very high income

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pages: 221 words: 55,901

The Globalization of Inequality by François Bourguignon

Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, liberal capitalism, minimum wage unemployment, offshore financial centre, open economy, Pareto efficiency, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

The existence of substantial rents and the nature of the financial sector’s activities have made 13 For a review of the ties between the development of finance and income distribution, see Asli Demirguc-­Kunt and Robert Levine, “Finance and Inequality: Theory and Evidence,” Annual Review of Financial Economics 1 (2009): 287–318. The Forces behind R ising Inequality 97 possible the very high incomes of certain operators and executive officers, via the microeconomic mechanisms described earlier. And, in fact, the overrepresentation of the financial sector among very high incomes is remarkable. In the United States, 13% of very high incomes are connected to the financial sector, this number being 18% in France and the UK, even though this sector represents only 5% of total jobs.14 The rise in CEOs’ and top executives’ compensation is also linked to the development of the financial sector. The increasing “financialization” of economies has made them more sensitive to the annual performance of companies.

The number of people willing to pay any sum in order to catch a glimpse of these stars, and the vast amounts of money that companies will offer them to advertise their goods and thus reach out to their huge fan bases, are also significant sources of income. These superstars represent a significant segment of the very high income bracket. They have technological advances to thank for their superstar status, as these have allowed them to reach a truly global audience. Technical progress and globalization also explain the development of “winner-­take-­ all” dynamics.8 The same phenomena of scale explain the recent emergence of other “very high incomes.” In the financial sector, skilled financial operators are awarded bonuses at the end 8 Robert H. Frank, The Winner-­Take-­All Society: Why the Few at the Top Get So Much More Than the Rest of Us (New York: Penguin Books, 1995). 88 Chapter 3 of the year that are more or less proportional to the profits they generated for their company.

Overall, globalization has thus most likely played a role in increasing inequality in most countries over the recent decades, although its impact will have varied depending on the country considered and each one’s specific context or policies. Yet, there are still other forces that have played a part in modifying the distribution of income, which we turn to now. Technological Progress, Superstars, Bosses, and Very High Incomes The vertiginous development of communication and information science and technology has profoundly transformed the modes of production of goods and services, while creating an increased demand for workers who know how to use these new technologies. As with the increased specialization in capital-­and skill-­intensive goods brought about by globalization, this transformation has contrib- 86 Chapter 3 uted to a rise in the relative remuneration of skilled labor in developed countries.7 But the very facts of globalization and of the spontaneous international spread of innovations have meant that this same phenomenon has been at work in developing economies too and represents another possible explanation for rising inequalities in these countries.


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

"Robert Solow", accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, twin studies, very high income, Vilfredo Pareto, We are the 99%, zero-sum game

Again, this collapse was due solely to the decrease of very high incomes from capital (or, crudely put, the fall of the rentier). If we look only at wages, we find that the upper centile’s share remains almost totally stable over the long run at around 6 or 7 percent of total wages. On the eve of World War I, income inequality (as measured by the share of the upper centile) was nearly three times greater than wage inequality. Today it is a nearly a third higher and largely identical with wage inequality, to the point where one might imagine—incorrectly—that top incomes from capital have virtually disappeared (see Figure 8.2). To sum up: the reduction of inequality in France during the twentieth century is largely explained by the fall of the rentier and the collapse of very high incomes from capital. No generalized structural process of inequality compression (and particularly wage inequality compression) seems to have operated over the long run, contrary to the optimistic predictions of Kuznets’s theory.

Indeed, in the United States, as in France and Europe, today as in the past, income from capital always becomes more important as one climbs the rungs of the income hierarchy. Temporal and spatial differences are differences of degree: though large, the general principle remains. As Edward Wolff and Ajit Zacharias have pointed out, the upper centile always consists of several different social groups, some with very high incomes from capital and others with very high incomes from labor; the latter do not supplant the former.39 FIGURE 8.9. The composition of top incomes in the United States in 1929 Labor income becomes less and less important as one moves up within the top income decile. Sources and series: see piketty.pse.ens.fr/capital21c. In the US case, as in France but to an even greater degree, the difference today is that one has to climb much further up the income hierarchy before income from capital takes the upper hand.

If we break this down even further and looked at the top thousandth (the best paid 0.1 percent) in the top centile, we find individuals earning tens of thousands of euros a month and a few earning hundreds of thousands, even in the Scandinavian countries in the 1970s and 1980s. Of course there would not be many such people, so their weight in the sum total of all wages would be relatively small. Thus to judge the inequality of a society, it is not enough to observe that some individuals earn very high incomes. For example, to say that the “income scale goes from 1 to 10” or even “1 to 100” does not actually tell us very much. We also need to know how many people earn the incomes at each level. The share of income (or wealth) going to the top decile or centile is a useful index for judging how unequal a society is, because it reflects not just the existence of extremely high incomes or extremely large fortunes but also the number of individuals who enjoy such rewards.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

It was another proof that the assignment of Nobel Prizes is inevitably influenced by the prevailing intellectual winds. The “normative” role of the state – that government involvement in the economy is essentially one of correcting the market for “failures,” including, for some economists and politicians, the “failure” of generating excessively uneven income distributions, high unemployment, and very high incomes for some individuals – was replaced, in the mind of a growing number of economists (among whom the most prominent and influential had been Milton Friedman, George Stigler, Robert Lucas, F. Hayek, James Buchanan, Gary Becker, and a few other winners of the Nobel Prize in economics), by a view that advocated a limited governmental role. As we have seen earlier, it also gave a legitimate or almost ethical role to market outcomes, thus reducing the moral rationale for governmental intervention, as well as the rationale that had existed in the past for interpersonal, nonmoney exchanges based on traditional norms and community spirit.

