11 ms·

Summers on Piketty

47 points by marojejian 12y ago

selmnoo 12y ago
> So why has the labor income of the top 1 percent risen so sharply relative to the income of everyone else? No one really knows. Really? Isn't this what the bigger half of the book is about? It's because of rentier/patrimonial-capitalism, opportunity not being equally distributed in the system, etc.
- alexeisadeski3 12y ago
  Rentier/patrimonialic income is not labor income.
  - anigbrowl 12y ago
    It's not, but you're going to pay your fund manager a lot more than your gardener even if both exert similar amounts of effort and skill (I picked fund managers because they're notorious for charging a lot of fees despite their inability to consistently outperform markets). Or to take another example, suppose you're a lawyer. You'll be able to bill a lot more money to rich clients than you will to poor disenfranchised ones, even though the complexity and challenge of your legal work might be identical. This is partly because people usually assume other people are all utility maximizers; eg within the narrower cohort of criminal defense lawyers, public defenders are generally considered to be inferior lawyers because it is assumed that if they were sufficiently good, they would go into private practice and make more money.
    - alexeisadeski3 12y ago
      Neither lawyers nor fund managers are rentiers.
      - anigbrowl 12y ago
        You missed the point. I'm saying rentiers bid up pricing in those professions, affecting them indirectly. In the US, for example, there's a very clear bimodal distribution in legal income between graduating lawyers who go to work for large firms and who mostly do corporate law, and the others who don't. The former pays more than triple the latter, so guess where most of the talent goes. http://www.nalp.org/salarycurve_classof2011 http://www.nalp.org/salarycurve_classof2011
bsbechtel 12y ago
Does anyone think his solution of a global wealth tax will actually help lessen inequality? This solution seems simplistic and naive to me, and puts those at the bottom of the ladder at the mercy of these 'global wealth tax collectors' instead of the wealthy. I don't see much difference in these two, other than one group is at the mercy of market demands, and the other is supposedly at the mercy of a democratic populace. Correct me if I'm wrong, but he didn't write anything about actually empowering those at the bottom of the economic ladder, did he? Where are those solutions being offered up?
- aetherson 12y ago
  Well, Picketty does, presumably. Aside from him, no, I've literally seen not a single person defend the policy suggestion, even among reviewers who are otherwise completely positive on Capital in the 21st Century.
  - baddox 12y ago
    I haven't read the book, but I have heard people say that the global wealth tax is presented by Piketty as an admittedly idealistic suggestion rather than an imminent policy recommendation. From what it sounds like, the global wealth tax would merely tackle inequality directly, even if it meant lowering the quality of life (or slowing the growth in quality of life) among workers.
- nugget 12y ago
  Read Tyler Cowan's critique of Piketty which was just published today. My favorite bit is near the end, where Cowan reinforces that by Piketty's own admission, the proposed wealth tax would shift up to 75% of national income to the Government: ''Therein lies the most fundamental problem with Piketty’s policy proposals: the best parts of his book argue that, left unchecked, capital and capitalists inevitably accrue too much power -- and yet Piketty seems to believe that governments and politicians are somehow exempt from the same dynamic.'' I took a class from a famous economics professor who had emigrated from the former Soviet Union after its collapse. He made the point one day that there have always been rich and poor - and always will be. In America, the predominant distinction is capital wealth - dollars. In the USSR, it was political power; if you had political power, you had private planes, villas, and servants. At the end of the day, the inequality is always present. Link: http://www.foreignaffairs.com/articles/141218/tyler-cowen/capital-punishment http://www.foreignaffairs.com/articles/141218/tyler-cowen/ca...
carsongross 12y ago
The elephant in the room, of course, is Mr. Summer's object of desire, the Fed. Until the Fed is dealt with and the financial sector is subject to true market forces, it will continue to dominate the economy and produce destructive malinvestment.
- panarky 12y ago
  This seems to be the prevailing ideology, that all would be solved if only we could achieve perfectly free markets, stripped of regulation, politics and government influence. This is a thought-terminating cliché[1] that either ends rational argument or results in an evidence-free opinion war. Naturally, ideology trumped argument here again, as a thread about inequality gets hijacked by utopian economic balderdash. [1] https://en.wikipedia.org/wiki/Thought_Reform_and_the_Psychology_of_Totalism https://en.wikipedia.org/wiki/Thought_Reform_and_the_Psychol...
  - carsongross 12y ago
    You are projecting: I don't think we need perfectly free markets. I do think, however, that the Fed is the primary engine of economic inequality and malinvestment, via a fairly straight forward mechanism: early receivership of newly created money and allowing "too big to fail" banks to keep upside while the public pays for the downside.
- QuantumChaos 12y ago
