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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 th

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...
- mncolinlee 12y ago
  Interesting enough, Thomas Paine argued the exact opposite in his famous pamphlet arguing for Social Security. Paine is that American revolutionary you always see quoted at anti-tax rallies. His pamphlet on Social Security shared the same conclusions as Piketty's "Capital" except written two centuries earlier. "It is wrong to say God made rich and poor; He made only male and female, and He gave them the earth for their inheritance." -- Thomas Paine, On Agrarian Justice http://www.ssa.gov/history/paine4.html http://www.ssa.gov/history/paine4.html The Social Security system Paine advocated was more targeted to 21 year olds and was designed to offer everyone opportunity at the height of their lives. While he also theorized keeping the elderly from poverty, it was not the core idea of his plan.
- panarky 12y ago
  > there have always been rich and poor - and always will be Yes, and Jesus said[1] "ye have the poor always with you." Likewise, there will always be crime, and disease, and suffering. But do you agree that extreme inequality is a bad outcome? That putting more and more wealth and power into the hands of fewer and fewer monopolists and oligopolists is toxic to democracy and freedom? If so, then working to reduce extreme inequality is a noble cause just like reducing crime, disease and suffering is worthwhile. Even if these maladies will always be with us. [1] http://biblehub.com/kjv/matthew/26.htm#6 http://biblehub.com/kjv/matthew/26.htm#6
  - nugget 12y ago
    Let's say I live in a 1000 sq ft house and everyone else in my town lives in a 500 sq ft house; there is a certain level of inequality. Years pass, the economy rumbles on, we invent new products and more efficient services, and now I live in a 5000 sq ft mcmansion, and everybody else lives in 1000 sq ft houses. Inequality has increased, but the net standard of living has increased as well. Objectively, everyone is better off. Of course, some people may feel poorer because now they see the mcmansion on the hill and wonder why they don't live in that level of luxury (which didn't even exist before). Most economists seem to credit capitalism with the extreme advancements in quality of life, even for the poorest citizens, in first world economies. Sometimes the problem isn't inequality but envy and jealousy - I believe the Bible speaks to these two emotions as well.
yummyfajitas 12y ago
Empowering those at the bottom won't necessarily fix the inequality "problem". If Modi fixes the economy he'll empower those at the bottom. Right now everyone in India is equally poor. Fixing the economy might make this place unequally rich like the US. I imagine Piketty would consider that a problem if he knew India existed. If you want solutions for empowering those at the bottom, look to Bryan Caplan rather than Piketty. http://econlog.econlib.org/archives/2014/05/meant_for_each.html http://econlog.econlib.org/archives/2014/05/meant_for_each.h...
- anigbrowl 12y ago
  Right now everyone in India is equally poor. Well, that's bullshit. I'm not endorsing Piketty, but you're making even less sense, unless there's a joke I've missed. I do agree about unrestricted international immigration, such that there's a free flow of labor as well as capital. Unfortunately most people are mercantilist and opposed to the promulgation of global standards that would be required to make this work.
  - yummyfajitas 12y ago
    It's an attempt at poetic exaggeration - the point is the comparison between India and the US. India has a Gini of 33, the US has 45. Yet simply compare poverty in the US to upper middle class status in India, and you quickly realize that inequality isn't the most salient factor at play. I'm not sure why you believe we need some sort of "global standards" for open borders to work. I'm undecided on the issue, but I can't see how "global standards" play a role. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality http://en.wikipedia.org/wiki/List_of_countries_by_income_equ... http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-the-have-nots/ http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-t...
    - anigbrowl 12y ago
      OK, but France (Piketty's home country) has a Gini index of 32.7 and I find it easy to conceive of significant wealth disparities between individual French people notwithstanding their relative economic homogeneity. India was a poor example to pick, not just because of the existence of Indian billionaires, but because of the genetic institutionalization of inequality there in the form of caste, such that (until very recently) if you were born a Brahmin you had massively greater economic prospects than if you were born a Dalit. Anyway, as far as open borders go, the primary argument against them is that everyone will flood into those countries which have the most favorable conditions for workers, not just in terms of pay but in terms of safety, contractual rights and so forth. You would certainly want some sort of receiprocal arrangement, such that if people from China want to immigrate to the US, US people should be equally free to live, work and invest in China. You don't need to harmonize everything of course, but it's an incredibly difficult sell politically if you don't have reciprocity, on top of being an incredibly difficult sell because of mercantilist and xenophobic tendencies in the receiving economies. I'm heartily in favor of open borders and free trade in general, but most people hate the idea - even Tea Party types who profess a general disbelief in governmental competence.
baddox 12y ago
