Tuesday, January 10, 2017

Nobel Laureates — Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality

Eliminating rent seeking and toughening enforcement of antitrust laws are “critical” to reducing rising inequality, said two Nobel Laureates, Angus Deaton and Joseph Stiglitz, during a panel of Nobel laureates last Friday. Two fellow laureates, Roger Myerson and Edmund Phelps, echoed their message and warned of a return to 1930s-style corporatism.

“To the very considerable extent that inequality is generated by rent seeking, we could sharply reduce inequality itself if rent seeking were to be somehow reduced,” said Angus Deaton, recipient of the 2015 Nobel Prize in Economics. Deaton described inequality in the U.S. as being primarily driven by industry rents, and rejected proposals to increase taxes on the rich as a way to reduce rent seeking.

“I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” he said.

The panel was part of the annual Allied Social Sciences Associations (ASSA) meeting in Chicago. Fellow Nobel Laureate Joseph Stiglitz, recipient of the 2001 prize, offered a more sympathetic view of higher taxes on the rich as a method to reduce inequality, but stressed the importance of rent-seeking to the rise in inequality in the U.S....
Rent extraction is made possible by asymmetric power. The way to reduce rent-seeking is to level the power. Symmetrical power is an assumption of neoclassical economics as the basis of free markets that are fair.

But markets are not naturally symmetrical because societies are structured on the basis of class and power is distributed asymmetrically as matter of social structure.

The problem in addressing rent this way is that this was a key insight of Marx. So anyone proposing such a solution is bound to be attacked as a 'Marxist," "socialist," or 'communist." Most people capable of making difference don’t' want to go there, at least alone, and no one wants to go first.

Pro-Market
Nobel Laureates: Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality

3 comments:

AXEC / E.K-H said...

Inequality: Market failure or theory failure?
Comment on Asher Schechter on ‘Nobel Laureates: Eliminating Rent Seeking and Tougher Antitrust Enforcement Are Critical to Reducing Inequality’

Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is.

It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know for sure, without bothering much about the insane behavioral assumptions of utility and profit maximization, that the standard marginal theory of income distribution must be dead wrong. More, because neither Walrasianism, Keynesianism, Marxianism, nor Austrianism gets profit right all other distribution theories are false, too. This includes the theory of rent seeking which stood in the center at this year’s ASSA discussions.

The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4

Distribution theory has always been the deepest point in the swamp of economics. Do not expect that orthodox or heterodox economists who spent their clueless lives there will find a way out any time soon. The profit theory is false since Adam Smith#5 and the folks at the ASSA are lost in the woods. Let this sink in: NOT ONE of the participants has an idea about the pivotal concept of economics.

Economics has produced NOTHING of scientific value in the last 200+ years. The current state of economics is that of a cargo cult or fake science.#6 The proof is in the distribution theory.

Egmont Kakarot-Handtke

#1 See ‘Essentials of Constructive Heterodoxy: Profit’
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2575110

#2 See ‘When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism’
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1932119
#3 See ‘Profit for Marxists’
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2414301
#4 See ‘Heterodoxy, too, is scientific junk’
http://axecorg.blogspot.de/2015/09/heterodoxy-too-is-scientific-junk_85.html
#5 See ‘The Profit Theory is False Since Adam Smith. What About the True Distribution Theory?’
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2511741
#6 See ‘The real problem with the economics Nobel’
http://axecorg.blogspot.de/2016/09/the-real-problem-with-economics-nobel.html

Bob said...

There was no agreement on a theory of profit, yet that didn't stop them. Is that analogous to not having a theory of gravity, yet continuing to push forward in other areas of physics?

AXEC / E.K-H said...

Bob

After more than 200 years economists cannot tell the difference between the foundational concepts profit and income. This is comparable to medieval physics before the concepts of energy, mass, force, etcetera were clearly defined and properly understood.

For details see ‘The false foundations of economics’
http://axecorg.blogspot.de/2016/12/the-false-foundations-of-economics.html

Egmont Kakarot-Handtke