In recent years some of the credit that was made easily and cheaply available to banks, governments, and some individuals, by novel policies of central banks, has been used by the managers of many enterprises to buy shares in their own companies, rather than to make real investments. These maneuvers contribute to raising the value of the shares and to reducing taxable profits, which, in turn, contribute to increasing the short run compensations of the managers, which are often linked to the short run values of the shares. This is one of many examples of how some of the very high incomes (those of the top 1 percent) have become increasingly disconnected from true, genuine market forces, and how compensation arrangements for managers have contributed to making markets more risky, by encouraging enterprises to follow short run maneuvers. In these maneuvers social objectives have often taken a backseat. After the onset of the financial crisis in 2007, when the value of many new houses that had been bought with cheap, short run credit fell sharply, the interest rates on the mortgages of many who had bought these houses went up (after some grace period that had been used to attract unwary or naïve borrowers had expired), and when some of the house buyers lost their jobs, many became unable to keep servicing the debt.

However, ignoring the moral aspect of envy in normal situations, it must be recognized that some circumstances can generate what could be considered normal or understandable negative, psychologically based externalities to which it would be difficult and not smart for a society not to pay attention. A negative externality is definitely created for many hard-working but poorly paid workers when they become aware that there are individuals with very high incomes and consumption who are claiming all the country’s growth in income. This happens in democratic societies that keep repeating the notion that all human beings are created equal and that there are no divine rights for some to have a privileged status. The argument that, in a market economy, high incomes are always merited is not likely to impress many of those who work hard but receive incomes barely sufficient, or often insufficient, to support a dignified lifestyle for themselves and their children.


pages: 446 words: 117,660

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future by Paul Krugman

affirmative action, Affordable Care Act / Obamacare, Andrei Shleifer, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, bitcoin, blockchain, Bonfire of the Vanities, business cycle, capital asset pricing model, carbon footprint, Carmen Reinhart, central bank independence, centre right, Climategate, cognitive dissonance, cryptocurrency, David Ricardo: comparative advantage, different worldview, Donald Trump, Edward Glaeser, employer provided health coverage, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, frictionless, frictionless market, fudge factor, full employment, Growth in a Time of Debt, hiring and firing, illegal immigration, income inequality, index fund, indoor plumbing, invisible hand, job automation, John Snow's cholera map, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, large denomination, liquidity trap, London Whale, market bubble, market clearing, market fundamentalism, means of production, New Urbanism, obamacare, oil shock, open borders, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price stability, quantitative easing, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, universal basic income, very high income, working-age population

Nonetheless, it has been apparent for some time that the story is incomplete, because it fails to give a full picture of gains among families with very high incomes. Census numbers are of little use in studying high-income families, for two reasons, one major, one minor. The main problem is the arcane technical issue of “top-coding.” The questionnaires on which the Current Population Survey is based do not ask for precise incomes; instead, families are asked to place their income within a series of categories, of which the highest is “over x,” currently $250,000. This means, of course, that the Census data give no information about changes in the fortunes of families with incomes high enough to be above that top number. The minor problem is that Census data do not count one important source of income for high-income families: capital gains. It is precisely because Census data are weak when it comes to very high incomes that those who use that data usually look no higher than the 95th percentile; that is, the bottom of the top 5 percent.

Early last year, Americans for Prosperity, a Koch brothers–backed group, ran a series of ads featuring alleged Obamacare victims—but not one of those tales of woe stood up to scrutiny. More recently, Representative Cathy McMorris Rodgers of Washington State took to Facebook to ask for Obamacare horror stories. What she got instead was a torrent of testimonials from people whose lives have been improved, and in some cases saved, by health reform. In reality, the only people hurt by health reform are Americans with very high incomes, who have seen their taxes go up, and a relatively small number of people who have seen their premiums rise because they’re young and healthy (so insurers previously saw them as good risks) and affluent (so they don’t qualify for subsidies). Neither group supplies suitable victims for attack ads. In short, when it comes to the facts, the attack on health reform has come up empty-handed. But the public doesn’t know that.

Some of the revelations are cultural: the hysteria over a video of AOC dancing in college says volumes, not about her, but about the hysterics. But in some ways the more important revelations are intellectual: the right’s denunciation of AOC’s “insane” policy ideas serves as a very good reminder of who is actually insane. The controversy of the moment involves AOC’s advocacy of a tax rate of 70–80 percent on very high incomes, which is obviously crazy, right? I mean, who thinks that makes sense? Only ignorant people like . . . um, Peter Diamond, Nobel laureate in economics and arguably the world’s leading expert on public finance. (Although Republicans blocked him from an appointment to the Federal Reserve Board with claims that he was unqualified. Really.) And it’s a policy nobody has ever implemented, aside from . . . the United States, for thirty-five years after World War II—including the most successful period of economic growth in our history.


