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Thomas Piketty-Thoughts from DDO econophiles?

proglib
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4/20/2014 11:54:00 AM
Posted: 2 years ago
Taking on Adam Smith (and Karl Marx)

By STEVEN ERLANGERAPRIL 19, 2014
http://www.nytimes.com...

Read a good bit of this with breakfast, and enjoyed the concept of a very intelligent economist who recognizes both the value of private property and the complexities/difficulties of capitalism in a democratic society.

I'm very much a dilettante when it comes to economics, and would love to hear more informed folks' opinions on this gentleman and his book (which I haven't read, since I only heard of him and it this morning.:)
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
wrichcirw
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4/20/2014 6:14:25 PM
Posted: 2 years ago
Interesting "coffee-table" thread, if I may say so, lol.

I've taken a course with Prof Saez...a lot of the students in the class recognized him as a future Nobel laureate in the field of public economics. Berkeley is very keen on socialistic economic policy with a gigantic focus on the Gini coefficient in every course.

IMHO the focus is wrong-headed. This isn't against Saez or this book (which I haven't read) but more against the goal of achieving income equality. In any meritocratic society, the logical conclusion is that such a society would experience pronounced income inequality, and that this is a good thing because it rewards the high-achievers (it wouldn't be a meritocracy if it didn't).

The key IMHO to making such a system work is to establish a safety net where people at the bottom are not threatened with their lives for not being at the high end of the spectrum. If this can be established, and Pareto efficiency maintained (i.e. as long as no one is worse off, any economic improvement is good, even if only the rich benefit from it), then income inequality should not even factor in as a problem to be solved. The idea is that if you want to better your lot in life, work for it - otherwise, be content that your existence will not be threatened by the self-interests of others.

In the past, this wasn't possible. You couldn't provide a safety net because things like famines, catastrophic droughts, and plagues were common, so income inequality minus a safety net led to riots and rebellions. Now, with modern technology resulting in more materialistic stability, we really can establish such, where people do not need to fear for their lives if they find themselves out of a livelihood (theoretically of course) - this is the result of the material abundance provided by advanced capitalism, exactly as per Marx's theories. IMHO this is the next step in human development...figuring out how exactly to go about providing a safety net while maintaining the "golden goose" that is capitalism.

In this sense, I don't agree with Marx that there is an "end" to capitalism. I see establishing a viable safety net afforded by advanced capitalism as the solution to the various ailments that Marx pointed out that were resultant from capitalism, and that capitalism can and should continue on. I mean, much of what Marx calls "capitalism" has always been with us and is integral to any merchant, and merchants have been around for most of human history. M-C-M is a case in point...this is a central observation that Marx made on the nature of what he labeled the current state of dialectical materialism (i.e. the most modern state of human development)...but this is elementary for any market trader, whether it be the stock market or the grocery market.

I think what Marx was observing was the marriage of the primacy of the merchant class with the advents of industrialism, which led to unexpected horrors for the working class. He called this advent "capitalism", and saw it as being a huge engine of overall growth while simultaneously marginalizing the working class to the point of dehumanization. The solution to the latter IMHO is not to follow Marx's advice and destroy capitalism while replacing it with socialism, but to apply the benefits of capitalism in a manner that would ensure the marginalized are not dehumanized. In this sense, I'm for some redistribution, but not for the sake of achieving total equality, which in my view would destroy "capitalism", an undesirable outcome.

---

I didn't see anything in the article that suggested that the author addressed the other key aspect of Marxism, that being "unjust" power relations that surrounded the origination of "capitalism" (i.e. seizing of the enclosures), which from what little I can tell future Marxist scholars really focused upon. That's an entirely different can of worms...that's probably the more political aspect of Marx's philosophy, and it seems the article focused mainly upon the economics.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
proglib
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4/20/2014 11:28:13 PM
Posted: 2 years ago
At 4/20/2014 6:14:25 PM, wrichcirw wrote:
Interesting "coffee-table" thread, if I may say so, lol.

I've taken a course with Prof Saez...a lot of the students in the class recognized him as a future Nobel laureate in the field of public economics. Berkeley is very keen on socialistic economic policy with a gigantic focus on the Gini coefficient in every course.

IMHO the focus is wrong-headed. This isn't against Saez or this book (which I haven't read) but more against the goal of achieving income equality. In any meritocratic society, the logical conclusion is that such a society would experience pronounced income inequality, and that this is a good thing because it rewards the high-achievers (it wouldn't be a meritocracy if it didn't).

The key IMHO to making such a system work is to establish a safety net where people at the bottom are not threatened with their lives for not being at the high end of the spectrum. If this can be established, and Pareto efficiency maintained (i.e. as long as no one is worse off, any economic improvement is good, even if only the rich benefit from it), then income inequality should not even factor in as a problem to be solved. The idea is that if you want to better your lot in life, work for it - otherwise, be content that your existence will not be threatened by the self-interests of others.

