Plan B Forum

A Few Finger Exercises with the Saez and Zucman Wealth-Concentration Estimates…
By Brad DeLong | April 11, 2014, 9:38 pm


From Emmanuel Saez and Gabriel Zucman (March 2014): The Distribution of US Wealth, Capital Income and Returns since 1913:
DeLong Saez Zucman Finger Exercises numbers

From today’s perspective, the $800K per capita in today’s purchasing that the circa-1949 average member of the “merely rich”–those between the 99%ile and the 99.9%ile–had looks extraordinarily small. Why, a 3% rate of spending relative to assets would leave them with only $24K per capita to spend! Barely enough to give you the median standard of living in 2014! (OK, OK: a much bigger house and a much more comfortable commute than the median today–but no electronic toys and air travel a very exceptional treat.) Even the truly rich of 1949–the upper 15,000–would find that a 3% rate of spending relative to assets would give them only the upper-middle class standard of living today or, well, me: the kind of style of life at which one stays at the Crowne Plaza or the Holiday Inn Express because more fancy seems not worth it given other demands on one’s cash.

Looking at it the other way, our truly rich today–the top 0.01%, the top 30,000–have a standard of living that, if one trusts the real income figures, was only matched by the top 0.0003%–the top 400 in 1949…

Teaching Rawls after Piketty

by Chris Bertram on April 10, 2014

We’re hoping to have a proper book event on Thomas Piketty’s Capital in the Twenty-First Century in due course. That’s hard for those of us who have read it, because the book is so stimulating, so bursting with surprising facts and ideas, that there’s a lot to talk about. Still, I think I’ll permit myself to share a few thoughts that I had about the way in which reading Piketty might impact on teaching political philosophy, and, specifically, teaching Rawls and the difference principle.

A Theory of Justice came out in 1971 and was composed during the period the French call the trente glorieuses . During that period it was easy to believe that the power of inherited wealth had melted away and that we were living in a new era of more equal opportunity, with careers open to talents and income inequalities largely explained by the differences in talent and ability that the parties in the original position were denied knowledge of. To be sure, 1960s America (like 1960s Europe) hadn’t accomplished that social-democratic meritocratic ideal, but it was kind of visible in embryo, waiting to be born. Rawls’s book took us way beyond that, challenging the glib assumptions about desert that the winners flattered themselves with, but in its toleration of some inequality for the greater good (and particularly for the benefit of the least advantaged), Rawls’s view was recognizably connected to a then-emerging social reality.

Today things look very different. What we thought would be normal—widely spread prosperity, reduced income inequality, and constant growth—has been replaced by the world of the 1 per cent (indeed of the 1 per cent of the 1 per cent). Accumulated wealth and capital ownership in the hands of the few, which never completely went away but retreated into the shadows, is back and (if Piketty is right), threatens to subject us all to the dominance of a new rentier class if we don’t do something pretty drastic fairly soon.

I suspect, though, that the teaching of Rawls hasn’t really moved on in the light of the new social reality. Though Rawls actually writes explicitly about income and wealth , much of the classroom (and textbook) exposition of Rawls inevitably focuses on functional inequalities in income from labour (to provide incentives etc). With inequalities in wealth (and inherited wealth) being both more extreme and of growing importance in actual societies, there’s quite a lot of scope to include in our teaching (i) an account of the shocking facts about inequalities in wealth as Piketty documents them and (ii) to notice that so much of that wealth inequality is non-functional and even dysfunctional as it actually disincentivizes work and the development of skill. Piketty’s constant return to Vautrin’s advice to Rastignac in Balzac’s Père Goriot is instructive here: in a rentier society, why bother working hard and training, when marriage or inheritance are the way to riches? We need to get across to our students that a society in which inequalities of reward to work exist but are functional is even further from the society in which we actually live than they (and the media) normally assume.

However even though Rawls was writing at a time when a just society looked like an emerging possibility and when private wealth was in remission, he also provided (via the influence of James Meade) an attractive alternative to the society Piketty believes we are turning into. Specifically, I’m thinking of Rawls’s ideal of a property-owning democracy, a society with widely dispersed capital ownership and different forms of enterprise (an ideal most recently explored by Martin O’Neill and Thad Williamson in their collection Property-Owning Democracy: Rawls and Beyond ). Spreading the wealth, expropriating the expropriators somewhat, and giving us all a stake in society’s stock of capital and thereby assuring that citizenship and democracy are not sucked of their meaning by the super-rich: that’s a message on which Rawls’s normative theory and Piketty’s economic narrative converge.

Major Study Finds The US Is An Oligarchy
ZACHARY DAVIES BOREN, THE TELEGRAPH
............ APR. 16, 2014, 8:16 AM

The U.S. government does not represent the interests of the majority of the country's citizens, but is instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has concluded.

The report, "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens" (PDF), used extensive policy data collected between 1981 and 2002 to empirically determine the state of the U.S. political system.

After sifting through nearly 1,800 U.S. policies enacted in that period and comparing them to the expressed preferences of average Americans (50th percentile of income), affluent Americans (90th percentile), and large special interests groups, researchers concluded that the U.S. is dominated by its economic elite.

The peer-reviewed study, which will be taught at these universities in September, says: "The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence."

Researchers concluded that U.S. government policies rarely align with the preferences of the majority of Americans, but do favour special interests and lobbying organizations: "When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the US political system, even when fairly large majorities of Americans favour policy change, they generally do not get it."

The positions of powerful interest groups are "not substantially correlated with the preferences of average citizens," but the politics of average Americans and affluent Americans sometimes does overlap. This is merely a coincidence, the report says, with the interests of the average American being served almost exclusively when it also serves those of the richest 10%.

The theory of "biased pluralism" that the Princeton and Northwestern researchers believe the U.S. system fits holds that policy outcomes "tend to tilt towards the wishes of corporations and business and professional associations."

dgs49 wrote:The gay mafia?

Long Run wrote:A few apparent problems with that chart Econoline: First, using just 2009 for comparison will be a distortion since the U.S. had its worst economic performance in about forever, meaning very low corporate profits. I'm not sure how many of the other countries were impacted to that extent, but a comparison has to be done over a period of time to be valid.... " .

Okay, just one more thing about the gay mafia then I'll quit.