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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: 1, Troll) by VLM on Saturday July 29 2017, @03:05PM (1 child)
The alternative interpretation is in an era of automation and world trade to route economically around environmentalism and labor laws, is that trickle down makes the permanent economic decline smoother and less deep, at least immediately. The argument isn't that trickle down will give you the 60s boom economy again, its that it'll give you an economy that'll average as good as rural ohio rather than as bad as rural mississippi. Best of a bad situation, not the best situation.
You have to be realistic. Giving the government another trillion would result in what positives? Only negatives like handouts that keep poor people poor, fund a war in Syria or Iran... When your government finds itself in a hole, step one is stop digging deeper.
Although this sounds strange analogy, think of teeny bopper top 40 music. In the ancient days everyone listened to Glenn Miller, for example. For a variety of reasons the music industry has shed all its listeners except teens, leading to pretty crappy pop music. Better a large slice of a small pie and all that. Anyway the point is that non-teens are no longer part of the pop music economy. For automation and regulation caused outsourcing large swathes of the population are leaving the capitalist economic system permanently, more every year. Arguably what the legacy remaining capitalist economy needs on its downside is going to look really weird to people no longer in the economic system. Much like Ariana Grande sounds ridiculous if you're not a 13 year old girl.
Its not necessarily the end of the world. If you eliminate the abstraction of mutual funds and 401K plans most people never participated in the stock market and everything was "OK" (well plus or minus great depressions and stuff). Or most citizens never participated in the bond markets and it turned out OK.
The middle ages didn't end because we ran out of superstition or labor. The world of the future will probably have the "gold market" separate from the "copper market" with essentially no economic activity overlap other than the usual predator-prey relations for taxation, etc.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @04:56AM
I was gonna give a real response, but then I remembered which user I was responding to and decided a simple "batshit crazy" would suffice. Best of a bad situation?? I'm glad you're looking out for the 1%...