pages: 877 words: 182,093

Wealth, Poverty and Politics by Thomas Sowell

affirmative action, Albert Einstein, British Empire, Capital in the Twenty-First Century by Thomas Piketty, colonial exploitation, colonial rule, correlation does not imply causation, Deng Xiaoping, desegregation, European colonialism, full employment, Gunnar Myrdal, income inequality, income per capita, invention of the sewing machine, invisible hand, low skilled workers, mass immigration, means of production, minimum wage unemployment, New Urbanism, profit motive, rent control, Scramble for Africa, Simon Kuznets, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, transatlantic slave trade, transcontinental railway, trickle-down economics, very high income, War on Poverty

Not only may capital gains that are turned into cash in a given year represent money earned over a number of previous years, but often a different number of years for different people, extending to decades for elderly people who retire and sell either a business or a home.a When the earnings of multiple years are treated as if they were earned in a single year, that statistically exaggerates the annual income of people who receive capital gains, making statistical comparisons of disparities between people with high and low incomes similarly exaggerated, when very high incomes are far more likely to be predominantly capital gains and low incomes far more likely to be salaries. Moreover, because the turnover of people in very high income brackets is even greater than the turnover of people in other income brackets, the illusion that we are comparing the same sets of flesh-and-blood human beings over time is even more false than with other comparisons of people in other brackets. The ease with which many people are labeled “rich” or “poor,” on the basis of their respective annual incomes, is usually not only conceptually flawed but usually also involves no concrete information on just how high are the incomes of those labeled “rich,” or how much the lower incomes of those labeled “poor” are supplemented by large transfers of in-kind benefits from the government, quite aside from the fact that income is not wealth in the first place.

While fewer than half of the people in the top one percent in 1996 were still there at the end of a decade, only about one-quarter of those in the top one-hundredth of one percent in 1996 were still there in 2005.19 While the average income of those initially in the top one percent fell by 26 percent during that decade, more than half of the people initially in the top one-hundredth of one percent had their average income cut in half or more during that same decade.20 The turnover is even faster among those taxpayers with the 400 highest incomes in the country— incomes far higher than among the top one percent as a whole. Fewer than one-fourth of the income tax filers with the top 400 incomes in 1992 were in that same bracket more than once during the years ending in 2000— and only 13 percent were in that extremely high bracket more than twice during those nine years.21 At very high income levels— whether the top one percent, one-hundredth of one percent or the top 400 incomes— that income is far more likely to come from investments than from salaries, and earnings from investments are far more volatile than salaries. Income from investments is not only more volatile than income from salaries, it also differs from salaries more fundamentally because capital gains received in a given year are not necessarily earned in that particular year.

Most comparisons of high incomes with low incomes proceed as if similar things are being compared, but that is clearly not so when the very highest incomes are disproportionately capital gains and the lowest are predominantly salaries. Comparing annual incomes from salaries with multi-year incomes from capital gains received in a given year is comparing apples and oranges. Higher turnover rates in very high income brackets add to the distortions that exaggerate income disparities. When the actual flesh-and-blood individuals whose multi-year accruals of wealth put them in the highest income bracket, in the year when these accruals are turned into cash, keep disappearing from year to year, and being replaced by new individuals with one-year spikes in capital gains incomes, the exaggeration is even more pronounced.


pages: 273 words: 78,850

The Millionaire Next Door: The Surprising Secrets of America's Wealthy by Thomas Stanley, William Danko

affirmative action, estate planning, financial independence, high net worth, index fund, money market fund, mortgage tax deduction, the market place, very high income, Yogi Berra

But if a highly skilled ball player makes $5 million a year, having $1 million in net worth is no big deal. According to our wealth equation, a $5 million earner who is thirty years of age should be worth $15 million or more. How many highly paid ball players have a level of wealth in this range? We believe only a tiny fraction. Why? Because most have a lavish lifestyle—and they can support such a lifestyle as long as they are earning a very high income. Technically, they may be millionaires (have a minimum net worth of $1 million or more), but they are typically low on the prodigious accumulator of wealth (PAW) scale. How many households in America earn $5 million in one year? Fewer than five thousand of the nearly 100 million households. That’s about one in twenty thousand. Most millionaires never earn one-tenth of $5 million in a year.

What type of experience does she have doling out her wealth? We are her government. We’re experts in redistributing wealth. We should decide where and how wealth is distributed. We are the pros. We have to start taxing wealth before all the millionaires transform themselves into nonmillionaires. Mr. Stern: What about all those famous people we read about in the newspaper? The ones who have very high incomes? Mr. Young: God bless them, Bob. They are our best customers. I love people who are big earners. Realized income is our salvation. I want you to study these types. But I also want you to find out how these other types can exist without realizing a lot of income. Some of them must live like monks. What’s wrong with these people? Why don’t they sell a few million dollars’ worth of stock and buy a mansion?

Some doctors figure that working hard translates into a large income and that, therefore, there is no need to design a household budget. Some ask why they should waste time planning a domestic budget and investments when there is so much income to be made. Many high-income-producing UAWs feel this way. PAWs tend to have just the opposite feelings. To them, money is a resource that should never be squandered. They know that planning, budgeting, and being frugal are essential parts of building wealth, even for very high-income producers. Even high-income producers must live below their means if they intend to become financially independent. And if you’re not financially independent, you will spend an increasing amount of your time and energy worrying about your socioeconomic future. PLANNING AND CONTROLLING Planning and controlling consumption are key factors underlying wealth accumulation. Thus, one should expect that PAWs like Dr.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

"Robert Solow", battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

Our point is that the tax system is an appropriate instrument for achieving a more equitable distribution of income, and a more equal and just society. It is also an important tool for raising revenue. To achieve these goals, high marginal income tax rates should be applied to very high incomes. Our proposed higher rates are clearly much higher than the present top rate of 45 per cent that kicks in at £150,000. We believe that this rate should be increased back up to 50 per cent, where it was when it was introduced by the Labour government in 2010. In addition, we propose adding the two additional rates (60 and 70 per cent, mentioned above) to very high income levels. These additional rates might seem unrealistic in view of the fact that there has been a huge political battle over whether the present top rate of 45 per cent should be abolished altogether. But, taking a longer view over the past seventy years, it is a top rate in the range of 40 to 50 per cent – not our suggested top rate of 70 per cent – that is anomalous.