In the past, this wasn't possible. You couldn't provide a safety net because things like famines, catastrophic droughts, and plagues were common, so income inequality minus a safety net led to riots and rebellions. Now, with modern technology resulting in more materialistic stability, we really can establish such, where people do not need to fear for their lives if they find themselves out of a livelihood (theoretically of course) - this is the result of the material abundance provided by advanced capitalism, exactly as per Marx's theories. IMHO this is the next step in human development...figuring out how exactly to go about providing a safety net while maintaining the "golden goose" that is capitalism.

In this sense, I don't agree with Marx that there is an "end" to capitalism. I see establishing a viable safety net afforded by advanced capitalism as the solution to the various ailments that Marx pointed out that were resultant from capitalism, and that capitalism can and should continue on. I mean, much of what Marx calls "capitalism" has always been with us and is integral to any merchant, and merchants have been around for most of human history. M-C-M is a case in point...this is a central observation that Marx made on the nature of what he labeled the current state of dialectical materialism (i.e. the most modern state of human development)...but this is elementary for any market trader, whether it be the stock market or the grocery market.

I think what Marx was observing was the marriage of the primacy of the merchant class with the advents of industrialism, which led to unexpected horrors for the working class. He called this advent "capitalism", and saw it as being a huge engine of overall growth while simultaneously marginalizing the working class to the point of dehumanization. The solution to the latter IMHO is not to follow Marx's advice and destroy capitalism while replacing it with socialism, but to apply the benefits of capitalism in a manner that would ensure the marginalized are not dehumanized. In this sense, I'm for some redistribution, but not for the sake of achieving total equality, which in my view would destroy "capitalism", an undesirable outcome.

---

I didn't see anything in the article that suggested that the author addressed the other key aspect of Marxism, that being "unjust" power relations that surrounded the origination of "capitalism" (i.e. seizing of the enclosures), which from what little I can tell future Marxist scholars really focused upon. That's an entirely different can of worms...that's probably the more political aspect of Marx's philosophy, and it seems the article focused mainly upon the economics.

wrichcirw ,

This is why I enjoy DDO--especially the forums!

Thanks for your analysis.

I don't know much about Piketty, but I would hope that he could agree with you in principle that some inequality is inevitable and a motivation for creativity and production. (Hopefully I understood you correctly and didn't misstate too severely.)

[from the Times article] "This sort of vaccinated me for life against lazy, anticapitalist rhetoric, because when you see these empty shops, you see these people queuing for nothing in the street," [Piketty] said, "it became clear to me that we need private property and market institutions, not just for economic efficiency but for personal freedom."

Of course, whether folks who have the bare minimum are willing to "survive," and how far from death they need to be to not rebel is a gray area subject to debate. And that is where concerns about inequality and social stability are more difficult to work out, I think.

Lastly and briefly: For me, and perhaps many of the "99%" (to use a cliche as shorthand), I really don't care how many jets or islands or castles the "1%" (or 10% or whatever) own, if I'm able to earn a decent living until I can't, and then have enough for a more modest living, but still housed and fed safely.
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
wrichcirw
Posts: 11,196
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4/21/2014 4:48:44 AM
Posted: 2 years ago
At 4/20/2014 11:28:13 PM, proglib wrote:
At 4/20/2014 6:14:25 PM, wrichcirw wrote:
Interesting "coffee-table" thread, if I may say so, lol.

I've taken a course with Prof Saez...a lot of the students in the class recognized him as a future Nobel laureate in the field of public economics. Berkeley is very keen on socialistic economic policy with a gigantic focus on the Gini coefficient in every course.

IMHO the focus is wrong-headed. This isn't against Saez or this book (which I haven't read) but more against the goal of achieving income equality. In any meritocratic society, the logical conclusion is that such a society would experience pronounced income inequality, and that this is a good thing because it rewards the high-achievers (it wouldn't be a meritocracy if it didn't).

The key IMHO to making such a system work is to establish a safety net where people at the bottom are not threatened with their lives for not being at the high end of the spectrum. If this can be established, and Pareto efficiency maintained (i.e. as long as no one is worse off, any economic improvement is good, even if only the rich benefit from it), then income inequality should not even factor in as a problem to be solved. The idea is that if you want to better your lot in life, work for it - otherwise, be content that your existence will not be threatened by the self-interests of others.

In the past, this wasn't possible. You couldn't provide a safety net because things like famines, catastrophic droughts, and plagues were common, so income inequality minus a safety net led to riots and rebellions. Now, with modern technology resulting in more materialistic stability, we really can establish such, where people do not need to fear for their lives if they find themselves out of a livelihood (theoretically of course) - this is the result of the material abundance provided by advanced capitalism, exactly as per Marx's theories. IMHO this is the next step in human development...figuring out how exactly to go about providing a safety net while maintaining the "golden goose" that is capitalism.

