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Today the trend to greater equality of incomes which characterised the postwar period has been reversed. Inequality is now rising rapidly. Contrary to the rising-tide hypothesis, the rising tide has only lifted the large yachts, and many of the smaller boats have been left dashed on the rocks. This is partly because the extraordinary growth in top incomes has coincided with an economic slowdown.
The trickle-down notion— along with its theoretical justification, marginal productivity theory— needs urgent rethinking. That theory attempts both to explain inequality— why it occurs— and to justify it— why it would be beneficial for the economy as a whole. This essay looks critically at both claims. It argues in favour of alternative explanations of inequality, with particular reference to the theory of rent-seeking and to the influence of institutional and political factors, which have shaped labour markets and patterns of remuneration. And it shows that, far from being either necessary or good for economic growth, excessive inequality tends to lead to weaker economic performance. In light of this, it argues for a range of policies that would increase both equity and economic well-being.
Five minutes to midnight, marginal productivity theory "needs urgent rethinking."
[Wikipedia: Joseph Eugene Stiglitz is an American economist and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal. He is a former senior vice president and chief economist of the World Bank and is a former member and chairman of the Council of Economic Advisers. --Ed.]
(Score: 2) by aristarchus on Wednesday August 02 2017, @05:00PM
Yes, the concept is rather easy to understand. But evidently you fail to grasp what money is. Money does not exist as a natural object, and thus it cannot be something one simply "has" or not. You are reifying money, and possibly even, one suspects, deifying it.
Money is created by a relationship between humans. Thus is the Fed makes a loan, even on a factional basis, the loan itself creates the relationship that is "money". In economic theory this is sometimes referred to as M1, and further relations based on this loan multiply money, creating what economists call M2, M3, etc.
There is nothing surprising if the first step seems to create money out of "nothing". Unless you are a "conservative" who pines for the gold standard, because you are incapable of abstract thought and think that money has to be a commodity that embodies value intrinsically. But about commodities, um, those only have value relationally, some one has to want to buy your gold, or it too would not exist.