I wish more people could have Thomas Piketty's balanced view on capitalism. Too often it is treated as some sort of game where you have to pick sides whether you are for or against capitalism.
Especially in America there seems to be a kneejerk reaction to any calls for regulations or moderations of the effects of the free market. Usually it is dismissed without further discussion with "look what happened in the east block countries!"
But I think Thomas Piketty has a very good point in his book that if you in fact favor capitalism, you ought to be open to regulation of it. The alternative is what we have seen again and again in history, inequality gets so bad that we get uprisings and revolutions. Inequality is breeding ground for radical ideas like communism. Otto von Bismarck understood that and gave Germany the beginnings for a welfare system. Not because he really cared about workers but because he understood the dangers of inequality with respect to radicalization of the poor.
Today we can see the same thing starting to play out in America. The US have now been on a path towards ever higher inequality for many years and we can see it reaching a breaking point. Politics is getting ever more radical. Donald Trump and Bernie Sanders would never had gotten the support they got without the economic fundamentals having shifted so much.
We already know what high inequality leads to in modern times, because we have seen it play out in South America again and again. They oscillate between one political extremist or populist after another.
I think if the US doesn't actually seriously try to reduce inequality, the US risks ending up with its own Hugo Chavez character, or alternatively a right wing authoritarian.
And if inequality doesn't cause revolutions, there seems to be a good case for it causing asset bubbles. We saw this in 1929 which market the end of a dramatic wealth inequality increase, just as 2008. I think it will happen again because the fundamental problems have not been solved.
While the idea of government intervention in the free market is classically dismissed by right-wing politics, the reality of the past 40 years has been heavy intervention by US and many other Western governments.
However, unlike the forms of left-wing intervention that free-market thinkers decry, this intervention takes the form of tax breaks, bail-outs and guarantees against market failures by governments to industries and individual corporations. This has produced what's been called "socialism for the rich" in many countries, where financial institutions are free to act without fear of any consequence of negative repercussions. Just as steel mills were in Soviet Russia, or rice farmers in Mao's China.
Witness this week's apparent bailout guarantee by the UK government to Nissan, the TTIP, or the way the Japanese government behaved towards its financial sector in the 1990's.
And no, it hasn't been all 'right-wing' intervention, though I'd certainly agree that there has been a lot of that.
There's been a ton of new 'left-wing' intervention in the form of growing welfare programs and authoritarian prohibitions on free association a la affirmative action, anti-private-discrimination laws, etc.
It is, a big corporation should not be served a bread buttered on both sides. Tax break is a form of risk mitigation. Corporations are supposed to be awarded tax break to allow them to take risks and move us forward. Does it really happen?[1].
I am not sure why a big group whose over all interest is to preserve status quo should be allowed tax break and keep on earning billions in return. Why they should not be allowed to die if they are can't compete?
When you are a sculptor, you can (among other materials) use clay or marble.
With clay, you start with nothing and fill up the space until you get the shape you desire. With marble, you start with a slab and cut out the bits until all that is left is the statue you desire.
You're claiming that only one of these two things is sculpting, and the other is not.
The government doesn't own what we receive in private trade. Taxing what we earn is government intervention. This is the conventional understanding. What you're doing is what Orwell describes as doublespeak.
This is classic libertarian bullshit. Ask them how they enforce private property and watch the web of insane bullshit about how market intervention is "violence" unravels. Hilariously, the newest trend in libertarian thought is to embrace something like feudalism without reservation, which is basically the inevitable consequence of a libertarian society.
Typical passive aggressive leftist bully talks to the crowd, over the head of the libertarian, instead of addressing the libertarian directly.
Way to go with the straw man arguments too.
Orwell on socialists:
>The first thing that must strike any outside observer is that Socialism, in its developed form is a theory confined entirely to the middle classes. The typical Socialist is not, as tremulous old ladies imagine, a ferocious-looking working man with greasy overalls and a raucous voice. He is either a youthful snob-Bolshevik who in five years’ time will quite probably have made a wealthy marriage and been converted to Roman Catholicism; or, still more typically, a prim little man with a white-collar job, usually a secret teetotaller and often with vegetarian leanings, with a history of Nonconformity behind him, and, above all, with a social position which he has no intention of forfeiting.
Yeah Orwell, the democratic socialist and Labour Party member, would have hated income redistribution programs. Orwell was anti-authoritarian, but he knew that the market left to it's own devices was just another incarnation of authoritarianism.
I never said he would have hated compulsory income redistribution. I was just showing that even Orwell recognized that socialist movements are dominated by people like the "youthful snob-Bolshevik" (looking at you).
Orwell was wrong about the market. There is nothing authoritarian about voluntary interactions between consenting adults, even if said interactions involve the exchange of (god forbid!) currency.
In Western countries in general, social welfare spending is substantially higher now, as a percentage of GDP, than it was before the 1970s. Social democracy on the scale we have today is a relatively recent phenomenon.
Regarding your claim that welfare reform has had "horrendous" consequences, it is overly narrow and simply assumes no broader and longer-term negative consequences from compulsory income redistribution.
> How about you act like a decent human being instead of making ridiculous strawman arguments against me?
Love the calls for civility from the person proposing that anti-discrimination laws were bad. Also "the free baby market" isn't really a leap from any of these hardcore libertarian views.
> In Western countries in general, social welfare spending is substantially higher now, as a percentage of GDP, than it was before the 1970s. Social democracy on the scale we have today is a relatively recent phenomenon.
> Regarding your claim that welfare reform has had "horrendous" consequences, it is overly narrow and simply assumes no broader and longer-term negative consequences from compulsory income redistribution.
We can debate about how absurd it is to say that the 50% of the population who can't work (and would provide basically nil extra productivity to the labor force if they were unjustly forced to rejoin it) shouldn't have income redistributed to them, but I suspect this is a point of philosophy we'll never agree on.
>Love the calls for civility from the person proposing that anti-discrimination laws were bad.
You say that as if saying anti-discrimination laws are wrong is uncivil. That is just whole different level of close-mindedness and intolerance to ideological unorthodoxy. I'm half-expecting you to call me a heretic.
You're completely missing the fact that I consider forcing (through threats of imprisonment) people to surrender their private property as a punishment for private discrimination to be extremely uncivil, due to its use of violence.
>Also "the free baby market" isn't really a leap from any of these hardcore libertarian views.
Deal with my arguments, not straw man arguments that you conjecture into existence.
>This has absolutely nothing to do with program expansion, it has to do with an aging population.
You clearly didn't read it.
Annual spending growth on various components of social welfare spending (1972 - 2011):
Pensions and retirement: 4.4%
Healthcare: 5.7%
Welfare: 4.1%
Annual economic growth over the time frame:
2.7%
Now that I've substantiated my claim that welfare AND social welfare spending have grown tremendously, you're trying to move the goalposts. You ridiculed me with your snarky put-down when I made the claim, and it turned out to be absolutely correct.
Your "but but" argument just shows how far your intellectual dishonesty goes.
>We can debate about how absurd it is to say that the 50% of the population who can't work (and would provide basically nil extra productivity to the labor force if they were unjustly forced to rejoin it) shouldn't have income redistributed to them,
Should we throw people in prison for not living up to your moral standards and giving to the poor?
You're ignoring this authoritarian aspect of what you're endorsing.
> Now that I've substantiated my claim that welfare AND social welfare spending have grown tremendously, you're trying to move the goalposts. You ridiculed me with your snarky put-down when I made the claim, and it turned out to be absolutely correct.
It's not "moving the goalposts", your claim was that welfare programs were "growing". The definition of beneficiaries and benefits hasn't grown probably since LBJ was in the white house, only the pool of retirees and disabled persons has grown. In other words, government hasn't changed anything to make the program grow.
> Should we throw people in prison for not living up to your moral standards and giving to the poor?
How many people are in jail because of tax fraud versus in jail for some form of theft of property? That's a good primo facie test to verify that this ideology even passes a simple smell test. Even if that did demonstrate a problem, this idea that there's anything nonviolent about your ideology is fucking bonkers. The non-agression principle is anything but:
http://www.demos.org/blog/1/29/14/what-world-following-non-a...
>your claim was that welfare programs were "growing".
And I showed that they are.
>The pool of beneficiaries and benefits hasn't grown probably since LBJ was in the white house,
I have no idea if your claim is correct (probably isn't, given the massive increase in people of working age receiving disability benefits), but this is in fact "moving the goalposts".
When I said welfare programs were growing, I clearly was referring to how much was being spent on them. Your pedantic nonsense notwithstanding, my claim was absolutely correct.
>How many people are in jail because of tax fraud versus in jail for some form of theft of property?
The carrying out of the threat may be rare, but the use of the threat to deprive someone of their rights is not. It is endemic. A person has a right to their property and their privacy and income tax laws violate both.
>The non-agression principle is anything but:
Can you distill your anti-libertarian article down to its essence and post it here?
I would LOVE to know what the negative consequences are of compulsory income redistribution and for whom. In fact, I wonder if there are any positives. Social democracy is OF COURSE a recent phenomenon -- I mean, what era are you comparing it to?
Furthermore, and not saying that I disagree about your comment on the New Left, but "free association" is a non-sequitur even in the society you wish to exist (which doesn't [sucks]).
The negative consequence of compulsory income redistribution is the perversion of incentives leading to less individual responsibility over time. This saps the will to achieve, and leads to less economic development.
These programs are also clumsy cookie cutter solutions, which with a stroke a pen, impose the same formula to tens/hundreds of millions of people, without any consideration for the unique circumstances of this vast multitude of people. On one end, the people lose out, and on the other, they win out in the short term. The only determinant of which side a person is on is the amount of currency that they report to the government that they received for that year.
This becomes increasingly better gamed over time, leading to competitive energies being diverted to economically wasteful activities like tax avoidance (which is an industry worth hundreds of billions of dollars per year now).
To boil it down to its essence: there is no way compulsory income redistribution will be as effective (in the context of increasing economic output) as the market at distributing capital, and it is increasing economic output that is responsible for almost all gains in qualify of life and poverty reduction.
Free association is a straightforward concept and entirely feasible to protect through laws.
> Also love the revisionist history that welfare has in any way grown. It hasn't, in fact it's been scaled back dramatically since the 90s, and the consequences have been horrendous:
You can see this is action in UK right now with respect to NHS spending.
Communism isn't some "radical" boogeyman, it's just a process to eliminate inequality. (Why should there be any inequality at all?) We don't need to be diminutive about relatively different ideas; that's unhelpful at best.
Communism is a very specific ideology with a well-known, well-documented content and intellectual history. It isn't "just a process" for anything.
Communism is evil because its ideology has no relationship with reality and will inevitably be a practical disaster anywhere it's implemented to the degree that it's implemented as a result. There's no escaping it any more than you can escape the laws of physics.
By that description, it sounds like a Bogeyman [1] to me.
Anyway, I live in a mostly Capitalist system, and it's also authoritarian. The only thing that seems to keep it from spiraling into complete evil is that a democratic Leviathan [2] happens to rule over it. (Of course, the capitalism is always in a constant assault for control).
What's funny to me is that I have several neighbors who fervently describe themselves as pro-capitalist libertarians. Yet, when I'm out of coffee or I need my driveway plowed, they do it for free. Why is that? Probably because we are all friends and have common culture and mutual trust.
When people invoke the idea of communism they usually mean: why can't we all have a society where we all act as neighbors. Sure, that's a daunting goal, of course. But, it's no less impossible as when people invented the idea of the social contract. Or any of the other million inventions that people said were crazy or impossible.
> What's funny to me is that I have several neighbors who fervently describe themselves as pro-capitalist libertarians. Yet, when I'm out of coffee or I need my driveway plowed, they do it for free. Why is that? Probably because we are all friends and have common culture and mutual trust.
I don't wish to presume anything about you specifically, but I find that your neighbor's behavior only seems paradoxical to those who don't understand what it's actually like to think like and be a libertarian. It's not that libertarians want to assign a price tag to every interaction (as if money were the only thing of value) it's that they would rather appeal to people's self interest to achieve social outcomes than resort to force (which they see as an inevitable result of any form of socialism/communism).
> When people invoke the idea of communism they usually mean: why can't we all have a society where we all act as neighbors. Sure, that's a daunting goal, of course. But, it's no less impossible as when people invented the idea of the social contract. Or any of the other million inventions that people said were crazy or impossible.
A distributist/communitarian might say that, regardless of whether we can be neighborly with all of mankind, we can certainly be neighborly with people who are actually our neighbors, and thus we should aspire to the former without sacrificing the latter. Yet sacrificing the latter is what I tend to see from those who invoke the idea of communism.
Force in defense of property is self-defense. Force in pursuit of other people's property is aggression. Aggression is the problem, not force in general.
But most aggression comes from disgreement over who property belongs to! Whose property is Israel/Palestine again? Who "owns" the air and can expliit the resource of increasing its CO2 contents?
Is it obvious that humans can own large areas of land simply because their grandfather did? If so, then in the case of US, why do you start tracking property after the natives who originally used it were forced off the land? And so on.
Property is not a simple concept and something to easily be for or against.
Property is almost always disputed and almost always linked to use of force somehow.
Yes, but we recognize that as a disagreement over who has legitimate claim to the property. With taxes, we take property that practically everyone, except the most snobbish socialist intellectual, and certainly the courts, would recognize as belonging to the individual.
It's on a totally different scale in terms of how certain we can be that it's a violation of property rights.
I disagree that it is obvious. Most of the taxes are a cut of income that would not have been generated if taxes had not been invested 20 years ago in education and defense and infrastructure.
And who granted anyone else the ownership right to destroy the air I breathe and destroy the climate I depend on? Some taxes are a way to compensate for that.
It is more like a forced VC capital investment in your life... you get a big chunk of education and defense and security paid for you, but if you hit it big you have to pay a lot back for it.
If I mow your lawn without your asking, and you set up a lemonade stand on your lawn, and as a result, benefit financially from the lawn mowing service I provided, because it led to more people visiting your lemonade stand, that does not give me the right to threaten to imprison you to force you to pay me $20 for the service.
At least make the example straight: The majority of the neighborhood decided that all lawns should be mowed, because they don't want unmowed lawns that are bad for the economy.
And that neighborhood are the only ones who protect you from the squatters outside with nuclear weapons ready to take the lawn, so they think they have a say. (Unfortunately you are surrounded by neighbors on all sides, so they cannot stop rendering protection services due to laws of geometry). And they are the descendants of the neighbors who helped your great-great-grandfather take the lawn from the Indians in the first place.
I don't agree that there are cleae cut simple examples when it comes to property.
I'm not talking about unmowed laws that are bad for the economy though. That's a negative externality for which there are many more justifications for government intervention (though not for an income tax).
It you want to nitpick on my thought experiment, you could also bring up the fact that a lawn is on top of land, and that there are strong moral arguments against an individual having a natural right to absolute private ownership over land, which in turns provides various justifications for government dictating land-use rules and collecting taxes on land/real-estate.
But I was not trying to make a comment on negative externalities or the right to private land ownership.
I was making the point that the government spending money on something, and this action ending up benefiting you, does not grant the government the moral right to threaten you with imprisonment to force you to pay for that something.
Sure, you can define it like that, but in doing so you've just rolled an extremely complicated economic system (property) into the otherwise very simple concept of non-aggression.