I think there are two big issues to think about. The first is a public choice analysis of a potential global wealth tax. It's not enough to talk about a hypothetical economically sound (according to some economist) and perfectly implemented tax; we need to talk about what tax could actually be implemented given what we can surmise about the incentives of government officials. The second is whether the conceptual idea of a global wealth tax would work even if we assume it could be implemented in the real world in such a way that there are no loopholes or favoritism. Let's also just assume the taxed wealth is somehow simply destroyed, to avoid the potential problem of favoritism in the way the government spends the tax revenue. In that case, it seems to me that it absolutely would reduce inequality. But I think the better question is whether reducing inequality itself is a good thing, because I think there would be other disastrous effects by this tax despite inequality being reduced.
- tormeh 12y ago
  A universal wage would work. It's no sense in hiding from receiving it, in case that should be a problem. And the money has to come from somewhere, and the poor simply can't pay, so the rich will have to. Not directly, necessarily, but whatever part of the economy ends up having the capacity to be taxated that much must be a sector the rich own.
justincormack 12y ago
I think his idea is "actually empowering those at the bottom of the economic ladder" by giving them cash. Cash is pretty empowering for those who have none.
- bsbechtel 12y ago
  At the discretion of these 'global wealth tax collectors'...what is their criteria for choosing who is at the bottom of the economic ladder? Falling into a demographic that is sufficient for these tax collectors to retain their power?
- timtas 12y ago
  If by "giving them cash" you mean put them on an annuity, is there anything more disempowering? If you depend on me to survive, your independence is gone. The only power left to you is to vote for me again.
jokoon 12y ago
what's the difference between a wealth tax and a progressive tax ?
- dllthomas 12y ago
  If your question is primarily definitional: A wealth tax operates on the value. A "progressive tax" typically still operates on the derivative.
  - saalweachter 12y ago
    Where the derivative is "income". In the US, property tax is a wealth tax. "Progressive" is orthogonal to "wealth"/"income". You could have a progressive wealth tax, where individuals with large amounts of wealth are taxed at a higher rate than individuals with smaller amounts of wealth. E.g., if a $10 million house was taxed at 10%, and a $100,000 house was taxed at 1%, that would be a progressive wealth tax. If all houses were taxed a flat $1000, regardless of their value, that would be a very regressive wealth tax.
    - dllthomas 12y ago
      Very true, and clearer than I was while also more informative. Thanks!
loudmax 12y ago
One of the main purposes of the wealth tax is not to raise funds. The tax described in the book would be quite low, below 1%. Remember, the rate of return on fortunes over a million Euros (below this, they wouldn't be subject to the tax) is around 5%. So this does little to slow the global concentration of wealth. The main purpose of the tax is to track this wealth. When Piketty did research on the fortunes of the very wealthiest individuals, he had to rely on estimates from Forbes magazine, whose methodology is far from scientific. The idea is that with a better public understanding of where and how wealth is concentrated, we can formulate better policy.
alexeisadeski3 12y ago
A wealth tax is "eating the cake." It's society deciding that we've already done everything worth doing, now it's time to destroy what has been built. Such irrational occurrences are not without historical precedent. Just hope you don't personally have to live through one.
anigbrowl 12y ago
I don't think a global wealth tax is practical, so questions of its desirability are moot. I don't think that an endlessly progressive system of taxation is that desirable either, but on the other hand I think your idea of market constraints are also a bit facile. Of course some people misjudge a market and go bust spectacularly, but most people with a lot of wealth tend to accumulate more. ISTM that Piketty is reaching for a global wealth tax because he doesn't have anything in his economic modeling toolbox that would do the trick instead, so proposes reducing inequality by fiat. He's right about the problem, without having a good solution. the problem is not the existence of inequality per se. I am fine with some inequality and consider it is natural for Pareto distributions to emerge in economics, just as in nature the existence of whales and elephants is not the result of a conspiracy against plankton or ants. Indeed, there are abundant examples of unequal distributions in nature, from the lengths of rivers to numbers themselves, ie Benford's law. However, the distribution of capital is not an entirely natural process, and most people who think it is are handwaving simplistic economic models of perfect competition, infinitely substitutable goods, and so on, and forgetting that these perfect models only exist ceteris parabus, ie 'all other things being held equal.' In reality capital flows through a complex contractual, regulatory, and legislative economic environment that treats different participants differently, interferes with default supply and demand (often for perfectly good reasons), and which in turn can be influenced by the infusion of more capital through political lobbying or plain old corruption. What we often end up with instead of a 'free market' is a 'superstar economy' where capital flows increase disproportionately towards people in the top 1%* of the economy, resulting in much greater inequalities than we would expect in a Pareto model. There's an excellent book on this trend ion the Entertainment industry called Blockbusters, written by Anita Elberse last year. Here's a salient excerpt taken from http://lefsetz.com/wordpress/index.php/archives/2013/10/16/the-most-important-thing-you-will-read-all-day/ http://lefsetz.com/wordpress/index.php/archives/2013/10/16/t... (~1000 wrods, worth your time) with this particular bit pointing out that Chris Anderson's 'long tail' model doesn't seem to be panning out as he predicted or as a lot of digerati and creative types (including myself) hoped that it would: The same patterns