James K. Galbraith — Capitalism’s Great Reckoning

As the maladies of modern capitalism have multiplied, fundamental questions about the future of the world’s dominant economic model have become impossible to ignore. But in the absence of viable alternatives, the question is how to reform a system that is increasingly at odds with democracy.

James K. Galbraith looks at three recent books on the crisis in capitalism:

• Joseph E. Stiglitz, People, Power, and Profits: Progressive Capitalism for an Age of Discontent, W.W. Norton, New York; Allen Lane, London, 2019.
• Paul Collier, The Future of Capitalism: Facing the New Anxieties, Harper, New York; Allen Lane, London, 2018.
• Branko Milanovic, Capitalism, Alone: The Future of the System That Rules the World, Belknap Press, Cambridge, 2019 (forthcoming).

Project Syndicate
Capitalism’s Great Reckoning

James K. Galbraith | Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin

David F. Ruccio — Value and the Marxian critique of political economy

David Ruccio jumps into the debate about Marx's profit theory.

Occasional Links & Commentary
Value and the Marxian critique of political economy
David F. Ruccio | Professor of Economics, University of Notre Dame

Egmont Kakarot-Handtke — The thing with profit and exploitation

The Palgrave Dictionary summarizes: “A satisfactory theory of profits is still elusive.” (Desai, 2008)

This perhaps surprises the general public: economists do not know until this day what profit is. By consequence, they have NO idea about how the monetary economy works. More specifically, economics consists of four main approaches, Walrasianism, Keynesianism, Marxianism, Austrianism, and NONE of them gets profit right.#1

As a consequence, economic policy guidance never had sound scientific foundations. Because economists never captured the essence of the market economy, whatever they have said for or against capitalism, communism or socialism has been based upon provable false theories about how the monetary economy works....

AXEC: New Foundations of Economics
The thing with profit and exploitation
Egmont Kakarot-Handtke | University of Stuttgart - Institute of Economics and Law

Michael Roberts — Globalisation and Milanovic’s elephant

Of interest if you are following the economic debate on global  inequality.

Michael Roberts' Blog — blogging from a Marxist economist
Globalisation and Milanovic’s elephant

Michael Roberts

David F. Ruccio — The idea that we shouldn’t be concerned about inequality is bullshit

I think that "inequality" is the wrong term and concept here. The opposite inequality and none of the parties to the debate is arguing for equality of income or wealth. The problem is not resolved just by giving the poor more since the issues are broader and deeper. The problem is not "inequality," but asymmetry and disparity.

Asymmetry and disparity affect not only individual but also systemic functioning. This is both immoral and uneconomic and the two should be kept distinct since one is chiefly a normative issue and the other a factual one.

Better to emphasis basic rights along with systemic asymmetries and social disparity that results in privilege at the top and exclusion from the system at the bottom, both unmerited for the most part. The result is social, political and economic dysfunction.

In addition, there needs to be a distinction drawn between needs and wants. Basic needs that are vital are matters of right instead of merit in situations in which they can be met. Disparity in satisfying wants is not itself crucial. The issues resulting from disparity of wealth and income relate more to the resultant social, political and economic asymmetries that lead to systemic dysfunction.

Occasional Links & Commentary
The idea that we shouldn’t be concerned about inequality is bullshit
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

See also

Capitalism—a love story

Magpie — Capital Errors: from Bad to Worst (of All).

Magpie joins the human capital fray.

Magpie's Asymmetric Warfare
Capital Errors: from Bad to Worst (of All).
Magpie

David F. Ruccio — Human capital controversy

As I have long explained to students, the theory of capital is the most controversial topic in the history of economic thought because the theory of capital is the theory of profits—and therefore an answer to the question, do the capitalists deserve the profits they get? 

The original capital controversy was never resolved. But no there’s a new capital controversy, a controversy over human capital. It was launched by Branko Milanovic, based on Thomas Piketty’s refusal to include human capital in the other forms of capital he measures in his inquiry about the history and future prospects of wealth inequality.** 

Basically, Milanovic argues that labor is not a form of capital because labor involves a “doing” (work has to be performed in order for wages to be paid) while other forms of capital are characterized not by work but by nonwork, that is, ownership…
I’m with Milanovic on this. There is a fundamental difference between doing and owning.  