I think "hurting or threatening to hurt people" is a perfectly sufficient definition of aggression, and trying to stretch it to include property rights is a rhetorical trick to try and make a complicated political opinion seem obviously correct.
Laws against stealing are one of the basic laws of society.
Property is not extremely complicated. If I take your laptop without your consent, that's a violation of your rights. If you have 20 laptops, that doesn't change that fact. If I have 99 other people that agree that I should be able to take your laptop, that still doesn't change that fact.
What evidence are you using to claim that laws against 'stealing' are one of the basic laws of society? I assume you mean after codified laws and surely after agriculture. And, probably post-enlightenment, right?
But, at that point, laws are no longer 'basic laws of society' but laws of the sovereign - to maintain their power and control. And, interestingly, the soverign is the only one allowed to steal. I'm suggesting that maybe those 'laws' are no longer useful or at least may need to be modified. And, I think it's a cop-out to not try to think beyond that.
But, let's go back before the king. Did people really own land then? Doubtful. Did they even have individual property rights? Probably not in the sense that we do today. Most 'property' was collective. And, people didn't own land, which was thought as sacred.
In fact, behavior within families and kin groups is not much different then it was 12,0000 years ago. And, of all families and kin groups that I know, I see young children taught to share within the group. Where that breaks down is when they encounter strangers or 'invading' groups. And, only then do they rely on the laws of the state to make transactions.
So, that's what I mean when I point out my neighbors' behavior. Their natural inclination is to share (at least with those of their kin group).
Again, I don't think capitalism or communism are the answer. I don't know what is. I just think we can imagine something better.
>8. If any one steal cattle or sheep, or an ass, or a pig or a goat, if it belong to a god or to the court, the thief shall pay thirtyfold therefor; if they belonged to a freed man of the king he shall pay tenfold; if the thief has nothing with which to pay he shall be put to death.
>9. If any one lose an article, and find it in the possession of another: if the person in whose possession the thing is found say "A merchant sold it to me, I paid for it before witnesses," and if the owner of the thing say, "I will bring witnesses who know my property," then shall the purchaser bring the merchant who sold it to him, and the witnesses before whom he bought it, and the owner shall bring witnesses who can identify his property. The judge shall examine their testimony--both of the witnesses before whom the price was paid, and of the witnesses who identify the lost article on oath. The merchant is then proved to be a thief and shall be put to death. The owner of the lost article receives his property, and he who bought it receives the money he paid from the estate of the merchant.
>Plutarch, another ancient source for Draco, in his Life of Solon , claims that the penalty for the theft of an apple or a cabbage was death, and you could have someone made your personal slave if they owed you money. The writer also records that when Draco was asked the reason for making execution the punishment for most offences, the reply was that ‘Small ones deserve that (i.e. death), and I have no higher for the greater crimes.’
>The process of the law was one of political negotiation that involved everyone in the community. When there was a dispute, the elders met to discuss the punishments: their word was LAW. Offences regarded as unlawful included the unauthorised killing of a person, sacrilege, incest, adultery, theft, unauthorised assault, insult and neglect of kinship obligations. Punishments could range from making compensation over an agreed period of time to having to face a squad of spearmen, with only a shield and that person's ability to protect himself.
The reason laws against theft are universally found is that theft creates harmful incentives. It doesn't matter what stage of civilization we reach: the fundamental dynamics of multiple parties co-existing make theft harmful to creating economic value.
This is something I would argue is self-evident. Not sure why you're so desperate to question the moral principle that theft is wrong.
>I just think we can imagine something better.
Moral principles are timeless. There is nothing "better" than not stealing, because it is a basic requirement for a functioning society. The only type of configuration better than 'not stealing' is 'not stealing' + doing something good. But not stealing, murdering, assaulting etc are the foundational principles that a functioning society has to build on top of.
Ultimately every conception of rights is subjective, but property is generally recognized as that which we acquire through First Possession (a principle observed throughout the Animal Kingdom), and Homesteading (taking unclaimed natural resources and reconfiguring them into a more valuable resource).
First Possession at least has been shown in Game Theory simulations to lead to stable equilibriums, so it's not surprising that property rights are so widely observed. I think observance of the Homesteading principle naturally emerges from observance of the First Possession principle.
Where it gets fuzzy, in my opinion, is property rights over natural resources like land, which derive almost all of their value from their natural form, rather than the value done to them by their original appropriator.
How do you determine it's my laptop? How do you determine I didn't give consent? What about if I wrote a contract to lend you my laptop and we didn't specify a certain edge case? What about if you're using a hose in your garden and you accidentally damage my laptop next door? What about if I sell you the laptop and it breaks a few days later?
There are answers to all these questions, but we need a complicated system of laws to determine them.
>How do you determine it's my laptop? How do you determine I didn't give consent?
How do we determine that you assaulted me? It's your word against mine. We're not talking about the complexity of determining the true account of events, which is obviously great. We're talking about the complexity of establishing what property rights are. It's not complicated at all.
>What about if I wrote a contract to lend you my laptop and we didn't specify a certain edge case?
Then common law, which springs from the first principles of personal and property rights, would preside.
We'd have a similarly difficult time determining if a hockey fight classifies as assault. Or if in a traffic altercation, you stepping out of your car and aggressively approaching me justified my preemptive (or aggressive?) first punch.
>There are answers to all these questions, but we need a complicated system of laws to determine them.
The system of laws being complicated does not mean that it is not generally straightforward to determine what a person has property rights to. The complexity comes from the edge cases, but most cases are not edge cases.
>We're talking about the complexity of establishing what property rights are. It's not complicated at all.
Okay so what are they? What makes your claim to own the things you own correct and someone else's invalid?
Or more generally, how do you go from a world with no property rights, to one where everything has a defined owner, in a way that is simple and obviously fair?
Again, there are answers to these questions, but they are complicated and even within libertarian thought, people disagree about them.
>What makes your claim to own the things you own correct and someone else's invalid?
The fact that I made it, or acquired it from someone else through trade.
>Or more generally, how do you go from a world with no property rights, to one where everything has a defined owner, in a way that is simple and obviously fair?
The homestead principle is based on the notion that if something is unclaimed, and someone adds value to it, they should be able to enjoy the full benefit of that value-added thing.
The only 'artificial' private property is scarce natural resources, most importantly land, and that is because much if not most of its value comes from its natural form, rather than anything added to it by its original homesteader, and it is this class of property which society has a moral right to create rules/taxes on.
With respect to this latter class of property, once the rules on its use have been established (say a rule asserting that a property title owner must pay a rent equal to 1% of the value of their land to the government each year) anything the title owner earns in accordance with the rules (e.g. anything they earn on top of the 1% tax) is theirs by right.
And sure, these are reasonable answers, but they're starting to show complexity, and people aren't necessarily going to agree that they're obviously fair.
Society is complex, and trying to explain a principle and its application in all possible permutations will require an indepth explanation, but the overall concept is coherent and straightforward. I wouldn't call it ambiguous.
Regarding people disagreeing: people also didn't agree that ending ritual sacrifice and slavery were fair, but I don't believe many reasonable people would disagree on the general outlines of what private property is if the discussion is permitted to progress far enough.
I believe counter-notions are mostly a result of demagoguery and would dissipate in the face of reasoned inquiry.
Well for what it's worth, I think property is an effective economic system which should be utilised to the extent that it leads to good outcomes. I think arguing about a philosophical notion of property rights is ultimately pointless if a system that enforces them doesn't lead to better outcomes than one that flagrantly violates them.
I guess we can agree to disagree on that. I think if we step out of the philosophical, it's clear what private property rights are at the level of principle. True, there is a lot of disagreement in relation to specific cases, but I think that's due to superficial understandings people have about these cases, and that once the complexities of the given situation are elucidated, there would mostly be agreement on what a person has private property rights to.
As for outcomes, knowing what we know about incentives and how they affect the behavior of economic agents, and extrapolating the effect of the evolutionary processes of the market, it's inconceivable to me that violating private property rights would result in better outcomes in relation to increasing economic output over the long-run, than protecting them.
My impression is that completely unhindered property rights lead to ever amplifying inequality, as those who own capital are more able to earn money than those who do not.
I think a Capitalist system needs to be paired with a wealth redistribution mechanism to damp that amplification, such that inequality can only ever be maintained by constant effort.
EDIT: And while you may be right, I think being unable to conceive of ways in which you may be wrong speaks poorly of your imagination.
I don't believe that inequality justifies violence to force people to give up the currency they receive in private trade (to pay an income tax).
I also don't believe that inequality is a natural outcome of a market economy. The market will favor efficiency above all things, because it is an iterative process that rewards good utilizers/investors of capital with greater allocations of capital, and it is not efficient for 5 people to own and direct as much capital as 150 million people. More individual owners of capital means much more attention being given in the management of each unit of capital, resulting in higher returns on it.
The sources of income inequality need to be found in the government either not fulfilling its responsibility to manage the commons in the interest of the public, or in authoritarian prohibitions that disproportionately harm the less wealthy and the poor.
Free-market inhibiting factors that could be contributing to income disparity:
* high fixed-costs for participating in business. Fixed costs, unlike variable costs, punish small businesses. Regulations are known in the economics field as a source of fixed costs. A very basic example: you can't offer stock in your company on a stock exchange without having millions of dollars to pay lawyers. This excludes millions of small businesses from one of the best sources of capital: the public stock market. More on regulations causing an upward distribution of income: Working Paper: The Upward Redistribution of Income: Are Rents the Story?: http://cepr.net/publications/reports/working-paper-the-upwar...
* high market transaction costs as a result of regulations and taxes. Why do high market transaction costs contribute to income disparity? Because non-market transactions internal to an organization are not subject to the costs imposed by regulations and taxes. This will result in large corporations having a competitive advantage over small ones that rely on market transactions for a greater portion of their activity. For example, a large corporation doesn't need to pay a sales tax to have its accounting department do an accounting job for it. A small corporation that pays an external company to do it does.
Fair question, the answer is that you cannot. However, note that I did not say libertarians reject all uses of force, only that "they would rather appeal to people's self interest to achieve social outcomes than resort to force".
I think we would both agree that the generosity of your neighbors represents the ideal. But if they weren't so generous, how you get them to share their coffee plow your drive way? Would you lobby for regulations to be passed to force them to stop hoarding their coffee? Have the police requisition their plow for the greater good?
Or would you offer to compensate them for their goods and services? And if they refused, would you peacefully resign yourself to some other means of getting your needs met?
The socialist often invokes the spirit of generosity with his rhetoric, but when others are (in his view) insufficiently generous, he is too quick to trade the pen for the club.
> What's funny to me is that I have several neighbors who fervently describe themselves as pro-capitalist libertarians. Yet, when I'm out of coffee or I need my driveway plowed, they do it for free. Why is that? Probably because we are all friends and have common culture and mutual trust.
Even if there is no money involved, you may repay such favors in the future when they ask you. So it's more like borrowing a favor.
> why can't we all have a society where we all act as neighbors
Why can't we have that within capitalism? What does "act as neighbor" even mean? Does it helping one another for free? That already occurs for small tasks.
With regard to neighbors, there is hard-wired reciprocity involved. And, if one doesn't reciprocate, they may eventually be cut off from future generosity. On the other hand, many people genuinely get pleasure out of helping others. And, there are certain classes of people to whom special treatment is given - like the elderly and children.
Don't get me wrong. I'm not a communist, and I'm not completely against capitalism. Capitalism can be beneficial, especially in distributing resources. And, I understand and agree that capitalism is not a zero sum game (at least at the instant of the transaction). But, transactions are rarely equally beneficial. In fact, in the long run, transactions can actually harm one or more parties, especially those indirectly affected. And, based on my observations, it seems easiest to 'win at capitalism' via monopoly, deception, manipulation, trickery, and abusing intent.
Furthermore, what do we with those who are just unable to produce anything of value? it's implied that they just die.
So, generally, I'm not a fan of it (although I've also made a lot of money from it). But, what I dislike even more is the cop-out that it's somehow impossible for us to do better - that somehow 'natural laws' prevent it.
It's not really a donation if it's not voluntary. Whether someone should be supported by the government is an interesting question but calling taxes and welfare donations is doublespeak.
The way evil is used as a word by most people, your definition stretches far too wide. The connotation of "evil" is far more appalling than merely anything negative for human well-being. By your definition far too many things are evil to the point where the word is pretty mild, which is not how most people use it.
In short: you are doing poor communication to redefine it so differently from normal use.
Of course it's just a process. Capitalism is a process which centralizes surplus and power, i.e., increases inequality, and communism is a process which decentralizes surplus and power, i.e. decreases inequality. Calling communism unrealistic and disastrous is again just being diminutive.
Communists want for people who do productive work to have an equal say in how work is done and what happens to the product. Not complicated, not unrealistic, and certainly not an inevitable disaster.
In empirical terms, there's a lot more evidence for the disaster-causing tendency of capitalism than communism. At the very worst, the end result of communism is empirically unknown, since, to date, communism has not been allowed to flourish on a noteworthy scale.
Capitalism is a process that respects individual rights and in particular, contract law. It is a process that is responsible for more poverty reduction than any other in history, and for which there is a trove of evidence indicating that it boosts economic growth rates.
Communism is evil on a nightmarish scale because it advocates for violating an entire population's right to 1. their property, and to 2. engage in economic activity with other consenting adults.
Neither 1 or 2 are required for communism or socialism. Regarding #1, socialism distinguishes between personal private property and productive assets. Nobody is advocating for violating personal private property. And #2 is not something most mainstream socialists advocate for either, so it's mostly a strawman.
The only substantial difference between socialism and capitalism is the democratic control of the workplace. Capitalism's idea of a workplace is inherently totalitarian, socialism's is democratic. That's it.
It sounds like you are confusing communism with central ownership or state ownership. Communism is only concerned with the ability of workers to have meaningful control of work activity and output.
No I am not confusing anything. Marx laid out what mainstream Communism is, and that includes expropriating property from people, and denying the people the right to engage in voluntary economic interactions.
You may be confused as to what 'voluntary economic interactions' means, so I'll explain:
This would be any kind trade enter into by two consenting adults, like for example, doing a number of hours of work in exchange for a number of units of currency. By denying the right of employers to hire workers on any terms other than giving workers all of the revenue generated by the business, communism denies the right to engage in the aforementioned class of voluntary economic interactions.
I really recommend you think about these concepts. You seem to have a very shallow understanding of what communism is, and the implications of what it advocates for.
To advocate for radical reconfigurations of society, brought about by force, without thinking through the moral implications, is very reckless and morally irresponsible.
You seem to have a very particular idea of one kind of communism, and you seem happy to interpose it into my opinions.
Having said nothing about how or even if communism should be brought about, I certainly acknowledge that it seeks to bar certain apparently voluntary economic interactions on the grounds that they are not as voluntary as they first seem.
Take the rest of your strawman with you, I have no use for it.
>I certainly acknowledge that it seeks to bar certain apparently voluntary economic interactions on the grounds that they are not as voluntary as they first seem.
It would bar transactions that any court of law would find to be consensual. It's not a just system.
You're right I can't criticize your views that much because you do not actually outline what they are beyond vaguely saying they're communism but not saying specifically what that means in terms of what happens to the property we earn in private trade, and what private trades we're allowed to engage in.
That suggests to me that you are hiding what you truly believe in because you know it is not palatable while still promoting the 'communism' brand, knowing full well what most interpret that as.
