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I don't think economics itself has gone wrong -- I think the US economy in particular has done a poor job of distributing the wealth it has created. Ironically

I don't think economics itself has gone wrong -- I think the US economy in particular has done a poor job of distributing the wealth it has created. Ironically, that has created a populist backlash that has vaulted even worse economic ideas into power. Anyone read "Capitalism in the 21st Century"? It's long and dense, but it does make some excellent, well-supported points about the structure of an economy that explains the current situation very well with historical antecedents. This won't do it justice, but: inequality always increases, by definition, if the returns on capital outstrip the overall growth in the economy. (Think through that if it's not obvious; it's literally a mathematical truth.) The book argues that history is a series of long, slow accretions of wealth, with increasing inequality, until some shock (usually a violent revolution) overthrows the old system, resets inequality, and the cycle starts again. The latter half of the 20th century, for the US, was one notable exception: growth outstripped returns to capital, so the benefits of that growth were widely shared: inequality decreased. That trend ended in the ~1980s, and the widening inequality gap has fueled unrest. And the book points out that we've seen this show before. I think we're in the "history repeating itself as farce" phase, though.

logicchains 2y ago
> I think the US economy in particular has done a poor job of distributing the wealth it has created. The US financial system is structurally orientated towards distributing wealth poorly. It's an unavoidable economic fact that when someone spends newly created money there's a wealth transfer from currency holders to them (that's why counterfeiting is illegal), and in the US means there's a persistent, systematic transfer of wealth from currency holders to the banking/financial system. Which is extremely regressive, as poorer people hold the largest fraction of their wealth in cash, while the middle and upper classes have more of it in assets like housing and stock. Economists funded by the banking system will try to distract you by arguing about inflation vs deflation, but it's a smoke screen. It's perfectly possible to have a non-regressive inflationary economic system, e.g. one where the government directly prints money and gives it to the poor, and such a system would avoid the systematic transfer of wealth from the lower classes to the financial industry.
- ryandamm 2y ago
  I think this comment is a little bit reductive and conspiratorial, even if it gets first-order correlations correct. You don’t need a conspiracy, you just need a philosophy of small government and low regulation to let grifts expand through the financial parts of the economy. The history of financial regulation in the US is the banking industry finding new ways to evade regulation, which lead to moral hazards and privatized gains / socialized losses. But it’s not that the “system” is explicitly designed that way; instead, it’s an adversarial system and the US in particular (for cultural reasons) has long favored the vigilante over the regulator. The story works even without simple Hollywood villains. The system isn’t malicious, it’s just stupid. Which is a long way of mostly agreeing with you. (Oh, except on printing money. That’s a surprisingly deep subject that’s often misunderstood. You’re spot on about government-sponsored wealth redistribution, though. Fully on board with that.)
  - atwrk 2y ago
    To add to this point: We can look to China to see that the financialization of the economy, like it happened in the US, is not a natural law but can instead be restricted. China has explicitly said that they see the development of financial markets in the US as a problem for the US economy they decidedly aim to avoid. Stories like what happened to Jack Ma have to be interpreted in that context, I think. In my reading that wasn't about politics at all, but about an unregulated peer to peer lending product (i.e. a tech based loan shark system for exploiting people in need) he was about to release.
    - grumpy-de-sre 2y ago
      People like to forget China was aggressively combating financialization [1] long before Jack Ma was forced to step down. Ant financials ambitions were an absolute disaster in the making [2]. I still remember my wife casually mentioning, back in 2019 or something (well before Evergrande), that China was restricting property speculation. Prohibiting folks from taking out loans on third properties etc. As an Australian this was mind blowing to me, property speculation is a sacred religion there. I far from agree with their politics on social matters, but their financial regulators aren't asleep at the wheel and haven't been regulatory captured. 1. https://en.wikipedia.org/wiki/Three_red_lines https://en.wikipedia.org/wiki/Three_red_lines 2. https://www.forbes.com/sites/georgecalhoun/2020/11/16/why-china-stopped-the-ant-groups-ipopart-2-ants-dangerous-business-model/ https://www.forbes.com/sites/georgecalhoun/2020/11/16/why-ch...

logicchains 2y ago

> I think the US economy in particular has done a poor job of distributing the wealth it has created. The US financial system is structurally orientated towards distributing wealth poorly. It's an unavoidable economic fact that when someone spends newly created money there's a wealth transfer from currency holders to them (that's why counterfeiting is illegal), and in the US means there's a persistent, systematic transfer of wealth from currency holders to the banking/financial system. Which is extremely regressive, as poorer people hold the largest fraction of their wealth in cash, while the middle and upper classes have more of it in assets like housing and stock. Economists funded by the banking system will try to distract you by arguing about inflation vs deflation, but it's a smoke screen. It's perfectly possible to have a non-regressive inflationary economic system, e.g. one where the government directly prints money and gives it to the poor, and such a system would avoid the systematic transfer of wealth from the lower classes to the financial industry.

ryandamm 2y ago
I think this comment is a little bit reductive and conspiratorial, even if it gets first-order correlations correct. You don’t need a conspiracy, you just need a philosophy of small government and low regulation to let grifts expand through the financial parts of the economy. The history of financial regulation in the US is the banking industry finding new ways to evade regulation, which lead to moral hazards and privatized gains / socialized losses. But it’s not that the “system” is explicitly designed that way; instead, it’s an adversarial system and the US in particular (for cultural reasons) has long favored the vigilante over the regulator. The story works even without simple Hollywood villains. The system isn’t malicious, it’s just stupid. Which is a long way of mostly agreeing with you. (Oh, except on printing money. That’s a surprisingly deep subject that’s often misunderstood. You’re spot on about government-sponsored wealth redistribution, though. Fully on board with that.)
- atwrk 2y ago
  To add to this point: We can look to China to see that the financialization of the economy, like it happened in the US, is not a natural law but can instead be restricted. China has explicitly said that they see the development of financial markets in the US as a problem for the US economy they decidedly aim to avoid. Stories like what happened to Jack Ma have to be interpreted in that context, I think. In my reading that wasn't about politics at all, but about an unregulated peer to peer lending product (i.e. a tech based loan shark system for exploiting people in need) he was about to release.
  - grumpy-de-sre 2y ago
    People like to forget China was aggressively combating financialization [1] long before Jack Ma was forced to step down. Ant financials ambitions were an absolute disaster in the making [2]. I still remember my wife casually mentioning, back in 2019 or something (well before Evergrande), that China was restricting property speculation. Prohibiting folks from taking out loans on third properties etc. As an Australian this was mind blowing to me, property speculation is a sacred religion there. I far from agree with their politics on social matters, but their financial regulators aren't asleep at the wheel and haven't been regulatory captured. 1. https://en.wikipedia.org/wiki/Three_red_lines https://en.wikipedia.org/wiki/Three_red_lines 2. https://www.forbes.com/sites/georgecalhoun/2020/11/16/why-china-stopped-the-ant-groups-ipopart-2-ants-dangerous-business-model/ https://www.forbes.com/sites/georgecalhoun/2020/11/16/why-ch...