Category: Contemplation

Source: Economists are rethinking the numbers on inequality | The Economist

Yet just as ideas about inequality have completed their march from the academy to the frontlines of politics, researchers have begun to look again. And some are wondering whether inequality has in fact risen as much as claimed—or, by some measures, at all. It is fiendishly complicated to calculate how much people earn in a year or the value of the assets under their control, and thus a country’s level of income or wealth inequality.
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The conventional wisdom to have emerged from [recent wealth and income research] revolves around four main points. First, over a period of four to five decades the incomes of the top 1% have soared. Second, the incomes of middle-earners have stagnated. Third, wages have barely risen even though productivity has done so, meaning that an increasing share of GDP has gone to investors in the form of interest, dividends and capital gains, rather than to labour in the form of wages. Fourth, the rich have reinvested the fruits of their success, such that inequality of wealth (ie, the stock of assets less liabilities such as mortgage debt) has risen, too.

Each argument has always had its doubters. But they have grown in number as a series of new papers have called the existing estimates of inequality into question.

Few dispute that wealth shares at the top have risen in America, nor that the increase is driven by fortunes at the very top, among people who really can be considered an elite. The question, instead, is by just how much. … Proposals for much heavier taxes on high earners, or a tax on net wealth, or the far more radical plans outlined in Mr Piketty’s latest book, are responses to a problem that is only partially understood.

Source: The Real Class War – American Affairs Journal, By Julius Krein

The socioeconomic divide that will determine the future of poli­tics, particularly in the United States, is not between the top 30 per­cent or 10 percent and the rest, nor even between the 1 percent and the 99 percent. The real class war is between the 0.1 percent and (at most) the 10 percent—or, more precisely, between elites primarily dependent on capital gains and those primarily dependent on profes­sional labor.
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While the top 5 or 10 percent may not deserve public sympathy, their underperformance relative to the top 0.1 percent will be more politically significant than the hol­lowing out of the working or lower-middle classes. Unlike the work­ing class, the professional managerial class is still capable of, and re­quired for, wielding political power.

Members of the top 5 or 10 percent have done better than the middle and working classes in recent decades, but this masks their dramatic underperformance relative to the top 1 percent (and espe­cially the top 0.1 percent).

the costs of maintaining elite status—and passing it on to one’s children—have risen disproportionately for the top 5 or 10 percent. The ongoing decline of the middle and working classes may have reinforced the top 10 percent’s sense of elite status, but it also means that any backsliding would be catastrophic. These pressures have converged in two key areas in particular: real estate and education.
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This underappreciated reality at least partially explains one of the apparent puzzles of American politics in recent years: namely, that members of the elite often seem far more radical than the working class, both in their candidate choices and overall outlook. … Many of the most aggressive proposals associated with the Left—such as student loan forgiveness and “free college”—are targeted at the top 30 percent, if not higher. Even Medicare for All could potentially benefit households earning be­tween $100,000 and $200,000 the most; cohorts below that are already subsidized.

The purposelessness of many professional careers in the capital accumulation economy starkly contrasts with the growing number of unaddressed needs in the public sector. The legions of finance drones making utterly pointless discounted cash flow models could be far better employed designing a serious industrial policy. The engineers currently laboring over algorithms to make social media more addic­tive should be funded to focus on more productive technological advances. All the effort now devoted to coming up with new pricing strategies for old drugs could be directed at real medical problems, like increasing resistance to antibiotics. The vast resources invested in unprofitable ride-hailing apps and real estate arbitrage could have been used to solve America’s ever-increasing public infrastructure and housing challenges.