3 ms·

> But economic inequality per se is not bad. Both essays feel like they are built on a strawman argument. Nobody serious said inequality was bad or good, not e

by HSO 11y ago

> But economic inequality per se is not bad. Both essays feel like they are built on a strawman argument. Nobody serious said inequality was bad or good, not even Piketty. The discussion is about degrees, and PG adds nothing to it by arguing categorically. That we are talking degrees of inequality is also the reason why economists argue with statistics and do not differentiate much between specific causes or mechanisms on the micro level. Sorry to burst that bubble but PG is not a "creator of inequality" on the level that is interesting. Shifting a few hundred people around means nothing given that we are talking about income and wealth distributions over millions of households in the US alone (and increasing inequality is a global phenomenon). Clearly, tax policy, financial (de)regulation, labor market policies, even the fall of the Soviet Union, etc. are more relevant than petty arguments over whether this startup or that high freq trader made a few mega- or even gigabucks in a nice or not so nice way. On a sidenote, the relative impacts of the trader vs the startupper on aggregate welfare is not as clearcut as intimated by PG at all, once you take second- and higher-order effects into account. Furthermore, creating wealth for some individuals may also decrease overall inequality; it depends on the starting and end positions of said individuals in the wealth distribution and the other ongoing processes in the economy. Lastly, economic systems have a lot of feedback mechanisms, both positive (ie destabilizing) and negative (stabilizing). We should at least consider the possibility that past a certain degree of inequality, wealth becomes self-perpetuating. This is especially pertinent for US Americans, given the degenerate nature of their "democracy".

nabla9 11y ago
Well said. Macroeconomics is mostly closed sytem, not open system like microeconomics. Roughly 70% of US GDP is private consumption (household final consumption expenditure). Startups that build cool products need markets that can afford to buy them. The top 1%-2% may be wealthy, but as a consumer segment they are not big enough to justify new microprocessor plant or Apple product line. More importantly, rich don't pay for innovation. Luxury phones like Vertu are diamonds and personal service, there is no pressure for innovation. You don't need speech recognition if you can afford personal service. You don't need self driving car if you have a driver or enjoy driving with your Porsche. It's the middle class who creates demand for high-tech bleeding edge innovations. Who will buy the Oculus rifts and create enough cash flow to carry the VR-industry next 5 years? If the number of upper middle class families drops 5%, will Tesla lose 5% of their sales? The share of the GDP going to the middle class has been falling. It's down roughly 10% from 2000 and something like 30-20% from 70's. Low income people spend more money into necessities and very small high income population just can't consume enough to be large demand creating force. If the income distribution of the country starts to resemble classical South American country, it will have the economic structure of classical South American country sooner or later. PG has supply side view of the economy. It's not the whole picture.
brooklyndavs 11y ago
Also remember Piketty, while concerned about income inequality, was most concerned about wealth/capital inequality. Thus his worldwide tax on wealth proposal. I would argue that Piketty did say that wealth inequality, on the extreme, is a net bad for society. He brought up many examples of how destabilizing extreme levels of wealth inequality, like what England and France saw at the start of the 1900s and what the United States is seeing now, can be for a society. With that said, as it becomes easier to start and run a company with less and less human capital more of the value of that company is going to go to the capitalists who invested in said company. This I believe might make that self-perpetuating wealth cycle easier to get into. So, I can see a situation where the aggregate result of this negative pattern across all startups in the economy would outweigh any positive results an individual startup might have on society. Note, the above is without any policy solutions and is why I strongly believe we need things like a basic income and wealth tax to help stabilize society worldwide as technology continues to make us humans more productive.

by HSO 11y ago

nabla9 11y ago

Well said. Macroeconomics is mostly closed sytem, not open system like microeconomics. Roughly 70% of US GDP is private consumption (household final consumption expenditure). Startups that build cool products need markets that can afford to buy them. The top 1%-2% may be wealthy, but as a consumer segment they are not big enough to justify new microprocessor plant or Apple product line. More importantly, rich don't pay for innovation. Luxury phones like Vertu are diamonds and personal service, there is no pressure for innovation. You don't need speech recognition if you can afford personal service. You don't need self driving car if you have a driver or enjoy driving with your Porsche. It's the middle class who creates demand for high-tech bleeding edge innovations. Who will buy the Oculus rifts and create enough cash flow to carry the VR-industry next 5 years? If the number of upper middle class families drops 5%, will Tesla lose 5% of their sales? The share of the GDP going to the middle class has been falling. It's down roughly 10% from 2000 and something like 30-20% from 70's. Low income people spend more money into necessities and very small high income population just can't consume enough to be large demand creating force. If the income distribution of the country starts to resemble classical South American country, it will have the economic structure of classical South American country sooner or later. PG has supply side view of the economy. It's not the whole picture.

brooklyndavs 11y ago

Also remember Piketty, while concerned about income inequality, was most concerned about wealth/capital inequality. Thus his worldwide tax on wealth proposal. I would argue that Piketty did say that wealth inequality, on the extreme, is a net bad for society. He brought up many examples of how destabilizing extreme levels of wealth inequality, like what England and France saw at the start of the 1900s and what the United States is seeing now, can be for a society. With that said, as it becomes easier to start and run a company with less and less human capital more of the value of that company is going to go to the capitalists who invested in said company. This I believe might make that self-perpetuating wealth cycle easier to get into. So, I can see a situation where the aggregate result of this negative pattern across all startups in the economy would outweigh any positive results an individual startup might have on society. Note, the above is without any policy solutions and is why I strongly believe we need things like a basic income and wealth tax to help stabilize society worldwide as technology continues to make us humans more productive.