  Actually, Dr. Summers does implicitly mention the Fed, when he says "Probably the two most important steps that public policy can take with respect to wealth inequality are the strengthening of financial regulation to more fully eliminate implicit and explicit subsidies to financial activity, and ..." When he refers to implicit subsidies, I believe he is referring to some actions of the Fed in bailing out banks. Apart from direct bailouts, the monetary policy of the Fed was a bailout of a financial sector that was "too big to fail". So I don't think Dr. Summers is skirting around this issue. I would further guess that the author would advocate a return to more conventional neo-Keynsian monetary policy, as opposed to the highly interventionist policies pre and post financial crisis. Which might still not satisfy your desire for "true market forces", depending on what you meant.
alexeisadeski3 12y ago
At a time when taxes are obscenely high - at least in the US - the discussion should be of massive cuts, not new taxes. Alas, I am not optimistic. People have suffered for generations under horrific conditions. No reason it can't happen here. Or to be more precise: No reason it can't happen here again. Don't forget slavery and Native Americans. EDIT: Moved this from a sub post to here: A lot of people are evidently misinformed about the state of US taxation. Since several have responded to my previous post with similar statements, I'll just take the top post and address the whole issue in one go. 1. The US has low tax rates relative to the rest of the world For low earners, yes. For high earners no. Re low earners: Federal income tax is low, SS contributions are moderate, but - and this is key - sales taxes (VAT) are extremely low, excise taxes on fuel are extremely low, and import duties are generally extremely low. Car registration, government fees, etc are all generally moderate to extremely low. Re high earners: a) Income taxes are extremely high. See http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates , sort by "Individual (max)", and note that only France, Belgium, Sweden, and Aruba are higher. b) Corporate tax is extremely high. Note that many will correctly state that some corporations are able to avoid some of the corporate tax. This is true, though overstated if you only follow what the NYT reports. For domestic US corporations doing business only in the US, their effective corporate rate will range between 35% and 45%, depending on their state. e) Estate taxes. We pay 50% of our net worth upon death on all assets transferred to our descendants. A truly morally repugnant tax, this one. Passing on our advantages and earnings to our children is a great joy to many people. d) Tax enforcement is insanely strict. Prison sentences and hefty fines await those who transgress. e) We can't leave: American citizens pay tax to the US government even if they reside elsewhere. If we give up our citizenship, we must pay the US government between 30 and 40% of our net worth. The US is the only OECD nation to do this. 2. US taxes are lowest they've been since XX!" This is true for low and middle earners, whose current tax rates are very low. Not true for high earners. The US tax code is the most progressive in the OECD. The last tax reform was under Reagan. He traded high tax rates with lots of loopholes for moderate tax rates with few loopholes. Since then, the few loopholes have largely been closed (with exceptions, such as the popular middle class* home interest deduction) whilst rates have risen substantially. See the wiki link above: top US income tax rates are the fifth highest in the world. 3. Overall US taxation is low! As detailed above, the US taxation regime is the most progressive in the OECD. But taxation is still not low. At 34% of GDP[1], it's higher than Canada and only 5 points lower than the UK. 11 points less than France. [1] http://www.usgovernmentrevenue.com/total http://www.usgovernmentrevenue.com/total
acr25 12y ago
Ah, I remember summers on Piketty. The fresh seafood, the smores, the fireworks. Ferry horns in the distance. And, oh yeah, the global wealth tax.
nopinsight 12y ago
The impact of technology on inequality is already quite pronounced in a number of occupations. For example, many after-school teachers in Asia are now outcompeted by star teachers enhanced by video and computer-aided teaching platform. > For example, I suspect we will soon see the rise of educator superstars who command audiences of hundreds of thousands for their Internet courses and earn sums way above the traditional dreams of academics. This is already happening in Asia. A South Korean tutor makes $4 million a year. A tutor in Thailand built and owned an 18-story tutoring center in a downtown area. [1] http://www.forbes.com/sites/jamesmarshallcrotty/2013/08/11/south-korean-tutor-makes-4-million-a-year-can-you/ http://www.forbes.com/sites/jamesmarshallcrotty/2013/08/11/s... [2] http://image.soidb.com/bangkok/zm/105100922_01.jpg http://image.soidb.com/bangkok/zm/105100922_01.jpg
elchief 12y ago
Larry's opinion is irrelevant. If you call yourself an Economist, and missed the bubble+collapse, you should resign, and stop talking. "Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws." ... "Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown." When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector."
- anigbrowl 12y ago
  I also disagree with Summers over these things, but lack of foresight in some areas doesn't invalidate his opinions on everything else. Take it with a pinch of salt, by all means, but he's not an idiot.
  - elchief 12y ago
    Would you go to a "good boat design" talk by the designer of the Titanic?
timtas 12y ago
A good analysis of Piketty by some real economists: https://www.youtube.com/watch?v=aL90pISm7Y8 https://www.youtube.com/watch?v=aL90pISm7Y8