No, to the extent that Communism can be considered evil, it is because it leads to terrible outcomes. You can argue that the outcomes are a consequence of not enforcing a property system, but it's still the outcomes themselves which are bad.
The advocacy of violating human rights, in denying people a right to engage in voluntary economic interactions, and to the property they earn in said interactions, is also evil.
First of all, without the principle, human economic activity would simply be impossible. In fact, it is the most central principle of all human rights. Without homesteading, we cannot own our own bodies. Appropriation of natural resources is the process by which we assert a right over the bodily material that food (originally unclaimed natural resources) turns into.
Second, if the government merely stopped protecting private property from aggressive seizure, that would be one thing. But communism advocates the government being the primary instrument by which people aggressively prevent others from existing as independent economic agents (homesteading natural resources).
>without the principle, human economic activity would simply be impossible.
Nonsense, non-captialist societies may have been less effective, but they were obviously still engaged in economic activity. Unless you define economic activity to mean "trade within a property system" in which case it's a meaningless tautology.
> Without homesteading, we cannot own our own bodies. Appropriation of natural resources is the process by which we assert a right over the bodily material that food (originally unclaimed natural resources) turns into.
That seems like an unnecessarily morbid way to derive the kind of morality you're talking about. (Seriously, we can only have rights because we turned food we owned into our flesh?) I prefer to define my morality in terms of people not property.
>But communism advocates the government being the primary instrument by which people aggressively prevent others from existing as independent economic agents
By which you mean, prevent them from withholding resources from other people.
Again, I'm not saying Communism is good, I just object to the way you're arguing that the problem is breaking some arbitrary principles you like, rather than the very real suffering it caused.
>Nonsense, non-captialist societies may have been less effective, but they were obviously still engaged in economic activity.
There has never been an economic system that has has zero defence for private property rights (in the abstract sense of one having exclusive rights to that which they appropriate from the natural world or receive from another legitimate owner). The soviet union had small privately owned farms. North Korea has black markets that are widely tolerated by authorities. But even at a more basic level, having an exclusive right to the food that the state gives you is an exercise of private property rights. Economic existence would not be possible with zero observance of economic independence between individuals.
>That seems like an unnecessarily morbid way to derive the kind of morality you're talking about. (Seriously, we can only have rights because we turned food we owned into our flesh?)
I see it in an opposite way. I see property as really our own person. I use the term 'property' because that is better understood. But morally, I think it's more appropriate to see the things we own as an extension of our person, and not as a separate class of matter we call property.
>By which you mean, prevent them from withholding resources from other people.
Withholding resources you created through your own effort, or acquired through private trade trade, is self-defense in my opinion. I think this is common sense and consistent with how we commonly define rights.
Maybe on paper; in practice, communism has been a process of structuring inequality differently: the criteria is how good are you in serving your current leader/mentor/sponsor and how lucky/good are you in choosing your next one.
While this criteria exists in all systems, it is the most defining one in communism and other authoritarian systems.
This is a classic 'no true Scotsman' fallacy. If you would like to avoid the fallacy, you could make arguments such as 'more socialist systems are associated with _ positive outcome', or socialism is more moral because _. I lean strongly against socialism, but would prefer everyone made better arguments for their causes; G.A. Cohen is a good starting point for moral/ethical arguments in favor of socialism.
Update: parent comment was substantially changed since my comment was written. It originally said something to the effect of: 'but true socialism has never been implemented'. Perhaps I should have quoted it to avoid this confusion/deception.
This isn't a no true scotsman, that commentor is correct. The state building ideologies of the 20th century are inherently authoritarian, but if you think they're the only components to socialist thought then you're simply uninformed. There are a multitude of anti-authoritarian socialist schools of thought, most notably anarcho-communism. There's also mutualism which is a market based socialist system.
Socialism isn't about state control, the socialist states that existed (and still do sort of exist, notably Cuba) see themselves as transitionary states between capitalism and socialism, up until the time they're no longer necessary (I don't defend this approach, there's multiple reasons why I believe this is wrong). These states never claimed to be practicing socialism, but they remain socialist states because of their end goal.
If you're interested in stronger well structured arguments for socialism, from an anti-authoritarian perspective I recommend reading the writings of Bakunin and Proudhon for more theoretical looks at property and the state. Kropotkin is great for anarcho-communism. Here's some books I recommend with free links:
And not particularly an ideology book, but an interesting firsthand recount by George Orwell of his time fighting with Socialists and Anarchists against the Fascists in the Spanish Civil War which is called "Homage to Catalonia"
I just wanted to thank you for taking the time to provide this information. I wish more people understood that communism and anarchism are legitimate forms of government that haven't been well tried and are widely misunderstood.
You have no moral right to use violent force against someone to force them to give up their private property for the crime of having more than another person. The goal of eliminating resource inequality absolutely does not justify this violation.
What you say would be true if property would be an issue with two people when they meet one-to-one.
There are different kinds of property on a sliding scale.
1) Your personal belongings, tools of trad and other things needed for living are considered yours by everyone in practically all cultures. That's property protected by ethics and morality.
2) Anything past that is service that society/government provides for people living in advanced society. It's not a moral issue anymore. It's a issue of society agreeing on tax rate and forms of property protection.
It would be helpful to at least acknowledge that most people dont' agree with unlimited property rights morals and stop preaching like it's god given truth.
That is just an arbitrary distinction to justify your greed for the property of others.
We either have a moral right to make exclusive use of natural resources or we do not. Whatever argument you make for the right to appropriate natural resources as 'personal' property can be applied to the right to appropriate natural resources as 'non-personal' property.
These debates get very philosophical, but when you step out of the theoretical for a moment, and think about what it means to tax someone's income, it's self-evident what property rights are, and that violating them is an authoritarian infringement upon human rights.
Taxing income requires a law demanding that a person disclose personal information on all of their private income to the government. Anyone who refuses to surrender their privacy and disclose this extremely personal information faces the potential punishment of being thrown in prison, where they are kept in a small enclosure, and where they often develop mental illness, and suffer from physical and sexual abuse. This is overt mass-surveillance enforced through threats of incarceration.
Then, once a person has disclosed this personal information under threat of imprisonment, a tax on income requires demanding that people hand over a share of this currency that they've received in private trade. This tax debt is unlike other types of debt. It's a debt obligation that a person assumes without their consent.
If I receive currency in private trade, that's my property. If you came up to me in the street, and demanded I give you a share, and attacked me when I refused, you would know, instinctively, that you're being an aggressor, and so would every bystander who witnessed the assault. It's merely the obfuscation provided by using layers of government intermediaries that obscures this fact when you do the same thing through the political process.
>We either have a moral right to make exclusive use of natural resources or we do not.
Others don't have the obligation to protect what you think is your right. Imagine the value of your property rights, if neither law nor law enforcement would protect it.
>it's self-evident
If most people disagree with you, it's not self evident. No amount of sidestepping arguments of others and continued preaching is going to convince others. Essentially you are just stating your ideology and calling it self evident.
This is like abortion issue where minority of people asserts that fetus has rights but majority don't see it.
>Others don't have the obligation to protect what you think is your right.
True, but they also don't have a moral right to violate my rights.
If the government merely stopped protecting private property from aggressive seizure, that would be one thing. But thanks to "social democracy" (demagogic democracy), the government has become the primary instrument by which people aggressively seize the property of others.
>If most people disagree with you, it's not self evident.
I disagree that most people disagree with me. Most people do not consider the steps involved in money that someone earns going into their own bank account thanks to government intervention.
If they did consider it, I believe it would be self-evident to most what property rights are, and that violating them is an authoritarian infringement upon human rights.
>If they did consider it, I believe it would be self-evident to most what property rights are, and that violating them is an authoritarian infringement upon human rights.
So, you work on the assumption that me and most of the people you argue against are just misinformed and if you preach to them enough, this self evident universal morals is revealed to them?
>So, you work on the assumption that me and most of the people you argue against are just misinformed and if you preach to them enough, this self evident universal morals is revealed to them?
Yes, though I don't consider it preaching. I consider it informing.
There is a silverlining to loss of financial privacy due to taxes. It enables insurance. It reduces principal agent problem when you have many layers of employees. It enables safer voluntary transfer of wealth. It gives you some leverage against government by shopping tax jurisdictions for your business.
You can provide your personal information voluntarily, and all the benefits you mention would be conferred from this, without any privacy rights being violated.
There have been nowhere near enough actual trials of communism to conclude anything fully. The core examples were all poorer countries with various problems, corruption… To reject communism as a concept over the atrocities of Stalin et al is as reasonable as rejecting capitalism because the U.S. was built on slavery and the genocide of first peoples.
The atrocities were real, and they did connect to economics, but to just assert that capitalism is the slavery of U.S. history or that communism just is gulags and bread lines is extremely short-sighted. Neither system was anything like the core principles of the economic models (which are just models, so we should reject anyone who focuses only on the models and not on practical reality, but we can't treat each real-world case as the definitive case either).
While you are right, many people (e.g. Hayek) argue that collectivism entails authoritarianism and control. That the two are inextricably linked, due primarily to the local knowledge problem.
I'm not necessarily arguing that that is the case just trying to explain why people make this argument. The idea is that, logically, any economically communist country will, by definition, eventually come to resemble the Soviet Union, China, and other negative instances.
We can debate whether or not that is so, but I think it's a legitimate debate to have, especially being that all known examples have in fact worked out that way.
All you're saying is that attempts at communism have all had major problems. That's true, but it's not enough to be conclusive.
If you want to pick examples that point various ways, you can note that Cuba has corruption, lack of democracy, is an impoverished island suffering the effects of significant economic embargoes in the global system and yet still vies for having one of the best health care systems. They even a top country in providing doctors to serve abroad in troubled places!
And the Soviet Union was a horrendously corrupt place that failed in most
respects to live up to communist ideals and yet still managed to compete
technologically with the richest countries on the planet despite being
economically far far far weaker in fundamentals. The U.S. only barely beat the
Soviets in the space race etc while being massively richer. The Soviets had
many orders of magnitude more losses in WWII also.
The history of Communism is one where anti-communists did everything they could
to undermine any success, the trials were full of corruption and abuse, and
even still they had notable successes.
The kibbutzen failed not strictly because all the ideas were unworkable. They
failed because they had to function economically in a larger context. None of
them had wealth along the lines of successful capitalists either. Capitalists
have only ever operated capably by controlling a lot of capital or getting
subsidy, at least in the form of law enforcement that serves the side of
capital.
We can conclude that all attempts at communism so far have had serious flaws.
We can also conclude that capitalism has always had serious flaws too. Anyone
who takes a polarized one-sided view on this stuff can be rejected as just
being dogmatic. Piketty is not one of these one-sided dogmatic people, he's
actually interested in studying empirical evidence and not concluding more than
the evidence can truly support.
That's a bit of an understatement. It has a pretty much 0% success rate, for both coercive and voluntary attempts.
> capitalism has always had serious flaws too
Yes, but nothing like the communist failures, and capitalism has had incredible success stories.
> The Soviets had many orders of magnitude more losses in WWII also.
Nobody doubts the heroism and sacrifice of the Red Army in WW2. That's a whole 'nother topic, though.
> The U.S. only barely beat the Soviets in the space race etc while being massively richer.
The USSR was able to direct massive resources at single problems, at the sacrifice at most everything else, but the US could do it with little sacrifice.
> did everything they could to undermine any success
Nobody made the communist countries perform mass slaughter.
> The kibbutzen failed not strictly because all the ideas were unworkable.
They couldn't feed themselves. No communist system has ever been able to feed itself. All have required imports from capitalist economies, or starved, or tolerated capitalist farmers.
> Nobody made the communist countries perform mass slaughter.
And communist ideas also had zero to do with those countries committing mass
slaughter.
Communism, even in a very flawed form, has indeed succeeded. See Cuba. The
main reason they would be wealthier with capitalism is because the U.S. would
have proactive economic ties instead of working to isolate them. Given their
isolation and inherent lack-of-wealth relatively speaking, communism there is
at least in a state no reasonable person can describe as 0% successful, even if
you have points of criticism.
In terms of kibbutzen, you do realize that the entire premise of
self-suffiency, i.e. sustinance farming, is basically the definition of
poverty, right? I mean, the whole premise that a small community can achieve
for themselves in isolation a whole decent standard of living is nonsense. We
acheive the greatest standards of living through widespread connection in
larger groups on larger scales. Trade and all and specialization… No effort for
tiny isolated communes could ever achieve the quality of life of large
cosmopolitan economies, That issue isn't a strictly communist vs capitalist
one.
Communism is indeed a simplistic model that is unworkable in a rigid dogmatic
sense, just like anarchy or capitalism. There's no example of pure version of
any of these ever existing.
Being closed to discussing the actual ideas of communism by just talking about
Stalin's atrocities or tiny communes failing is a good way to just close
yourself to actually engaging with the intellectual questions. Obviously, all
philosophical / political principles are distinct from the complexity of
real-world economic practice. We can still discuss the principles as a way to
think about and explore the issues. Communist principles, as ideas, have
nothing to do with mass slaughter.
..simply do not produce enough to sustain themselves. Capitalist farmers do, with a surplus they sell. All such voluntary collectives have collapsed (unless they get subsidies from the government).
> have nothing to do with mass slaughter
I strongly suggest reading "The Black Book of Communism". Every advocate of communism needs to read it, if only to prepare an answer.
You're right that nothing in the principles of communism suggest mass slaughter. But those who try to implement it time and again resort to it. The reason is fairly straightforward - people resist having all their property expropriated and being forced to work on collectives. The response is to kill them.
I'm not an "advocate of communism". And it's nonsense to say that capitalist farmers produce enough to feed themselves as a response to my point about internal isolation. No capitalist farmer with the same amount of resources and wealth as a kibbutz would be all that productive without utilizing the benefits of the rest of our complex market economy and what that provides to them. In other words, it's the larger context that is the factor, not the internal structure of the farm. The kibbutzen were only communist in an internal way, not living in a communist world.
"having all their property expropriated and being forced to work on collectives" is also not a principle of communism. Forced labor is not a communist value.
In simple terms, capitalist farmers produce a surplus, kibbutz farmers produce a deficit. Kibbutzen operate within a market economy and have all the resources of it that are available to the capitalist farmer - they still can't make a go of it.
> not a principle of communism.
Collective ownership of the means of production means confiscating it.
> Forced labor
When the collective decides that certain work must be done, and with no market forces, that means assigning people to the jobs. I.e. forced labor.
Anyone who views any of these ideas with a rigid dogma is misguided. The broad scope of varied ideas that fall under the concepts of communism do not exclude the concept of markets. Markets are extremely valuable.
If you wanted to say that there are major fundamental problems with having no markets, I'd agree completely. Communism is not a set of ideas necessarily anti-market.
Or, to be pragmatic, if we agreed for this exchange that "communism" meant precisely an economic structure without markets, then I'd agree that's simply unworkable. All of my points in this thread rely on my assumption that the term "communism" refers to a wider scope of ideas and models, some of which have some merit but which nobody ever should dogmatically advocate (nor should they dogmatically reject as being synonymous with Lenin/Stalin/Mao).
To the best of my understanding, market socialism is just worker coops operating within a traditional market economy. That would mean it's not an actual political ideology.
The only important question in terms of test subjects dying is whether they
don't die under some other circumstance. The U.S.S.R and Chinese dictatorships
were/are horrendous. On the other hand, Cuba has major ethical problems but
subjects dying isn't these days really among them. Cuba does a better job of
keeping people healthy and secure than the U.S. does. There's no homeless sick
people in Cuba basically. Everyone gets quality medical care even though the
country is massively poorer in fundamental resources than the U.S.
