No, Productivity Does Not Explain Income — Blair Fix

Did you hear the joke about the economists who tested their theory by defining it to be true? Oh, I forgot. It’s not a joke. It’s standard practice among mainstream economists. They propose that productivity explains income. And then they ‘test’ this idea by defining productivity in terms of income.

In this post, I’m going to show you this circular logic. Then I’ll show you what productivity differences look like when productivity is measure objectively. They’re far too small to explain income differences....

Naked Capitalism
No, Productivity Does Not Explain Income

Blair Fix, a PhD student at the Faculty of Environmental Studies at York University in Toronto, Canada and author of ‘Rethinking Economic Growth Theory From a Biophysical Perspective‘ 2015)

Originally published at Economics from the Top Down; cross posted from Evonomics

Austin Clemens — No one measure of inequality tells the whole story–income, wealth, and consumption should be considered together

A challenge is limited data.

WCEG — The Equitablog

No one measure of inequality tells the whole story–income, wealth, and consumption should be considered together
Austin Clemens

Bill Mitchell — Reducing income inequality

The recent political ructions such as the Brexit outcome in the UK, the popularity of Donald Trump and Bernie Sanders in the US, the growing extremist popularist movements in Europe and elsewhere, and the scrape-in victory of the incumbent conservative government in Australia at the recent federal elections, have been attributed in no small part to a growing resentment against rising income (and wealth) inequality. A ‘progressive manifesto’ has to address this issue and work out ways that the gap between real wages and productivity growth is eliminated so that workers can rely more on wages growth to fund their consumption growth rather than credit. This blog continues to discuss the elements of such a Manifesto and today we focus on the question of income inequality and ways in which productivity growth can be better shared.

Bill Mitchell – billy blog
Reducing income inequality

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Joe Mellor — Fat Cats already made more in 2016 than most will earn all year

Putting things in perspective.

The London Economic
Fat Cats already made more in 2016 than most will earn all year
Joe Mellor

Lawrence Wittner — Has the Time Come for Democratization of the Economy?

A study released at the beginning of December by the Institute for Policy Studies (IPS) reported that America’s 20 wealthiest individuals own more wealth than roughly half the American population combined—152 million people. The startling level of economic inequality in the United States is also highlighted by Forbes, which recently observed that the richest 400 Americans possess more wealth than 62 percent of the American public—192 million people. Furthermore, these studies apparently underestimate the concentration of wealth in the United States, for the use of offshore tax havens and legal trusts conceals trillions of dollars that the richest Americans have amassed for themselves and their families…

In the 1970s, America’s wealthiest 0.1 percent—the richest one-thousandth of the population—owned 7 percent of U.S. household wealth. Today, that figure has risen to 20 percent—about as much wealth as is possessed, in total, by the bottom 90 percent of Americans.

Although the 20 richest Americans, who possess more wealth than about half the American population combined, include some founders of corporations, they are outnumbered by the heirs of families with vast fortunes. The latter individuals include Charles and David Koch (the scions of a wealthy founder of the John Birch Society, with $82 billion between them) and four members of Wal-Mart’s Walton clan (with $127.6 billion among them).

All right, you might say; but does this economic inequality really matter? Well, it certainly matters to those Americans whose economic opportunities have been stunted to facilitate this accumulation and hoarding of vast wealth. Furthermore, as the authors of the IPS study note: “Extreme inequalities of income, wealth and opportunity undermine democracy, social cohesion, economic stability, social mobility, and many other important aspects of our personal and public lives.” In addition, “extreme inequality corrodes our democratic system and public trust. It leads to a breakdown in civic cohesion and social solidarity, which in turn leads to worsened health outcomes. Inequality undercuts social mobility—and has disastrous effects on the economy.”

Inequality of income and wealth is another of the paradoxes of liberalism.

Counterpunch
Has the Time Come for Democratization of the Economy?

Lawrence Wittner

Dean Baker — Brad DeLong on Piketty's Likely Response to Rent Argument

Significant because rent.

Beat the Press
Brad DeLong on Piketty's Likely Response to Rent Argument
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, DC

See also

Asymptosis
Yes: Concentrated Wealth and Inequality Crushes Economic Growth
Steve Roth

David F. Ruccio — What’s class got to do with it?

The other day, I recommended the first two installments in the TPM series on “the road to inequality”—albeit with the caution that there was too little discussion of capitalism as a system.

