Squeezing the rich is good: even when it raises no money

by Chris Bertram on February 2, 2014

In the UK the press and commentariat have been in a huff about Labour’s proposal to levy income tax at 50% on incomes above £150,000. This is supposedly “anti-business” and “sends the wrong signal”, despite the fact that the top rate was higher under Thatcher. Much noise also about the danger that “wealth creators” (whoever they are) may leave and go off to other jurisdictions, concern unaffected by the fact that lots of other countries tax those on high incomes at a steeper rate. All of this is to be expected of course, as is the fact that journalists, who, when spouting right-wing guff, claim to be “reflecting” the views of their readers, continue to spout it when those readers disagree, as in this case.

However, the feature of the discussion I want to write about is the assumption, generally taken as decisive by the commentariat, TV interviews and the like, that if such a tax would raise little or no money then that should count against it decisively. On this view taxes are an unfortunate necessity, required to finance state expenditure and to be minimized whereever possible: a tax that raises no money is therefore pointless, imposing needless pain for no benefit.

But this view is just plain wrong, for several reasons. First, in a complex society structured by all kinds of institutional rules, the idea that people have full liberal property rights in their pre-tax income is unwarranted. They participate in a co-operative venture with others in society subject to certain conditions, and those conditions include one that part of “their income” already belongs to the wider society, via the state. This point, hated by libertarians, defeats the widespread view that people are having “their money” take off them: it wasn’t theirs to start with. Though I think such an argument, with some caveats, is correct, it is a second and third consideration that I’d want to rely on here.

The second consideration is that inequality is deadly for democracy, and for the equal political status of citizens. Because the power and influence high earners derive from their income threatens such status equality, there is a strong public interest in constraining it, even if doing so raises no money at all. It isn’t just that the rich come to own media outlets or that politicians are swayed by their donations to parties, it is also that the prominence their cash gives them gets them listened to and taken seriously by opinion formers. Their experience matters and shapes public policy, that of an unemployed teenager in the North East doesn’t: we need to shift the balance of voice in favour of the unemployed teenager and against the City trader.

Third, income inequality makes life worse for the rest of us in real terms. Economists are supposed to believe that utility (whatever that is) matters intrinsically and money only matters instrumentally. But right-wing economists often seem to forget this as soon as they are asked to comment on tax policy and inequality, arguing as if their theorems apply to cash and not to utility. If we’re dealing in cash terms, then a tax that makes some people worse off and nobody better off looks bad, and looks Pareto inferior. But it isn’t necessarily Pareto inferior if we focus on well-being: making some cash poorer may make some others better off, a Pareto incomparable outcome. Here’s one way how: if those on high incomes have too much, they can outbid the rest of us for goods that are intrinsically in limited supply or where supply can’t be quickly increased. If I’m further away from being able to buy a house near to where I work, because house prices are raised in an auction I can’t compete in, then I’m worse off even if my income stays flat. Reducing the purchasing power of the wealthy is therefore good for me (unless I got hold of a house early and can earn windfall gains from the auction). And similarly for many other goods. Unrestrained income for the wealthy also means that they can commit more of their resources to ensuring that their offspring make it to the top in the next generation, thereby harming the opportunities for the rest of society.

I could go on and enumerate more mechanisms whereby squeezing high earners is good, even if it raises no money, but the general point should be clear. It should give Labour reasons to go on the offensive (“class war”); it certainly gives the commentariat reason to stop making their stupid talking point. They won’t, of course.

[Update: the originally posted text mis-stated the threshold, now fixed]

{ 362 comments }

1

adam.smith 02.02.14 at 5:22 pm

I agree with all three points, but would point out that, empirically, soaking the rich has not proven a very good strategy in combating inequality. The US has the most progressive system of taxation among advanced industrialized countries. Sweden has one of the least progressive systems of income taxation among advanced industrialized countries. (http://lanekenworthy.net/2008/02/10/taxes-and-inequality-lessons-from-abroad/ & more posts on his blog). Yet Sweden does a hugely better job redistributing. Politically, Chris may still be right and “soak the rich” is a winning strategy. But policy wise the right strategy is to collect more taxes—even if they’re regressive—and make better use of them.

2

MPAVictoria 02.02.14 at 5:22 pm

Bravo! Plus I am not at all sure that the tax would not raise more revenue.

3

MPAVictoria 02.02.14 at 5:32 pm

Adam the US does not have the most progressive tax system
See:
http://delong.typepad.com/sdj/2012/11/tax-shares-paid-by-the-rich-does-the-us-have-the-most-progressive-tax-not-tax-and-transfer-but-tax-system-in-the-oecd.html

Also the data used appears to not include state and local taxes which are usually highly regressive:
http://www.motherjones.com/kevin-drum/2011/03/who-you-calling-progressive

4

JW Mason 02.02.14 at 5:43 pm

Right on.

Adam Smith is right that the US combines a relatively progressive tax system with high level of post-tax income inequality. Not sure what this proves. The US also combines the worlds best universities with a not so great system of K-12 education. I don’t imagine adam.smith (or anyone else) would take this as an argument against higher ed.

5

In the sky 02.02.14 at 5:54 pm

Also the data used appears to not include state and local taxes which are usually highly regressive

By “highly regressive” I think you actually mean “not very progressive”.

6

JW Mason 02.02.14 at 5:55 pm

That said, I did write a little opinion piece a few years ago, making the case against tax fairness on somewhat similar grounds.

7

Plume 02.02.14 at 6:03 pm

Adam.smith,

Using the term “soak the rich” immediately places you. It’s an absurd term, used by the rich to prevent fair taxation. Or those who defend them.

The “progressivity” of American taxation, by the way, has plummeted in the last four decades. From the 1930s through the early 60s, the top rate was in the 91% range, and effective taxation for the wealthy was in the 55% range. Today? You have the Romney’s of the world paying 14% effectively — well, at least on the one and only tax return he let us see.

We need to go back to those old rates, but add many more tax brackets after 400K. That’s an absurdly low “top” bracket, given the fact that Americans make billions in a single year.

Something like 1 mil; 10 mil; 50 mil; 100 mil; 1 billion might be good. The top rate should be 99%. And lest someone respond with, “Well, then no one will strive to make that much.”

Good. Because those who do, if they have a workforce, get their money by radically underpaying their workforce to an obscene degree. There is no other way to make billions except through exploitation. We shouldn’t allow that as a society. It actually should be illegal. So a high tax is the next best thing to what is truly needed — to outlaw the hoarding of massive amounts of personal wealth.

8

adam.smith 02.02.14 at 6:05 pm

MPA – Kenworthy has more links here: http://lanekenworthy.net/2012/02/16/is-the-u-s-tax-system-more-progressive-than-those-of-most-other-rich-countries/ take a look at the Barnes and the Whiteford posts in particular. Note that all of these people (with the possible exception of Whiteford) are ideologically to the left of Drum and DeLong.

@JW Mason – given your opinion piece I’m not sure we disagree much here. At least I agree with your 2003 version ;).

9

Plume 02.02.14 at 6:08 pm

Good article from Salon about the massive influence of money in our politics, from a different angle:

http://www.salon.com/2014/02/01/the_1_percents_most_ruinous_sin_how_they_sap_our_politicians_of_all_decency/

Think about politicians who spend five hours a day listening to filthy rich people whine about their persecution (to get their donation). And then compare that with the time spent talking to average Joes and Janes a day by these same politicians. Which is about zero.

No wonder our policies are so completely skewed toward the 1% and above.

10

adam.smith 02.02.14 at 6:08 pm

11

hix 02.02.14 at 6:12 pm

Well, Sweden must be doing something wrong. That might be it.

12

MPAVictoria 02.02.14 at 6:15 pm

adam@8
Adam you didn’t say the US had one of the most progressive tax systems, you said it had the MOST progressive.

13

MPAVictoria 02.02.14 at 6:16 pm

Also any study that doesn’t include state and local taxes doesn’t tell us much.

14

adam.smith 02.02.14 at 6:23 pm

MPA – did you follow the links as I suggested? Barnes has the US as most progressive. Whiteford has the US as first or second depending on measurement.

15

Plume 02.02.14 at 6:27 pm

Adam.smith,

Hopefully you realize he is using the term ironically. It’s not typical of Krugman to echo fat cats and their shills when it comes to language. Not that he is a radical anti-capitalist, or anything. He’s far from that. But he still keeps away from such loaded, nonsensical language, unless he’s been ironic.

16

soru 02.02.14 at 6:29 pm

On the other hand, raising no money is a highly unlikely property of a tax rise. So if some specific tax change genuinely would raise no money, something is fishy. Most likely the person or organisation saying it would be revenue-neutral is lying, for the usual reasons.

If not, then there very likely is some other change which will also have equal or greater good side-effects, but also raise money. Which seems not only more useful, but also a politically easier sell.

17

Plume 02.02.14 at 6:31 pm

Also, talking about “progressivity” without addressing effective taxation is rather empty. It’s similar to apologists for the 1% banging on about how high our corporate tax rate is when no corporation actually comes close to paying it.

Most, according to the GAO, pay nothing. There are enough carve-outs, deductions, write-offs, subsidies, etc. etc. to make that the norm.

18

adam.smith 02.02.14 at 6:31 pm

oh god no, I hadn’t notice that. Please write ten more posts explaining irony to me!!!

19

Plume 02.02.14 at 6:34 pm

Soru,

Agreed. It’s fishy and defies math and logic.

If, for example, we raised the rates, added higher brackets, and got rid of loopholes, endless deductions, subsidies, etc. etc. for the rich and the super-rich, revenues would have to go up. It would be impossible for them not to rise.

And we know about the reverse. Bush cut taxes in 2001 and 2003, and revenues fell for his first three years and his last. They didn’t even exceed Clinton levels until 2005. It took five years for them to beat Clinton’s last year of revenues, and that is a record gap, at least since Hoover.

20

Plume 02.02.14 at 6:35 pm

Adam.smith,

Then why did you bring it up?

21

MPAVictoria 02.02.14 at 6:38 pm

“MPA – did you follow the links as I suggested? Barnes has the US as most progressive. Whiteford has the US as first or second depending on measurement.”

And Brad Delong disagrees. At the very least the point is debatable.

22

mrearl 02.02.14 at 6:42 pm

In The Sky, I think MPA meant “highly regressive,” not relatively unprogressive. He could have omitted the “highly,” but here’s evidence of ” just plain regressive” state and local taxation from folks who apparently don’t think regressive taxes are such a bad thing:
http://taxfoundation.org/article/comments-who-pays-distributional-analysis-tax-systems-all-50-states

So, even in rebutting ITEP, regressive taxation is conceded at the state and local level.

23

Consumatopia 02.02.14 at 6:43 pm

Even if adam.smith is right, that’s not an argument against soaking the rich, it’s an argument for soaking the middle class too. Why not have both a strongly progressive income tax and a VAT?

That said, reading through all of those linked posts, I’m not sure I saw anything that directly answered DeLong’s point that some “negative taxes” in the US like the EITC and the Child Tax Credit are more comparable to what other countries would call transfers.

24

Plume 02.02.14 at 6:49 pm

Consumatopia ,

I think the EITC is necessary right now, but it’s a bad idea overall. It makes it easier for wealthy corporations and business owners to keep their wages low, knowing the public kicks in the difference. It would be much better, IMO, to do at least these two things:

1. Raise the minimum wage to $15 an hour, and hook it to inflation.
2. Set a maximum ratio of ownership (or executive) pay to rank and file of 10 to 1.

It would be far better, as long as we’re stuck with capitalism, to make sure capitalists pay workers fair wages, than to externalize their costs onto the public at large. We shouldn’t have to subsidize their greed.

25

elm 02.02.14 at 6:50 pm

Let’s play a game of chasing-definitions!

But we can all play. The bit that adam omits is Transfers (colloquially, they’re thought of as taxes too, so its slippery to make the distinction behind the scenes).

And the u.s. has one of the least progressive transfer regimes among developed countries http://inside.org.au/how-fair-is-australia%E2%80%99s-welfare-state/

26

adam.smith 02.02.14 at 7:04 pm

@Consumatopia – good points. In an ideal world having both VAT and strongly progressive income tax would be the best outcome. What I was trying to say is that given the empirics we have, I’d spend more energy on the former than the latter, at least if the principle goal is fighting inequality as Chris’s post suggests. I’m still open to the possibility that “class warfare” in tax policy is good politics.

As for how to categorize the EITC—that comes down to whether looking at tax progressivity without transfers makes any sense at all. Arguably it doesn’t. Once you count the EITC out, you also have to count all the stuff that Suzanne Mettler categorizes as the “submerged welfare state” out. Which goes back to the point I think JW Mason’s piece makes nicely. We should focus less on the the details of taxation and more on having a robust state apparatus and public sector.

27

hix 02.02.14 at 7:21 pm

The super rich all mainly earn capital income, which makes taxation highly regressive just about anywhere in the western world. One doesnt even have to consider all the more or less legal accounting Shenghians to shift off those profits to the Caymans or Ireland.
The richest Swede has all his money in a fake charitable foundation or on the Caymans. Its a shame. Guy pays 0 capital gains taxes.

28

Plume 02.02.14 at 7:55 pm

adam.smith,

But if we talk about hidden “welfare,” then we have to talk about the not so hidden trillions spent on wealthcare. We fight most of our wars to protect and defend markets and private property for the wealthy, and to force new markets open for our capitalists. We spend fortunes protecting private property for the rich domestically. We spend fortunes protecting their so-called rights in courts. We externalize their costs for them when it comes to pollution and waste — and rotten wages and benefits. We taxpayers spend roughly 7 billion a year to subsidize fast food corporations, for example.

And we lead the world in that waste and pollution. We actually throw away roughly half of our food, for instance.

Whenever the conversation turns to “transfers” it inevitably leaves out the rich. But they, in fact, receive the greatest amount. And it’s not close.

29

adam.smith 02.02.14 at 8:10 pm

Plume, do you ever read a single link? You clearly have no idea what Mettler’s work is about and what the “submerged welfare state” refers to. Which is fine, but then don’t comment on my use of it or, you know, do something shocking and spend an hour reading instead of writing twenty repetitive posts.

30

Collin Street 02.02.14 at 8:26 pm

We should focus less on the the details of taxation and more on having a robust state apparatus and public sector.

But the rich are opposed to that, too, and for much the same reasons.

[power is a positional good, and a more-powerful more-effective state diminishes the power of the privately wealthy.]

31

Plume 02.02.14 at 8:30 pm

adam.smith,

My post at 28 is a first for me on the topics mentioned. Try again.

And you might try to link to actual articles, instead to a site, when you show a subject line of a particular author. It’s lazy.

32

UserGoogol 02.02.14 at 8:32 pm

Plume@24: The public is not a disjoint category from corporations. EITC is funded by taxes (and deficit spending), and corporations and rich people do pay a decent chunk of that, although not as much as one might like. The EITC is an alternative way to get money from corporations to workers. Some of that tax burden gets paid by the rest of us, but some of the cost of the minimum wage is going to get shifted onto prices too.

More generally, a minimum wage is mathematically equivalent to a tax of $X for each man-hour a company employs which is then funded towards a $X/hr wage subsidy, with the difference that the company pays its workers directly instead of going through the government. By having an explicit wage subsidy like the EITC, you have more flexibility to play around with things: have rich companies pay more into the system, have the benefit not be based on a strictly per-hourly basis, and so on. Moving from EITC as it is to EITC as it might be, moving from funding it out of the general budget to funding it from a payroll tax of some kind could help further push the burden onto corporations without just having a minimum wage.

Focusing on wages (especially when you make clear you aren’t particularly fond of the wage system) just seems too narrow minded. The working poor need money, and the rich have plenty to take. How we get the money from point A to point B is a technical issue that shouldn’t be obscured by whether the transaction goes through the government.

33

Plume 02.02.14 at 8:41 pm

Usergoogol,

But even with the EITC, they aren’t making enough money. And, with 95% of recent gains going to the top 1%, I think it’s more than fair to raise the minimum wage.

Executives paid themselves roughly 25 times their rank and file in the 1960s. Today, it’s more than 400. In Fortune 100 companies, more than 1000. And that’s just domestically. If we count workers overseas, the ratio is off the charts. Workers at Foxconn make 70 cents an hour, for instance, to build Ipads. Apple made 41 billion in profits in 2012 as a result, and added to its cash reserves enough to bring that total to 161 billion, give or take.

To me, it’s immoral, indefensible, unforgivable, that we, the public, should have to subsidize low wages for very, very profitable ventures, so execs at those companies can hoard millions or billions unto themselves. That’s just despicable and it should be illegal. They make their fortunes through the grotesque underpayment of wages. Why on earth should the public support and subsidize that?

If we must keep our disgusting economic system, then execs should be forced to pay at least living wages, and redistribute profits back to the workers who create them, instead of shareholders.

34

Omega Centauri 02.02.14 at 8:43 pm

I think in the USA the discussion gets derailed because of the distortion caused by S-corps. These are small generally family owned businesses, and profits are taxed as if they are individual income, even though in many cases they are reinvested in the corp. So in the US at least there is at least a little bit of truth to the complaints about the taxing the job-creators. I don’t know if the UK has similar issues, -or if small privately held corps can play by the same tax rules as the boys.

I wouldn’t say that it is impossible for a tax increase to decrease revenues. In the case of a tax like the one discussed here, at least some of the wealthy targets will move overseas, and thus this tax-minimizing behavior will cut into revenue. It becomes a matter of does the government lose more due to this effect, than it raises from those who stay.

35

Brett Dunbar 02.02.14 at 8:45 pm

It is possible for a tax to raise negative revenue, the very rich pay rather a lot of tax both on income and on spending they also employ personal staff who also pay tax. They are rather more capable of moving abroad than lower income groups. If the tax lost from those rich people who move abroad exceeds the additional tax paid by the rich who don’t relocate then the tax costs money.

36

Plume 02.02.14 at 8:46 pm

Companies don’t leave because of taxation in America. We’re among the least taxed people in the developed world. Effectively. After deductions, etc. etc.

They leave to take advantage of even cheaper labor and even more laxness in regulations. It’s not about taxes. But they claim it is. And that’s just pure BS and propaganda, designed to maximize their profits even more.

37

Plume 02.02.14 at 8:52 pm

Brett Dunbar,

Where are they going to go, when the rest of the developed world has much higher taxes on the rich than we do?

Again, it’s a phony, bogus threat.

“Keep our taxes low or we’ll go Galt.”

Then go. We don’t need or want you. And it also tells us everything we need to know about their actual loyalties. They aren’t to America or Americans. They’re to Greenland. Moneyland. Money. Yet another reason why it’s insane to depend upon people who couldn’t care less about society overall. We need to bypass them altogether and hire people directly, via a major expansion of the public sector. Guarantee that there is no unemployment, by law. Make sure anyone who wants to work, never has to wait for a job, and is paid a living wage, at least.

It’s time to stop being the victims and playthings of the 1% and above. What a fool’s game that is.

38

Eric Titus 02.02.14 at 9:00 pm

Why all the vitriol against adam.smith? It seems fair to say that tax progressivity doesn’t explain the differences between the US and Sweden. And really, raising rates without cutting down on loopholes seems like an ineffective strategy for reducing income inequality.

The larger point is that maybe the way to reduce inequality is to increase spending on redistribution (welfare, public schools, etc) or public goods (parks, arts, etc) rather that taxing the rich. Maybe the inequality in the US today is more about the decline of unions and social equality than lower tax rates. I think this is why folks to the left of Delong/Krugman criticize their obsession with tax rates.

MPAVictoria – Delong’s method is problematic. According to his graph/logic, a country where the top 10% have 26% of the income and pay 26% of the taxes is as progressive as a country (the US) where the top 10% have 34% of the wealth and pay 45% of the taxes. While some of Delong’s stuff is excellent, this one does not pass the eye test.

39

djr 02.02.14 at 9:16 pm

I think that arguing against the “if it raises no money, it’s a bad idea” argument would be a mistake politically, significantly because to do so would implictly concede the “it will raise no money argument”.

Nobody actually seems to think it would raise no money, estimates for how much it would raise seem to be contentious, from £100M to £3.5B depending on behavioural response.[1] (I think that’s code for “getting accountants to come up with ways to avoid paying it”.) That’s 0.2 to 7 times the amount the bedroom tax is expected to save.

[1] http://www.theguardian.com/politics/2014/jan/27/ed-balls-50-tax-rate-deficit-thinktank

40

Plume 02.02.14 at 9:17 pm

Eric,

Yes, we need more public spending for the poor and the working class. But if you don’t tax the rich more, where do you get the money? Does it make sense to tax the non-rich more in order to help the non-rich? Seems like a bit of a wash. Not fully, of course. But you’re at least reducing the impact of greater spending and potential reductions in inequality.

The richest 400 Americans hold as much wealth as the bottom 60%. Just 400. And one family, the Waltons, heirs to the Walmart fortune, hold more than the bottom 40% combined. You’re not going to help inequality levels by a little bit more social spending, especially while taxing the people you’re trying to help.

The gap is so grotesque, so unconscionable, we’re long past dabbling with the margins. We need much stronger medicine. I think the only solution is to dump our system altogether, as it’s just economic apartheid writ large. But short of that, we’re going to need to radically increase taxes on the rich, and make it illegal to continue to underpay workers to the degree now in effect, at least (since roughly 1973).

41

MPAVictoria 02.02.14 at 9:23 pm

“But if you don’t tax the rich more, where do you get the money?”

This is the key point.

42

Brett Dunbar 02.02.14 at 9:29 pm

There was a section on the 31st January episode of Tim Harford’s radio 4 series More or Less on how much the 50% band actually raised. The programme is available permanently as a podcast on the radio 4 website at http://www.bbc.co.uk/podcasts/series/moreorless

43

Eric Titus 02.02.14 at 9:38 pm

Plume @40
Let’s take your example about the Waltons. Most of their wealth is in stocks, so changing tax rates will not affect their wealth one whit. And when they sell stock they are taxed at the capital gains rate, so income tax hikes would have a minimal effect. (capital gains taxes are increasing this year).
On the other hand, raising the wages of Walmart workers (through minimum wages or other action) would actually have a dramatic impact on inequality.

44

Plume 02.02.14 at 9:45 pm

Eric,

It’s not an either/or thing. Both/and.

I think capital gains should be included in one’s personal income total. No difference. We shouldn’t tax labor more than investment. All monies made, just total ‘em up and tax them together. The more you make, the higher the percentage. As mentioned, we really need those higher tax brackets, too.

As a society, we have a vested interest in discouraging personal accumulation of great wealth. It’s bad for society. Very, very bad for society. If we stick with capitalism, taxation is one method of evening the playing field and discouraging said hoarding.

And we need to make it the law to pay a living wage, at least.

45

AA 02.02.14 at 9:49 pm

Income taxes don’t seem like the fairest form of taxation. What about people who have extremely volatile incomes? They’ll pay more in taxes than a person who earned the same amount in a smooth, constant way. And income taxes do not take into account the debts that individuals may have accrued in order to get to their current position. When lawyers and doctors or small businesspeople are hundreds of thousands of dollars in debt, their “high” income is effectively far lower than it seems. Nor do income taxes really get at the people with the huge dynastic wealth, whose money often comes from long-term capital gains.

Why not do a wealth tax instead? Yet it’s a rare politician who will speak up for it instead of higher income taxes.

46

roy belmont 02.02.14 at 9:59 pm

One thing that may be working behind the tax-free gated security fences, where the refusal to share has become a moral philosophy, is the idea that one surefire way to reduce income inequality is to reduce the actual numbers of the inequal – not by economic adjustment, but by actual elimination.
The poor are no longer complaining, because the poor are no longer with us.
That this has a parallel in the inaudible response of some wealth-hoarders to climate change – that the reduction of carbon footprint is easiestly done by reducing the size of the foot itself.
It’s right out of fuedalism’s playbook.
Get em all hooped up and ready to kill, and then sic em on each other.
Or maybe some kinda manageable plague?
Only right now that’s not available, or timing or something. And communication’s so pervasive and instant that you got to watch what you say, even at closed-door dinners for the mega-rich.
So there’s a quietus.
But that neo-Darwinian hope is still there.
Why should we share our hard-won wealth with people who shouldn’t even be here in the first place?

47

adam.smith 02.02.14 at 10:09 pm

“But if you don’t tax the rich more, where do you get the money?”

This is the key point.

And my key point is that, judging by the countries who do at least decently well at redistribution, the answer is by taxing everyone—including the rich—more. All (I believe, haven’t gone through them one-by-one) countries that achieve significant degrees of redistribution have national VATs above 18%.
One problem is that, as hix says, taxing the super-rich isn’t actually all that easy at the national level. Thomas Piketty (who with Saez assembled the data behind the 1% argument) just has a new book out on global inequality that’s getting a lot of attention (summary here) and he thinks the only way to get to the super-rich are international agreements (which he strongly supports).
I’m not sure that’s right (I’d be more optimistic that we have some leverage nationally, especially for a country like the US), but he’s certainly right that raising income taxes is not going to affect the 1% very much.

Some other points
I agree with djr @39. Even if just for argumentative purposes you don’t want to stipulate the (almost certainly incorrect) notion that we’re on the right side of the Laffer Curve in any advanced industrialized country.

@Eric – thanks. Though I think part of this is that my first post wasn’t particularly clear, partly because I assumed that Kenworthy’s arguments had been absorbed more widely in the US left than they have been, partly because I was still trying to figure out my exact view on this. So here’s another try, now somewhat clarified:

I take Chris’s argument 2&3 to be:
Claim 1: Inequality is bad in a number of important ways
Claims 2: We should tax the rich more because
Claim 3: Taxing the rich more lowers inequality, even if it doesn’t increase tax revenues.

As I said, I entirely agree with Claim 1. I have no strong opinion on Claim 2, but am happy to agree. I disagree with Claim 3 on empirical grounds. The progessivity of tax code has almost no impact on how much redistribution takes place in a country (so it doesn’t really matter whether the US’s taxes are the most progressive or not, I probably should have left that out. The differences are tiny anyway) Among advanced industrialized countries, the total amount of tax revenues is by far the strongest predictor on how much redistribution happens through the system of taxes and transfers. So I’m mainly reacting against the “even if it doesn’t raise revenue”. Because empirically, raising tax revenue is by far the most important thing to do if you want to fight inequality. And it almost doesn’t matter how you do it. For example if you gave me the choice between a 20% tax increase on the top 1% or a 20% tax increase on everybody, my argument is that the progressive option should be the latter.

48

Neville Morley 02.02.14 at 10:10 pm

I’m well aware of all the arguments about the impossibility and irrelevance of classical antiquity as a model for the modern world – but as an inspiration, if nothing else, Athenian democracy has a lot going for it: that’s democracy in its literal sense as the power of the ordinary people – the poor, as Aristotle expressly notes – to defend themselves against the rich and keep them in line. Yes, it was only for citizens, and that excluded women, and some of them had slaves, but the basic idea that communal wealth should be used to support everyone, and that the rich needed to be soaked regularly for the collective good – and the success of a system that got the rich informing and bringing court cases against one another for failing to be suitably generous benefactors to the community – is worth keeping in mind.

49

Bruce Wilder 02.02.14 at 10:20 pm

Neoliberal ideology is so thick a blanket over our ability to think about these issues that I wonder if many of us can, even with the best will in the world. Knowing some economics, even being something of an alleged expert, is as likely, it seems, to make you stupid as a rock, as it is, to give any genuine insight.

Lane Kenworthy is so full of it, I don’t think I can take up his nonsense, without foaming at the mouth. His alleged “mild progressivity” is just an artifact of the underlying dynamic driving upward re-distribution, the bow wave of the SS Plutocracy driving northward.

UserGoogol @ 32

By having an explicit wage subsidy like the EITC, you have more flexibility to play around with things: have rich companies pay more into the system, have the benefit not be based on a strictly per-hourly basis, and so on. Moving from EITC as it is to EITC as it might be, moving from funding it out of the general budget to funding it from a payroll tax of some kind could help further push the burden onto corporations without just having a minimum wage.

Maybe I’m reading too much into this, but is the premise that the incidence of payroll taxes falls on corporations? I know that’s a neoliberal doctrine, but it is also craziness. I fear that “you have more flexibility to play around with things” and “How we get the money from point A to point B is a technical issue” just seems like a prescription for the political equivalent of hiring neoliberal technocrat Larry Summers to do (another) frontal lobotomy, followed by shock treatment for our depressed state. “a technical issue” is too likely to become another name for a political shell game.

50

mattski 02.02.14 at 10:31 pm

Bruce,

This stuff gets you a little worked up. Don’t get hung up on Larry Summers.

Krugman & Stiglitz balance it right out.

51

Bruce Wilder 02.02.14 at 10:38 pm

adam.smith @ 46

You cannot escape the reflexivity between the fiscal regime (taxation and public spending on public goods) and the distribution of (pre-tax) income. The analytic convenience of presuming even for a moment that pre-tax income is a priori to policy, and independent of fiscal policy (and monetary policy in the broad sense that includes regulation of financial institutions) is just an invitation to self-deception.

It’s a dynamic system. If a policy of reducing the extremes of inequality is successful, then rich people will claim less of the whole society’s income, and it will be necessary to tax more broadly, because income is more broadly distributed.

The argument that, say, a 50% tax on top incomes will not raise all that much revenue — which I don’t believe for a second, by the way; the best evidence is that the inflection point of the so-called Laffer Curve is more likely to be in the neighborhood of a 70% top marginal rate — misses the point, if the assertion rests on the idea that the distribution of income will change in response to the tax, in ways that reduce the tax’s revenue-raising potential.

So, if the goal is a less extreme distribution of income, then, yes, in a sense, the goal is a broader regime of taxes, which can raise revenue against a broad distribution of income. But, that doesn’t mean that a broad distribution of taxes is an effective initial means to achieve a broader distribution of income.

52

Bruce Wilder 02.02.14 at 10:41 pm

mattski @ 50

Stiglitz, maybe. Krugman is a case of “with friends like this . . . ” much of the time. Krugman labels himself a liberal, but he’s a very conservative fellow in certain ways, and particularly in the economic doctrines he adheres to.

53

mattski 02.02.14 at 10:42 pm

But, that doesn’t mean that a broad distribution of taxes is an effective initial means to achieve a broader distribution of income.

It has the virtue of being better in the long term and politically easier in the short term.

54

mattski 02.02.14 at 10:43 pm

@ 52

You’re giving me a sad. I take it you don’t read his stuff on a regular basis?

55

JW Mason 02.02.14 at 11:02 pm

I take it you don’t read his stuff on a regular basis?

Have you looked at his textbooks?

56

Don N. 02.02.14 at 11:25 pm

@52 and 55 – yes I have. Really, don’t embarrass yourselves. He is both liberal, wants much stronger redistribution and cares to change structural inequality. You really are off base.

DN

57

Collin Street 02.02.14 at 11:59 pm

It has the virtue of being better in the long term and politically easier in the short term.

Are you unfamiliar with the concept of “hysterisis”?

58

notsneaky 02.03.14 at 12:13 am

Hmm. Ok, let’s call this what it is: an argument for tax rates on the rich that are on the “wrong side” of the Laffer curve.

