Growing Inequality (or How Libertarian Theories Go BOOM!)

[boneyard bill]

So ... this book is about the current US economic structure, and somehow this has something to do with libertarians?

Piketty is a Marxist. ...

boneyard bill, is anyone whose economics you dislike automatically a Marxist?

Also, can you explain, in your own words, what you think Marxism is?

I never heard of Piketty until his book came out. It is the people who reviewed his book who said he is a Marxist nor was it used a pejorative way. These were all msm types who were simply reporting on who he was.

As for your second question, do you want a book?

Of course, I can explain what Marxism is, but not in a few paragraphs. I could also tell you about its Leninist variant and its Maoist variant and its Trotskyite version and the Revisionists. I do not ramble on in these boards about issues that I have not studied.

 

[AthenaAwakened]

http://www.alternet.org/economy/how...letter986714&t=2&paging=off¤t_page=1#bookmark

Back in minute

OK, back

Basically, the lessons boiled down to this: Some degree of inequality is both unavoidable and desirable in a free market, and income inequality in the U.S. isn’t very pronounced, anyway. Libertarians starting with these ideas tend to reject any government intervention meant to decrease inequality, claiming that such plans make people lazy and that they don’t work, anyway. Things like progressive income taxes, minimum wage laws and social safety nets make most libertarians very unhappy.

Uncle Milty put it like this:


“A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom.… On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.”

Well, that turns out to be spectacularly, jaw-droppingly, head-scratchingly wrong. The U.S. is now a stunningly unequal society, with wealth piling up at the top so fast that an entire movement, Occupy Wall Street, sprung up to decry it with the catchphrase “We are the 99%.”

How did libertarians get it all so backwards? Well, as Piketty points out, people like Milton Friedman were writing at a time when inequality was indeed less pronounced in the U.S. than it had been in previous eras. But they mistook this happy state of affairs as the magic of capitalism. Actually, it wasn’t the magic of capitalism that reduced inequality during a brief, halcyon period after WWII. It was the forces of various economic shocks plus policies our government put in place to respond to them that changed America from a top-heavy society in the Gilded Age to something more egalitarian in the post-war years.

The book, Capital in the 21st Century,is causing quite a stir, but will it cause structural change in the global economy?

Are you seriously arguing that we have been following libertarian policies?

that depends. Are you going to seriously argue that (1) Libertarian. Economic thought has had absolutely no influence on US economic policy and/or (2) that the US has been following some other ideology in its purest form.

The government has been intervening in all kinds of way and in all kinds of areas in the US economy.

you do of course realize that without the government there is no economy for the nation, right? You do of course realize that for the last thirty to forty years, depending on who you ask, that the bulk of government involvement in the economy has been on behalf of corporate interests and their effort to reregulate and engineer an economy that benefits corporations and the very rich while fucking over work folk and small business, right?

Most libertarians favor, first of all, a gold standard. We went off the gold standard way back in 1933, and it could be argued way back to 1913 since the Fed was allowed to accept debt, as well as gold among its reserves. The last vestige of the gold standard was abandoned in 1971 when we went off the gold standard even with regard to foreign central banks. So if we're not on a gold standard most libertarians would object right there.

Milton Friedman was an exception. He did not favor a gold standard. Nor did he favor a central bank. He thought the government should simply expand the money supply by 3-5% per year. In other words, the money supply should expand roughly in line with productivity so that you had plenty of liquidity but didn't create inflation. But among libertarians, Friedman is actually a little on the heretical side.

In any case, we haven't had anything like Friedmanite policies either. Far from targeting the money supply, the Fed has usually targeted interest rates. This actually violates the most basic of all economics rules - the law of supply and demand. If the government sets the price of potatoes, for example, it is pretty predictable that you are going to get either a surplus of potatoes or a shortage because it is the market price that tells the producer that there is a surplus or a shortage and allows him to respond to that. If markets do not set the interest rate you are going to get distortions because interest rates are the price of money.