Now, the third installment is in. Jared Bernstein’s “digging around in the data weeds” yields a first-rate introduction to the various measures of inequality in the United States (with which regular readers of this blog will be familiar), all of which point in the same direction: “toward greater economic distance between people and households in their economic outcomes.”

Unfortunately, Bernstein—by his own admission—focuses on the size (individual or household) distribution but shies away from any kind of extended discussion of the class distribution of income….

Here’s the problem: it’s not just that wages are more equally distributed than profits, thus leading to more inequality. As I see it, the opposing movements of the wage and profit shares signal a fundamental change within capitalism that puts more and more value in the hands of capitalists—to do with it what they will—and less in the pockets of workers. 

It thus makes workers (and society as a whole) even more dependent on capitalists, who are able to not only capture the surplus created by those workers, but also to use the surplus to rig the system to get even more of the surplus now and for the foreseeable future.… 

Occasional Links & Commentary
What’s class got to do with it?
David F. Ruccio | Professor of Economics, University of Notre Dame

Nick Bunker — Putting rents at the center of U.S. income inequality

The rise of income inequality in the United States since the late 1970s is a well-documented fact, but the reasons for the rise still aren’t well understood. The possible culprits include skill-biased technological change, globalization, the rise of the robots, and an increasingly popular reason: increased “rents” in the U.S. economy.

Rents, in economics parlance, are extra returns above and beyond what we’d expect in a competitive market. A new paper by Jason Furman, chair of the President’s Council of Economic Advisers, and Peter Orszag, former director of the Office of Management and Budget and a current Vice Chairman at Citigroup Inc., presents some evidence that not only have rents increased, but they provide a fundamentally important explanation for rising inequality.…

Economic rents predistribute income upward and this accumulates as wealth. The playing field is tilted so that gains flow upward unnaturally and not owing to the invisible working of "natural forces" to generate optimal order spontaneously, as the story goes.

WCEG — The Equitablog
Putting rents at the center of U.S. income inequality
Nick Bunker

Rising income and wealth inequality – 1% owns more than bottom 99%

When we talk about inequality it is important to differentiate between income and wealth inequality.

Together they constitute one of the clearest examples of how the neo-liberal policy structures that have been in place over the last 30 odd years are failing and are pushing the world toward an unsustainable reckoning where it is anybody’s guess what the manifestation will look like – but I predict it will be destructive and ugly and drawn out and may not resolve itself into anything we would like.

Bill Mitchell – billy blog
Rising income and wealth inequality – 1% owns more than bottom 99%
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Paul Tudor Jones on inequality: He has nothing new to offer

Paul Tudor Jones' view that the private sector is what we need to rely on to solve massive income and wealth inequality is ignorant.

Paul Tudor Jones wants the "free market" to solve wealth inequality. LOL!!!

Billionaire trader Paul Tudor Jones thinks the "free market" is going to solve income and wealth inequality. Keep dreaming, Paulie. He also thinks that capitalists should just "give" more of their profits to workers in the form of higher wages. Guess what? That's not capitalism. (Is he really advocating for Socialism?)

Would he be okay with the state making things more equitable, like it's done at certain times in the past? Of course not, he already made that clear. The free market has to be the one to do it.

What fucking bullshit these people.

And he says that income inequality will eventually be addressed...either through war or revolution or, shriek...HIGHER TAXES. (I'm sure he'd prefer the former two.) He lumps taxes in with war and revolution. Nice. Yeah, to his kind it's worse.

By the way...it wasn't the "free fucking market" that made guys like Paul Jones so vastly more wealthy than the average Jones; it was policies of the state, which he and his kind control.

Related: Protesters to picket Paul Tudor Jones' home over income inequality

Seems Jones is a big supporter of Republicans. Not that Dems have done much to end income inequality (think, Clintons and their cronies), but Jones' choice of party affiliation is disturbing and hypocritical.

The World's Top Incomes Database

The World's Top Incomes Database
Facundo Alvaredo, Tony Atkinson, Thomas Piketty and Emmanuel Saez
h/t Jan Milch

Sam Pizzigati — Inside Our Profoundly Unequal "New Normal"

Wealth's current tilt to the top sometimes seems almost eternal. But can our economy "self-correct"? A provocative new paper out of the developed world's official research agency contemplates our tomorrow.

Truthout

Inside Our Profoundly Unequal "New Normal"
Sam Pizzigati, Too Much | Op-Ed

Egregious subjugation of the working class continues. Workers get 2.6% pay raise for critically important work while Jamie Dimon sees salary double

Another example of egregious subjugation of the working class. Long Island Railroad Workers were given a 17% pay raise, spread out over 6.5 years, but they must kick in more toward their health care payments, so it works out to even less than the paltry, 2.6% annual increase.