47 points by marojejian 12y ago

> So why has the labor income of the top 1 percent risen so sharply relative to the income of everyone else? No one really knows. Really? Isn't this what the bigger half of the book is about? It's because of rentier/patrimonial-capitalism, opportunity not being equally distributed in the system, etc.

alexeisadeski3 12y ago
Rentier/patrimonialic income is not labor income.
- anigbrowl 12y ago
  It's not, but you're going to pay your fund manager a lot more than your gardener even if both exert similar amounts of effort and skill (I picked fund managers because they're notorious for charging a lot of fees despite their inability to consistently outperform markets). Or to take another example, suppose you're a lawyer. You'll be able to bill a lot more money to rich clients than you will to poor disenfranchised ones, even though the complexity and challenge of your legal work might be identical. This is partly because people usually assume other people are all utility maximizers; eg within the narrower cohort of criminal defense lawyers, public defenders are generally considered to be inferior lawyers because it is assumed that if they were sufficiently good, they would go into private practice and make more money.
  - alexeisadeski3 12y ago
    Neither lawyers nor fund managers are rentiers.
    - anigbrowl 12y ago
      You missed the point. I'm saying rentiers bid up pricing in those professions, affecting them indirectly. In the US, for example, there's a very clear bimodal distribution in legal income between graduating lawyers who go to work for large firms and who mostly do corporate law, and the others who don't. The former pays more than triple the latter, so guess where most of the talent goes. http://www.nalp.org/salarycurve_classof2011 http://www.nalp.org/salarycurve_classof2011

bsbechtel 12y ago

Does anyone think his solution of a global wealth tax will actually help lessen inequality? This solution seems simplistic and naive to me, and puts those at the bottom of the ladder at the mercy of these 'global wealth tax collectors' instead of the wealthy. I don't see much difference in these two, other than one group is at the mercy of market demands, and the other is supposedly at the mercy of a democratic populace. Correct me if I'm wrong, but he didn't write anything about actually empowering those at the bottom of the economic ladder, did he? Where are those solutions being offered up?

aetherson 12y ago
Well, Picketty does, presumably. Aside from him, no, I've literally seen not a single person defend the policy suggestion, even among reviewers who are otherwise completely positive on Capital in the 21st Century.
- baddox 12y ago
  I haven't read the book, but I have heard people say that the global wealth tax is presented by Piketty as an admittedly idealistic suggestion rather than an imminent policy recommendation. From what it sounds like, the global wealth tax would merely tackle inequality directly, even if it meant lowering the quality of life (or slowing the growth in quality of life) among workers.
nugget 12y ago
Read Tyler Cowan's critique of Piketty which was just published today. My favorite bit is near the end, where Cowan reinforces that by Piketty's own admission, the proposed wealth tax would shift up to 75% of national income to the Government: ''Therein lies the most fundamental problem with Piketty’s policy proposals: the best parts of his book argue that, left unchecked, capital and capitalists inevitably accrue too much power -- and yet Piketty seems to believe that governments and politicians are somehow exempt from the same dynamic.'' I took a class from a famous economics professor who had emigrated from the former Soviet Union after its collapse. He made the point one day that there have always been rich and poor - and always will be. In America, the predominant distinction is capital wealth - dollars. In the USSR, it was political power; if you had political power, you had private planes, villas, and servants. At the end of the day, the inequality is always present. Link: http://www.foreignaffairs.com/articles/141218/tyler-cowen/capital-punishment http://www.foreignaffairs.com/articles/141218/tyler-cowen/ca...

carsongross 12y ago

The elephant in the room, of course, is Mr. Summer's object of desire, the Fed. Until the Fed is dealt with and the financial sector is subject to true market forces, it will continue to dominate the economy and produce destructive malinvestment.

panarky 12y ago
This seems to be the prevailing ideology, that all would be solved if only we could achieve perfectly free markets, stripped of regulation, politics and government influence. This is a thought-terminating cliché[1] that either ends rational argument or results in an evidence-free opinion war. Naturally, ideology trumped argument here again, as a thread about inequality gets hijacked by utopian economic balderdash. [1] https://en.wikipedia.org/wiki/Thought_Reform_and_the_Psychology_of_Totalism https://en.wikipedia.org/wiki/Thought_Reform_and_the_Psychol...
- carsongross 12y ago
  You are projecting: I don't think we need perfectly free markets. I do think, however, that the Fed is the primary engine of economic inequality and malinvestment, via a fairly straight forward mechanism: early receivership of newly created money and allowing "too big to fail" banks to keep upside while the public pays for the downside.
QuantumChaos 12y ago
Actually, Dr. Summers does implicitly mention the Fed, when he says "Probably the two most important steps that public policy can take with respect to wealth inequality are the strengthening of financial regulation to more fully eliminate implicit and explicit subsidies to financial activity, and ..." When he refers to implicit subsidies, I believe he is referring to some actions of the Fed in bailing out banks. Apart from direct bailouts, the monetary policy of the Fed was a bailout of a financial sector that was "too big to fail". So I don't think Dr. Summers is skirting around this issue. I would further guess that the author would advocate a return to more conventional neo-Keynsian monetary policy, as opposed to the highly interventionist policies pre and post financial crisis. Which might still not satisfy your desire for "true market forces", depending on what you meant.