For example, in 2001 the Fed Chairman, Alan Greenspan undertook what has become known as the "Greenspan put." He forced interest rates down from 6.5% all the way down to 1% two years later. The result was the housing bubble. Many, many people bought houses because the low interest rates and easy credit terms made them so affordable. And many people were getting second mortgages on the equity in their homes. But what happens when the interest rate goes up? The price of housing falls. Now people owe more on their homes than the homes are worth. For the "house flippers" who were speculating on this bubble, they are sure to go bankrupt because the rents won't cover the mortgage cost. So they need to sell these houses but they can't get enough to pay the mortgage so they go bankrupt. Likewise, home owners are tempted just to walk away from their mortgage. And that spreads to the banks and to all those financial institutions that have bought derivatives called "mortgage backed securities." And you know the rest of the story.

All this because the Fed would not allow the market to set the interest rate. Instead, they thought they would juice the economy and get us out of the bust from the dot.com bubble. They just created a bigger bubble. We're doing the same thing now which is why so many people are saying that we're heading for another crash.

what about tax and wage policy? What about financial oversight? what about all the other things economic that aren't the Fed but impact the future of the nation?

 

[AthenaAwakened]

For some reason the Right and Libertarians have so internalized the Protestant Work Ethic that they can't help but equate being poor with being lazy and evil and being successful with being hard working and good.

They've basically turned the economy into a morality play.

nice nice way to put it.

And the market is the holy arbiter of all things right and righteous

Guess what? If nobody works, nobody eats. The only reason we have anything is because somebody works to produce it. But some people figure out a way to get other people to work for them for a guaranteed wage provided that they assume the risk. So you get other people to work for you, and you hope that you can sell those products for more than it cost you to produce them (including, of course, the wages that you have to pay out). If you can pull that off, you can get rich. (Most people who try it, of course, do not succeed).

So now you can sit around and do nothing? Is that immoral? No. Being lazy is not immoral. There's no Protestant Work Ethic when if comes to being rich. So why are lazy poor people so denigrated?

Because they have to live off others. That is the difference between the lazy rich and the lazy poor. The lazy rich have arranged sources of income so that they do not have live off others. (Of course, it is the irony that many very hard-working, ambitious entreprenuers work hard all their lives so they can leave all that wealth to their lazy children, but that's the way the system works when you have private property).

So most of us never figure out a way to accumulate enough wealth so that we don't have to work at least until retirement age. But is that any reason to resent the ones who do? I don't see why we should. On the other hand, does that mean that we shouldn't resent the people who don't work and have to live off of us? No.

Work is a given and everyone has to do it except the few who've managed to save enough to avoid it. So if we create incentives NOT to work, we will get less work, and if we create disincentives to not work we will get more of it. It's really that simple. Nature creates a disincentive to not work. It's called starvation. Why would you want to remove that incentive? We have enough people who can't work i.e. children, disabled people, old folks that we don't need the extra burden of people who just don't feel like it.

you do know that rich people do live off the work of others, right? Part of all profit in an enterprise with employees lies in the difference between what the worker produces and what the worker is paid. Not saying that's a bad thing, just that its a thing and one not to be glossed over, ignored, or lied about.

 

[Jason Harvestdancer]

Are you going to seriously argue that (1) Libertarian. Economic thought has had absolutely no influence on US economic policy and/or (2) that the US has been following some other ideology in its purest form.

1. Yes, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.
2. No, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.

Of course people on this forum will take issue with point one, because they think bailouts and subsidies are libertarian.

 

[AthenaAwakened]

Are you going to seriously argue that (1) Libertarian. Economic thought has had absolutely no influence on US economic policy and/or (2) that the US has been following some other ideology in its purest form.

1. Yes, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.
2. No, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.

Of course people on this forum will take issue with point one, because they think bailouts and subsidies are libertarian.