are visible in album sales. …out of a total of 870,000 albums that sold at least one copy in 2011, 13 album titles sold more than a million copies each, together accounting for 19 million copies sold. That’s 0.001 percent of all titles accounting for 7 percent of sales. The top 1,000 albums generated about half of all the sales, and the top 10,000 albums around 80 percent of sales. Deep in the tail, 513,000 titles or nearly 60 percent of the assortment, sold fewer than 10 copies each, together making up half a percent of total sales. tl;dr while we expected a power-law distribution in economics because we're so used to them from nature, the way our economic system is actually calibrated results in a much more extreme distribution that almost disappears into the axes of the demand graph. Now this sort of thing is a problem for a lot of creative types, because while we can all leverage the incredibly low marginal costs of digital distribution (hooray), there are often significant fixed costs too, and if you can't spread those out over a sufficiently large number of copies then You Are Fucked because you won't be able to get enough capital to pay those fixed costs. On the positive side, this works out well for writers: writing is of course time-consuming, but since computers are so cheap these days and most people in the developed world have one anyway, the non-labor cost of producing a literary work is very low. So you can have a runaway hit like 50 Shades of Grey where the author typed up a bunch of sexual fantasies, released the result as an e-book (which turned out to be a great move because it's hard to tell what people are reading on a Kindle, compared to a peperback novel with a lurid cover), and made a fortune. For musicians, it's a bit different; some people are blessed with musical talent, others work hard at it as a craft. But then musical performance has to be recorded or brought to the public, and while that's far cheaper and easier than it used to be thanks to digital technologies, it's not free or super-easy and so you see a lot of people raising money from fans on Kickstarter to record albums or launch a tour (depending on whether the artists are better skilled/equipped to play live or record themselves). These artists need an extra capital infusion because launching a new musical product has some significant fixed costs which are otherwise tough to accumulate from normal operating revenues. Then there's movies, the field I work in. This too has been affected by digital technology; in that there's no need to shoot on film any more thanks to digital cameras, and you can also do amazing special effects that would either not have been achievable with practical (physical) methods or which would have been prohibitively expensive. Yay digital. However, the cost of film and the inconvenience of film cameras are only a small part of a typical film budget. You still have to pay for things like actors, propers, locations, food, transport and so on, and where effects are concerned people's expectations of spectacle increase to match the processing power available, so the public wants ever more elaborate effects and ever-higher production quality (eg color-grading that requires a much greater degree of visual consistency through the whole film than used to be the case a few decades ago). So the cost of manufacturing a film product that meets normal commercial expectation is still in the hundreds of thousands, if you get lucky; if your business strategy is to sell it rather than hope for awards and then sell it, you need to spend at least $1 million, a sum which does not grow on trees. (There are many famous instances of hit films being made on tiny shoestring budgets of only a few thousand $. And occasionally that happens, but: a) they're vanishingly rare; b) they usually take many years to produce; c) the actual cost to get into the theater is always far higher - the low number is what the producers had spent before a movie executive wrote a check to pay for commercial-quality post-production; and d) the shoestring film almost always involves a ton of freebies from friends/relatives/industry insiders. The odds of making a hit film for a few thousand are about as good as the odds of you outdoing Flappy Bird this weekend, ie virtually nil.) Now getting back to economics, this is a problem for filmmakers because unless you start out rich or have good social capital, it's not that easy to get your hands on $1 million in the first place, and it's more difficult to do so when more and more consumer spending on tickets/DVDs/rentals goes towards blockbuster movies, as there are fewer unit sales over which you can average your fixed costs. This is not to suggest that the pie of consumer movie spending is completely fixed such that if someone who watches my film will necessarily skip yours; but the pie isn't infinite and (more to the point) the acceleration of revenue concentration around blockbusters is greater than the overall sales growth, so blockbusters get larger and larger shares of a slowly-increasing pie. The overall increase is not sufficient to maintain sales growth or even parity for less popular/populist offerings. B-movie film god Roger Corman summed up the problem succinctly here: http://blogs.wsj.com/speakeasy/2010/09/18/film-school-roger-corman-explains-why-b-movies-vanished-from-theaters/ http://blogs.wsj.com/speakeasy/2010/09/18/film-school-roger-... What happens in practice is a race to the bottom; because it's increasingly hard to raise funding for a venture of uncertain commercial prospects as the demand tail shrinks and the (externally) perceived costs of production and distribution fall, that exerts downward pressure on wages as a factor of production for films that are not well-budgeted, such that the extremely bimodal distribution of film sales in reflected in wage scales. Rather than resulting in equilibrium (because goods in this market are not easily substitutable), it's far more likely that less successful participants will simply exit the market, which further exacerbates and accelerates concentration.

