Hudson on the Piketty Phenomenon

[vt]

Re: Hudson on the Piketty Phenomenon

Not just the fireman, but the policeman (or woman) and especially the soldier.

It still makes my blood boil to have seen our returning Vietnam vets cursed and spit on by some low life dirt who failed to understand the soldiers were forced into service and war by leaders who thought them expendable.

It's difficult to explain artistic , athletic, or any type of talent; even the talent to manage a small, medium, or large business.

Shouldn't a world class violinist be paid more than a rapper? But who are we to judge how citizens spend their money for what they perceive as value? The world is not fair.

Any large fortune gained illegally should be forbidden. Any gained unethically should be controlled and corrected. Any gained by a measure that it is excessive by a reasonable standard needs to be changed. But someone who creates something that improves life for people should not be denied the fruits of their labor.

8% of the population is employed by the non profit industry. Those organizations are supported by wealthy benefactors, corporations, and in some cases by government grants.

What's inequality and not inequality is a complex subject. This thread is raising important issues.

It's not just distributing the wealth pie; more importantly is how do we grow the pie to have far more share in the innovation, invention, and creativity that this country has always cultivated, plus how do we duplicate this in other nations?

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

Here's an interesting article about NYC real estate taxes that appeared this month.

THE EXISTING TAX SYSTEM IS "SIMPLY INDESCRIBABLE," SAID New York University law professor Roderick Hills, who also called it “a morass of indecipherable and indefensible legal lunacy.”

“Everything they say about the way the system works is absolutely correct,” said Carol Kellermann, president of the Citizens Budget Commission. “Whether this suit is valid and is upheld, I think to me what is useful and important about it is that it gets to the issue of the need to revise the tax system.”

The quirks in the city’s property-tax algorithm are hard to keep straight.

To start with, take the disparities between houses in wealthy neighborhoods and houses in less-wealthy ones.

As a not-so-random example of how this works: last year the Daily News reported that Bill de Blasio paid $2,900 in real estate taxes on each of his 11th Street rowhouses in Park Slope, though they are worth (at the very least) $1.1 million each.

At the same time, a homeowner in the much-less-posh Woodhaven section of Queens pays $3,700 in taxes on a townhouse that’s now on the market for $299,000.

Now look at how both the mayor and the Woodhaven homeowner make out compared to Ernest Robinson, a Bronx renter and one of the plaintiffs in the suit.

the whole article...

http://www.capitalnewyork.com/articl...tag-page-image

[vt]

Re: Hudson on the Piketty Phenomenon

A clearer view than Piketty's on America's experience with inequality:

http://www.amazon.com/Chasing-Americ...american+dream

[Thailandnotes]

Re: Hudson on the Piketty Phenomenon

I found it interesting that Pikkety's book has already gotten more than 60 negative one-star reviews* on Amazon, whereas (Stiglitz) The Price of Inequality which is along the same lines has only garnered 1.

*Skimming these will seem like you just walked into the wrong bar.

(vt's Chasing the American Dream has not been reviewed)

[don]

Re: Hudson on the Piketty Phenomenon

The Accidental Controversialist:
Deeper Reflections on Thomas Piketty's "Capital"

by Thomas I. Palley

Thomas Piketty's Capital in the Twenty-First Century is a six hundred and eighty-five page tome that definitively characterizes the empirical pattern of income and wealth inequality in capitalist economies over the past two hundred and fifty years, and especially over the last one hundred. It also documents the grotesque rise of inequality over the past forty years and ends with a call for restoration of high marginal income tax rates and a global wealth tax.

His book has tapped a nerve and become a phenomenon. In laying a solid blow against inequality, Piketty has also become an accidental controversialist. That is because his book has potential to unintentionally trigger debate over so-called "free market" capitalism. The big question is will that happen?

To get some perspective on its phenomenon status, consider the following. The book (at time of writing this article) is number one onAmazon.com's best seller list, beating out the likes of Lynn Vincent'sHeaven Is for Real: A Little Boy's Astounding Story of His Trip to Heaven and Back; George Martin's A Game of Thrones 5-book Boxed Set; Erlend Blake's Never Work Again: Work Less, Earn More and Live Your Freedom; and Dale Carnegie's How to Win Friends & Influence People.