In this sense, I don't agree with Marx that there is an "end" to capitalism. I see establishing a viable safety net afforded by advanced capitalism as the solution to the various ailments that Marx pointed out that were resultant from capitalism, and that capitalism can and should continue on. I mean, much of what Marx calls "capitalism" has always been with us and is integral to any merchant, and merchants have been around for most of human history. M-C-M is a case in point...this is a central observation that Marx made on the nature of what he labeled the current state of dialectical materialism (i.e. the most modern state of human development)...but this is elementary for any market trader, whether it be the stock market or the grocery market.

I think what Marx was observing was the marriage of the primacy of the merchant class with the advents of industrialism, which led to unexpected horrors for the working class. He called this advent "capitalism", and saw it as being a huge engine of overall growth while simultaneously marginalizing the working class to the point of dehumanization. The solution to the latter IMHO is not to follow Marx's advice and destroy capitalism while replacing it with socialism, but to apply the benefits of capitalism in a manner that would ensure the marginalized are not dehumanized. In this sense, I'm for some redistribution, but not for the sake of achieving total equality, which in my view would destroy "capitalism", an undesirable outcome.

---

I didn't see anything in the article that suggested that the author addressed the other key aspect of Marxism, that being "unjust" power relations that surrounded the origination of "capitalism" (i.e. seizing of the enclosures), which from what little I can tell future Marxist scholars really focused upon. That's an entirely different can of worms...that's probably the more political aspect of Marx's philosophy, and it seems the article focused mainly upon the economics.

wrichcirw ,

This is why I enjoy DDO--especially the forums!

Thanks for your analysis.

I don't know much about Piketty, but I would hope that he could agree with you in principle that some inequality is inevitable and a motivation for creativity and production. (Hopefully I understood you correctly and didn't misstate too severely.)

[from the Times article] "This sort of vaccinated me for life against lazy, anticapitalist rhetoric, because when you see these empty shops, you see these people queuing for nothing in the street," [Piketty] said, "it became clear to me that we need private property and market institutions, not just for economic efficiency but for personal freedom."

lol, this "lazy anticapitalist rhetoric" permeates Berkeley, as I'm sure you're aware.

Of course, whether folks who have the bare minimum are willing to "survive," and how far from death they need to be to not rebel is a gray area subject to debate. And that is where concerns about inequality and social stability are more difficult to work out, I think.

Now, here's where it becomes interesting, IMHO. In this envisioned, safety-net meritocracy, these people who have the bare minimum subsist because they don't want to pursue any goals.

A rebellion involves a goal, so those who are comfortable with subsistence would not be motivated by such goal setting, lol.

IMHO equating inequality with social instability is only relevant when that safety net doesn't exist. If the safety net is there and is viable, then inequality would not result in social instability.

Lastly and briefly: For me, and perhaps many of the "99%" (to use a cliche as shorthand), I really don't care how many jets or islands or castles the "1%" (or 10% or whatever) own, if I'm able to earn a decent living until I can't, and then have enough for a more modest living, but still housed and fed safely.

Aye, I think this is great conception of what a meritocratic, advanced-capitalistic society should strive for.

I've posted my own conception of a safety net a couple times on this forum...lemme see if I can find it...ah, here it is (I had to actually look through Roy's posts, lol...I post here too much http://www.debate.org...)...Roy thought it was so draconian as to even exceed most conservatives' demands for entitlement cuts)
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
wrichcirw
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4/21/2014 4:52:17 AM
Posted: 2 years ago
Just to flesh out my logic, providing a safety net would strengthen the hand of a laborer's bargaining position when determining wage levels in the labor market, as they no longer are forced into working for survival, which is a form of slavery, IMHO.

Such a situation would ameliorate any concerns that may come up from my suggestion (in the other thread) about eliminating the minimum wage once my conception is implemented.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
slo1
Posts: 4,341
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4/24/2014 7:24:38 AM
Posted: 2 years ago
I don't think I can address the merits of his economic theories, but there are huge relevant political and societal repercussions that are on the horizon.

Excerpt from the article:

Mr. Piketty has thrown down a challenge to democratic governments to deal with an increasing gap between the rich and the poor " the very theme of inequality that recently moved both Pope Francis and President Obama to warn of its consequences.

My comments:

1. The increase in the wealth gap in western nations can't continue indefinitely. There comes a point where the wealth held by the top X % starts having political, economic, and societal repercussion that something will happen whether it is legislation, coup, or something else.

2. The top X% receive a larger benefit with the protection of their wealth than the lower X%. Not even only because the rules are different between the groups, but simply because the top X% actually have property and money that needs protection.

3. It would behoove the top X% to understand at what point does there become significant headwinds forcing a redistribution of their wealth and they should support policy that avoids that. IE: Maybe it is better to give away 20% on capital gains now than it is to have x party take control and raise capital gains tax to 50%. The collective promoted policy is to have taxes as low as possible rather than trying to define what is viable long term.