The people dying in the cases you are referencing did not die because of the ideas of communism. The atrocities were carried out in the name of communism but had no basis in actual communist ideas.
You can say the same thing about National-Socialism or any other ideology out there. There are just not enough countries to try them all on, and I am not sure why should we...
National Socialism (i.e. Hitler) was based fundamentally on nationalism and racism. We can reject it because the principles themselves are unethical. We can reject it even if it had succeeded economically!
If you want to make an argument that the principles of communism are unethical, that's an independent argument from the claim that certain historic attempts had various atrocities and therefore you reject the principles (even though many of the atrocities are not related to the principles — Stalin disappearing his political enemies has no basis in communist principles…
1. My argument was about "National Socialism and any other ideology out there", you focused only on the first part. Even if you filter out unethical ones (not sure how, but let's say you can), there would still be too many to try, and not sure why should we keep trying theories instead of letting the society evolve in a natural way.
2. Specifically about giving communism a fair trial despite all past failures because it is "ethical": no thanks. I find its principle of "dictatorship of the proletariat" unethical and proven disastrous.
3. Stalin disappearing his political enemies was rooted at least in part in Lenin's cornerstone principle of "democratic centralism" which was critical ingredient for the success of the communist revolution. Trying to decouple the two doesn't do history justice.
The point is that you should argue why you find "dictatorship of the proletariat" unethical and not confuse the difference between ethics and economic viability.
There's definitely philosophical problems with communism and communist thinkers of various sorts. No denying that. But the screwed up crappy attempts at something like communism simply don't invalidate all of the principles which must be considered separately.
Basically, if you run a shitty version of an experiment, you don't get to then claim you proved the null hypothesis. It's one thing to say "we can't afford to experiment" and another to say "we had [shitty] experiments and so now we can conclude things."
You could argue for no more trials and still accept the fact that we never got any good trials from which to conclude enough about the real principles.
> We can reject it because the principles [nationalism and racism] themselves are unethical
I'd also contend that it's unethical for a society to reward all people the same regardless of effort and talent.
Should I make as much money as a singer as Taylor Swift? I have terrible pitch. I can't write music. I can't play an instrument. I have no stage presence.
Now, you might say that based on my talents, I shouldn't be allowed to be a singer at all. But not allowing someone to choose what they do with their life also seems unethical.
If deaths caused by leaders purporting to advance communist ideals can be attributed to communism, then how many have died at the hands of those purporting to advance capitalist ideals? Would it be reasonable to attribute these deaths to capitalism as well? I really don't these type of conclusions are a positive contribution to economic discourse.
Are there significant examples of that in history? I would be looking only at governments causing the deaths of their own citizens. I don't think it'd be fair to count foreign wars there.
EDIT: Just to be clear, i'm not implying that they do not exist. Genuinely don't know of any and would be curious if you do.
The great famine of 1876 [1] in Bengal is a possible example. I'm not very familiar with it, but it seems that exports of grains were at an all time high while an estimated 5.5 million people starved to death. Grains were allocated to maximise revenue, and feeding the poor was not the most lucrative option. Of course reality is more complicated than this short paragraph, but this tragedy doesn't reflect well on laissez-faire...
That is certainly an interesting example. I'm somewhat tempted to say that that feels like a consequence of colonialism moreso than capitalism, though?
I'm not sure. It seems like the British forced India to export its grain. They may have been paying higher prices, but that's not made particularly clear, at least not from the article. And of course, they'd have to be paying pretty substantially higher prices to cover also the very high costs of transport at that time, especially for such a bulky commodity as grain.
That being said, it's certainly possible for something like that to happen in principle. That is, a country exporting a product that its citizens need because others are willing to pay more for them.
I suppose though, the capitalist would argue that that would enrich the exporters of that product, causing them to spend more money in their hometowns, thereby enriching the local population sufficiently to compete with the prices paid by foreigners for whatever the product is.
Two potential problems with that, I guess are:
1. The means of production of product X being owned by foreign companies, which is not uncommon.
2. Even if they are owned locally, the owners of the capital might buy mostly imported items, stimulating the economy comparatively little.
It's certainly an interesting issue. One that is probably best resolved by an empirical analysis of foreign investment and laissez-faire policies in relation to income growth for the poorest people of those countries. Certainly there are great success stories, e.g. South Korea, Singapore, Japan, and Brazil maybe to a lesser extent? Cuba is probably the closest thing to a success story in the contrary case (communist policies), and that doesn't seem like much of a success.
American civil war is probably the clearest example. That was a war to defend the private ownership of the means of production. Then there are atrocities committed by capitalist governments, for example the Tasmanian genocide. [1]
Since I am headed for bed, let me preemptively quote from the Georgia's declaration of seperation [2]:
>> The people of Georgia having dissolved their political connection with the Government of the United States of America, present to their confederates and the world the causes which have led to the separation. For the last ten years we have had numerous and serious causes of complaint against our non-slave-holding confederate States with reference to the subject of African slavery. They have endeavored to weaken our security, to disturb our domestic peace and tranquility, and persistently refused to comply with their express constitutional obligations to us in reference to that property, and by the use of their power in the Federal Government have striven to deprive us of an equal enjoyment of the common Territories of the Republic.
Thanks for the response. But is the civil war really a great example of that? Slavery seems largely orthogonal to capitalism. That's a war that could have happened in a communist or capitalist country.
Thanks for that. That seems like a pretty solid example. In reading about it, I would nitpick one detail that seems non-capitalist to me: they didn't allow the currency to float. This is a pretty big deal, from my admittedly limited understanding of economics.
If you don't allow the currency to float, your import/export ratios can't respond to market forces, and in a globalized economy this can be catastrophic, especially during a global downturn. To quote from the wiki:
"One of the junta's economic moves was fixing the exchange rate in the early 1980s, leading to a boom in imports and a collapse of domestic industrial production; this together with a world recession caused a serious economic crisis in 1982, where GDP plummeted by 14%, and unemployment reached 33%"
Of course, you can't prove a counter-factual. There's no way to know for sure what would have happened if they hadn't done this. But it seems to me that this, at least somewhat, mitigates the significance of this particular example.
Carrying a communist (or capitalist, or ...) banner around as you pillage doesn't make you a communist (or a capitalist, or ...). Attack the system, not those who usurp its name. Only then we can have a discussion.
I am painfully aware that this argument seems prone to a "no true Scotsman" defense, but really, the basic principles of communism are very much at odds with many of its famous "proponents" (usurpers).
Usually communism requires totalitarianism. I don't know of any examples where communism didn't require totalitarian as long as we are talking about the country level. But I'd like to hear some counter examples I'm not thinking of.
No countries actually had communism, but if we're talking about socialism, then you're mostly right. My opinion is that there are many reasons for it, including:
- Those countries were poor and without sufficiently established democratic institutions.
- Those countries had to immediately mobilize to defend from richer capitalist countries (lead by the US) trying to undermine them in any possible way. Constant defense mode leads to totalitarianism.
That doesn't mean that socialism requires totalitarianism by nature.
Central planning is not a requirement for socialism.
In fact, the only significant difference between capitalism and socialism is a democratically controlled workplace, which is inherently less authoritarian than capitalistic totalitarian workplace governance.
It's also ironic how people constantly conflate "democracy" and "capitalism" on one hand, and "totalitarianism" and "communism" on the other, while completely accepting totalitarianism during a significant portion of their life -- their workplace.
>> Only now can we fully appreciate the correctness of Engels' remarks mercilessly ridiculing the absurdity of combining the words “freedom” and “state”. So long as the state exists there is no freedom. When there is freedom, there will be no state.
And millions were killed by fascism, by colonialism, and by other -isms. There is nothing inherent to communism/socialism that necessitates killing, plus historical context is a thing.
By the time enough people notice or are willing to admit to themselves whats going on, its usually past the point of no return. It gets past the point where reasonable fixes and solutions can be applied.
Especially hard when there is a lot to loose.
Try convincing any manager in a large corp, with 2 kids about to head to college/a mortgage/family healthcare bills or some combo of those three to take a difficult decision and 90% of the time you will fail. Fact of life.
Over time I have come to the conclusion it really depends on the kind of leaders we prop up. Yes we prop them up. Every time we go along with whatever the empire needs defending justifications they come up with to do the next dumb thing.
While we like to believe we are lucky that Zuckerberg or Page&Brin landed up in the positions they did rather than a Larry Ellison controlling Google or Murdoch controlling Facebook. I think we just need higher expectations. I would rather support a Mark Shuttleworth or a Jimmy Wales, or even a Elon Musk.
The difference being they have clear stated visions for the future that doesn't just benefit them and their corp but everyone.
These days I actively work against people who I see working to strengthen their positions at the expense of others.
I don't think GP meant that the market should have rules but that capitalism should be regulated (as an organism is) to maintain inequality at the sweet spot where it is efficient, instead of letting it rise and getting fever.
We've lost long-form and investigative journalism as a counter-balance, but we've gained ubiquitous surveillance and crowd-sourcing social media. Traditional corruption is much easier to see. "White collar" corruption runs rampant.
There will be a period of adjustment as our institutions adapt, die, or new institutions arise. I am optimistic as long as the powers that be favor the creation of wealth rather than appropriation.
Wealth deteriorates and has maintenance costs. Name an asset that one can hold billions of dollars in that doesn't have to be cleaned, guarded, repaired, or otherwise maintained.
But they are. Real estate taxes are based on value, which goes up with inflation. Some states (Oregon) tax all business property based on its value, which goes up with inflation. When you sell the real assets, the inflated value is taxed as "income".
Real estate taxes pay for services. They're indexed to land values, but generally with a multiplier. That value has as a predominant factor the earning potential of the land itself, though with a confounding factor of of land's role as an asset class, which, ironically, is inflated by not taxing land highly enough, according to cogent arguments.
All of those factors scale, more or less, with inflation. So your tax obligation should be keeping reasonable track with your earning capacity for that land.
If you can't afford to pay taxes on your land, then the problem, generally, is that you're squatting on valuable property that's better reallocated to a more beneficial use. If you're simply looking to squat and retire, head to the outback.
"capitalism capitalism capitalism" - Absolutely all countries are capitalistic including USSR and North Korea. The only difference is who controls the capital. To be for or against capitalism is the same as to be for or against the wind. Ironically in free market capitalism capital actually belongs to people and the more left leaning the country is the more capital and power belongs to some of the selected few who got there not because of their merits but for being good politicians or in worse cases by simply using power and intimidation. Results are always bad.
I agree people seem to be either "the free market solves all problems" or "capitalism is slavery and must be destroyed" (but don't focus on an actual viable alternative).
I'm chipping away on my own alternative which is a bit of a hybrid. Competition and inequality between individuals but not between groups within society.
I applaud the effort, and I wish more people focused on a first principles approach to fixing society as you do. But I strongly disagree with some of your claims, and stopped reading as a result:
"Software people are in a great position to design a new system"
What makes you believe this? Many people, myself included (and I write software), think software people would be poor at this. People, society and culture aren't code. Social and emotional intelligence are critical.
"We are great at being objective and not being caught up in the zealotry that is coupled with the classical systems of capitalism, communism etc."
With all due respect, are you kidding? That is very naive to say the least. To say more, it smacks of Silicon Valley arrogance and smugness, against which, as you may be aware, there is a rising distrust and backlash.
> What makes you believe this? Many people, myself included (and I write software), think software people would not be so great at this, because society isn't code. Social and emotional intelligence are critical.
I think there are in general 3 areas of information that are useful when contributing to the development of a societal system. Those being:
* Research (History / modern economic research)
* The Cutting Edge (Technology / modern business, project and team management / open source model)
* Domain Knowledge (Specific and detailed knowledge of a particular domain)
Software people have 2 of the 3. Plus they can collaborate easily using the open source model. I think wikipedia is proof that great things can be done without requiring "experts" with a great collaboration model.
I also think that a lot of economics is not relevant if you are going for a "no free enterprise" based system.
> "We are great at being objective and not being caught up in the zealotry that is coupled with the classical systems of capitalism, communism etc."
> With all due respect, are you kidding?
No one is perfect and we aren't free from bias. However, a big part of our jobs is choosing between options eg. technologies. We strive to diminish our egos and bias to make good choices. I think this attribute is very useful for the topic of societal systems which tends to be extremely polarizing (eg. https://www.reddit.com/r/Anarcho_Capitalism/).
It isn't so much the inequality itself is bad, but rather having distinct groups that compete with each other. (Group inequality is an inevitable outcome of this but not the root issue). Group competition is bad simply because it is less efficient if your goal is for the maximum good for all people.
Say you have a valley and two tribes in it. If they fight for control of the valley they are expending resources in that competition. If they merge into one tribe then all resources can be spent on the good of all people.
Of course then there is the argument of 'but you can't get everyone to work together in the one group!' but with modern technology I think this is a solvable problem.
> Group competition is bad simply because it is less efficient if your goal is for the maximum good for all people.
Humans are lazy and self interested. They work hard when they need to and competition provides the need. That goes for individuals as well as groups.
Would people try as hard to woo their future spouse if they were matched and promised to each other at birth? Why did my comcast service get faster and cheaper as soon as verizon entered my community?
Competition is painful, but it motivates us to be better.
With the right system though competition between individuals is sufficient. Humans will try and get ahead to woo their spouse by whatever means are available. Having individuals compete for prestige and salary is enough to engage humans to strive for excellence.
Group competition doesn't relate to this aspect though. In a one group system individuals incentivized by individual reward won't be lazy or they lose out so group competition is not necessary.
For example, take a series of tribes in one area competing for resources. If all but one tribe die out due to disease, the individuals of that tribe won't suddenly become lazy. Why? Because they still need their personal acclaim to attract a mate and be successful.
In a multi group system (capitalism) there is no incentive for groups to compete (as in increase consumer value at the expense of profit) without competition, so yes in this system group competition is necessary. However, this attribute is not true of all systems.
> Ignoring [the mental state of the people being optimized for], what is wrong with inequality between groups?
A bit cheeky, I know, but I don't think you can just write off emotional results of systems.
But to answer in better faith: I think [Rawls's Veil of Ignorance thought experiment](https://en.wikipedia.org/wiki/Veil_of_ignorance) is a good response here. In short (skipping how he arrives at the conclusion): when judging the quality of life a system produces, measuring by maximums (or even averages) is probably not the way to go. Median and mode are also very important dimensions to pay attention to.
Also worth noting: if we did live in some future utopia where "inequality" really meant the difference between "all my needs are easily met with little stress" and "I experience nearly constant bliss"... yea, we can have some inequality. But, pockets of the developed world aside, we're not there yet. Not even close. So long as we have around 50% of the world in poverty, and more than 1 billion children in extreme poverty, aiming to "lift all boats" faster than the amount a "rising tide" does is a discussion worth having.
...which is why I spent my entire last paragraph discussing why addressing inequality is often considered as a way to tackle inequality. We don't get to pretend they're separate things for at least another few centuries.
> inequality gets so bad that we get uprisings and revolutions
Poverty I think has more to do with political unstability than inequality. Having a large share of the population who cannot sustain a decent (for that time) way of life will create political tensions, not so much Paris Hilton's lifestyle.