Now that Thatcherism has been largely discredited for the harm it inflicted on the typical family, there is no reason why low rates on the rich should be regarded as the baseline for serious discussion of the appropriate tax rates. Indeed, we are simply suggesting moving closer to the tax rates that prevailed during the ‘Golden Age of Capitalism’, that early postwar period of widely shared economic prosperity. And now, as then, the higher rates would only apply to a relatively small number of very high-income individuals, who can easily afford to bear a heavier tax burden. In 1975, for instance, when the top rate was 83 per cent, it applied to incomes over £20,000 (about £190,000 in today’s pounds), substantially lower than the threshold to which we are suggesting a 60 per cent rate should be applied. We also note that our proposed higher rates are consistent with the recommendations of a committee of leading UK public finance scholars and tax practitioners who argued that ‘tax schedules should never be set so as to cause such marginal rates of tax to ‌exceed, say, 70 per cent’.14 It might seem curious to be arguing for a 70 per cent top rate when the government has recently contended that even the additional 50 per cent rate raised almost no revenue and for that reason the top rate was reduced to 45 per cent.


pages: 452 words: 150,785

Business Adventures: Twelve Classic Tales From the World of Wall Street by John Brooks

banking crisis, Bretton Woods, business climate, cuban missile crisis, Ford paid five dollars a day, Gunnar Myrdal, invention of the wheel, large denomination, lateral thinking, margin call, Marshall McLuhan, plutocrats, Plutocrats, short selling, special drawing rights, tulip mania, upwardly mobile, very high income

* For details on this product of the national creativity, see Chapter 3. 3 The Federal Income Tax I BEYOND A DOUBT, many prosperous and ostensibly intelligent Americans have in recent years done things that to a naïve observer might appear outlandish, if not actually lunatic. Men of inherited wealth, some of them given to the denunciation of government in all its forms and manifestations, have shown themselves to be passionately interested in the financing of state and municipal governments, and have contributed huge sums to this end. Weddings between persons with very high incomes and persons with not so high incomes have tended to take place most often near the end of December and least often during January. Some exceptionally successful people, especially in the arts, have been abruptly and urgently instructed by their financial advisers to do no more gainful work under any circumstances for the rest of the current calendar year, and have followed this advice, even though it sometimes came as early as May or June.

Particular subcategories of the rich and the well-paid can avail themselves of various other avenues of escape, including corporate pension plans, which, like stock options, contribute to the solution of the tax problems of executives; tax-free foundations set up ostensibly for charitable and educational purposes, of which over fifteen thousand help to ease the tax burdens of their benefactors, though the charitable and educational activities of some of them are more or less invisible; and personal holding companies, which, subject to rather strict regulations, enable persons with very high incomes from personal services like writing and acting to reduce their taxes by what amounts to incorporating themselves. Of the whole array of loopholes in the Code, however, probably the most widely loathed is the percentage depletion allowance on oil. As the word “depletion” is used in the Code, it refers to the progressive exhaustion of irreplaceable natural resources, but as used on oilmen’s tax returns, it proves to mean a miraculously glorified form of what is ordinarily called depreciation.

The low cost of high-income people’s charitable contributions, whether in the form of works of art or simply in the form of money and other property, is one of the oddest fruits of the Code. Of approximately five billion dollars claimed annually as deductible contributions on personal income-tax returns, by far the greater part is in the form of assets of one sort or another that have appreciated in value, and comes from persons with very high incomes. The reasons can be made clear by a simple example: A man with a top bracket of 20 per cent who gives away $1,000 in cash incurs a net cost of $800. A man with a top bracket of 60 per cent who gives away the same sum in cash incurs a net cost of $400. If, instead, this same high-bracket man gives $1,000 in the form of stock that he originally bought for $200, he incurs a net cost of only $200.


pages: 312 words: 91,835

Global Inequality: A New Approach for the Age of Globalization by Branko Milanovic

"Robert Solow", Asian financial crisis, assortative mating, Berlin Wall, bitcoin, Black Swan, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, centre right, colonial exploitation, colonial rule, David Ricardo: comparative advantage, deglobalization, demographic transition, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, Francis Fukuyama: the end of history, full employment, Gini coefficient, Gunnar Myrdal, income inequality, income per capita, invisible hand, labor-force participation, liberal capitalism, low skilled workers, Martin Wolf, means of production, mittelstand, moral hazard, Nash equilibrium, offshore financial centre, oil shock, open borders, Paul Samuelson, place-making, plutocrats, Plutocrats, post scarcity, post-industrial society, profit motive, purchasing power parity, Ralph Nader, Second Machine Age, seigniorage, Silicon Valley, Simon Kuznets, special economic zone, stakhanovite, trade route, transfer pricing, very high income, Vilfredo Pareto, Washington Consensus, women in the workforce