The days of spending huge amounts of money to put people in office who have political positions that protect the top 10%'s money from being over taxed will at some point be a losing strategy. Like I said the wealth gap can not increase indefinitely without any type of repercussions and eventual major redistribution event.
proglib
Posts: 391
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4/25/2014 1:11:12 AM
Posted: 2 years ago
At 4/24/2014 7:24:38 AM, slo1 wrote:
I don't think I can address the merits of his economic theories, but there are huge relevant political and societal repercussions that are on the horizon.

Excerpt from the article:

Mr. Piketty has thrown down a challenge to democratic governments to deal with an increasing gap between the rich and the poor " the very theme of inequality that recently moved both Pope Francis and President Obama to warn of its consequences.

My comments:

1. The increase in the wealth gap in western nations can't continue indefinitely. There comes a point where the wealth held by the top X % starts having political, economic, and societal repercussion that something will happen whether it is legislation, coup, or something else.

2. The top X% receive a larger benefit with the protection of their wealth than the lower X%. Not even only because the rules are different between the groups, but simply because the top X% actually have property and money that needs protection.

3. It would behoove the top X% to understand at what point does there become significant headwinds forcing a redistribution of their wealth and they should support policy that avoids that. IE: Maybe it is better to give away 20% on capital gains now than it is to have x party take control and raise capital gains tax to 50%. The collective promoted policy is to have taxes as low as possible rather than trying to define what is viable long term.

The days of spending huge amounts of money to put people in office who have political positions that protect the top 10%'s money from being over taxed will at some point be a losing strategy. Like I said the wealth gap can not increase indefinitely without any type of repercussions and eventual major redistribution event.

Thanks for the interesting comments!

What do you think of @wrichcirw's points (if I can paraphrase) that it is not so much the size of the wealth gap as that folks at the bottom are increasingly falling through the cracks of the social safety net?

As I said, in layperson's terms, I don't much care how many islands Bill Gates may own if I have a decent chance to make a decent living and some way to securely provide for myself when I can no longer work.
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
slo1
Posts: 4,341
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4/25/2014 7:12:03 AM
Posted: 2 years ago
At 4/25/2014 1:11:12 AM, proglib wrote:
At 4/24/2014 7:24:38 AM, slo1 wrote:
I don't think I can address the merits of his economic theories, but there are huge relevant political and societal repercussions that are on the horizon.

Excerpt from the article:

Mr. Piketty has thrown down a challenge to democratic governments to deal with an increasing gap between the rich and the poor " the very theme of inequality that recently moved both Pope Francis and President Obama to warn of its consequences.

My comments:

1. The increase in the wealth gap in western nations can't continue indefinitely. There comes a point where the wealth held by the top X % starts having political, economic, and societal repercussion that something will happen whether it is legislation, coup, or something else.

2. The top X% receive a larger benefit with the protection of their wealth than the lower X%. Not even only because the rules are different between the groups, but simply because the top X% actually have property and money that needs protection.

3. It would behoove the top X% to understand at what point does there become significant headwinds forcing a redistribution of their wealth and they should support policy that avoids that. IE: Maybe it is better to give away 20% on capital gains now than it is to have x party take control and raise capital gains tax to 50%. The collective promoted policy is to have taxes as low as possible rather than trying to define what is viable long term.

The days of spending huge amounts of money to put people in office who have political positions that protect the top 10%'s money from being over taxed will at some point be a losing strategy. Like I said the wealth gap can not increase indefinitely without any type of repercussions and eventual major redistribution event.

Thanks for the interesting comments!

What do you think of @wrichcirw's points (if I can paraphrase) that it is not so much the size of the wealth gap as that folks at the bottom are increasingly falling through the cracks of the social safety net?

As I said, in layperson's terms, I don't much care how many islands Bill Gates may own if I have a decent chance to make a decent living and some way to securely provide for myself when I can no longer work.

That is true to a point, but that was my point. There is a point where it becomes not true and it would behoove the rich to understand where that point exists. (Got the point? I think I just poked my eye on all the "points" when reading that)

The fundamental problem with that is the reason why it can not continue to grow indefinitely.
- Money supply is finite.
- The more money in fewer peoples hands is less money in the rest of the peoples hands.
- Expanding the money supply = inflation.

The standard argument against the above is that rich people don't put there money in the mattress, they "invest" it. It then gets to trickle down to the people.

- There is some truths to that. However an expanding wealth gap just fosters greater barriers to entry into entrepreneurship, less competition, etc. Once it reaches critical mass it can cause economical problems. More power in less amounts of hands is never a good thing and money = power.
Aithlin
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4/26/2014 7:56:11 AM
Posted: 2 years ago
It's rather interesting that nearly all of the 1 star Amazon reviews pertaining to "Capital in the 21st Century" consisted of conservatives/libertarians calling Piketty a "Marxist," or "communist."
proglib
Posts: 391
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4/26/2014 1:29:55 PM
Posted: 2 years ago
At 4/25/2014 7:12:03 AM, slo1 wrote:
At 4/25/2014 1:11:12 AM, proglib wrote:
At 4/24/2014 7:24:38 AM, slo1 wrote:
I don't think I can address the merits of his economic theories, but there are huge relevant political and societal repercussions that are on the horizon.