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...

mncolinlee 12y ago
Interesting enough, Thomas Paine argued the exact opposite in his famous pamphlet arguing for Social Security. Paine is that American revolutionary you always see quoted at anti-tax rallies. His pamphlet on Social Security shared the same conclusions as Piketty's "Capital" except written two centuries earlier. "It is wrong to say God made rich and poor; He made only male and female, and He gave them the earth for their inheritance." -- Thomas Paine, On Agrarian Justice http://www.ssa.gov/history/paine4.html http://www.ssa.gov/history/paine4.html The Social Security system Paine advocated was more targeted to 21 year olds and was designed to offer everyone opportunity at the height of their lives. While he also theorized keeping the elderly from poverty, it was not the core idea of his plan.
panarky 12y ago
> there have always been rich and poor - and always will be Yes, and Jesus said[1] "ye have the poor always with you." Likewise, there will always be crime, and disease, and suffering. But do you agree that extreme inequality is a bad outcome? That putting more and more wealth and power into the hands of fewer and fewer monopolists and oligopolists is toxic to democracy and freedom? If so, then working to reduce extreme inequality is a noble cause just like reducing crime, disease and suffering is worthwhile. Even if these maladies will always be with us. [1] http://biblehub.com/kjv/matthew/26.htm#6 http://biblehub.com/kjv/matthew/26.htm#6
- nugget 12y ago
  Let's say I live in a 1000 sq ft house and everyone else in my town lives in a 500 sq ft house; there is a certain level of inequality. Years pass, the economy rumbles on, we invent new products and more efficient services, and now I live in a 5000 sq ft mcmansion, and everybody else lives in 1000 sq ft houses. Inequality has increased, but the net standard of living has increased as well. Objectively, everyone is better off. Of course, some people may feel poorer because now they see the mcmansion on the hill and wonder why they don't live in that level of luxury (which didn't even exist before). Most economists seem to credit capitalism with the extreme advancements in quality of life, even for the poorest citizens, in first world economies. Sometimes the problem isn't inequality but envy and jealousy - I believe the Bible speaks to these two emotions as well.

