General Economics Discussion

Hey TOTJO!

In response to a skype convo in the knights group, I thought I would start a thread on a subject near and dear to me, Economics.

To begin, I would like to ask if anyone here has read French economist Thomas Piketty's work 'Capital in the 21st Century?' I would like to start with that. Full disclosure, I have not finished reading it yet (on page 200 something).

Dr. Piketty's central thesis is ' that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability.' Dr Piketty goes on to exhaustively analyze why this seems to be the case as evidenced by centuries of economic data, and goes on to assert that the present state of inequality worldwide 'is not an accident, but rather a feature of capitalism'.

This assertion gave me pause. I had never thought that to be the case, until I began reading Piketty's book. What do you guys think? Is inequality built into the workings of modern capitalism? And if so, is this beneficial to society as a whole? If not, how can we as Jedi address this inequality?

All these labels makes it hard for me to keep a strait mind. What was the former of society the Native Americans have in which they as a whole chose to choose to create a whole for the entire way of life. They took care of their own sick, food , work,at no cost to them directly but in trade for a more harmonious places in the "machine " of things. It could be seen as communistic views if painted that way.

Do we have any economists here :huh:

I had to read wikipedia on it. He is sort of targetting the top 10% of wealth isnt he? I don't know enough to agree or disagree, but I know they already pay most of the tax - not personally. Personal wealth at that level is a byproduct of much greater wealth holdings I'd imagine.

There is a risk he is using the perception of wealth and tax by the normal person and applying it to the ultra rich - who have a very different perception of wealth and experience of taxation. I have a sneaking suspicion that at that level, wealth 'is' society. They have had freedom to buy and do whatever they like all their lives usually, so the concept of wealth is probably for them more about creating opportunities for everyone else!!! These people basically own a stake in almost everything in some way or another. They are almost the blood to the body, without it none of the organs would work.

Consider the cavemen would have been jealous about the other bloke with a better cave, prettier girlfriend, sharper stones, bigger fire. They might have blamed any number of reasons, to justify any nature of reaction to the perceived problem, but the point is the caveman with the better tools can make quicker progress on even better tools which allows those other relatively good tools to be left behind for the other cavemen to pick up and understand. Eventually that inequality represents a 'value' which can be traded for goods and services.... as each person has unique strengths and weakness. The result is more people have better tools, and a society grows.

But as the society grows you get new poor people who start with nothing, and they look around at people with both different degrees of better tools, but who also themselves are building better tools at different rates. You can imagine how this then continues on over thousands of years.

So I think its human nature to assess self worth in those terms... but I don't think its necessarily a bad thing that wealth inequality exists so long as their is an accessible system to change ones wealth - indeed if not just because its human nature to assess our own worth in relation to others apparent 'worth' or 'success'. I then even consider it a good sign that a huge wealth disparity exists, because it shows a stable period of growth which looking around quite evidently has lifted the quality of life from the proverbial caves. I don't ignore the strengths of the system just so I can blame it for its inherent weakness.

To me this then defines what welfare safety nets are required to support those who are unable to participate in that. What this system does then is provide the most flexible means for wealth to be generated in the areas of meeting societies needs. The more people you can satisfy within this system, the more reward you achieve. So to me capitalism is a very democratic mechanism, because it is quite literally the people working for the people - despite socialism trying to claim the mantle by letting the government decide for them.

But his suggestion might be good for all I know... but it does seem strange, a global tax. A system built on the individual participation would be vulnerable to changes in the majority of individuals perception and participation of that system, but I don't think we are global society yet, despite having a globalized economy. Would it really solve any problem or just empower a new body to shift the problem where it wanted?

It's just taxation is so complex. Tax for normal people is way way different to tax on the ultra rich, because normal people's wealth is just usually an income stream, maybe some land tax, maybe a property purchase tax or perhaps a tiny amount of earnings in shares or savings. For the ultra rich their wealth is tied up in all nature of activity, and taxation applies to these in all sorts of places at all sorts of amounts.. which goes back to my view about perception. It's not wrong for example to minimize taxation - it is a actually an instrument of government fiscal policy to structure a taxation system in such a way to try and shape business activity in certain ways by creating favorable taxation circumstances to get business to do what government thinks they should be doing. Tax minimization is actually a fundamental part of managing wealth, because growth is difficult at the best of times, and the bigger the investments the bigger the risks and impacts of uncertainties in those terms - not just for the individual mind you, because the bigger it is the more of society it represents and supports.