I don't think bailouts are libertarian, but I think resistance to raises in or the mere existence of minimum wages if not originating in libertarian thought, they sure do dance a mean two step with it. Deregulation (which is really re-regulation but that's a discussion for another thread) mania looks pretty libertarian to me. The switch from guaranteed benefit pensions to 401ks does appear to jive with libertarian principles along with various moves to privatize or "restructure" social security. The charter school movement has many libertarians in its cross-sectional group of supporters. Even those fools out in Nevada I'm sure claim that grazing on public lands for free and threatening federal law enforcement is all all done based on the highest ideals of liberty.

 

[laughing dog]

Are you going to seriously argue that (1) Libertarian. Economic thought has had absolutely no influence on US economic policy and/or (2) that the US has been following some other ideology in its purest form.

1. Yes, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.
2. No, our economy is mostly mixed Kenyesian-Corporatists, but it also has Monetarist, Welfarist, and Socialist influences. Any libertarian influences are holdovers from the past that haven't been erased yet.

Of course people on this forum will take issue with point one, because they think bailouts and subsidies are libertarian.

Written like a true conservolibertarian.

 

[ksen]

So why are lazy poor people so denigrated?

Because they have to live off others.

But some people figure out a way to get other people to work for them . . . If you can pull that off, you can get rich.

So when poor people live off others we should denigrate them but when the rich live off others we should not denigrate them?

That is the difference between the lazy rich and the lazy poor. The lazy rich have arranged sources of income so that they do not have live off others.

Sounds like that's exactly what the lazy rich do, live off others.

(Of course, it is the irony that many very hard-working, ambitious entreprenuers work hard all their lives so they can leave all that wealth to their lazy children, but that's the way the system works when you have private property).

You mean that's the way our system works. That doesn't mean it has to keep working that way or that changing how it works all of a sudden means we've done away with private property.

So most of us never figure out a way to accumulate enough wealth so that we don't have to work at least until retirement age. But is that any reason to resent the ones who do? I don't see why we should. On the other hand, does that mean that we shouldn't resent the people who don't work and have to live off of us? No.

Work is a given and everyone has to do it except the few who've managed to save enough to avoid it. So if we create incentives NOT to work, we will get less work, and if we create disincentives to not work we will get more of it. It's really that simple. Nature creates a disincentive to not work. It's called starvation. Why would you want to remove that incentive? We have enough people who can't work i.e. children, disabled people, old folks that we don't need the extra burden of people who just don't feel like it.

If we could turn irony into money your family would be set for generations.

 

[boneyard bill]

AthenaAwakened writes:

Are you seriously arguing that we have been following libertarian policies?

that depends. Are you going to seriously argue that (1) Libertarian. Economic thought has had absolutely no influence on US economic policy and/or (2) that the US has been following some other ideology in its purest form.

Libertarianism isn't an economic policy. Libertarianism is a political theory. As part of libertarian theory it embraces free market economics, but libertarians did not invent free market economics. Economists did that. So you're just confusing things to talk about libertarianism when you mean free market economics. But even free market economics is not a completely unified field so free market economists will disagree among themselves. And influence libertarian thought has had on policy has been miniscule. Free market economics is the default position of virtually all schools of economics. They begin with the market and then seek to determine when intervention might be appropriate.

I wouldn't argue that US policy has been influenced by any policy "in its purest form." But the neo-Keynesian school seems to have been the most dominant for quite a while now, and it is failing miserably. The Monetarist school is probably the only school besides Keynesianism that had a significant influence on policy since World War II.

The government has been intervening in all kinds of way and in all kinds of areas in the US economy.

you do of course realize that without the government there is no economy for the nation, right?

Are you kidding? That's about the most laughable thing I have heard in quite a while. Of course, we would have an economy without the government. You think people wouldn't grow food without the government? You think they wouldn't trade without the government?

The government plays a role in providing security and resolving commercial disputes, but if people don't work, they starve. And when you have people working, you have an economy. Have you ever considered taking a course in economics? You could sure use one. You don't have to go to college anymore. You could probably find one on-line.