The usually sober Sunday New York Times had a long article accompanied by a side-bar placing Piketty's book alongside Adam Smith's (1776) The Wealth of Nations; Thomas Malthus' (1798) An Essay on the Principle of Population; John Stuart Mill's (1848) Principles of Political Economy; Karl Marx's (1867) Das Kapital: and John Maynard Keynes' (1936) The General Theory of Employment, Interest and Money. I think it fair to say phenomenon is no exaggeration.

Piketty's book consists of four sections. The first provides a theoretical framework, the second two provide empirical documentation, and the fourth provides a policy framework for reversing the surge in inequality of the past forty years. By all accounts from those who know, the empirical work is superb in scope and detail and it is praised as part of a new economic scholarship that explores "big" data sets. In Piketty's case the big data is individual tax returns.

The book's timing is near-perfect because of awakened political interest in inequality, but its empirical findings are not revolutionary and rising income and wealth inequality have been documented for years, albeit less comprehensively. Beginning in 1988 with the first edition of The State of Working America, Larry Mishel and his co-authors at the Economic Policy Institute in Washington DC have biennially documented the problem of wage stagnation and rising income inequality in the US -- and they too use big data from the Current Population Survey. Jamie Galbraith substantially confirmed that picture in his 1998 book Created Unequal: The Crisis in America Pay. Moreover, he too used biggish data on the distribution of manufacturing wages, and he subsequently extended his research to cover the international economy.

Another economist who documented rising US income and wealth inequality is Edward Wolff in his 2002 co-authored book Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It, and his 2008 book Poverty and Income Distribution. With regard to global patterns, Branko Milanovic has been the preeminent contributor with his 2002 article "True World Income Distribution, 1988 and 1993: First Calculations Based on Household Surveys Alone"and his 2005 book Worlds Apart: Measuring International and Global Inequality. Other renowned contributors include Anthony Atkinson andFrançois Bourguignon. And of course, Piketty has also contributed with his masterly 2003 article, co-authored with Emmanuel Saez, on US income inequality from 1913 to 1998. Indeed, his book is in part an extension of the methodology developed therein.

Given this, it is interesting to ask why Piketty has broken through where others have failed. In my view, one reason is political. Mishel, Galbraith, and Wolff are progressive left economists. Though their books are not theoretical or comprehensive policy treatments of the problem, their implicit theoretical logic emphasizes economic and political power. That logic is explicitly developed in my 1998 book Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism.

The important point is mainstream economics has difficulty acknowledging work from such sources because to acknowledge is to legitimize. That creates the strange situation in economics whereby something is not thought or known until the right person says it. This pattern applies to income inequality, the macroeconomics of debt deflation, the economics of international capital controls, and Phillips curve inflation theory, to name a few instances.

These observations lead to a second concern, which is, after the initial fuss dies down, Piketty's book may end up being gattopardo economics that offers change without change. The public discourse on income and wealth inequality has been increasingly owned by progressive economists, both because of their early identification of the issue and the logical coherence and empirical consistency of their explanation. That has placed mainstream economics on the political defensive. Piketty provides a mainstream neoclassical explanation of worsening inequality in the first section of his book. That creates a gattopardo opportunity whereby inequality is folded back into mainstream economic theory which remains unchanged.

Using a conventional marginal productivity framework, Piketty provides an explanation of rising inequality based on increases in the gap between the marginal product of capital, which determines the rate of profit (r), and the rate of growth (g). Because capital ownership is so concentrated, a higher profit rate or slower growth rate increases inequality as the incomes of the wealthy grow faster than the overall economy.

The conventional character of Piketty's theoretical thinking rears its head in his policy prescriptions. His neoclassical growth framework leads him to focus on taxation as the remedy. There is little attention to issues of economic institutions and structures of economic power because these are not part of the neoclassical framework. That substantially explains progressive economists' diffident embrace of the book. Furthermore, even if technically feasible, Piketty's tax prescriptions are politically naïve given capital increasingly controls the political process.

These features have led some critics to raise old "Cambridge" arguments about the intellectual incoherence of marginal productivity income distribution theory. Critics also assert Piketty conflates physical and financial capital, overlooking the role of finance in determining rates of return and patterns of income and wealth distribution. There are two problems with these responses. First, mainstream economists determined long ago to turn a blind eye and deaf ear to such arguments. Second, these arguments miss the bull's-eye which is the nature of capitalism.

