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November 14, 2017

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Luis Enrique

I am not sure it is entirely discredited if narrowed down to mean that sometimes people make themselves fabulously rich in ways that have spillovers. The spillovers would be greater if they made themselves less fabulously rich, but still. In the data that IMF and others use, hard to separate rent gathering oligarchs holding back growth from wealth creating entrepreneurs.

(Please don't take this to mean I think the rich = wealth creating entrepreneurs.)

Chris Pepin

I noted a Sam Bowles hyperlink; but the paper it linked to had neither Dr. Bowles as a coauthor or even in the bibliography. Apologies if I misread the link...(this is from another fan of Samuel Bowles).

J Lave

I think there is a simple point to make. Supply side economics when there is insufficient capital. We know that there is insufficient capital when interest rates are high.

A tax cut on the rich, will primarily manifest in increased savings (as rich have a high propensity to save). This will lead to increased capital for borrowing, which will lower interest rates.

Currently, investment is low. However, interest rates are low. Thus the cause of low investment is not insufficient savings. Rather it is insufficient consumption. The goal should be to increase consumption, which can be done by increased goverment spending or tax cuts / credits aimed at the lower and middle classes who have a high propensity to spend

chris

@ Chris - Sorry, I got the link wrong. It's not corrected.
@ Luis - I agree. The right over-romanticise the rich as wealth creators, the left maybe over-stigmatizes them as parasites. The difficulty is designing policies that distinguish the two; incomes taxes fall equally on both and so don't do so.

Nicholas

The defense of inequality does not rely on 'trickle down' theory, or on the marginal propensity to save of the rich being high.
The defense of inequality is much simpler - a level of inequality is necessary to provide the incentives to cause people to a)work hard, b)innovate, and c) expose themselves to risk, d)take uncomfortable decisions.
Put more simply, if all the money was shared out equally, lots of people would sit on their arses and do nothing, and there would a lot less money to share out.
I don't know why Chris makes out its so complicated.

Luis Enrique

Nicholas you need to do a lot of work to demonstrate that the level of effort expended on £1m year is noticeably less than on £48m
https://www.theguardian.com/business/2017/apr/28/sir-martin-sorrell-pay-uk-wpp

Kaleberg

It should be rather obvious we are in a capital glut and have been since the early 1990s. There is inflation, but it is primarily focused on rent producing goods like stocks, bonds, and prime real estate. Low interest rates, high P/E ratios and rising prime real estate costs are just inflation for the wealthy.

If nothing else, look at much more quickly the stock market recovers after an economic shock than labor does. Face it: no one has any money; there's nothing to invest in; park the money in stocks.

Ahmed

Nicholas,

Inequality is a good thing, it's the sign of a meritocracy. The problem is that a meritocracy contains the seeds of its own destruction, as those who win in the first round pass along advantages to their children in the form of higher education and inherited wealth. Then you end up with a plutocracy.

A plutocracy is ingrained inequality, not the good kind of inequality.

You need a certain amount of wealth redistribution in order to achieve a certain equality of opportunity.

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