Tag Archives: inequality

Robert Skidelski

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Robert Skidelski reminds us that, if a critical mass of people is ever going to enjoy the good life, at least two things have to happen. First, the wealth we are creating has to be shared and not just horded by an elite few. And second, we have to learn to distinguish what we need from what we want, and put some limits on the latter rather than let advertisers and other brainwashers always convince us that we want more and more.

There is little echo in this narrative of the older view that machines offer emancipation from work, opening up a vista of active leisure – a theme going back to the ancient Greeks. Aristotle envisaged a future in which “mechanical slaves” did the work of actual slaves, leaving citizens free for higher pursuits. John Stuart Mill, Karl Marx, and John Maynard Keynes comforted their readers with the thought that capitalism, by generating the income and wealth needed to abolish poverty, would abolish itself, freeing mankind, as Keynes put it, to live “wisely and agreeably and well.”

Likewise, in his essay “The Soul of Man Under Socialism,” Oscar Wilde claimed that with machinery doing all the “ugly, horrible, uninteresting work,” humans will have “delightful leisure in which to devise wonderful and marvelous things for their own joy and the joy of everyone else.” And Bertrand Russell extolled the benefitsof extending leisure from an aristocracy to the whole population…

But the concept of growing abundance, articulated by Keynes and others, has been over-ridden by economists’ commitment to inherent scarcity. People’s wants, they say, are insatiable, so they will never have enough. Supply will always lag behind demand, mandating continuous improvements in efficiency and technology. This will be true even if there is enough to feed, clothe, and house the whole world. Poised between the profusion of their wants and the paucity of their means, humans have no option but to continue to “work for hire” in whatever jobs the market provides. So the day of abundance, when they can choose between work and leisure, will never arrive. They must “race with the machines” forever and ever.

February 2019 in Review

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Most frightening and/or depressing story:

Most hopeful story:

  • Here is the boringly simple western European formula for social and economic success: “public health care, nearly free university education, stronger progressive taxation, higher minimum wages, and inclusion of trade unions in corporate decision-making.” There’s even a glimmer of hope that U.S. politicians could manage to put some of these ideas into action. Seriously, I’m trying hard not to be cynical.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both:

  • We could theoretically create a race of humans with Einstein-level intelligence using in-vitro fertilization techniques available today. They might use their intelligence to create even smarter artificial intelligence which would quickly render them (not to mention, any ordinary average intelligence humans) obsolete.



where academic economics is headed

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Writing in Boston Review, Harvard Professor Dani Rodrik and others talk about how public opinion has turned against the economics profession to some extent over the last decade or so, and how academic economists are trying to engage with the issues of the day, including inequality, technological change and climate change.

  • economic history
  • behavioral economics
  • the study of culture (hmm, not sure if economists first thought of this one…)
  • wealth concentration
  • costs of climate change, and setting an appropriate carbon price
  • “concentration of important markets” (maybe this means concentration of a few firms within a given market?)
  • working class income stagnation
  • social mobility
  • empirical data analysis to test and confirm theory
  • analysis and study of institutions
  • appropriate allocation of property rights, including “intellectual property”
  • innovation, technological change, and their effects on growth and labor markets
  • money, power, and politics

They list a few “economic universals” which they think will never change: “market-based incentives, clear property rights, contract enforcement, macroeconomic stability, and prudential regulation”. Traditional topics that will probably always be studied include labor, credit, and insurance markets; tax, fiscal and monetary policy; international trade; recessions and financial crises; public goods and social insurance programs. I had to look up prudential regulation, which is basically capital requirements and limits on risk in the banking sector.

socialism, capitalism, and inequality

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This article on History News Network sums it up pretty well. Socialism doesn’t work well when it means an authoritarian government controlling all aspects of the economy in the name of “the people” (e.g., the Soviet Union). Capitalism works well for an elite few but does not work well for the majority when it allows private wealth to hijack the political process (e.g., the United States, especially in recent decades).

There is a formula that works pretty well. It’s almost boringly simple and yet seems depressingly out of reach for the U.S. as long as wealthy individuals and industries are able to buy elections and write the nation’s laws to continue stacking the deck in their favor, while using our free speech protections to wage an effective propaganda war so that the public actually supports this.

It’s a common mistake of both left and right to talk about capitalism and socialism as if there were only two choices. One-party socialist systems in less developed countries have not worked well over the past century. Capitalism as practiced in the United States and many other nations has mainly benefitted those who already are wealthy. The nations in which all citizens gain from economic growth have combined elements of market economies, private ownership, and political policies that mitigate inequality. In western Europe, public health care, nearly free university education, stronger progressive taxation, higher minimum wages, and inclusion of trade unions in corporate decision-making result in much lower inequality and much happier populations.

fair vs. unfair inequality

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This interesting article in Vox talks about academic ideas on how to distinguish and measure a difference between fair and unfair inequality. The premise is that there is no moral justification for leaving anyone below the poverty line, even if they are there due to bad choices of their own making. But once out of poverty, there is a need for incentives for people to make effort, make good choices and take the kind of good risks that sometimes pay off for society. There is also a difference between people who are less well off because of bad luck (often the luck of who their parents are) and people who are less well off because they have made less effort or bad choices. Of course, people who are better off because of luck or breeding will tend to rationalize their success relative to others as being due to superior effort and good choices, when in fact they may not be the case. So having an objective way to measure this is an interesting idea. It suggests you could have policies that kick in automatically when some measure of “unfair inequality” gets to a certain level. I don’t quite understand the measure itself, but this is a blog post referring to an academic paper, and I didn’t dig into the academic paper itself.