I am much more worried about long term, mass unemployment in Europe for instance, than with the concentration of wealth of a few silicon valley billionnaires.
That's kind of the debate "no one should be rich" vs "no one should be poor". A lot of Piketty's focus is on the former where I think we should focus on the latter.
Calling another user a rambling fool is not OK on Hacker News, and even if it were true we would prefer it to such uncivil comments as this. Please stop.
If you want to make the silly argument that anything other than completely free markets isn't capitalism, stop calling authoritarian state capitalism "communism".
I think anti-free-market ideologies like Piketty's are deeply authoritarian and violent.
What does it mean to reject the free market? It means rejecting a right of a person to 1. keep what they receive in private trade, and to 2. engage in any voluntary interaction they wish with another consenting adult, especially if it involves the exchange of currency (god forbid!).
As a corollary to this, it means prying into people's personal affairs to determine how much in income tax they owe (tax laws that profoundly violate privacy rights by forcing people to disclose how much currency they received in private trade and from what sources) and whether they engaged in prohibited voluntary interactions with other consenting adults (interactions like one person letting another stay at their home for a short-duration in exchange for an amount of currency).
In my opinion, this deeply misguided mentality that Piketty and you exhibit is responsible for billions having their human rights violated on a systematic basis, and probably a similar number of people having shorter, less fulfilling lives than they otherwise would have.
> I think anti-free-market ideologies like Piketty's are deeply authoritarian and violent.
I watched the whole video I didn't see him arguing with authority and violence. He said there can be other factors and he wants to open up a debate.
> As a corollary to this, it means prying into people's personal affairs to determine how much in income tax they owe ...
His argument is to have finanacial transparency which does not mean taxing everything.
As far as progressive taxation is concerned, Organised groups or individuals generate Income by exploiting resources which are either natural or is generated by other individuals. Towards what end they accumulate this wealth? To use within the social framework? So when they use that money won't it impacts society? so I actually fail to understand why they should not be income taxes?
>A Yale law professor suggests that oft-ignored truth should inform debates about what statutes and regulations to codify.
Socialist ideology relies exclusively on aggressive violence.
>His argument is to have finanacial transparency which does not mean taxing everything.
Transparency is a euphemism for violating people's privacy.
>As far as progressive taxation is concerned, Organised groups or individuals generate Income by exploiting resources which are either natural or is generated by other individuals. Towards what end they accumulate this wealth?
"exploiting" is such a leftist buzzword. People in a market generate income by trading something of value that they generate for currency that others freely give them. Their income is what they receive through private trade. They come under no moral obligation to provide income to other co-nationalists simply as a consequence of making private trades.
> He supports heavy taxes on private property. Tax laws are based on violence
I didn't get the same impression watching the video. Do you have any references? As far as Law and Violence is concerned, I agree voilence to some degree may be involved. So what is your alternative? No Law every man/group for himself?
There is no such thing as No Law. Void will ne replaced with Natural Law in which powerful eliminates weak. If well reasoned Law is not present in society, Law of jungle will take over.
> People in a market generate income by trading something of value for currency that others freely give them
Something of value is the operative word here. From where "something of value" comes? There is no tax on exchanging valuable thoughts. We are only taking about financial trades which does impacts society.
>As far as Law and Violence is concerned, I agree voilence to some degree may be involved. So what is your alternative? No Law every man/group for himself?
The violence of Law should be applied exclusively against those who violate the human rights of others. It should not be used to take property from one group to give to another.
>Something of value is the operative word here. From where "something of value" comes?
I grab some clay, and create a nice figurine. You give me some sea shells in exchange for it. No one has a right to a share of my sea shells. If some group of people preaching "social democracy" violently assault me for refusing to hand over a share, they are the aggressors.
The social democracy advocates have done what Bastiat predicted:
>When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.
> He recommends a global wealth tax and, for the United States, top income tax rates of 80 percent on income above $500,000 or $1 million to combat inequality and 50 or 60 percent on income above about $200,000 to combat inequality and grow the government.
First of all I haven't read the book yet so can't comment on the numbers.This limit can very well be a million or a few millions. He is arguing is that effective tax rate on multinational companies is lower than small and medium scale businesses. This isn't good for capitalism. In fact this will just hasten the process towards concentration of resources in the hands of few organization or groups. Will it look like a capitalist society anymore when a few big groups own everything and others compete for minimum wages?
> The violence of Law should be applied exclusively against those who violate the human rights of others. It should not be used to take property from one group to give to another.
You are circumventing the basic question. From where property came from? Did individual said "Let there be property" and property came into existence?
No, property is a result of individual's or an organized group's utilization of natural or human resources. Piketty is not arguing to take it away with force in communist fashion. All he is arguing is that tax should increase with income which is contrary to what is happening on the ground nowadays[1][2].
> I grab some clay, and create a nice figurine. You give me some sea shells in exchange for it. No one has a right to a share of my sea shells.
We are discussing taxation of higher income not some petty transaction between individual player. However, if we take your argument to its logical conclusion and imagine a billion dollar Multi-National making the same argument that I am just bartering few thousand tonnes of clay with few hundred tonnes of seashell so we aren't responsible for soil erosion and extinction of species.
Only reason not to tax large groups was that they generate employment and moves the society forward by investing money into research. This is not true research [3] as well as jobs[4].
>This limit can very well be a million or a few millions.
An income tax rate of 80 percent on any income bracket is extremely heavy according to my definition of a 'heavy tax', as is a tax amounting to 2-10% of the value of privately owned assets. His proposal is of the typical disastrous socialist variety that show an utter misunderstanding of how capital is formed.
>You are circumventing the basic question. From where property came from? Did individual said "Let there be property" and property came into existence?
>No, property is a result of individual's or an organized group's utilization of natural or human resources.
Acquiring property is a result of an individual utilizing their own property, or the human resources that others freely give them, in a manner that generates value.
Piketty's proposal is to violate people's human rights. The fact that it's done through taxation rather than communist-style expropriation of the means of production doesn't change that.
>We are discussing taxation of higher income not some petty transaction between individual player. However,
The principle doesn't change because the values involved increase. A sound principle is universal, and not arbitrarily stop being morally applicable due to considerations relating to the sum involved. There is no sound principle for a tax on income or private property.
>if we take your argument to its logical conclusion and imagine a billion dollar Multi-National making the same argument that I am just bartering few thousand tonnes of clay with few hundred tonnes of seashell so we aren't responsible for soil erosion and extinction of species.
But I used clay as my example because it is abundant.
If we are going to change the fundamental premise of the example, and assume a scarce natural resource is being appropriated, then society could certainly charge a fee for the act of appropriating the natural resource.
Let's say that each tonne of iron ore extracted from the crust costs society $10.00 in diminishment of natural resources, and in environmental damage. Let's say society charges an iron ore miner $50 to extract a tonne of iron ore, to compensate for these costs.
Now if the iron ore miner pays the fee, mines the ore, smelts the iron, and fashions the iron into an incredible machine, you have absolutely no right to what the machine produces. An income tax is not a tax on using scarce natural resources, or a charge for damaging the environment. It is robbery against someone successfully generating economic value. It is a human rights violation.
> If we are going to change the fundamental premise of the example, and assume a scarce natural resource is being appropriated, then society could certainly charge a fee for the act of appropriating the natural resource.
and from your comment elsewhere.
> The homestead principle is based on the notion that if something is unclaimed, and someone adds value to it, they should be able to enjoy the full benefit of that value-added thing.
What resources are not scarce in your view? If a forest is unclaimed and then I should be allowed to claim and cut it to produce valuable furniture and keep all the profit to me. Noting available on this earth is unlimited or free.
> A sound principle is universal, and not arbitrarily stop being morally applicable due to considerations relating to the sum involved. There is no sound principle for a tax on income or private property.
Universal Principal is progressive taxation, and tax rate is determined by scale of operation. An individual making furniture out of unclaimed wood cannot be compared to an industrial scale operation resulting in deforestation and they cannot be taxed on the same rate.
> Now if the iron ore miner pays the fee, mines the ore, smelts the iron, and fashions the iron into an incredible machine, you have absolutely no right to what the machine produces. An income tax is not a tax on using scarce natural resources, or a charge for damaging the environment. It is robbery against someone successfully generating economic value. It is a human rights violation.
Ok what this hypothetical machine is going to produce?
You have also chosen not to reply back to other data points so I will leave the argument here. What is your on Warren Buffet's observation or tax rates vs. employment data.
Charging a fee for appropriating natural resources can be fully justified, but whether a fee is charged comes down to practicality.
Example: it's not practical to charge every individual camper a fee for every piece of obsidian they find. While scarce, the amount of obsidian they stand to find and take is so small, that the cost of enforcing the tax would far exceed the cost to society of them depriving us of the natural resource. Moreover, the amount they're taking is so small that the actual fee they would have to pay society to compensate it for the appropriation of this natural resource would be close to zero.
>What resources are not scarce in your view? If a forest is unclaimed and then I should be allowed to claim and cut it to produce valuable furniture and keep all the profit to me. Noting available on this earth is unlimited or free.
You should have to pay society for the value of the trees you're cutting down, and the cost you're incurring upon society through the harm the tree-cutting does to the rest of the forest. Society is also fully within its rights to reserve some areas of the forest to maintain the ecosystem.
>Universal Principal is progressive taxation, and tax rate is determined by scale of operation.
There is no universal principle behind an income tax. You yourself said it doesn't apply to petty transactions involving me trading a clay figurine for sea shells. It's not universal. It's arbitrary gouging of those with the most to tax.
>An individual making furniture out of unclaimed wood cannot be compared to an industrial scale operation resulting in deforestation and they cannot be taxed on the same rate.
Morally there's no qualitative difference. 1 billion individual furniture makers cutting down 1 tree each does exactly the same amount of damage as one company cutting down 1 billion trees. It's the natural resources that should be taxed, not the people.
>Ok what this hypothetical machine is going to produce?
This hypothetical machine produces information. It's a computer. It sells computations. It is powered by solar panels that are on land that I'm renting from the government.
I've paid for the cost of the natural resources I'm using (iron ore and sunlight I'm using up). The iron ore and energy is legitimately mine. You have no right to the value I generate using these inputs.
> This hypothetical machine produces information. It's a computer. It sells computations. It is powered by solar panels that are on land that I'm renting from the government.
I am glad you elaborated. So how this information is produced. In order to produce the information, you will rely on the works of centuries of collaborating between individual and groups. You will use that for free to produce value and then sell it on price of your choosing?
I am not against Capitalism. On the contrary, I hate collectivism with passion. Argument in favor of progressive taxation does not mean we are heading towards communism.You constantly use tangible and intangible resources from society without paying for them and right taxation is necessary to keep providing you those resources.
>I am glad you elaborated. So how this information is produced. In order to produce the information, you will rely on the works of centuries of collaborating between individual and groups.
That information is freely available. And making use of it and generating value for myself does not make me indebted to you and does not give you a right to use violent force to compel me to forfeit this share of my income that you think I owe you.
You reject an entire line of thinking before even reading into it, because you make assumptions about what you think a few key-words mean in a particular context.
This is a low value comment. A substantive comment would identify parts of my argument that you believe are disconnected from reality, and would substantiate the claim with logical arguments.
Picketty's book has been out for a while now. It is good economics. It deserves rightful praise, and scrutiny.
Acemoglu and Robinson's answer[1] is also good economics. Digestible podcast form here [2]. It purports that Picketty's "r>g" model is flawed. It also deserves a reading.
All of this is part of a larger discussion, which C21 started. r > g doesn't seem to explain nearly as much as Picketty presents in the book, but that doesn't mean his larger idea is fundamentally invalid, or that he didn't introduce something valuable.
Rognlie also makes important critiques of Piketty's argument.[1] Piketty makes strong claims resting on declining labor share of capital. This is true, but is driven largely by an increase in owner-occupied rents in real estate, which suggests interpretations very different from Pikettys; namely that redistribution in the form of zoning and development restrictions has been the key driver rather than changes in the relative value of productive capital. From Rognlie's abstract:
>>> Overall, the net capital share has increased since 1948, but when disaggregated this increase comes entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. When decomposed into a return on fixed assets and a residual share of pure profits, the fall and rise of capital income outside the housing sector in the US owes mostly to the residual: it is not paralleled by fluctuations in the measured value of non-housing capital. This observation—combined with the theory of factor substitution, and simulation results from a multisector model—casts doubt on explanations of changes in the net capital share that rely on changes in the value of capital. There is greater support in the data for narratives that emphasize cyclical and trend variation in market power.
For a summary in layman's terms, I'd suggest Noah Smith in [2]. Note that Noah has Keynesian sympathies and is not particularly right leaning.
This is perhaps a bit controversial, but I just can't take seriously any critique of Piketty that doesn't look at least 150 years back like he did. He (and his coworkers) did a lot of legwork on about 200-300 years of history, it's just amazing. You cannot dismiss his theory just on the basis of 50 years.
As you write: "redistribution in the form of zoning and development restrictions has been the key driver" - how do you know that without looking further back in time? It's like criticizing Galileo by saying "speed of fall of most objects is influenced by air resistance". It's a true statement, in a limited context (the Earth), but it doesn't disprove first Newton's law.
One also has to keep in mind that we try to approximate or explain reality. I currently do a lot of maths and we can prove theorems from our axioms. Something is a certain way and not the other, here is my proof! End of discussion.
Economics doesn't have axioms and therefore no provable proof. If somebody has a good idea and data to support it it's an good argument, but it doesn't mean it will repeat or even that we now have solved the problem. If somebody has a better idea backed by better (or even the same!) data he also has a good argument and we now have a bad time with no best argument, but 2 conflicting.
One thing that always puzzles me about r > g is that it's comparing a first derivative to a second derivative. How can this be meaningful?
To explain further, r is return on investment, which approximately means rate of growth of wealth of capital. That is, it is a the first derivative of a stock, or equivalently a flow. g is the rate of growth of income, where income itself is a flow. So it's the second derivative of a stock. How does it even make sense to compare these two quantities when they don't have the same units?
> One thing that always puzzles me about r > g is that it's comparing a first derivative to a second derivative. How can this be meaningful?
It's not. It's Piketty trolling the economics field, which has become overly math-y, and try too hard to distil complex interactions into basic formulae.
It's basically his way of saying that capital's share of income is growing faster than labour's share of income, or that the return (r) on capital is outpacing the return on labour, which is represented by the growth rate (g) of the economy.
In other words, it's not a real mathematical formula. It's an idea, a basic premise, merely represented by a 'formula' because hey, it's how every economist does it nowadays, right?
r isn't the growth rate of capital's share of income though.
r represent the return on capital (which is proportional to capital's share of income), not the growth rate of the return on capital, or the growth rate of capital's (share of) income.
On the other hand, g isn't the return on labor, or labor's share of income. It's (approximately) the growth rate of the return on labor.
Would you rather have $100 and then get 200% of it every year (r = 200%) or get an amount that increases at 100% every year (g = 100%) starting with $1? With the second option you'll have twice as much money in just 11 years. So in this picture income eventually wins, even though r > g. It's not just "not a formula" it is total nonsense. It doesn't make sense to compare a growth rate of an amount to a growth rate of an annual increase!