You do of course realize that for the last thirty to forty years, depending on who you ask, that the bulk of government involvement in the economy has been on behalf of corporate interests and their effort to reregulate and engineer an economy that benefits corporations and the very rich while fucking over work folk and small business, right?

Realize it? I've been saying on these boards for lo these many years. And I've been pointing out and posting evidence that Obama is even worse in this regard than his predecessors. The Federal Reserve has funneled trillions of dollars to the big banks during Obama's administration. And trillions is not an exaggeration. It is literally true. He has also refused to prosecute the big banks for money laundering, fraud, and other illegal activities even though that have been convicted in civil suits and forced to pay large fines. But it's the stockholders who get stuck with the fines in civil suits. Criminal suits would be directed at the officers of these banks who would then face jail time. Instead, they get bonuses.

ALL regulation favors the large corporations. The large corporations were behind most of our regulatory agencies. They want regulation to keep out competition.

what about tax and wage policy? What about financial oversight? what about all the other things economic that aren't the Fed but impact the future of the nation?

In tax policy we need to lower taxes on capital. We have the highest corporate tax rate in the world. We have high taxes on other forms of investment as well. This is insanity. It leads to less and less investment here and more and more investment abroad.

We don't need a wage policy. Having a wage policy is the worst thing you can do for wages. All it does is increase unemployment which leads to lower wages in the longer term.

"all the other things" that you are talking about are mostly things the government shouldn't be doing anything about anyway. We weren't exactly living in the dark ages in 1900 when most of these laws had not yet been enacted. But we had the highest standard of living in the world and had become the world's economic power house.

 

[boneyard bill]

Athena Awakened writes:

you do know that rich people do live off the work of others, right? Part of all profit in an enterprise with employees lies in the difference between what the worker produces and what the worker is paid. Not saying that's a bad thing, just that its a thing and one not to be glossed over, ignored, or lied about.

Do I know it? I stated it in my post. But note that the worker does not assume any risk. He gets paid a wage. He can go out and buy some raw materials and try to make something on his own and then he gets to keep the entire sale price. But if it turns out that he cannot sell the products for as much as it cost him to buy the materials, he also suffers the loss. By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

 

[AthenaAwakened]

Athena Awakened writes:

you do know that rich people do live off the work of others, right? Part of all profit in an enterprise with employees lies in the difference between what the worker produces and what the worker is paid. Not saying that's a bad thing, just that its a thing and one not to be glossed over, ignored, or lied about.

Do I know it? I stated it in my post. But note that the worker does not assume any risk. He gets paid a wage. He can go out and buy some raw materials and try to make something on his own and then he gets to keep the entire sale price. But if it turns out that he cannot sell the products for as much as it cost him to buy the materials, he also suffers the loss. By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

if you don't know that profit comes from the difference between cost and price, there is no point in talking any more.

 

[boneyard bill]

Athena Awakened writes:

you do know that rich people do live off the work of others, right? Part of all profit in an enterprise with employees lies in the difference between what the worker produces and what the worker is paid. Not saying that's a bad thing, just that its a thing and one not to be glossed over, ignored, or lied about.

Do I know it? I stated it in my post. But note that the worker does not assume any risk. He gets paid a wage. He can go out and buy some raw materials and try to make something on his own and then he gets to keep the entire sale price. But if it turns out that he cannot sell the products for as much as it cost him to buy the materials, he also suffers the loss. By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

if you don't know that profit comes from the difference between cost and price, there is no point in talking any more.

Of course it does. But so does loss. So the "profiteer" has to deal with the possibility that he might lose money. In fact, about 8 out of 10 new businesses do, in fact, fail. The worker, however, does not take that risk. He gets paid even if the entrepreneur loses money.