yummyfajitas 12y ago

Empowering those at the bottom won't necessarily fix the inequality "problem". If Modi fixes the economy he'll empower those at the bottom. Right now everyone in India is equally poor. Fixing the economy might make this place unequally rich like the US. I imagine Piketty would consider that a problem if he knew India existed. If you want solutions for empowering those at the bottom, look to Bryan Caplan rather than Piketty. http://econlog.econlib.org/archives/2014/05/meant_for_each.html http://econlog.econlib.org/archives/2014/05/meant_for_each.h...

anigbrowl 12y ago
Right now everyone in India is equally poor. Well, that's bullshit. I'm not endorsing Piketty, but you're making even less sense, unless there's a joke I've missed. I do agree about unrestricted international immigration, such that there's a free flow of labor as well as capital. Unfortunately most people are mercantilist and opposed to the promulgation of global standards that would be required to make this work.
- yummyfajitas 12y ago
  It's an attempt at poetic exaggeration - the point is the comparison between India and the US. India has a Gini of 33, the US has 45. Yet simply compare poverty in the US to upper middle class status in India, and you quickly realize that inequality isn't the most salient factor at play. I'm not sure why you believe we need some sort of "global standards" for open borders to work. I'm undecided on the issue, but I can't see how "global standards" play a role. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality http://en.wikipedia.org/wiki/List_of_countries_by_income_equ... http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-the-have-nots/ http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-t...
  - anigbrowl 12y ago
    OK, but France (Piketty's home country) has a Gini index of 32.7 and I find it easy to conceive of significant wealth disparities between individual French people notwithstanding their relative economic homogeneity. India was a poor example to pick, not just because of the existence of Indian billionaires, but because of the genetic institutionalization of inequality there in the form of caste, such that (until very recently) if you were born a Brahmin you had massively greater economic prospects than if you were born a Dalit. Anyway, as far as open borders go, the primary argument against them is that everyone will flood into those countries which have the most favorable conditions for workers, not just in terms of pay but in terms of safety, contractual rights and so forth. You would certainly want some sort of receiprocal arrangement, such that if people from China want to immigrate to the US, US people should be equally free to live, work and invest in China. You don't need to harmonize everything of course, but it's an incredibly difficult sell politically if you don't have reciprocity, on top of being an incredibly difficult sell because of mercantilist and xenophobic tendencies in the receiving economies. I'm heartily in favor of open borders and free trade in general, but most people hate the idea - even Tea Party types who profess a general disbelief in governmental competence.

baddox 12y ago

I think there are two big issues to think about. The first is a public choice analysis of a potential global wealth tax. It's not enough to talk about a hypothetical economically sound (according to some economist) and perfectly implemented tax; we need to talk about what tax could actually be implemented given what we can surmise about the incentives of government officials. The second is whether the conceptual idea of a global wealth tax would work even if we assume it could be implemented in the real world in such a way that there are no loopholes or favoritism. Let's also just assume the taxed wealth is somehow simply destroyed, to avoid the potential problem of favoritism in the way the government spends the tax revenue. In that case, it seems to me that it absolutely would reduce inequality. But I think the better question is whether reducing inequality itself is a good thing, because I think there would be other disastrous effects by this tax despite inequality being reduced.

tormeh 12y ago
A universal wage would work. It's no sense in hiding from receiving it, in case that should be a problem. And the money has to come from somewhere, and the poor simply can't pay, so the rich will have to. Not directly, necessarily, but whatever part of the economy ends up having the capacity to be taxated that much must be a sector the rich own.

justincormack 12y ago

I think his idea is "actually empowering those at the bottom of the economic ladder" by giving them cash. Cash is pretty empowering for those who have none.

bsbechtel 12y ago
At the discretion of these 'global wealth tax collectors'...what is their criteria for choosing who is at the bottom of the economic ladder? Falling into a demographic that is sufficient for these tax collectors to retain their power?
timtas 12y ago
If by "giving them cash" you mean put them on an annuity, is there anything more disempowering? If you depend on me to survive, your independence is gone. The only power left to you is to vote for me again.

jokoon 12y ago

what's the difference between a wealth tax and a progressive tax ?