Excerpt from the article:

Mr. Piketty has thrown down a challenge to democratic governments to deal with an increasing gap between the rich and the poor " the very theme of inequality that recently moved both Pope Francis and President Obama to warn of its consequences.

My comments:

1. The increase in the wealth gap in western nations can't continue indefinitely. There comes a point where the wealth held by the top X % starts having political, economic, and societal repercussion that something will happen whether it is legislation, coup, or something else.

2. The top X% receive a larger benefit with the protection of their wealth than the lower X%. Not even only because the rules are different between the groups, but simply because the top X% actually have property and money that needs protection.

3. It would behoove the top X% to understand at what point does there become significant headwinds forcing a redistribution of their wealth and they should support policy that avoids that. IE: Maybe it is better to give away 20% on capital gains now than it is to have x party take control and raise capital gains tax to 50%. The collective promoted policy is to have taxes as low as possible rather than trying to define what is viable long term.

The days of spending huge amounts of money to put people in office who have political positions that protect the top 10%'s money from being over taxed will at some point be a losing strategy. Like I said the wealth gap can not increase indefinitely without any type of repercussions and eventual major redistribution event.

Thanks for the interesting comments!

What do you think of @wrichcirw's points (if I can paraphrase) that it is not so much the size of the wealth gap as that folks at the bottom are increasingly falling through the cracks of the social safety net?

As I said, in layperson's terms, I don't much care how many islands Bill Gates may own if I have a decent chance to make a decent living and some way to securely provide for myself when I can no longer work.

That is true to a point, but that was my point. There is a point where it becomes not true and it would behoove the rich to understand where that point exists. (Got the point? I think I just poked my eye on all the "points" when reading that)

The fundamental problem with that is the reason why it can not continue to grow indefinitely.
- Money supply is finite.
- The more money in fewer peoples hands is less money in the rest of the peoples hands.
- Expanding the money supply = inflation.

The standard argument against the above is that rich people don't put there money in the mattress, they "invest" it. It then gets to trickle down to the people.

- There is some truths to that. However an expanding wealth gap just fosters greater barriers to entry into entrepreneurship, less competition, etc. Once it reaches critical mass it can cause economical problems. More power in less amounts of hands is never a good thing and money = power.

Excellent "points." (Good thing I wear glasses for reading these days--they shield my eyes from sharp objects. :)

Some of what you say requires data to back it up, of course. (True of any economic argument that purports to reflect the real world; same with mine or @wrichcirw's or Piketty's.)

I wonder if we four [can I bring Piketty in, or is that presumptious?:)] could get consensus that some inequality is a real world given, but at some point inequality could be so extreme such that even though the underclasses survive relatively "comfortably," they would become restive.

Just speaking for me, I'm not sure.

One of your points that I'm not sure I agree with is concerning the amount of money.

(As I said early in this topic, I'm pretty much an economic dilettante. It is a subject that fascinates me, but I never got much past Econ 1B, and didn't get very good grades in the few courses I took. I read a TON of econ and political econ books, especially the Austrians, who seemed to write more clearly and not go off into arcane theories that made no sense to me.)

Back to the point: to me the amount of money is a fairly arbitrary thing over time. Inflation seems to happen when more money is printed than new goods and services created. However, as we see with the price of clothing going down in real terms (I'll find the reference from today's paper later:), the real issue is how much goods and services.

Industrial societies have show an amazing ability to produce more goods and services with less labor and natural resources. The supply of goods and services is almost by definition variable both up and down with no obvious bounds. I won't say infinite, but it is definitely not a fixed pie that society distributes.

Therefore, again, for me at least, I'm not really bothered by the amount of wealth that Bill Gates for example has compared to the amount of goods and services I consume. He and people like him (Hewlett and Packard on the hardware side) are largely responsible for the fact that I am using both a good and a service that NEVER EXISTED before they (in a very large sense of entrepreneurs of the 20th and 21st century) used their brains, hard work, determination and risk-taking to create personal computers, the internet, etc.

On a social level, I admire Gates, Buffet, etc., more for realizing that it is both morally right, and in the interest of people with wealth to share some of it. However, I tend to agree with @wrichcirw, after thinking about his point that rebellion takes ambition that the lowest achievers don't have, and is distasteful to many of us in the middle that have enough for our families.

Interesting column about Piketty and inequality in last weeks NY Times by conservative Ross Douthat: http://www.nytimes.com...
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
proglib
Posts: 391
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4/26/2014 1:31:15 PM
Posted: 2 years ago
At 4/21/2014 4:52:17 AM, wrichcirw wrote:
Just to flesh out my logic, providing a safety net would strengthen the hand of a laborer's bargaining position when determining wage levels in the labor market, as they no longer are forced into working for survival, which is a form of slavery, IMHO.