And let’s get the preliminary caveats out of the way: currently existing tax rates on the rich are probably not anywhere near the “wrong side” of the Laffer curve. So basically this is a theoretical exercise. There’s still a lot of room to argue for higher tax rates on the rich, even if one thinks this whole argument is bunk. In other words, just because I disagree does not mean I don’t think we shouldn’t increase the tax rate on the rich.

Ok, now the argument itself.

The first part, ” First, in a complex society…” just says that some part of an individual’s income/wealth is a result of the existing social infrastructure which makes it possible to earn it, rather than due to an individual’s own “effort”. And that means that all individuals in society should be expected to contribute their “fair” share to maintaining that social infrastructure. Sure, of course. But that’s an argument for positive – and progressive – tax rates, not necessarily on tax rates on the rich “on the wrong side of the Laffer curve”. In other words at best it’s a necessary not a sufficient condition for the conclusion drawn.

Second premise: “The second consideration is that inequality… This is basically a rent seeking argument (it’s only sort of about inequality). Folks who already have lots of wealth/income have the ability to use that wealth/income to transfer further wealth/income from others to themselves. By taxing the people who due to their high income/wealth are most likely to engage in rent seeking, we limit their power to engage in such behavior. Even if such taxes raise no revenue (or even less revenue) there might be a pure efficiency advantage to such a policy (less rent seeking). To some extent I buy this. But it’s still cost/benefit kind of thing and it’s not clear that you really want to go that far (thinking about it quickly, putting these kinds of rent-seeking considerations into it shifts the Laffer curve right, allowing for a higher efficient tax rate, but it doesn’t completely eliminate it)

The third premise income inequality makes life worse for the rest of us in real terms… is … pretty weird. It’s essentially an argument that envy and jealousy should be rewarded. So my rich, born with a silver spoon in his mouth, never had to worry about a thing, neighbor gets struck by lightning. I feel better now. Should social policy really reflect those kinds of preferences? You take that argument seriously, you’re gonna end up going some dark paths.

So go with #2 but flesh it out.

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derrida derider 02.03.14 at 12:18 am

Peter Diamond and Emmanuel Saez are two of the world’s leading authorities on optimal taxation – one is a Nobellist, the other a Clark medallist (many insiders think the Clark more prestigious than the quasi-Nobel). They run a series of formal (ie nice mathematically buttoned down) arguments here that, because at upper incomes it is mainly positional goods that yield utility – that is, at the upper levels income yields steeply declining marginal utility (a finding with some empiric support in ingenious experiments). So if we tax ALL the rich heavily (ie don’t change their position much relative to each other) they won’t really miss the money.

Now there is, unfortunately for we progressives, some pretty good econometric literature that finds that very high marginal tax rates does reduce measured income (some from increased incentives for tax evasion, some economically “real” because these people then work, save, rip off their shareholders and lobby politicians less enthusiastically). Diamond and Saez’ point, then, is the same as this post but comes from a more “economic” perspective – that measured income in the case of the rich is a misleading guide to their welfare. But unlike the post it doesn’t require us to consider the rich as a pack of bastards we wish to get revenge on.

D & S, for example, argue that we should set marginal tax rates for the 1% only at the Laffer point – the point where revenue is maximised,. In the US they calculate that’s about 73 cents in the dollar, based on the empiric literature. Any higher leaves us less revenue to spend on people who will enjoy the extra money.

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Bruce Wilder 02.03.14 at 12:48 am

notsneaky @ 58 is doing a pretty good job of getting down to it.

3.) income inequality makes life worse for the rest of us in real terms… I don’t see why this statement points to “envy and jealousy” as opposed to, say, status-seeking conspicuous consumption, which is socially wasteful, or injurious social or political domination, which leaves “losers” sick and depressed.

2.) a rent seeking argument Why not start from an argument from incidence and economic rents? It seems to me that a realistic model of income distribution would identify economic rents as an important “unearned” component of income, particularly the incomes of rentiers and the politically powerful (C-suite executives).

By having a relatively low marginal rate of income tax on business corporations in possession of significant sources of economic rent and their controlling top executives, we are incentivizing (I hate that word) the ruthless exploitation of political and market power. Laffer might be right: lower marginal rates get more effort, but it’s effort focused on predation and looting.

1.) As a policy aimed at backing away from an emergent neo-feudalism of globalized rentiers, the “wrong side” of the Laffer Curve might actually be the right side.

61

Bruce Wilder 02.03.14 at 12:54 am

derrida derider: unlike the post it doesn’t require us to consider the rich as a pack of bastards we wish to get revenge on

Having watched the spectacle of Tom Perkins (he of the $300,000 wristwatch — talk about positional goods!), this week, it’s hard not to think that we should skip income taxation and go directly to confiscatory inheritance taxes combined with summary execution. If they give every evidence of being a pack of rabid dogs, what’s the percentage in denying reality with them?

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JW Mason 02.03.14 at 12:54 am

income inequality makes life worse for the rest of us in real terms… is … pretty weird. It’s essentially an argument that envy and jealousy should be rewarded.

I think only an economist could think this way. “Envy and jealousy” includes concern with almost everything that makes for a decent existence — a sense of personal agency and of personal significance, having authority in some domain, being free from arbitrary authority of others, a secure place in one’s community, a degree of status and respect, an opportunity to participate in collective decision making. All of which depends on one’s relative position.

And even if you don’t buy that, even if you still want to call it “envy and jealousy,” who are you to tell people that that part of their subjective wellbeing doesn’t count?

63

QS 02.03.14 at 12:55 am

Why do we keep talking about income tax when the giant sucking sound is emanating from capital gains? Why is a 1%’ers cash income treated differently from income made on investment? Why no system that pegs the individual’s capital gains tax to their income tax bracket, such that a 1%’er would pay 39.6% tax on their investment income? Do that and you’d have more than a nominally progressive tax code: the rich would have to pay up, finally.

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QS 02.03.14 at 12:58 am

All of which depends on one’s relative position.

Capitalism is a system that runs on relative position. Are you relatively more credible as a job candidate? You’re hired. People don’t get feel like losers because they’re mentally weak, but because inequality has real material knock-on effects.

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Bruce Wilder 02.03.14 at 1:00 am

QS @ 63

Low capital gains taxes, generous depreciation and depletion allowances, low inheritance taxes, uncollectable corporate income taxes, etc. do make the tax code far from progressive in its upper reaches. But, hey, don’t tell Lane Kenworthy. He’ll cry.

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Plume 02.03.14 at 1:01 am

The discussion of inequality has nothing to do with jealousy or envy. Suggesting that is just a lame attempt to silence that discussion, or at least deflect attention from the wealthy. No one with any intelligence falls for that nonsense.

Inequality is created by taking something from others so you have more than they do. Wealth is finite. Time is finite. Labor is finite. Resources are finite. If one person has more of something, others have less. That’s just math and physics.

Conservatives, however, have this odd belief that money can be multiplied, alchemically, magically, so that everyone wins and no one loses anything. Unless, of course, they have to pay taxes. That someone can magically make billions without screwing over, exploiting and otherwise shitting on a huge number of people. Sorry, but that’s impossible. Anyone who has managed to hoard millions of dollars via business has done so through screwing over his or her workforce, plus consumers, plus the earth.

Inequality is not only unjust, it’s indefensible. Mathematically, socially, environmentally and economically. The latter, primarily because people who concentrate large amounts of money actually take that money OUT of the economy, and the capitalist system needs money to flow through it, not kept out. The concentration of money in a few hands reduces economic activity, demand, growth. And in the capitalist system, that hurts all of us.

67

Plume 02.03.14 at 1:03 am

Not to mention the increase in social pathologies and suffering across the board, as addressed here:

http://inequality.org/

and here:

http://www.equalitytrust.org.uk/

For starters . . .

68

JW Mason 02.03.14 at 1:07 am

No one with any intelligence falls for that nonsense.

If only that were true…

69

mattski 02.03.14 at 1:07 am

JW Mason @ 55

No, I haven’t. What would I see there?

70

David Kornreich 02.03.14 at 1:25 am

From what I know S-Corporations profits are income. Owners are able to use the company account to pay all sorts of basically personal expenses. Their should be a cap on the amount of money that can be earned as an S-Corporation or a tax somehow related to it’s spending.

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JW Mason 02.03.14 at 1:30 am

Mattski-

You would see many of the views that he (rightly) attacks on his blog and his column, presented as fact.

One example. The current edition of International Economics (published 2012) states repeatedly and unequivocally that “An increase in the money supply must eventually cause all prices to rise in proportion.” And this isn’t just an aside — it’s the central assumption of his explanation (based on Dornbusch’s model) of how monetary policy in a floating exchange rate environment works. So when he mocks people for thinking that huge expansion in the monetary base since 2008 must, must eventually cause runaway inflation, he is mocking them for believing what he himself teaches.

72

In the sky 02.03.14 at 1:38 am

The latter, primarily because people who concentrate large amounts of money actually take that money OUT of the economy

How do you take money out of the economy, exactly?

73

Plume 02.03.14 at 1:43 am

By sitting on it, instead of spending it.

America works on roughly 70% consumer spending. Stashing the money offshore, in the Cayman’s, investing it overseas, or sitting on it in any other form takes it out of the spending flow.

Our economy doesn’t generate economic activity through the concentration of money. It generates it through consumer spending. And rich people are the least efficient spenders on the planet. The working poor and the middle class the most efficient. They spend virtually all of their money here, now.

Nick Hanauer does a great job explaining this here:

74

Plume 02.03.14 at 1:49 am

In the sky,

I responded. It’s in moderation. Probably cuz I posted a video, too. Nick Hanauer’s, from his TED talk.

75

Plume 02.03.14 at 1:55 am

JW Mason,

Isn’t it true that the total amount of the money supply isn’t really important? It’s who has the money, not the total. I think the Ron Pauls of this world are a bit crazy on that topic.

The Fed a few years ago handed out 16 trillion dollars to banks and corporations around the world, and we didn’t see a blip on the inflation screen. I think that was the single biggest increase in the money supply evah.

Since the rank and file hasn’t seen an increase in our wages for forty years, demand hasn’t gone up, which is necessary for prices to go up, in general. Demand has gone down instead.

It’s not the total amount. It’s how it’s distributed. And right now, it’s distributed among people (the rich) who don’t drive consumer spending, because they spend so much less as a percentage of their own totals. And this removes it from the people who spend the most, the working class, the middle class, etc. etc.

In short, the wrong people have the money, when it comes to a consumerist-driven economy.

76

notsneaky 02.03.14 at 2:07 am

Bruce, really quickly,

3) I can elaborate later on but I think my statement is pretty obvious. Consider an alternative situation. Once a year we round up all the rich people who have incomes above X$ per year. And then, as part of an exercise in social catharisis we go around and kick each one of them in the nuts (they’re all male, of course). However, we do let each of them opt out of getting kicked in the nuts by paying Y$. The only argument for this kind of policy is that it makes the rest of feel good to kick some rich SOBs in the nuts. Maybe. Probably. But… what kind of theory of morals are you relying upon here? One which says this is a universal good, not just “feels good” for the us, who do the kicking.

2) Sure, that’s more or less part of what I said. But that’s still just an argument for progressive taxation, not “kick’em in the nuts” taxation. (To the extent there might be some wiggle room, like I said, this is the part which can actually works logically, but it needs to be made more precise)

3) Assumes it’s conclusion. It is good if we do X. Suppose we do X. It is good. The actual question is “do we want to back away from an emergent neo-feudalism of globalized rentiers” AT A COST TO OURSELVES (or simply to spite some others). Because that’s what Chris is arguing for. It’s not just an argument that it would be good to “back away from an emergent neo-feudalism of globalized rentiers” but that it’s even good to do so just out of spite and envy.

Look, if you wanna go around kicking rich guys in the nuts because it makes you (and the non-rich guys) feel better, I sympathize with the intent. But I’ve got enough self-awareness to realize that it’s essentially a shitty, petty, instinct. Like I said, I can’t think of a theory of morals which would say, hey, that’s hunky dory, indulge. So I’m not gonna pretend that it’s a policy that is recommended for society as whole. It’s like a fantasy that’s better off never put into practice.

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notsneaky 02.03.14 at 2:13 am

In the above example, the Y$ the rich pay to avoid getting kicked in the nuts is burnt in a public bonfire while the rest of us chant loudly while wearing funny looking hats with big black clasps and very very short shorts. In other words, the Y$ is a pure waste by assumption.

78

derrida derider 02.03.14 at 2:32 am

What notsneaky said.

And do not forget that the filthy rich are a very tiny minority, especially outside the US. It’s a mathematical fact that if you want to raise a shitload of money to spend on the poor you have to heavily tax those in the middle, not just the top. The truly rich class has money but no people, the truly poor class has people but no money (d’uh). Only the middle class has money and people.

What I’m saying is that people here who want a big welfare state, more public goods, etc should be first and foremost arguing for more taxes on themselves – nice solidly paid academics in the top quartile but not the top percentile – not some tiny distant class of strangers they have never met and are never likely to become. Because it never ceases to amaze me how dead keen most people are on more taxes or less welfare or both for people who are not them.

79

Anarcissie 02.03.14 at 2:33 am

MPAVictoria 02.02.14 at 9:23 pm:
“But if you don’t tax the rich more, where do you get the money?”
This is the key point.

In the sky 02.03.14 at 1:38 am:
“The latter, primarily because people who concentrate large amounts of money actually take that money OUT of the economy”

How do you take money out of the economy, exactly?’

Answer to question 1: you print it, or create it ex nihilo as credits to an account. Then later you can tax people, take the printed money or credits away, and destroy them. Unlike commodity money, fiat money has no significant physical being and can be popped in and out of existence at the will of whoever has the money power — usually, the government. It has a spooky, mystical quality of not quite being there, like certain particles in QM. This is something to remember when you hear that somebody has billions of dollars.

Answer to question 2: see answer to question 1.

What giving money or any other kind of wealth to rich people does do is destroy utility. A dollar or anything you can get with a dollar is worth much more to a poor person than a rich one. When you move dollars or other wealth to the rich, you destroy most of its utility. Destroying utility creates scarcity, which is crucial to the capitalist social order. Keep most of the money and other wealth away from the working class and the poor, and allow landlords, real estate speculators, banks, and other rentiers to feast on them so that they have to work for bits of it, and you can keep up the value of money with respect to labor and goods produced by labor, in spite of its rather fictional nature.

Another problem with soaking the rich is that, even if their money were real, you would have to keep them around to soak. But once you create a social order with a class of rich people, they will not permit you to soak them any more (except theatrically).

80

notsneaky 02.03.14 at 2:45 am

I think only an economist could think this way.

I don’t think so, most economists I know recognize that getting satisfaction out of another person’s misfortune is not a pretty thought. And if you’re right, then that just means the economist has it right.

“Envy and jealousy” includes concern with almost everything that makes for a decent existence

Really? I guess for some people it’s true. The people who… get eaten up with envy and jealousy when others are better off than them. But are those the “representative agents” we want to base public policy on? For most people a “decent existence” means being able to satisfy their basic needs, a certain level of security and comfort, and some amount of hedonistic indulgence. None of these things necessarily depend on others experiencing less happiness and being made worse off.

— a sense of personal agency and of personal significance, having authority in some domain, being free from arbitrary authority of others, a secure place in one’s community, a degree of status and respect, an opportunity to participate in collective decision making. All of which depends on one’s relative position.

They may depend on one’s relative position, or they may not. If I can experience a sense of personal agency and of personal significance, with authority in some domain, and free from arbitrary authority of others (that one is the separate rent seeking argument sneaking in there), a secure place in my community and a degree of status of respect (perhaps I don’t even care about that) and an opportunity to participate in collective decision making (again, rent seeking argument, not this argument) WITHOUT regard to how others folks are doing then, no, it doesn’t depend on my relative position. If it does, then yeah, it’s a form of envy and jealousy. And again, we’re not talking about what exactly it is that makes people happy – as that can lead down some dark paths – but whether or not considerations of envy and jealously are something to account for in how structure public policy.

And even if you don’t buy that, even if you still want to call it “envy and jealousy,” who are you to tell people that that part of their subjective wellbeing doesn’t count

The same person who thinks it’s ok for me to tell others that it’s pretty shitty to experience happiness at others expense. You don’t like that person? Well, who are you to tell me……..

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notsneaky 02.03.14 at 2:46 am

Dang it, “most economists I know ” –> “most non-economists I know”. No preview button.

82

notsneaky 02.03.14 at 2:57 am

(Krugman’s) current edition of International Economics (published 2012) states repeatedly and unequivocally that “An increase in the money supply must eventually cause all prices to rise in proportion.”

He does need to add “outside of a liquidity trap” in there, but otherwise it’s fine. Drop him a note next time he brings it up.

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Bruce Wilder 02.03.14 at 2:58 am

notsneaky

I think you’re imagining asymmetry, where I see symmetry. I don’t imagine that the rich are without resentments. I think the rich might enjoy kicking poor me in the nuts, for the fun of it, and, as a matter of social and economic policy I would prefer that the government constrained them from doing so. A 70% top marginal rate might be one element of an effective policy of constraint.

84

JPL 02.03.14 at 3:01 am

Well done, Prof. Bertram! Best post I’ve seen on CT for quite a while. I haven’t got time to comment now, but we need to have a fuller explicit understanding of what ‘equality’ means in the areas of economic activity and the application of ethical principles. Imbalances of economic outcome such as we are seeing these days lead to asymmetries in the application of ethical principles in so many other areas of social policy where the interests of the wealthy are opposed to the welfare of everybody else, meaning benefit for the .1 percent and harm for everyone else, for no justifiable reason. Along similar lines, there was an interesting interview with Angus Deaton on the LSE British Politics and Policy blog (“Five minutes with Angus Deaton”). This problem, of the ability of the wealthy to override ethical principles in policy making, concerns the whole world; all political systems seem to tend toward plutocracy. And there needs to be a definite effort to respond to corporate media hacks when they parrot their specious conventional nostrums.

Also, thumbs up to Bruce Wilder, esp. @61.

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MPAVictoria 02.03.14 at 3:02 am

Meh, I am fine with kicking this asshole and all his asshole friends in the balls

http://online.wsj.com/news/articles/SB10001424052702304549504579316913982034286

I don’t think that that makes me a shitty person. You defending him and his ilk might make you one though.

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Plume 02.03.14 at 3:11 am

Conservatives often say there is not enough money amongst the rich to tax. Taxing it won’t put a dent in the deficit.

Well, let’s see. The 1% brings in roughly 20% of all income, though I’ve seen estimates as high as 25%. Income for Americans was roughly 8 trillion last year, though I’ve seen estimates as high as 11 trillion. That means the 1% made at least 2 trillion that we know about.

If they paid as much as they did from the 1930s thru the early 60s, effectively (55%), that would put revenues at roughly 1.1 trillion. Again, that’s just for the top 1%. Given the fact that they pay significantly less that that, effectively — well under half that rate — at worst, we’re doubling revenues just from that 1%. And, if we add new tax brackets for the super-rich, that revenue total would go higher.

In short, a tax increase on the wealthy would garner many hundreds of billions in new revenue a year. At least. That’s not bean bag.

87

notsneaky 02.03.14 at 3:12 am

I don’t imagine that the rich are without resentments. I think the rich might enjoy kicking poor me in the nuts, for the fun of it,

Sure, but they shouldn’t be allowed to do it, and the fact that they shouldn’t be allowed to do it is NOT an argument that the non-rich should be allowed to do it.

and, as a matter of social and economic policy I would prefer that the government constrained them from doing so. A 70% top marginal rate might be one element of an effective policy of constraint.

Let’s say I agree in principle (I don’t know if 70% is the right number, but I agree with the general intent). But that is – as I pointed out – an argument for progressive taxation, or an argument for limiting rent-seeking. It’s not an argument for just taxing people for the hell of it, with no concrete benefit to others, simply because it might make someone less envious.

Meh, I am fine with kicking this asshole and all his asshole friends in the balls

Me too. But there’s a difference in what we feel is fine for us personally, and skipping along to the conclusion that it’s a good idea to base social policy on such sentiments. Like I said, you take that seriously, and you wind up in some dark places.

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Plume 02.03.14 at 3:19 am

There is nothing “for the hell of it” involved. Nothing. Taxing the rich more is far better for the economy, for social cohesion, for the health and longevity of the rest of the population, for democracy and as an incentive to reinvest in production, rather than speculation. It would lower deficits and eventually debt, and allow greater social spending. It’s all positive — even, ironically, for the wealthy themselves. It redirects their personal greed and selfishness into more productive venues that would redound to them a thousand times over. It would increase demand for their own products. It would, in short, be great karma for them.

There is no downside.

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JW Mason 02.03.14 at 3:20 am

I am not happy in a world in which some people get to make many decisions that affect everyone’s lives, while most people get very little say.

That is not the same as wanting to kick anyone in the balls.

There is no special moral status to the distribution of property rights and associated incomes that happens to exist right now. The belief that economic outcomes should weight Bill Gates’ preferences one million times more heavily than yours or mine, is no different from the claim that our preferences should be weighted equally. Some people think one kind of world will be better to live in, some the other.

Here’s a lovely grassy field? What shall we use it for? This is a decision we make collectively. If I feel strongly about it, but someone else gets to make the choice without any input from me, my unhappiness has nothing to do with jealousy.

And you can’t say, “he makes the choice because he owns it.” Whether he ought to own it is the question we’re discussing.

90

MPAVictoria 02.03.14 at 3:22 am

“Me too. But there’s a difference in what we feel is fine for us personally, and skipping along to the conclusion that it’s a good idea to base social policy on such sentiments. Like I said, you take that seriously, and you wind up in some dark places.”

Yes truly the real danger that exists right now is that society might pick on the rich. We are lucky to have you among us as a prophet of some dark, terrible future.

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JanieM 02.03.14 at 3:23 am

JW Mason @ 87: Well said.

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Plume 02.03.14 at 3:24 am

JW Mason,

About those collective decisions, versus decisions made for us by a tiny fraction of the population, the financial elite:

Really good article on Salon today. A shocker that it’s published in a mainstream outlet. A very pleasant shocker, as I agree with pretty much everything the author says:

http://www.salon.com/2014/02/02/why_youre_wrong_about_communism_7_huge_misconceptions_about_it_and_capitalism/

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Bruce Wilder 02.03.14 at 3:25 am

In the sky @ 72: How do you take money out of the economy, exactly?

Presuming that this is a colloquial expression, I think a reasonable interpretation might be along the lines of “investing” in purely financial assets. Where by “purely” I mean financial assets, which are not ownership claims on productive “real” capital, but simply money debts. If the rich “save” a lot, the other side of this saving is the poor “borrowing” a lot (or the government borrowing a lot). For a while, the poor may be spending their borrowed funds on final consumption, but, sooner or later, a larger and larger part of the earned income of the poor will be diverted into the payment of interest and debt, and these payments become income to the rich, who “save” it as more borrowing by the poor. (Or, if it is the government, the government sees an increasing portion of its tax revenue diverted from spending on public goods or transfers to the poor, to servicing its growing debt, i.e. transfer the rich, who are the gov’t’s creditors.)

This is “taking money out of the economy” in the sense that it can set up a spiral in which effective demand for final goods is drained from the economy, as the “saving” by the rich and corresponding “borrowing” by the poor or the government reduces final demand for goods.

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Plume 02.03.14 at 3:28 am

MPAV,

I’m in my 50s, and I can’t remember a time when the filthy rich whined and moaned so much about their supposed persecution. It’s unprecedented in my lifetime.

In the past, they at least had the decency to hide such feelings, if they had them. And for most of my youth, CEOs didn’t even appear publicly. This seemed to change with Lee Iacocca of Chrysler. It’s been all downhill since. The billionaire as deluded Rock Star and Martyr all in one.

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JW Mason 02.03.14 at 3:31 am

Really good article on Salon today.

Oh hey I know that guy! Had beers with him a couple months ago. Good for him…

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Plume 02.03.14 at 3:32 am

Bruce Wilder,

Thanks. You explained it much better than I did. My response post is still hung up in Moderation. Probably because I added a video by Nick Hanaeur (TED talk) about how one billionaire won’t buy as much in this economy as a thousand working class folks, etc.

Our economy is consumer-driven (70%). It doesn’t do well if people sit on their money. That’s taking it out of the economy in effect, even as it’s being “invested.”

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whatever 02.03.14 at 3:37 am

I think the ‘rich will leave’ argument is antithetical to a market economy. If an agent in an economy choses to leave, other actors will replace him or her. simple as that.
SO yes, let hte rich go galt. There will be others to take over.

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adam.smith 02.03.14 at 3:53 am

Bruce @51 – I didn’t read further downthread, so might not answer all of your points, but I don’t know why you think I’d disagree with any of what you write. Nowhere do I suggest that pre-tax income inequality is a given. I don’t even mention pre-tax inequality. I think 90/50 inequality can be reduced through straightforward means like stronger unions and collective bargaining. 99/50 inequality requires more directly political change, but like Hacker/Pierson I don’t think it’s a coincidence that 99/50 rations are much higher in places where unions are weak.
But Chris’s post is about taxation, so I wrote about taxation.

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GiT 02.03.14 at 4:13 am

@66

“Inequality is created by taking something from others so you have more than they do.”

That’s one way of creating inequality. It’s clearly not the only way. It’s entirely possible to add value. Wealth is not just the amount of matter and energy available for use.

“Wealth is finite. Time is finite. Labor is finite. Resources are finite.”

Sort of. Not in the sense you probably intend, though. People have done a pretty good job of magnifying the labor and wealth they get out of their finite time and resources. And not all such increases depend on increased consumption or exploitation of time and resources. Beethoven didn’t take up much more time and resources than others of the time, and yet he created quite a bit of value.

Increases in the quality and efficiency of “work” have increased “wealth” lots. Take a fixed pool of time and resources, and you can create a huge variety of magnitudes of real wealth out of it, varying on the basis of distribution, technique, design, and invention (not that those 4 things are exhaustive…). Give me 8 hours, a tool set, and some lumber and you’ll get jack shit. Give it to a carpenter and you’ll probably get something useful, maybe even something beautiful.

“If one person has more of something, others have less. That’s just math and physics.”

Well, that’s a restatement of the first sentence, and it remains wrong. Whatever you think “math and physics” say aside. If I show you a trick for getting the arils out of a pomegranate you didn’t know, no one has less but you have more. And we need not confine such increases in wealth to the exchange or diffusion of techniques, knowledge, skill, stories, &etc (“intellectual property”, though it need not be property).

Rearrange things and you increase wealth, just by applying information about preferences. The basic principle of exchange at work here is pretty simple (‘it’s just math’, one could add). I have X and it is worth $10 dollars to me. It’s worth $20 to you. You have Y and it’s worth $5 to you and $20 to me. We swap. Presto, a world with more wealth than before, achieved simply by rearranging who has what in their possession.

“Conservatives, however, have this odd belief that money can be multiplied, alchemically, magically, so that everyone wins and no one loses anything.”

I don’t care how money ends up fitting into the picture, but to repeat, it is entirely possible to win without losing. Pareto improvements exist, and it’s trivial to demonstrate this. Turning their existence into a ridiculous ideology about how to structure society (NAP branded libertarianism) is absurd, but that doesn’t controvert obvious truths.

“That someone can magically make billions without screwing over, exploiting and otherwise shitting on a huge number of people. Sorry, but that’s impossible.”

No, not really. The Harry Potter books made a few hundred million. In a world with a larger relevant book reading demographic, it’d be billions. I don’t think Rowling was shitting on anyone when she wrote them. I don’t think her writing them required her to deprive others of much of anything. I’m fine with taking most of that income back and passing it around, but it’s not because I think she exploited people to get it. I look forward to the sophistry explaining how she did.

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JW Mason 02.03.14 at 4:28 am

I don’t think her writing them required her to deprive others of much of anything.

Her writing the books didn’t deprive anyone of anything. Her *getting an income* from the books certainly did. Specifically, it deprived people of the right to freely copy and distribute and make use of the stories in their own way. Her property is not in the books. It is in the legal right to exclude others from using the books in a certain way.

(Similarly, whatever she has spent her income on is the right to exclude people from certain goods. To own a house simply means to have the legal right to deprive others of the use of it.)

Now, you might think that, on balance, this is a good trade for society. I think all of us agree, for example, that it is a good thing that you have the right to deprive others of the use of your personal residence. But that doesn’t change the reality that that is what it is.

We can debate whether the current right-to-exclude Rowling has with respect to her books is the right one. Certainly we want some provision to be made for people who spend their time writing. Are copyrights better than fellowships, stipends, etc.? Maybe so, maybe not. Perhaps we think the chance of getting rich encourages people to write better books. On the other hand, some people who might have enjoyed the books, didn’t get to read them. Some people who might have sold their own books based on hers, didn’t get to make an income from that. Some plays or alternative movies based on the books didn’t get made. And so on.

We can decide whether we think, on balance, a stronger right-to-exclude would lead to better outcomes, or a weaker one, or just the one we’ve got, or none at all. But we cannot say that Rowlings *property rights over her books* (as opposed to the writing of them itself) does not deprive anyone of anything. By definition, it does. That’s what a property right is.

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notsneaky 02.03.14 at 4:31 am

@87

I am not happy in a world in which some people get to make many decisions that affect everyone’s lives, while most people get very little say.

That is not the same as wanting to kick anyone in the balls.

It’s not. And it is also not what we’re discussing. The statement “we should increase taxes on the rich in order to distribute decision making power more equally” is not the same as the statement “we should increase taxes on the rich, even if it raises less revenue, because it will make some people feel better”. Chris establishes the case for the former, then waves some hands, does some sleight of hand, poof of smoke, and claims he’s made the case for the latter. That’s what I disagree with.

There is no special moral status to the distribution of property rights and associated incomes that happens to exist right now.

Sure. But again, that’s an argument for redistributive taxation, for progressive taxation and for taking from the rich to give to the poor. It is not an argument from taking the rich and flushing it down the toilet in the hope that that will somehow make the poor feel better.

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JW Mason 02.03.14 at 4:46 am

“we should increase taxes on the rich in order to distribute decision making power more equally” is not the same as the statement “we should increase taxes on the rich, even if it raises less revenue, because it will make some people feel better”

I think they are the same — except the last clause should read, “because it will make people better off.”

taxing the rich and flushing it down the toilet in the hope that that will somehow make the poor feel better.

What’s the referent of “it” here? Money claims are not the same as real goods and services. Suppose Bill Gates’ bank balance today is $90 billion, tomorrow we make it $90,000. In what way have we as a society become poorer?

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Plume 02.03.14 at 4:55 am

GiT,

I’m talking about making a fortune from business, via a workforce. You respond with hypothetical single human actors who make innovations, or artists, or someone outside the business world. And even then, you speak of added value via labor, but it’s labor in capitalism that receives so little compensation for what it does, while capital takes the lion’s share.

A business owner derives their compensation by taking the revenues generated by their workforce, by the sweat and blood of others, keeping most of that for themselves, and then redistributing back some of it to that workforce. The workforce is being screwed over relative to the amount taken from them for the value they’ve produced, the hours they work, etc. It is impossible for an owner to both pay a fair salary and make a fortune. It’s mathematically impossible, as mentioned. If an owner pays fair compensation for labor done for him or her, there is not enough surplus left over to hoard vast sums.

There is enough for the owner to make a nice living. But not a killing.

As for Rowling. In a sense, she is quite different, because her production came mostly from herself. I respect that, as a writer and artist meself. I respect being compensated for what one does, as opposed for what others do for you, which is the business/employer/employee model in a nutshell.

