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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: 0) by Anonymous Coward on Saturday July 29 2017, @06:14PM (3 children)
You're missing the part where Reagan-era tax changes made astonishingly little difference to tax receipts because the rate cuts went along with a massive cut to tax dodges. Basically nobody was paying those top rates.
(Score: 4, Informative) by Thexalon on Sunday July 30 2017, @01:08AM (2 children)
I went over this about over a year ago [soylentnews.org]: Tax rate cuts = tax receipt declines, tax rate increases = tax receipt increases. Whatever the peak of the Laffer so-called Curve (and bear in mind that there's no evidence whatsoever that it's a smooth curve, and no equation has ever been developed to describe it) really is, it's above any tax rates anybody in the US has experienced since the 1980's.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @06:39AM
Right, which is why nobody hires an accountant for their taxes, which is why all the companies with a US presence pay fat chunks of their worldwide income to the US, which is why tax havens are science fiction and why loopholes are a theoretical abstraction.
In other news, there are alternatives to living like Cleopatra, as Queen of DeNial.
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @08:18PM
It doesn't take a genius to figure out that when you start out at a tax rate over 90 percent (FDR, Truman, Ike) and make a cut, you will see some effect.
It quickly falls apart from there.
there's no evidence whatsoever that it's a smooth curve
Yup. It was a thought experiment, drawn on a cocktail napkin.
It had no data table that was analyzed.
There has never been a shred of evidence in any real-world economy that the Laffer Curve boosts job growth in any predictable way.
In fact, for the last 3-plus decades, we have seen evidence of the opposite.
When tax cuts to the Oligarch Class aren't tightly bound to actual new jobs created, those giveaways to The Rich aren't effective at their claimed purpose.
...and even attempts to do that have had questionable results.
I'll mention once again how, since 1985, a reworked unemployment insurance in Italy has been helping workers laid off by bust-and-boom Capitalists to start their own (Socialist) worker-owned cooperatives. [google.com]
It's working very nicely in northern Italy, with co-ops accounting for about a third of the economic activity.
-- OriginalOwner_ [soylentnews.org]