dllthomas 12y ago
If your question is primarily definitional: A wealth tax operates on the value. A "progressive tax" typically still operates on the derivative.
- saalweachter 12y ago
  Where the derivative is "income". In the US, property tax is a wealth tax. "Progressive" is orthogonal to "wealth"/"income". You could have a progressive wealth tax, where individuals with large amounts of wealth are taxed at a higher rate than individuals with smaller amounts of wealth. E.g., if a $10 million house was taxed at 10%, and a $100,000 house was taxed at 1%, that would be a progressive wealth tax. If all houses were taxed a flat $1000, regardless of their value, that would be a very regressive wealth tax.
  - dllthomas 12y ago
    Very true, and clearer than I was while also more informative. Thanks!

loudmax 12y ago

One of the main purposes of the wealth tax is not to raise funds. The tax described in the book would be quite low, below 1%. Remember, the rate of return on fortunes over a million Euros (below this, they wouldn't be subject to the tax) is around 5%. So this does little to slow the global concentration of wealth. The main purpose of the tax is to track this wealth. When Piketty did research on the fortunes of the very wealthiest individuals, he had to rely on estimates from Forbes magazine, whose methodology is far from scientific. The idea is that with a better public understanding of where and how wealth is concentrated, we can formulate better policy.

alexeisadeski3 12y ago

A wealth tax is "eating the cake." It's society deciding that we've already done everything worth doing, now it's time to destroy what has been built. Such irrational occurrences are not without historical precedent. Just hope you don't personally have to live through one.

