Friday, November 6, 2015
Branko Milanovic — Does a shift toward more capital income guarantee rising income inequality?
More on Picketty.
It's not just the capital/labor share but the share within capital. Concentration of wealth, that is, ownership, leads to greater concentration; broadening ownership reduces future concentration of wealth. Social democracy as a social, political and economic position between capitalism and state socialism requires broad ownership.
Global Inequality
Does a shift toward more capital income guarantee rising income inequality?Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace
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13 comments:
"Concentration of wealth, that is, ownership, leads to greater concentration; broadening ownership reduces future concentration of wealth"
Another reason why bank lending should be carefully controlled. Bank lending concentrates equity - both in the owner and potentially the control of the bank. If you can't get a loan you have to sell equity to others to get going.
Now of course if the wealthy are the only ones doing equity investment then all you do is move the problem from bankers to VCs - rather than solving it.
"In brief, if you had possessed the opportunity and foresight to have invested $10,000 in Uber on AngelList in 2010, Albright estimates your money would be worth $127.5 Million today. Wow."
http://www.crowdfundinsider.com/2015/10/76123-how-much-money-would-you-be-worth-if-you-had-invested-in-uber-on-angellist/
Not so much foresight as luck.
Saying you had the foresight to invest in the next big thing is like saying you had the foresight to 'invest' in the correct lottery numbers.
Everybody who does angel investing knows that it is a blunderbuss approach, and not one a sniper would recognise. You get a lot of duffers.
Neil then why is the lefty Picketty brigades so obsessed and impressed by it?
They must think it actually took foresight otherwise why would the be so impressed...
Like the Randians prbably think the lottery winners are part of the survival of the fittest cohort... "well, he picked the winning numbers, why couldnt you?" .... natural selection....
The Picketty people must just be jealous/envious of what is in reality pure luck....
"Neil then why is the lefty Picketty brigades so obsessed and impressed by it?"
Huh?
Its their source of funds Dan... (perhaps not yours...)
Why would we want to Picketty tax a newly wealthy lottery winner when the govt just got done running this big game that resulted in their new found great wealth in the first place?
Dan here:
"Cohen, the prime mover behind the Tennessee State Lottery, says he's thinking about working on the national debt with a national lottery bill.
"I know that the state lottery's against it, but I think a national lottery to pay off the national debt would be a good thing. ... Debt is a serious problem. A national lottery could help."
http://taxfoundation.org/blog/national-lottery-not-solution-national-debt
Cohen here and Picketty are on the same page wrt "source of funds".... one person is a lottery winner and another is an Uber winner....
Here is another:
http://www.dailymail.co.uk/news/article-3306979/Only-one-America-s-expensive-cities-buy-tiny-180-square-foot-shack-just-2-million.html
You can get a much bigger home and land for a tenth of this Palo Alto price of $2M... so we tax the Palo Alto guy working at Facebook who has $2M of "wealth" in this shack but pass on the guy in Peoria working for the sewer authority with the bigger house and more land?
Anyway unicorn valuations are not realized dollars, I suggest taking a look at past IPO's and how much of those over-valued companies fall off after they are initially hyped and released to the market.
You can't expect to fund everything thought one time confiscation of unrealized dollars (to start with because you can't confiscate what doesn't exist, a shareholder of Uber may seem rich, but unless he can trade the shares in a liquid market fast enough he has zero dollars in his pocket, just theoretical dollars).
The mere suggestion of it would crush the "value" of many of the private owned companies to 1/100 of their theoretical valuations as soon as they are made public, in fact a lot of their derived value comes from the fact that they are not yet public and shares cannot be exchanged in a liquid market (so derived from future expectations, specially those of their not very objective shareholders).
Even on publicly traded companies those valuations are not realized dollars (I refuse to use the word "wealth" as are two distinct things), someone holding a bag of CDO's backed by mortgages in 2007 would be incredibly rich, on late 2008 he would not only be poor but would be deep into negative equity which is worse.
So making everyone own some shares of Facebook is not going to make us much more rich, at the moment you are going to confiscate those securities they will drop to a value closer to the liquid value of their assets relatively to income.
"Even on publicly traded companies those valuations are not realised dollars"
Pretty much all assets are not realised dollars. Housing wealth for example is entirely illusionary. Firstly you can only get that price if the market stays tight and secondly you have to live somewhere.
Sorry matt, I have no idea what you are talking about.
Dan maybe this way:
Why would anyone play the lottery any more if there was a Picketty tax that would just tax away the winnings?
I played yesterday the jackpot was $150M... you only get half after tax so I was figuring "cash value" of $75M so pretty sweet even after taxes so I bought a $2 ticket...
Now if Picketty tax came in and took the $75M because I lotteried myself into the 1% why would I have played at all?
So before the Picketty tax can be imposed you are going to have to get policymakers to end the lotteries FIRST....
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