Clear and concise presentation of Stiglitz's position relative to the approach of Picketty. Many solid points including monopoly power and capital share versus labor share through exploitation based on market power favoring capital. Stiglitz also hones in on rent and rent-seeking.
I think that the thrust of my book, The Price of Inequality, and a lot of other work has been to question the margin of productivity theory, which is a theory that has been prevalent for 200 years. A lot of people have questioned it, but my work is a renewal of questioning. And I think that some of the very interesting work that Piketty and his associates have done is providing some empirical basis for doing it. Not only the example that I just gave that if you look at the people at the top, monopolists actually constrain output. People who make the most productive contributions, people who make lasers or transistors, or the inventor of the computer, DNA researchers, none of these are the top wealthiest people in the country. So if you look at the people who contributed the most, and the people who are there at the top, they’re not the same. That’s the second piece.
A very interesting study that Piketty and his associates did was on the effect of an increase in taxes on the top 1 percent. If you had the hypothesis that these were people who were working hard and contributing more, you might say, ok, that’s going to significantly slow down the economy. But if you say it’s rent-seeking, then you’re just capturing for the government some of the rents.INET
Joseph Stiglitz: Economics Has to Come to Terms with Wealth and Income Inequality
Lynn Parramore
4 comments:
And as everybody knows, govt needs to capture those rents in order to have money to spend... :p
IIUC, there is a perennial finding that inflation in luxury goods is greater than inflation in the CPI. One way of looking at that is that the higher inflation in luxury goods is a kind of tax on the rich (metaphorically, at least). Can it also be an indication that the rich are rentiers, because, psychologically, it is easier to spend windfall income (rents) than earned income? Can it also be used to justify higher taxes on the rich on the theory that society as a whole should collect such taxes instead of the producers and purveyors of luxury goods?
The basic principle of a sane economics is that what is socially necessary has a higher priority than what is discretionary.
Failure to acknowledge this is a fundamental flaw in neoliberalism and economic liberalism in general and a foundational principle of social democracy and socialism.
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