Such a situation would ameliorate any concerns that may come up from my suggestion (in the other thread) about eliminating the minimum wage once my conception is implemented.

@wrichcirw

I've been taking your name in vain in responding to @slo1. Thought you might want to know. :)
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
proglib
Posts: 391
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4/26/2014 1:42:13 PM
Posted: 2 years ago
At 4/21/2014 4:48:44 AM, wrichcirw wrote:
At 4/20/2014 11:28:13 PM, proglib wrote:
At 4/20/2014 6:14:25 PM, wrichcirw wrote:
Interesting "coffee-table" thread, if I may say so, lol.

I've taken a course with Prof Saez...a lot of the students in the class recognized him as a future Nobel laureate in the field of public economics. Berkeley is very keen on socialistic economic policy with a gigantic focus on the Gini coefficient in every course.

IMHO the focus is wrong-headed. This isn't against Saez or this book (which I haven't read) but more against the goal of achieving income equality. In any meritocratic society, the logical conclusion is that such a society would experience pronounced income inequality, and that this is a good thing because it rewards the high-achievers (it wouldn't be a meritocracy if it didn't).

The key IMHO to making such a system work is to establish a safety net where people at the bottom are not threatened with their lives for not being at the high end of the spectrum. If this can be established, and Pareto efficiency maintained (i.e. as long as no one is worse off, any economic improvement is good, even if only the rich benefit from it), then income inequality should not even factor in as a problem to be solved. The idea is that if you want to better your lot in life, work for it - otherwise, be content that your existence will not be threatened by the self-interests of others.

In the past, this wasn't possible. You couldn't provide a safety net because things like famines, catastrophic droughts, and plagues were common, so income inequality minus a safety net led to riots and rebellions. Now, with modern technology resulting in more materialistic stability, we really can establish such, where people do not need to fear for their lives if they find themselves out of a livelihood (theoretically of course) - this is the result of the material abundance provided by advanced capitalism, exactly as per Marx's theories. IMHO this is the next step in human development...figuring out how exactly to go about providing a safety net while maintaining the "golden goose" that is capitalism.

In this sense, I don't agree with Marx that there is an "end" to capitalism. I see establishing a viable safety net afforded by advanced capitalism as the solution to the various ailments that Marx pointed out that were resultant from capitalism, and that capitalism can and should continue on. I mean, much of what Marx calls "capitalism" has always been with us and is integral to any merchant, and merchants have been around for most of human history. M-C-M is a case in point...this is a central observation that Marx made on the nature of what he labeled the current state of dialectical materialism (i.e. the most modern state of human development)...but this is elementary for any market trader, whether it be the stock market or the grocery market.

I think what Marx was observing was the marriage of the primacy of the merchant class with the advents of industrialism, which led to unexpected horrors for the working class. He called this advent "capitalism", and saw it as being a huge engine of overall growth while simultaneously marginalizing the working class to the point of dehumanization. The solution to the latter IMHO is not to follow Marx's advice and destroy capitalism while replacing it with socialism, but to apply the benefits of capitalism in a manner that would ensure the marginalized are not dehumanized. In this sense, I'm for some redistribution, but not for the sake of achieving total equality, which in my view would destroy "capitalism", an undesirable outcome.

---

I didn't see anything in the article that suggested that the author addressed the other key aspect of Marxism, that being "unjust" power relations that surrounded the origination of "capitalism" (i.e. seizing of the enclosures), which from what little I can tell future Marxist scholars really focused upon. That's an entirely different can of worms...that's probably the more political aspect of Marx's philosophy, and it seems the article focused mainly upon the economics.

wrichcirw ,

This is why I enjoy DDO--especially the forums!

Thanks for your analysis.

I don't know much about Piketty, but I would hope that he could agree with you in principle that some inequality is inevitable and a motivation for creativity and production. (Hopefully I understood you correctly and didn't misstate too severely.)

[from the Times article] "This sort of vaccinated me for life against lazy, anticapitalist rhetoric, because when you see these empty shops, you see these people queuing for nothing in the street," [Piketty] said, "it became clear to me that we need private property and market institutions, not just for economic efficiency but for personal freedom."

lol, this "lazy anticapitalist rhetoric" permeates Berkeley, as I'm sure you're aware.

Of course, whether folks who have the bare minimum are willing to "survive," and how far from death they need to be to not rebel is a gray area subject to debate. And that is where concerns about inequality and social stability are more difficult to work out, I think.

Now, here's where it becomes interesting, IMHO. In this envisioned, safety-net meritocracy, these people who have the bare minimum subsist because they don't want to pursue any goals.

A rebellion involves a goal, so those who are comfortable with subsistence would not be motivated by such goal setting, lol.

IMHO equating inequality with social instability is only relevant when that safety net doesn't exist. If the safety net is there and is viable, then inequality would not result in social instability.

Lastly and briefly: For me, and perhaps many of the "99%" (to use a cliche as shorthand), I really don't care how many jets or islands or castles the "1%" (or 10% or whatever) own, if I'm able to earn a decent living until I can't, and then have enough for a more modest living, but still housed and fed safely.