That said, Rowling never could have made her fortune without workers at the bookbinding and manufacturing side, or the truckers who took her books from point A to point B, or the bookstore employees making minimum wage who sell and track her books for her and so on. No one does it alone anymore. But, unlike with business owners, who often get paid obscenely high salaries even when their companies are basket cases, Rowling made her money on the actual sales volume of her books. So, again, she has a better case for her compensation. But far too many of the people involved along the way did not get a fair share for the work they did.

Who is rewarded and for how much is arbitrary in our society. What is valued and what is not is arbitrary. The people who call the shots and make the rules set value to maximize their own compensation, and that results in winners and losers. Capitalism can’t function without that. Economic apartheid is baked right in. It’s in its DNA.

And we haven’t even started to talk about the part played by the public sector in all of this, through infrastructure, schools, museums, libraries, R and D, the Internet, etc. etc. Where would business owners be without the public sector picking up so much of their tab for them?

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GiT 02.03.14 at 4:59 am

“Her writing the books didn’t deprive anyone of anything. Her *getting an income* from the books certainly did. Specifically, it deprived people of the right to freely copy and distribute and make use of the stories in their own way. Her property is not in the books. It is in the legal right to exclude others from using the books in a certain way”

I can get a free copy of HP right now. And there’s troves of fan fic floating around. For the most part her income comes from a large number of people not minding tossing Rowling 10 dollars for a book. And the mere possibility of amassing billions by millions of people not minding tossing you a few dollars, or an hour or two of labor, or whatever, for creating something they like doesn’t go away by working up the usual talk about the right to exclude, which is really tangential to the main point.

Plume says any fortune requires shitting on people. But all it takes to get a fortune is a huge audience with the willingness and the ability to toss you a few bucks for what you do. This is true whether they do it in a ‘pay what you wish’ world or a regime of enforceable intellectual property rights.

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Brett 02.03.14 at 5:06 am

Good points, GiT. Truth be told I don’t care if some people are making billions – I only care if the rest of society is growing as well, and that’s the problem for me with the present economy (not that Mark Zuckerberg or J.K. Rowling are billionaires). Inequality is endemic to any society that progresses beyond the point of direct democracy levels, and you see it even in companies where the workers have direct voting power over the spread between low-level employee play and top-level employee pay (at Mandragon, for example, the wage differential has gone up over time – it went from 1:3 to 1:9 and higher for particular places, although it’s still far lower than what we see in regular large firms).

I don’t think the type of super-high income taxation that’s Plume’s arguing for will have the effects they think it will. There are always ways around taxes, in part because tax shortcuts tend to be popular with everyone, and not just the rich (try abolishing the mortgage interest deduction in the US). You’d see more stuff like “company cars”, or the company paying for your home/apartment payments (Jack Welch got a super-expensive company apartment as part of his compensation). You know, sort of like how the Soviet Union didn’t pay senior bureaucrats more – they just gave them special privileges like extra (and more comfortable) homes, extra access to stores selling high-quality foreign goods, special cars, and so forth.

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Brett 02.03.14 at 5:12 am

@Plume

A business owner derives their compensation by taking the revenues generated by their workforce, by the sweat and blood of others, keeping most of that for themselves, and then redistributing back some of it to that workforce.

This isn’t pre-modern agriculture. The business owners make an offer to people to do stuff for him or her for an agreed-upon amount, they do stuff, they get paid when the owner’s not being a shitheel. What the owner chooses to pay themselves is the amount they’ve decided they need to be paid for the whole venture to be worthwhile, as opposed to going off and doing something else. And without the owner, there is no compensation for anyone, no “revenues generated by the workforce”, no business.

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Plume 02.03.14 at 5:21 am

Brett,

Not true. Not at all. We don’t need a single “owner.” They are completely superfluous to our existence and a functioning economy. We could just as easily do everything we need ourselves, in a public sector, and make the Commons wall to wall.

And even in our existing system, you should care that someone makes billions. That means that the amount of money he or she makes is NOT made by others. Money can’t exist in two places at once. It can’t magically be in Zuckerberg’s pocket and yours and mine at the same moment. If he controls it, hoards it, sits on it, it’s not in the pockets of his workforce, who would spend it in a far more efficient manner.

Tell me, if you own a really huge store, with all kinds of goods to sell, which would you rather see? Mark Zuckerberg, with his, let’s say, 1 billion in disposable cash? Or 10,000 people with $100,000 to spend in your place of business?

If you say Zuckerberg, you’d be a very stupid business owner.

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Plume 02.03.14 at 5:28 am

Also, that part about the agreed upon pay? Nonsense. Workers take what they can get, and they have no say in what they get. They aren’t in the driver’s seat. Especially with high unemployment. Capital is in the driver’s seat.

It’s a right-libertarian myth to claim workers accept crappy wages “voluntarily” so it must all be legitimate and beyond questioning.

No one’s buying that garbage.

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notsneaky 02.03.14 at 5:54 am

I think they are the same — except the last clause should read, “because it will make people better off.”

By assertion? At least conceptually they’re obviously different. And if someone is made “better off” (i.e. they feel better) if someone else is made poorer (all else constant and all that) then that surely is just envy and spite.

You appear to be saying that because it is possible for the same policy to have two different outcomes simultaneously, then that implies they are the one and the same outcome. Not so.

What’s the referent of “it” here?

The taxed away income/wealth of course.

Money claims are not the same as real goods and services. Suppose Bill Gates’ bank balance today is $90 billion, tomorrow we make it $90,000. In what way have we as a society become poorer?

Irrelevant side issue. Obviously we’re using dollar income or wealth as a stand in for real resources since we don’t want to waste time on semantics, since that’s not the point of discussion. BTW, the same rhetorical question can be asked with regard to Joe Schmoe’s grandmother who’s got 2000$ dollars in life savings in her account. If tomorrow we make that 2.02$, in what way have we as a society become poorer?

Think of it as burning down all of Gates’ mansions, dumping a few of his cars in the Pacific, and kicking his cat if you have to.

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The Temporary Name 02.03.14 at 5:54 am

Truth be told I don’t care if some people are making billions – I only care if the rest of society is growing as well

When it isn’t you can point to a billionaire and rightly say their money is misallocated.

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Collin Street 02.03.14 at 6:07 am

The business owners make an offer

The business owners do shit. The business managers make an offer, &c. Sometimes the “business owner” and the “business manager” are the same people, but in a joint-stock company — the vast bulk of our economic activity — that’s not the case, and it’s certainly not a distinction you can just handwave away.

[this is a pretty basic error, you know. You shouldn't have made it. You should be deeply embarrassed that you have made it.]

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JW Mason 02.03.14 at 6:30 am

By assertion? At least conceptually they’re obviously different. And if someone is made “better off” (i.e. they feel better) if someone else is made poorer (all else constant and all that) then that surely is just envy and spite.

As a card-carrying economist (your PhD is from Northwestern, iirc), you are obliged by the laws of the guild to judge well being only in terms of people’s preferences as expressed in their behavior. If people are willing to incur a cost to burn witches on the village green, then witch-burning is an economic good. You might not go in for it yourself, but if the goal is just to organize society in the way that best fits your personal view of what’s best, no reason to bother with markets and prices and such.

Irrelevant side issue. Obviously we’re using dollar income or wealth as a stand in for real resources

No, it is relevant. But I thank you — seriously! — for writing this. Those of us on the Post Keynesian side get into the habit of saying “capitalist economies are based on money contracts not barter” so much that it becomes a kind of catechism. We forget what it means and why it matters. This exchange is reminding me why it does.

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Brett 02.03.14 at 6:41 am

@Plume

Also, that part about the agreed upon pay? Nonsense. Workers take what they can get, and they have no say in what they get. They aren’t in the driver’s seat. Especially with high unemployment. Capital is in the driver’s seat.

It’s worse with high unemployment, but no, they still can refuse an offer – especially in a society with welfare support, although their standard of living may drop (and I’m in favor of having a basic income specifically to allow people to drop off if they’d prefer to live off of the equivalent of $20,000/year as opposed to working). And there are policies to boost the economy that can create tighter labor markets, where employers actually do have to compete over employees and try to bait them away with bonuses and higher wages than competitors.

Not true. Not at all. We don’t need a single “owner.” They are completely superfluous to our existence and a functioning economy. We could just as easily do everything we need ourselves, in a public sector, and make the Commons wall to wall.

The real world and historical examples of this don’t fill me with confidence. Having a diversity of owners weakens the bargaining power of any particular owner, whereas having it in the power of state means they can send you to jail in addition to refusing to employ you, and you don’t have any alternatives.

It can’t magically be in Zuckerberg’s pocket and yours and mine at the same moment. If he controls it, hoards it, sits on it, it’s not in the pockets of his workforce, who would spend it in a far more efficient manner.

If it’s not in his pocket then it might never have existed in the first place. Like I said, this isn’t pre-modern agriculture, and modern wealth and income isn’t “land” that you can have under the control of a feudal lord or democratic collective of farmers with equal productivity and output.

I do think you can tax at higher levels without substantially affecting that output, but that’s tweaking the existing system as opposed to tossing it aside in favor of some unknown alternative whose real life case examples, again, don’t fill me with confidence.

@Collin Street

The business owners do shit. The business managers make an offer, &c. Sometimes the “business owner” and the “business manager” are the same people, but in a joint-stock company — the vast bulk of our economic activity — that’s not the case, and it’s certainly not a distinction you can just handwave away.

In joint-stock companies, yes, and in fact I do have issues with joint-stock company set-ups where the shareholders have actual power to turf out executives for not paying them enough in dividends as opposed to buying a share of firm output in exchange for what is essentially a fixed-sum loan of money.

That said, I’m not sure the alternative would be much better. You’d have a collection of family firms and partnerships, meaning that ownership would likely be even more concentrated. Better to tweak the system, making it harder for shareholders to overthrow leadership for short-term gains.

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GiT 02.03.14 at 7:11 am

“I’m talking about making a fortune from business, via a workforce”

And a business includes the gains in wealth from the mechanisms mentiond Those mechanisms for value creation don’t disappear. The exploitation of surplus value remains the exploitation of *surplus* value. Value in excess of the value of the raw inputs – at base, value in excess of the cost of the reproduction of the worker.

” You respond with hypothetical single human actors who make innovations, or artists, or someone outside the business world.”

I’m not sure why you think exchange, allocation, direction, invention, design, the application of technique, &etc only occur outside the business world.

“And even then, you speak of added value via labor, but it’s labor in capitalism that receives so little compensation for what it does, while capital takes the lion’s share.”

Some labor is highly compensated, most isn’t. And I’m not sure what your “but” is there for. Yes, labor adds value (specifically: socially necessary labor. “Work” alone, in the physics sense is ambivalent). That’s all it takes for us not to be talking about zero sum. It remains the case that we’re talking about a positive sum game. A positive sum game can also be a win/lose rather than a win-more/win-less game, but that’s a separate question.

“The workforce is being screwed over relative to the amount taken from them for the value they’ve produced, the hours they work, etc.”

Being screwed relative to what it was possible for you to have gained is not the same as being worse off than you were ex ante. But even then, as before, being worse off than you were ex ante doesn’t imply that you’re in a world with less wealth and value than before.

” It is impossible for an owner to both pay a fair salary and make a fortune. It’s mathematically impossible, as mentioned.”

You don’t demonstrate “mathematical impossibility” by mentioning things. The impossibility of the proposition has everything to do with your stipulated conceptual definitions and very little to do with math. If you define “owner” to mean someone who doesn’t do anything but take from employees, then naturally it will follow that their receipt of *any* compensation is unfair: you’ve baked it in, you’ve already defined ownership as unfair. This isn’t mathematical proof, it’s tautology.

“Who is rewarded and for how much is arbitrary in our society.”

Not really. It follows perfectly non-arbitrary patterns having to do with wealth, social capital, social networks, skill, institutional structure, features of particular industries, &etc. ‘Wrong’ and ‘unjust’ is not the same as ‘arbitrary.’ Who is rewarded and for how much is reasonably predictable in our society.

“And we haven’t even started to talk about the part played by…”

Which is good, because I’m perfectly aware of these things. As well as the Marx 101 ‘bosses are exploiting the workers’ stuff. I’d really rather keep things focused on the claims that economic activity is all zero sum and that the finitude of time/resources/labor/etc implies that such activity is zero sum, because those sorts of claims ought to be discarded and replaced with a more robust conception of the sources of value.

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Bruce Wilder 02.03.14 at 7:13 am

Better to tweak the system, making it harder for shareholders to overthrow leadership for short-term gains.

I’ll just note that there’s a lot to be said in favor of a 50% corporate income tax rate, and actually collecting the tax, and much of what can be said in its favor is tangential to the revenue raised, though revenue may be substantial. For one thing, thorough tax audits can be an important prop to the integrity of financial accounting and reporting. (When companies are paying the top executives multi-million dollar compensation tied to financial accounting numbers, the marginal incentives can put a lot of unfortunate pressure on accounting controls and standards.) For another, a substantial corporate income tax dampens the oscillation in results, and reduces the risks associated with losses.

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Collin Street 02.03.14 at 7:24 am

@113: you’d be interested in australia’s “dividend imputation” system, which collects some significant corporate taxes and then [effectively] rebates them in their entirety to the company owners recipients in the form of refundable tax credits [attached to dividends paid].

Which is pretty similar to how VAT-type sales taxes work, really [call it a value-removed tax!]. Do the plutocrats like it? No, not so much.

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GiT 02.03.14 at 7:28 am

“Truth be told I don’t care if some people are making billions – I only care if the rest of society is growing as well, and that’s the problem for me with the present economy”

Hmm, I care, because such resources represent both the possibility and the power to direct a lot of activity, and I’d rather diffuse that possibility and power democratically than let it sit in the hands of individuals, who invariably use much of it for risible or invidious purposes.

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Bruce Wilder 02.03.14 at 7:38 am

This Jan 2013 column from Krugman, responding to Stiglitz, is a fairly good illustration of Krugman the conservative economist, while this Dec 2013 column, responding to Ezra Klein, among others is a contrasting illustration of Krugman the liberal political analyst. Both columns are about income inequality and their relation to the Great Recession. Now there’s a year between them, so maybe there’s some evolution going on, but I think a close reading leaves the conservative economist’s major commitments intact. Speaking for myself, I cheer the Dec 2013 column, but I roll my eyes at the Jan 2013 column.

My point is that Krugman’s politics, which are more legible to the vast majority of his readers than his economics, do not always line up neatly with his economics. This isn’t just Krugman; I think it is a general problem in the econoblogs — we tend to identify folks like Brad DeLong and Mark Thoma and Noah Smith, who line up with Krugman, as liberals, because they appear relatively liberal, politically. Their establishment, mainstream economics, though, can be quite conservative, and much harder for many readers to “read”, and this will show up, indirectly, and in sometimes disappointing or frustrating ways.

The economic conservatism, one could say, is as much or more a conservatism of method and a conservatism of socialization, than a conservatism of desiderata. Krugman in Jan 2013 is not saying he wants an extreme income distribution — a political statement. Only that as a matter of textbook economics, he doesn’t see a logically necessary constraint on the content of a technocratic macro policy aimed at full-employment. That’s implicitly a declaration in favor of a certain analytic method, and also certain conventions of the mainstream profession associated with that analytic method. By not seeing a constraint, he legitimates a dialectic with still more conservative economists, who do desire an extreme income distribution (think Mankiw or Feldstein), and, effectively, rejects a dialectic with more left economists, who do see a constraint, or, say, criticize what they regard as an observed instance of policy forming a Marxist Reserve Army of the Unemployed. (A probably horrible example I know, but it is hard to think of an example that doesn’t need a lengthy explanation to be plausible.)

Krugman relies on analytic models almost exclusively, to bolster his intuition. It is a very common style in economics. Keynes was, similarly, an intuitionist. It’s a style, which is quite similar to the Chicago-style of working out the particulars of a deductive system, which was mastered by Samuelson; that similarity of style accounts, I think, for the aforementioned dialectic — the New Keynesians and the New Classicals in macro, for example, find each other’s work legible, even if they persist in talking past each other on every issue of substantial conflict.

The conservatism of his economics makes Krugman, imho, a poor critic of the very conservative, even reactionary Bernanke, just to point to an example of how this matters. He has a hard time seeing daylight between himself and Bernanke, and he’s so busy declaring the triumph of kludgy old IS/LM analysis in explaining the course of the Great Recession, that he seems scarcely aware of the pernicious effects of Bernanke’s policy choices.

He’s a bit too prone to accept certain shibboleths of the profession — he’ll go rather uncritically with a story of exchange rates balancing international trade, and talk of the on-going Euro crisis in those terms. He’s never been particularly good on institutional policy issues, such as how to regulate the financial sector — his method just doesn’t prepare his mind to think effectively about how to constrain strategic competition, or even why it’s important to the performance of the economy overall. He’s hardly alone in this — the macroeconomists, generally, are one big fail on banking and financial regulation.

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Ben Saunders CTA 02.03.14 at 8:34 am

I think that is fair comment that it may be good to deprive others of money in order to improve my situation.

However, it is also true that it may be bad from my perspective to deprive others of money. If I provide goods or services that are mainly of interest to those with more disposable income, then if my target market has less money, then that is bad for me.

To continue your example of buying a house, if I am a house builder and there is less profit on the sale of the house I build, it is bad for me.

And if it is bad for me, I suppose I might not see the point in building the house in the first place.

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Ben 02.03.14 at 8:42 am

“the idea that people have full liberal property rights in their pre-tax income is unwarranted.”

And my teeth? Do my teeth belong to the collective?

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Gorgonzola Petrovna 02.03.14 at 9:13 am

Interesting discussion. I wonder if Ben, talking about his teeth as if they are the same as his dollars @119, is onto something here. True, the idea that people have full property rights to their pre-tax income is unwarranted, but they sure feel like it is warranted. Perhaps a cleaner and easier way to achieve the same goal would be to limit their pre-tax incomes. Placing union representatives on the boards of directors, or something.

122

Peter T 02.03.14 at 9:27 am

In all complex societies those charged with managing the society as a whole have an uneasy relationship with the upper levels of the elites (those with a disproportionate command of the forms of power that society rests on). So classical Greek tyrants and citizen bodies worried about the rich, kings worry about the high aristocracy, the pope keeps a stern eye on cardinals and so on. Where the elite capture the central institutions of the polity life never goes well for those lower down. Very often, it does not go so well for the polity itself. This is not economics, it is basic sociology and an obvious lesson of history (sorry Plume – it’s one Marx got wrong).

Lining up the super-wealthy and mulcting them of a humungous amount to avoid being kicked in the balls would actually be quite humane by comparison with many of the methods historically employed. The point of the exercise is to keep in front of the rich that their wealth and status are not theirs by right, but are an outcome of the joint endeavours of the society of which they are a part. The rich, of course, wish to deny this. If you let them do so, they will escape control.

Neville Morley mentioned classical Athens. They forced the rich to spend a significant fraction of their wealth on public goods (festivals, triremes). That has much to recommend it, for the point is not to find some optimal level of taxation but to continually reduce the wealth otherwise piled up in private hands while continually reminding those hands of their dependence on others.

123

Bruce Wilder 02.03.14 at 9:35 am

The lesson of failed democracy: if you are not managing the commons, you become the commons.

124

Sam Dodsworth 02.03.14 at 9:38 am

And my teeth? Do my teeth belong to the collective?

You know that thing about teeth and money being interchangeable is just a story parents tell, right?

125

Collin Street 02.03.14 at 9:59 am

Ben: a good self-test.

On average, an average person is going to perform averagely in disputes. Which is to say: a dispute requires at least one person to have made an error [of fact, of implication, of relative importance].

So if we assume all disputes have two people, an average person is going to make an average of 0.5 errors per dispute. Real-world, a bit more, because often both people will be partially wrong, a bit less because often disputes have lots of people and we can expect that the less-error side will have slightly more. About fifty-fifty, say, or a decent approximation.

So if you’re admitting to yourself that you stuffed that claim up or something less often than one out of every… three, disputes, say, you’re implicitly claiming that you’re performing significantly above average. And you have to ask yourself where this superior performance is coming from, and there’s only two possibilities:
1: you’re regularly engaging with people significantly less smart than you are [in which case you should think about, you know, maybe stopping being a bully], or
2: your perceived superior performance is illusionary. Dunning-Kruger shit. Not good.

[and you can test for the former by letting someone else judge who your peers are, testing yourself against classmates or co-workers [say] selected by some other person. If you’re convinced that nine-times-out-of-ten you showed up your co-workers or the rest of the people in your tute you should probably conclude that that your conviction is unsound.]

126

Tim Worstall 02.03.14 at 10:29 am

“Adam you didn’t say the US had one of the most progressive tax systems, you said it had the MOST progressive.”

Sadly all answers are correct here. It depends upon what the definitions are. The US Federal income tax system is one of the most progressive income tax systems in the world. The Federal tax system as a whole is also one of the most progressive.

The State and local tax systems are pretty regressive, including as they do sales taxes.

It’s the absence of a VAT of Federal sales tax that makes the Federal system so progressive in comparison to other tax systems.

This is pretty much Lane Kenworthy’s point. He goes on to point out that if you want to raise enough money to run something like a European welfare state then income tax just isn’t going to manage it. You need to have something like a VAT to be able to collect enough of GDP to pay for it all.

Re the Diamond and Saez rate of 73% as the peak of the Laffer Curve. That does come with some caveats. That’s if there are no allowances in the system. And it’s also specific to the US tax system, based as it is upon possession of a passport, not residency. There’s an implication in their paper that a residency based system (like has to be true in the EU, given the free movement of labour) has a lower peak, 54% from memory.

And the UK already has a top rate at about that: there’s no limit on employers’ NI and yes, that 13% or so has an incidence upon the employees’ wages, not the employers’ profits. Add that to the current 45p rate and we’re around that peak already.

“Third, income inequality makes life worse for the rest of us in real terms. Economists are supposed to believe that utility (whatever that is) matters intrinsically and money only matters instrumentally. But right-wing economists often seem to forget this as soon as they are asked to comment on tax policy and inequality, arguing as if their theorems apply to cash and not to utility.”

I’m not an economist and I’m certainly right wing by the standards around here. But that is moving over from income inequality to consumption inequality. And it is that second which is, to my mind, the important thing that should be considered. That utility: what can people actually consume rather than what’s their gross income?

And the TUC ran some interesting numbers a couple of years back about the top 10% and the bottom 10% in the UK. Income inequality, pre tax and pre benefits, was around 30:1. Consumption inequality (including free at the point of use NHS and education etc), after taxes and benefits and government spending etc was more like 6:1.

Obviously one can argue that more should be done or less: but it is true that a lot is already being done.

127

notsneaky 02.03.14 at 10:33 am

As a card-carrying economist (your PhD is from Northwestern, iirc), you are obliged by the laws of the guild to judge well being only in terms of people’s preferences as expressed in their behavior. If people are willing to incur a cost to burn witches on the village green, then witch-burning is an economic good. You might not go in for it yourself, but if the goal is just to organize society in the way that best fits your personal view of what’s best, no reason to bother with markets and prices and such.

Not at all (wrong school btw). One can study certain preferences, that doesn’t mean one has to agree with them. You can study how preference for racism affects outcomes without personally condoning these very preferences. And you can study how a society characterized by envy functions, without wanting to live in such a society, or more, a society which sanctions these kinds of preferences (envy or racism) at a macro level.

If someone is willing to pay to burn witches, or willing to give up 100$ (real resources) to take away 100$ from someone else, that may be an economic good to them, but it’s no a “economic good” in any… Platonic or whatever sense. And there’s an obvious externality present, no?

And the reason you bother with prices and markets and such (with some redistribution thrown in) is because they may be a good way of achieving some goal. But that doesn’t mean that I have to chose a particular goal.

This is a discussion about what Social Welfare Criteria we should use. I can take of my economist hat and put on my moral philosopher hat. And I’m saying that the social welfare function criteria Chris is arguing for, despite a certain superficial appeal to baser instincts, is pretty f-ed up, once you think it through.

128

Phil 02.03.14 at 10:46 am

JWM & notsneaky: I think you’re arguing over a misread of Chris’s OP (the ‘envy and jealousy’ part). Here’s Chris’s point 3:

if those on high incomes have too much, they can outbid the rest of us for goods that are intrinsically in limited supply or where supply can’t be quickly increased. If I’m further away from being able to buy a house near to where I work, because house prices are raised in an auction I can’t compete in, then I’m worse off even if my income stays flat. Reducing the purchasing power of the wealthy is therefore good for me (unless I got hold of a house early and can earn windfall gains from the auction).

Seems pretty material to me. Chris goes on to say (under the same point) that

Unrestrained income for the wealthy also means that they can commit more of their resources to ensuring that their offspring make it to the top in the next generation, thereby harming the opportunities for the rest of society.

which you could (and I think notsneaky did) absorb into point 2, ‘rent seeking’. But the rest seems like a separate point.

129

Unlearningecon 02.03.14 at 11:01 am

Your third point is often overlooked but is important, especially since so many goods are positional nowadays, as are jobs like footballers, where we observe spiraling income with no commensurate increase in quality (two words: Ronaldo and Bale). James Kroeger actually has been pointing this out for some time, and I have commented on it a couple of times, too. There’s some evidence, from the housing market and things like concerts and sporting events, that inequality pushes the price of certain things up without effecting higher production (usually because said production is not possible).

By the way, to snipe in on notsneaky’s conmversation:

“You can study how preference for racism affects outcomes without personally condoning these very preferences.”

This itself is a normative decision. I’m not saying anyone is definitely claiming otherwise, but I think it needs to be said.

130

Ed Herdman 02.03.14 at 11:21 am

“Ronaldo and Bale” oh snap! Good point about the normative decision as well – it seems to me that the proper focus would be put back on rejecting the preference and trying to find other ways of achieving good ends without any support for the position (normative or otherwise).

Back to the very original topic – I am sure this has been mentioned somewhere or other, but if the taxes (or transfers, in that case) bring no additional revenue, then where does the supposed pain inflicted on the wealthy come from? If this is just an attempt to divert the source of popular retaliation against the wealthy (which is going to remain until the inequality situation improves substantially, or at least until people feel again that we live in something like a meritocracy), it is clearly a useless one.

131

Katherine 02.03.14 at 11:24 am

Perhaps a cleaner and easier way to achieve the same goal would be to limit their pre-tax incomes. Placing union representatives on the boards of directors, or something.

Well, quite. All this talk of progressive taxation just brings me back round to why the income is so unequally distributed in the first place. Taxing income will always make (some) people feel as if their money is being taken away from them. Redistribution would be less necessary if the distribution was bit fairer in the first damn place.

132

Unlearningecon 02.03.14 at 11:25 am

Yep, there’s a clear tension between holding the position that tax increases are futile and also holding the position that they will destroy the economy.

133

Salem 02.03.14 at 12:08 pm

“Yep, there’s a clear tension between holding the position that tax increases are futile and also holding the position that they will destroy the economy.”

There’s no tension. If you tax doctors more, and they respond by working less, you have hurt the economy (less medical services) but not raised any tax revenue. The point being that you can’t tax leisure.

134

guthrie 02.03.14 at 12:14 pm

I would have thought the obvious counter would be “Okay, we’ll take the rate back down to 40%, but we’ll close all the loopholes as fast as we can.” Articles etc. I’ve seen make it clear that the rich, i.e. in the 40% tax band, are all too frequently paying much less than 40%, say 32% or less, so you could raise a few billion more by actually getting them to cough up.
Same of course goes for the corporation tax.

135

Phil 02.03.14 at 12:28 pm

Out of interest, has anyone ever sketched in any points on the Laffer Curve? I may have been misinformed, but I read somewhere that it was based on the common-sensical observation that nobody would do any work if taxes were 100%, so you could logically extrapolate back from that to find the point at which the tax rate stopped deterring work.

The thing is (it seems to me) this is actually not common sense at all, but a bizarre and intriguing thought-experiment, which doesn’t necessarily lead where Laffer seems to have thought it would. All wages are taxed out of existence: nobody gets any take-home pay for doing anything. What now? Everyone starves? Presumably not – presumably there’s some kind of UBI. So then, in effect, everyone’s getting the same salary no matter what they do. So… nobody does anything productive? Does that follow? I know I’d be getting an awful lot of reading done, but I already get paid to do that (at least some of the time). Would nobody work as a farmer, a tailor, a doctor, a teacher, an engineer for their UBI plus the love of farming, etc? It starts to sound as if Laffer had invented end-stage communism, then thought “well, that would never work…”.

(And why a curve anyway? Would nobody do any work if the tax rate were zero? The tax on, in that case, what?)

136

Phil 02.03.14 at 12:34 pm

Incidentally, there’s a passage in Peter Hall’s diaries where he explicitly factors in higher-rate taxation (which was considerably higher at the time) and treats it as an incentive to earn more money – as in, another hundred K might sound good, but if you think you’ll have to subtract 60% instead of 40% you realise you’ll actually need another 150 at the very least. Admittedly he was talking about the money he was going to demand from patrons of his services rather than the profits he was hoping to realise, but I can’t see why entrepreneurs wouldn’t be similarly motivated. A higher tax band is only a disincentive when you’re coming up to it, surely.

137

mattski 02.03.14 at 12:47 pm

Bruce @ 118 re Krugman

and, effectively, rejects a dialectic with more left economists,

I don’t think this is so. Not at all. In our example he takes Stiglitz VERY seriously and gives him high honors & respect.

Also, I don’t understand where you’re coming from to suggest Bernanke is in some way ‘reactionary.’ Bernanke… tripled the money supply, did he not?! This is a reactionary??

I know we’re not going to see eye-to-eye on this, Bruce, but from my perspective you’re letting Krugman’s sincere effort to keep his own prejudices from clouding his vision really get under your skin. But there is a very real sense in which we can say that civilization is built on the ability of people to restrain their impulses.

138

mattski 02.03.14 at 12:53 pm

JW Mason,

I am curious how you think Krugman would respond if you asked him in a coffee shop about the apparent discrepancy between his columns/blog posts and his textbook vis-a-vis the money supply.

You sound convinced that his answer wouldn’t satisfy you. ?

139

BenK 02.03.14 at 3:57 pm

It is nice to hear someone baldly say what he means. It at least gives everyone a sense of where the battle lines are drawn. Of course, I’m saddened that anyone would take the position Prof. Bertram holds.

140

MPAVictoria 02.03.14 at 4:10 pm

“There’s no tension. If you tax doctors more, and they respond by working less, you have hurt the economy (less medical services) but not raised any tax revenue. “

I have always doubted this. People like money. They will keeping working to make more money even if the tax rate goes up a couple of percentage points. In fact they might even work harder to keep the amount they bring home the same.

141

JW Mason 02.03.14 at 4:11 pm

Mattski-

That was just one example. Rational expectations — strongly affirmed in the textbook, dismissed in the public writing — would be another. Maybe the most dramatic example — briefly discussed in the blog my name links to — is his public hostility to the sort of trade policy that his scholarly work explicitly justifies.

You could make a list of others, maybe I will at some point.