A better response is for critics to stick with the rate of profit versus growth argument while dumping the neoclassical marginal productivity aspect of Piketty's theoretical argument. Mainstream economists will assert the conventional story about the profit rate being technologically determined. However, as Piketty occasionally hints, in reality the profit rate is politically and socially determined by factors influencing the distribution of economic and political power. Growth is also influenced by policy and institutional choices. That is the place to push the argument, which is what critics of mainstream economics have been doing (unsuccessfully) for decades. The deep contribution of Piketty's book is it creates a fresh opportunity in this direction.

Mainstream academic economists will try to block that and push thegattopardo tactic. My prediction is "r minus g" algebra will make its way into the curriculum, with the profit rate explained as the marginal product of capital; Chicago School economists will counter the economy has mechanisms limiting prolonged wide divergence of r and g; and Harvard and MIT graduate students will have opportunities to do market failure research arguing the opposite. The net result is economics will be left essentially unchanged and even more difficult to change.

[vt]

Re: Hudson on the Piketty Phenomenon

True no reviews, but editorial reviews from other professors in the field:

"Rank and his colleagues achieve two important tasks in this book. They describe, in the words of average Americans whom they interviewed, what the 'American Dream' means. And then they show, through creative analyses of the hard data, how much that dream is being thwarted by the political economy of 21st century America. It makes for a poignant contrast." --Claude S. Fischer, PhD, Professor of Sociology, University of California, Berkeley

"Over the last generation, the ideal of the American Dream and the reality of the American economy have increasingly clashed. In this informed, and engagingly written book, Mark Rank takes us deep into the minds and lives of Americans of all walks of life as they build-and sometimes watch crumble-their own dreams. A powerful portrait of the ups and downs of a riskier and more unequal economy." --Jacob Hacker, PhD, Stanley B. Resor Professor Political Science; Director, Institution for Social and Policy Studies; Yale University

"In his exceptionally important new book, Chasing the American Dream, Mark Rank shows how rising economic inequality has distorted the meaning of the American dream and circumscribed the opportunities of ordinary Americans. Rank combines interview and focus groups with the life history method he pioneered in earlier work to show the astonishing rate at which individuals move in and out of poverty and affluence and how initial advantages and disadvantages translate into patterns of cumulative inequality which define their lives. Written with exceptional clarity, illustrated with vivid individual stories, this book will engage scholars, students, and non-specialist readers who want to know what is happening to the elusive American dream." --Michael B. Katz, PhD, University of Pennsylvania, author of The Undeserving Poor: America's Enduring Confrontation with Poverty

Just maybe Pikettys book is being pushed as a political and media agenda? Could "Chasing the American Dream" be closer to the answer?"

The professors cited above don't appear sponsored by another agenda like say the Koch bothers, whereas the Piketty book looks closer to fitting a political agenda.

[Polish_Silver]

Re: Hudson on the Piketty Phenomenon

I found it interesting that Pikkety's book has already gotten more than 60 negative one-star reviews* on Amazon, whereas (Stiglitz) The Price of Inequality which is along the same lines has only garnered 1.

*Skimming these will seem like you just walked into the wrong bar.

(vt's Chasing the American Dream has not been reviewed)

A lot more people have heard of Stiglitz than Pikketty.
It seems like everyone agrees the subject is important. Interestingly, Hudson blames it on interest rate variations, and I agree that is at least part of the cause. Does Pikkety talk about interest rates?


I think the inequality bothers me less than the problem that the money is going to people who don't deserve it in the sense of being rewarded for producing something useful to others.

The people I resent are the ones who manipulate the system into rewarding their own group. One of these groups is corporate executives. They have created a system of corporate governance that enriches the people at the top for no good reason. I don't know how to fix it, but probably somebody does.

[Woodsman]

Re: Hudson on the Piketty Phenomenon

Not just the fireman, but the policeman (or woman) and especially the soldier.

I say the fireman because it's tough to be anti-fireman, but I think we're on the same wave length here.

It still makes my blood boil to have seen our returning Vietnam vets cursed and spit on by some low life dirt who failed to understand the soldiers were forced into service and war by leaders who thought them expendable.

