tag:blogger.com,1999:blog-582368152716771238.post292525500661395129..comments2024-03-18T07:59:05.430-05:00Comments on The Grumpy Economist: Why and how we care about inequalityJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger93125tag:blogger.com,1999:blog-582368152716771238.post-84225622415896747552018-05-15T23:38:25.003-05:002018-05-15T23:38:25.003-05:00An insightful update on who is trying to Keep Up W...An insightful update on who is trying to Keep Up With the Joneses:<br /><br />"the gap between the top 1% and the next 9% has increased... Why should the concerns of these people over index so dramatically in the public consciousness? It is because these are exactly the people – that is, those who are in the top 10% but not in the top 1% of earners – who write our newspapers, run the civil service, occupy professorships at our universities, and ultimately those who go into politics. Their intuition – no more than a gut feeling, cchanneled by a mixture of confirmation bias and hubris – is post-hoc rationalised into an ‘urgent’ issue that must be addressed by ‘society’."<br /><br />http://quillette.com/2018/05/11/elites-inequality-rise-fall-managerial-class/Andrew Friedmanhttps://www.blogger.com/profile/03367947221786101429noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-60318211459284512362014-12-25T01:33:52.601-06:002014-12-25T01:33:52.601-06:00The saviors of worthless have never been severely ...The saviors of worthless have never been severely punished and as a result their rhetoric keeps growing. In reality Picketty-ism is Marxism in disguise.<br /><br />When are the rich going to initiate a brutal backlash on these saviors of the worthless ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51983964292788377272014-12-20T15:04:25.380-06:002014-12-20T15:04:25.380-06:00I have been thinking about this post for a while n...I have been thinking about this post for a while now. The most basic economic problem is determining "values". In a market, relative prices capture these values and coordinate the economic activity by equating marginal costs and benefits. <br />If prices capture the economic value of activities, it is not far fetched to imagine that income/wealth, at least partially, captures (correlated with) the economic-social values of individuals. (From neuroscience, we have some idea that a good part of a person identity and self-value comes from his/her social connections/status.) In an economy with high level of income-wealth inequality, the system is giving (imperfect) signals to a lot of its members that they are worthless: 1 percent of the population is equal in worth to another 40%, for example. A "Bill Gates" has a value equal to millions of low wage workers.<br /><br />Does this intuitive argument make any sense to you? Most people feel intuitively that something is wrong with high inequality .... I tried to make it a little more economic :)Reza Mahanihttps://www.blogger.com/profile/07341891132329892562noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-60235497452441879992014-11-24T22:20:47.677-06:002014-11-24T22:20:47.677-06:00That is assuming government benefits have risen si...That is assuming government benefits have risen significantly in the last fifteen years even taking into account the Clinton are welfare reform.John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27535831637980163132014-11-24T22:15:57.796-06:002014-11-24T22:15:57.796-06:00"If you believe cronyism is the problem, why ..."If you believe cronyism is the problem, why is the first item on your agenda not to repeal the Dodd Frank act and Obamacare, surely two of the biggest invitations to cronyism of our lifetimes?" <br /><br />Regarding repealing Obamacare, wasn't US health care extremely problematic before the law was even passed? Health spending in the US has been rising above that of Europe since the 1908's and the government subsidizing nearly half of all health spending. Government health research spending barely makes up any of this, so I would personally say that leaving the system as it is for the case research hardly makes a reason for a broken system to remain. After the relative success of health systems with more state control (at least compared to the mess in the US), shouldn't that be a logical alternative to our old system. <br /><br />Maybe repealing Obamacare would be a good idea simply because of the high costs of its inspiration: the Swiss system. But, doesn't the low cost of Canada's single payer system, or even France's system that, while being high compared to other countries, would involve a serious reduction in health expenditure in the US. <br /><br />There are other obvious reasons for health reform in the United States mostly regarding our rather appalling infant mortality rate and comparatively low life expectancy. John Handleyhttps://www.blogger.com/profile/16057855086740377031noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-44941553729060729102014-11-21T07:40:10.929-06:002014-11-21T07:40:10.929-06:00Your assumption reveals your bias.