Thus, the crisis represented not a break in this trend, but rather the reverse: reinforcement of an already existing trend. Third, the rebalancing has a counterpart in the distribution of personal incomes worldwide in the sense that it changed the shape of the global income distribution from being strongly twin-peaked (having many people at very low incomes, then practically nobody in the middle, and finally more people at very high income levels) to being fuller in the middle, such that the global income distribution is now beginning to look like the distribution of a single country. We are, of course, still far from that point, but we are certainly closer to it in 2011 (or today) than we were in 1988. This trend, too, was merely reinforced during the crisis. FIGURE 1.3. Relative gain in real per capita income by global income level, 1988–2008 and 1988–2011 This graph shows relative (percentage) gain in real household per capita income (measured in 2011 international dollars) at different points of the global income distribution for two different time periods: 1988–2008 (replicating the graph in Figure 1.1, except that we now use 2011 instead of 2005 international dollars) and 1988–2011.

I argue that the outbreak of World War I and thus the reduction of inequality subsequent to that war are to be “endogenized” in the economic conditions predating the war, by which I mean that domestic inequalities played an important role in the run-up to the war. In making this argument I go back to an older, and in my opinion, most persuasive, interpretation of the outbreak of World War I. According to this interpretation the war was caused by imperialist competition, embedded in the domestic economic conditions of the time: very high income and wealth inequality, high savings of the upper classes, insufficient domestic aggregate demand, and the need of capitalists to find profitable uses for surplus savings outside their own country. In the early twentieth century, finding an external investment outlet for the surplus savings meant being in physical control of a place, and making such investment profitable required that other possible competitors be excluded even at the cost of a war.


pages: 352 words: 107,280

Good Times, Bad Times: The Welfare Myth of Them and Us by John Hills

Capital in the Twenty-First Century by Thomas Piketty, credit crunch, Donald Trump, falling living standards, full employment, Gini coefficient, income inequality, income per capita, longitudinal study, mortgage debt, pension reform, plutocrats, Plutocrats, precariat, quantitative easing, Right to Buy, unpaid internship, very high income, We are the 99%, working-age population, World Values Survey

• For earnings up to £290 per week, the couple would also have received small amounts – hardly visible here – of what was then Council Tax Benefit. Figure 4.9: Components of income for a couple with one child, 2010–11 Figure 4.10 shows, for the same kind of family, what that meant in total in terms of what is officially called their ‘effective marginal deduction rate’ – how much of any extra £1 of earnings did they lose? We are used to hearing the arguments about whether people on very high incomes should face Income Tax of 45 per cent or 50 per cent on their top slices of income, but the rates shown in the figure are far higher for those with low earnings. In fact, the rate was 75 per cent or more for all of the earnings range shown, up to nearly £560 per week, that is, around median earnings. Those on very low earnings were facing rates of over 95 per cent. Where calculated entitlements dropped below a minimum amount, the loss on one extra pound of income – which is what this DWP chart shows – can be quite high, accounting for the spikes in marginal deductions where this happens for Housing Benefit, around £560 in this case, for instance.

These suggest that for most households, the effect of the cuts identified by the Treasury was equivalent to about 0.6 per cent of income using this wider concept. However, for the poorest fifth the loss was nearly three times this, 1.4 per cent. For the other groups, the loss was just below the overall average. The top group is shown as having had the largest average percentage loss from changes in taxes and cash benefits, but that is partly the product of averaging out the losses for the small very high-income group right at the top across the whole of the top fifth, most of whom did much less badly. Within all of these changes women might be expected to have done worse than men – given that the changes in taxes and benefits most severely affect families with children (and single-parent families in particular) and that cuts to public services have larger effects on families and on older pensioners using social care.


pages: 457 words: 125,329

Value of Everything: An Antidote to Chaos The by Mariana Mazzucato

"Robert Solow", activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, bank run, banks create money, Basel III, Berlin Wall, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, business cycle, butterfly effect, buy and hold, Buy land – they’re not making it any more, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, cleantech, Corn Laws, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, debt deflation, European colonialism, fear of failure, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, full employment, G4S, George Akerlof, Google Hangouts, Growth in a Time of Debt, high net worth, Hyman Minsky, income inequality, index fund, informal economy, interest rate derivative, Internet of things, invisible hand, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, laissez-faire capitalism, light touch regulation, liquidity trap, London Interbank Offered Rate, margin call, Mark Zuckerberg, market bubble, means of production, money market fund, negative equity, Network effects, new economy, Northern Rock, obamacare, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, peer-to-peer lending, Peter Thiel, profit maximization, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, rent control, rent-seeking, Sand Hill Road, shareholder value, sharing economy, short selling, Silicon Valley, Simon Kuznets, smart meter, Social Responsibility of Business Is to Increase Its Profits, software patent, stem cell, Steve Jobs, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, transaction costs, two-sided market, very high income, Vilfredo Pareto, wealth creators, Works Progress Administration, zero-sum game

Second, in almost every OECD country wage shares have declined by several percentage points in favour of rising profit shares, even when real employee compensation has gone up.44 As Figure 9 below shows, this was the result of average productivity growth rising faster than average or median real-wage growth in many countries, especially in the US. Third, personal distribution of income and wealth has become more and more unequal. In both the US and the UK, and in many other OECD countries, those with the highest incomes have enjoyed an increasing share of total national income ever since the 1970s, as can been seen in Figure 10. Furthermore, income distribution is extremely skewed towards very high incomes, not just the top 10 per cent and 1 per cent, but especially the top 0.1 per cent.45 Wealth distribution reveals a similar pattern. A 2017 Oxfam report, An Economy for the 99%, found that in 2016 eight men own the same wealth as the poorest half of the world's population. In a report published a year earlier, An Economy for the 1%, Oxfam calculated that the club of the wealthiest 1 per cent of individuals globally shrank from 388 members in 2010 to just sixty-two in 2015; in other words, the very richest were getting even richer relative to others who were also by any sensible standard very rich.