I'm with you. Just remember that they were both kids and both used by forces beyond their understanding and influence, the soldier and the dissident. Both were fighting on behalf of American ideals taught to them every day of their lives since birth. My contempt is largely reserved for the old men who sent them there against their will and against the interests of the nation as was recognized by the dissidents early on. My blood boils with the understanding that these ruthless and cynical men used those American ideals to their own cynical and ruthless ends and against the interests of soldier and dissident. And I'm embarrassed by the behavior of the young baby boomers at the time who should have known better.

Funny you mention the war. I just came back from a trip to your neck of the woods a few weeks ago. While there I stopped by Arlington National Cemetery to visit with an old friend as I usually do when I'm in town. After paying my respects, I often head over to JFK's grave site if there's time. I read the inaugural speech and watch folks bunch up before the flame.

This time as I was walking off past Bobby's memorial, McNamara's grave site caught my eye and I stopped and felt a distinct impulse to expectorate. I didn't, of course. I heard one of the kids, a teenager, ask his companion, "who's this guy?" and I found myself saying out loud, "nobody; just a lying moral coward and a decomposing sack of sh!t." It was uncharacteristic of me and inappropriate, but that place always puts me in a different frame of mind.


And at that moment I felt a hand land on my shoulder and I turned to meet an older, better dressed gentleman offering his other hand to me in a gesture of goodwill. He said nothing; just smiled broadly and nodded. I noticed a little replica gold Combat Infantryman's Badge on the lapel of his jacket and I knew he understood exactly what I had intended. The kids laughed, as kids usually do. No doubt we were ridiculous to them, two crazy old dudes standing before a cut forest of granite markers and smiling like loons. In front of us stood a mound where the desiccated bones of admirals and generals and secretaries lie, still clad in their woolen uniforms and suits. Together that small band of men had consigned millions others to their own graves. But we were here and alive, two strangers pumping our arms in recognition and worthy of every one of the kids' giggles and titters I'm sure.

It's difficult to explain artistic , athletic, or any type of talent; even the talent to manage a small, medium, or large business.

Shouldn't a world class violinist be paid more than a rapper? But who are we to judge how citizens spend their money for what they perceive as value? The world is not fair.

As you say, "should" and "fair" aren't all that relevant here. And we are talking about the art market, generally. Who can make sense of a world where Jeff Koons and Damien Hirst are considered world class. Art has become a kick in the nuts and a slap in the face.

Any large fortune gained illegally should be forbidden. Any gained unethically should be controlled and corrected. Any gained by a measure that it is excessive by a reasonable standard needs to be changed. But someone who creates something that improves life for people should not be denied the fruits of their labor.

If we enforced that standard the US would have the GNP of Lesotho. iTulip is not the best place to express it, but history has proved Balzac right.

8% of the population is employed by the non profit industry. Those organizations are supported by wealthy benefactors, corporations, and in some cases by government grants.

I can't speak to the numbers, but there's plenty of data and anecdotes demonstrating that most of this philanthropy goes to serving the interest (social and commercial) of the benefactors. The Chronicle of Higher Education and the WSJ both did rather deep pieces that support this conclusion; they're on Google if you have an interest. And the tales told by my ex (big in Development & Philanthropy) convinced me that this is the reality. Still and all, philanthropy - however misallocated, minuscule compared to the task before it, and scatter shot - is to be encouraged and recognized as a civic good.

What's inequality and not inequality is a complex subject. This thread is raising important issues.

Hardly as complex as we pretend it is (cf., Picketty, Galbraith, Hudson et al.) in my opinion.

It's not just distributing the wealth pie; more importantly is how do we grow the pie to have far more share in the innovation, invention, and creativity that this country has always cultivated, plus how do we duplicate this in other nations?

Of course it is and we know how to do all of that better than anyone in the world. The people are desperate for work and relief, the nation is desperate for infrastructure (TECI), and there's an army of entrepreneurs desperate for capital to help make that happen (Chris Cole's Spillway), but the malignant cohort in command considers war and its derivatives too lucrative and useful to give up. And then there's FIRE. So we continue to be hollowed out as a nation and an economy.