In Piketty's model, r is return on capital. So that means it's the return on things like equities (and btw, interest is compounding on investments, don't know why you represented otherwise), real estate (Piketty is not overly find of the role of rentiers/landlords in the economy), machinery and so on. So the money accrued by the owners of wealth and machinery that is, essentially passive income, or income generated by capital, is r.
g is the growth of the economy. We calculate it as GDP, what he's interested in is basically people's combined incomes and economic activity that goes with it.
The premise that r > g is saying that people who have wealth, their return on that wealth will always be higher than the growth of the economy. If the economy grows 1%, the return on capital (remember it's all capital in the economic sense) will be more than 1%. Now this isn't true for all years in all places, but it has been shown to be true in the long run, which is how wealth is accrued quicker by those who already have wealth, and how inequality increases. Keep in mind Piketty's book is a massive tome.
And btw, comparing a rate that's calculated as %/year to another calculated as %/year is mathematically correct.
Your example is nonsense btw, it almost seems like you've confused r with g, because interest certainly compounds with capital, whereas with income, while you'll get increases over time, it generally isn't of the same magnitude and relates to labour, of which you have a finite amount.
I haven't confused r with g. I think you may not have thought through what these quantities represent. r is the return on capital. An asset worth A returns A*r per year. This says nothing about wether A increases or decreases. You can use your capital income to buy more capital assets. But you can also use labor income to buy more capital assets. Basically the argument only works if you assume all capital income is saved, but no labor income is saved. But then the savings rate is doing all the work.
It's a shorthand for talking about how the ownership of everything (both current stocks and claims on future production) is being distributed between workers and capitalists. When r > g, the share of ownership of capital (by growth in capital) is growing faster than the continuous stream of claims on future production (which is what money is, and what makes up income). If capital is liquid, it can be converted into a claim on future production. That's how the units are made compatible.
That doesn't really make sense. r isn't a growth rate of the share of ownership on capital. It's a return on capital, i.e. the growth rate of capital. r implies nothing about the change in total value of capital assets. Total capital assets could double or halve and r wouldn't have to change. in fact, under most circumstances, the value of capital assets and the return on capital move in opposite directions.
It doesn't really make sense to take "percentage increase" as dimensionless, because it leads you to compare growth rate of incomparable things. One of the most basic rules of economics is that you can't compare stocks and flows. Why would it be meaningful to compare their % increase per year?
Let's say that for construction company A, the total number of houses it has built increases by 10%. (This is comparable to an r of 10%). And let's say that, each year, construction company B builds 5% more new houses than it built the year before. (This is comparable to a g of 5%). No matter how much of a head start A starts with, under these assumptions, B will always eventually have more total houses built.
Or to put it more generally, a stock growing at fixed rate grows linearly, but a flow that grows linearly implies a stock growing at a quadratic rate. O(N^2) will always outpace O(N).
It seems to me that all the hoopla about r > g is based on an elementary mathematical error.
Or really, more honestly, assumptions about savings rate are doing all the work, and r and g really have almost nothing to do with it.
> Or to put it more generally, a stock growing at fixed rate grows linearly, but a flow that grows linearly implies a stock growing at a quadratic rate. O(N^2) will always outpace O(N).
I see what you're getting at, but surely you've got the rates wrong. A stock growing at a fixed rate grows exponentially, and O(exp N) will always outpace O(N^2).
You're right that I made a mistake, but it's the labor income case that is exponential, not the capital income case. Earning Wr every year is constant income and linear growth in wealth (where W is your starting wealth). Earning I(1+g)^n every year is exponential growth in both income and wealth.
Note that r is the return on capital, for an asset worth W, you earn W*r income. It says nothing about whether W increases or decreases. (In fact, if the value of W increases but the income generated is the same, then r goes down.) That would be a capital gain (or capital loss). An asset can produce a return on capital while losing value. If you assume W doesn't go down in value, and furthermore, all the capital income is reinvested, but no labor income is reinvested, then you do indeed get exponential growth of wealth for the capital income case, and no growth of wealth for the labor income case. But then all the work is being done by assumptions about savings rate and depreciation, and none by the comparison between r and g.
I think the idea of the comparison is that r (return on investment) is greater than g (growth of income) and that this leads to the problem of wealth concentration.
The relevance of the comparison is that the working class are dependant on g while the truly wealthy have and control r.
This was kind of bugging me. It's one thing for one person to make the mistake once, but there's something like a 4:1 ratio of Picketty:Piketty in these comments.
On one hand it seems like a nitpicky thing to point out, but on the other hand, to paraphrase Lieutenant Commander Data: one is his name; the other is not [1].
I'm a third of the way through C21. Skimming the beginning of Acemoglu and Robinson, feels like they are criticizing points that Picketty raises - specifically that politics plays a substantial role in inequality, and r vs g. Maybe it's just a question of degree. Probably worth more than a cursory glance.
Anyways, since you linked to such a relevant C21 response, do you know if there's a team-piketty response to Acemoglu? No longer have access to JSTOR etc, and am not necessarily well equipped to analyze the quantitative claims.
Picketty's re-response[1]. It gets rather technical from there on. It's not my area of expertise, either, so I won't come with my opinion on the matter. Acemoglu is a giant, and so is Picketty, so I watch the fight from afar.
The first two levels of discussion (C21 and Acemoglu's immediate answer) are digestible, though.
What's important to understand is that this is all part of a larger discussion on inequality, which has gained a lot of momentum in the last few years in economics (in all fronts -- wealth, income, education, etc.) It's fine to take the position of "I'm not sure" for the moment being, while informing yourself.
I'd like to add that there seems to be more of a consensus in education inequality.
That is, noncognitive skills developed very early (age 0-4) are a huge factor in educational outcome and early childhood intervention is pretty close to agreed upon to be a necessary thing to improve the outcomes of children who grow up in a poor environment.
James Heckman's work on the topic might be worth reading.
Wonderful talk. One thing he called for was a wealth tax, which is something that makes complete sense but is going to be very unpopular. On the otherhand, he also calls for progressive income taxes (something that is reported by the media and an easier pill to swallow) - in my country, Canada, progressive income taxes are not the answer IMHO.
We didn't have as much inequality for education (i.e. lots of decent Universities, not terribly expensive). The problem is wealth in the form of housing has exploded for a large fraction of the population (typically older people) and has left young people (well, anybody without a house) in the dust. In major cities like Toronto and Vancouver, average detached houses cost well over a million bucks. This is also happening because of bone-headed environmental policies (I'm all for the environment, I just don't understand why people without homes are punished for having a green belt while people with homes are rewarded). Our current PM (I'm a fan) has done many good things but he doesn't get this. We had something called the child tax credit, which families with children would get unconditionally - this became something you'd get based on income. Now, young people who are desperately saving for downpayments are hampered even more ... buying a home is just out of reach. In my humble opinion, a wealth tax is the way to go and young people should make their voices heard to our representatives.
In summary, people need to understand the difference between income inequality and wealth inequality. I argue the problem is NOT income inequality - it is wealth differences.
Exactly. We should be taxing wealth and not income (or roughly speaking, unearned instead of earned income). Taxing productive activity is literally counter-productive.
This will only become a more pressing issue once automation (esp. of the transport industry) gets into full-swing. Eventually we won't have a choice in the matter.
There are a whole host of current issues that are culminating in wealth and income distribution problems: the anglosphere's property frenzy and inevitable bust; quantitive easing pumping up asset prices while doing nothing for the real economy; global corporate tax avoidance; the rise of the low-paid 'gig' economy and under-employment; fewer high paid jobs all demanding workers with ever higher levels of education (unattainable-for-many); capitalism's tendency to concentrate wealth as demonstrated by Picketty.
A crisis is brewing. People know it. Trump and Sander's - though ostensibly very different - appeal to people who recognise that for them, the current path does not lead to a great place. Crises can be good of course. They leave us no option but to make changes.
> We should be taxing wealth and not income (or roughly speaking, unearned instead of earned income).
You'll see most economists advocating a consumption tax, instead.
> quantitive easing pumping up asset prices while doing nothing for the real economy
Both the "pumping up asset prices" and "while doing nothing for the real economy" is extremely disputable. It's kind of pompous of you to think you know better than the team of PhDs at the Fed, too.
> global corporate tax avoidance
The corporate tax should be 0%. No, I'm not kidding; hear me out.
Corporations aren't people; they don't ever actually pay taxes. People pay taxes. Yes, I know corporations are legal entities, but they're owned and managed by people, somewhere down the line. Those are the people the corporate tax is intended to target.
Presumably, the "goal" here is to get the corporations with scale economies, negotiation power, etc. to be taxed and use this to redistribute economic gains.
But what happens is that instead the burden of these taxes fall onto the shoulders of non-management workers in the firms and the people who buy what the firm produces. Because the incidence of a tax is indirectly distributed by a mechanism which depends itself on the negotiation power of the actors in the system.
That is the exact opposite group of the original intention (you'd want the burden to be as much as possible on managerial staff and shareholders -- eg. the people running the corporations). Also, the tax is distortionary and incentivizes all sorts of unproductive practices.
Of course, the tax would have to be replaced with something. That something should target the people owning and running the companies to make sure the tax burden is actually bore by them.
Consumption taxes can do that.
> the rise of the low-paid 'gig' economy and under-employment; fewer high paid jobs all demanding workers with ever higher levels of education (unattainable-for-many)
What you'll see with automation is a polarization of the labor market [1]. So what you said is not false, but not spot on. There are going to be more of both low and high paying jobs, and fewer middle paying jobs.
> A crisis is brewing. They leave us no option but to make changes.
Things are better than they've ever been, on average.
I don't think we should make any sweeping revolution, but smart, targeted changes. Of course, not all of those are pollitically feasible (imagine politically advocating for a 0% corporate tax replaced by a consumption tax and targeted taxes on shareholders and CEOs/board members).
> You'll see most economists advocating a consumption tax, instead.
The problem with that is that it affects the poor more than the wealthy. Buying the same thing will hurt one person much more than another and will do little to ease inequality, it may exacerbate it. Additionally, it puts us in the position of making judgments about what should and should not be taxed and how much.
> Corporations aren't people; they don't ever actually pay taxes. People pay taxes.
I would buy this if we didn't give corporations so many rights. Indeed, their purpose is tools to shield individuals. Sometimes this is good; if I create a corporation and my business fails, they cannot come after my personal assets and that encourages economic investment. But it can also be bad when the corporation becomes a place to hide my assets from taxation or even to avoid personal responsibility. They can engage in speech, litigate in court, and even get government benefits such as grants or funding. Because of this, we should tax them.
No they cannot engage in speech, because they do not have mouths.
Only people have mouths. A corporation is not a person, it is a group of people. And those people are the ones who pay taxes and engage in speech. Corporations do not exist, outside of them being a representation for the owner behind them.
In some sense I agree with you. And it seems that, anyway, the big multinationals can find ways to squirrel away their profits without having to pay much, if any, taxes anyway. So in this way corporate taxes hit the SMB's while the big boys get a free pass..
However, one argument against lowering corporate taxes I've seen is that it would incentivize people to skirt around their personal taxes by "using" corporations. Instead of buying your own car, let a corporation (maybe your employer, maybe your own 1-person corporation that everybody would set up in a system like this?) own the car and you just use it. So somehow you'd need to prevent that kind of behavior. Perhaps shifting the tax burden from income to consumption would do that, IDK and I'm too tired to think about it now.
Another tax that economists generally seem to think well of, is land value taxes (originally by Henry George, IIRC). But these seem more or less impossible politically, as the politicians are generally better of than the average Joe and tend to own more land/property..
I don't know how it works in the USA, but under the NZ tax system you can't just have your company buy a car for you to use personally. If you use a company car for any private use then you have to pay Fringe Benefit Tax.
I'm not sure about corporate law, but I think you'd have to pay your corporation to access the car; otherwise you're violating the fiduciary duty (and also piercing the corporate veil).
It's kind of pompous of you to think you know better than the team of PhDs at the Fed
I just want to say I disagree with this. I'm going to claim that the only difference between the armchair-economists and the PhDs who set the policy is that the policy-wonks actually get to implement their bullshit, while the armchair-economist is powerless to affect anyone.
Also, how is your claim that a consumption tax and 0% corporate tax not the very pomposity your object to?
> You'll see most economists advocating a consumption tax, instead.
I was under the impression that a land value tax was the most widely supported amongst economists (due to its efficiency, lack of distorting effects, and difficulty in avoiding).
> Both the "pumping up asset prices" and "while doing nothing for the real economy" is extremely disputable. It's kind of pompous of you to think you know better than the team of PhDs at the Fed, too.
See Richard Koo regarding balance sheet recessions for a less pompous assertion that QE does little to help. There are plenty of other eminent economists such as Mr Koo who also disagree with the FED's 'team of PhD's'.
You'll see most economists advocating a consumption tax, instead.
I'm not sure what the difference is between a consumption tax and a sales tax.
The corporate tax should be 0%. No, I'm not kidding; hear me out.
Corporations aren't people; they don't ever actually pay taxes. People pay taxes. Yes, I know corporations are legal entities, but they're owned and managed by people, somewhere down the line. Those are the people the corporate tax is intended to target.
Presumably, the "goal" here is to get the corporations with scale economies, negotiation power, etc. to be taxed and use this to redistribute economic gains.
But what happens is that instead the burden of these taxes fall onto the shoulders of non-management workers in the firms and the people who buy what the firm produces. Because the incidence of a tax is indirectly distributed by a mechanism which depends itself on the negotiation power of the actors in the system.
Pretty much. I don't remember where I read it but I did read a study of corporate tax in the USA over the past few decades that found that increases in corporate tax were almost entirely born by non-management employees and consumers.
found that increases in corporate tax were almost entirely born by non-management employees and consumers.
This seems tautological to me. Of course increases in corporate tax are born by non-management employees and consumers. Take Management + Non-management + Customers as a group, then Management represent approximately 0% of this group. Also, Non-management + Customers aren't in a position to change the flow of money through the corporation to shield themselves from changes to taxation.
For the majority of corporations their income comes from consumer spending. In those cases it's always the consumer who pays.
You forgot the owners of the company. Presumably taxing the company would equate taxing them, which is separate from workers. But such is not how tax incidence works.
"Things are better than they've ever been, on average."
Sure but that isn't how human psychology works. Especially in rich countries, where basic needs are met, inequality start playing a much greater role with respect to happiness.
Inequality has always been an important factor. The poor in France probably had it better than people in the stone age or medieval times when they made their revolution. Some can be said for the Russians. But they all made revolutions due to the high level of inequality.
If you look at countries experiencing big revolutions it seems to me to have not been about how poor or rich the countries were in absolute terms but rather how unequal they were. In fact in exceptionally poor countries you don't get any revolutions at all because people are to busy just surviving, and there is no intellectual class to advocate it and fuel the flames.
Also "better" is a tricky term. Every society place different expectations on people's lifestyles. One interesting thing I observed about America e.g. is that if you look at things purely statistically in terms on material goods you'll find that the Americans has more TVs, bigger house, more and bigger cars, more of all sorts of stuff, go out eating more frequently etc than say your average Scandinavian or Dutch person. Yet interestingly when you talk to these Americans life seems much harder. They worry about having enough money to repair their car if it breaks down. They need to go to work or whatever. They worry about not being properly covered on medical insurance, not having enough money for their kids college. They seem terrified of losing their job, or getting one will less good health insurance or whatever because they have a particular condition which requires this or that particular insurance which only the particular job they have now provides. So many seem overworked and stressed out.
