Saturday, June 21, 2014

Matt Bruenig — Why Grow The Pie?

After all, what is meant to be the value of a bigger pie? Surely it is that people get more stuff. But a bigger pie doesn't actually mean everyone gets more stuff. Only a specific widespread distribution of the increase in the pie does that. And, if you've paid any attention to the market distribution trends over the last half-century, you know that only non-market distributive institutions are able to ensure that specific distribution results.
So "fighting over the pie"—which means fighting over how to construct our distributive institutions—is the only way that a bigger pie gets funneled into something that's useful to the non-rich. Adding a bunch of income at the top of society without adding it anywhere else (or even subtracting it elsewhere) grows the pie, but who cares about that? Not me.
As a general matter, this pie analogy is perhaps the most deceptive one in all of popular economics writing. The way it is used always assumes that the gains to growth are distributed proportionally. The suggestion of the metaphor is that if the economy grows 3%, then everyone's slice grows 3% and everyone maintains their relative distributive position. But that's not what happens. Instead, the rich increase their market income by far more than 3% and the rest increase their income by much less, if they increase it at all. Consequently, the rich gobble up ever-greater percentages of the pie.
Demos Policy Shop
Why Grow The Pie?
Matt Bruenig

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