As we have seen, in a capitalist economy some rent is necessary: there is an unavoidable price tag to maintaining the circulation of capital in the economic system. But the scale of the financial sector and of financialization generally has increased value extraction to the point where two critical questions must be answered: where is value created, extracted and even destroyed? And how can we steer the economy away from excessive financialization towards true value creation? Proposals such as taxing away very high incomes and accumulations of wealth may treat some of the symptoms of excessive finance. They do not, however, treat the causes, which lie deep in a system of value extraction which has grown up over the last forty years or so. If the objective is long-term growth, the private sector must be rewarded for making decisions that target the long-term over the short-term. While some companies might be focusing on boosting their stock prices through share buy-backs, aimed at increasing stock prices and hence stock options (through which executives are paid), others may be taking on the difficult investments to increase the training needed for workers, introduce risky new technology, and investment in R&D, eventually leading, with luck, to new technology and more likely leading to nowhere.


The Limits of the Market: The Pendulum Between Government and Market by Paul de Grauwe, Anna Asbury

"Robert Solow", banking crisis, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, conceptual framework, crony capitalism, Erik Brynjolfsson, eurozone crisis, Honoré de Balzac, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kitchen Debate, means of production, moral hazard, Paul Samuelson, price discrimination, price mechanism, profit motive, Robert Gordon, Ronald Coase, Simon Kuznets, The Nature of the Firm, The Rise and Fall of American Growth, too big to fail, transaction costs, trickle-down economics, ultimatum game, very high income

A Reformist Scenario There is, however, the possibility of an alternative, less invasive scenario. In this reformist scenario forces arise in society which put a brake on the rush of capitalism towards its limits. Let us first talk about income inequality. In this scenario great pressure is placed on governments to raise taxes on the top incomes and wealth. The fundamental pressure to achieve a more fair distribution forces governments to raise taxes on very high incomes and wealth, making inequality less extreme and more acceptable to society once again. This is in fact the scenario which occurred from the s in those parts of the world which did not convert to communism. Tax rates of ninety per cent and above on top incomes were the rule at the time in countries such as the UK and the US. In many European countries, too, incomes above a certain level were largely siphoned off.


pages: 165 words: 45,129

The Economics of Inequality by Thomas Piketty, Arthur Goldhammer

"Robert Solow", affirmative action, basic income, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, conceptual framework, deindustrialization, endogenous growth, Gini coefficient, income inequality, low skilled workers, means of production, moral hazard, Pareto efficiency, purchasing power parity, Simon Kuznets, The Bell Curve by Richard Herrnstein and Charles Murray, very high income, working-age population

QJE 111 (2): 605–637. Erickson, C. and A. Ichino. 1995. “Wage differentials in Italy.” In R. Freeman and L. Katz, eds., Differences and Changes in Wage Structure, pp. 265–306. Chicago: University of Chicago Press. Erikson, R. and J. Goldthorpe. 1992. The Constant Flux: A Study of Class Mobility in Industrial Societies. Oxford: Clarendon Press. Feenberg, D. and J. Poterba. 2000. “The income and tax share of very high income households.” AER 90 (2): 264–270. Feldstein, M. 1995. “The effect of marginal tax rates on taxable income: A panel study of the 1986 Tax Reform Act.” JPE 103 (3): 551–572. Fleurbaey, M. 1996. Théories économiques de la justice. Paris: Economica. Freeman, R. 1973. “Changes in the labor market status of Black Americans, 1948–1972.” Brookings Papers on Economic Activity, no. 1, pp. 67–120. ______ 1995.


pages: 162 words: 51,473

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

"Robert Solow", Bonfire of the Vanities, Bretton Woods, business cycle, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, Kenneth Arrow, knowledge economy, life extension, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, plutocrats, Plutocrats, price stability, rent control, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

The important contribution of Wolff’s book is that it reinforces the evidence that much of the important action in American inequality has taken place way up the scale, among the extremely well-off. Wolff focuses on wealth rather than income—on assets rather than cash flow. This has some advantages over annual income as an indicator of a family’s economic position, especially among the rich. Someone with a very high income may be having an unusually good year, while it is not unheard of for wealthy families to have negative income if they make a bad investment; in each case their assets will be a better clue to where they really fit in the rankings. More important, however, wealth is in some ways a better indicator than income data of what is happening to the very successful—simply because it is so narrowly held: In 1989, the top 1 percent of families owned 39 percent of the wealth but received only (a still impressive) 16 percent of the income.