 

[laughing dog]

Do I know it? I stated it in my post. But note that the worker does not assume any risk. He gets paid a wage. He can go out and buy some raw materials and try to make something on his own and then he gets to keep the entire sale price. But if it turns out that he cannot sell the products for as much as it cost him to buy the materials, he also suffers the loss. By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

Nonsense. Plenty of workers end up without getting paid when a company closes.

if you don't know that profit comes from the difference between cost and price, there is no point in talking any more.[/QUOTE]

Of course it does. But so does loss. So the "profiteer" has to deal with the possibility that he might lose money. In fact, about 8 out of 10 new businesses do, in fact, fail. The worker, however, does not take that risk. He gets paid even if the entrepreneur loses money.[/QUOTE]

 

[boneyard bill]

laughing dog writes:

Nonsense. Plenty of workers end up without getting paid when a company closes.

Unfortunately, I have to say that this is typical of your nit-piking responses. OK, I agree. The world is not perfect. You can't get blood out of a turnip. So the worker might have to end up with a legal claim to property which he is never able to collect on fully. But the legal status of the worker is that he does not take a risk, and the legal status of the entrepreneur is that he must pay the worker whether or not he makes money. That's the best we can do.

The law says that I have a right to life and that it is illegal for someone to murder me. Does that mean I can't possibly get murdered?

 

[AthenaAwakened]

Nonsense. Plenty of workers end up without getting paid when a company closes.

if you don't know that profit comes from the difference between cost and price, there is no point in talking any more.

Of course it does. But so does loss. So the "profiteer" has to deal with the possibility that he might lose money. In fact, about 8 out of 10 new businesses do, in fact, fail. The worker, however, does not take that risk. He gets paid even if the entrepreneur loses money.[/QUOTE][/QUOTE]

who said anything about a profiteer?

you really gotta stop debating arguments from your past and deal with the ones you are in now.

 

[ksen]

But if it turns out that he cannot sell the products for as much as it cost him to buy the materials, he also suffers the loss.

You mean kind of like what low-wage workers do now: sell his product (labor) for less than the cost it takes to maintain himself?

By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

lol @ the worker doesn't have risk.

 

[Deepak]

That is the difference between the lazy rich and the lazy poor. The lazy rich have arranged sources of income so that they do not have live off others.

The rent is too damn high

 

[boneyard bill]

Of course it does. But so does loss. So the "profiteer" has to deal with the possibility that he might lose money. In fact, about 8 out of 10 new businesses do, in fact, fail. The worker, however, does not take that risk. He gets paid even if the entrepreneur loses money.

[/QUOTE]

who said anything about a profiteer?

you really gotta stop debating arguments from your past and deal with the ones you are in now.[/QUOTE]

?????????

 

[boneyard bill]

You mean kind of like what low-wage workers do now: sell his product (labor) for less than the cost it takes to maintain himself?

By working for a wage, he gets less money (potentially), but he doesn't have the risk that the entrepreneur has assumed.

lol @ the worker doesn't have risk.

Guess what? Life is risky. If you don't want risk, don't get born. If there's an idea that is absolutely bound to fail, it would be the idea that we should create a "risk-free" society. Although many of our liberal politicians seem to want to do that. (Or at least promise it). Still, there is a difference between taking a risk and just being subject to the normal human risks.

The entrepreneur takes a risk, the worker is subject to the possible risk that the entrepreneur will fail, and the worker will not get all that is due to him.

You know, this is so obvious that I shouldn't have to point it out. It's the kind of argument I've come to expect from laughing dog, but it appears that everyone wants to make this inane point right now. Is that the best you can do?

 

[SimpleDon]

I have read now the whole book. It is a rather compelling study of causes of wealth and income inequality. Its solutions half, what has to be done is somewhat less so compelling. Is there anyone else here who has read the book?