[lektrode]

Re: Hudson on the Piketty Phenomenon

I say the fireman because it's tough to be anti-fireman, but I think we're on the same wave length here.

I'm with you....
....
Of course it is and we know how to do all of that better than anyone in the world. The people are desperate for work and relief, the nation is desperate for infrastructure (TECI), and there's an army of entrepreneurs desperate for capital to help make that happen (Chris Cole's Spillway), but the malignant cohort in command considers war and its derivatives too lucrative and useful to give up. And then there's FIRE. So we continue to be hollowed out as a nation and an economy.

+1
and its nice - for a change - to see you two agree on stuff. (and eye read near everything you both type)
again - i think we (most of us on the 'tulip) agree on WHERE we are, its HOW we got here that is the ultimate issue

now if we might just come up with more ideas on WHAT needs to be done, would say Mr J's concern(s) - re: the usefulness of the public/free sections - could be put to rest

[shiny!]

Re: Hudson on the Piketty Phenomenon

+1
and its nice - for a change - to see you two agree on stuff.

It sure is.

again - i think we (most of us on the 'tulip) agree on WHERE we are, its HOW we got here that is the ultimate issue

People may never agree on HOW we got here. That, IMO, is what all the left/right finger pointing is about.

now if we might just come up with more ideas on WHAT needs to be done, would say Mr J's concern(s) - re: the usefulness of the public/free sections - could be put to rest

If by "what needs to be done," you mean "how to fix the broken system," we can discuss what brought us to this pass and what needs to be done 'till doomsday, but with the foxes in full control of the henhouse very few of our brilliant ideas will come to fruition.

If by "what needs to be done," you mean "how to protect ourselves and maybe even prosper in this rigged, dysfunctional system," I believe that is where EJ wants to keep the focus. That means focusing more on things as they are, not how they ought to be.

[don]

Re: Hudson on the Piketty Phenomenon

1- an understanding of how our world works, rather than a 'blind trust' of managing our personal portfolios, is not only preferable but necessary.

2- a grownup acknowledgment that the US has been the world's hegemon since '45 and is acting as any hegemon would be expected to act is the starting point of comprehension, not a regurgitation of official agitprop. Once that's acknowledged we can go forward with . . .

3- the best way to maintain and possible grow our endangered portfolios.

hey, one can dream, can't one . . . .

[vt]

Re: Hudson on the Piketty Phenomenon

Vietnam and Iraq 2 were wars we should never have gotten into. I remember well colleges shutting down quickly almost immediately after Kent State; I was in grad school in D.C.. That was the most significant nationwide college protest ever.

We agree about TECI vs. FIRE; this is a reason almost everyone is here.

The two of us (and everyone in the forum) come from different perspectives and viewpoints of how to accomplish the common goals. I feel we do agree that we want to help the middle class and the poor to reverse their decline in living standards.

Above all we have found a respect for each other amid previous understandings, and that's progress.

[vinoveri]

Re: Hudson on the Piketty Phenomenon

If by "what needs to be done," you mean "how to fix the broken system," we can discuss what brought us to this pass and what needs to be done 'till doomsday, but with the foxes in full control of the henhouse very few of our brilliant ideas will come to fruition.

Exactly.
Talk is cheap and reform ain't happenning.

If by "what needs to be done," you mean "how to protect ourselves and maybe even prosper in this rigged, dysfunctional system," I believe that is where EJ wants to keep the focus. That means focusing more on things as they are, not how they ought to be.

Just be careful. It's very easy to become an unwitting Collaborator.

[shiny!]

Re: Hudson on the Piketty Phenomenon

Just be careful. It's very easy to become an unwitting Collaborator.

For every thing there is a season...

We're all unwitting collaborators to greater or lesser extents; it's impossible not to be! If you own stocks or insurance, use Federal Reserve Notes, pay any financial service fees or interest on debt, you're playing in FIRE's playground. The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

[lektrode]

Re: Hudson on the Piketty Phenomenon

For every thing there is a season...

We're all unwitting collaborators to greater or lesser extents; it's impossible not to be! If you own stocks or insurance, use Federal Reserve Notes, pay any financial service fees or interest on debt, you're playing in FIRE's playground. The idea is to stay solvent during the death throes of the FIRE economy, then be part of the building of the TECI economy.

+1