Tag Archives: Piketty

The Three Major Trends that Shaped the Global Economy for Decades Are About to Change

BOOK REVIEW

Capital in the Twenty-First Century, Author: Thomas Piketty.

By Luke Kawa – According to Charles Goodhart, professor at the London School of Economics and senior economic consultant to Morgan Stanley, demographics explain the vast majority of three major trends that have shaped the socioeconomic and political environments across advanced economies over the past few decades.

Those three would be declining real interest rates, shrinking real wages, and increasing inequality.

The conditions that fostered these three intertwined major developments are nearly obsolete, and this has profound implications for the framework of the global economy in the decades to come. more> http://tinyurl.com/ntyfgd8

How To Use Economics & Not Be Used by Economists

BOOK REVIEW

Economics: the User’s Guide, Author: Ha-Joon Chang.
Kicking Away the Ladder, Author: Ha-Joon Chang.

By Ha-Joon Chang and Lynn Fries – The two central propositions of Classical economics that have been adopted and advanced by the Neoclassical school is that market competition keeps producers efficient.

So you have to become efficient, otherwise you’ll be wiped out by market competition.

And the other is that you have a self-equilibrating quality of the market. So market can be just left alone.

Neoclassical economists are saying the same thing, but actually in quite different ways. And there are quite a lot of differences between the two approaches. But the two most important are the following:

Unlike Neoclassical economics, Classical economics is a class-based theory. So in Classical economics there are capitalists, there are workers, and there are landlords. And most of their theory is about how the division of income between these three groups affect the way that an economy makes investment, generates economic growth, and manages itself.

Neoclassical economics deny that. They even deny that class is an analytically meaningful category. They construct the theory on the basis of individuals. Individuals are all different.

In Classical economics, it is assumed that the capitalists are behaving in particular ways, workers behave in particular ways. Landlords are behaving in particular ways.

The Neoclassicals have turned the theory into an individualistic theory, whereas Classical economics is a class-based theory. more> http://tinyurl.com/qynd3yb

Related>

Can the world get richer for ever?

By Theo Leggett – Growth is seen as a panacea for a great many ills. It creates jobs, erodes debts and raises living standards. For politicians, it also generates votes. It is almost universally seen as a Good Thing.

Journalists are complicit in this. We frequently describe rapid growth as “robust”. Slower growth is “anaemic” and an economy in recession is often portrayed as “sick” or “ailing”.

Yet there’s a problem here. We live on a finite planet, but growth is exponential. So an annual increase in gross domestic product (GDP) of 3% might not sound like much – but it means an economy will double in size every 23 years.

Vandana Shiva believes that current measures of growth place too much emphasis on potentially harmful activities, such as logging or mining, and do not value natural wealth. more> http://tinyurl.com/pjqh2zb

Related>

Reforming ‘the Mercenary Society’ via an Energetic Agenda

BOOK REVIEW

How Good We Can Be: Ending the Mercenary Society and Building a Great Country, Author: Will Hutton.

By Christopher Colford – The Davos 2015 parade of plutocrats may have been worth all the time and trouble, after all – despite its customary spectacles of self-indulgence – if the pageantry helped pique the conscience of some of the One Percenters and their courtiers, at least momentarily.

Most of the conversations between chief executives here are about Piketty-type issues.

They talk about things [at Davos that] they wouldn’t be talking about back in the boardroom,” one eminent corporate leader told Elliott of The Guardian. more> http://tinyurl.com/k2rabnp

Bonfire of the humanities

BOOK REVIEW

The Cheese and the Worms, Author: Carlo Ginzburg.
The Great Cat Massacre, Author: Robert Darnton.
The Return of Martin Guerre, Author: Natalie Zemon Davis.
Decline of the West, Oswald Spengler.
A Study of History, Author: Arnold J Toynbee.
Wealth of Nations, Author: Adam Smith.
The Influence of Sea Power Upon History, Author: Alfred Thayer Mahan.
Capital in the Twenty-First Century, Author: Thomas Piketty.
The History Manifesto, Authors: David Armitage and Jo Guldi.

By David Armitage and Jo Guldi – Short-termism has no defenders. Everyone seems to be against it, and yet proponents of alternatives are also in short supply.

