Moneypiketty

Tue May 13, 2014, 03:24 PM

Capital in the Twenty-First Century

https://m.youtube.com/watch?t=0&v=7TLtXfZth5w   (four minute video of author)

  <- snip ->

The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.

  <- snip ->

http://www.hup.harvard.edu/catalog.php?isbn=9780674430006
Is the basic premise of the book accurate? Are we currently on a path to ever increasing economic inequality because growth of capital exceeds growth of the overall economy?

I would tend to agree. So what should be done, if anything? Piketty outlines some ideas - higher income taxes for the top brackets, higher estate/inheritance taxes, and a tax on wealth. I think raising the minimum wage and instituting a financial transactions tax would also be a step in the right direction.

(Note: I have not read the book yet - I am basing this on various articles found online. Please tell me if I got anything wrong.)

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Response to Isidore (Original post)

Tue May 13, 2014, 03:32 PM

1. Those are all pretty good ideas

to solve the problem. Won't happen, though. Not enough voters think about it deeply enough.

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Response to Isidore (Original post)

Tue May 13, 2014, 04:21 PM

2. These are good ideas, I think we should go further though.

Like a 100% tax on inheritance, a universal basic income and a job guarantee program, free housing and public colleges.

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Response to radicalifornian (Reply #2)

Tue May 13, 2014, 04:51 PM

3. I'm not sure I understand how a 100% tax on inheritance would even work.

Could you give a basic rundown of the major points? Any exemptions (persons and/or money amount)?

I find the basic income idea intriguing, there are a few countries that are doing this now, right? I wonder what, if any, studies have been done regarding before and after figures on poverty, homelessness, economic growth rates, etc.

I'm all for free education - I've seen studies say that education is one of the primary drivers of economic growth, so it actually should be a good investment.

Obviously the market is not the best resource allocator - based on how many empty homes there are while at the same time so many homeless people. Not sure free housing is a workable solution, but something definitely needs to be done.

If the financial industry in general didn't siphon off such a large portion of economic output with little to no value added, there probably wouldn't be as much of a need to constantly try to come up with solutions for basic survival with dignity.

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Response to Isidore (Reply #3)

Tue May 13, 2014, 06:09 PM

5. Probably just have the IRS inherit the assets of the deceased.

I wouldn't be opposed to certain exemptions for lower and middle income families. I would want to make sure the money is going to fund social spending on things like UBI, public education, and public housing.

Matt Bruenig has a calculator over at Demos that shows what effect a UBI of varying amounts would have on the poverty rate, and how much it would cost.
http://www.demos.org/blog/10/3/13/how-universal-basic-income-would-affect-poverty

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Response to radicalifornian (Reply #2)

Tue May 13, 2014, 06:50 PM

6. A few counterpoints

I can see two very negative consequences of a 100% tax on inheritance. First, it would lower productivity because people would work less. I'm already at a point in my life where I could buy an annuity that would comfortably pay my expenses for the rest of my life. One of the things that motivates me to continue to work on things that society values is because I know that the additional money I earn and don't use is money that those that survive me can use. Without that incentive, I will probably choose to work less and society will be less well off.

The second problem is that it would increase my consumption levels. If my money is all "use it or lose it", I'm going to spend it all on consumption. That will decrease the capital stock that provides benefits for society. Is it really better that I take more vacations to the Caribbean or that I live more frugally and save money that others can use to buy houses, equipment, etc.

Basic income seems like a good idea, but I have concerns about it as well. I certainly don't think that anyone in our wealthy society should lack the essentials in life. My concern is that the more generous you make a guaranteed income, the more of a disincentive you create for people working. Without people working, we would no longer have a wealthy society and we would all be poor. I'd prefer that we have a guaranteed income in the form of guaranteed jobs.

I'm not sure why housing should be free. Obviously, someone has to pay for it. Why not the occupier?

Free college is also problematic. First, it is hard to see how you would control price inflation for colleges if the people attending didn't have to evaluate the costs relative to the benefits. The other problem is that people who attend college earn substantially more than those who don't. Subsidizing them at the expense of people that don't attend college seems grossly unfair. I'd rather see a system that helps students finance the cost of their education but, unlike today's system, puts financial risk on the institution if the student is not able to repay their debts. My hope would be a system that would provide funding for anyone willing and able to benefit from college to secure financing but only to an extent commensurate with the financial value provided by the education.