Giants: The Global Power Elite

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This is a new book from Project Censored (or at least that’s where I became aware of it). I’m not sure whether I agree with the politics 100%, but numbers are numbers and these are a bit shocking.

As the number of men with as much wealth as half the world fell from sixty-two to just eight between January 2016 and January 2017, according to Oxfam International, fewer than 200 super-connected asset managers at only 17 asset management firms—each with well over a trillion dollars in assets under management–now represent the financial core of the world’s transnational capitalist class. Members of the global power elite are the management–the facilitors–of world capitalism, the firewall protecting the capital investment, growth, and debt collection that keeps the status quo from changing. Each chapter in Giants identifies by name the members of this international club of multi-millionaires, their 17 global financial companies—and including NGOs such as the Group of Thirty and the Trilateral Commission—and their transnational military protectors, so the reader, for the first time anywhere, can identify who consitutes this network of influence, where the wealth is concentrated, how it suppresses social movements, and how it can be redistributed for maximum systemic change.

“delusions of merit”

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This long article describes how people who have made it tend to have have “delusions of merit“. In other words, they believe they have earned their place in society through effort or self-discipline, that those less fortunate have not made the effort or do not have the self-discipline, and therefore they feel no moral obligation to help those beneath them. The problem is, we are not talking about a vast middle class refusing to help a small underclass here. We are talking about a small minority failing to feel compassion for the vast majority of fellow people.

we’re #1…in road deaths in the industrialized world

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It’s not just health care costs, life expectancy, infant mortality, education, drug addiction and infrastructure. As more evidence the U.S. is gradually slipping behind the rest of the developed world in many areas, here is a New York Times article on how road deaths are worse here than our peer countries in terms of wealth. And not just western Europe, but again our close cultural and historical cousins like Canada and Australia.

It didn’t used to be this way. A generation ago, driving in the United States was relatively safe. Fatality rates here in 1990 were roughly 10 percent lower than in Canada and Australia, two other affluent nations with a lot of open road.

Over the last few decades, however, other countries have embarked on evidence-based campaigns to reduce vehicle crashes. The United States has not. The fatality rate has still fallen here, thanks partly to safer vehicles, but it’s fallen far less than anywhere else.

As a result, this country has turned into a disturbing outlier. Our vehicle fatality rate is about 40 percent higher than Canada’s or Australia’s. The comparison with Slovenia is embarrassing. In 1990, its death rate was more than five times as high as ours. Today, the Slovenians have safer roads.

Let’s not set our sights too high – could we start by just making America average again? Let’s try to catch up to our peers with similar levels of wealth and technology, instead of continuing to slip further behind. Or we could just bury our heads in the sand, not learn about the world, let our politicians tell us how great we are, and never find out that there could have been a better way.

anti-monopoly politics

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This Intercept article talks about an anti-monopoly message some Democrats are trying out. I like the idea in principle. Productivity growth has been stuck in second gear for close to 50 years now, and yet we hear about record corporate profits and stock market returns. These things happen at the same time only if big business is able to make unfair profits by rigging the system unfairly in its favor. That way their profits can grow while wages and innovation both stagnate. This is not a recipe for long-term growth for the economy as a whole.

Big business has been able to hijack the “free market” message for a long time now. Of course, a truly free market is about a truly level playing field for businesses of all sizes, and one where innovators can compete with established big businesses. I would argue that it is also about an economy where entrepreneurs and small business owners can take chances and innovate against a backdrop of health care, childcare and retirement security. But maybe that should not be the focus – one appeal of an anti-monopoly message could be to give the devisive social issues a rest for awhile and focus on inclusive economic growth.

The author gives several examples of monopoly power hurting both rural and urban interests:

FRERICK TALKS ABOUT running a Teddy Roosevelt-style campaign. In rural towns in southwest Iowa, he has challenged the merger between Monsanto and Bayer, which would give two companies (the other is Dow/DuPont) control of 75 percent of the U.S. corn seed supply. Add the company created by the merger of ChemChina and Syngenta, and three companies would sell 80 percent of all seeds. Farmers have no ability to bargain for corn seed, which has doubled in price over the last decade, even while crop prices have dropped…

But Frerick has a broader case to make on monopolies. In urban areas of Des Moines with less connection to farm life, he’s talked about cable companies who take hours to answer customer service calls, or shrinking local newspapers due to Facebook and Google’s capturing of prized eyeballs for advertisers. In older communities, he’s condemned pharmaceutical companies that funnel patients to expensive drugs with little or no competition. A separate 2016 paper Frerick wrote while at Treasury explained how drug companies use corporate charity as a profit center, by paying discounts for individuals so insurers and government plans have to pay exorbitant rates for medications…

Most hospitals buy supplies in bulk through group purchasing organizations (GPOs) which carry a “90/10” requirement. Hospitals must continue to purchase at least 90 percent of their supplies from inside the GPO to qualify for discounts and avoid millions of dollars in penalties. This contractual obligation fortified BD’s monopoly, despite selling a more dangerous, more expensive product.