If, say, Thoma...Your assumption reveals your bias. <br />If, say, Thomas Sowell drew a large crowd, would you dis them as lazy as well?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6873850368832230612014-10-30T21:00:04.863-05:002014-10-30T21:00:04.863-05:00" I view the Affordable Care Act as a decent ..." I view the Affordable Care Act as a decent attempt to repair the social safety net"<br /><br />When it is government action that a) increases the need for safety net via a drag on the economy, incentives against employment, costs imposed on small business, and government action that b) endangers the life of the existing safety net programs by reckless overspending, then no, there is nothing decent about the ACA "attempt". As more of the same, it is about the acquisition of power in government. Falstaffhttps://www.blogger.com/profile/06865552505521389155noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-58970990501051855392014-10-20T15:35:27.118-05:002014-10-20T15:35:27.118-05:00There are valid reasons to tax the wealthy more he...There are valid reasons to tax the wealthy more heavily than the 95% and financial regulations based in protection from speculation. When taxes on the wealthy are too low they are far less careful in the ways they invest their money which leads to speculation. Our economic history is filled with boom and bust cycles with the two largest being the stock markets of the 1920's and the millennium era. Both of these eras have two things in common that lead to the economic disasters that followed. The lowest marginal income tax rates since WWI and either non existence or reductions in financial regulations. Both eras had marginal tax rates below 40%. The 20's had very little regulation of the financial sector and the early 2000's saw the deregulation of rules that prevented another depression for nearly 80 years. A 40% marginal tax rate based on an income devoid of loop holes on the top 5% and implementation of Dodd Frank would make a much stronger economy. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-85925602762143269452014-10-13T16:30:31.717-05:002014-10-13T16:30:31.717-05:00There is one type of government intervention that ...There is one type of government intervention that has led to greater inequality that is missing from this article: Fed policy. The latter to a great extent is explained by financial gigantism. A financial sector that accounts for 7 or 8% of GDP is clearly inefficient. The Greenspan Put was a massive subsidy to hedge funds and private equity funds. Combined with high leverage it created a massive asymmetric bet, i.e. a free optionAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87274300920522859602014-10-13T10:29:32.709-05:002014-10-13T10:29:32.709-05:00Thanks for posting the article, its been eye openi...Thanks for posting the article, its been eye opening. However I don't think the solutions to inequality are as plain and simple as you laid out Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-91421851432884433872014-10-11T01:07:31.069-05:002014-10-11T01:07:31.069-05:00It's not useful to read too much into the word...It's not useful to read too much into the word inequality. A lot of the concern with inequality is actually concern about poverty. <br /><br />Inequality has broader appeal than poverty as few people identify themselves as being part of the poor. So if a politician talks about dealing with poverty, much of what he says will fall on deaf ears. If he talks about inequality, the middle classes will listen as well. <br /><br />You can argue inequality itself isn't a problem. But you can't argue poverty - and it's brother, unemployment - is not. <br /><br />In America, we can talk about poor schools, drug laws, and so on as some of the structural problems contributing to our poverty right now. But that fails to explain the trend among developed nations of high or rising unemployment and stagnant wage growth.<br /><br />We have to be realistic with the possibility that because we have such incredible productivity growth, we simply have an excess supply of labor, particularly in developed countries. The evidence is there, one farmer with some equipment today creates enough food for thousands. Facebook serves billions of people and has only 7 thousand employees. We are all limited in our consumption by time, not only money; we eat only a few meals per day, we have only so much free time to spend on X number of activities. <br /><br />Right now, due to political and social problems we still have people dying of starvation. But when those people are finally integrated into the modern global economy and are well fed and well housed, what then? How will they earn INCOME when all that they consume is produced via such a high productivity multiplier that there is no room for them in labor market.<br /><br />Of course, if supply is exceeding demand, prices should fall until a new equilibrium is reached. Except, people are not a commodity, they are differentiated by their skill. So what is happening is that those who are skilled (e.g. computer programmers) are employed and highly paid. And those who are unskilled are either eating ramen noodles in the cold, or selling drugs on the corner.<br /><br />Suppose we ignore the fact that it is nigh impossible to convert the unskilled population, particularly older, unskilled population to skilled, we will still likely have an excess supply problem. The idea is that if we took only 10% of the people who are unemployed, impoverished, and/or incarcerated (globally) and trained them to be skilled in the most in-demand professions of today (programming, petroleum engineering and so on), all we may achieve would be to reduce those wages down to the median wage, and still leave 90% of the rest eating ramen without any healthcare.