But I also think the human capital controversy has even larger implications.…

Occasional Links & Commentary
Human capital controversy
David F. Ruccio | Professor of Economics University of Notre Dame Notre Dame

Branko Milakovic — Some prefer land: Stiglitz on income and wealth inequality

A couple of days ago I was invited to give comments on Joe Stiglitz’s presentation of a new paper on theoretical models of evolution of wealth and income inequality. The other two commentators were Duncan Foley and Paul Krugman. Stiglitz’s paper is not, as far as I know, on the Internet yet, so I cannot give the link. (I also had my own slides, but I do not know how to upload them here, so I cannot include the link to them either.) 

Stiglitz’s is a long paper (some 60 pages) and is in reality composed of two independent papers. The first one, on which I mostly commented, is a continuation of the discussion started by Piketty’s “Le Capital…”. Stiglitz points out to several very important puzzles that cannot be easily accommodated in the current neoclassical framework: broadly constant rate of return despite massive capital deepening, rising share of capital incomes even if the production function studies tend to find elasticity of substitution between capital and labor of less than 1, and stagnant wages despite the increase in K/Y ratio. The second paper is the extension od Stiglitz’s 1969 paper on the theory of wealth and income inequality whose objective is to model the long-run distributions among households that differ in terms of labor and capital incomes they receive and savings behavior.…

Milanovic on Stiglitz on Piketty.

global inequality
Some prefer land: Stiglitz on income and wealth inequality
Branko Milakovic

Sam Pizzigati — The Flacks for Plutocrats Need a New Analogy

A rising tide lifts all boats. A growing economic pie means bigger slices for everybody. Wealth that flows to the top will always trickle down. Cheerleaders for wealth’s concentration have over the years invoked a variety of images to rationalize the ever larger fortunes of our society’s most fortunate. 

These images all rest on a single economic assumption: that letting wealth accumulate in the pockets of a few grows an economy’s capacity for investment and ultimately, as investments create jobs, leaves everybody better off. That assumption has dominated mainstream economics for generations. 

But that’s changing. Even mainline economic institutions are these days challenging the notion that good fortune for the few eventually and automatically translates into better fortune for the many. Now we have a new analysis that essentially shreds what little credibility remains from that once potent rising-tide world view.…

Milanovic and van der Weide have some thoughts of why higher income inequality so stunts income growth for a state’s poorest. They point to the phenomenon they call “social separatism.” 

In a society where the rich are grabbing incomes “significantly greater than the incomes of the middle classes,” the rich have little interest in public services. Their lives revolve around private services, everything from private schools to private country clubs. 

These wealthy, note Milanovic and van der Weide, “prefer not to invest in public goods like education, health, and infrastructure.” But these public investments — for the poor — make all the difference in the world. Paltry investments in public services translate into paltry, or worse, income growth for the poor. 

The political implication? If income inequality speeds the growth of wealthy people’s incomes, Milanovic and van der Weide wonder, how can we expect the wealthy to accept public policy changes that reduce inequality? 

We can’t, of course. Most rich will continue to claim that trickle down works, no matter how empty that claim may be. And the evidence for that emptiness is pouring from much more than academic studies. We now have, for instance, the live-action contrast of Kansas and California. 

In Kansas, an exceedingly rich people-friendly governor and legislature two years ago slashed taxes on the state’s wealthy, most notably by making business profits tax-free. 

In California, meanwhile, voters at about the same time raised tax rates on taxpayers making over $500,000 by 30 percent.

The story since then: California, notes analyst David Cay Johnston, has grown jobs “at 3.4 times the rate of Kansas.” California’s weekly wages have also grown more than weekly wages in Kansas.

"Social separatism" is class and power structure by another name, since "class" and "power" are politically incorrect terms in economics.

Inequality.org
The Flacks for Plutocrats Need a New Analogy

Sam Pizzigati | Editor, Too Much, the Institute for Policy Studies online weekly on excess and inequality

Branko Milanovic — On Mark Thoma: marginalism, Marx etc

Mark Thoma has written a very nice blog on how Piketty’s work is transforming economics by bringing it closer too it political economy roots. I found the post excellent, and wanted just to point out one thing which I think is very pertinently argued by Thoma and another where he somewhat simplifies the matter.

Global Inequality
On Mark Thoma: marginalism, Marx etc
Branko Milanovic