pages: 470 words: 148,730

Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee, Esther Duflo

"Robert Solow", 3D printing, affirmative action, Affordable Care Act / Obamacare, Airbnb, basic income, Bernie Sanders, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, charter city, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, endowment effect, energy transition, Erik Brynjolfsson, experimental economics, experimental subject, facts on the ground, fear of failure, financial innovation, George Akerlof, high net worth, immigration reform, income inequality, Indoor air pollution, industrial cluster, industrial robot, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Jean Tirole, Jeff Bezos, job automation, Joseph Schumpeter, labor-force participation, land reform, loss aversion, low skilled workers, manufacturing employment, Mark Zuckerberg, mass immigration, Network effects, new economy, New Urbanism, non-tariff barriers, obamacare, offshore financial centre, open economy, Paul Samuelson, place-making, price stability, profit maximization, purchasing power parity, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Robert Gordon, Ronald Reagan, school choice, Second Machine Age, secular stagnation, self-driving car, shareholder value, short selling, Silicon Valley, smart meter, social graph, spinning jenny, Steve Jobs, technology bubble, The Chicago School, The Future of Employment, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, trickle-down economics, universal basic income, urban sprawl, very high income, War on Poverty, women in the workforce, working-age population, Y2K

For example, the CEO could prioritize growing the firm, being popular with the workers, or pursuing some new product because it is good for the world, even if it is not the best for share value. The shareholders may tolerate this to keep their CEO happy. It might even be part of the reason why workers’ salaries were rising when top tax rates were high. So the point of the very high top tax rates of the 1950s and 1960s, which applied only to extremely high incomes, was not so much to “soak the rich” as to eliminate them. Almost nobody ended up paying the top rates, because those very high incomes had all but disappeared.58 When the top tax rates went down to 30 percent, ultra-high salaries became attractive again. In other words, high top tax rates may actually lead to a reduction not just in inequality after taxes, but also in inequality before taxes. This is important because, as already discussed, a large part of the reason for the divergence in inequality between Europe and the United States in recent decades comes from pre-tax inequality.

A silver lining of the 2008 crisis is that it reduced the appeal of the financial sector for the brightest minds; a study of career choices of MIT graduates found those who graduated in 2009 were 45 percent less likely to choose finance than those who graduated between 2006 and 2008.63 This may lead to a better allocation of talent, and to the extent finance’s salary levels infect every other sector, it could further reduce income inequality. All in all, therefore, it seems to us that high marginal income tax rates, applied only to very high incomes, are a perfectly sensible way to limit the explosion of top income inequality. They would not be extortionary, since very few people will end up paying them; top managers will simply not get these kinds of income anymore. And from all we see, they won’t discourage anybody to work as hard as they can. To the extent they affect people’s choice of career, it will likely be in a positive direction.


pages: 219 words: 65,532

The Numbers Game: The Commonsense Guide to Understanding Numbers in the News,in Politics, and inLife by Michael Blastland, Andrew Dilnot

Atul Gawande, business climate, correlation does not imply causation, credit crunch, happiness index / gross national happiness, Intergovernmental Panel on Climate Change (IPCC), moral panic, pension reform, pensions crisis, randomized controlled trial, school choice, very high income

It might surprise us to find that a teacher and a firefighter living together are relatively rich, but only if we do not know how they compare with everyone else, don’t know where they are in the distribution, and have ignored the colors of the income rainbow. The next chart shows the distribution of income in the UK for childless couples—two people living together, their incomes combined. Half have net incomes (after tax and benefits) of less than £18,800 (about $38,000) (marked as the median), but the average for the group is around £23,000 (about $46,000), pulled up by the relatively small numbers of very high incomes. That is, most are at least 18 percent below average. The highest incomes are far too high to fit on the chart, which would need to stretch yards to the right of the edge of the page to accommodate them. The most common income is around £14,000 (about $28,000), roughly 40 percent below average. More people in this category have incomes at this level than any other. It was intriguing to tell these numbers to colleagues in the BBC, on what for them was a modest income of about £50,000 ($100,000) a year, and watch their jaws hit the floor.


pages: 251 words: 69,245

The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality by Branko Milanovic

Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, plutocrats, Plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

Consider the starting point of the heroine in both novels: She lives in a very rich, comfortable, and respectable household. In one case, she is married, in the other single. But then in both cases, the next step, love or marriage, is to take her to a much higher level of wealth. Mr. Karenin’s income is not mentioned anywhere in the book. However, from his conversation with Anna’s brother, Stepan Oblonsky, we find out that he considers 10,000 rubles a very high income, an income, as we find elsewhere in the book, earned by bank directors.2 We also know that a high government salary amounts to 3,000 rubles and that Stepan Oblonsky, also in the employ of the government, but at a lower level than Mr. Karenin, is making 6,000 rubles.3 So we can surmise, given Mr. Karenin’s very prominent governmental position, that his income is along the order of 8,000-9,000 rubles per year.


pages: 305 words: 69,216

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

Andrei Shleifer, banking crisis, Bernie Madoff, business cycle, collateralized debt obligation, collective bargaining, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, market bubble, money market fund, moral hazard, mortgage debt, Myron Scholes, oil shock, Ponzi scheme, price stability, profit maximization, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, savings glut, shareholder value, short selling, statistical model, too big to fail, transaction costs, very high income

An alternative that is receiving increasing attention, probably rightly so, is "claw back": part of the employee's bonus is placed in an account, and if he has a bad year the account is reduced. This is an effective method of fitting pay to performance if the employee is solely or primarily responsible for specific transactions involving measurable profits or losses. Consideration should perhaps be given to increasing the marginal income tax rate of persons who have very high incomes, in order to reduce their appetite for risk-taking. Such incomes typically contain a good deal of economic rent. Think of the boxing champion who makes millions but whose next best job would be as a bouncer in a strip joint, paid the minimum wage. Taxing economic rents is efficient because it has, by definition (and in my example), minimal substitution effects. It will not deflect the taxpayer to a different occupation just because it taxes the income available to him only in his present one.