alexeisadeski3 12y ago

At a time when taxes are obscenely high - at least in the US - the discussion should be of massive cuts, not new taxes. Alas, I am not optimistic. People have suffered for generations under horrific conditions. No reason it can't happen here. Or to be more precise: No reason it can't happen here again. Don't forget slavery and Native Americans. EDIT: Moved this from a sub post to here: A lot of people are evidently misinformed about the state of US taxation. Since several have responded to my previous post with similar statements, I'll just take the top post and address the whole issue in one go. 1. The US has low tax rates relative to the rest of the world For low earners, yes. For high earners no. Re low earners: Federal income tax is low, SS contributions are moderate, but - and this is key - sales taxes (VAT) are extremely low, excise taxes on fuel are extremely low, and import duties are generally extremely low. Car registration, government fees, etc are all generally moderate to extremely low. Re high earners: a) Income taxes are extremely high. See http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates , sort by "Individual (max)", and note that only France, Belgium, Sweden, and Aruba are higher. b) Corporate tax is extremely high. Note that many will correctly state that some corporations are able to avoid some of the corporate tax. This is true, though overstated if you only follow what the NYT reports. For domestic US corporations doing business only in the US, their effective corporate rate will range between 35% and 45%, depending on their state. e) Estate taxes. We pay 50% of our net worth upon death on all assets transferred to our descendants. A truly morally repugnant tax, this one. Passing on our advantages and earnings to our children is a great joy to many people. d) Tax enforcement is insanely strict. Prison sentences and hefty fines await those who transgress. e) We can't leave: American citizens pay tax to the US government even if they reside elsewhere. If we give up our citizenship, we must pay the US government between 30 and 40% of our net worth. The US is the only OECD nation to do this. 2. US taxes are lowest they've been since XX!" This is true for low and middle earners, whose current tax rates are very low. Not true for high earners. The US tax code is the most progressive in the OECD. The last tax reform was under Reagan. He traded high tax rates with lots of loopholes for moderate tax rates with few loopholes. Since then, the few loopholes have largely been closed (with exceptions, such as the popular middle class* home interest deduction) whilst rates have risen substantially. See the wiki link above: top US income tax rates are the fifth highest in the world. 3. Overall US taxation is low! As detailed above, the US taxation regime is the most progressive in the OECD. But taxation is still not low. At 34% of GDP[1], it's higher than Canada and only 5 points lower than the UK. 11 points less than France. [1] http://www.usgovernmentrevenue.com/total http://www.usgovernmentrevenue.com/total

acr25 12y ago

Ah, I remember summers on Piketty. The fresh seafood, the smores, the fireworks. Ferry horns in the distance. And, oh yeah, the global wealth tax.

nopinsight 12y ago

The impact of technology on inequality is already quite pronounced in a number of occupations. For example, many after-school teachers in Asia are now outcompeted by star teachers enhanced by video and computer-aided teaching platform. > For example, I suspect we will soon see the rise of educator superstars who command audiences of hundreds of thousands for their Internet courses and earn sums way above the traditional dreams of academics. This is already happening in Asia. A South Korean tutor makes $4 million a year. A tutor in Thailand built and owned an 18-story tutoring center in a downtown area. [1] http://www.forbes.com/sites/jamesmarshallcrotty/2013/08/11/south-korean-tutor-makes-4-million-a-year-can-you/ http://www.forbes.com/sites/jamesmarshallcrotty/2013/08/11/s... [2] http://image.soidb.com/bangkok/zm/105100922_01.jpg http://image.soidb.com/bangkok/zm/105100922_01.jpg

elchief 12y ago

Larry's opinion is irrelevant. If you call yourself an Economist, and missed the bubble+collapse, you should resign, and stop talking. "Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws." ... "Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown." When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector."

anigbrowl 12y ago
I also disagree with Summers over these things, but lack of foresight in some areas doesn't invalidate his opinions on everything else. Take it with a pinch of salt, by all means, but he's not an idiot.
- elchief 12y ago
  Would you go to a "good boat design" talk by the designer of the Titanic?

timtas 12y ago

A good analysis of Piketty by some real economists: https://www.youtube.com/watch?v=aL90pISm7Y8 https://www.youtube.com/watch?v=aL90pISm7Y8