Thanks for the thread Des! I'm not sure inequality is fundamental to capitalism but I think it probably is fundamental to the type of capitalism present in most countries today.

The research also shows quite convincingly that within a society, the problems of inequality have less to do with absolute income and more to do with relative incomes. Even if the poorest in the UK (for instance) are much richer than the poorest in Mozambique that doesn't really help the poorest in the UK feel better. Furthermore - it's not even about income. It's about wealth (capital, savings etc). It's wealth distribution in any given country that leads to social unrest, revolution and ultimately any kind of measure of fairness relevant to that particular society.

I don't mean to spoil the book for anyone else but Piketty's solutions are wealth redistribution through a wealth tax and / or very high inheritance taxes. In the office of an academic these can seem like sensible ideas but they are fiendishly difficult to implement in the real world.

First they need to be implemented globally or the capital will simply move to where the tax regime is most benign. Secondly wealth and inheritance taxes can be brutal, and are generally unpopular. The elderly couple who own a nice house but have a low income - they'd have to sell their home. The young kids who lose their parents in a fatal accident - they would lose their home to inheritance taxes. Sure you can start carving stuff out but before you know it the rules become very complicated. Taxes that are complicated are easily avoided - especially by the richest.

The fact that such taxes are unpopular means that they are tough to implement in a democracy. If the only way to achieve such policies is through circumventing the democratic process then I'm not sure the medicine is worth the side effects.

So morally I agree with much of what Piketty suggests but the practical implementation is a huge hurdle.

As Jedi I think there are two main things we can do. FIrst of all - do everything we can to ensure that we are not a burden on the state, or other people. Second - if we are lucky enough to have more than we need then we should give serious consideration to charitable causes - especially those which can seek to reduce inequality.

I would say that inequality is a fact of capitalism. Some people will earn more and retain it while others will earn and lose or not earn as much. But he acts like this is a bad thing and it is not. Equality is a myth. Some will be lucky, some are smarter, some have more drive, some more desire to work for wealth. Those things bring rewards at times.

To say that we must prevent people from earning or being given wealth because others do not have as much is a despicable claim to the property and ultimately lives of others. It's a death blow to invention and drive. Why ought anyone work hard to become a world-class inventor or surgeon if you will only shackle them to the predefined limits of others anyhow?

Further this pretense acts like equality is something we must enforce and inequality to be bad. If that be the case then let us all break our legs because some people cannot walk, let us lobotomize ourselves because some people are not as clever as others. Let us all live in huts because some people live in poverty. The hilarity of such economists is they put forward such suggestions while most likely living better than much of the world and not being willing to give up that position. It's two-faced and sad.

I'm not much of an economist ; since I was a teenager my ideas of "economy" were based on an unrealistic reading of Marx and Engels. But Piketty's book is interesting once one gets through all the historical analyses.

The Third (on the inequalities) and Fourth (on redistribution) parts, Chapters 7 through 16, are the most interesting parts of the book, where he is conjecturing on the problems and remedies for them as what Des and Loudzoo have already described.

Piketty is an economist - and a pretty good one. We can very likely give credence to his analysis of an impressive lot of assembled records of where wealth was, who had it and what they could do with it. He can show us what has been going on on the economic front over the last couple of centuries that have brought about the social and economic inequalities (hence also the injustices) that we face in this early part of the 21^st Century and, from this, point to some measures that are likely to work towards smoothing out these inequalities.

Yet, he is not a philosopher. It is not his job to determine if these measures are morally right or fair. Naturally, anyone without wealth is going to see the equalising measures proposed by Piketty as very fair and long overdue, whereas those in affluent families - especially the 40% at the bottom of the top - are going to regard the same measures as terribly harsh austerity.

What I feel that we need to retain from all this, as Jedi, is that moral philosophy and ethics, certainly by considerations in the domain of distributive Justice, are not and cannot be wholly "objective" (our Doctrine's maxim on Morality is rather shallow about that), as it is the "objective" self - "me, my, mine", or by group "us, our, ours" that tends to get in the way of Adam Smith's invisible hand. Charity as it were - not in the sense of merely giving, but in the sense of the love of the ultimate Ground (what we would call the Force) - is going to be largely "subjective". An enlightened self-interest ("self" being sort of broadly employed there to include a pre-reflexive "I/we") could aid in furthering us along the way in our pursuit of a more just society. Knowing, of course, that it will always be merely a 'pursuit'.