It is unreasonable to expect to discuss this book with an Austrian/Libertarian, as you have seen over this short thread. They reject the methodology of this book, which relies on evaluating historical data. Their methodology is based on logic applied to certain unassailable truths. They reject attempts to compare theory to actual historical data, going so far as to claim that deviations from the theory shown by the historical record must be caused by unknown economic factors, misallocations, corrupting the economy and the data. That their theory is absolutely correct, that if it was followed the data would fit the theory because the economy wouldn't be subject to corrupting factors, usually government interference in the economy.

They are in essence saying that their theories are not descriptive of the economy that we have now, today. That their theories are only valid for their idealistic free market economy. I don't believe that even the proponents of Austrian/Libertarian economics fully realize the degrees of separation between their fantasy economy, and the real economy that we have right now.

You see this repeatedly in the responses from our resident Austrian/Libertarians, Jason, Dismal, ColoradoAtheist and Boneyard Bill.

They disclaim any connection between their fantasy economics and the supply side economics or Reaganomics that is our current set of governing policies, although they will strongly defend these. It is sufficient for them in their minds to deny that the any negative outcomes are not the result of any of their theories or of even their influence. They preach against government regulation but aren't responsible in any way for the bad outcomes from deregulation. They support supply side theories reducing taxes on the very rich and increasing them on the poor but deny connection to income inequality. Alternately, they deny any problem for the economy resulting from income inequality, from the reduced demand in the economy that results from income inequality.

This level of denial would be sufficient reason to completely ignore them of course. Except that they are influential in the spectrum of movement conservatism's free market economics. Austrian/Libertarian economics provides much of the theoretical basis for the idea that a self-regulating, self-organizing free market can exist. That they do this mainly by repeating over and over again that the free market can exist and that it is capable of preventing bad behavior through the rather simplistic mechanism of supply and demand setting barter type prices, seems to not matter to the true believers. As if repetition was proof.

Austrian/Libertarian economics is neoclassicial economics-lite. Math free economics. Its main appeal seems to be in its simplicity, you only have to keep three principles in mind. The free market can exist and is the nearly perfect form of capitalism. The gold standard is the perfect form of money and anything else is flawed. The government can't do anything right, you have seen this in the DMV, any problem in the economy is the government's fault.

 

[Jason Harvestdancer]

They are in essence saying that their theories are not descriptive of the economy that we have now, today. That their theories are only valid for their idealistic free market economy. I don't believe that even the proponents of Austrian/Libertarian economics fully realize the degrees of separation between their fantasy economy, and the real economy that we have right now.

You see this repeatedly in the responses from our resident Austrian/Libertarians, Jason, Dismal, ColoradoAtheist and Boneyard Bill.

The problem with that "rebuttal" is that it actually is true that our mixed Corporatist-Keynesian economy isn't a free market economy. It really isn't. Yes, there are business out there, and some of them are making profits while others are losing money, but that's not sufficient to say that our bailout economy is a free market economy.

It is true that Supply Side economics (and also Demand Side economics) is qualitatively different, both in theory and in implementation, from free market economics. This can be determined by asking what, exactly, Supply Side economics IS. Supply Side economics is the attempt by the government to boost the economy through stimulation of supply. What is so free market about that? Because it helps the rich? That's an awfully short sighted and distorted view of the problem.

Some here do have the absurd view that libertarian economic thought is influential in Republican circles. They clearly aren't basing that view on what Republicans propose to do to the economy, so I have to conclude that they are basing that view on what Democrats say about Republicans in their campaign rhetoric. But if you say there is no difference between a regulation that specifically helps the rich, one that specifically prevents the poor from holding the rich accountable, and a regulation that isn't there at all, then we're not dealing with the real world but an idealized faith-based version. Proponents of that claim don't fully realize the degrees of separation between their fantasy economy and the real economy we have right now.

You see this repeatedly in the responses from SimpleDon.

What this whole book, article about the book, and thread are really about is "Republican policies don't work. Libertarians say they are offering an alternative to what the Republicans offer, but I don't like their alternative. Let us try to say that their alternative is actually the same thing the Republicans are offering even though all the facts say otherwise."