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Great podcast w/ @timoreilly & @BenedictEvans discussing What’s the Future & Why. With a @doctorow quote.… #platform
83 replies and sub-replies as of Oct 25 2017

Economists deploy math to justify inequality the way court astrologers used celestial mechanics to prove the divine right of kings
(Except of course the divine right of kings derived from the Bible, not astrology, and no good economist justifies anything. ;)
The entire point of economics is to understand there are trade-offs. You can choose where to set the trade-off but you can’t avoid it
Measures to reduce inequality tend to reduce growth. That’s a trade-off, and we choose the balance of each we want to aim for. 2/
And that certainly isn’t a view limited to the Chicago school.
The thesis that growth/equality are opposed is not well supported in data and there's plenty of mainstream thought that runs counter to it
I'm late, did we have the equality or equal opportunity talk yet chaps?
See, eg Piketty on Gates and Betancourt
Or George Akerlof and Robert Shiller… (etc etc)
Phishing for Phools
Ever since Adam Smith, the central teaching of economics has been that free markets provide us with material well-being, as if by an invisible hand. In Phishing for Phools, Nobel Prize–winning economists George Akerlof and Robert Shiller deliver a fundamental challenge to this insight, arguing that markets harm as well as help us. As long as there is profit to be made, sellers will systematically exploit our psychological weaknesses and our ignorance through manipulation and deception. Rather than being essentially benign and always creating the greater good, markets are inherently filled with tricks and traps and will "phish" us as "phools."Phishing for Phools therefore strikes a radically new direction in economics, based on the intuitive idea that markets both give and take away. Akerlof and Shiller bring this idea to life through dozens of stories that show how phishing affects everyone, in almost every walk of life. We spend our money up to the limit, and then worry about how to pay the next month's bills. The financial system soars, then crashes. We are attracted, more than we know, by advertising. Our political system is distorted by money. We pay too much for gym memberships, cars, houses, and credit cards. Drug companies ingeniously market pharmaceuticals that do us little good, and sometimes are downright dangerous.Phishing for Phools explores the central role of manipulation and deception in fascinating detail in each of these areas and many more. It thereby explains a paradox: why, at a time when we are better off than ever before in history, all too many of us are leading lives of quiet desperation. At the same time, the book tells stories of individuals who have stood against economic trickery—and how it can be reduced through greater knowledge, reform, and regulation.
I hate to say this, but none of your examples actually support that assertion
Inequality stems in part from monopolism. Monopolism makes capital less productive and encourages unproductive "financial engineering"
Buybacks, etc, rather than R&D, which encourages growth. It also suppresses wages and thus demand, leading to harmful credit bubbles
Growth historically has arisen from many factors, including public spending and redistributive policies that stimulate demand
As well as the kind of basic R&D that creates industries (ARPAnet, etc), investment in skills that enable rapid growth & labor flexibililty
Not to mention viable infrastructure to allow growth to proceed (electrification, rights of way for telcoms operators, etc)
All of these interventions cut against inequality and promote growth.
Economic policies have trade-offs. That’s not the Chicago school - it’s the foundational point of economics. No free lunches.
I'm not arguing that trade offs don't exist. I'm arguing that the idea that equality and growth trade off against one another isn't true
Then what do you think the negative consequences are? What bad effects do, say, 95% top rate income tax and 95% inheritance tax have?
At what marginal rate? In the Roosevelt era, that rate applied to the very largest fortunes fostered meritocratic capital allocation
as opposed to hereditary privilege, which is a drag on national wealth ("good genes" are a myth)
After all (a even Picketty agrees) inheritance is by far the largest driver of inequality. We tax it - should we ban it? Why not?
Piketty has a good prescription: tax those fortunes per annum, thus anyone who can't allocate capital efficiently enough to increase ahead
of the tax will have it siphoned off and redistributed to people who put it to work more productively
"The state will allocates that capital more effectively" is a vast assumption. And I'm not talking about 'fortunes', but middle class homes:
X will inherent their parents' suburban home and Y will not. This is a huge driver of racial wealth inequality in the USA, for example.
it's hard to think of a science with less empirical success than economics; so astrology is an apt comparison.
