg dollars, to redistribute it to whomever is on the receiving end of that helicopter drop (which is almost guaranteed to not be everyone you just stole the purchasing power from). Ever see Canadians complain about the value of their loonie in threads online? I see it constantly, they complain because they've lost purchasing power. What happened? The USD soared when the Fed stopped debasing it so aggressively with QE, and the Canadian economy went into recession because commodities are priced in dollars (leading to a double whammy). The US effectively did helicopter drop trillions of dollars. The Fed's balance sheet presently represents a housing, bank, government and stock market bailout. The bottom 50% don't own much in the way of assets however, so when you debase their purchasing power and send the value of the dollar plunging (post 2002 or so), their standard of living falls significantly. The rich could mostly care less, within reason, because their assets can often be shifted to better returns based on what's happening at the moment. Average worker incomes however cannot be shifted, they simply get eroded. This is fundamentally why the median US worker has seen almost zero inflation-adjusted income increase in 40 years, post Nixon's choice to debase the USD. No coincidence the cost of everything has soared (including commodities), perfectly timed from that fateful decision. It's also no coincidence that every nation's GDP simultaneously skyrocketed - priced in dollars - when the Fed began debasing the USD around 2002/03. In vague terms that represents the vast loss of purchasing power that the dollar experienced, to the benefit of pretty much everyone else. It's also why, when the dollar turned back the other way after QE stopped, emerging economies like Brazil crashed so hard and fast (as the USD pulls capital out of Brazil like a gravity well), and it's why China is bleeding such large sums of capital right now (as occurred on a smaller scale across Asia the last time the dollar went on a big bull run in the 1990s, leading to the Asian economic crisis of 1997). If you're the Fed and you run actual 3% to 4% persistent inflation (while lying and pretending the CPI is accurate at say 2%), and worker wages climb by 1% to 2% per year - then over 20 years the average worker gets destroyed. In pretty much every country a helicopter drop has been tried, it has led to inflation in relative proportion to the size of the drop. Inflation harms the poorest the most (see: Venezuela, Argentina, Zimbabwe, Russia, Brazil). The US is a bit of a special case in that regard, because it can export some of that inflation to the world via the global reserve currency, which helps blunt the amount of inflation that immediately hits the domestic economy. That inflation often finds its way back however, which we may see shortly with China liquidating its treasuries.
ThomPete 11y ago
Finland (and Denmark, Sweden, Norway) this isn't as big an issue yet because we redistribute wealth quite heavily. But it will be more and more because no matter whether you believe in austerity or heavily investing via ex quantitative easing technology outperform the effect of them all.

collyw 11y ago

" Recession means that the labor share of income goes up, not down." I think that is the way a capitalist system is supposed to work. Unfortunately in the UK and the US at least, they have been throwing money at the problem in the form of quantative easing. This has almost certainly kept asset prices high (the UK is well overdue for a hous price crash), and I assume that it has the effects of keeping labor prices lower.

tormeh 11y ago
Nobody has ever explained to me, in a satisfying way, what's wrong with a helicopter drop. Edit: I mean helicopter drops in the original sense. That is, printing money and the giving it away unconditionally and equally to all flesh-and-blood citizens.
- eronhp 11y ago
  It's basically the place you drop it, everybody agrees that we should drop it on the needy, but somehow we always drop it on the banks and the wealthy.
  - tormeh 11y ago
    That is conventional policy, yes, which is why helicopter drops are so exciting: unconditional and equal transfer to flesh-and-blood citizens create much-needed inflation without disproportionately favoring the rich.
- adventured 11y ago
  You're debasing the currency that you're 'printing' to use in the helicopter drop. That means you're stealing purchasing power from anyone that uses eg dollars, to redistribute it to whomever is on the receiving end of that helicopter drop (which is almost guaranteed to not be everyone you just stole the purchasing power from). Ever see Canadians complain about the value of their loonie in threads online? I see it constantly, they complain because they've lost purchasing power. What happened? The USD soared when the Fed stopped debasing it so aggressively with QE, and the Canadian economy went into recession because commodities are priced in dollars (leading to a double whammy). The US effectively did helicopter drop trillions of dollars. The Fed's balance sheet presently represents a housing, bank, government and stock market bailout. The bottom 50% don't own much in the way of assets however, so when you debase their purchasing power and send the value of the dollar plunging (post 2002 or so), their standard of living falls significantly. The rich could mostly care less, within reason, because their assets can often be shifted to better returns based on what's happening at the moment. Average worker incomes however cannot be shifted, they simply get eroded. This is fundamentally why the median US worker has seen almost zero inflation-adjusted income increase in 40 years, post Nixon's choice to debase the USD. No coincidence the cost of everything has soared (including commodities), perfectly timed from that fateful decision. It's also no coincidence that every nation's GDP simultaneously skyrocketed - priced in dollars - when the Fed began debasing the USD around 2002/03. In vague terms that represents the vast loss of purchasing power that the dollar experienced, to the benefit of pretty much everyone else. It's also why, when the dollar turned back the other way after QE stopped, emerging economies like Brazil crashed so hard and fast (as the USD pulls capital out of Brazil like a gravity well), and it's why China is bleeding such large sums of capital right now (as occurred on a smaller scale across Asia the last time the dollar went on a big bull run in the 1990s, leading to the Asian economic crisis of 1997). If you're the Fed and you run actual 3% to 4% persistent inflation (while lying and pretending the CPI is accurate at say 2%), and worker wages climb by 1% to 2% per year - then over 20 years the average worker gets destroyed. In pretty much every country a helicopter drop has been tried, it has led to inflation in relative proportion to the size of the drop. Inflation harms the poorest the most (see: Venezuela, Argentina, Zimbabwe, Russia, Brazil). The US is a bit of a special case in that regard, because it can export some of that inflation to the world via the global reserve currency, which helps blunt the amount of inflation that immediately hits the domestic economy. That inflation often finds its way back however, which we may see shortly with China liquidating its treasuries.

ThomPete 11y ago

Finland (and Denmark, Sweden, Norway) this isn't as big an issue yet because we redistribute wealth quite heavily. But it will be more and more because no matter whether you believe in austerity or heavily investing via ex quantitative easing technology outperform the effect of them all.