The Long Island Railroad is the largest commuter railroad in the country. A strike would have affected hundreds of thousands if not millions of people, businesses, etc in the region. In other words these workers' jobs are absolutely essential to the economy and peoples' lives.

In contrast, Jamie Dimon gets a near DOUBLING of his pay (from $11.4 million per year to $20 million) in one year even though he guided his bank to a 0.7% return on assets. In other words if Jamie Dimon were gone no one would see the difference. Even worse, the bank could have held Treasuries and made a heck of a lot more than what Jamie Dimon delivered.

That's the state of our tragic society.

Philip Pullella — Pope Francis In Peace Message Attacks Mega-Salaries With 'Crumbs' For Poor

Pope Francis said in the first peace message of his pontificate that huge salaries and bonuses are symptoms of an economy based on greed and inequality and called again for nations to narrow the wealth gap.

In his message for the Roman Catholic Church's World Day of Peace, marked around the world on Jan. 1, he also called for sharing of wealth and for nations to shrink the gap between rich and poor, more of whom are getting only "crumbs".

"The grave financial and economic crises of the present time ... have pushed man to seek satisfaction, happiness and security in consumption and earnings out of all proportion to the principles of a sound economy," he said.

"The succession of economic crises should lead to a timely rethinking of our models of economic development and to a change in lifestyles," he said.

Francis, who was named Time magazine's Person of the Year on Wednesday, has urged his own Church to be more fair, frugal and less pompous and to be closer to the poor and suffering.

His message will be sent to national leaders, international organisations such as the United Nations, and NGO's.

Titled "Fraternity, the Foundation and Pathway to Peace", the message also attacked injustice, human trafficking, organised crime and the weapons trade as obstacles to peace.

The Huffington Post
Pope Francis In Peace Message Attacks Mega-Salaries With 'Crumbs' For Poor
Philip Pullella | Reuters

Dirk Ehnts — Irving Fisher on the Great Depression

“Finally the Government stepped in and itself went deeply into debt with the banks. [Fisher]” Instead, the news today are rather showing us the opposite, as the NY Times reports in this headline:

U.S. Government Shuts Down in Budget Impasse

One wonders why politicians would actively sabotage the national economy and make the cake smaller. Either they are ignorant – but I hardly believe that – or there are some people who will gain and some that will lose from this. This is probably about distribution.

Ya think?

econoblog101
Irving Fisher on the Great Depression
Dirk Ehnts | Berlin School for Economics and Law

Alexander Reed Kelly — Majority of Americans Have No Ability to Save

Roughly three-quarters of Americans are living paycheck-to-paycheck, with little to nothing in emergency savings, a survey released by Bankrate.com shows.

Truthdig
Majority of Americans Have No Ability to Save
Alexander Reed Kelly

Icing on the cake...Obama will nominate Summers for Fed chair

We've been hearing these rumors for a while now and perhaps many of us thought it was just a bad joke. The fact that Obama was even considering Larry Summers to run the Fed seemed unconscionable given his unbelievably destructive history. But leave it to Obama, once again, to smash the hopes, needs and spirits of his supporters and those who fight for equality and progressive causes everywhere.

This is the icing on the cake. The fact that Obama is going to nominate Summers--one of the chief architects of financial sector deregulation that ultimately led to the crisis--as Fed Chairman solidifies his presidency as one of the worst and certainly the most deceitful in history.

Not only did Obama fail to deliver on all the promises he made to millions who voted for him and support him, but he put in place a policy team that has led to the fastest and most extreme rise in income inequality ever seen in this country, not to mention all the other things he did like NDAA, trillions to the banks, Obamacare, expanding wars, keeping Guantanamo open, not standing up for workers when he said he would, "grand bargains," austerity, etc, etc.

Liars are despicable, but political leaders who are liars are the worst. Go to hell, Mr. President!

U.S. now has the highest income inequality in the developed world

Very ignominious achievement.

So how did America get so darn great at ratcheting open the chasm between the haves and have-nots? Thank the dynamic duo of Wall Street and Washington, which have been working so well together for the past few decades to make laws that favor banks. Turns out this Axis Of Making It Rain has also been making laws that favor the exorbitantly wealthy. Win-win. Unless you are poor, in which case: Sorry, be born to richer parents next time, maybe?

The higher the dot, the higher the income inequality.

Read rest of the story here.