"But the focus on taxes is again a straightjacket imposed by the equality-versus-efficiency lens through which too many public finance economists see policy issues. The preferred policy instruments are always taxes and transfers, when it is not at all clear that these alone are the best tools for reducing inequality (although they are surely useful for increasing it). This is the same technocratic spirit that makes American liberals love the Earned Income Tax Credit as the only redistributive arrow in the state’s quiver.
The structure and limitations of Piketty’s argument also explains the love the liberal American policy wonk has for it. It comes with a Zip file full of spreadsheets, a clear argument reasoned from data and common sense, the charisma of the economics profession, and a policy prescription that is technically feasible and politically hopeless.
Like the policy expert, it has neither utopian demand-it-all energy nor the concrete backing of a political actor aiming to win. The book reminds the American wonk community that if only their people could run the show, they have the expertise (and the data!) to produce finely-calibrated optimal policies without politics."
(Sorry again for just posting a quote, I have some stuff on the works, one on the way interest groups should interact with electoral politics and the other about whether the welfare state is dead, which one would you like me to focus on given that they're both side projects?)
Wouldn't mind hearing about whether the Welfare State is dead. Could be interesting.
ReplyDeleteDefinitely agree on Jacobin's take on the whole neo-liberal and Piketty thing. These guys are essentially conservatives, not so much focused on creating any systematic, radical change in the economy, as they are on marginal tweaks.
Marginal Revolution has talked a lot about wealth inequality vs. income inequality and how the two seem almost inversely correlated. Sweden has a great deal of persistent wealth inequality, for instance. Almost seems that the socialists "lost" the debate of trying to seize direct ownership of the capital goods, but took a more neo-liberal-esque approach of redistributing the income stream from said capital goods.
That's the fundamental difference I think your link hits on.
Is that necessarily a bad thing? When it comes to massive re-works of the private sector, I get a little bit....erm....antsy. And when it comes to incremental marginal changes not being enough, well, I'm looking at a school system that thinks "technology" means an Ipad in every class room (with the same lecture style of learning), and medicine means lots of hospitals and expensive procedures. More radical transformations might best be directed at those sectors, which are within the government's realm of responsibility, rather than systematic change in the private capital markets.
Thoughts?
I was actually enjoying the article about Thomas Piketty's "fair weather friends", which were the Post Keyesians of course heh:
ReplyDeletehttps://www.jacobinmag.com/2014/05/pikettys-fair-weather-friends/
Thomas Palley (of Yale) and Krugman passed words against each other concerning what Palley called the "Gattopardo" of economics via Piketty - basically, just using slight tweaks and logic to incorporate things and ideas traditionally left out of mainstream economics (inequality and capital) into the broader framework, changing very little in the process.
We'll see. It definitely changes the conversation and puts the New Classical revolution of the 70s-2000s back onto the defensive. It definitely leads new room for a broader discussion on various formerly taboo topics like inequality, and it gives Post Keynesians a chance to rehash the Cambridge Capital Controversy (see here: http://en.wikipedia.org/wiki/Cambridge_capital_controversy).
Interesting point about Sweden, and as we know they primarily manage inequality via labor unions and transfers. I don't think wealth in the traditional European sense was ever big in Sweden like it was in, say, France or Italy, so it could be that its wealth is more concentrated in fewer hands having been accumulated only over the past century or so.
I do agree though that the wealth tax is both politically and practically impossible. I would probably only focus on increasing various estate taxes if anything, which is much easier to do since it mostly involves financial capital for a small number of people at a given time (the date of an Estate Holder's death). Piketty's definition of Capital isn't all too clear, and may include productive capital that may be both hard and silly to price and tax. But I digress.
And personally I think that it's far more indirect than simply boistering up direct protections to workers (by passing higher minimum wage laws at the state/local level, by strengthening laws on overtime, increasing the EITC's funds for single people etc). Because like, alright even if we have the tax (which is popular precisely because it could never be passed), where would that extra money go to? If we just use it to pay off interests and loans (as Piketty suggests as a means to fix the Eurocrisis), well that'd be alright policy but what the hell does that do to inequality?
ReplyDeleteReally wouldn't matter what you do with the money, I would think. The tax in general prevents wealth accumulation which would in turn prevent the emergence of Gilded Age-level inequality. Sort of like saying "okay, but WHAT should we do with the money we are spending????" during a stimulus season. Okay, that's a good discussion to have, but the fundamental macro-economic says spend more money fixes the problem, and the fundamental macro picture here would say the Wealth Tax prevents the emergence of Gilded Age 2.0.
ReplyDeleteObviously I have not read Piketty yet and am only somewhat familiar with the arguments.
Now from my Global Financier perspective, using the taxes to pay down debts makes sense. The accumulation of wealth has led to a huge savings glut that has depressed interest rates everywhere, which is leading to a lot of people borrowing money and a lot of rich people owning debt. Our overall debt level has declined but this is a defining feature of our economy and possibly a defining feature of a market-based oligarchy....we get owned through our debt.
It also has uses from a macro-economic perspective, because it makes balance-sheet recessions less likely to happen. That does a LOT for inequality, because recent recessions and jobless recoveries have hit middle and lower class people very, very hard.