In comparison, I don't even have a car, and it isn't a big deal. I go to work on a subway. My dutch friends would often just have biked. College education, no worries already taken care of by government. Health insurance. Same deal. Worried about losing job. Not a big deal, my work doesn't have any special perks I need and unemployment benefits are quite good so I will manage fine until I find a new job.
It seems American society has manage to create this system where the only acceptable lifestyle for a normal person is simply far more expensive than most can afford and they borrow money to keep up appearances. While in most of Europe you can be happy with a lot less. The really important things in life are taken care of like health, school, work etc.
Having smaller houses, cars and fewer huge flatscreen TVs seem like a small disadvantage in comparison.
I am not saying one thing is better. If American truly just want lots of stuff, maybe that is the best approach, but it just doesn't seem to make people that happy or calm to me.
only acceptable lifestyle for a normal person is simply far more expensive than most can afford
This is the ginormously over-sized glowing fluorescent pink elephant in the room.
"Fix the economy" isn't going to work because the economy isn't a thing you can take in for repair. The Economy is a confusing thing because we talk about it like it's a noun, but it's really a verb: The Economy is something humans do, like sport or recreation.
The US needs to do some deep re-thinking about what it values. I'm in Australia and we seem to be doing a fairly good job of adopting the US model, despite there being some, in my opinion, better models to choose from.
If I buy stock in Company X, it doesn't go to Company X, it goes to some other dude who sold me that stock. How is that "providing capital for growth"? It's a casino.
Who do you think sold that stock in the first place? Company X, to raise capital. If there weren't people willing to buy company X stocks in he future, they would be unable to sell them when they needed capital.
Unaffordable housing markets are created by 3 things usually:
1. Strong NIMBY anti-development policies.
2. Low property taxes.
3. Foreign money using housing as a bank account.
You see it in vancouver, london, SF, NYC and you'll probably find those ingredients in other places too.
To counteract it you need:
Federal legislation that prevents any city or province from restricting dense multi-family development of up to 20 stories. By right development, minimal parking requirements and so on. It's in the interest of the federal government to make housing affordable, but not so much in the interest of local governments. Something like Japan's federal inclusive zoning laws are ideal.
Property tax is a wealth tax, and it happens to be pretty low in places like Vancouver or London. I would increase it to something around %1 in stages. People are more accepting of a property tax than a straight wealth tax because it already exists and doesn't directly penalize saving behavior.
Also adding high taxes on unoccupied units in dense areas. And an other housing tax on non-residents of a city to make using housing as a bank account a really bad idea.
Hasn't it been getting really bad now? Canadian incomes did not go up by %25 when the currency went down by %25, but rent has risen a lot recently in the past year. I moved away years ago, but that is what I've heard. That chart only goes to 2015.
But yes, that was the only thing saving BC from being a place where nobody could afford to live in it, since the rental market reflected the local supply & demand only.
If your a typical professional making $4000/month after taxes, you will be paying something around $1500+ for a 1 bedroom apartment in Vancouver, which isn't %25, but %37+ of income.
I can't imagine rent having gone up by much in one year. But yes, vacancy rates have gone down, and that has made finding apartments challenging.
But the claims of Vancouver having unaffordable housing predate the recent decline in the vacancy rates. They stem from the high price of a Single Family House, which for a densely populated metropolitan area like Vancouver is an inappropriate standard for housing affordability IMO.
The one thing I think people forget is that since wealth is a function of time (and age), there is intronsic inequality that you can't get rid of.
Looking at wealth by age bracket. It is strongly correlated, which shouldn't surprise anyone. The longer you work the more you save. A 20 year old is going to have a lot less wealth than a 60 year old. I'm not sure that will ever change.
Sure, but there's a strong sense that the bottom rungs of the ladder are progressively more out of reach for the younger generation.
Housing is a great example. Instead of getting into the initial mortgage, we're paying rent for longer, and have a harder time coming up with the money for the down payment... In part because the rent is, to borrow a phrase, too damn high.
"Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home," said Zillow Chief Economist Dr. Svenja Gudell. "We know Millennials value homeownership and want to buy. The next challenge will be figuring out how they can save for a downpayment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes."
And then there's education. The low-cost public universities have turned into massive debt generators.
The entry points to the wealth curve are more and more beset by the vampires of finance and their rent-seeking necromancers, summoning up undying debt to prey on unsuspecting youth. Inequality is growing wider as a result.
This time phenomenon is not a function of capitalism. Interest rates coordinate time with risk. In the 80s my dad bought his first house (on a middle class gs-7 federal job) at an interest rate of 12%; in the nineties he got a second house at the same value for 6%, (thus effectively free, by refi the first), and in the early aughts he got a third at 3%.
Why? Not because of the free market, but because the fed keeps goosing the interest rate downward to stimulate growth. Will I be able to do such a thing? No.
I'm tempted to blame ultra-loose monetary policy, but I'm not so sure. I live in the Bay Area where house prices are also out of control, but I'm not sure why we focus on prices (rather than monthly debt payments) since what, 90% of the market is payment buyers?
In any case, I do believe the current interest rate environment has distributional consequences that haven't been well-studied. It seems the biggest beneficiaries of this environment will be people with lots of debt-financed assets who manage to sell for high nominal prices. On the other hand, a lot of people think rates aren't coming down any time soon (check the yield curve on US treasuries, the 30-year rate is like 3.4%) so maybe this will be a one-time shock where people who took on a ton of debt ca. 2008 will reap big one-time profits as cheaply-acquired assets realize big capital gains.
In any case, I think it's naive to assume holding rates so low, for so long, doesn't have major wealth transfer effects.
Agreed. The question is what does a young person do? Take on an asset that is known to be overvalued or wait for the rate climate to change.
As a data point, condos in Toronto (condos in Toronto are generally tiny and not the most desirable place to raise 2 kids) appreciated by 9-10% this year despite continuous bubble talk by various levels of govt. You and I both know this will not stop until rates rise; and they won't - at least in canada - because of a significant problems in the oil sector of our economy. Is the right thing to do to buy into this "ponzi" scheme and try to time the exit? Or continue to hold the course of staying out of it and waiting for rates to rise. I have rented since 2008 when I graduated and I'm tired of shoveling my money into the fire :'(
Bay area housing prices are created by prop 13 incentivizing people not to sell houses (reducing supply) and creating low property taxes (reducing cost), very strong NIMBY blocking of development (reducing supply), some foreign money investing in the area (increasing demand) and a tech economic boom (increasing demand).
Mortgage rates do not cause it as much, a percentage point increase in a typical bay area mortgage will only add ~$300/mo to a 560k house mortgage. The mortgage interest deduction reduces it by your tax rate.
SF is an area where people rather have an economic recession vs growth because the system can't handle growth.
The problem might be 40 years of tight monetary policy. The inflation that comes with a higher growth economy gives wage earners opportunity to move to new, better jobs. In a low growth economy, they fight over jobs and lose earning power.
A better national economy also probably has fewer people chasing the wealth in the valley.
I agree with you, but it is also IS income inequality. The amount of marginal income increases (or new income) is going to the top centile and decile and is not proportional at all to the distribution of either income or wealth.
"
The average income for the richest 1 percent of Americans, excluding capital gains, rose from $871,100 in 2009 to $968,000 from 2012-13, he wrote. The 99 percent, on the other hand, experienced a drop in average incomes from $44,000 to $43,900, Wolfers said. The calculation excludes government benefits in the form of Social Security, welfare, tax credits, food stamps and so on.
"
However, the research in Piketty's book also shows this up through 2010, and I remember the figures he was drafting showing 50% of new income going to the top decile going through 2010 - so Bernie might be a bit aggressive in his numbers, but even 50% of new income going to 10% of the population is just bad. I remember in the book he outlined how only places like Colombia or otherwise Fascist regime countries are worse than the US.
I can dig up the numbers from the book - I read it on ebook so it's always a hassle waiting for the pages to refresh looking for info :/
The answer to that isn't more taxes and regulations. Government has completely failed us. The answer is for the people to get off their butts and do something about the problem.
Agreed - something fundamental really needs to change. I'm most worried that it'll come as a result of this election to some degree. I don't think people are supporting Trump because they like him, but I think that they've almost got no choice but someone that might (even if totally by accident) blow up the system. I think this will be totally nuts, but then again - if he loses I fear things may get violent.
> I don't think people are supporting Trump because they like him, but I think that they've almost got no choice but someone that might (even if totally by accident) blow up the system.
They're supporting Trump because they've been failed by the status quo, and Trump has, at the very least, recognised that, versus the establishment who just pretend everything is OK.
His 'fixes' for the economy aren't the typical progressive economic fixes, but rather populist ideas like strong-arming corporations into keeping American jobs or keeping money in the US which, while not necessarily drastically reducing inequality, will have the result of at least giving some of the working class a boost. Globalism absolutely has allowed many working class jobs to be outsourced to areas of cheaper labour.
Whatever you think Trump is, he's a result of the sentiment of his supporters. He's the least-ideological Republican candidate in recent history (which is why Ted Cruz campaigned on the idea that Trump isn't a 'conservative').
> if he loses I fear things may get violent.
Things are already violent. Look at the news, riots in multiple US cities. Violent protests everywhere. Mass swaths of unemployed people who resort to crime. These are all the result of failed economic policies.
You're right though - if the status quo continues, the violence that's occurring today likely will escalate.
Something PM Trudeu could do to reduce inequality in Canada is to introduce proportional representation, as he promised to. PR correlates with lower economic inequality, presumably because all votes have equal value under PR, coalition governments are harder for special interests to sway, and PR promotes majority rule (protecting against a minority group using the government to enrich itself or entrench its relative wealth).
I have personally found Renting housing in Canada to be tremendous value. Some of these homes in Calgary, Edmonton, Winnipeg, Hamilton, Ottawa and other non Toronto/Vancouver cities can be rented for cheap. Homes which would sell for around $700k can be rented for around $2000 a month. In Calgary right now, nice apartments can be had for around $1000/month all in.
> in my country, Canada, progressive income taxes are not the answer IMHO.
They would be if they were actually progressive in a meaningful way. The problem is that they're only progressive between the poor and the middle class, then taxation on capital returns is low again, taxation on wealth is non-existent, and the rich have all sorts of mechanisms to avoid taxation.
Serious question: How much more information do you typically retain by reading all 696 pages, versus watching a 20 minute summary?
The linked webpage talks about that, saying that it needed to be condensed into a TED talk because the book scared of many people (myself included).
But for all the prodigious evidence, how much do you really remember? Does any of it come up in conversation at a dinner party?
> Piketty predicted (correctly) [that it] ... would attract vicious assaults from the mainstream of economic thought.
Ah, so is this more of an academic thing. Not just for the layperson, but for the economist. Like a dissertation that needs to be backed up with a ton of evidence and references. Ok, I think I answered my own question. I also just changed my own attitude towards reading books like this. It's not entertainment, it's knowledge.
Reading the whole thing is more in the entertainment realm. He advises some things that aren't acceptable in the US like government control of CEO salaries, but also some things that aren't acceptable anywhere, like confiscatory taxes. I.e. he states that there wouldn't be government benefit to taxing the super rich so heavily they are no longer rich because there are too few of them to contribute meaningfully to large state projects, but he still states they should have confiscatory (his term) taxes applied to them just to remove their wealth so that there is less income inequality.
When people talk about the book or summarize they often stick to the more factual stuff, like the fact that income equality is real and growing, but they often skip over the other parts that no one would actually agree with like the above.
I listened to it on Audiobook and definitely didn't retain crap. But it's interesting. There were a lot more moments of "pause and reflect" probably listening to tens of hours of audio-book instead of a 20min video.
Suppose r > g as Picketty claims. What would be the implications? One I could think of is that rather than investing in human labor (e.g. education), it would make more sense to invest in capital (e.g. stock market) since that would yield you higher returns. Also, all the talk about wealth inequality uses percentages like the top 10%. However, the top 10% is not stable. In fact, the turnover is very high, much higher than it has been in the past. For instance:
> Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today [0]
And just a casual look through the richest lists, you don't see a lot of old money. Most are first generation wealth.
So my question is, how is it possible that there is high turnover in the wealthiest while wealth inequality is always much higher than income inequality as Picketty claims? When Bill Gates generated great wealth by founding Microsoft, was that considered income or capital appreciation? I think it would be capital appreciation since he sold stock and the stock appreciated. But is this really "capital" in the sense that its passive investment like a money printing machine that was passed down generation to generation? Or if his wealth would be considered income, then how is wealth inequality always so much higher than income inequality considering the richest Americans created their wealth in a similar means to Gates?
r > g doesn't actually explain that much in terms of wealth inequality. See Acemoglu and Robinson paper in my other reply.
There is evidence that intergenerational mobility is going down, but not so much at the tippy top of the ladder. More on the "if you are born from lower class parents, you are likely to be lower class at 40" side.
Early childhood education is shown to help with the lower rungs of the ladder; most of the damage in a child's noncognitive skills is done before the age of 4 by bad environment (absentee parents, stressed parents, etc.) This lack of noncognitive skills effects outcomes everywhere starting with educational achievement.
I am not as well read in the mobility between the middle and upper classes, so I won't comment there.
Right, wealthy parents are able to provide more opportunities for their offspring. But hasn't that always been true? I imagine the education available to the least fortunate today is much better than the education available to someone in the lower class from 100 years ago. Capitalism has allowed for better high end services, like better teachers and tutors, but overall information and knowledge has been democratized. There is no secret math or science you learn for the right price.
The problem I see is that when we talk about social mobility, we always talk about relative classes, in which case there will always be 1/5th of the population in the bottom fifth. In terms of absolute wealth, my experience is that everyone, more or less, is better off from generation to generation, at least in material terms.
> my experience is that everyone, more or less, is better off from generation to generation, at least in material terms.
That is correct. Even when people make claims like "middle class income hasn't grown in the last xyz years" they're basing it on statistical sleights of hand, see [1].
> The problem I see is that when we talk about social mobility, we always talk about relative classes, in which case there will always be 1/5th of the population in the bottom fifth.
Right, but the question is more about opportunity. Like if you created a Markov transition model, what are the probabilities of going [1/5]->[2/5] (or [3/5], etc.)
> Right, wealthy parents are able to provide more opportunities for their offspring. But hasn't that always been true?
Sure. But the point is that we aspire for our society to be meritocratic. That is we'd like it to be better to be born smart than rich. Of course that's never been the case, but we want to isolate the "why".
It's not necessarily even about opportunities. If you make college free, for example, it ends up being a subsidy on the children of the tiers [4/5] and [5/5] (playing loose with facts here) because, even if you isolate parent's wealth they __still__ end up in college more often.
Things that are difficult to measure (like motivation and noncognitive skills) are built at a young age, and a good environment is needed to foster that.
> I imagine the education available to the least fortunate today is much better than the education available to someone in the lower class from 100 years ago
I know it's been the case in Canada [2], I've been told it's not in the US, but I'm unsure it's really the case (turns out you need fairly sophisticated statistical models to measure it properly).
> One I could think of is that rather than investing in human labor (e.g. education), it would make more sense to invest in capital (e.g. stock market) since that would yield you higher returns
Keep in mind that, in economics, capital includes machinery - anything that can be owned and generate passive income. So robots, computers, machines - all fall under capital. Anyone that lives in today's world can clearly see that labour is being replaced by machines. So capital's share of income absolutely (r) is growing faster than labour's share of income, represented by (g).
