4 ms·

His second figure[1] shows his argument is nonsense. The slope of increases in productivity remains constant on most of the graph, it just is that a certain po

His second figure[1] shows his argument is nonsense. The slope of increases in productivity remains constant on most of the graph, it just is that a certain point, wages stop going up. That is, the computer revolution did not change that slope, at least not until 1995-2005 (possibly from the internet). Until the 70's, increases in worker productivity from technology were given to the worker as pay. After the 70's, it appears they were given to management and shareholders. [1] http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADiI/m_DQ4HrrylU/s1600/productivity.jpg http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADi...

astazangasta 12y ago
Political explanations are not unjustified: https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Memorandum https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Me...
msandford 12y ago
Probably because decoupling the dollar from gold meant that it was possible for nominal wages to continue to rise, but more slowly than prices. Until then if you wanted to pay people less money you had to somehow literally cut their pay. You had to make them accept a smaller number on their paycheck. After that, through the miracle of inflation, the numbers on their paychecks could continue to go up, up up! Just as long as those numbers are going up more slowly than inflation, you as a business owner are giving people a pay cut and they're not noticing it. Life is good! Me personally, I think that's the cause of a lot of the inequality.
- pjc50 12y ago
  http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png Inflation existed before the decoupling, and has been low in the US since the early 80s. Nominal wage rigidity is important but the gold standard does not guarantee price levels or wage levels.
  - msandford 12y ago
    You'll notice that up through the 40s it was possible for inflation to go negative and for there to be deflation. That means that while prices would rise for a time, they would then fall for a time. That made borrowing less attractive since there wasn't an implicit guarantee that you'll pay back the loan with money worth less than what was loaned to you. In other words, get $X buying power now, pay back $0.8X buying power over time. It's a slam dunk. After the 40s (and the war) there was a brief flirtation with deflation and then by the 60s inflation was in full force. Eventually people realized this was happening and a few years later Nixon nixed (HA!) the gold standard here in the US. Once that happened it became incredibly obvious that inflation, borrowing and not really paying for it was the new standard move if you had half a brain. Businesses got it very quickly. Most of the population in the US has yet to realize it, otherwise it would have been changed by now. EDIT: Given the regular changes to the way CPI is calculated I'm not sure I entirely agree with the reported numbers. I suspect that they're actually a few percent higher, so inflation has probably averaged not 4% for the last 30 years, but more like 6-7% 1.04 ^ 30 = 3.24 1.07 ^ 30 = 7.61 If that were the case it would explain a lot of the inequality. If inflation is 6-7% and returns have been averaging 8% (this is what most pensions assume they can get and shoot for) then your real rate of return is a pittance, almost not worth mentioning. Might that also cause some hard to detect but definitely real inequality as well?
crimsonalucard 12y ago
He's wrong because he's not looking at enough data. The 1930s to 1975 was an anomaly in wealth distribution. The prevailing trend if you look at a another centuries worth of data is different: In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. As a general rule wealth grows faster than economic output, or in other terms: r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. Governments should step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability down the road. In simple terms, rich peoples' invested wealth grows faster then poor peoples' wealth due to compounding interest. This is the true reason for the wealth gap AND this is the prevailing economic theory of wealth inequality among academia.
mcguire 12y ago
That one has me confused, too. Back in the early '90s, I remember hearing a considerable amount of argument from various economists about why computerization wasn't improving productivity. It was the late '90s before I stopped hearing that and the apparent benefits of computers became apparent.

astazangasta 12y ago

Political explanations are not unjustified: https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Memorandum https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Me...

msandford 12y ago

Probably because decoupling the dollar from gold meant that it was possible for nominal wages to continue to rise, but more slowly than prices. Until then if you wanted to pay people less money you had to somehow literally cut their pay. You had to make them accept a smaller number on their paycheck. After that, through the miracle of inflation, the numbers on their paychecks could continue to go up, up up! Just as long as those numbers are going up more slowly than inflation, you as a business owner are giving people a pay cut and they're not noticing it. Life is good! Me personally, I think that's the cause of a lot of the inequality.

pjc50 12y ago
http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png Inflation existed before the decoupling, and has been low in the US since the early 80s. Nominal wage rigidity is important but the gold standard does not guarantee price levels or wage levels.
- msandford 12y ago
  You'll notice that up through the 40s it was possible for inflation to go negative and for there to be deflation. That means that while prices would rise for a time, they would then fall for a time. That made borrowing less attractive since there wasn't an implicit guarantee that you'll pay back the loan with money worth less than what was loaned to you. In other words, get $X buying power now, pay back $0.8X buying power over time. It's a slam dunk. After the 40s (and the war) there was a brief flirtation with deflation and then by the 60s inflation was in full force. Eventually people realized this was happening and a few years later Nixon nixed (HA!) the gold standard here in the US. Once that happened it became incredibly obvious that inflation, borrowing and not really paying for it was the new standard move if you had half a brain. Businesses got it very quickly. Most of the population in the US has yet to realize it, otherwise it would have been changed by now. EDIT: Given the regular changes to the way CPI is calculated I'm not sure I entirely agree with the reported numbers. I suspect that they're actually a few percent higher, so inflation has probably averaged not 4% for the last 30 years, but more like 6-7% 1.04 ^ 30 = 3.24 1.07 ^ 30 = 7.61 If that were the case it would explain a lot of the inequality. If inflation is 6-7% and returns have been averaging 8% (this is what most pensions assume they can get and shoot for) then your real rate of return is a pittance, almost not worth mentioning. Might that also cause some hard to detect but definitely real inequality as well?

crimsonalucard 12y ago

He's wrong because he's not looking at enough data. The 1930s to 1975 was an anomaly in wealth distribution. The prevailing trend if you look at a another centuries worth of data is different: In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. As a general rule wealth grows faster than economic output, or in other terms: r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. Governments should step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability down the road. In simple terms, rich peoples' invested wealth grows faster then poor peoples' wealth due to compounding interest. This is the true reason for the wealth gap AND this is the prevailing economic theory of wealth inequality among academia.

mcguire 12y ago

That one has me confused, too. Back in the early '90s, I remember hearing a considerable amount of argument from various economists about why computerization wasn't improving productivity. It was the late '90s before I stopped hearing that and the apparent benefits of computers became apparent.