As for what he would say — I don’t know. In the “What Undergrads Need to Know About Trade” he sort-of justifies the contradiction on the grounds that “innovative stuff is not a priority for undergrads.” And I get the impression from his blog that he continues to think that there’s one kind of theory that is right for real-world discussions among practicioners and a different kind that is right for the classroom. Which would be ok if the latter were just a simplified version of the former but seems problematic when they flatly contradict each other, as it seems to me they often do.

But really, I don’t know the answer to your question. Maybe I’ll get a chance to ask him someday…

142

Anarcissie 02.03.14 at 4:20 pm

Katherine 02.03.14 at 11:24 am @ 131:
‘… Redistribution would be less necessary if the distribution was bit fairer in the first damn place.’

But what is fair? Even casual observation of sites of social production will reveal that the actual, real contribution of the participants and immediate bystanders are inextricably mixed and the judgement thereof subject to point of view, opinion, and prejudice. Feudalism solved this problem through traditionally assigned roles and rights which were the result of old contests of power; liberalism-capitalism solves it by continuous negotiation, which are mostly characterized by the exertion of present power. In other words, fairness isn’t on the liberal table because it can’t be computed and the ruling and dominant classes don’t want it anyway (otherwise they could not rule and dominate). The only truly fair distribution is a communist distribution, and you will not get that from capitalism however reformed.

143

Glen Tomkins 02.03.14 at 4:36 pm

Maybe I missed it in your list, but it seems to me that one strong reason to not let the owners keep so much of the wealth created by production, is that they have nowhere to place all this excess money except into bubbles whose inevitable bursting hurts us all.

They don’t seem to be able to just stuff it in mattresses. They expect a healthy return on “investment” as money’s due, even now that the productivity of our industrial and commercial enterprises is so high — and these people already so wealthy that they won’t spend their ever-increasing share of the profits of this production generating demand — that the world is way oversupplied with money available for the relatively few actual, capitalizing, investments available. where they can’t get real investments with real returns, they demand nth degree derivative investments with nth degree derivative returns.

The wage stickiness you hear about is a benign factor, perhaps the only thing right now keeping us from a deflationary spiral and secular contraction. This “RoI stickiness” that I don’t hear enough about is its evil twin. In a sense the two are at war right now, a class war that only the owners are waging in earnest.

144

Katherine 02.03.14 at 5:03 pm

In other words, fairness isn’t on the liberal table because it can’t be computed and the ruling and dominant classes don’t want it anyway (otherwise they could not rule and dominate). The only truly fair distribution is a communist distribution, and you will not get that from capitalism however reformed.

I have no particular argument with this. I am not a capitalist and not a liberal (in the sense that I am further left).

145

Phil 02.03.14 at 5:06 pm

People like money. They will keeping working to make more money even if the tax rate goes up a couple of percentage points. In fact they might even work harder to keep the amount they bring home the same.

See above re Peter Hall.

146

Plume 02.03.14 at 5:12 pm

Taxing people more, leading to them working less . . . .

That’s just Randian fiction. To put it generously.

Most people don’t have the luxury to go Galt. And most rich people show how much they love money by the mere attainment of their riches. They typically don’t quit even once they have a ton. They typically keep going for more and more and more. And a host of studies show how much the rich are invested in being richer than other rich people. How much that drives them. There is actually more “envy and jealousy” at the top than between the bottom and top.

And if someone can make, say, a million a year, and take home 850K of that, and tax rates suddenly increase so that he or she takes home “just” 700K of it, that’s still 700K. They’re not going to give that up, because 700K a year is a hell of a lot better than zero, and they have expenses! It becomes even more of a moot point once you’re making tens of millions or billions. No one’s going to miss the difference between 80% of a billion and 50% of a billion (effectively).

Or, if they work less because they’re taxed more and suddenly take home less, they take home less, thus increasing the problem that supposedly led them to working less in the first place. “I’ll show them!!!” It’s bogus. Not to mention, the vast majority of people also don’t get to cut hours and still satisfy customers, clients, patients, etc. etc. Eventually, a doctor (or lawyer, or money manager) will alienate enough patients with his or her golfing, they won’t have any left.

And can a CEO keep his or her job by cutting back on work? Uh, no.

Again, it’s Randian garbage.

147

Plume 02.03.14 at 5:18 pm

And as others have mentioned, it’s not like any of these rich assholes is irreplaceable. Go Galt. Who cares? There is always someone waiting in the wings willing to do the work you do, and most likely with greater skill.

. . .

To borrow from Pop Culture: The judges at American Idol reportedly make in the 8 figure range. Simon Callow held out because he was only making something like 30 million a year, to play judge for a few months. I think it’s safe to say that Idol could find millions of people willing to do the job for much less — and they’d probably be much better at it. And that’s yet another demonstration of the irrationality of the markets and the capitalist system in general. Its completely arbitrary nature. It’s complete divorce was reality and logic.

148

hix 02.03.14 at 5:23 pm

How many copies did Rowlins latest book sell again before it was known she is the author? Ah right 1500 copies. Even now, she doesnt sel anywhere near as many as with Potter. Potters sucess relies on Potters sucess. People enjoy Potter so much more than other similar quality books because so many others enjoy Potter too, with whom they can talk about Potter, or watch a big budget movie, or visit a big budget theme park attraction. The best does not win in popular cultur. Randomness, marketing budgets and path dependency dominate.

Gates and Zuckerberg are such ovious cases of dumb luck, upper class relations and ruthlesness in winner takes it all markets thats its not even worth bothering to elaborate. The same is true for less obvious business cases. For example, discount stores too are natural monopolies. Sam Walton admits as much for Wal-Mart in his Autobiography – that if things had gone slightly different, some other now bankrupt discount chain could have been the big winner.

149

GiT 02.03.14 at 5:34 pm

“Randomness, marketing budgets and path dependency dominate.”

Well yes, clearly. When I brought up Rowling I never said otherwise. But fortune by path dependency and social coordination isn’t fortune by deprivation, exploitation, and predation – though some use the latter to create the former.

150

Plume 02.03.14 at 5:38 pm

Zuckerberg and Gates would be nothing without the public sector inventions of the computer, the Internet, GPS and now, touch screen technology. All of this romanticism about the lone wolf entrepreneur is total crap. They ride to their billions on the shoulders of millions of others, and generations (of not centuries) of innovations that preceded them. And most of the innovation happened in the public sector, by public sector workers, funded by the public, which they then used for their own personal profit. And they use public infrastructure to move their products, and their workers went to public schools, etc. etc. etc.

Yes, it matters that some people make billions. Again, that means their workers can’t, because the revenues generated by that workforce, from which the Zuckerberg’s steal their outrageous portion (and fortune), are finite. Those revenues are finite. So if the top dog takes billions, that’s money that is no longer available at all to the people who actually generated the revenues.

Math. It’s just math. Well, morality as well.

151

Rob in CT 02.03.14 at 5:49 pm

Tax inflation-adjusted capital gains as income. Income is income is income, damnit. This would subject capital gains to the progressive federal income tax, and also avoid screwing long-term buy & hold investors who made modest gains over a long time period.

Give the estate tax teeth. I’d change it to an inheritance tax. We want the wealth spread out, right? So what matters isn’t just the size of the estate but how much goes to each heir. Set a low exemption amount (say, $250k? Even less?) indexed to inflation and tax inheritance above that with progressive marginal rates.

Speaking of the income tax, there aren’t enough marginal rates. There should be many more, up to about 75% or so at the top (which should be well up into the tens of millions/yr stratosphere).

I’m sure Congress will get right on that. It would be nice if they did, though.

152

Plume 02.03.14 at 5:50 pm

Bruce Wilder 115,

Isn’t another reason for a much higher corporate rate, in effective terms, the greater incentive to put money back into production?

Corporate taxes are on profits, not sales. Profits are what you have left over after overhead is covered. Overhead includes labor. If we taxed corporations at 90%, say, and made it stick, they would have to put money back into the business to avoid that taxation. Ownership would likely say, “Well, I’d rather spend it on our business than hand it over to the government.”

The taxes could be set up to encourage actual hiring of new employees, purchasing of manufactured goods, and better rank and file wages. Not just the empty talk about domestic versus overseas hiring from our pols. But something with real teeth. A tax strong enough to shift idle money away from speculation and into production instead.

And by encourage, I don’t mean “tax credits.” I mean punitive taxes to be avoided through new hires and more investment in concrete goods. Do the right thing, and you avoid the hammer. Not, do the right thing in a thousand different instances, and we give you a cookie for each of those instances.

153

Barry 02.03.14 at 7:03 pm

Plume 02.03.14 at 5:12 pm

” Taxing people more, leading to them working less . . . .

That’s just Randian fiction. To put it generously. “

Heck, at least half of our problem comes from people who could have retired long ago with several tens of millions of $$ in the bank, but kept shooting for $100 million, and then $500 million, and then $1 billion.

154

mattski 02.03.14 at 7:12 pm

JWM

But really, I don’t know the answer to your question. Maybe I’ll get a chance to ask him someday…

:^)

I do hope so. I wish I could be a fly on the wall on that occasion.

155

Anarcissie 02.03.14 at 7:16 pm

Plume 02.03.14 at 5:38 pm @ 150:

‘… Zuckerberg and Gates would be nothing without the public sector inventions of the computer, the Internet, GPS and now, touch screen technology. …’

Sure, but in the case of Gates and Zuckerberg and many other celebrities, repulsive though they may be personally, people volunteered to give them money and repute. There is a fault in culture here as well as faults in institutions, systems, and personalities.

156

Plume 02.03.14 at 7:31 pm

Anarcissie,

True. And part of that fault goes back to that belief, that romanticism about the lone innovator, the great pioneer who does all the work him or herself, with no help from anyone, past or present. Sol they “deserve” the massive rewards. That’s part of the Great American Myth, and I don’t think it’s reproduced all that much in other countries — except via our exportation of said myth.

This myth seems to have afflicted many liberals and progressives, too, who keep saying they don’t have a problem with a winner-take-all system, where one person can make billions, despite complete dependence upon millions of others and the public sector.

It’s actually quite incredible that this has been basically taken for granted as the norm.

157

Plume 02.03.14 at 7:36 pm

And I do wish liberals, progressives, conservatives, etc. etc. would stop trying to speak for all Americans when they claim things like . . .

“Americans don’t have a problem with people getting rich. They celebrate this.”

Not this American. I think it’s highly immoral, indefensible and unjust, at least when a business owner or CEO with a workforce does it. And even without a workforce, those other factors kick in:

Generations of shoulders to sit on; parents, teachers and the public sector overall in the present, etc. etc.

In short, there is really no case where a winner-take-all is legit, as far as amassing fortunes. It always takes a village (past, present and future) and then some.

158

Bruce Wilder 02.03.14 at 8:08 pm

Katherine @ 131: Redistribution would be less necessary if the distribution was bit fairer in the first damn place.

Indeed, but, to repeat the point I made @ 51 about the inevitable reflexivity of any policy, and reinforcing the point UnlearningEcon and others have made upthread, setting an effective dampener on the ability of people to realize very high incomes may be a necessary part of a strategy of creating a society where redistribution is less necessary.

When Bertram argues that raising substantial revenue from the proposed tax rate is not necessary, I think he’s opening the door to these kinds of arguments: that maybe squeezing the rich, cuts off some of the more pernicious dynamics that lead to extreme inequality and its social costs.

159

Salem 02.03.14 at 8:23 pm

@MPAVictoria, 140:

If you reject the premise, then naturally you aren’t going to like the result of the syllogism. But there’s no inconsistency. And notice that the question to which I was responding was assuming the same premise, i.e. Ed Herdman’s “if the taxes (or transfers, in that case) bring no additional revenue, then where does the supposed pain inflicted on the wealthy come from?” Note that if people respond in the way that you claim, then the extra taxes will bring in extra revenue. Note also the title of this post.

Try and engage, hmmm?

160

MPAVictoria 02.03.14 at 8:32 pm

“Try and engage, hmmm?”

Well that was needlessly condescending. Still it is always best to know what kind of person you are talking to, so thank you for that I guess.

161

Plume 02.03.14 at 8:33 pm

Salem,

But your premise is absurd, as discussed in 146 and 147.

Higher taxes won’t lead to people working less, except, perhaps, for a tiny, tiny fraction of a fraction of people. For the reasons listed.

And if those people decide to go Galt? F ‘em. Who cares? It won’t hurt “the economy” in the slightest.

162

Plume 02.03.14 at 8:35 pm

It’s basically:

“If you don’t give me what I want, I’m just going to hold my breath until I go blue in the face!!”

“Uh, well. Suit yourself.”

163

Salem 02.03.14 at 8:38 pm

My premise???

164

roy belmont 02.03.14 at 9:01 pm

Anarcissie-
I’m more elaborating what I think you’re saying than arguing with it.

…people volunteered to give them money and repute…

You wear them high heel shoes and that skin-tight dress honey what do you expect?
-
a fault in culture that’s hard to pin but more and more seems to have come about through the same blame the victim/customer pseudo-morality, where you buy it it’s on you.
You initiate the transaction, the merchant just patiently awaits your patronage.
You dress like that it’s on you.
You don’t have to work here you know, you wanted a job with us.
A place in our congregation, a house in our village etc etc.
It wasn’t “culture” at first, it was a thing like Windows or Fbook. Voluntary participation. Come in from the remnants of the wild, enjoy the fruits of the wheel®.
Or like buying blackmarket drugs. Your choice. You become addicted, still your choice.
Nobody decided to adopt petro-chemical energies. They just happened. We chose that path however blindly, just like people chose Windows and Fbook.
Capitalism relies on the Judeo-Christian morality of personal responsibility to evade the moral implications of locking up access to essential things then bottlenecking openings to that access, then blaming the customers for the direction of civilization when that artificial restriction impedes the show.
TV industry spokesapologists were great at that back in the day.
At the same time they were educating whole entire generations about the world and culture and morality and civilization, they were whining about only giving the public what it was asking for, when accused of dumbing-down the people’s heads.
So don’t blame us for where it all went.
We were just responding to a perceived market need.
You were the ones giving us all that money.

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notsneaky 02.03.14 at 9:05 pm

Phil @128

You’re right, that first part is not the rent-seeking argument, while the last sentence is. Chris is throwing a couple different things in there, but the stuff about houses and auctions is the “pecuniary externality” argument.

If a group of “others” increases their demand for a good I like to consume, its price will rise and I will be worse off. First, it’s not the case that this is necessarily a problem. Chris is not looking at it in a general equilibrium – those goods have to be produced, there may be substitution and complementarity effects – where it could slice either way. If the demand for yachts rises, and that raises their price, that’s no skin of my back, as I don’t consume yachts. And if I’m a poor manual laborer connected in some way to the yacht-building industry it’s actually bonus for me (in that case I’d want to transfer purchasing power from the non-yacht buying middle class to the yacht buying upper class!).

Second, this, again, is an argument for positive tax rates, maybe even progressive tax rates. It’s *not* an argument for destructive tax rates. It’s possible that in such a situation there will exist some destructive tax on the rich which will make the poor better off (by changing the terms of trade). But in that case there will also be a regular, non-destructive tax rate which will make the poor better off without hurting the rich as much. So again we’re back to simple envy.

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Rob in CT 02.03.14 at 9:07 pm

Not that this will be new to many here, but… Dickens, 160 years ago:

The wonder was, it was there at all. It had been ruined so often, that it was amazing how it had borne so many shocks. Surely there never was such fragile china-ware as that of which the millers of Coketown were made. Handle them never so lightly, and they fell to pieces with such ease that you might suspect them of having been flawed before. They were ruined, when they were required to send labouring children to school; they were ruined when inspectors were appointed to look into their works; they were ruined, when such inspectors considered it doubtful whether they were quite justified in chopping people up with their machinery; they were utterly undone, when it was hinted that perhaps they need not always make quite so much smoke. Besides Mr. Bounderby’s gold spoon which was generally received in Coketown, another prevalent fiction was very popular there. It took the form of a threat. Whenever a Coketowner felt he was ill-used – that is to say, whenever he was not left entirely alone, and it was proposed to hold him accountable for the consequences of any of his acts – he was sure to come out with the awful menace, that he would ‘sooner pitch his property into the Atlantic.’ This had terrified the Home Secretary within an inch of his life, on several occasions.

However, the Coketowners were so patriotic after all, that they never had pitched their property into the Atlantic yet, but, on the contrary, had been kind enough to take mighty good care of it. So there it was, in the haze yonder; and it increased and multiplied.

So yes, to hell with this idea that if you raise taxes on ultra rich people they’ll go Galt and then YOU’LL BE SORRY, MOM!

Bullshit. Always has been.

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MPAVictoria 02.03.14 at 9:09 pm

Rob I really like that quote. Thank you.

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notsneaky 02.03.14 at 9:10 pm


(notsneaky, i.e. me)
“You can study how preference for racism affects outcomes without personally condoning these very preferences.”

(Unlearningecon)
This itself is a normative decision. I’m not saying anyone is definitely claiming otherwise, but I think it needs to be said.

Of course it is! We’re having a normative discussion – what kind of Social Welfare Function should society have? I say, choose one without envy, even if the people in the society experience envy, and of course choose one which does not …. “enable” or “acquiesce” “condone” (I need a better word here) racism, even if some people in society are racist. I’m sure Chris and JW Mason would agree with the latter, but they’re – apparently, some effort is being made to avoid the essence of it – disagreeing with the former.

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notsneaky 02.03.14 at 9:19 pm

Btw, it occurs to me (though I may very well be wrong, especially as I’m quite rusty on the history of thought stuff) that this is very similar to the argument for why classical utilitarians assumed “equal capacity for happiness”.

Obviously people don’t have “equal capacity for happiness”. For whatever reason, nature or nurture, there are folks out there who no matter what you do for them, will always be unhappy, and even folks who no matter (almost) what you do to them, will remain fairly happy. But when deciding on public policy – choosing a social welfare function – the right thing to do is still to assume that this isn’t the case, that the capacity for happiness is the same for everyone. Otherwise, again, you end up going some dark paths (for example, someone can argue – and some people did – that Africans don’t have much of capacity for happiness, therefore it’s ok to enslave them)

One thing that JW Mason is sort of right about, is that your standard social choice theory takes people’s utilities as given and them maps these to a society’s social criteria. Here, I (and the classical utilitarians) say, bunk, we don’t have to do that. So I am departing from standard approach. Of course standard social choice theory assumes that people’s utility functions are not interdependent, while here we’re discussing the case where they are.

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notsneaky 02.03.14 at 9:29 pm

Phil @135

Yeah people have estimated Laffer curves in the past. Even if tax revenue doesn’t go to zero with a 100% tax rate, that doesn’t matter for the argument (it’s usually presented that way for heuristic purposes but it’s not necessary). The point is that the curve flips its slope at some level.

MPA @140

That’s already build into the Laffer curve. It’s why it flips its slope, the different strength of the income and substitution effects.

To add, and reply to JW Mason’s earlier comment – about slashing Bill Gates’ bank account and does that make society worse off . If you raise the tax rate and tax revenue falls or doesn’t increase, then pretty much by definition that means the tax base has shrunk. And tax base going shrinking, almost by definition, means society is poorer. And that’s the scenario that is being assumed. So you can’t side step the issue by pretending that we have a non-revenue increasing tax-increase, but the society isn’t poorer (in material terms) than before. Those are the assumptions Chris makes.

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Bruce Wilder 02.03.14 at 9:29 pm

mattski @ 137: I don’t understand where you’re coming from to suggest Bernanke is in some way ‘reactionary.’ Bernanke… tripled the money supply, did he not?! This is a reactionary??

Well, yes, it is reactionary. I’ve read Bernanke’s Essays on the great depression, and I think they are plainly the work of a reactionary conservative. He thought that preserving the plutocracy of the 1920s and its financial system would have prevented the New Deal institutional reforms, and that would have been a good thing. And, in our time, he acted radically (reactionary doesn’t preclude radical) to preserve our rotten financial system, and to increase the concentration of financial power in a small number of institutions, with, among other predictable consequences, a reduction in labor force participation, reduced labor share of national income and a declining median wage. Using a financial crisis to preserve or further concentrate existing power structures, and redistribute income and wealth upward pretty much defines reactionary politics.

Bernanke has a mild personality. He’s not a ranter, and he can be very reasonable and gracious in an academic fashion. But, he’s pretty right-wing.

That no one seems to be aware of just how right-wing Bernanke is, is attributable in large part to the endorsement he received from Krugman (and others, like Thoma), who closed ranks with him, as a technocrat, instead of highlighting which side Bernanke was on, in the political conflict over income and wealth.

I am not Plume, even if I echo some aspects of his critique. I am not, myself, all that far from the moderate center in my politics. I think I see Krugman’s politics for what they are, in part because my own views are not far from his. There is this tension, though, in his views, between an intellectual commitment to conservative doctrines and a political critique and values, which are more populist. JW Mason notes the apparent conflict between the textbook Krugman and the polemicist Krugman. If he were more obviously Straussian, one might suspect that he subscribes to a noble lie.

Politically, it’s a problem because Krugman the polemicist is the trusted voice for a lot of popular discontent and criticism, which doesn’t recognize that he’s a bit of a conservative sheep in liberal wolf’s clothing. He effectively blunts the development of populist and progressive reform demands. Just to reiterate the point about his relation with Bernanke, he invested a lot of ink endorsing QE as a third or fourth-best policy, deserving support from the left, rather than condemning the policy for subsidizing a rotten, predatory system resisting necessary reform, while slowing the recovery of the labor market and continuing the neglect of public infrastructure, climate change, etc.

As for the (academic) Economics, I find myself thinking that what’s wrong with mainstream policy economics is pretty much everything. Keen is right, in the main; it’s a decaying research program, destroying knowledge as it goes on. Krugman’s comparative advantage is that he’s a throwback to a time when Economics was less stupid. Still, Krugman works off a false epistemology, when he tries to use analytic models, descriptively and prescriptively, as is his wont. Krugman is a pretty smart guy, and I think he’s constantly realizing this — not globally, but in parts, one at a time, which accounts for the some of the odd contradictions between what he says in his columns and what his textbook says, or even what he says from one column to the next. He’s not the guy to re-write the textbook from the ground-up, so he’ll continue to wobble with one foot planted in conventional analysis and one foot in emerging recognition of reality.

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MPAVictoria 02.03.14 at 9:39 pm

“To add, and reply to JW Mason’s earlier comment – about slashing Bill Gates’ bank account and does that make society worse off . If you raise the tax rate and tax revenue falls or doesn’t increase, then pretty much by definition that means the tax base has shrunk. And tax base going shrinking, almost by definition, means society is poorer. And that’s the scenario that is being assumed. So you can’t side step the issue by pretending that we have a non-revenue increasing tax-increase, but the society isn’t poorer (in material terms) than before. Those are the assumptions Chris makes.”

What if you don’t think that material well being is all that matters? Tell me how much is equality and social cohesion worth?

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Bruce Wilder 02.03.14 at 9:50 pm

notsneaky: If you raise the tax rate and tax revenue falls or doesn’t increase, then pretty much by definition that means the tax base has shrunk. And tax base going shrinking, almost by definition, means society is poorer. And that’s the scenario that is being assumed. So you can’t side step the issue by pretending that we have a non-revenue increasing tax-increase, but the society isn’t poorer

Tax revenue could fall because the economy’s distribution of income changes in response to the tax rate. Not because the tax is collected and redistributed as transfers, but because people change their economic strategies in ways that effectively dampen inequality of income. Maybe, a high marginal tax rate means that C-suite executives cannot benefit from a super-high salary and bonus, and that changes who seeks to become a C-suite executive or who is hired into those positions, and where and how they seek their personal satisfaction. It’s no longer possible to make a personal fortune in a year or two at the precarious top of the pyramid of a giant corporation, so turnover at the top slows; the tournament among general managers lower in the hierarchy slows and becomes less desperate, and psychopaths are less dominant among the competitors, as the lottery ticket of a sojurn at the top promises to pay less. Maybe, executives lose interest in assembling giant corporations as a means of padding executive compensation, and industrial concentration declines. Maybe, the life of an investment banker seems less appealing, when it is not possible to earn vast sums in a few years, and more bright people become engineers or educators, instead of financial parasites.

There are some serious costs to the society to having so many of the best and brightest channelling their efforts into the financial sector, where “innovation” is so often destructive of value, and when grabbing the golden ring of corporate leadership can pay off so handsomely in a short time, that executives take risks, disinvest from implicit contracts, practice short-termism, etc. to realize those gains.

Taxing a bad doesn’t have to raise much revenue to improve social welfare.

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MPAVictoria 02.03.14 at 9:55 pm

@173

You know there are times when posting here just makes me feel stupid in comparison.

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notsneaky 02.03.14 at 9:58 pm

What if you don’t think that material well being is all that matters? Tell me how much is equality and social cohesion worth?

That’s fine. You can increase equality with regular ol’ progressive taxes, no need to implement destructive taxes. It’s only once you get past a concern over equality and into pure envy (“I want you to have less, even if I have no more, or even if I have less too”) that destructive taxes come into play.

And you’d have to be a bit more specific about what you mean by “social cohesion” and why it’s a good (not denying it is) but it seems to me that going around kicking people in the nuts to make others feel better isn’t really going to make society more cohesive. I’m pretty sure a history book may provide some examples.

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MPAVictoria 02.03.14 at 10:02 pm

“That’s fine. You can increase equality with regular ol’ progressive taxes, no need to implement destructive taxes. It’s only once you get past a concern over equality and into pure envy (“I want you to have less, even if I have no more, or even if I have less too”) that destructive taxes come into play.

And you’d have to be a bit more specific about what you mean by “social cohesion” and why it’s a good (not denying it is) but it seems to me that going around kicking people in the nuts to make others feel better isn’t really going to make society more cohesive. I’m pretty sure a history book may provide some examples.”

You know what? Ignore me and respond to Bruce. His comment has much more able phrasing than mine.

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In the sky 02.03.14 at 10:03 pm

Some of the economics in this thread is painfully wrong.

1. No, it’s not “Randian fiction” that people work less if you tax them more. It is a well documented empirical fact. (And what’s more, higher taxes incentivize hiring a clever and morally questionable tax advisor to help you shift your income.) This does not imply we’re on the wrong side of the Laffer Curve. As a very rough estimate if you increase the tax rate on high earners by 1%, you tax revenue will increase by 0.5% (Auten and Carroll (1997), Gruber and Saez (2002)).

2. Investing/saving today is consumption tomorrow. You cannot permanently take resources out of the economy by saving it. Eventually it is spent.

3. Corporations don’t pay taxes because contrary to Mitt Romney’s assertions, corporations are not people. Taxes on houses are paid by the humans who use those houses. Similarly corporate taxes are paid by the shareholders, workers, and consumers who use those corporations. The burden of the tax is distributed wide and far, and there is little reason to think that this tax somehow magically targets the rich and powerful. Empirical evidence suggests unionized workers, via lower wages, pay about a third of the costs. (Indeed once upon a time Joe Stiglitz showed that workers could end up paying more than 100% of the tax.) So no, taxing corporations is not the great idea some commenters here suggest it is.

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notsneaky 02.03.14 at 10:06 pm

Bruce,

Maybe. In a second best world (which is of course where we live). I’m thinking in those cases there’s gonna be a different set of tax rates which achieve the same goal but without destroying anyone’s income more than it needs to be. It’s the difference between *relative tax rates* (how much you tax activity A relative to activity B) vs. the level of the tax rates. I’m not sure though and you may very well be right. Let me think about that a little.

(also, taking the number of psychopaths in society as given, if you decrease their number in finance, you got to increase their number somewhere else so it becomes a problem of the “optimal allocation of psychopaths” (did I mention I was an economist?). A better argument someone might make is that certain market structures and industry cultures produce psychopathic behavior in otherwise non-psychopathic people. Then I think your conclusion goes through easily)

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MPAVictoria 02.03.14 at 10:07 pm

“There is little reason to think that this tax somehow magically targets the rich and powerful.”

Well except for the fact that rich people are the ones who actually own the corporations. Of course I would just be fine with taxing all capital gains and dividends as regular income.

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In the sky 02.03.14 at 10:13 pm

Well except for the fact that rich people are the ones who actually own the corporations. Of course I would just be fine with taxing all capital gains and dividends as regular income.

Continue to the next bit about consumers having to pay higher prices, and workers ending up earning lower wages, and then re-read the bit about having little reason to think that this tax somehow magically targets the rich and powerful share holders.

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GiT 02.03.14 at 10:20 pm

” No, it’s not “Randian fiction” that people work less if you tax them more. It is a well documented empirical fact”

To me, the empirical facts suggest that the income effect dominates the substitution effect. What’s the documentation?

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Plume 02.03.14 at 10:25 pm

Tax increases don’t necessarily increase prices. If businesses can’t sell their product with higher prices, they won’t raise those prices. And given that the rank and file is tapped out, they won’t be able to sell at higher prices.

It is also not likely that a business which receives an increase in taxes will cut wages. We know that tax cuts don’t lead to higher wages for workers, or more workers. Why should we expect wage cuts and job losses, necessarily, if taxes go up?

Basically, the logical extension of that argument is to zero out all taxes on business. Because it’s just passed along to consumers and hurt employees, supposedly. But then, businesses would be the free riders they complain so much about. The 47% that never pays any taxes. Blah blah blah.

Got a deal for ya: If I had the power, I’d happily get rid of all of your business taxes, in exchange for the following:

1. You can no longer claim personhood.
2. You can no longer donate, as a corporation, to any political cause or person
3. Personal income tax now is based upon all monies made, from all sources, without exceptions.
4. Top rate goes to 95%. Top bracket goes to 1 billion, with additional brackets of 1 mil; 10 mil; 50 mil; and 100 mil.
5. You receive zero in government subsidies from now on.

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Gorgonzola Petrovna 02.03.14 at 10:36 pm

165 ” If the demand for yachts rises, and that raises their price, that’s no skin of my back, as I don’t consume yachts.”

I don’t consume yachts either. Nor does anyone I know. Nor do I appreciate the idea of a personal yacht, or a mega-mansion. Thus, building a yacht is not, from my prospective, a socially necessary activity; it’s a waste of labor and resources. And thus it definitely is skin off my back.

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notsneaky 02.03.14 at 10:52 pm

Yes Gorgonzola, and that’s why the Social Welfare Function shouldn’t reflect solely your preferences (why is it skin off your back if someone else wastes their labor and resources? Not your, theirs). Someone else can make the same arguments for organic broccoli and justify a super high tax on, hell, let’s make it all organic food

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notsneaky 02.03.14 at 10:53 pm

… gorgonzola included (ugh, joke got cut off)

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Ed Herdman 02.03.14 at 11:09 pm

Thanks for the response, Salem. It was an obvious enough response and clearly I’ve been away from economics too long. It was an honest question and you have an honest answer. I don’t think Plume starts his comment off on the right foot talking about John Galt and going right for the strawman, either.

That being said I think that Plume’s response is not entirely incorrect. While it’s clear to people who work or have been around people who work that workers actually do keep in mind their final income – similar, if not identical considerations are seen when people working on the clock are told to be careful about overtime, and in people planning retirements at the end of a high-income period as the base for a pension, rather than retiring at the end of a period after a pay cut.

So long as you have stepped tax rates (or its equivalent in a progressive or regressive tax function), people are going to try to balance their work against their income. Surely the poorer side of this spectrum of decisions is uncontroversial – the adjunct professor or the high school graduate working multiple jobs because the pay is lousy, while their spouse works multiple jobs as well. It would be nice if there was a clear definition between “ducking out of work to avoid taxes” and “declining to take on more work because of time and personal health preferences.”