I'm talking about redistributive policies like funding decent education (ending postcode lotteries) and redressing redlining
Redlining is a fun topic. On one hand, massive historic US racial bias. On the other, 2008 shows why not every mortgage should be approved
The greatest plurality of defaults in 2007/8 weren't liar loans, they were overleveraged middle-class house-flippers
And higher government spending is great. Except it has to be paid for, and that means lower incomes elsewhere. Again - pick your trade-off
Not lower incomes - lower wealth concentration. Wealth != income.
If I do not inherit my parents house, I need to pay rent or a mortgage, and this comes out of income. Very direct connection.
If the government takes money away from people, that's money they don't have and can't spend. Trade-off - perhaps good, perhaps not.
If the government doesn't take money from people, they can't provide stable property relationships and no spending takes place.
Trade-off! No-one wants no state. No-one wants totalitarianism. We try all to work out the margin of balance in the middle.
And so my original point - economists do not 'justify' inequality - they try to work out how the trade-offs work and point out the choices
You're attributing to all economists a kind of platonic ideal of conduct. However, I've sent you the rate card for consulting economists
who literally hire out for the sole purpose of justifying lax monopoly enforcement. May I gently suggest that the profession does not always
rise to the lofty standards that we would all like to see, and that many of its prominent members are in fact ideologues who seek evidence
to justify the policies they are ideologically committed to, rather than being honest brokers of objective truth?
Wadr spending money one doesn't have is a basic characteristic of American life.
However, the money doesn't rest with the government and is redistributed where, hopefully, it is more productive in a societal sense no?
Ofc. Schools, roads, R&D, housing, healthcare, etc.
Just interjecting to say I’d like to see Evans and Doctorow debate on stage.
No all male panels, Dan...
But it’s a cage match, not a panel
A literal Mano a Mano
I mean we could use Cory as the warm-up before the diverse and justified intellectual pile-on
Piketty's prescription is fortunes in excess of $100M. I think that leaves plenty of room to inherit a house, even for the largest families
and so does nothing for the inequality between the black families whose parents were denied mortgages and the white families whose weren't
Which will certainly be better drivers of productive growth than capital that isn't growing fast enough to offset modest wealth tax
Meanwhile, Piketty's prescription is for fortunes worth IIRC $10M ($100M?) so we're not talking middle class homes
Cory's talking about taxing fortunes, you're talking about taxing middle-class homes. You're what, 10^3 out of sync with each other?
The inequality of "I can afford a home and you cannot" is 10^3 more important than the inequality of "I have a home and he has $100bn"
Indeed. But the cities with the greatest growth have become places where working people can't afford a home of any description
Largely due to laissez-faire policies, preferential tax rates for passive income, and fewer public housing starts
If the primary purpose of this discussion is to figure out housing, then redistribution is a slam dunk, & more of the same is a catastrophe
I imagine @doctorow wouldn't argue for 95% but something moderate which prevents extreme concentration and thus unproductive rent-seeking.
So any policy that changes the economy has positive and negative effects. Economists try to work them out. That’s not justification.
Except when it is, as with economists who take as article of faith that the only monopolistic outcome states should regulate is high prices
And then charge $1000/hour to defend this proposition to policy-makers
The belief that selfishness is pareto-optimal isn't math, it's ideology: the math that undergirds it is inevitable policy based evidence
As to no free lunches, even the Chicago School believes in positive-sum outcomes.
Isn't a non-zero-sum benefit a free lunch?
The 1950s and 60s are calling ...
What if those profiting from growth *and* deciding on the trade-offs are not the ones suffering from the inequality.
Voodoo economics. The consensus today is that lack of aggregate demand is the greatest drag on growth. People aren't paid enough.
There is no question that economics requires trade-offs. But we are making the wrong trade-offs.
We continue to optimize for capital scarcity even though the world is AWASH in capital.
Wage stagnation due to slack labor market: LFP at 1970s level. 7 years of 2% economic growth coming home to roost.
No, it's 30 years of wage stagnation coming home to roost. Best way to boost growth right now is to put money in hands of spenders.
You call BS that economists support inequality?
Sure, but trade offs should and do begin with the choices we make, not the gender or race we are born with
Can you identify a body? There's been a murder.