<br /><br />I have no idea how to address this problem. Forceful income redistribution is not a credible, sustainable solution, I agree. In the far future, say 150 years from now, the entire world population may possibly be skilful enough to command an average wage, but I find it unlikely we'll have a very low unemployment rate. Can we ever reach global perfect equilibrium in the labor market? And if we can, can we do that while having the wages be sufficient to live modestly - and pay for health costs as well?<br /><br />Maybe we can. I hope so. One thing is certain, capital will still accumulate wherever it is. Those that have sufficient capital working for them, don't have to work. And the more capital they have, the more capital they accumulate. Working for a median or even above median wage, even with a high savings rate, takes decades to acquire enough capital to live off of. And so we will have inequality, that is not going to change. This perhaps not in itself problem. But if the answer to the two questions above are NO, then we might be compelled to find ways to incentivize capital to flow more easily to the working population.saltnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87073395376402336342014-10-05T09:39:46.431-05:002014-10-05T09:39:46.431-05:00Inequality. Such loaded concept! May I respectfull...Inequality. Such loaded concept! May I respectfully suggest you read the excellent research on the topic by Princeton Economist Marc Fleurbaey. In particular, I recommend his 2011 Econometric Society Monograph 'A Theory of Fairness and Social Welfare,' written jointly with Francois Maniquet.<br /><br />He and others work on the development of a language that people from 'the left' and from 'the right' can use and discuss the kinds of inequalities that 'deserve' correction and the extent to which they shall be corrected. The starting point is always to identify what people have a right to. In an exchange economy, for example, the individuals may have a right to consume the 'equal split' of the aggregate endowment, they may have a right to trade the equal split of the aggregate endowment, or they may have a right to consume/trade their individual endowments. The same framework for policy evaluation will lead to different measurements for inequality, and different recommended policies, depending on one's starting point in regards to 'who has the right to what.' <br /><br />This topic cannot be depoliticized, but it can be studied in a systematic way when we have a disciplined language in which to make explicit our assumptions about what is and ought to be, just like in the rest of Economics.Eduardo Zambranohttp://calpoly.edu/~ezambrannoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-83314739575331002322014-10-04T22:35:48.062-05:002014-10-04T22:35:48.062-05:00But when people are selfish, how can we expect the...But when people are selfish, how can we expect them to behave ethically. Even in democracy the people who can make laws, if something effects their selfish interest why would them do it. Eg. corruption is one of most important factor for inequality, but why would politicians will make strong laws when they themselves involved in corruption. If someone is beneficiary of manipulation of a rule, he has no (selfish) interest to make rule which can't be manipulated. <br />Simple point is when people can(means have power to) manipulate the system and if it gives them selfish benefit, they will do it (what else would you expect from a species which is genetically selfish). <br />So if solution is not the ones like honest govt, ethical population etc its what a solution to lead to. The real solution is how to achieve it, what laws or mechanism should be put in place so that even selfish people finds it in their selfish interest to behave honestly. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-89301134109357928212014-10-04T11:34:21.936-05:002014-10-04T11:34:21.936-05:00You are right under the premise that life should b...You are right under the premise that life should be nice and easy. Give me one reason, moral, economic, political or any other that this is true. Your dirty shot that Prof. Cochran talks from the perspective of someone having “a job protected by life time tenure” and that as such he does not “acknowledge the difficulties that free markets bring to many workers the way “ misses the basic fact that Prof. Cochran did not get his tenure as a gift from anyone. Everyone, has an equal chance to master profession of his or her choosing. I know people without college education, with professions as car mechanic, cook, carpenter, truck driver who are simply good in their profession and maintain a solid middle class lifestyle, despite the recession. As someone who hired and fired employers, I can assure you that the free market is very bad for bad workers. Henryk A. Kowalczykhttp://www.henrykkowalczyk.comnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3709631526163940792014-10-04T11:13:34.645-05:002014-10-04T11:13:34.645-05:00I lived a meaningful part of my adult life in the ...I lived a meaningful part of my adult life in the socialistic country. There were plenty of innovative people willing to offer their ideas even if not being able “to keep most of the fruits of their innovation.” There was lack of capital and their inventions disturbed the blissful marasmus of the government bureaucracy. Henryk A. Kowalczykhttp://www.henrykkowalczyk.comnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-18840869276035420822014-10-03T17:04:23.888-05:002014-10-03T17:04:23.888-05:00The market competition that we are witnessing toda...The market