A random thought which is probably neither here nor there – when you have a tax system with increased rates in steps, it clearly could distort peoples’ views of their actual preferences for work tolerance versus pay, because even the appearance of discontinuous jumps makes it appear their ratio of work to pay decreases, and probably this is true even if it doesn’t. Of course, even if you can make that simple calculation, there are lots of other issues which militate against working longer.

@ Gorgonzola Petrovna: That is exactly true. In fact it’s well documented that luxury businesses are also disproportionately harmful, since the people who work for them (middle-class or poor people) are entirely at the mercy of the buyers, and if the economy turns down you have a lot of infrastructure and human capital sitting around being unused. But still there are some troublesome human factors that make this less than straightforward, like pride: If a person or a family just gets by with its own luxury marque (or just a service that caters more to the wealthy, like freelance builders), and we say that’s “not social necessary,” what then of their skill set and their own capital? We are unfortunately too late in the game to say “you should have chosen a different job,” or at least that’s the case when politicians begrudge job training programs. I am also skeptical of the idea that we could kill off industries as useless without putting historic (or even current) skills in danger.

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Peter T 02.03.14 at 11:12 pm

2. Investing/saving today is consumption tomorrow. You cannot permanently take resources out of the economy by saving it. Eventually it is spent.

One of those simple statements that falls apart if unpacked, but somehow so often never is. So it stands there to support a whole pyramid of nonsense.

You can take resources and redirect them to consumption of luxuries, usually involving conspicuous waste (“look at my dress with a fragile 10 yard train covered with pearls”), or into non-productive display or into monuments. Any major city is littered with obvious examples of all of these. Just look around.

Europe had a natural experiment along these lines: across much of eastern Europe (Hungary, Poland, the Baltic) the upper levels of the elites captured the state in the C16 and C17. Enabled by foreign alliances and the rents from export trades in resources (grain and timber in the north, cattle in Hungary). Serfdom was reimposed, the rights of the lower and middle classes curtailed, urban life stifled, taxes on the upper classes pretty much abolished and so on. Class warfare in the form of peasant uprisings and savage repression were endemic. It ended in foreign conquest, and the echoes of the experiment still linger. The alternative policy followed further west of selectively confiscating the fortunes of the upper nobility had much happier endings all round.

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JW Mason 02.03.14 at 11:18 pm

Investing/saving today is consumption tomorrow.

A guy named Maynard wrote a whole book explaining why that isn’t true. Funny story.

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mattski 02.03.14 at 11:24 pm

Bruce,

[Bernanke used] a financial crisis to preserve or further concentrate existing power structures, and redistribute income and wealth upward pretty much defines reactionary politics.

What actions are you referring to? And what actions–realistically–would you have been in favor of?

That no one seems to be aware of just how right-wing Bernanke is, is attributable in large part to the endorsement he received from Krugman (and others, like Thoma), who closed ranks with him, as a technocrat, instead of highlighting which side Bernanke was on, in the political conflict over income and wealth.

I believe Krugman and Thoma would reject this characterization.

[Krugman] effectively blunts the development of populist and progressive reform demands.

Strongly disagree here. One of Krugmans strengths, in my view, is his feel for ‘what the market can bear’ where we’re talking about the market of ideas. You know, I enjoy CT because my sympathies are solidly on the left. But there is not nearly enough “reality checking” over here, IMO. Everyone who comments here, I think, would do well to imagine trying to make an impression on their “conservative cousin from Oklahoma” on a semi-regular basis. Much of the conversation here takes no account of how decent people from red-state America think.

The flak Krugman gets from the right is intense, I think you’d allow.

Re Steve Keen, my impression is he’s a bit of a loon. JW Mason can correct me but seems to me a year or so ago JWM tried on his blog to analyze one of Keen’s signature equations and concluded that is was more baffling than convincing.

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Ed Herdman 02.03.14 at 11:25 pm

We also can think of a any number of scenarios that disprove the second fork of 2. easily: Putting it under the mattress and forgetting about it, burying your silver in a Viking hoard, D.B. Cooper’s lost ransom money.

Even if we try to redefine what “saving” means, there’s still the time preference issue. A simple economic example: Let’s say that there is a small town with just one bakery. If the owner decides to “save” all his income indefinitely, even against the needs of the bakery and the other people in the area, it won’t be good.

Even more simply, there are two different ideas naturally expressed by the phrases “consumption tomorrow” (how many tomorrows from now? How many lost opportunities in the meantime?) versus “permanently taking resources out of the economy” (which is just a silly statement, since entropy is taking resources out of the economy all the time).

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JW Mason 02.03.14 at 11:38 pm

Re Steve Keen, my impression is he’s a bit of a loon. JW Mason can correct me but seems to me a year or so ago JWM tried on his blog to analyze one of Keen’s signature equations and concluded that is was more baffling than convincing.

Yes, that’s right. Which is really too bad.

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notsneaky 02.04.14 at 12:04 am

Europe had a natural experiment along these lines: across much of eastern Europe (Hungary, Poland, the Baltic) the upper levels of the elites captured the state in the C16 and C17. Enabled by foreign alliances and the rents from export trades in resources (grain and timber in the north, cattle in Hungary). Serfdom was reimposed, the rights of the lower and middle classes curtailed, urban life stifled, taxes on the upper classes pretty much abolished and so on. Class warfare in the form of peasant uprisings and savage repression were endemic.

This is going off topic, but the last sentence isn’t entirely correct. Cossacks aside (and that was later), what’s peculiar about that time period, at least in Poland and Baltics, is the (relative) LACK of rebellions by peasants and class warfare as this process took place. Hungary did have a rebellion or two, but considering all of Europe, less than average. You’re thinking of the Holy Roman Empire, Bohemia and the German Peasants’ War, but that’s different.

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In the sky 02.04.14 at 12:32 am

A guy named Maynard wrote a whole book explaining why that isn’t true. Funny story.

No, he didn’t. Please do not try and misconstrue what I said.

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Collin Street 02.04.14 at 2:03 am

I don’t consume yachts either. Nor does anyone I know. Nor do I appreciate the idea of a personal yacht, or a mega-mansion. Thus, building a yacht is not, from my prospective, a socially necessary activity; it’s a waste of labor and resources. And thus it definitely is skin off my back.

Ah, but I do consume yachts. So I can tell you some of the interesting economics: there’s some non-obvious stuff here.

Boats are actually cheap. Fibreglass box, some metal bits, maybe a small engine. Sails can be pretty pricy ’cause there’s some fancy chemistry involved, but there’s really not an awful lot of resource consumption involved in boatbuilding. And fibreglass lasts a pretty long time, so there’s a lot of good second-hand deals out there.

http://www.internationalonedesign.org/boats-get-one/shaw-pricing
http://www.sharpies.com.au/Boats4sale.html

… mind, these are both pretty cheap classes. Anyway. Boats are cheap. The cost is storage: boats range between “size of a large sofa” and “size of a medium-sized house”, and they — well, the larger ones — have to be stored on or near the water, and “on or near the water” is a high-demand resource. Boat storage is a positional good: levelling out the income distribution will cause pretty significant falls in the cost of boat ownership

[as the people at the top cease being able to afford their seven favourite expensive hobbies and have to cut back to three, people in the middle get access to their second-favourite expensive hobby and some of the people in the bottom get access to their favourite, leading to a significant improvement in net social utility.]

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MPAVictoria 02.04.14 at 2:03 am

“and workers ending up earning lower wages”

I don’t believe for a second that if we cut Corporate taxes that any of the money would wind up going to higher wages. Please tell me you are not that naive.

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Peter T 02.04.14 at 2:30 am

notsneaky – in terms of major rebellions (the sort that get time in history books), yes. My feel is that in terms of lower-level unrest, with occasional major outbreaks, no. The big ones were like Pugachev, Rakoczi or Gyorgy Dosza. One historian characterised Tsarist Russia as a state at war with its population – a constant background hum of threat, with attacks on gentry houses very common. Ireland had the same pattern – rick-burnings, local assaults on bailiffs and so on, punctuated by major rebellions every generation or so.

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mpowell 02.04.14 at 4:05 am

notsneaky @ 178

I was going to respond to this post earlier along similar lines as you but had other things to do. This point on income distributions by Bruce is clever and also related to a similar question I was thinking of posing to CB. Typically we assume that voluntary economic transactions are well-fare enhancing. Thus we assume that if a tax reduces the incidence of a class of voluntary activities wealth destruction has occurred. But what if your business is thievery? You acquire some tools, do some damage to someone’s house, and steal some stuff. If this activity happens less because of a higher tax, well that’s probably well-fare enhancing. Now I’m sure some commenters here will feel the activities of certain businesses or their executives have more in common with the thief than the skilled carpenter. I was wondering if CB was assuming that his preferred tax would result in wealth destruction (because that doesn’t sound so good) or if he was assuming that, on the whole, the activities of the class of people in question (over 100,000 pounds annually) was destructive in-and-of itself? I think there are some people around here that do assume that. I’m not sure where everyone sits though. You could even imagine some corner cases where a CEO spends slightly less time thinking about how to squeeze his workforce and pay himself more as a result (perhaps along the lines of BW’s hypothetical).

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Anarcissie 02.04.14 at 4:08 am

roy belmont 02.03.14 at 9:01 pm @ 164:
‘… We were just responding to a perceived market need.
You were the ones giving us all that money. …’

If people don’t even have the potential of intelligence, agency, and autonomy, then even capitalism is too free for them. They need to go back to feudalism or fascism. But if they do have the potential, then something is missing because, for the most part, they don’t exercise them. Hence we get repulsive, destructive characters like Gates and Zuckerberg given enormous powers, wealth, and repute. I figure it’s either culture or genes. If it’s genes, the situation is hopeless; so I’m looking for my keys under the streetlight.

199

ambzone 02.04.14 at 4:08 am

The 85 richest persons internationally have as much money as the poorest half of this planet. This is for those here arguing that the very, very rich are too few to warrant their own special measures…

200

Bruce Wilder 02.04.14 at 6:37 am

Steve Keen, my impression is he’s a bit of a loon.

Keen’s a gadfly. Ed Prescott is a loon. To know your players, you need a program.

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roy belmont 02.04.14 at 6:49 am

They need to go back to feudalism or fascism.
or back to when they had
intelligence, agency, and autonomy.
The consensus history which has the linear climb of humanity out of the swamps of superstition and ignorance isn’t honest. There was a fall, a lessening of knowing, the same way you can see the loss of agency and autonomy, something happened and we were diminished.
Too much of the contemporary layout’s off that competitive struggle that treats nothing of origin and shaping.
Positing the loss, as opposed to never having it, of agency and autonomy and consequent loss of intelligence, or vice versa, what was it?
What happened to make that loss, such a huge thing for us to lose, why?
Some defeat that was so terrible and complete the fact of it was lost.

202

Chris Bertram 02.04.14 at 9:16 am

Regular commenters may enjoy this rebuttal of the post, by a stockbroker with a British flag photoshopped to his face, apparently:

http://linkis.com/blogspot.co.uk/nalse

203

Sasha Clarkson 02.04.14 at 10:14 am

A well-argued column.

With the law of the jungle, there are no property rights: all you own are your genes; anything else you have to fight to gain or to keep. Homo Sapiens has reached its dominant position by cooperation, thus modifying the jungle law. The state is an instrument of this cooperation. It is not in the interests of most of us to support a state whose only function is to protect private property.

In reality, sub-groups of cooperating humans compete against each other, and the political stage is part of this. I would argue that, in many countries, the Right represents a small sub-group which, by rigging the rules in their own favour, cooperates to parasitise the rest of the species. If we allow them to do it, we deserve what we get!

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Ronan(rf) 02.04.14 at 11:25 am

A job in The City *and* a Union Jack face tattoo ? Some people have all the luck (shouldnt it be ‘a very English’ bloke/lad/mate/chap rather than dude ? )

205

notsneaky 02.04.14 at 11:30 am

Peter T,

I was thinking of Dozsa when I mentioned that Hungary had a few. I’m not sure if I’d classify Rakoczi as a peasant uprising (mostly just plain ol’ anti-Hapsburg, with a bit of religious warfare thrown in).

Pugaches was a cossack rebellion and that happened much later, long after serfdom had already been well established in Russia for a couple centuries. There were some earlier rebellions in Russia but they were mixed up with the Time of Troubles so they weren’t “anti-serfdom” per se. Until mid 17 century or so the peasants while technically enserfed could more or less “choose” their lords. Since the periphery was sparsely populated, the lords out there would “steal away” the peasants from the lords in the interior by offering much better terms. Or the peasants’d just run off to the Polish-Lithuanian Commonwealth where serfdom was more established and stricter but material conditions were better (probably because of the better developed grain export). The “state of war with its own population” is really end of 17th century on.

The peculiarity I was referring to is that there was surprisingly little resistance to the establishment to serfdom. There was more resistance to its existence, a few centuries later.

206

Gorgonzola Petrovna 02.04.14 at 1:23 pm

194 “why is it skin off your back if someone else wastes their labor and resources? Not your, theirs”

Because we operate in the same economy. If this economy dictates that a number of workers must dig and fill holes all days, then it’s a bad economic system. Inefficient. All other things equal, these workers could take over a part of the socially necessary work that others do, and, for example, reduce everyone’s work-week to 4 days.

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Marcos 02.04.14 at 1:43 pm

Chris @202,
You surely must be jesting. Rebuttal seems too generous a word.

208

Anarcissie 02.04.14 at 2:50 pm

roy belmont 02.04.14 at 6:49 am @ 201 — The invention of slavery and the state.

209

Plume 02.04.14 at 3:59 pm

Again, yes, it’s a Randian fiction — or whatever right-wing proponent one wants to use. It assumes that people have elasticity regarding their hours, their debts, their obligations. A tiny, tiny fraction of society has that elasticity. And even those who do have it, tend to like their standard of living, or they wouldn’t have worked obsessively to reach it — unless it was inherited.

They have debts, monthly bills, desires for more consumption. And any CEO will have a very tough time keeping her or his job if they “cut back” on their hours due to any increase in taxation.

As for empirical evidence? When the top rate was 91% from the 30s thru the early 60s, we saw no evidence of the rich leaving the workforce, and we saw no evidence of an increase in work hours when their taxes plummeted. And plummet they did.

Also, contrary to conservative fictions, all of that tax cutting, all of that trickle down, failed to improve life, wages or compensation for workers. Their salaries started to stagnate or decline almost at the same time those taxes for the rich started to drop. And the economy cooled almost in unison with those tax declines. There is zero empirical evidence to show that tax increases on the wealthy hurt the economy, workers or wages, and overwhelming evidence showing that tax cuts never help. In fact, our economy performs much better with much higher taxes on the rich.

Yes, it’s Randian, or Laffer, or Chicago School, or Austrian School, or Ron Paul fiction.

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Plume 02.04.14 at 4:05 pm

Btw, while tax reform is most needed, it’s really small ball in the scheme of things. We now know that just 85 people hold as much wealth as the bottom 3.5 billion. In America, the richest 400 hold as much as the bottom 60%.

Worldwide, the richest 20% consume 85% of our resources. Which obviously tells us capitalism has been an abysmal failure of epic proportions, especially when it comes to the allocation of resources — which it was supposed to be so “efficient” at.

Think about it. Basically, we have 85% of our production geared for 20% of the population, leaving 15% of that production geared for 80% of the population.

This is obscene. It would likely make even the 18th century denizens of Versailles blush. Why do so few in 2014 seem to even bat an eye at this?

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Reason60 02.04.14 at 4:32 pm

Fixation on tax rates is something only ideologues and politicians do. Businesses certainly don’t.

When businesses consider decisions, the cost of taxes is only one of a very long list of issues. Rent, labor cost, material cost, energy cost, capital cost, and on and on are far more important in their decisions that just taxes.

Isn’t it odd that we never hear a CEO threatening to leave Manhattan because the rent is too damn high?

212

Michael Weissman 02.04.14 at 5:44 pm

@notsneaky et al.
I’m surprised nobody here as even mentioned Robert Frank’s extensive work on positional goods. His book (it’s pretty much always the same one published under various revisions and titles) goes into a lot of detail in showing how inequality eats away at overall welfare quite aside from any subjective sense of “envy and jealousy”. Distribution of private goods matters, the nature of public goods and the distribution of power matters. Full rational actors, free of envy, are in many cases constrained to participate in negative-sum arms races for positional goods. Damping down those arms race by taking goods away at the top is a positive-sum move. And, BTW, distasteful as “envy and jealousy” might be, it’s not a good idea to ignore them if one wants an economic discussion of human beings, as opposed to some hypothetical other species.

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Bruce Wilder 02.04.14 at 5:55 pm

Plume @ 152: Isn’t another reason for a much higher corporate rate, in effective terms, the greater incentive to put money back into production?

I think that might actually touch on one of the strongest arguments against a high corporate income tax rate: when the government is effectively your partner, sharing half the profits, as it were, then the business may have to managed at times, to satisfy the state.

Back in the day, Congress mandated a lot of so-called “tax expenditures”, by granting firms income tax breaks. With an effective rate of 50%, this was real money, and corporate executives paid close attention. Probably too close attention. Management attention is a scarce resource, and the certainty attached to income tax breaks would leave management focused on getting them, while neglecting more basic investments, the results from which might be harder to calculate. I consulted once for a manufacturing firm, which should have been reforming its production and distribution processes — just-in-time and all that sort of thing — but was instead scheming to transfer certain production lines to Puerto Rico to realize some very lucrative tax breaks. Whatever small benefit there might have been to Puerto Rico was cancelled out by the harm to the communities production left, and the more general project of reform was neglected, and even undermined.

In general, a corporate income tax is falling on established firms, which are realizing substantial economic rents. It is because the corporate income tax is effectively a tax on economic rents that explains why its blunting of marginal income has so little effect on effort or output. That also implies, though, as a rule, that such firms should be throwing off cash, not retaining it. You don’t want rentiers running your society. Taxing economic rents should be a strategy for preventing that, not reinforcing it, but things go awry in this wretched world.

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MPAVictoria 02.04.14 at 6:04 pm

Plume @209

Your newsletter, subscribe etc.

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Bruce Wilder 02.04.14 at 6:20 pm

mattski @ 189: What actions are you referring to? And what actions–realistically–would you have been in favor of?

I don’t enjoy it when you play dumb. Stupid should not be an effective argument, and I’m not here to make it one.

“realistically” looks to me to be promising more work than you can legitimately get out of it.

At the core of a financial crisis are bad debts. Not rational expectations or adaptive expectations, but, rather, mistaken expectations. And, the state will intervene to help settle that debt, arriving at a revision of values and ownership claims. There’s going to be a four-way split between debtor, creditor, the state, and wastage, and in that split, there are choices to be made about the distribution of wealth and power, and therefore, income. It’s a political choice, a choice about who gets what. It’s pretty clear in the aftermath who got the better end of the deal. It’s why we are talking, here and now, about the pernicious effects of an extreme of income inequality.

Bernanke was a critical player in making that choice, a choice to make the rich richer at the expense of the working and middle classes. He did it, I think it is clear to those paying attention, out of personal, political conviction.

This should not be controversial. This is just a reading of the undisputed facts of the case.

That so-called liberal economists can not bring themselves to make the nature of this political choice at the core of economic policymaking clear is an indictment against them. It is a failure to do their duty in instructing the public in a democracy. And, yes, I agree with you: I expect Krugman and Thoma would reject this characterization. Their denials wouldn’t make my accusation untrue.

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William Berry 02.04.14 at 9:23 pm

Bruce Wilder, Plume, JWM, et al: Thnx, guys, you won.

[Pie] In the sky: you lose.

MPA Victoria @174: yeah, me too.

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bob mcmanus 02.04.14 at 10:17 pm

210: This is obscene. It would likely make even the 18th century denizens of Versailles blush. Why do so few in 2014 seem to even bat an eye at this?

Terror, Napoleon, Antietam, Verdun, Lenin, Stalin, Hitler, Nanjing, Auschwitz, Hiroshima, SAC and a zillion still waiting megatons

218

geo 02.04.14 at 10:37 pm

Bruce Wilder @171: I am not, myself, all that far from the moderate center in my politics.

Surprised to hear this, Bruce, and I suspect at least some others here are too. Would you mind describing your politics, however succinctly?

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bob mcmanus 02.04.14 at 11:32 pm

218: That so-called liberal economists can not bring themselves to make the nature of this political choice at the core of economic policymaking clear is an indictment against them. It is a failure to do their duty in instructing the public in a democracy.

I thought economics wasn’t a “morality play.”

Thoma and Krugman et al are externally and internally constrained, by history and their economic and political ideologies. 1) Growth, Equilibrium and stability are achieved and maintained by monetary policies of Central Banks, 2) distribution is determined outside economics in politics after the surplus is generated, ie taxes.

This is not a failure or partial surrender to freshwater fashion but more a realistic appraisal of what is possible after the victory of Capital, or an acceptance of subsumption when looking at the costs of rupture in the 20th century. It is a goddamn tough political choice.

Krugman and Thoma are not going to call for guillotines but are also not optimistic that less than guillotines will do much good. Economics is the freaking dismal science, fer gawds sake.

I am shocked at the optimism of the OP and “winning” comments after the last century, the last 50 years. This ain’t the 1950s anymore, and the Great Compression had a mighty expensive preparation. We ain’t legislating or organizing our way out of this one, this time. That War is over, and the bad guys won.

I suppose for a certain frame of mind, idle dreams are better than horror.

Marx lived in an optimistic age. He really didn’t mean “Nothing to lose but your chains.

We lost the War. Now, at best, it is “Die on your feet or live on your knees.”

But, facing Global Warming and the poisoning of the Planet, is “at best” any longer available? Now is it “Die on your feet or die on your knees.” Nothing to lose but your chains” has become nothing to gain either. Is the releasing of pure rage a moral option?
Do I have to watch the Sauds and Waltons move to Elysium…quietly?

Endnotes #3 September British magazine, booklength. 1 and 2 are also essential

Maybe here is an analysis that takes history and material conditions seriously, that doesn’t blame the proletariat for not trying hard enough.

I could be optimistic, actually am optimistic over at Endnotes. Not around here. Moody.

220

Collin Street 02.05.14 at 12:15 am

The peculiarity I was referring to is that there was surprisingly little resistance to the establishment to serfdom. There was more resistance to its existence, a few centuries later.

What’s surprising about that? At the time serfdom came into being, we can presume that it offered a reasonable deal for both sides under the circumstances then present. Which presumably wasn’t the case later, or the people who wanted to stop being serfs wouldn’t have wanted to stop being serfs.

221

Bruce Wilder 02.05.14 at 12:16 am

Optimism is cowardice.

222

john c. halasz 02.05.14 at 12:29 am

@220:

The cossacks IFAIK were basically runaway peasants or serfs. They went south to the steppe country, where they met up with the Tatar “hordes”. So they formed their own groups, since nomadic horsemen ruled the roost in that region over any settled agrarian mode. The “hosts” and the “hordes” were basically the same thing, except for skin color, language and religion. What made the cossacks difficult to deal with is that they were autonomously self-governing and rather anarchic, so eventually, they “had” to be brought into line or else liquidated.

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notsneaky 02.05.14 at 12:37 am

That’s sort of lore, not fact. A lot of cossacks were free booting impoverished noblemen, or folks who never got enserfed in the first place (there were a good many free peasants in these places even at the height of serfdom). The cossacks themselves were very adamant that they were of “noble born” and strongly distinguished between the cossacks as such and “chernya” (not sure what the English term is. The “black masses” that they lived alongside). This was pretty much from the get go until even the Russian Revolution, when there was a big split in the Don and Kuban, with the Cossacks opposing the Bolsheviks, while a good chunk of the chernya … while not exactly supporting the Bolsheviks, wasn’t all that interested in fighting them either (a pretty much universal rule is that unless their own land is threatened, peasants aren’t all that interested in politics and warfare).

Of course since there was little to no official records, and a lot of the credibility of being “noble born” relied just on the fact that someone would vouch for you, and since it was a martial society in which bravery was a way to (a form of) ennoblement the line between the noble cossacks and the peasant chernya was more fluid then in other contemporary social arrangements in the region.

224

MPAVictoria 02.05.14 at 1:46 am

“At the time serfdom came into being, we can presume that it offered a reasonable deal for both sides under the circumstances then present.”

Really? Wouldn’t it be more likely that the serfs choose the “deal” as an alternative to a violent death.

225

notsneaky 02.05.14 at 2:17 am

MPA Victoria, sort of, but then peasants in Western Europe, chose (the possibility of) violent death instead and serfdom ended, diminished etc. The question is why the difference.

We’re way off topic now, but I think Colin’s sort of right too, just looking at it in a different way. It’s actually a pretty under studied question, even by Marxists folks (with some notable exceptions) for whom this should be bread and butter.

My own hypothesis is that initially the increase in the ability to export grain – a rise in the price at which you could sell the grain abroad – both increased total surplus AND created incentives for landlords to enserf peasants. Additionally, labor was scarce, so that also increased the incentive for landlords to try and extract more surplus from peasants. But, initially, the competition between landlords in the periphery and the landlords in core areas (intra class warfare, if you will) meant that the enserfment proceeded gradually. Landlords captured a bigger share of the pie, but since total surplus was rising, there was still enough for peasants’ incomes to go up as well (that sort of (feudal vs capitalist economies) contradicts one of central theorems of Marxism, but as Okishio showed, that’s a good thing – the Marx’s original theorem was contradictory). At that point the choice for the peasants is “fight or acquiesce” but since their income’s rising (as their share is falling) “acquiesce” is a better option, given that the alternative risks violent death.

At some point there’s a limit to that and the good times of high export prices end, and labor becomes not to so scarce, and at that point there’s no more increase in total surplus so now all you got left is landlords holding a bigger piece of pie and serfdom. That’s when you get Pugachev’s rebellion and so on.

226

mattski 02.05.14 at 5:51 pm

Bruce @ 215

Bernanke the Reactionary

Bernanke was a critical player in making that choice, a choice to make the rich richer at the expense of the working and middle classes. He did it, I think it is clear to those paying attention, out of personal, political conviction.

I don’t think this is right at all. I think Bernanke felt his first duty was to stabilize the economy, whereas perhaps you felt his first duty was to promote a fairer distribution of wealth.

I fully agree that on balance the response to the financial crisis only exacerbated inequality. I fully agree that political power in the US today is disastrously misappropriated. I do not agree that the ‘Left’ is in possession of some special wisdom as to what should be done about this beyond the very humble first steps of, a) increasing taxes on the upper end of the spectrum, b) improving regulation of the financial sector, c) increasing transparency on the flow of political money and d) [my pet favorite] increasing funding for public media.

And I don’t think you succeeded above in making a persuasive case re Bernanke. You rather punted on my request for evidence…

227

Anarcissie 02.05.14 at 6:15 pm

Bruce Wilder 02.05.14 at 12:16 am @ 221:
Optimism is cowardice.

Even Optimism of the Will?

228

Bruce Wilder 02.05.14 at 6:31 pm

Oh, Anarcissie, that’s such a CT question!

229

Plume 02.05.14 at 6:36 pm

Optimism is a defense strategy. It helps us get up in the morning, instead of shooting ourselves. It’s one of those Nietzschean fictions that we all need, in one form or another — even those who say they don’t. Fighting to rid himself of those fictions didn’t help Nietzsche in the long run, though his was a gallant effort.

I’ve rid myself of the optimism behind the religious belief in an afterlife — going back roughly to the age of nine. But an optimism that humanity will get a little closer to an horizon of peace, love and understanding? It’s a foolish belief, without much basis in history. But at least here and there, at times, when things get very dark, the thought helps (in some small way) get me out of bed.

Everyone has some form of this. Some kind of optimism about something in their lives or their surroundings. Just the act of posting on a blog, for example, entails optimism to some degree. Foolish or not.

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Bruce Wilder 02.05.14 at 8:08 pm

mattski @ 226

I agree that the ‘Left’, as you put it, is not in possession of any special wisdom about what should be done about inequality. It needs to get some. It needs to open its eyes. Bernanke should not be getting a pass, because Krugman, who should know better but doesn’t, said Bernanke was an okay guy, fully paid up member of the guild, etc. You can’t win a class war, if the only classes hiring armed and fighting professionals are the mega-rich and the corporate executive class.

My position is not, as you claim, that I think Bernanke had a duty “to promote a fairer distribution of wealth.” I think he had a duty to do as he did, because that’s what the people who hired him, wanted him to do. I think those of us, who aren’t rich and powerful, who form the 99%, ought to recognize that Bernanke doesn’t work for us, isn’t working for us. (Ditto for Tim Geithner and Larry Summers and, yes, Barack Obama.)

What’s pernicious here is the illusion that Bernanke was acting in a broad public interest, guided solely by technocratic considerations, putting partisan and ideological considerations aside. That’s a view, I think, which has been legitimated by nominal spokespersons of the ‘Left’ (or centre-left, anyway) on economic policy, like Krugman. It’s b.s. And, it disables and dis-empowers the 99%, when they cannot see an alternative, whether it’s an alternative from the socialist Left or the populist Left or the liberal Left, or even a centre-right, which isn’t owned and operated as a wholly-owned subsidiary of the 1/1oth of 1%.

You previously have made the point that the ‘Left’ can be out of touch with the reality of the political attitudes of those cousins from Oklahoma — people I would characterize as having authoritarian political attitudes, the traditional targets for populist political appeals. Those people were instinctively opposed to the Wall Street Bailout, and I think their instincts were pretty good in some respects. When the ‘Left’ aren’t clear about the distributional issues, and, instead lecture the rubes on the virtues of elite technocratic competence, that’s when the ‘Left’ loses touch with reality.

In an earlier comment I wrote that the core of a financial crisis is a lot of bad debt, and governance requires a revision of values and equity claims, with, inevitably, some division among creditors*, debtors*, the state and wastage. The argument for intervention by central power and assumption of some equity claims or debt by the state is that it is possible to reduce wastage; that’s the argument for technical expertise and technocratic governance. The rest, though, is a continuum of choice: there’s no technical, a priori reason to favor creditors over debtors; the economy isn’t more “stable” because creditors have all their rights vindicated and debtors are thoroughly screwed. And, being a continuum of choice, it is as much a legitimate arena of political contest as the progressivity of the income tax.

I don’t think an objective observer, looking back at 2007-8 and since, could confirm Bernanke in good technocratic stewardship for the broad public, even if we could, counterfactually imagine him as a “public” servant. There was a lot of wastage — reduction in labor force participation, reductions in home ownership, falling wages, a lot of housing stock unnecessarily neglected or damaged, increases in parasitic debt, regularizing predatory banking practice, etc. The recovery has been the weakest in post-WWII history.

*I’m using the simple language of creditors and debtors, because it is convenient to my theme of political choice about who gets what, but I’m conscious that the problems of finance are problems of mediating institutions, which are both creditors and debtors and, frequently, neither. In the actual financial crisis of 2007-8, derivatives figured prominently and among the most egregious of the failures of governance involved derivatives. Bernanke’s role in seeing that AIG’s derivatives books was paid out in full is highly questionable, for example, on both distributional and technocratic grounds.