Aye, I think this is great conception of what a meritocratic, advanced-capitalistic society should strive for.

I've posted my own conception of a safety net a couple times on this forum...lemme see if I can find it...ah, here it is (I had to actually look through Roy's posts, lol...I post here too much http://www.debate.org...)...Roy thought it was so draconian as to even exceed most conservatives' demands for entitlement cuts)

I finally got a chance to read your conception of a safety net. Fascinating, and a worthy proposal.

As a formerly lazy young person, one who is now a somewhat less lazy almost senior citizen (depending on the age limit:), I will say that something even approaching such a concept of bare bones room and board would be a good idea, and allow the lazy (or crazy, rhyme not at first intended:) to survive until they wanted to get some ambition.

I didn't read that much of Roy's response (funny how tunnel vision bores me), but I disagree with him that it is the underclass that would stop such a proposal being adopted. Partly the underclass, but also ideologues of the right and left would get in the way, IMHO.
"I would remind you that extremism in the defense of liberty is no vice.* And let me remind you also that moderation in the pursuit of justice is no virtue." Barry Goldwater
*Except in a democracy it might lose you an election.

http://unitedwegovern.org...
wrichcirw
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4/27/2014 11:17:29 AM
Posted: 2 years ago
At 4/26/2014 1:29:55 PM, proglib wrote:
At 4/25/2014 7:12:03 AM, slo1 wrote:
At 4/25/2014 1:11:12 AM, proglib wrote:
At 4/24/2014 7:24:38 AM, slo1 wrote:
I don't think I can address the merits of his economic theories, but there are huge relevant political and societal repercussions that are on the horizon.

Excerpt from the article:

Mr. Piketty has thrown down a challenge to democratic governments to deal with an increasing gap between the rich and the poor " the very theme of inequality that recently moved both Pope Francis and President Obama to warn of its consequences.

My comments:

1. The increase in the wealth gap in western nations can't continue indefinitely. There comes a point where the wealth held by the top X % starts having political, economic, and societal repercussion that something will happen whether it is legislation, coup, or something else.

2. The top X% receive a larger benefit with the protection of their wealth than the lower X%. Not even only because the rules are different between the groups, but simply because the top X% actually have property and money that needs protection.

3. It would behoove the top X% to understand at what point does there become significant headwinds forcing a redistribution of their wealth and they should support policy that avoids that. IE: Maybe it is better to give away 20% on capital gains now than it is to have x party take control and raise capital gains tax to 50%. The collective promoted policy is to have taxes as low as possible rather than trying to define what is viable long term.

The days of spending huge amounts of money to put people in office who have political positions that protect the top 10%'s money from being over taxed will at some point be a losing strategy. Like I said the wealth gap can not increase indefinitely without any type of repercussions and eventual major redistribution event.

Thanks for the interesting comments!

What do you think of @wrichcirw's points (if I can paraphrase) that it is not so much the size of the wealth gap as that folks at the bottom are increasingly falling through the cracks of the social safety net?

As I said, in layperson's terms, I don't much care how many islands Bill Gates may own if I have a decent chance to make a decent living and some way to securely provide for myself when I can no longer work.

That is true to a point, but that was my point. There is a point where it becomes not true and it would behoove the rich to understand where that point exists. (Got the point? I think I just poked my eye on all the "points" when reading that)

The fundamental problem with that is the reason why it can not continue to grow indefinitely.
- Money supply is finite.
- The more money in fewer peoples hands is less money in the rest of the peoples hands.
- Expanding the money supply = inflation.

The standard argument against the above is that rich people don't put there money in the mattress, they "invest" it. It then gets to trickle down to the people.

- There is some truths to that. However an expanding wealth gap just fosters greater barriers to entry into entrepreneurship, less competition, etc. Once it reaches critical mass it can cause economical problems. More power in less amounts of hands is never a good thing and money = power.

Excellent "points." (Good thing I wear glasses for reading these days--they shield my eyes from sharp objects. :)

Some of what you say requires data to back it up, of course. (True of any economic argument that purports to reflect the real world; same with mine or @wrichcirw's or Piketty's.)

I wonder if we four [can I bring Piketty in, or is that presumptious?:)] could get consensus that some inequality is a real world given, but at some point inequality could be so extreme such that even though the underclasses survive relatively "comfortably," they would become restive.

Just speaking for me, I'm not sure.

I'm not sure either, and given this uncertainty, myself I'd side with the extremity not being offensive. I mean, humanity has saw it fit to label other humans gods in the past and looked upon them with admiration, so I'm guessing there is little to no limit as to how extreme the disparity could get and still result in stability.

It's a trend I've noticed a bit with people, that once someone or something is recognized as "good" there is this gigantic bandwagon effect that takes over and develops a life of its own. It works in the opposite direction as well, which IMHO is where the importance of maintaining the safety net becomes paramount.

