That Awful Four(teen) Letter Word

Posted by Bob Lord

Paul Krugman's column in yesterday's Times, Sympathy for the Luddites, pokes at an uncomfortable truth. Those on both the right and left want to believe that education is the answer to both unemployment and inequality. 

It likely isn't. 

As Krugman points out, mechanization is eliminating jobs of the "highly-skilled" just as it has eliminated jobs of the unskilled. We can tell those who have lost their jobs to mechanization or globalization, some in their 50's or older, to train for a new job, but what if that job is mechanized out of existence as well?

Ultimately, we need to deal with the reality that income is moving from labor to capital, as Karl Marx predicted it would. Krugman confronts this head on:

Education, then, is no longer the answer to rising inequality, if it ever was (which I doubt).

So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

I can already hear conservatives shouting about the evils of “redistribution.” But what, exactly, would they propose instead?

That awful four(teen) letter word: redistribution. Here's to the day when redistribution is not considered so awful. 

Comments

[BruceJ]

" But what, exactly, would they propose instead?"

Why, Mr. Lord, they would propose the Goldfinger paradigm:

"I don't expect you to talk, Mr. Bond, I expect you to die!"

They have no plan; mainly because they have no plan for anything, beyond saying "NO!"

[Michael Powers]

I always thought that for those at the top it was about the money, and, to an extent, it is. But only inasmuch as it serves to reinforce a notion that is ancient. That those few at the top are the only real productive, decent, righteous people on the planet, and they are surrounded by lazy, ungrateful barbarians clamoring at their gates with their hands out, wanting free stuff. THEIR stuff. All the money in the world wouldn't matter because, in order for success to have meaning for them, others must fail. And if they fail, then they must somehow deserve it. They planned poorly, or made bad decisions, or were immoral and are now reaping god's judgement. Because again, of what use is heaven to them, unless others burn in hell?

[Thucydides]

Two competing theories for why a 120 million job economy is only producing 3 million vacancies and why 3 million vacancies are only poducing job growth of 150,000 per month. One is based on Peter Diamond's (Nobel Prize winnning lefty) job matching function. The other is Nobel prize winning economist Edward Prescott's work that taxation and welfare reduce motivation and incentive to participate in the economy.

When Reagan reduced tax rates in the 80's, the Beveridge curve did a major curl in the opposite direction of its current curl. It curled in producing a much lower unemployment rate with a 3% vacancy rate. The curve is now curved radically different. A three percent vacancy rate now produces an unemployment+permanent disability rate of 13%. Under Reagan, it produced an unemployment+permanent disability rate of 8%.

The theory you are supposing is that the economy radically changed in the blink of an eye. The reality is that a President changed in the blink of an eye. As soon as we get a better set of policies, the Beveridge curve will twist back around.

[Thane "Goldie" Eichenauer]

Redistribution is awful because it is a synonym for involuntary charity which not being voluntary is not charity at all. Unless an action is completely voluntary then redistribution will always and forever be a bad word as all people resent having their labor and property taken away from them by force.

[Bob Lord]

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Thucky, Ill try to respond to the concepts youve raised in a subsequent post. In the meantime, Ill say this: You seem to think its impressive and / or persuasive to cite the prizes won by those economists who share your view and refer to concepts like the Beveridge curve. It really isnt. Theres a reason why millions know who Paul Krugman is and relatively few know who Edward Prescott is, and it has nothing to with their views. Its that Krugman can explain his views and deconstruct the views of others in a way that those who are not immersed in the field can understand. That also explains why Clinton and Reagan were so successful. Do you think Reagan ever would have mentioned the Beveridge curve? So, when you did so, were you doing your best to persuade, or doing your best to show off?

Have you considered, carefully, whether Prescotts theory really provides an adequate explanation for the extreme inequality we are facing, a situation which, by the way, has been evolving since about 1980, when Reagan took office? Or have you been blinded by the gleam from Prescotts Nobel prize?