competition that we are witnessing today is like an athletic race: some citizens, well fed and accessing health and education systems are far ahead; most of the others are left unjustly behind: the fair and decent minimum that can be done is to put them all on the same line of departure, giving equal opportunities at the beginning.Ronaldo Campos Carneirohttps://www.blogger.com/profile/02150892704337221694noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-83623478971097656222014-10-03T13:42:05.380-05:002014-10-03T13:42:05.380-05:00i read mencken on veblen. that "geyser of pis...i read mencken on veblen. that "geyser of pishposh" :)Anonymoushttps://www.blogger.com/profile/02667467783925318118noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-57196223309178199012014-10-02T06:38:28.566-05:002014-10-02T06:38:28.566-05:00People who think inequality is a problem are break...People who think inequality is a problem are breaking the 10th commandment. Governments that reduce inequality are breaking the 8th commandment. These are manifestations of an immoral society.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41134002887607192072014-10-01T15:30:21.022-05:002014-10-01T15:30:21.022-05:00Ditto manfred, we need to hear people with ideas. ...Ditto manfred, we need to hear people with ideas. This is an essential part of voters making informed decisions. How many people don't want to hear about the associated risks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-82688023385804848402014-10-01T15:02:38.786-05:002014-10-01T15:02:38.786-05:00The struggle for equality (equal treatment under t...The struggle for equality (equal treatment under the law) began with this country's founding.<br /><br /> "No taxation without representation"<br /><br />Politics has economics beat by about 200 years in this case.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3046596440733302482014-10-01T14:33:51.231-05:002014-10-01T14:33:51.231-05:00An honest and ethical population to work with is t...An honest and ethical population to work with is the most important factor.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-44453710170127077882014-10-01T13:49:13.299-05:002014-10-01T13:49:13.299-05:00I let the snarky comment in, because the table is ...I let the snarky comment in, because the table is truly intreresting. Art history is about the middle of the pack! But, let's not follow the usual NY times jump to conclusions. The fact that 5.9% of art history majors make it into the 15, does not mean that if you choose to major in art history rather than computer science, you have a 5% chance of making it to the 1%. The returns to education is not the same thing as income of majors. For example, it could well be that ne'er do well scions of wealth go in to art history, and live off their 1% inheritances, rather than your implication that there are some great $500k jobs out there in art history. <br />How did we get on this? I actually love art history. Sorry for picking on it. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-16814972129527375212014-10-01T13:40:56.738-05:002014-10-01T13:40:56.738-05:00" I’m all for art history. Just don’t pretend..." I’m all for art history. Just don’t pretend that the measured economic returns to education will apply." How about you try not pretending that you've actually looked at the measured economic returns to art history? http://economix.blogs.nytimes.com/2012/01/18/what-the-top-1-of-earners-majored-in/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1<br />Larry Rothfieldhttps://www.blogger.com/profile/02625303509257924190noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19149836825116036322014-10-01T12:26:44.249-05:002014-10-01T12:26:44.249-05:00Inequality is a very old topic for economists. It&...Inequality is a very old topic for economists. It's in your textbook. The returns to skill literature is 30 years old. Inequality is a very new hot topic in politics. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77190947901591995982014-10-01T12:16:57.024-05:002014-10-01T12:16:57.024-05:00Hi Prof:
I'm glad you posted this, because we...Hi Prof:<br /><br />I'm glad you posted this, because we need to start talking about this. I agree with much of what you say regarding people's motivations, but here are some key points:<br /><br />1. Inequality appears to be a new topic for economists. Let's acknolwedge that and dive in and investigate before developing a policy opinion.<br /><br />2. Inequalty is a suboptimal division of wealth. Given declining marginal utility to wealth, a state with any inequality is sub-optimal. (You gotta agree with that, right? That's why we like competitive markets...right?)<br /><br />3. BUT, to motivate people, we need the prospect of inequality.<br /><br />4. So, here we have a dlillema: we must balance an optimal division of wealth, with the prospect of inequality as a reward for a good job. In otherwords, we like equality of wealth, but inequality of income - a paradox.<br /><br />5. r>g, because people only invest in companies with higher than global growth expectations. (ie: my uncle's loser start-up isn't in the S&P 500) <br /><br />6. Money's ability to be used to secure a further advantage increases the value of all money, and should foster increased motivation.<br /><br />7. Some new economic thinking is required to defnine the optimal balance between unequal income and equal wealth.Fish Goldsteinhttps://www.blogger.com/profile/13864053986442147618noreply@blogger.com