It’s the dry rot and mold infecting the unreformed mediating institutions of finance, following the flood of liquidity and Quantitative Easing and prolonged low policy rates, which should worry everyone, but especially the ‘Left’.

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Collin Street 02.05.14 at 8:45 pm

Really? Wouldn’t it be more likely that the serfs choose the “deal” as an alternative to a violent death.

Point is, we can presume, pretty reliably, based on nothing more than human nature and the undisputed facts of history, that the serfdom deal became — for the serfs — less good compared to the alternatives over time.

My guess is that falling levels of violence — fewer brigands, feudal wars, &c — driven by stronger central states diminished the value of the protection from outsiders that serfdom offered: lords couldn’t present themselves as protecting their serfs because there was nothing to protect them from. But there are other possibilities: technological change, serf-massacring becoming increasingly stigmatised in noble tea-parties, whatever. Almost certainly multiple complexly-interacting factors, of course.

232

Barry 02.05.14 at 8:53 pm

Bruce Wilder :

“Those people were instinctively opposed to the Wall Street Bailout, and I think their instincts were pretty good in some respects. “

Really? Opposed to bailing out everybody else, and willing to lie about – well, everything.
But what has the Tea Party wave done to deal with Wall St?

233

MPAVictoria 02.05.14 at 9:14 pm

“My position is not, as you claim, that I think Bernanke had a duty “to promote a fairer distribution of wealth.” I think he had a duty to do as he did, because that’s what the people who hired him, wanted him to do. I think those of us, who aren’t rich and powerful, who form the 99%, ought to recognize that Bernanke doesn’t work for us, isn’t working for us. “

This is a pretty cynical take on the duty a public official owes the public. I also think it lets Bernanke off the hook.

234

Plume 02.05.14 at 10:03 pm

The tea party never cared about the bailouts for Wall Street. They arose in opposition to even the hint that Obama might help underwater homeowners. That sparked the “populist” cough couch rebellion by Santelli on CNBC, which was so obviously stage-managed, followed by the bizarre outburst against the ACA, which was a very conservative program, straight out of the Heritage Foundation. The tea party eventually had to put up token resistance to the Wall Street bailouts, to avoid complete mockery for their shilling. They now talk of “crony capitalism” when that’s just redundant.

Bruce strikes me as correct when he talks about Bernanke doing as he’s told to do by his employers, the billionaire class. Which is all the more reason why we need to tear down and reopen the Fed under new management. Us. We the people.

No more quasi-private/public nonsense.

235

john c. halasz 02.05.14 at 10:37 pm

I would put it slightly differently. The prevailing monetarist economics was not simply an ideology, but a techno-structure that had co-evolved with the very type of economy it prescribed. Hence the arsonists were put in charge of fighting the fire, precisely because that was the only operative structure in place or practically conceivable to most. Bernanke was, of course, a principal elaborater of that monetarist techno-structure and ideology, both as a prominent academic and as a Fed governor, CEA chairman and Fed chairman, promoting especially the “great moderation” thesis, the extraordinary capacities of monetary policy (“helicopter money”), and the global savings glut thesis, (which had heavily influenced the rationalizations of Fed policy in the naughties). So there is no contradiction between Bernanke’s acting disinterestedly in what he thinks of as the public interest and his serving rather cravenly the interests of the prevailing powers, especially in the financial sector. He was just sincerely deluded by his prior formation and blind-sided by the risks that had built up, (since the prevailing doctrine had it that the new crazy-quilt world of structured securitizations and derivatives diffused and and balanced risks, rather than, as in actual fact, increasing them through information loss, skewed and misaligned incentives, tight couplings and increasing embedded leverage). Mere corruption had nothing to do with it, provided one maintains a sufficient level of abstraction.

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JW Mason 02.05.14 at 10:42 pm

Personally, I am not interested in a fairer distribution of wealth. What I’m after is an extension of the social spaces in which wealth doesn’t matter. With the eventual goal (far in the distance, clearly visible though we ourselves are unlikely to reach it) a world where wealth doesn’t exist.

237

Peter T 02.05.14 at 11:02 pm

Notsqueaky @ 225 makes me want to bang my head against a wall. Not notsqueaky him/herself – from within a certain paradigm the hypothesis makes a certain sort of sense. But the paradigm is carefully constructed to exclude/elide the ways large social choices are made, and most of the factors actually involved.

One would think economists – if they were serious about wanting to know how such choices are made – would be right into history. Instead, they mostly seem to either ignore it or mine for factoids, when not supporting the closing of economic history departments.

I brought up the different trajectories of eastern and western Europe because they offer a such a good contrast of the ways the interplay of elites, commons, the state and various resources play out. In fact there were three trajectories: western Europe, where the state retained enough independence from the upper levels of the elite to control them in alliance with lower level elites and commons; Eastern Germany/Baltics/Poland/Lithuania/Ukraine/Hungary where the upper levels captured the state, weakened it and exploited everyone else; and Russia, where the state allied with the elites but retained control (you could say the state captured the elites). In all three there was a feedback between local institutions and the ability of various groups to influence the course of events: where the state encouraged parlements, cortes, estates, assizes, county meetings and so on, and worked with and through them (often because it wanted to support for war), they fostered participation. Where it suppressed them (anti-union laws anyone?) lower level groups were left without resources or avenues to oppose the gradual imposition of ever stricter controls. Some of of Bruce Wilder’s observations playing out across a continent and a few centuries.

238

bob mcmanus 02.05.14 at 11:05 pm

236: Communisation. see Endnotes at 219 if you have lost faith in social democracy or violent revolution and prefer to avoid waiting for the apocalypse. Or keep your own faith.

Although I prefer “accumulation” to “wealth” because it works as a more general metaphor and is not so much the morality tale.

239

bob mcmanus 02.05.14 at 11:07 pm

237: You know, we can at least take a glance at Asia MENA etc. There are sources available.

China has much to teach us.

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john c. halasz 02.05.14 at 11:11 pm

@236:

Wealth is a stock; income is a flow. I think you might mean to say: a generalized condition in which income doesn’t depend on the ownership of wealth and in which wealth is a common pool resource. But then, under such a putative condition, all our definitions would change, eh?

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roy belmont 02.05.14 at 11:20 pm

JWMason at 10:42 pm 236

I’m totally sympathetic to the overall goal there especially

extension of the social spaces in which wealth doesn’t matter

but this

a world where wealth doesn’t exist.

I dunno man.
It’s like wanting a world where there’s no fat. I don’t mean overweight people I mean the lipidity, the energy storage capacity of the body.
Financial wealth maybe yeah who needs that except the capitalists and their plutophiliac children?
But the biological advantage, the competition, the hierarchies of survival, wealth as success in the gene-survival contest…getting rid of that is a much larger project than merely getting outside the parasitic grasp of capitalism.
That vagueness of scale is how this crap sustains itself. In the midst of a millenia-long complete cancellation of Darwinian struggle, the winners of the artificial jungle game are all about the Darwin again, now that they’re up.
“Losers” in the modern context mostly just don’t have any money or the stuff that comes from/with money. But losers in the original Darwin thing didn’t make viable contributions to the gene pool. So are we done with all that?
The perversion of the long-standing one – biological adaptive superiority – into the short-term pseudo one – I got your money! – skews the conversation so much it’s hard to distinguish the genuine from the phony. The baby from the bathwater.
Collective prosperity eliding into the hive mind totality. Because income disparity.
It’s just that there are positive mutations. Happiness-making mutants.
Seconding McManus’s “China has…” yes. Even something as simple as the Opium War of mid 19c. Very instructive. Hello Afghanistan.

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mattski 02.06.14 at 12:03 am

Bruce @ 230

We agree on quite a bit. But as far as the Left,

[needing] to get some [wisdom]. It needs to open its eyes

Is that really the pressing issue? What could the Left do if it indeed had the right insights? Would love to hear you on this.

It seems to me that as long as Red-state America is going to send right-wing loons to Congress there isn’t a whole hell of a lot ANYONE can do to make positive change. Well, what can we do about this? The best answer I can come up with is to engage in dialogue with heartland conservatives. My secret ambition [don't mock me please!] is to organize discussion groups that do just that, and create media out of it. There are few more effective techniques than genuine respectful dialogue.

My feeling about Bernanke is that he absolutely believes he acted in the public interest. Similar to my feeling about Obama. He finds himself ‘at the controls’ only in the most nominal of senses. The inertia/momentum of our plutocratic state is too much for a divided government to deal with. Maybe if Democrats controlled the legislative, the executive AND the judiciary we would be seeing some better developments. But, long term, the pressure has to come from below. I think you might agree.

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William Timberman 02.06.14 at 12:04 am

Star Trek Socialism: Scarcity defeated. Wealth held in common. Income distributed according to some more or less egalitarian principle not involving a reserve army of the unemployed, but otherwise not specified.

I’d be happy to live on less, if a) I didn’t have to kiss a lot of ass, b) the people steering the ship didn’t most of them sound like sociopaths or morons, and c) externalities were fully accounted for, including the destroying-the-planet-and-our-posterity’s-prospects ones.

Could those looking through that end of the telescope please be given a little more respect, maybe even a shot at buttonholing the Krugmans of the world and giving them a good talking to?

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roy belmont 02.06.14 at 2:56 am

Star Trek Capitalism: Taking the same ax you brought to the wilderness of the New World to the wilderness of stars.

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Lee A. Arnold 02.06.14 at 3:58 am

Well the thing about Star Trek is that they are all in a military with duties, orders, a chain of command. They run into private space traders and so on. It is structurally similar to McHale’s Navy. Indeed, later series brought in capital burlesques, via the Ferengi.

I am always a little surprised that the left doesn’t champion direct money printing for the healthcare system, as a way to set the precedent for a change in social preferences. It would slay a handful of dragons at once. Healthcare needs a monopsonist to manage the unique cost-inflation on the supply-side, while the demand-side is almost perfectly finite: no one wants more healthcare than is necessary to be healthy. Further, there is also a fascinating little question of just deserts. Consider monetary policy in the financial crisis: We (the Fed) gave $7-10 trillion additional to the financial system, so they can unwind their intra-bank trades and thus avoid putting the entire economy into bankruptcy court to sort-out the ownership of assets, after which the money now sits as bank reserves, to be reduced by “financial repression” as the economy takes off again (if ever). All of this, without really chancing inflation. So the question is: what is the difference from printing the money to pay for healthcare? Why does provision of this unique and problematic good, i.e. healthcare, have to be provided through the private bank system of debt creation and economic expansion followed by taxation?

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Bruce Wilder 02.06.14 at 4:45 am

geo @ 218 asked about my politics, and, I guess, why I would characterize my self as near the center in politics. I would say, if I appear to be leaning pretty far left, it is because, though I choose to stand near center ground, I lean against the prevailing wind, and right now, those winds are blowing at hurricane force. I have to lean pretty far left, just to stand my ground.

I don’t regard Ben Bernanke as evil. I think the point of view and interests he represents are legitimate. john c. halasz @ 235 did a brilliant job of summing up the case for Ben Bernanke acting in the public interest as Ben Bernanke sincerely conceived it. Contra MPAVictoria @ 233, my cynicism is not letting Bernanke “off the hook”; I’m not cynical. The problem as I see it, is that Ben Bernanke and the neoliberal politics and economics he represents are not opposed adequately. Bush appointed him; Obama re-appointed him; Krugman and other economists endorsed him in non-partisan, non-ideological terms. No one put Bernanke on the hook. And, he has had a major role, major discretion in determining the distribution of wealth and income — nothing could be more political, more deserving of political contest.

He was not adequately opposed intellectually, and consequently, couldn’t be adequately opposed in the execution of power. As john c. halasz so eloquently put it: “the arsonists were put in charge of fighting the fire, precisely because [the monetarist economics that Bernanke helped to fashion] was the only operative structure in place or practically conceivable to most.“. [emphasis added]

mattski: Is that really the pressing issue?

I kind of think it is. I think we need some kind of mass politics to represent a mass interest, but I don’t think it will get organized solely or primarily by spontaneous uprising from below. It’s been retarded by the low ebb of social affiliation generally, and I don’t know the causes of that social atomization, and it has also been inhibited by what Chris Hedges identified as the death of the liberal class, the passing away of institutions, which nurtured thinkers and leaders, who could press the case for change and for paying attention to the broad, general interest.

If the discontents of the local notables class, represented by the Tea Party and Ted Cruz or Rand Paul, seem to spring from an untutored id, it is because there’s no front lobe of liberal ideology to shape and filter those impulses. Instead, there’s the networks of Dick Armey and the Koch Bros. It’s not that long ago that Bob Dole would have been one of their representatives — his id wasn’t pretty, either, but his table manners were better. In the Great Depression era, Carter Glass, a Senator from the Harry Byrd organization, came out of that class, and wrote radical banking reforms into law. That they’ve been co-opted by the plutocracy is obedience to some natural law of politics. They are not the natural allies of the working man, but they aren’t the natural allies of the plutocrats, either.

And, the discontents of much of the middle and working classes are scarcely represented at all. I think a lot of ordinary people are deeply disturbed by economic and political trends, without understanding much in abstract policy terms, without being able to find trustworthy and authoritative voices to listen to or follow. I think mattski is right about there needing to be a lot of low-level social organization and discussion — not indoctrination, but people learning and developing informed points of view — before masses of people are likely to demonstrate much good taste or commitment. Move On! hasn’t cut it, and Elizabeth Warren is lonely.

The Right organizes Fox News to fight the increasingly imaginary “liberal media” and the Left organizes Media Matters for America to fight the right-wing media. What kind of ratings or audience share does Media Matters get? It’s absurdly lop-sided.

Barry @ 232: There are always going to be a lot of people, who don’t pay a lot of attention to politics, and don’t understand much on those rare occasions when they do pay attention. Their participation in politics, even whether they participate in democracy, depends on organization and leadership. If the Left is not going to contest organization and leadership of large swathes of the population, because . . . racist cooties, or god and guns, or just anger and resentment, then, yeah, the Right-wing sociopathic demagogues, who do get busy are going to lie and cheat and channel resentments into craziness or worse.

Plume @ 234 — The activist Left really should try to take over some of the regional Federal Reserve banks. The governance structure is open to popular takeover — a legacy of the populists. If the economics department at the University of Minnesota can take over a Federal Reserve bank, surely a political organization with a broader constituency could, as well. Even if the lefties were not wholly successful, they’d surely get some resources as a consolation prize.

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Bruce Wilder 02.06.14 at 4:49 am

is NOT obedience to some natural law of politics

Sorry for the omission of that “not”

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Bruce Wilder 02.06.14 at 5:00 am

Just a counterfactual footnote.

I don’t think the case of Krugman et alia v. Bernanke was all that heavy a lift in 2008/9. They could have opposed him on partisan grounds, and should have. A simple argument could be made that Bernanke had exercised extraordinary power in the crisis, which might have been appropriate, but it would be dangerous in a democracy to confirm anyone in the exercise of such authority. Rotation in office would ease exposure of those decisions to necessary scrutiny, . . . blah, blah, blah. They could be high-minded and technocratic, and still help ease him out, in other words.

And, I think, even within the admittedly narrow bounds of mainstream economics, it wouldn’t be that hard to identify Bernanke with conservative politics, and demand someone with a bit more sympathy for the wage-earning classes and less for the banksters.

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Bruce Wilder 02.06.14 at 5:15 am

Lee A. Arnold @ 245

There’s a real risk in the great expansion of purely financial assets in the capital stock of the country. There’s nothing you can do with purely financial assets, but sell insurance. Health insurance is a big outlet for it. But, there will be many others.

And, contra Krugman of the columns, pro Krugman of the textbook, (resolving the contradiction pointed out by JW Mason above) it will be inflationary in the long-run. Private, for-profit health insurance is pretty obviously a vehicle driving inflation of medical care costs, as has been extensively documented. (Yeah, ACA is going to start bending the cost curve real soon now.) Some of the other outlets: Student loans are well-established; what’s that done for college tuition costs? A lot of money is pouring into converting previously occupier-owned houses into rental properties — that will show up as deteriorating housing stock and increasing rents. States are being pressed to sell infrastructure. There’s been a lot of pressure to turn computer software and music and books into rental streams. There’s some risk that the whole payments system will be privatized, with increasingly severe limits on publicly issued cash money. Marxists in the 19th century were fighting over ownership of the mean of production; in the 21st century, maintaining public ownership of the means of payment may require a defense.

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Chris Warren 02.06.14 at 5:21 am

Personally, I am not interested in a fairer distribution of wealth. What I’m after is an extension of the social spaces in which wealth doesn’t matter. With the eventual goal (far in the distance, clearly visible though we ourselves are unlikely to reach it) a world where wealth doesn’t exist.

The only social space where “wealth doesn’t matter” is where a bunch of nudists eke out a short, brutish life living on raw fish, shell fish, snails, lizards and wild berries and edible roots.

The issue with modern wealth is not wealth, but the fact that some accumulate astronomical mountains of wealth by expropriating the wealth produced by others.

That is all.

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Lee A. Arnold 02.06.14 at 5:47 am

Bruce Wilder #249 — A single-payer (monopsony) is not required to use an insurance structure. Insurers can be entirely gotten out of the provision of healthcare (unless people elect to do otherwise, such as by allowing a private upper-tier healthcare insurance).

I caused confusion by calling supply-side cost increases “inflation”, when this word should be reserved for consumer-basket price level increases. I see no reason why directly printing money to pay doctors and nurses for healthcare should necessarily cause real inflation. They could not keep raising their prices, of course, and the demand-side would have to be a monopsony.

In fact I am not convinced that printing money has always led to inflation historically. This only seems to follow when the whole system has a problem and a government wrongly thinks that printing more money is the way to fix it.

252

Anarcissie 02.06.14 at 5:58 am

Printing or otherwise generating money will not cause inflation where it does not flow, for example under present circumstances the working class and the poor are not getting more money than usual — in fact, their world may be somewhat deflationary. Consequently the price of labor and the goods produced by labor does not inflate. As the money is created, it is made available to the rich and goes into the things the rich concern themselves with — real estate, equities, collectibles, precious metals, flacks, lawyers, and politicians.

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Bruce Wilder 02.06.14 at 6:15 am

Also, at the check cashing, payday lender on the corner.

254

Plume 02.06.14 at 6:51 am

The place where wealth doesn’t matter. Yes. That is the dream. Most don’t even stop to think about it, because we live in this capitalist soup, but there once was a time when people could go through most of their lives without any interaction with markets beyond their own community. Economic matters didn’t follow them 24/7. Other life-spheres dominated — spiritual, familial, artistic, sports, what have you. Today, nothing escapes the domination and dominion of capital, economics, markets. It has an obscenely disproportionate impact on our society, which is why we can no longer simply accept that people who choose a life in business should be able to call the shots and do as they please.

Once, long ago, we could be cavalier about that. It really didn’t matter if Joe or Jane wanted to make their own products and sell them locally. It was no skin off our teeth. We grew our own food, made our own clothes, built our own homes, and Joe and Jane just added to the mix. We even bought things from them from time to time. But today? After more than two centuries of primitive accumulation and the division of labor, we no longer provide for ourselves, and everything is a commodity and everything is a transaction and capitalism follows us everywhere.

Some of us see this as madness. Others see it as nothing more than “Nature.” And for those who see it as nature, they don’t see it as a problem that only a tiny fraction of the population even wants to own a business, hire workers, control the markets, set prices, set wages and determine our destinies for all intents and purposes. They don’t see it as a problem that this tiny fraction has such a disproportionate impact on all our lives . . . . when centuries ago they didn’t.

So, aside from the need for redistribution — which is totally necessary and totally just, given the imbalance the above creates — we do need to return to a time when the economy was not the be all and end all of existence. We need to return to a time and place where we have the freedom and liberty to escape from all of that. The right-libertarian idea of freedom and liberty seems to be, instead, to end even the tiny portion of life not already subject to capital, to economics, to commodification. They want wall to wall business.

I want as little of it as is humanly possible.

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Plume 02.06.14 at 6:59 am

This is the part of Marx that Lenin and those who followed him forgot:

“to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner… without ever becoming hunter, fisherman, herdsman or critic.”

This, along with real, actual democracy, was the best part of the communist dream. It was butchered and perverted and bastardized by those who believed they had to out compete and out produce the west first, before they made any of this happen — even if they ever wanted it to happen, which I doubt. They lost sight of the real goal. Not a world of Red Plenty. But a world where we all had just enough and more than enough free time to pursue our dreams beyond the acquisition and accumulation of stuff and more stuff.

That was the great error. To believe that endless work and endless production should be the end goal. A twist on Nietzsche’s power for power’s sake. The production of stuff to get more stuff to produce more stuff to buy more stuff.

Enough!!

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david 02.06.14 at 8:54 am

That dream died when someone went and invented penicillin and home electronics. Then suddenly industrial wealth meant an alleviation of real human suffering and tedium.

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MPAVictoria 02.06.14 at 11:23 am

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mattski 02.06.14 at 12:03 pm

Bruce @ 246

My takeaway from what you wrote is you’re not really sure what the Left should be doing. (Well, who is?!)

I have a gut feeling that we are mostly perplexed by the same thing: how did America go from the successes of the New Deal, the widespread prosperity of the 50’s & 60’s, to the economic sclerosis that characterizes the Reagan and post-Reagan eras. It is certainly a vexing question.

I think my answer is, for the most part, an alarming percentage of wealthy people are also dangerously neurotic and the correlation is not accidental. AND, the combination of great wealth with unusually fearful, jealous dispositions is not good. So, (painting in broad strokes here) long term strategy for dealing with this state of affairs is not to fight fire with fire but rather to “demilitarize.” And that is done by talking patiently and respectfully with people who find themselves persuaded by conservative ideology. (I do have a conservative cousin in Oklahoma, and I need to do a better job of engaging with him!)

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William Timberman 02.06.14 at 12:52 pm

The development of rentier-engineering has been fascinating. We no longer rob (extract from, if you must) the poor, we now rob every established economic class lower down the greased pole than the bankers: homeowners, students, the sick, credit-card users, prisoners, city parking meters and other services, all parts of the military including the shooting parts, etc. I read somewhere recently that after buying up masses of foreclosed and otherwise distressed properties in high-density areas like Phoenix and Las Vegas, the banks have hit upon derivatives based on the stream of rental income as the swindle-du-jour.

Maybe there’s a silver lining in here somewhere. It ought to be easier, for example, to organize a rent strike than a homeowner’s strike, even in an area where most of the rental properties are single-family dwellings. If all our soldiers vote with their pocketbooks and sign a contract with Blackwater, etc., rather than re-up, what then? It seems to me that the instabilities in this new world order don’t always show up where the rentiers expect them to. I’m sure that I’m not the first to have spotted such eddies in the expected course of events. It’s probably too early to see if anyone seriously attempts to exploit them, but it will be surely be interesting to see what, if anything, comes of them.

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bob mcmanus 02.06.14 at 1:34 pm

My takeaway from what you wrote is you’re not really sure what the Left should be doing. (Well, who is?!)

Well, liberal reformers gonna reform. Warren’s “Postal Bank” although 100 years old, is a decent idea.

Spontaneity, Mediation, Rupture …Endnotes #3

Revolution is not a plan.

(1) The unfolding crises of capitalism cause proletarian struggles both to proliferate and to transform in character. (2) These struggles tend to generalise across society, without it becoming possible to unify concurrent struggles under a single banner. (3) In order for fundamentally fragmented struggles to pass over into a revolution, communising measures will have to be taken*, as the only possible way of carrying those struggles forward. (4) It will thus become necessary to abolish class divisions — as well as the state, distinctions of gender and race, etc.— in the very process of revolution (and as the revolution). Finally, (5) a revolution will therefore establish, not a transitional economy or state, but rather, a world of individuals, defined in their singularity, who relate to one another in a multitude of ways. This last point will hold true, even if those individuals inherit a brutal world, ravaged by war and climate catastrophe — and not a paradise of automated factories and easy living.

*Yes, at a certain point this will become logistics. But right now, it can also mean looking for struggles as they erupt (Thailand, Turkey, abortion in Texas, grass in Alaska) and trying to relate and empathize.

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Trader Joe 02.06.14 at 1:42 pm

@255 plume
“But a world where we all had just enough and more than enough free time to pursue our dreams beyond the acquisition and accumulation of stuff and more stuff. “

Ahh…but what if your dreams are to live by the ocean for the serenity of it, or drive a fine sports car for the pleasure of going fast and the joy of driving, or nurturing a thoroughbred horse for the sybiotic joy of man and beast riding a challenging course or taking a trail ride. A well made suit, a first class bottle of wine, a leather bound book – while no doubt some view all of these as status symbols only, they are also “dreams” and “hobbies” which unfortunately for the masses (and even the marginally moneyed) take some dollars to pursue…indeed, not everyone can live at the beach even if everyone wanted to, so that resource would need to be allocated.

Not trying to go off topic – I think the overall arc of the discussion has been pretty interesting – and there’s a huge space between where we are now and some sort of socialist utopia which should be diligently pursued. But frankly sackcloth, denial and just enough are not really too appealing to most folks regardless of how ‘egalitarian’ that might all be. I find its far more appealing to find a way to redistribute than to encourage confiscation.

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Ronan(rf) 02.06.14 at 2:21 pm

Perhaps in 2008 Bernake saw his primary role, as a result of having studied the Great Depression, being to stabilise the global economy ? Which the Fed did do, afaik ?
IANEA so what are people saying his options were domestically that could have lessened inequality, undermined the plutocracy etc ? Is this the difference between a fiscal or monetary stimulus ? Or are we saying let the banks take bigger loses ? Is this within his remit ? Apologees for the ignorance ..

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Ronan(rf) 02.06.14 at 2:37 pm

Within his remit *practically*. The Fed not being a technocracy works both ways, and also means he has to deal with political/institutional pressures etc Id assume ? To pass a meaningful fiscal stimulus do you need political support (at least in the executive branch) to design programs to implement that stimulus ?

264

TM 02.06.14 at 3:19 pm

Re “progressive” tax system: This part of the debate seems to have faded out but I’d like to add something here. Here’s an article on the Arkansas state income tax (http://www.arktimes.com/ArkansasBlog/archives/2014/02/05/mike-ross-rolls-out-income-tax-plan-phased-in-cut-to-overcome-43-years-of-inflation). Here the top bracket starts at $34,000 a year. 60% of tax-payers are in the top two brackets (you have to scroll down a bit to get to the tables). This is fairly typical for US states. Any numbers about US tax structure that only include the federal level are going to be grossly misleading.

Mother Jones had an article (http://www.motherjones.com/kevin-drum/2012/02/soaking-poor-state-state) directly comparing taxes paid as percent of income by the poorest 20% versus the 1%. The poor pay twice the tax rate than the rich.

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Lee A. Arnold 02.06.14 at 4:14 pm

Anarcissie #252: “Printing or otherwise generating money will not cause inflation where it does not flow…”

Printing money also need not cause inflation where it DOTH flow, if (and maybe only if) that flow is: 1. necessary (e.g. healthcare), and 2. not over-demanded (e.g. healthcare). Thus, the printed money for the healthcare system need never be in excess of demand. No inflation.

Money would be entering the economy at a different point, that is all. Right now it enters the economy via private bank credit expansion: the system of fractional reserve lending. The old idea there is, that it won’t become inflationary because borrowers need to pay it back, and lenders won’t over-lend because it reduces their return.

Where has that gotten us to? The current theory of “secular stagnation”. This theory is that various causes (i.e., capital-biased technological change; globalization; winner-take-all market goods) have reduced the need for labor while at the same time so much money has been made, that the financial system doesn’t have places to invest it all — thus interest rates are low, thus the zero lower bound, thus the Greenspanian need to pump up bubbles to get households going again with the most recent famous one being the housing bubble (and now, a global stock price mini-bubble just crashed).

And in the middle of all of this, we are expecting the poor to pay in for healthcare, or else the rest of us to shoulder the burden of them! So now the rich are whining about their tax rates. Ignore them, go around them — print the goddamn money instead!

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Lee A. Arnold 02.06.14 at 4:21 pm

I think Hazel Henderson once wrote that Marx didn’t understand money.

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Lee A. Arnold 02.06.14 at 4:24 pm

I think it ought to be clear by now that much of the financial profession, and much of the economics profession, doesn’t understand money either.

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Crickets Chirpping 02.06.14 at 4:26 pm

It is tough with our debasement of academic standards and the bastardization of “think tanks” into lobbyists. I was surprised by a couple of the states’ rankings on the table, so i tried to look up the underlying data. The complete report is here:
http://www.itep.org/pdf/whopaysreport.pdf

But I can’t make heads or tails of it. Homeownership rates for households making less than $21,000 a year in California is very low. I don’t believe I can get to a 4% real estate tax rate on the bottom quintile. Or that the poorest quintile pay TWICE the absolute (and 5x the rate) as the top 5% do in business excise taxes.

‘Any numbers about US tax structure that only include the federal level are going to be grossly misleading. ‘

I disagree – even accepting their data at face value, California is still a fairly flat/progressive state. Looking at the overall country, it won’t change the averages by more than a percent or two…

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Lee A. Arnold 02.06.14 at 4:39 pm

For the U.S., computing effective total tax rates — that is, including federal, state and local — for the quintiles is presumed to be almost impossible, due to state and local variations, user fees, etc. The last two attempts I saw showed that U.S. total taxes are nearly flat, down to the bottom quintile. Thus U.S. tax system is hardly progressive. If you include all transfers, then the U.S. system is more progressive, with the exception that the top quintile does better that the next quintile down: the richest do better than the second richest.

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Plume 02.06.14 at 5:30 pm

One of the main problems with trusting economists to handle any of this is that they have jobs. Generally, fairly nice jobs. Sometimes even cushy. As do most nice, well-meaning liberals and progressives from the middle class. So, they naturally believe it’s quite the sensible thing to do to “go slow,” be “pragmatic” and “practical” because they have theirs. They’re pretty set. Not as set as the 1%, obviously. But they’re pretty set. So they don’t want to rock the boat, fearing it will capsize and knock them out, so they won’t have their nice house with its 3.5 baths, 2.5 fireplaces, its sun room and brand new kitchen with all the latest stainless steel gear.

Go slow. Be practical. Be pragmatic.

Meanwhile, millions of human beings actually starve to death. Three billion humans live on less than $2.50 a day. You can afford to buy your Ipads because most of the people who make them work for 70 cents an hour in conditions that lead many to suicide. And what was the response to those suicides? Not to pay more or make conditions better, but to actually put nets around the warehouses.

So, you sit there in your comfy chairs and you play with numbers and you make fun of people who talk of better ways to live and organize societies.

Of course, some of us share fault there. Some of us don’t talk about our own sense of needed gradualism, once we’ve made the leap into true socialism. The gradualism involved with making the next leap after that into a kind of state without a state, which we know would take generations. It would take generations to internalize the changes, to make them routine, to make it so there wouldn’t be a big fuss over every microbial decision, that it would all function as a day to day routine, as we do now, because humans adapt like that. They get used to change and internalize it over time. It becomes the norm. The past then seems to be alien.

So, some of us who talk about end goals are at fault for not making that more clear. But bashing that far off horizon is still a copout. It’s still just a way to avoid the idea of change altogether. Because when one can say that a very distant goal, that may or may not ever be reached, seems crazy, they can just say, “Let’s just forget about the whole thing.” Even the long, “progressive” journey toward that very distant horizon. “Let’s just stay where we are instead. It’s much safer and warmer here.” It makes it worse if they think someone is promoting an immediate leap into that distant horizon, when they aren’t.