The mission of the humanities is to transmit questions about value – and to question values – by testing traditions that build up over centuries and millennia. And within the humanities, it is the discipline of history that provides an antidote to short-termism, by giving pointers to the long future derived from knowledge of the deep past. more> http://tinyurl.com/osmocby

Thomas Piketty, climate change and discounting our future

BOOK REVIEW

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown, Author: Philip Mirowski.

By David Hodgkinson – Emissions trading is a an elaborate “bait-and-switch” strategy, in which politicians are diverted from an original intention to reduce emissions into the endless technicalities of instituting and maintaining markets for carbon permits. The not unintended consequence is that the level of emissions continues to grow apace.

It’s well understood, Mirowski continues, that emissions trading stifles technological innovation to curb emissions. Funds that ordinarily might have been used to alter energy infrastructure are “pumped into yet another set of speculative financial instruments, leading to bubbles, distortions of capital flows, and all the usual symptoms of financialization”. more> http://tinyurl.com/o68vvsa

What Stiglitz Misses On Inequality: The Responsibility Of Economists

[ Piketty ]

By Steve Denning – There is one category of actor curiously missing from Stiglitz’s list of villains: his fellow economists. There is no mention for instance that it was the winner of the Nobel Prize for Economics, Milton Friedman, whose New York Times article on September 13, 1970, “The Social Responsibility of Business is to Increase its Profits”, launched the idea that corporations should focus solely on making money for themselves and the shareholders, and basically, to hell with everyone else.

Nor is there any mention of the famous 1976 article by Professors Meckling and Jensen, “The Theory of the Firm,”–one of the most cited economics articles ever–which provided a supposed economic rationale for giving generous stock options to the top management so that they would focus sharply on making money for the company–and themselves. It was the nonsensical psychology and fantasy mathematics of this article that provided the economic rationale for the idea that the purpose of a firm is to maximize shareholder value and led to the very management practices about which Stiglitz so eloquently complains. more> http://tinyurl.com/olrwaj5

Related>

The outrage is not so much over inequality but all the dubious ways the rich got richer

[ Piketty ]

By Miles Kimball – There are many reasons to be concerned about wealth inequality itself, regardless of the source of that inequality, but it is hard to pursue a discussion on the topic for long before someone makes a claim about whether the wealthy acquired their money in a deserving way.

Partisans on the political left and right know which side of this argument they are supposed to emphasize:

many who feel the government needs more revenue conveniently argue as if almost all wealth comes from underhanded, unscrupulous skullduggery,

while many who feel the government needs less revenue conveniently argue as if almost all wealth were created by the likes of Steve Jobs, who brought us i-everything. more> http://tinyurl.com/no9oka4

Thomas Piketty and the Foreign-Investment Question

By Bernard Avishai – In 1975, about twenty per cent of companies’ valuations could be attributed to intangible assets, such as knowledge; by 2007, the proportions were reversed.

Changes in the makeup of corporate assets matters, in particular, when discussing international inequality.

The gap between rich and poor countries is between knows and know-nots, not just between haves and have-nots.

It used to make sense to assume that, once a domestic business owned material assets, it wouldn’t need a very high learning curve before it was working more or less profitably. But, while that outlook worked for products like soap, it doesn’t hold up for something like smart phones: virtually anyone with a factory, a recipe, and cheap labor can make soap, but building smart phones requires knowledge. more> http://tinyurl.com/ls5kumk

Related>

What Thomas Piketty Got Wrong

By Steve Denning – There is no mention of the actual driving force behind increased executive compensation, namely, the shareholder value movement which explicitly proposed compensating executives with stock so that their actions would be aligned with shareholder value.

This began with Milton Friedman–another Nobel Prize winner in Economics–who proposed back in 1970 that the purpose of a firm is to make money for its shareholders.

In 1976, Professors Meckling and Jensen gave an economic rationale for generously compensating managers with stock to encourage them to focus on short-term shareholder value.

Ronald Reagan and Margaret Thatcher gave this political cover and the rest is history.

The book misses the more obvious solution: removing the intellectual foundations of the pay increases by rejecting the shareholder value theory. more> http://tinyurl.com/nht4b59

Related>