anigbrowl 12y ago

I don't think a global wealth tax is practical, so questions of its desirability are moot. I don't think that an endlessly progressive system of taxation is that desirable either, but on the other hand I think your idea of market constraints are also a bit facile. Of course some people misjudge a market and go bust spectacularly, but most people with a lot of wealth tend to accumulate more. ISTM that Piketty is reaching for a global wealth tax because he doesn't have anything in his economic modeling toolbox that would do the trick instead, so proposes reducing inequality by fiat. He's right about the problem, without having a good solution. the problem is not the existence of inequality per se. I am fine with some inequality and consider it is natural for Pareto distributions to emerge in economics, just as in nature the existence of whales and elephants is not the result of a conspiracy against plankton or ants. Indeed, there are abundant examples of unequal distributions in nature, from the lengths of rivers to numbers themselves, ie Benford's law. However, the distribution of capital is not an entirely natural process, and most people who think it is are handwaving simplistic economic models of perfect competition, infinitely substitutable goods, and so on, and forgetting that these perfect models only exist ceteris parabus, ie 'all other things being held equal.' In reality capital flows through a complex contractual, regulatory, and legislative economic environment that treats different participants differently, interferes with default supply and demand (often for perfectly good reasons), and which in turn can be influenced by the infusion of more capital through political lobbying or plain old corruption. What we often end up with instead of a 'free market' is a 'superstar economy' where capital flows increase disproportionately towards people in the top 1%* of the economy, resulting in much greater inequalities than we would expect in a Pareto model. There's an excellent book on this trend ion the Entertainment industry called Blockbusters, written by Anita Elberse last year. Here's a salient excerpt taken from http://lefsetz.com/wordpress/index.php/archives/2013/10/16/the-most-important-thing-you-will-read-all-day/ http://lefsetz.com/wordpress/index.php/archives/2013/10/16/t... (~1000 wrods, worth your time) with this particular bit pointing out that Chris Anderson's 'long tail' model doesn't seem to be panning out as he predicted or as a lot of digerati and creative types (including myself) hoped that it would: The same patterns are visible in album sales. …out of a total of 870,000 albums that sold at least one copy in 2011, 13 album titles sold more than a million copies each, together accounting for 19 million copies sold. That’s 0.001 percent of all titles accounting for 7 percent of sales. The top 1,000 albums generated about half of all the sales, and the top 10,000 albums around 80 percent of sales. Deep in the tail, 513,000 titles or nearly 60 percent of the assortment, sold fewer than 10 copies each, together making up half a percent of total sales. tl;dr while we expected a power-law distribution in economics because we're so used to them from nature, the way our economic system is actually calibrated results in a much more extreme distribution that almost disappears into the axes of the demand graph. Now this sort of thing is a problem for a lot of creative types, because while we can all leverage the incredibly low marginal costs of digital distribution (hooray), there are often significant fixed costs too, and if you can't spread those out over a sufficiently large number of copies then You Are Fucked because you won't be able to get enough capital to pay those fixed costs. On the positive side, this works out well for writers: writing is of course time-consuming, but since computers are so cheap these days and most people in the developed world have one anyway, the non-labor cost of producing a literary work is very low. So you can have a runaway hit like 50 Shades of Grey where the author typed up a bunch of sexual fantasies, released the result as an e-book (which turned out to be a great move because it's hard to tell what people are reading on a Kindle, compared to a peperback novel with a lurid cover), and made a fortune. For musicians, it's a bit different; some people are blessed with musical talent, others work hard at it as a craft. But then musical performance has to be recorded or brought to the public, and while that's far cheaper and easier than it used to be thanks to digital technologies, it's not free or super-easy and so you see a lot of people raising money from fans on Kickstarter to record albums or launch a tour (depending on whether the artists are better skilled/equipped to play live or record themselves). These artists need an extra capital infusion because launching a new musical product has some significant fixed costs which are otherwise tough to accumulate from normal operating revenues. Then there's movies, the field I work in. This too has been affected by digital technology; in that there's no need to shoot on film any more thanks to digital cameras, and you can also do amazing special effects that would either not have been achievable with practical (physical) methods or which would have been prohibitively expensive. Yay digital. However, the cost of film and the inconvenience of film cameras are only a small part of a typical film budget. You still have to pay for things like actors, propers, locations, food, transport and so on, and where effects are concerned people's expectations of spectacle increase to match the processing power available, so the public wants ever more elaborate effects and ever-higher production quality (eg color-grading that requires a much greater degree of visual consistency through the whole film than used to be the case a few decades ago). So the cost of manufacturing a film product that meets normal commercial expectation is still in the hundreds of thousands, if you get lucky; if your business strategy is to sell it rather than hope for awards and then sell it, you need to spend at least $1 million, a sum which does not grow on trees. (There are many famous instances of hit films being made on tiny shoestring budgets of only a few thousand $. And occasionally that happens, but: a) they're vanishingly rare; b) they usually take many years to produce; c) the actual cost to get into the theater is always far higher - the low number is what the producers had spent before a movie executive wrote a check to pay for commercial-quality post-production; and d) the shoestring film almost always involves a ton of freebies from friends/relatives/industry insiders. The odds of making a hit film for a few thousand are about as good as the odds of you outdoing Flappy Bird this weekend, ie virtually nil.) Now getting back to economics, this is a problem for filmmakers because unless you start out rich or have good social capital, it's not that easy to get your hands on $1 million in the first place, and it's more difficult to do so when more and more consumer spending on tickets/DVDs/rentals goes towards blockbuster movies, as there are fewer unit sales over which you can average your fixed costs. This is not to suggest that the pie of consumer movie spending is completely fixed such that if someone who watches my film will necessarily skip yours; but the pie isn't infinite and (more to the point) the acceleration of revenue concentration around blockbusters is greater than the overall sales growth, so blockbusters get larger and larger shares of a slowly-increasing pie. The overall increase is not sufficient to maintain sales growth or even parity for less popular/populist offerings. B-movie film god Roger Corman summed up the problem succinctly here: http://blogs.wsj.com/speakeasy/2010/09/18/film-school-roger-corman-explains-why-b-movies-vanished-from-theaters/ http://blogs.wsj.com/speakeasy/2010/09/18/film-school-roger-... What happens in practice is a race to the bottom; because it's increasingly hard to raise funding for a venture of uncertain commercial prospects as the demand tail shrinks and the (externally) perceived costs of production and distribution fall, that exerts downward pressure on wages as a factor of production for films that are not well-budgeted, such that the extremely bimodal distribution of film sales in reflected in wage scales. Rather than resulting in equilibrium (because goods in this market are not easily substitutable), it's far more likely that less successful participants will simply exit the market, which further exacerbates and accelerates concentration.