Perhaps a question would develop as to if someone was an "unjust" recipient of a vicious "bandwagoning" cycle, how would someone escape such a cycle...that's a valid criticism, IMHO, and may indeed be an impetus for a rebellion.

So I suppose I am just saying that you're probably right, and that to account for such tendencies, some measure of opining about the alleged evils of inequality is warranted, but only for this reason, and that this reason does not dismiss the validity of a meritocratic approach.

One of your points that I'm not sure I agree with is concerning the amount of money.

(As I said early in this topic, I'm pretty much an economic dilettante. It is a subject that fascinates me, but I never got much past Econ 1B, and didn't get very good grades in the few courses I took. I read a TON of econ and political econ books, especially the Austrians, who seemed to write more clearly and not go off into arcane theories that made no sense to me.)

lol, that probably just means you don't have a grasp of the numbers, but have an excellent grasp of the theory.

Back to the point: to me the amount of money is a fairly arbitrary thing over time. Inflation seems to happen when more money is printed than new goods and services created. However, as we see with the price of clothing going down in real terms (I'll find the reference from today's paper later:), the real issue is how much goods and services.

Industrial societies have show an amazing ability to produce more goods and services with less labor and natural resources. The supply of goods and services is almost by definition variable both up and down with no obvious bounds. I won't say infinite, but it is definitely not a fixed pie that society distributes.

Fully agree with this analysis about money, inflation, and scarcity.

Therefore, again, for me at least, I'm not really bothered by the amount of wealth that Bill Gates for example has compared to the amount of goods and services I consume. He and people like him (Hewlett and Packard on the hardware side) are largely responsible for the fact that I am using both a good and a service that NEVER EXISTED before they (in a very large sense of entrepreneurs of the 20th and 21st century) used their brains, hard work, determination and risk-taking to create personal computers, the internet, etc.

On a social level, I admire Gates, Buffet, etc., more for realizing that it is both morally right, and in the interest of people with wealth to share some of it. However, I tend to agree with @wrichcirw, after thinking about his point that rebellion takes ambition that the lowest achievers don't have, and is distasteful to many of us in the middle that have enough for our families.

Interesting column about Piketty and inequality in last weeks NY Times by conservative Ross Douthat: http://www.nytimes.com...

I'll respond to the article in another post.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
wrichcirw
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4/27/2014 11:37:04 AM
Posted: 2 years ago
At 4/26/2014 1:29:55 PM, proglib wrote:
At 4/25/2014 7:12:03 AM, slo1 wrote:

Interesting column about Piketty and inequality in last weeks NY Times by conservative Ross Douthat: http://www.nytimes.com...

IMHO I found the quotes from the article to be interesting:

"Piketty himself is a social democrat who abjures the Marxist label. But as his title suggests, he is out to rehabilitate and recast one of Marx"s key ideas: that so-called "free markets," by their nature, tend to enrich the owners of capital at the expense of people who own less of it."

This is a violation of Pareto efficiency, as there is indeed an expense to some people when there is growth.

I think the idea becomes that owning capital is a risky endeavor and that divorcing capital from the person him/herself is a warranted conception. It goes back to the saying "at least you got your health," lol.

So, Pareto efficiency in the model I conceived would only apply to the safety net and not to the levels of capital one may possess.

My own conception of free market activities is that it's ridiculously vicious and is much more aggressive than most people attribute to it. Most people think it's "peaceful" but IMHO it's anything BUT peaceful...you have a buyer that wants to pay as little as possible for something (and wouldn't mind being PAID to "buy" something) and a seller that wants to get as much as possible for selling something...this is inherently conflicting and will indeed create winners and losers. The idea of the safety net then becomes that no matter how badly you lost (as long as you didn't do anything illegal), then you don't have to worry about your life being on the line.

---

"Absent another such disruption, he expects a world in which the returns to capital permanently outstrip " as they have recently " the returns to labor, and inequality rises far beyond even today"s levels. Combine this trend with slowing growth, and we face a future like the 19th-century past, in which vast inherited fortunes bestride the landscape while the middle class fractures, weakens, shrinks."

I'm also for a very high estate tax for these reasons, which may not be very practical (people would just flee the country with their wealth before they die).
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
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11/24/2014 5:13:50 PM
Posted: 2 years ago
At 4/20/2014 11:54:00 AM, proglib wrote:
Taking on Adam Smith (and Karl Marx)

By STEVEN ERLANGERAPRIL 19, 2014
http://www.nytimes.com...

Read a good bit of this with breakfast, and enjoyed the concept of a very intelligent economist who recognizes both the value of private property and the complexities/difficulties of capitalism in a democratic society.

I'm very much a dilettante when it comes to economics, and would love to hear more informed folks' opinions on this gentleman and his book (which I haven't read, since I only heard of him and it this morning.:)

I'm going to start on Piketty's Capital in the Twenty-First Century after I get done with my current book on economics. I'll let you know what my impressions amount to when I get done.
You can call me Mark if you like.