I think the US culture of exceptionalism puts individuals in 2 simple buckets, winners and losers. I think everyone wants to be a winner and then not improve the overall system but to look down on the 'losers' and signal 'success' status.
The idea that they won't be able to validate themselves and their 'specialness' in this way makes them subservient to the status-quo, vulnerable to hubris and immune to the problems of inequality. Do we have a social identity because we seem to predominatly seek validation and identity from our work.
This in group out group is an integral part of US culture and this base survival of the fittest 'superman' ideology is inherent in a frontier type economy exploiting new resources.
The system is fine tuned to exploitation but what happens when there are no resources to exploit. The US problem goes way beyond mere capitalism and communism. At some point you would need to build a society that values people independently of their work, success or money or you run the risk of creating a modern exploitative unfeeling dystopia.
A lot of these discussions especially here are marked by a distinct lack of emphathy, dehumanization and blame the victims mentality that a quick reading of the evolution of political, social and economic systems from feudalism till now will quickly dispel. Power concentrates itself.
I'm a huge fan of Piketty, and have been slogging through his terrific (but long) book and it's change my perception on a lot of things.
I don't want to challenge capitalism - competition drives innovation, and the need to survive and to make a better life for oneself is at the core of that. However, we need to admit that not all people are driven by this, and in our world (at least in the United States) it's not about survival in terms of life and death and hasn't been for some time.
The people on our streets are not there because they deserve to be, neither are many of the people in the boardrooms. Today, there's a disparity between the have and have nots and it has less to do with capitalism than the reality of growth which Piketty outlines really well in his book that's definitely changed the way that I look at it. It's hard to see value in supporting the status quo when it's only going to return 1-2% year after year - especially after an excessively long period of unprecedented growth due to the devastation and rebuilding through the 20th century. However, this results in a lot of the wrong things being valued in my opinion.
I feel like we're at a pivotal point in human history. We're at income disparity levels second only to countries scourged by ISIS, we're at wealth concentrations comparable to Europe pre-world war one. Marginal income increases have little to do with marginal productivity increases of either companies or employees. I feel like the fundamental definition of value needs to be re-evaluated.
I really think that the nature of capital/wealth have really changed. When cost of living dominates anyone's ability to be a productive member of society, that's when we should reconsider how to go about either distribution of wealth that's leading to that (that hardly ever works) or instead how we quantify and define wealth. Shifting this balance in favor of what we as a society value, I think is the best way to start to really change things.
All that you said is right--we have allowed a monster to grow. And killing that monster is going to require sacrifice now. It never comes any other way.
yes - either we need to find a new "source of value" or some form of tear down needs to take place. I think historically tear downs have been at a core of human growth and progress, so I think that will happen before people are forced to change their minds.
To those who desperately want free markets proven inherently unjust, Piketty is a prophet. But he's a false prophet. He's pretty much a hack of a social scientist.
"We find evidence of pervasive errors of historical fact, opaque methodological choices, and the cherry-picking of sources to construct favorable patterns from ambiguous data." [1]
The fact that the book is a best seller when its intended audience is really people with a graduate education in economics tells me that most people bought is as a signal of smartness (or as an honest effort to inform oneself, but without actually slogging through the book)
I read the book. You'd be surprised at how readable it is.
Piketty says in the opening that his purpose is as much "contributing to the historical record", as it is making an economics argument. Probably half the book is history, with lots of data on things like "what percent of US wealth has been held as farmland vs. business equity over time", or "what did world war 2 do to savings rates"?
> The five most-highlighted passages in the Kindle edition of the text occur before page 26, just over two-thirds of the way through the introduction, according to Amazon's 'Popular Highlights' data
Don't be too elitist. How many who posted a comment on HN right now actually have the education to comprehend the book? I'm pretty sure it's no higher percentage than that of the general population and yet here you all are commenting on it as if you know what you're talking about.
I didn't say it requires such an education; I said it was intended for those people.
Anyone can read it, really, it's just going to be a slog for most people. Like reading some famous philosophy books (Sartre or the big name German philosophers comes to mind); it's not that anyone lacks requisites to read those book,s just that they're a slog without.
Sartre sits on my shelf unread for that reason; I imagine C21 sits on a lot of shelves for the same reason.
It just came out at an appropriate time; a year after Occupy Wall Street, etc. Inequality and inter-generational mobility is clearly on people's minds these days.
Similar story happened with Nassim Taleb's Black Swan book. It's not a particularly good book -- it's rambling, hand wavy, and only ever presents anecdotal evidence as support for its claims. But the book came out at an appropriate time (right before the financial crisis) so it was embraced.
We need a complete top-to-bottom restructuring of our Federal Government--end welfare, end the giant socialist military system hiding within our economy. We need to audit the Fed and then probably close it down or somehow come up with sound money. We need to prosecute every banker and every entity involved in the 2008 financial crisis.
That would solve 90% of what ails us. Getting the EPA off people's backs and back to some level of sanity would help a ton, too.
Very few. Plenty of graphs and tables, but there are no obvious equations.
What equations there are are inlined in the text, so that people wouldn't notice them while cursorily skimming the book, and they're very simple ratios of two properties.
I might come across as a uneducated plebeian (because I am), but I've recently had some similar thoughts about Shakespeare. This is not related to Capital in the 21st Century, it's just a tangent on the topic of "most people bought it as a signal of smartness."
When I was in high school, our English class slogged through The Merchant of Venice without any references or plain English translations. We just took turns reading it aloud from front to back. I understood the general plotline, but so much of it just went straight over my head. I've seen a few Shakespeare productions, but I always struggle to understand what they're talking about. I think I wasn't alone in feeling a little bit stupid and uncivilized, but I just tried to fit in anyway and pretended to enjoy it.
Then a few days ago I discovered "No Fear Shakespeare" on SparkNotes. [1] I read through the modern English version, and I am just so sad that this wasn't available to me in high school.
The Oregon Shakespeare Festival has commissioned 36 playwrights to translate all of Shakespeare’s plays into modern English [2], and I presume they will be performing those versions on stage. If you read that article on the New York Times (and the comments), the pretension and snobbery is off the charts.
I think people assume that you have to be smart to understand Shakespearean English, and therefore people who don't enjoy slogging through Shakespeare are stupid and ignorant. That's completely false, Elizabethan English is a foreign language. You can't just "pick it up" by being smart.
I'm not saying that we should forget the original Shakespeare. I understand the purists and academics who love the original language and pore over all the idioms and witticisms. But if I'm going to the theater to see an entertaining performance, I would much rather hear some lines of dialogue that I can actually understand. So I hope I can see some of those Oregon Shakespeare productions.
My problem with this book is that he doesn't deal at all with the gold standard. During the timeline of his survey, the currencies were almost all gold-backed and by the end, are all fiat currencies. He completely ignores it, yet at the least he should have explained why it was not relevant.
This is a sort of facile answer, since there are a lot of details to prove, but in short, because monetary policy over the long run should not have any effect on the real rate of return r and economy-wide growth rate g, which is what the book's argument hinges on.
The two big differences between the gold-backed system before the 70s and afterwards are:
- We picked fixed pegs to gold, meaning exchange rates were fixed and not floating as they are now
- Fixed exchange rates + free flow of capital is incompatible with being able to exercise monetary policy (banks can't print money since it needs to backed by gold) [1]
But it doesn't matter whether central banks exercise monetary policy or not!
Let's say a central bank today decides to print money. In the short run, that stimulates the economy, but in the long run it will lead to large rises in both nominal rates and inflation expectations, which cancel out (since real return = nominal return - inflation). The long run real rate of return is unaffected, as is the GDP growth rate.[2]
But ohh, it HAS!!!
You are just looking in the wrong place...
Basically it happens all over the world, what is called 'carry trade'... All the money being printed in Japan in the last 30 years has been creating inflation in a lot of the underdeveloped countries in the world, just not in Japan...
The World economy is so interconnected nowadays that most policies of the past doesn't work anymore as Central Bankers would expect. Keynesian Ben Bernanke's helicopter isn't creating inflation nor growth...
'Long run' in economist-speak means multiple decades, generally.
But to answer your question directly, it's because the financial crisis and the massive deleveraging it caused effectively sucked a lot of money from the world economies. In the absence of QE we would've seen a painful, grinding deflation like Japan went through during the 90s.
Central banks can print money to increase the monetary base, but that's directly offset by 1) the large destruction of financial value during the crisis and 2) the fact that people are just taking that money and sitting on it. The net effect is less leverage in the system and not much effective change in liquidity.
Note that less leverage is a good thing in this case -- it makes banks less likely to go bankrupt, and makes a repeat of the '08 crisis much less likely.
It's because the gold standard is meaningless, only trotted out by gold bugs conspiracy theorists. The concentration and division of wealth is what matters, not nominal values or gold pieces.
If gold is so meaningless, why is it continually being purchased by central banks?
Maybe you need to share your economic wisdom with China (buying several hundred tonnes per year) or Russia (bought 200,000 ounces in the July 2016 alone).
You don't agree, fine. But "conspiracy theory" is just an ad hominem at this point.
They also buy other currencies (both have foreign reserves in the hundreds of billions), commodities (gold, oil, silver, aluminum), stocks and bonds, etc...
Gold's value is as a commodity, and a historic store of value, much like other commodities (businesses and governments also hoard oil to ride out price and fluctuations). But it's not about to replace fiat any time soon (or ever again really).
Edit - I should add, at various times throughout history, grain, livestock and spices were all used as currency. Gold's special place comes from the fact it was one of the very first metals to be worked (~7000 years ago), it's easy to work, it doesn't tarnish, and of course it's shiny (so it was widely used as jewellery). It's durability and perceived value allowed it to be traded in a way that you can't trade goats or barley. But at the same time, there's nothing particularly special about it, it's always traded much the same as other durable commodities, that fact is just hidden sometimes by the fact that for a period of history, everything was compared to gold, instead of another unit.
Specie money hasn't fared any better against inflationary trends than fiat currency. It's just expressed differently, through devaluation.
You'll find a long treatment of this in Adam Smith's Wealth of Nations, which also introduces the concept that England had, effectively, three separate currency systems in simultaneous circulation: copper-based pence for retail, silver-based shillings and pounds for wholesale, and gold guineas for finance.
There's also the story of the Roman denarius, which was devalued from 90+% silver to less than 5% over the course of about 250 years.
Up until 1968, dollars were convertible into gold and pegged at $35 / oz [1], meaning the government intervened to keep it at that price.
From 1968-1971, the US still honored that rate with other countries, but stopped intervening in the private gold market [2]. Then the US left the gold standard, and everyone else followed suit.
well, that's not at at all what I asked for an example of. I know the history of the gold standard and when/how/why the dollar was taken off gold backing.
I would like to know of a historical example of when a significant (meaning large quantity, high economic impact) exchange of dollar denominated treasury notes were redeemed for their face value in gold metal. did that ever even happen? I'm unaware of any instances of that, but then, I'm not a scholar in the field.
How is that any different from redeeming notes in dollars, then buying gold for the pegged price of $35/oz.?
Since the markets were open and liquid, I'm sure people converted between gold and dollars all the time. It just wasn't anything to make note of.
What did cause Nixon to take the US out of Bretton Woods is when a bunch of our trading partners threatened to redeem dollars for gold all at once, and we didn't have enough gold to cover it.
Picketty's theory is that there's something inherent to market economies that leads to capital's share of income increasing. The evidence suggests it's due to peculiarities related to how advanced economies treat property/land, that are orthogonal to their status as market economies, that are responsible for capital's growing share of income.
Piketty's theory is not that capital's share of income is increasing. I read this many time and I think it is a misconception of his work.
His theory is that wealth grows faster than the economy, and that it creates wealth inequality. He has shown that it is not something new, that it is something stable throughout history.
I'm not even sure that his theory is limited to market economies. At least, it's not limited to modern market economies.
>Piketty's theory is not that capital's share of income is increasing.
and
>His theory is that wealth grows faster than the economy, and that it creates wealth inequality.
This is the same thing..
Whether the 'income' is in capital gains or in dividends, if wealth grows faster than the economy, it means that capital's share of earnings is increasing.
Capital is used as a synonym of wealth. It's a book about wealth inequality.
The book was originally written in French, and land is considered as "capital foncier". Maybe this meaning got lost in translation, but I think "capital" also has the "wealth" meaning in English.
Nevertheless, the point I was making still holds. The Medium post isn't a refutation of Piketty's theory.
Yes, that confusion is a decent enough explanation. The important thing I want to highlight, is that as factors of production go, increasing returns to land have different policy implications than increasing return to capital:
A general wealth tax might be required if capital was actually the problem; with all the economic inefficiency that implies. I don't know for sure.
But increasing returns to land have a simple solution: a land value tax, with no negative impacts on economic activity, since supply of land is perfectly inelastic, since land is basically fixed in abundance.
(To forestall a common argument: that the Dutch are converting some of their land from below the sea level to above sea level doesn't change matters.)
We are fortunate to live in a world where Georgism applies, ie taxation to finance a welfare state doesn't have to impact the economy at all.
I'm sold to Henry George's land value tax idea, if we were to create a nation. But we aren't.
In our current situation, I would worry that taxing only the wealth "stored" in land ownership would create a massive economical crisis as capital tries to escape this new tax.
A broader wealth tax base, with a slightly higher rate for land, is a more prudent approach.
The Australian capital territories are currently phasing in a broader land taxt and phasing out stamp duty in exchange. Not flight of capital has happened so far, and no crisis either.
And how is land supposed to flee? You can't take soil with you.
Wouldn't a broader wealth tax that applies to movable capital as well lead to that very moveable capital fleeing? (As an example, I am currently in the process of optimizing my own capital gains taxes, by eg choosing the country I hold my assets in carefully.)
I was more talking about a fall of real estate valuations as you introduce a significant land value tax. And it must be significant to cancel the impact of land value on the rise of inequality.
Wikipedia says: "In economics, capital goods, real capital, or capital assets are already-produced durable goods or any non-financial asset that is used in production of goods or services." (https://en.wikipedia.org/wiki/Capital_(economics))
So, you just produce it in a factory or at home etc.
Especially in America there seems to be a kneejerk reaction to any calls for regulations or moderations of the effects of the free market. Usually it is dismissed without further discussion with "look what happened in the east block countries!"
But I think Thomas Piketty has a very good point in his book that if you in fact favor capitalism, you ought to be open to regulation of it. The alternative is what we have seen again and again in history, inequality gets so bad that we get uprisings and revolutions. Inequality is breeding ground for radical ideas like communism. Otto von Bismarck understood that and gave Germany the beginnings for a welfare system. Not because he really cared about workers but because he understood the dangers of inequality with respect to radicalization of the poor.
Today we can see the same thing starting to play out in America. The US have now been on a path towards ever higher inequality for many years and we can see it reaching a breaking point. Politics is getting ever more radical. Donald Trump and Bernie Sanders would never had gotten the support they got without the economic fundamentals having shifted so much.
We already know what high inequality leads to in modern times, because we have seen it play out in South America again and again. They oscillate between one political extremist or populist after another.
I think if the US doesn't actually seriously try to reduce inequality, the US risks ending up with its own Hugo Chavez character, or alternatively a right wing authoritarian.
And if inequality doesn't cause revolutions, there seems to be a good case for it causing asset bubbles. We saw this in 1929 which market the end of a dramatic wealth inequality increase, just as 2008. I think it will happen again because the fundamental problems have not been solved.