In short, we need visionary leaders, not bean counters in their comfy chairs. We need visionaries who seek to include everyone, not just the lucky 1% and their functionaries right down into the middle class.

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Lee A. Arnold 02.06.14 at 5:52 pm

Unfortunately there is not a lot of Hazel Henderson available on video, but here is a good interview:

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mattski 02.06.14 at 6:15 pm

Special for Bruce.

From today’s On Point, from NPR.

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mattski 02.06.14 at 6:17 pm

274

Crickets Chirpping 02.06.14 at 6:47 pm

“You can afford to buy your Ipads because most of the people who make them work for 70 cents an hour in conditions that lead many to suicide. And what was the response to those suicides?”

Do you know what life was like in rural china before the industrialization boom? It wasn’t good.

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Lee A. Arnold 02.06.14 at 6:49 pm

Here is another terrific new video of Hazel Henderson that went up last year, and deserves much more viewership. It may not be evident at first how advanced and experienced this person is. She is one of the great intellectual (and emotional) synthesists of our time. She is not creating ideas purely out of scholarship. For 40 years she has discussed practical ideas with thousands of people and NGO’s that deal with poverty, development, environment, and women’s issues, all over the world. She has been almost ignored by recent mainstream media, though after being at the U.S. OTA until Reagan killed it in 1980, she wrote a long-running Businessweek column and has appeared in other publications, and has spoken at dozens of international groups. (Gell-Mann gives her a nice mention in The Quark and the Jaguar.) She occasionally exhibits a minor flaw of synthesists — sometimes not putting things into approved academic jargon — and so standard economists have criticized her for not putting everything into their proper language. This I think is largely in order to dismiss her, because to listen to her further, makes them uncomfortable. Really she is way ahead of most of them on everything from finance to environment.
http://www.youtube.com/watch?v=1FGCr_9lxcE

And another one, from last year:
http://www.youtube.com/watch?v=WpE61Q91DaA

Maybe the world will finally wake-up to Hazel. If President Hillary has any sense, she’ll put her on staff.

276

Plume 02.06.14 at 7:04 pm

Crickets Chirpping,

That’s the capitalist myth. That life was so much worse before people were kicked off their lands and their means for self-provision were destroyed. It’s just a reflex today. The first thing that pops into the mind of capitalist cheerleaders.

In reality, they were better off in the country, until the economy left them stranded there, moved to the cities, crushed local and community economies. It was better.

And pretty soon, they’ll be just like us, unable to turn back, incapable of doing without umpteen other humans making stuff they once made themselves, in their own homes, or never knew they “needed,” because they didn’t.

That’s the trap which primitive accumulation and the endless of division of labor produced and produces, and so-called “communist” nations — which were never communist — fell into.

277

mattski 02.06.14 at 7:17 pm

Lee @ 270

I have to say I wasn’t impressed with some of Hazel Henderson’s remarks. For instance,

“The main error is that money is equated with wealth.”

If so, what is the negative consequence? How does this differentiate from what is classically known as ‘greed?’ Even without money people will still have the tendency to hoard and accumulate out of a desire for security.

“[True wealth is] the population and its talents and the resources of the earth.”

Why no mention here of goods & services?

“As the money system grew people began to equate money with actual wealth. So then the money system went global and began to disorder every local ecosystem and every local social system on the planet. And so what we have now is this gigantic financial bubble where there is about nine times more money circulating than the real goods and services that money is supposed to track.”

She doesn’t specify what the negative consequence of this “bubble” is other than to say that the financial system has “veered off into outer space.” This strikes me as especially odd in view of your advocacy for ‘printing’ money!

278

david 02.06.14 at 7:18 pm

mainland China hit the Malthusian cap a long time ago, even despite the population loss to regular wars. for most of the past two thousand years, its population levels have only been sustained through aristocratic bureaucracies carefully maintaining a capital stock (the great irrigation and canal projects)

279

david 02.06.14 at 7:24 pm

Population is the real problem with trying to enforce an end to the intrinsic capitalism demanded by urban life. The main problem with Pol Pot’s dream of restoring pre-colonial rural ways of life was that in the mere eight decades that France colonized Cambodia, the population boomed by ten times. That’s not sustainable without both industrial-scale agriculture and the international trade necessary to obtain the capital or chemicals.

280

Crickets Chirpping 02.06.14 at 7:46 pm

How do you square:

“be just like us, unable to turn back, incapable of doing without umpteen other humans making stuff they once made themselves, in their own homes, or never knew they “needed,” because they didn’t. “

with complaining about $0.70 an hour being too little? So do you want them to be richer, or poorer (in financial terms). Are suicide rates higher or lower in China today? All in mortality rates are vastly lower than 50 let alone 100 years ago. But with the comments about Pol Pot, I’m afraid where this conversation will go …

281

Plume 02.06.14 at 7:48 pm

David,

If I understand you correctly, industrialization caused the boom in population so we need more industrialization to sustain the population which will grow even more with further industrialization and need further industrialization to support, etc. etc..

That’s a classic trap.

And, it runs into the finite conditions of a finite world. The earth itself will shut that down eventually. It won’t give us a choice even to go slow with our changes.

As mentioned upthread: the richest 20% of the population consumes 85% of all resources — leaving just 15% left over for 80%. Aside from the obvious immorality in such an imbalance, this obviously tells us further industrialization is not sustainable. The World Wildlife Fund estimates that we will need two entire earths to meet resource demands by 2030, and four entire earths if the world catches up with the average American.

It’s really a matter of where (and when) you want your crisis and the size you will accept. Further industrialization might delay the inevitable until later, but it creates a far greater crisis down the road.

282

david 02.06.14 at 7:56 pm

I am regrettably unable to see into future decades, although I will point out that the only societies with a proven track record of sub-replacement fertility are the heavily industrialized ones. Worse yet, effective contraception is the exclusive output of chemical industries.

But all that isn’t really the relevant point. I would willingly gamble on starving in 2030 if it means not starving today.

283

Plume 02.06.14 at 7:59 pm

I want them to be paid for their work at least the same as anyone in the developed world. To me, it’s obscenely immoral to pay someone at Foxconn 70 cents an hour to produce a product sold for X amount, whereas they’d be paid, say, $18 an hour to produce that same exact product sold for X amount — if they worked here. The cost of living in China is irrelevant. What’s relevant is the value of the product produced and the compensation extracted by corporate ownership.

The owner of the company reaps their reward from revenues produced by workers regardless. He or she derives their compensation through the grotesque underpayment of wages. They take the remainder of total revenues minus costs and reinvestment. Labor being their biggest cost. They have every incentive to cheat and steal from and exploit their workforce, because the more they do so, the more they get to keep for themselves.

By allowing them to pay radically different wages in other countries, this just encourages greater exploitation and theft. And it tells us something that should be obvious to all:

They’d do it here if they could get away with it.

So why do we organize our policy and our society around their wishes and desires? Why do we coddle them and pamper them and beg them to stay with endless tax breaks and subsidies? They’re not really all that into us.

284

Plume 02.06.14 at 8:12 pm

David,

You’re setting up a false choice, though. Further industrialization isn’t necessary to avoid starvation, now, today. Better land management is. Breaking up huge corporate farms, turning them over to smaller, much smaller producers, families, etc. would increase yield and efficiency. Taking profit out of the deal would allow more of the value to remain with the food and the service, rather than finding its way into the bank accounts of the Monsantos, etc. etc.

Make organic the rule, not the exception. Create free space in cities for common gardens and greenhouses. Push hard for self-provisioning at home to the degree possible. Offer courses for all, and make them mandatory in public schools, to teach everyone how to grow their own food. Instead of building another mall, build common gardens and greenhouses, along with teaching facilities. Instead of building another factory to make a green colored deodorant, instead of a white colored deodorant, build those organic produce facilities, again, with teaching tacked on.

This is not difficult. It’s common sense. It means that we stop coddling and pampering the financial elite, stop letting them run things, and take that into our own hands. It means sanity (for all) instead of unbridled profit-making machines that serve a tiny fraction of society.

285

david 02.06.14 at 8:19 pm

As far as I am aware, industrial farming is more, not less, efficient at food production than family or small operations. The quality is lower but the crucial quantity is far higher. Returns to scale, a willingness to be cruel to chickens, and generous application of artificial fertilisers and irrigation projects are all major contributors to the disparity.

286

Plume 02.06.14 at 8:34 pm

David,

Thanks for reminding me of the other cost. Factory farms produce massive amounts of waste and pollution. See, for instance, this expose on Smithfield Farms. But, warning. Read it after you’ve already eaten.

No, they are not more efficient, by definition. They don’t work in a vacuum. You have to factor in what they do to the land, to animals, to the water system, with their massive amounts of anti-biotics, growth hormones, pesticides and the like. They make us sick, which adds to our health care costs and our lost productivity. They are not more efficient.

And we Americans throw away roughly half of our food. The lack of quality goods and their effects has to be a part of that dynamic.

Small family farms would, as you say, concentrate more on quality than quantity. People wouldn’t throw away so much, because it wouldn’t be junk, and the levels of pollution and despicable treatment of animals would radically fall.

Costs are an holistic affair, as is “efficiency.” Private, for-profit economies of scale also have the power to externalize far more of their costs onto the rest of us. That needs to be factored in.

287

Lee A. Arnold 02.06.14 at 8:48 pm

Mattski #276 — So things have to all be said in the very same sentence, for you to give them validity?

288

Anarcissie 02.06.14 at 8:57 pm

mattski 02.06.14 at 7:17 pm
‘… I have to say I wasn’t impressed with some of Hazel Henderson’s remarks. For instance, “The main error is that money is equated with wealth.” If so, what is the negative consequence? …’

Well, for one thing, as money becomes more fictive and abstract, it becomes more unstable. Hence the financial events of 2005-2009, which many found deleterious, although in the end the rich were made whole and then some. In general, it is often thought that a lack of contact with reality is not a good thing.

289

mattski 02.06.14 at 10:24 pm

Lee,

No, not that. I just didn’t see her–in the instances I cited–making a coherent point. There were other remarks she made that seemed quite valid.

290

JW Mason 02.06.14 at 10:42 pm

As far as I am aware, industrial farming is more, not less, efficient at food production than family or small operations

In a competitive market, all production processes that are actually carried out are equally efficient, assuming all inputs and outputs are fully accounted for. So if, where you live, you can find for sale industrially farmed vegetables, large-scale organic vegetables, and local family-farm vegetables, then you know that all these techniques are equally efficient. (Needless to say, any intrinsic value that people place on organic or local produce is an output, just as much as a greater number of vegetables would be.)

Now, you may want to think of efficiency like an engineer, rather than economist — as the physical quantity of some output relative to the physical quantity of some input. The problem there is, which input? If we are engineers rather than economists, we don’t have the option of using prices to combine them; we have to pick one. And we are very likely to find that the production technique that maximizes output (in physical terms) per unit of land input is quite different from the technique that maximizes output per unit of labor input. So there’s no sense in which one technique is inherently “more efficient”: it all depends which input you want to economize.

Now in the case of agriculture, my understanding is that modern industrial farming as practiced in the US is strongly labor-saving. Most physical outputs are extremely high per hour of labor, compared with agriculture in other times and places. But if you measure output per acre instead, traditional agriculture does better. This makes sense since, compared with other times and places, wages are very high in the US. But in a setting where natural resource constraints bound more tightly, or agricultural labor was cheaper (which does not have to imply poverty; many people — like me! — enjoy farmwork and under the right institutional arrangements would be willing to do it cheaply), a shift back to traditional methods might be more efficient.

Again, that is in physical terms. In economic terms, if people prefer to buy cauliflower from small farms, that makes small farms more efficient producers of cauliflower, every bit as much as if they could produce more cauliflowers from the same inputs.

291

Andrew F. 02.07.14 at 12:25 am

292

JW Mason 02.07.14 at 12:40 am

Andrew-

Those are indeed interesting: thanks. They illustrate my point well. What you see is — setting aside aggregation issues — agricultural output has increased by 250% over the past 70 years. This has been achieved with an approximately constant land input. Labor input, on the other hand, has fallen by 75%, while manufactures inputs have increased –
by 20-30% for durable equipment and buildings, and by much more for intermittent goods, up to 2,500% in the case of pesticides. So how much more efficient has agriculture become, if at all? It depends on the relative prices of different inputs. If labor is expensive, as it is in the US, then the increase in efficiency is very large. In a setting where land cost more, the gains would be smaller but still substantial. And in a setting where manufactured goods were very expensive, the technogical changes in US agriculture might appear as a very modest gain in efficiency or even as a regress.

Efficiency is simply not a property of a technique of production in itself. It’s possible that with a sufficient rise in the price of fossil fuels, more labor-intensive agricultural techniques that today are inefficient would become the more efficient ones.

293

JW Mason 02.07.14 at 12:41 am

(intermediate goods, not intermittent)

294

DaveL 02.07.14 at 1:22 am

JW Mason @ 290: “So if, where you live, you can find for sale industrially farmed vegetables, large-scale organic vegetables, and local family-farm vegetables, then you know that all these techniques are equally efficient. “

Wouldn’t that only be the case if they all cost the same? In practice, local family-farm vegetables and organic vegetables tend to be more expensive than industrially farmed vegetables. The same is true of eggs and meat.

295

JW Mason 02.07.14 at 1:25 am

In a competitive market, a higher price means a more valuable product. A half dozen eggs costs less than a dozen. Doesn’t mean it’s a better deal.

296

Plume 02.07.14 at 2:53 am

The real “efficiencies” and innovations regarding industrialized farming have occurred in the way corporation raise, manage and manipulate our expectations, not so much in the actual production of safe, healthy food that finds its way quickly to our dinner tables.

In reality, it’s marketing that has seen the greatest levels of “progress,” that and the incredible efforts taken to mask the process of production and storage. We still really can’t eat what we want, when we want to, even though we’re basically told we can. Take, for instance, orange juice:

Orange juice as a health drink

Key excerpts:

Alissa Hamilton points out in Squeezed: What You Don’t Know About Orange Juice, that with the rapid growth of convenience foods a larger question emerged around the very notion of what normal food was: processed or untouched? People ate one alongside the other without thinking too much about it. In the 1950’s, chemists developed more than 400 new additives to aid in processing and preserving food (taste was an afterthought, at best). Canned meals, powdered foods, frozen seasonal and exotic produce were now readily available year-round. Women’s magazines extolled these “new” foods and their miraculous time-saving attributes. But the idea that something processed could also be “fresh,” was provoking questions. By 1960 the FDA was becoming concerned with the misrepresentative “fresh” labeling of commercial orange juice. Not only was it far from fresh, but sugar
and water were being added. Federal standards and regulation ensued.

. . . .

But as Hamilton details in her book, there is practically nothing fresh or pure about it. Most commercial orange juice is so heavily processed that it would be undrinkable if not for the addition of something called flavor packs. This is the latest technological innovation in the industry’s perpetual quest to mimic the simplicity of fresh juice. Oils and essences are extracted from the oranges and then sold to a flavor manufacturer who concocts a carefully composed flavor pack customized to the company’s flavor specifications. The juice, which has been patiently sitting in storage sometimes for more than a year, is then pumped with these packs to restore its aroma and taste, which by this point have been thoroughly annihilated. You’re welcome.

297

Plume 02.07.14 at 3:02 am

Basically, the above is like spending most of your time trying to make a sick person look better on the outside only, rather than treat the sickness itself. That’s where industrialized farming has “advanced” things around the world. Cosmetics. We really would all be better off if we had local food culture, all organic, with as little importation as possible.

At least until we can find a way to get healthy, fresh food quickly from the farm to our tables, without processing it to death and adding artificial colors, sweeteners, softeners, bulk, thinners, air, water and preservatives to hide what is actually being eaten. And we also should have labels that give us farm fresh dates in detail. When was the fruit or vegetable actually picked? When did it actually leave the farm? Not its “expiration date” only. Give consumers the information they need to make sensible, logical choices. Stop hiding the process. And reform that process so you stop making us all sick.

298

Lee A. Arnold 02.07.14 at 3:51 am

mattski #289 — “No, not that. I just didn’t see her–in the instances I cited–making a coherent point. There were other remarks she made that seemed quite valid.

I am not sure that I understand you. Hazel Henderson is NOT — and I should make this clear — NOT proposing to print money. That is my idea in response to people who want pure socialism: advocate that, first. It would probably work, and it would get you closer to where you want to go.

299

Lee A. Arnold 02.07.14 at 3:54 am

If Ben Bernanke can go along with socialism in saving the financial sector, we can surely print the money for baseline healthcare.

300

Plume 02.07.14 at 4:05 am

Lee A. Arnold,

What is the difference between your idea of printing money for baseline healthcare and my suggestion of those electronic digits for hours worked? That pool of electronic digits, held by all. For all. For everyone.

As mentioned, money is just a representation of value, agreed upon within a closed system. Those electronic digits would be the same thing, within an alternative closed system. The key is agreement and acceptance.

Any system that has 1000 trillion in outstanding derivative trades is one that bases its system on fiction. That’s our current system. Why not make that available to 100% of the population, instead of the lucky few at the very, very top of the pyramid?

It sounds like you’re part of the way there with your printing idea.

301

Lee A. Arnold 02.07.14 at 4:46 am

Plume #300: “the difference between your idea of printing money for baseline healthcare and my suggestion of those electronic digits for hours worked?”

First, I think you can the print the money for a special sector that has certain, very unusual, supply and demand characteristics. You don’t have to change the rest of the system, and thus it may be a more achievable agreement, however distant in the future. But it won’t work for the government to print the money for everything else, because the common value of different things slips away from the collective grasp. This is the “knowledge problem”, expressed in yet another way.

To elaborate about supply and demand in healthcare: they almost cry-out for institutionalist (socialist) treatment. First, demand is absolutely fixed: no one wants to stay in the hospital one minute longer than necessary. You just want to get well, and get out of there. So the demand side will never go out of control. (We exempt elective and cosmetic surgery, as being better for private insurance.)

On the supply side, innovation is valued well beyond any market price, because it might save your life. Thus it is invaluable. You might like a special market mechanism for comparison and best results, but you might as well print the money. We will all be happier, and that is economists’ “utility”.

I am not entirely sure I understand your question, but a second answer might be, that you seem to want to redesign what money is, but but I see no reason why. Perhaps it is in order to protect it from domination by plutocrats, but theirs is a cheap trick, and it hardly requires that much thought.

Money is already a pool of electronic digits, but it is not valued entirely by the number of hours worked. That is the labor theory of value, and it doesn’t hold water.

We also must value different skills and different innovations, and change these values in the process of life, where individuals use those skills and innovations among other individuals who want them or need them — here, the knowledge problem is more quickly computed by markets.

302

Plume 02.07.14 at 5:15 am

It’s not the LTOV, strictly speaking. It’s simply the fairest way to assess value, account for exchanges, track them, and it removes the arbitrary from the process. There is no need to believe in or dismiss the LTOV to utilize it.

When you say “we must value different skills and different innovations,” who is that “we”? Certainly not the majority of humans, who have no say in the matter under our current system. And it’s certainly not valued according to any commonsensical, independent criteria. The winners of society set the rules and the value. We don’t.

There is no reason whatsoever, for instance, to value a Day Trader or a Hedge Fund manager above a teacher, a nurse, an EMT worker, etc. etc. That’s just completely arbitrary. The valuation is made by the people with the money and power to make that valuation, not by all of us, and certainly not be any useful criteria. In short, if you’re in the club, you make sure people in the club are “valued.”

And, to prove its arbitrary nature even more, this changes over time. Bankers, for instance, prior to financial deregulation, made far lower wages, as did most CEOs of major corporations. Doctors once made basic middle class wages not so long ago. And in our pioneering days, they made very little, often being supported by an entire town, with their home and food provided (temporarily) by the community in the form of a trade, with a small stipend to boot.

Your description implies a kind of longterm, established, independent metric for value which simply has never existed. It shifts across time and place. Athletes, musicians, actors, entertainers, have all seen dramatic changes in their compensation over time, as another example.

As for your “knowledge problem.” Given the recurrence of one crisis after the next in capitalism; given the need for endless bailouts by the public; given the fact that 85% of production is geared toward 20% of the population, leaving just 15% for 80% of the people . . . it’s obvious that the “knowledge problem” has not been solved. Add to that the incredible waste and pollution the system generates. Again, as mentioned above, we throw away half our food.

The system I propose couldn’t possibly be worse and would have to be better, as it’s based on the local, the community, local and community needs, to order, as opposed to centralized corporations producing products for future sales, based upon wishes and prayers. Unsold and returned merchandise is a massive problem in the capitalist system. It wouldn’t be in a produce-to-order system.

303

Plume 02.07.14 at 5:18 am

Also, on “value.”

In the 1960s, the typical CEO paid himself roughly 25 times the rank and file. Today, it’s more than 400 times. Larry Ellison of Oracle paid himself well over 10,000 times his rank and file. “Value” is quite fluid and obviously arbitrary in the capitalist system. There is no standard metric for “value” or it would not change so radically over time.

I think you are exaggerating the sense that our current system is fairly stable in its assumptions and valuations. History tells us this is definitely not the case.

304

Lee A. Arnold 02.07.14 at 5:25 am

Plume #302: “It’s simply the fairest way to assess value, account for exchanges, track them, and it removes the arbitrary from the process.”

I don’t see how any of that is true.

305

Lee A. Arnold 02.07.14 at 5:27 am

You continue to appear to think that what is happening now, must continue to happen, unless we adopt your radical revision. Is that your position?

306

Plume 02.07.14 at 5:34 am

No. My vision is of a distant future. Not something we leap into from where we are today. It’s for a time long after the change to real socialism, when we’ve put enough distance between ourselves and the madness and injustice of our current system. When we’ve internalized the realization that we finally hold an equal share of power, each to each. I hope for a day when this becomes second nature, routine, everyday to us, and we can shed most aspects of a “state.” Before that time, we’ll need one, but it must be engaged in a program of redistribution and social justice to reverse the ravages of capitalism.

So it’s a process. Steps. A horizon. Not one quick leap.

I’m just disagreeing with your rather generous description of our current system, and your dismissal of alternatives. Seriously, “the knowledge problem” is not something that will be an issue in the system I propose, but it is a problem now. With capitalism.

307

Plume 02.07.14 at 5:42 am

And the reason why it’s the fairest? Because work is work. Labor is labor. If we value X more than Y, we’re doing it based upon our own biases, or, in the case of capitalism, based on being one of the ruling class that gets to make those decisions, whether the rest of us agree or not.

And most of us don’t.

Workers make up the vast majority of the adult population. CEOs and business owners a tiny majority. But those CEOs and business owners value their own work far, far more than they value the labor of their workforce. As mentioned, the gap today is greater than ever before. Why should we, the majority, accept that valuation? It’s absurd. It’s absurd as valuation and absurd that we allow them to decide this for us.

The only fair and logical way to set wages is for everyone to decide, not a tiny fraction of the people who hold the levers of power.

It’s not much different from this: The people with blue eyes and blond hair are in charge. They “value” people with blue eyes and blond hair above all others. So they pay those people more than anyone with brown eyes and dark hair.

Paying Hedge Fund managers billions while paying teachers 50K is no less absurd.

308

Plume 02.07.14 at 5:44 am

In short, it’s called economic apartheid.

309

SoU 02.07.14 at 5:45 am

@299
“If Ben Bernanke can go along with socialism in saving the financial sector”
are you being sarcastic, or are you actually characterizing Bernanke’s response to the Lehman collapse as socialism?

310

Plume 02.07.14 at 5:51 am

#307. Meant, CEOs and owners make up a tiny minority.

It’s late. Editing skills failing . . . fast. Must. Go. To. Sleep.

311

Lee A. Arnold 02.07.14 at 5:58 am

Plume # 306: “No. My vision is of a distant future. Not something we leap into from where we are today.”

Then who cares? Devote your time to devising the next step, instead. Visions of the distant future are a dime a dozen.

312

Lee A. Arnold 02.07.14 at 6:07 am

SoU #309: I suppose it depends on your definition of “socialism”, and it also depends on whether you considered Lehman to comprise the entire financial sector.

313

Anarcissie 02.07.14 at 2:20 pm

@132 — Nothing Bernanke has done strikes me as a pursuit of the ownership and control of the means of production by the workers. Maybe a definition of ‘socialism’ is in order.

In regard to money, basing money on labor does not require submission to the frightful wrongthink of the LTV. It’s just another thing one could base money on, like land, gold, or a mysterious, constantly shifting, oft fiddled collection of goods and services. It could be done bottom-up by a system of credit unions and cooperatives. But I digress.

314

Anarcissie 02.07.14 at 2:20 pm

I meant, ‘@312′.

315

Lee A. Arnold 02.07.14 at 3:27 pm

@313 — This brings up a couple of questions about definitions.

Is “capitalism” to be restricted to its original definition, too? That is fine with me, but it goes against much of the conversations above.

If you base money on labor, that is the original definition of the “labor theory of value”.

A bottom-up system of credit unions and cooperatives would relocate the pooling of excess funds to a more local level. Again that is fine with me, but functionally speaking, this is still “capitalism”. And also, it is not “basing money on labor”; the value of the money will still be determined by both supply and demand for goods, services, skills, and innovations, as determined by “consumer utility”.

316

Anarcissie 02.07.14 at 4:11 pm

The Labor Theory of Value proposes that the exchange value of a commodity will be determined by its labor ‘content’. That does not necessarily involve currency at all. The currencies in which exchange values were (sometimes) measured could be based on anything the traders agreed on, including labor. One could still pay a huge sum, in labor-based money, for something that required no labor whatever. Remember, like the lady said, ‘Money is not wealth.’

Basing money on labor, or land, or gold, or anything else, can be a conscious decision, not something that just happens to happen.

By ‘capitalism’ I mean the private ownership and control of the means of production by an elite who exploit the labor of a working class and other resources. Credit unions and other cooperatives are private, but they are not supposed to involve the exploitation of a working class by an owning and managing elite. In much of this discussion, ‘capitalism’ assumes the capitalist state as well as the existence of capitalists and capitalist enterprises, a capitalist state being one in which capitalists not only exist but form the ruling class. Bernanke’s doings seem to me to be in complete conformity with the capitalist state and the interests of its ruling class, although I suppose some libertarian types would characterize central-government intervention in the economy as fascism. It certainly doesn’t look like socialism to me.

317

Plume 02.07.14 at 4:31 pm

Lee A. Arnold,

Who cares? I do. And it’s far from a dime a dozen. You’re just looking for any possible way to dismiss it or any other alternative. You can’t on its merits, so you latch on to something ridiculous like its place as an aspiration, a goal.

Marx talked about communism as something in the future, too. He talked of stages toward that goal.

Anarcissie,

Yes to your last paragraph. Very well stated.

318

Lee A. Arnold 02.07.14 at 5:38 pm

Anarcissie #316: “By ‘capitalism’ I mean the private ownership and control of the means of production by an elite who exploit the labor of a working class and other resources.”

And popular political discourse in the U.S. uses “socialism” to mean any government involvement in, or bailout of, any economic activity whatsoever. Not only from the right: Occupy Wall Street, for example, frequently called the Fed bail-outs, “socialism for the rich”.

So: Two pop definitions, both of them unfaithful to the originals.

My point in #299 was that the debate has lacked the obvious moral quid pro quo. If the government can print money to fund Wall Street’s bad gambles, it can surely get involved in healthcare.

319

Plume 02.07.14 at 5:42 pm

Of course, Occupy was being ironic.

But your main problem is in your limits. Why limit it to just health care insurance? That, as with so much of your thinking, is arbitrary.

“We can go here, but not there, or there.”
“Why?”
“Because I say so.”

320

Lee A. Arnold 02.07.14 at 5:48 pm

Plume @317 — Okay, so forget all the visions of leaps. What is your next step?

321

Lee A. Arnold 02.07.14 at 5:53 pm

Plume #319: “Why limit it to health insurance? That, as with so much of your thinking, is arbitrary.”

Actually I tried to describe, I think twice, why supply and demand in healthcare have special characteristics which allow the consideration of direct government monetization without inflation. That is pretty far from arbitrary. As a step to a better world, it is less than a leap to the distant future, I understand that already.

322

Plume 02.07.14 at 6:04 pm

To get people to open up their minds to the possibility of alternatives. Extending the realm of the possible is the main reason for offering future visions, visions of the future. Moving the Overton Window. Expanding the realm of the national conversation. To end the idea that we are stuck forever with what we have, or stuck just working on the margins, for “reforms” that always get rolled back anyway, even if they are passed — which is becoming all too rare these days.

IOW, those reforms, under present circumstances, are just about as unlikely as my future vision. But those ad hoc reforms give no one any lasting hope of actual, positive change, or anything to really become excited about for the future (especially young people), as a vision. Unless you’re a technocrat and just love nickel and dime-ing things to death.

The powerful vision of hope first. Then the steps. The acceptance that we’re not stuck forever with what we have first. Then the steps. The end of the brainwashing that tells us of the endless wonders of capitalism first. Then the steps. All of those, of course, being “steps” themselves.

They are steps, IOW.

Beyond that, organizing truly leftist groups from the ground up. A shift from running only national candidates, to running local and state first. Doing whatever we can to get on all ballots, into all debates, starting with the local. Take the message of alternatives to our system locally, state-wide and nationally, with an emphasis on the first.

323

Plume 02.07.14 at 6:10 pm

Lee A. Arnold #321,

I agree with you about health insurance. I don’t think you’re being arbitrary there at all. I’m saying stopping there is arbitrary. There are no barriers to doing the same kinds of things all across the board. No barriers.

Again, it’s all about a closed system and agreements within that closed system. We could all agree that a traffic cop should be the highest paid person in our society, and as long as we all agreed to this, it would become a normal, everyday fact of this closed system. Paying a traffic cop the most, or the local dog catcher, or a teacher, or a carpenter . . . none of that is any more arbitrary than paying a CEO 10,000 times more than their rank and file workers.

It’s all in the agreements and the acceptance. And, of course, in the power arrangements that hold this in place. Both those are entirely arbitrary too.

324

Plume 02.07.14 at 6:12 pm

IOW,

I think you confuse the existence of something with its legitimacy, or with it having a logical rationale behind it. If it exists, that must mean it’s the logical thing under our system.

No. All too many things are forced in this system, and would fail any independent test of logic from outside this system. Unfortunately, there is no outside at present.

325

Anarcissie 02.07.14 at 6:19 pm

Lee A. Arnold 02.07.14 at 5:38 pm @ 318 –

In popular discourse in the U.S., at least in my experience, capitalism is often conflated with private enterprise of any kind, markets, investment, classical liberalism, and so forth. While this is not entirely incorrect, it is much too broad. I am surprised you thought I was using the popular conception since I explicitly defined the word otherwise. As for socialism as ‘government control’, I agree that is how the word is used by the media and the politicians, but it is absurd with regard to the original, 19th-century idea. I am also surprised that, in these realms of elevated discourse, you would apply such a misnomer to Mr. Bernanke’s projects. As for Occupy Wall Street, it was a very diverse collection of people and ideologies, including provocateurs, saboteurs, spies, and street people; you could probably take any political proposition whatever and find at least one person (if only one installed by the cops) who would agree with it.