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Response to Myriel (Reply #6)

Tue May 13, 2014, 07:43 PM

9. People working less is not necessarily a bad thing.

Last edited Wed May 14, 2014, 02:30 AM - Edit history (1)

Especially in an economy with such high unemployment. I would argue that people working less would actually be a good thing because it would free up more jobs for those who are unemployed. Increased consumption is also not a bad thing. Increased demand is good for the economy. And I would argue that the benefits of redistributing wealth more equally would far outweigh the benefits we get from a large capital stock. I agree with part of what you said about the UBI, and I am certainly in favor of a job guarantee program. But I think that both should be implemented because in my opinion people shouldn't have to work in order to provide themselves with basic necessities. The UBI should obviously be less than what you can make working, so that incentive to work is still there. And I'm not talking about luxury condos, but modest public housing should be available to anyone who cannot afford to buy or rent their own home. I'm not particularly worried about the price inflation for public colleges. Especially since, like you said, people who attend college earn substantially more than those who don't. Which means there will be a larger tax base if everyone is offered the opportunity to go to college. The government will be able to handle the inflation, I'm more worried about the students who are having to pay thousands of dollars right now. I'd like to see a system where anyone who wants to go to college will be able to do so regardless of their financial status.

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Response to radicalifornian (Reply #2)

Thu May 15, 2014, 05:18 AM

10. 100% inheritance tax is too radical for me and I think would have some unintended consequences.

However, the idea of a universal basic income is something that has intrigued me for a while.

If we had a UBI, why would we need a job guarantee program? Provided the UBI is enough for basic subsistence (and is coupled with universal health care) then people would work only if they wanted extras; things like a bigger house, cable, internet, etc.

There would be plenty of money being spent on essentials thus creating jobs, but people wouldn't absolutely need to work just to survive, so those who want to work probably wouldn't have much difficulty finding as many or as few hours of work as they needed.

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Response to Dem David (Reply #10)

Thu May 15, 2014, 03:29 PM

11. There are a few reasons why I think a JG should be implemented regardless of whether or not we have

a UBI. First off, the amount of people who would quit their jobs if we just had a UBI would probably offset the amount of new people who would be hired due to increased demand. A job guarantee program would make sure that those people who quit their bad paying jobs would be able to get good paying jobs immediately after, thus keeping the unemployment rate from going up and freeing up the jobs created by increased demand for those who are already unemployed.

Also, the job guarantee would set the labor standard. Not just in terms of wages, but also working conditions. If people are able to get good paying jobs with good working conditions, corporations would have to have equal or better pay and working conditions in order to attract employees.

And lastly, we all know that capitalism goes through natural boom/bust cycles. A permanent job guarantee would make sure that when the bust happens people who lose their jobs would easily be able to get another job instead of having to rely solely on a UBI.

I fully support UBI, but I feel like a job guarantee addresses some concerns that a UBI alone is unable to solve.

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Response to Isidore (Original post)

Tue May 13, 2014, 05:32 PM

4. Ever play Monopoly?

It's a simple simulation of an unregulated, free market, capitalist economy.

One player eventually ends up with all of the assets and cash, while the other players eventually go broke. Every time.

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Response to Isidore (Original post)

Tue May 13, 2014, 06:53 PM

7. The biggest criticism...

that I've seen of his book so far is that his basic equation is flawed because it assumes that capital is always accumulated and never consumed. Once you factor in the inevitable spending of capital on consumption, it is no longer true that the wealthy accumulate wealth faster than the economy grows.

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Response to Myriel (Reply #7)

Tue May 13, 2014, 07:41 PM

8. I think the criticism is flawed....

In order to save money one must have more than one needs for the basics of life. That savings is 'capital accumulation'. One must accumulate capital in order o become wealthy. The economy is not growing anywhere near what the richest are earning just for waking up in the morning. I think the critics saying he's wrong simply don't want people to know how badly they have been screwed and will continue to be screwed. Last summer I read "Capitalism: A Structural Genocide" by Garry Leech. Quite revealing.

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