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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 jmorris on Saturday July 29 2017, @06:49PM (6 children)
Yes we can. For example most of what Hawking babbles about these days has nothing to do with his specialty. This is a very common pattern where an expert in a narrow field gains fame and then begins attempting to transfer it to fields they have no more expertise in than most other knowledgeable laymen... which is what Hawking is when he goes outside theoretical astrophysics.
We can ignore Stiglitz because he is from a school of political economics that we know is a dead end. It has been literally tried a hundred or more times now on every continent other than Antarctica and failed. It usually accumulates a large body count at some point in the failing. It isn't failing because of the "wrong people", it isn't failing because of nefarious dark forces, it isn't failing by random chance, it is failing because it does not work. Anyone still following it is either hopelessly deluded or Evil, pushing it for ulterior motives of political power knowing full well the expense in human suffering.
The only economics that isn't utter garbage is Mises in Human Action, since he uses no fake math to obscure an agenda, arguing only from logic derived from first principles. Economics is a solved problem. What we lack is a political system that can allow the solution. Authoritarian political systems must, by definition, forbid the individual decision making and initiative needed to make a free market work and all we have as an alternative is Republics that seem to quickly decay into universal franchise Democracy and then to Socialism... which is authoritarian and incompatible with free markets. And that is the rise and fall of every society since we discovered fire.
(Score: 1, Insightful) by Anonymous Coward on Saturday July 29 2017, @09:53PM (1 child)
So is trickle-down. And shock doctrine. And Keynesianism. And all the others actually, because if there is one working great somewhere on this planet, tell me, I'd like to move over there.
Most of it is para-psychological voodoo using unrealistic hypothesis and scenario, one of them being that Humans are perfectly predictable and rational creatures. So if by "solved problem" you mean "we should just burn the whole thing and restart from scratch", yeah, maybe.
Uh? Republic, democracy and socialism are three independent axes. One cannot "decay" (whatever that was suppose to mean, but I guess it was a judgment of value on your behalf) into another.
And yes, Hawking should stick to astrophysics.
(Score: 2) by jmorris on Saturday July 29 2017, @10:48PM
No, that is the sperg libertarians. A society made only them might actually approximate "perfectly rational" enough to work. But humans aren't like that and Mises doesn't make the mistake of believing they are. Go read the book, economics IS a solved problem. Our politics is what we still don't know how to do. All of the proposed political systems have obvious flaws and when put into practice they fail exactly like they can be predicted to do. So we keep rotating through the same cycles.
Anonymous Conservative is probably on the right track defining the base problem but how we use that knowledge to build a better political system to resist the cycle is still an open problem.
(Score: 1) by Prune on Sunday July 30 2017, @04:13AM (2 children)
Here's something your precious Mises didn't know: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1773169 [ssrn.com]
(Score: 2) by jmorris on Sunday July 30 2017, @04:58AM
According to Mises, bringing advanced math to the subject of economics means you don't understand the problem. When was the last time you saw someone using so much as a calculator when making an buying decision? Yes it happens, but not enough to matter. Most economic decisions are "Do I want THIS more than THAT" and it isn't usually something that can be quantified with advanced math. Even billion dollar decisions more often than not end up turning on things that math can't accurately capture. Math is a tool, nothing more; some humans will use it in their decision making and some won't and if no two tax accountants can agree on what you owe the tax collector, good luck applying math to determine which house you should buy. That is why his book is called Human Action and not Economic Calculus or How to Model Economic Behavior. It helps if you actually read the books before burning (if only rhetorically) them, it works a lot better that way.
Humans are well adapted to operate in an environment where perfect information isn't possible. In fact, even if such information were possible and made available to them, many wouldn't use it. A system of economics for humans must account for these things.
(Score: 2) by jmorris on Sunday July 30 2017, @05:02AM
Damn, forgot the zinger. I'm pretty sure that is the paper that does put finished to Socialism / Communism since those ARE dependent on a single central authority being able to possess complete knowledge. But no, not even with a super computer beyond our current tech is such knowledge possible in real time. Any intellect or group of them short of divine must fail. So when somebody proposes Socialism as the answer, the critical question from Ghostbusters should be used, "Are you a God?"
(Score: 0) by Anonymous Coward on Sunday July 30 2017, @11:22AM
Conversely, outside of Bizzarro world:
Amazing how many are trying to argue with jmorris as if they were debating a rational person. All this effort will be in vain. It is like trying to explain "recusal" to Trump. Just ain't gonna happen.