In reference to 299, you are quite right: the government could print money for medical care, and it would not cause inflation as long as the money was connected to some form of real value. In the case of medical practice I think the case is somewhat dubious, characterized by corruption, rakeoffs, and artificial scarcities, but no doubt some value is imparted.

However, the printing of money for the rich, whose main role in the financial crisis was destructive, is a bad example.

326

Plume 02.07.14 at 7:18 pm

Anarcissie #325,

Again, we agree. The American right has successfully distorted the meaning of socialism to basically signal totalitarian control by government. In reality, socialist theory prevents that control. It must be fully democratic, including the economy, and offers no chance for dictators. The people, not political parties or dictators, own the means of production. And most socialist theories depend on local, community control, and are quite antagonistic toward centralized power. Actually, toward any concentration of power at all.

The whole point of “social good” must necessarily move completely away from that kind of concentration.

And then Marx adds that this should lead to a future world of real communism, which is basically the internalization of socialist ideals to the point where a state structure is no longer needed. We take care of that on our own, as a natural, everyday routine. It’s just a part of our day to day, and we have tons of free time to pursue our own bliss, as Joseph Campbell might term it.

Contrary to the idea of forced conformity, socialism and then communism, especially, would lead to everyone getting a chance to pursue his or her dreams — no longer enchained by capitalism or capitalists. No longer just a number, a piece of marketing data, a consumer, a commodity.

I posted it before, but this was a really good article about misconceptions regarding communism and capitalism in Salon.

327

Anarcissie 02.07.14 at 7:36 pm

@326 — Lenin contributed to the confusion somewhat by defining the particular form of socialism he was implementing as ‘state capitalism’, that is, a situation in which the supposedly worker-based, democratic government/state would take the place of the private capitalist. Had I been there to object, Lenin would have dismissed my objection as ‘infantile Left hippie deviationism’. It may be said for his side that he was in the middle of an ongoing civil war accompanied by foreign invasion, subversion, and blockade. However, not long before he died, he spoke up firmly for a transition to local cooperatives. Unfortunately the centralized, authoritarian concept of the state which he had created was much more appealing to the seminarian Dzhugashvili and his successors and was retained.

‘Age after age, their tragic empires rise.’

328

Plume 02.07.14 at 8:03 pm

#327,

Left anarchists, especially, objected on those grounds, which very few Americans seem to know. As did the Narodniks, whom Michael Perelman discusses in his The Invention of Capitalism.

Lenin seemed overly enthusiastic about the supposed wonders of capitalist industrialization, and he (ironically) implemented primitive accumulation in Russia, in order to speed that process through.

There are too many “ifs” to recount when it comes to Russia. But at least two key “ifs” stand our for me:

1. What if the world embraced the nascent revolution, instead of trying to crush it?
2. What if Lenin and those who followed him in leadership implemented true socialism, with a fully democratized economy, focused on local and community control and needs, never falling for any competition with the west?

I think the first “if” makes the second “if” possible. Pretty much every government with a sense of being under siege tends to curtail freedoms, not enhance them. We’ve seen that in every major war even among so-called liberal democracies.

329

Anarcissie 02.07.14 at 9:45 pm

Well, we can’t expect the powerful, wealthy, and high of status not to pursue their perceived interests, which are usually more power, wealth, and status respectively (or they would not be what they are). And they have most of the soldiers, cops, flacks, and spies. Some have hoped in vain for successful insurrection, but I think mostly the dissident have to choose between interstitial subversion and ‘working within the system’. And the last-named, too, has not been very successful in recent decades. In any case, Lenin was not going to get a break.

330

Lee A. Arnold 02.07.14 at 11:14 pm

Plume #322: “To get people to open up their minds to the possibility of alternatives… The powerful vision of hope first. Then the steps.”

Oh for God’s sake let’s come up with some concrete steps first, that’s the hard part. All of us can supply the powerful vision-of-hope thingy. We have it on tap. It is inchoate and nascent, it is already who we are. It is on tap like beer.

In the U.S., pushing Obamacare in the right direction over the long haul, is a possibly smart way to go. All of its flaws will be discussed, will be thumped, by the mainstream newsthumpers, and that is one of the routes to “public education” about “universal coverage”.

I have been derided around Crooked Timber for years now, because I maintain that the world will be almost entirely socialist in about 100 years. And that it might even happen in the U.S. first.

How and why? I think we just follow the psychology of what is happening now. It was described by Schumpeter (big warning to fearful labelers: he was a -gasp!- conservative!) in Capitalism, Socialism, and Democracy (1942), especially the part that conservatives never read properly: everybody is about to get very sick and tired of all this crap. All of it. Innovation becomes increasingly automated and corporatized, it leaves more and more people out of the big pie, the entrepreneurial mentality devolves into a tarnished, tawdry gibberish, and so the whole premise becomes ridiculous.

For me, the most interesting economist of the last century after Keynes, or third after Coase.

Where can that premise be made ridiculous at the present time? We need merely to continuously refute the Ailes-Rove-Koch-Fox-octopus. (Although that is to denigrate cephalopods, my apology. Let’s say, refute the “social cognitive bias” of “hard-money fear of public institutions”, perhaps. Institutions reduce transactions costs: this is the Coasian key to introducing “cooperation” back into economics, where it should properly contextualize, envelop, and overshadow “competition”.)

We need merely to continue constructing the society-wide conversation that the internet is already affording us. Look at what has already been happening: the plutocrats are already NOT coming up with any new ideas. They have begun to fall apart intellectually. The disintegration is faster than one might have suspected. It is pathetic, people!

331

GiT 02.08.14 at 12:09 am

Late in the game now but I recalled this essay I liked on “leveling down” (and also out)

http://newleftreview.org/II/70/malcolm-bull-levelling-out

332

Plume 02.08.14 at 1:57 am

Lee #330

Oh for God’s sake let’s come up with some concrete steps first, that’s the hard part. All of us can supply the powerful vision-of-hope thingy. We have it on tap. It is inchoate and nascent, it is already who we are. It is on tap like beer.

So, you trash and dismiss the idea of expanding the national conversation and the realm of the possible by including alternatives to capitalism . . . and you then call for “concrete steps.”

But your idea of “concrete steps” is:

We need merely to continuously refute the Ailes-Rove-Koch-Fox-octopus.

and, you pretty much claim victory:

We need merely to continue constructing the society-wide conversation that the internet is already affording us. Look at what has already been happening: the plutocrats are already NOT coming up with any new ideas. They have begun to fall apart intellectually. The disintegration is faster than one might have suspected. It is pathetic, people!

IOW, your “concrete steps” means having a conversation. But one within the narrow boundaries you think best. A conversation. Though you seem to believe that conversation (as you want it to be) already has the plutocracy on the run, whereas anyone paying attention sees that’s quite clearly not the case. All the evidence points to their even greater dominance, power, wealth and wealth concentration, etc..

But you really have made things much clearer. A conversation which includes alternatives to capitalism is a complete waste of time. But a conversation as suggested by Lee A. Arnold solves everything. It’s actually already solved our problems.

333

Plume 02.08.14 at 6:29 pm

Lee A. Arnold,

You start by dismissing and mocking the idea of expanding the national conversation by including alternatives to capitalism. You mock the entire idea and demand “concrete steps” instead. But when you list your own idea of “concrete steps,” you, too, suggest a national conversation.

Please explain the difference.

You also say that “We need merely to continuously refute the Ailes-Rove-Koch-Fox-octopus” and basically claim victory already. Your last paragraph actually suggests that your strategy is triumphant over the plutocracy as we speak. Given the actual facts on the ground, given the ever growing and more radical increase in inequalities of power, wealth and privilege, that’s a rather absurd deduction . . . not only as a causal inference but in the sense of who is really besting whom.

334

DaveL 02.08.14 at 8:10 pm

Plume @ 296:

The orange juice thing is interesting, but having not read the book, I’d like to ask if the sort of orange juice I drink, which says it is “not from concentrate” and lists exactly three ingredients: orange juice, tricalcium citrate, and vitamin D3, is different from the processed swill described in the book, or is it mislabeled? I’d assume if artificial flavors, or corn syrup, or whatever was added, it would have to be on the ingredients list.

335

GiT 02.08.14 at 8:33 pm

It’s processed. Straight from the horse’s mouth:

“the oranges are washed and then the orange oil is extracted from the peel to capture the from-the-orange taste and aromas which are later carefully blended into the juice for consistent quality and flavor….

“the fresh juice is flash pasteurized….

“juice is then stored in chilled tanks for future packaging….

“stored juice is blended with fresh juice and a bit of the natural oils…. Pulp may be blended at this point too”

Ingredients list: 100% pure and natural orange juice.

http://www.tropicana.com/#/trop_grovetoglass/grovetoglass.swf?squeezed_from_fresh_oranges

336

Plume 02.08.14 at 8:38 pm

DaveL #333,

Good questions.

I’m no expert on the subject, but if I understand the process correctly, those flavor packs are put in without labeling. They manage to bypass the ingredients issue somehow.

I’ve switched to buying fruit and eating that, instead of drinking juice. But even buying the whole fruits runs into a host of other problems with storage, waxes, dyes, gases, etc. etc. . . . . not to mention pesticides and hormones.

The further away we get from our food sources, the more likely it is that we’re eating very unhealthy things. And the further away businesses get from their customers, the easier it is for them not to care.

337

Anarcissie 02.09.14 at 12:51 am

Lee A. Arnold 02.07.14 at 11:14 pm @ 330:
Plume #322: “To get people to open up their minds to the possibility of alternatives… The powerful vision of hope first. Then the steps.”
Oh for God’s sake let’s come up with some concrete steps first, that’s the hard part. All of us can supply the powerful vision-of-hope thingy. We have it on tap. It is inchoate and nascent, it is already who we are. It is on tap like beer. …’

I don’t find it hard to think of concrete steps. Every credit union, every cooperative, every commune is a set of concrete steps. In the realm of agitprop, we have people like Food Not Bombs who go into public places and give away food, exemplifying communism (although they dare not call it that, of course). The difficult thing is getting beyond the small population of radicals, dissidents, and cranks who do these things naturally, and making some kind of impression on the general population. Most of them are utterly convinced that There Is No Alternative to what they see around them, except maybe something worse. Hence the power of tribalism, which is one of the major resources of the Right — if there is No Alternative, you might as well fight with all your strength for the benefit of yourself, your family and your kind for a bigger share of the existing swag however filthy it may be. Giving the idea of an different arrangement is where the Vision Thing is needed — along with the concrete steps, of course.

338

Lee A. Arnold 02.09.14 at 5:57 am

Plume #332: “But when you list your own idea of “concrete steps,” you, too, suggest a national conversation.”

I have three difficulties, one substantive, one rhetorical, one temporal.

Substantively, I do not think that capitalism is necessarily greedy or anti-ecological. But it needs to be tempered by a socializing institutionalism (for want of a better phrase).

Rhetorically, I don’t understand the absolute insistence that we agree to, or believe in, a certain set of ideas. I think the preprogramming, “Capitalism is evil,” is substantively wrong. But I also think that any ideological preprogramming is a rhetorical mistake. Of course much broader agreement is necessary, but I think that this new agreement is going to be an emergent property, and even the intellectual framework of it will be emergent, and larger and different than we expect. This is just the way ecology is.

Temporally, I think that things are changing faster than I would have imagined:

Plume writes (#332) that I “basically claim victory already…. suggests that your strategy is triumphant over the plutocracy as we speak. Given the actual facts on the ground, given the ever growing and more radical increase in inequalities of power, wealth and privilege, that’s a rather absurd deduction . . . not only as a causal inference but in the sense of who is really besting whom.”

It is not my strategy. Describe what is happening, shorn of any ideology: Since 30-40 years ago a new shift in incomes and wealth has continued to worsen and become a renewed major grievance, this time across nations. We are going right up against ecological limits that also may destroy us. What do we hear, from the Great and the Good? In the U.S., a billionaire momentarily set aside his mighty labors, in order to say what? Ans.: To liken increased taxes to Kristallnacht! Consider that statement: tin-eared immorality, Pecksniffian fatuity, and last but NOT least, lack of intellectual framework. (Schumpeter, on the inevitable loss of personal stature among this class is psychologically deep, fascinating and damning.) Why are we hearing this whining silly crap? Because the 100 years of directed, controlled conversation by one-way mainstream media are rapidly ending. They no longer control the public conversation. They cannot promulgate some turgid theoretical nonsense about how important they are. This is an informational shift of historic proportions. Looks to me like the plutocracy is mentally disintegrating, under extreme emotional duress. They are spending tons and tons and tons and tons of dough to swing the elections, and I imagine now they are really starting to worry about the votes. The game is on! and it is changing faster than I would have imagined.

339

Plume 02.09.14 at 6:25 am

Lee A. Arnold 337,

I’m getting the impression that your posts are send ups. You can’t seriously believe what you’re saying. The plutocrats are on the run? They’re worried about the vote?

Come on. They win no matter who is elected in our system. The Dems, the GOP. It doesn’t matter. Both parties are on board with neoliberalism and give them what they want. Both parties know who butters their bread, and it aint us. The GOP might be a bit more aggressively in their pockets, and sing their praises far more readily than the Dems. But don’t kid yourself. For the plutocrats, it’s heads they win, tails we lose.

Also: I’m not calling for any “pre-programming” that “capitalism is evil,” though it most certainly is. I’m talking about expanding the realm of the conversation to include alternatives. Not sure how many times I have to say that. Your rejection of this sounds much more like a desire to “pre-program” the conversation yourself. You want us to start and end with the notion that capitalism is awesome, not “greedy or anti-ecological” at all. It just needs a few tweaks. And, apparently, if someone doesn’t agree with you about that, it’s because they’re supposedly steeped in too much ideology.

I’m asking for a major expansion of the conversation, a vigorous, no holds barred, emancipatory debate in service of everyone. You want to keep it in its nice, little narrow capitalism-only frame, one that suits the plutocrats just fine. That’s being “ideological.”

340

Lee A. Arnold 02.09.14 at 6:17 pm

I don’t hate anybody except dictators. All billionaires are not dictators. I don’t think about villainising billionaires as such. I think they are boring , most of them are pretty stupid, and some of them do bad things, yes. But I do not need a systems-theory villain.

Or, if there exists a systems-theory villain, it would have to include cognition problems, and so the villain is something like, “information-inundation, from growing ecological-limit complexities”.

And greed is a Biblical villain. Find out how many deaths per day are now caused by red-state refusal to take the ACA Medicaid expansion, and publicize this number, to vote-out Republican state legislators.

Another next-step idea.

What I don’t understand is, that after I write that we need socializing institutions in addition to capitalism, and perhaps we ought to print the money alongside the private financial system and just pay for all healthcare directly, you write — instead — that I “want to keep [the conversation] it in its nice, little narrow capitalism-only frame, one that suits the plutocrats just fine.”

And I don’t even insist on them, they are just ideas.

Because in order to “expand” the conversation to “include alternatives”, apparently I must agree to your insistence that capitalism is evil, and that nothing less than a root-and-branch extirpation will do the trick. I cannot question it, I must agree to it. Otherwise I am not allowing a “major expansion of the conversation”.

Again, even in addition to the substantive and theoretical concerns, I don’t think this will work as a rhetorical strategy for expansion.

341

Plume 02.10.14 at 12:21 am

Lee A. Arnold #340

This is classic straw-man production:

Because in order to “expand” the conversation to “include alternatives”, apparently I must agree to your insistence that capitalism is evil, and that nothing less than a root-and-branch extirpation will do the trick. I cannot question it, I must agree to it. Otherwise I am not allowing a “major expansion of the conversation”.

I have never even remotely suggested that you need to agree with my critique of capitalism, or accept the solutions I propose. Your agreement is entirely irrelevant when it comes to expanding the conversation. It has no bearing on whether or not we can have that expanded conversation. “Agreement” is beside the point. A place at the table (uncensored), however, is definitely at issue.

An analogy: There is this members-only sports club, and they talk a lot of football. It’s an unwritten rule there that whenever anyone discusses the great defensive teams in NFL history, the Steelers must dominate. There is no room for dissenters, like those of us who believe the Rams of the 1970s were better.

For decades, a small group of activists have sought inclusion in the club, but have been turned down (perennially) because they think the Rams were the best ever. Then, suddenly, one day they were granted invitation. The board decided to let them in, even though no one on the board agreed with their beliefs regarding the best defenses of all time. Nothing had changed along those lines. All that had changed was the decision to broaden the base of inclusion.

That’s all we anti-capitalists ask for. A place at the table to make our case.

342

Lee A. Arnold 02.10.14 at 1:19 am

#341: “I have never even remotely suggested that you need to agree with my critique of capitalism, or accept the solutions I propose.”

Let’s see, there is: “looking for any possible way to dismiss it or any other alternative” (#317). “so much of your thinking, is arbitrary” (319). “those ad hoc reforms give no one any lasting hope of actual, positive change” (322). “you confuse the existence of something with its legitimacy” (324). “dismissing and mocking the idea of expanding the national conversation by including alternatives to capitalism” (333). “want to keep it in its nice, little narrow capitalism-only frame, one that suits the plutocrats just fine” (339).

I’d say you sound very certain about these mischaracterizations.

343

Lee A. Arnold 02.10.14 at 1:21 am

As I said in a previous discussion, I think we are going to need BOTH capitalism and socialism.

344

Lee A. Arnold 02.10.14 at 1:23 am

And I think that is also, by the way, probably a very good rhetorical stance.

345

Plume 02.10.14 at 1:55 am

Lee A. Arnold #342,

Again, are you being serious? Since when is making an assertion in a debate, or stating a position, or arguing for a particular position, the same thing as expecting your full agreement? Especially when it comes to a call for an expansion of the conversation.

Follow the logic of your own assertion. And, yes, it is an assertion, just like the ones you quoted by me. Go meta. If this is the case, then you have been insisting on the same agreement from me, not only in order to frame (and narrow) the debate, but with your particular points of view. You do so in caps in #343.

It’s bizarre that you would assert that my assertions are laden with expectation of your capitulation, while yours are somehow innocent of said assertion.

Again, you’re not serious, right? This is you yanking that proverbial chain.

We are both certain in our assertions. The difference between us is I don’t play passive-aggressive games to get the other discussant to back down. Again, I couldn’t care less if you agree with me or not. We’re both just presenting our views on the issue. Your agreement (with my views) is totally and completely irrelevant and unnecessary when it comes to expanding the dialogue.

346

Plume 02.10.14 at 2:09 am

A better way to put this:

It’s bizarre that you would assert that my assertions are laden with expectation of your capitulation, while yours are somehow innocent of said goal.

Speaking for myself, your capitulation is not an interest of mine. Not in the slightest. I care about the larger chance at broadening the scope of dialogue. It’s irrelevant whether you, Mr. Lee A. Arnold, agree with me or not. I honestly couldn’t possibly care less.

347

Lee A. Arnold 02.10.14 at 3:31 am

Is it your opinion that I must “want to keep it [the conversation] in its nice, little narrow capitalism-only frame, one that suits the plutocrats just fine” (339), because I do not agree with you?

348

Plume 02.10.14 at 5:06 am

It is my opinion that you want to keep the conversation in its nice, little narrow capitalism-only frame, one that suits the plutocrats just fine — because you dismiss and mock even the idea of alternatives. But more importantly, in this case, even the idea of discussing those alternatives.

It’s not about me or you, or your disagreement with me. Again, I couldn’t care less if you agree with me or not. It’s about expanding the conversation to include alternatives, and to seriously critique capitalism itself, without the chains of “it’s the only system possible” in place.

I’m interested in seeing a radical expansion of that conversation, one that includes some two centuries of dissent, unchained by restrictions capitalists love to impose, or love seeing others impose for them. I want an emancipatory conversation that ends the choke-hold of the status quo ante, one that blows up all establishment boundaries and replaces them with everything and anything.

Frankly, I’m bored to tears by the narrowness of current economic debates and the truly silly idea that all we need are tweaks here and there. Nero and his fiddle. But a conversation that allows everything and anything includes that still, by definition. So I’m not trying to silence the out-of-touch, day-late-and-dollar-short discussions. I just want the anti-capitalist position added to the mix. It is the anti-capitalist position that has been silenced for a long, long time and that needs to end.

349

Lee A. Arnold 02.10.14 at 5:32 am

But so far as I am aware, your anti-capitalist position has not been silenced, in these comments threads. Is it your position that any attempt to critique it is intimidation?

350

Plume 02.10.14 at 6:00 am

Lee A. Arnold #349,

I think your question pretty much seals the deal. You’re just skimming what I write, at best.

No. I welcome your critique. Bring it on. But you haven’t critiqued what I’ve said. You’ve dismissed and mocked even the idea of an anti-capitalist position, and dismissed even the discussion of that idea.

351

Lee A. Arnold 02.10.14 at 7:58 am

Plume #350: “I welcome your critique.”

Good. You wrote at #302 of the electronic digits for hours worked, “It’s not the LTOV, strictly speaking. It’s simply the fairest way to assess value, account for exchanges, track them, and it removes the arbitrary from the process.”

I wrote at #304, “I don’t see how any of that is true.”

You responded at #306, “the reason why it’s the fairest? Because work is work. Labor is labor. If we value X more than Y, we’re doing it based upon our own biases, or, in the case of capitalism, based on being one of the ruling class that gets to make those decisions, whether the rest of us agree or not.”

That wouldn’t make it the fairest value, and anyway it is wrong. In economics the “biases” or determinants of value are already named and well-studied. In the case of capitalism the entrepreneurs get to make part of the decision, yes, but there is also consumer demand and utility, the scarcity of resources, etc.: everything that goes into supply and demand. The case of innovation is critical. You can hardly begin to establish the value of a brand new innovation to people, before they begin to adopt it.

Now, we began to discuss this problem in another comments thread, starting around here:
http://crookedtimber.org/2014/01/13/the-repubs-wont-douthat/#comment-505347
and you asserted in that thread, at #127,

“sorry, no. We need to keep the tiers the same. Steady state. Prices set. Wages set…. Doesn’t matter if someone invents something new. Same salary. We don’t want to encourage endless invention of new consumer goods, anyway. We will be extremely picky and only allow things that are necessary and for the common good. We don’t produce competing consumer goods. …It’s got to be something really important, really necessary and really innovative — as decided by the populace and in accord with the Constitution. Democratically. There won’t be that huge number of inventions on the docket, because we won’t need them and we won’t encourage them.” (127)

Well I think that pretty much ended the argument right there for most everybody, but persevering, I replied,

“No, I don’t think you can actually KNOW that. Future innovations are not finitely pre-statable — in other words, you cannot predict them. (Just like biological evolution.) Further, you cannot predict the social value or usefulness or consequences of these innovations, until they are up and running. And there are lots of them, in fact it looks like we are in an acceleration of really good ones, in addition to all the junk. Consequently, your “guidelines” must be so general, as to admit a thousand new questions and exceptions weekly, or even daily. And people have to vote on them: Does this one fit into the guidelines, does that one fit into the guidelines? So, in your utopia, everybody has to vote on so much stuff that they may never leave the voting booth. But, they would never even make it into the voting booth, because they would have to spend all of their time in the library or on the internet, reading and studying the issues, to make good choices on the ballot, if they ever made it over to the voting webpage. But before that, they cannot possibly study that much stuff, because scientific knowledge has long outgrown the capacity of single brains.” (136)

In other words, the knowledge problem. After which you simply asserted that your new system would solve this particular knowledge problem better than market capitalism, largely due to the appearance of a new communal psychology with a “radical and total break from that system” (260) that would happen because “when a new system comes online, totally replacing the previous one, we react to it. We change. We adapt.” (264)

Your position a few problems which you assert to have overcome, but you really have not: 1. We cannot predict innovations. 2. The knowledge problem is a limitation in cognitive capacity, and your new system is inferior to even the current solution. 3. The success of your new system depends upon humans changing psychologically, due to a change in material conditions that comes BEFORE the very psychological change that is necessary to make the material change work properly. 4. Also that is material determinism, which is not in evidence for all psychological states.

352

Plume 02.10.14 at 3:33 pm

The voting isn’t constant. As mentioned. Just as we have routines in our current system, they exist in a communal system. In a capitalist business, for example, guidelines are set, management is delegated and delegates, and workers, for the most part, self-manage. They don’t have to be told what to do every minute.

In the system I’m talking about, communities meet, hash out their itinerary for the week or month or quarter or year, etc. People vote on that. Then everyone goes about their business. There is no reason for endless voting after that. Micromanagement is unnecessary.

And, again, “the knowledge problem” is dealt with far better in a communal system, because it’s far closer to the people. No longer do we have some centralized, corporate power, dictating from thousands of miles away. No longer are we producing goods for potential future sales. We’re producing them to order, after establishing need and routine.

On psychology. I have thought of my system happening in several different ways. As an immediate change from the current system, on some island, with people who agree upfront to the basic tenets and actually want to live in that kind of society . . . . and as what would follow the shift to socialism in a relatively healthy capitalist society with surplus production. If it’s the former, people are already fine with the shift and there isn’t a “psychological” issue. If it’s the latter, there is a ton of time to make that shift, just as it took time to shift into a capitalist mindset.

Again, there was a major problem of “psychology” there, too. The masses opposed the new dispensation, vigorously, and fought against it for a long, long time. That’s why it took capitalism more than three centuries to finally dominate things. Well, that and its inherent contradictions and baked in oppression, which were never solved.

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Plume 02.10.14 at 3:39 pm

On innovation. I probably overreacted, out of frustration, because you kept on talking about washing machines, or some such.

It’s frustrating to talk about this because you really are still critiquing this communal system based on capitalist conditions and modes, and they won’t exist.

As mentioned, it’s like trying to critique a chess match using the rules of Risk.

It’s an entirely different “game.” It has its own rules.

So, basically, yes, innovation will occur. Just as it occurred prior to capitalism, market-based economies, and economies that were dominated by employer/employee relations. They won’t happen for the same reasons, which will be to their advantage, not loss. There will be no reason to wait until something is profitable, or thought to be. And in the capitalist system, we have immense logjams for innovations, theft by big corporations, and massive delays due to lack of funding.

In the communal system I propose, there is no reason for any of that.

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Lee A. Arnold 02.10.14 at 4:49 pm

There will be no washing machines? Right now, there are lots and lots of labor-saving consumer durables which are manufactured at distant points, geographically VERY FAR from the locality of any communal system. There are washing machines, automobiles, computers, cell phones, plumbing pipes, electrical wiring and generators, medical devices, refrigerators, etc etc etc. There are hundreds or things.

And every day, thousands or millions of new decisions, total, are being made at the point of manufacturing of those items, and at points beyond those points, in regard to allocation, supply chains, energy improvements, introducing brand-new innovations into both the product lines and the manufacturing processes, etc.

So, are all the communes in a country going to vote on every little detail of what happens in distant places?

And the problem gets worse: suppose someone thinks up a new idea, let’s say an “anti-gravity generator”, but it would take a half-billion-dollar start-up. How does everybody else in all the communes evaluate the proposal, to give the person the money, the resources? What do you or I know about sub-atomic physics, or marine biology, or cardiac surgery?

And the problem gets even worse: What if there are a thousand new proposals for very new odd things, in very different fields, next month? Just in the next month? (That is probably a conservative estimate.) How does everybody else in all the communes evaluate all the proposals, to give the correct people the proper amount of money, the resources?

Your answer, reprinted above, was: “Doesn’t matter if someone invents something new…We don’t want to encourage endless invention… We will be extremely picky and only allow things that are necessary and for the common good… It’s got to be something really important, really necessary and really innovative — as decided by the populace… There won’t be that huge number of inventions on the docket, because we won’t need them and we won’t encourage them.”

Well, you have lost almost of your entire audience right there.

And theoretically, you are not solving the “knowledge problem”, you are avoiding it with restrictions and ignorance.

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Plume 02.10.14 at 5:43 pm

Again, You’re assuming capitalist infrastructure when it won’t exist. You are still using capitalist rules to critique a non-capitalist society. IOW, you are positing non-existent problems. Will flesh that out later today.

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Lee A. Arnold 02.10.14 at 6:26 pm

Hopefully the “fleshing-out” will be beyond the simple assertion that these are non-existent problems, because there will be a different set of rules and another form of logic, and will demonstrate instead, exactly HOW they are non-existent.

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Crickets Chirpping 02.10.14 at 6:37 pm

Lee,

Here is a start:
http://en.wikipedia.org/wiki/Democratic_Kampuchea

Your “knowledge problem” really was solved in Kampuchea, or at least made irrelevant.

Best,

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Plume 02.10.14 at 7:02 pm

I’m mobile, so must be brief for now. But, just imagine the absolute absence of capitalist relationships, markets, infrastructure, and pretty much all of your objections disappear. Your objections require their existence in order to overwhelm the communal system. Again, they don’t exit.

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Lee A. Arnold 02.10.14 at 11:29 pm

Some problems of information appear to exist independently of social structures, due to a basic cognitive structure. I tried to show it in a cartoon called New Chart (for Descartes)

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Lee A. Arnold 02.10.14 at 11:31 pm

Oh I keep forgetting it pops up. There is an ad on there, sorry.

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Plume 02.10.14 at 11:50 pm

Lee A. Arnold,

There are at least two different kinds of book and film critics. The first is fine with criticizing the work in question on its own terms; the second, wants to criticize the work in question because it’s not the story the critic would have written.

On the issue above, you are the second kind of critic.

So, again, given this is my hypothetical, if you don’t want to discuss it on its own terms, please stop wasting my time and yours.

The hypothetical in question assumes the following:

1. Capitalism does not exist anywhere within the borders of this new society. There is no remnant. Not one iota of capitalist production, market relations, employer/employee relations, corporations, cartels, monopolies, private businesses, supply chains, consumer culture or anything remotely to do with capitalism exists. Think the Monty Python sketch of the Dead Parrot.

‘E’s not pinin’! ‘E’s passed on! This parrot is no more! He has ceased to be! ‘E’s expired and gone to meet ‘is maker! ‘E’s a stiff! Bereft of life, ‘e
rests in peace! If you hadn’t nailed ‘im to the perch ‘e’d be pushing up the daisies! ‘Is metabolic processes are now ‘istory! ‘E’s off the twig! ‘E’s kicked the
bucket, ‘e’s shuffled off ‘is mortal coil, run down the curtain and joined the bleedin’ choir invisibile!! THIS IS AN EX-PARROT!!

2. There is no Wall Street, no Madison Avenue, no corporate personhood, because corporations don’t exist. There is no capitalist infrastructure of any kind, so it can’t overwhelm communal arrangements. It would have to exist in order to do that.

3. This society is wall to wall communalism. It is wall to wall “the people own the means of production.” It is wall to wall “small is beautiful; local is logical.” It is wall to wall cooperation between these small and beautiful, village ecosystems. It is wall to wall Commons, except for one’s home.

4. There is no profit. There is no money. The only exchange medium, aside from barter, are those electronic digits I spoke of.

5. Villages are proactive, holding meetings to ascertain need in advance. They commission what is necessary for the community. The community fulfills those commissions. There is great flexibility here as long as these commissions (and the way they’re fulfilled) meet Constitutional guidelines and mesh with other villages, regions and society overall.

. . . .

More later, to keep the length of the posts relatively short.

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Plume 02.11.14 at 1:10 am

Will take a close look at your video later. Skimmed the first part of it. It sounds good so far.

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