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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: 4, Insightful) by Ethanol-fueled on Saturday July 29 2017, @04:00PM (7 children)
Economists are pretty much practitioners of voodoo. You could argue the same about mathematicians, but at least mathematicians have a solid foundation based on repeatable, verifiable results.
Economics is based on a foundation of pop psychology with some sociology, opinion, personal politics, and adolescent-level algebra. Some people sprinkle a little higher-level math on top to make it appear to be more credible, but as the old saying goes, "garbage in, garbage out*."
* Also, the machine processing the garbage is itself garbage
(Score: 1, Touché) by Anonymous Coward on Saturday July 29 2017, @04:11PM (3 children)
So what's your alternative? Actual voodoo? Just give up and not even think about economics?
If it's too hard for you to understand you can just go back to your mathematics instead, leave the real thinking to the grown ups.
(Score: 0) by Anonymous Coward on Saturday July 29 2017, @07:54PM (2 children)
Everything we've done is wrong, but we can't consider alternatives - we must keep doing what we know as a historical fact is wrong!
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @12:46AM (1 child)
The fucking article itself shows that people are thinking about alternatives. Everything we have tried so far is a bit wrong. So lets try nothing and hope without any evidence it will be right?
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @04:48AM
Welcome to SN
(Score: 3, Interesting) by HiThere on Saturday July 29 2017, @04:53PM
The reason economics is so bad is that models are always based on what will benefit some particular collection of people. Experimentation in this area is difficult, and generally requires lots of political support...so it needs to be designed to please the people who authorize it...and it results are usually ignored.
The only way to do real economics is to test your models of past events...but even doing that rigorously is quite difficult. Even getting the data to validate against uncontaminated by political bias (at the time the data was generated) is quite difficult. And every government figures the results they collect differently....e.g., how do you measure unemployment? There isn't even a consistent measure from decade to decade.
The economists deserve a lot of the blame heaped on them, but an equal amount should go to the politicians who intentionally tamper with the data.
Javascript is what you use to allow unknown third parties to run software you have no idea about on your computer.
(Score: 0) by Anonymous Coward on Saturday July 29 2017, @11:52PM (1 child)
The stupidity is strong in this one.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @06:46AM
He actually has somewhat of a point. The field of economics is wholly unscientific and its predictive powers are very poor.