All I'm trying to get at here is that we ought noT confound the tea towels and those for the bath. Piketty is showing us the context of the socio-economic landscape in a very detailed way and making some quite apt inferences from that portrait. But his is the point of view of an economist. Very expert, yet very limited in scope. He is not doing the work of a moral/political philosopher in terms of determining what is "fair".

Remember, "fair" and "equal" are not synonyms ...

Alexandre Orion wrote: All I'm trying to get at here is that we ought no confound the tea towels and those for the bath. Piketty is showing us the context of the socio-economic landscape in a very detailed way and making some quite apt inferences from that portrait. But his is the point of view of an economist. Very expert, yet very limited in scope. He is not doing the work of a moral/political philosopher in terms of determining what is "fair".

Remember, "fair" and "equal" are not synonyms ...

A very interesting and thoughtful response. Alexandre. I suppose my main issue with such authors and indeed with many that subscribe to their views of wealth distribution is as follows:
They lack the courage of their convictions. They do not put forward that they should have to give anything up. They always think that their level of income and lifestyle is ok and that its always the bigger guy that is the evil one. They lack the stomach to give up their lifestyle and wealth while demanding that others have their wealth and lifestyle hamstrung. I can at least respect and debate a man that lives what he preaches but when they shout from the pulpit suggestions that they do not follow it strikes a cord.

How do they assess wealth? Rich people's wealth is all put into economic activity generally speaking, and slowing that might have some interesting outcomes. If we consider the successful condition of capitalist activity to be profits, then the proposal almost sounds like a penalty on success! So assuming no way to avoid the new tax, it would seem to be a disincentive to economic activity. I wonder what would be the best way to define success in capitalism... risk avoidance, profit, peace, quality of life etc? Makes me think capitalism should be taxed in such a way to promote fair and legal conduct, and should penalize unfair and illegal conduct.... rather then profits, which could be a valid measure of success. Regulators.... where are the regulators! If the suggestion is to give government more power, then I'm worried they are not particularly successful with the amount (considering its important role) they already have
:blink:

So I'd say international corporate tax evasion is probably the first thing to fix. Otherwise how is this global entity going to assess the boundary of an entity to determine its 'wealth' to tax? Corporations, Trusts, etc.... all make things a bit complex.

Those structures of wealth creation which are being used to determine this metric of 'wealth' is busy working to make profit and already being taxed as part of its participation in the economy. Over here in Australia one of the recent governments proposed introducing a new super profit tax on mining companies who exceeded a threshold in net profit that might have been earned over and above the existing tax arrangements... needless to say the small to medium miners stocks crashed and the big international firms just shifted efforts overseas instead, and so heaps of workers lost their jobs and rural towns property values crashed forcing people to lose lifes savings etc etc. The only losers were the poor and middle class.

So I guess we have to be careful trying to target the rich because they can afford the best people to understand how things are setup. The system works how the system is structured - and the only ones with enough money to understand that are the rich people! Everyone else learns the hard way, and its easy to lose but hard to earn.

The trick here might be to understand that globalized nature of the economy in regards to how it applies to the job seeker. If there is no work where one is born and raised, then they might have to move to where the work is. There is a lot of that in South East Asia for example. I'm not sure the answer is to wind down economic activity, in the hope governments will do something useful with more money. We just might need to view the human capital as being almost as fluid as the liquid capital, moving into the future.

Desolous wrote: Hey TOTJO!

In response to a skype convo in the knights group, I thought I would start a thread on a subject near and dear to me, Economics.

To begin, I would like to ask if anyone here has read French economist Thomas Piketty's work 'Capital in the 21st Century?' I would like to start with that. Full disclosure, I have not finished reading it yet (on page 200 something).

Dr. Piketty's central thesis is ' that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability.' Dr Piketty goes on to exhaustively analyze why this seems to be the case as evidenced by centuries of economic data, and goes on to assert that the present state of inequality worldwide 'is not an accident, but rather a feature of capitalism'.

This assertion gave me pause. I had never thought that to be the case, until I began reading Piketty's book. What do you guys think? Is inequality built into the workings of modern capitalism? And if so, is this beneficial to society as a whole? If not, how can we as Jedi address this inequality?

Knights group huh? Been wondering where you spend all your free time here, lol. Thanks for the suggestion, ill definitely add this book to the pile I have waiting on me...