pages: 262 words: 66,800

Progress: Ten Reasons to Look Forward to the Future by Johan Norberg

agricultural Revolution, anti-communist, availability heuristic, Bartolomé de las Casas, Berlin Wall, British Empire, business climate, clean water, continuation of politics by other means, Daniel Kahneman / Amos Tversky, demographic transition, desegregation, Donald Trump, Flynn Effect, germ theory of disease, Gini coefficient, Gunnar Myrdal, Haber-Bosch Process, Hans Island, Hans Rosling, Ignaz Semmelweis: hand washing, income inequality, income per capita, indoor plumbing, Isaac Newton, Jane Jacobs, John Snow's cholera map, Kibera, Louis Pasteur, Mahatma Gandhi, meta analysis, meta-analysis, Mikhail Gorbachev, more computing power than Apollo, moveable type in China, Naomi Klein, Nelson Mandela, open economy, place-making, Rosa Parks, sexual politics, special economic zone, Steven Pinker, telerobotics, The Wealth of Nations by Adam Smith, transatlantic slave trade, very high income, working poor, Xiaogang Anhui farmers, zero-sum game

A recent review of 878 observations from 103 empirical studies between 1992 and 2009 concluded that there are several such income turning points: ‘Results indicate the presence of an EKC-type relationship for landscape degradation, water pollution, agricultural wastes, municipal-related wastes and several air pollution measures.’25 This gives us hope for many poor countries that are rapidly approaching such incomes. However, there is one important exception: the emissions of carbon dioxide from fossil fuels, which does not begin to decline until very high income levels are attained. This is worrying, since more CO2 and other so-called greenhouse gases in the atmosphere make the global climate warmer and more unstable than would otherwise be the case. What this will result in is hotly debated. There is a broad spectrum of possible outcomes, from minor and even beneficial changes all the way to global disaster, and a lot of it depends on how much temperatures will rise.


pages: 317 words: 71,776

Inequality and the 1% by Danny Dorling

Affordable Care Act / Obamacare, banking crisis, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, Branko Milanovic, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, centre right, collective bargaining, conceptual framework, corporate governance, credit crunch, David Attenborough, David Graeber, delayed gratification, Dominic Cummings, double helix, Downton Abbey, en.wikipedia.org, Etonian, family office, financial deregulation, full employment, Gini coefficient, high net worth, housing crisis, income inequality, land value tax, longitudinal study, low skilled workers, lump of labour, mega-rich, Monkeys Reject Unequal Pay, Mont Pelerin Society, mortgage debt, negative equity, Neil Kinnock, Occupy movement, offshore financial centre, plutocrats, Plutocrats, precariat, quantitative easing, race to the bottom, Robert Shiller, Robert Shiller, TaskRabbit, The Spirit Level, The Wealth of Nations by Adam Smith, trickle-down economics, unpaid internship, very high income, We are the 99%, wealth creators, working poor

Big money has all but engulfed Washington and many state capitals – drowning out the voices of average Americans, filling the campaign chests of candidates who will do their bidding…[The reason] conservative Republicans would rather talk about poverty than about inequality is because they can then characterise the poor as ‘them’ – people who are different from most of us, who have brought their problems on themselves, who lack self-discipline or adequate motivation. Accordingly, in their view, any attempt to alleviate poverty requires that ‘they’ change their ways. Robert B. Reich, former US Labour Secretary, 201464 The alternative to putting the young into debt is to tax the rich. In late 2013 the International Monetary Fund (IMF) cast doubt on the UK government’s claim that taxing the rich at only 45 per cent on their very high incomes raised more tax than would a higher tax rate, for the dubious reason that the rich apparently then hide less of their money. The IMF concluded that a better top rate of tax would be 60 per cent, and that this would raise an extra £4 billion a year just from the 1 per cent.65 The rich have become richer by cutting the tax rates that apply to them (see Figure 5.7), and directly and indirectly increasing taxation on others – including the new student loan regime.66 Only the very rich appear to benefit from such policies.


pages: 232 words: 70,361

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

These solely profit-driven individuals will innovate more boldly—faster and faster, making it harder and harder for regulators to catch up, or for people to learn about their fraud before falling for a new one. If low top tax rates encourage innovation, they must galvanize rent extraction. Among the many policies that can curb the power of established wealth and contain rent-seeking, the quasi-confiscatory taxation of very high incomes historically has proved effective. But it faces a major limitation: as we’ve seen, it’s become too easy for the very rich to own a lot of wealth while reporting little taxable income. Reinstating a 90% top marginal income tax rate would not make a meaningful difference to the tax bills of many of America’s billionaires. Overcoming this limitation requires taxing top wealth itself at high rates.


pages: 272 words: 71,487

Getting Better: Why Global Development Is Succeeding--And How We Can Improve the World Even More by Charles Kenny

"Robert Solow", agricultural Revolution, Berlin Wall, British Empire, Charles Lindbergh, clean water, demographic transition, double entry bookkeeping, experimental subject, Fall of the Berlin Wall, germ theory of disease, Gunnar Myrdal, income inequality, income per capita, Indoor air pollution, inventory management, Kickstarter, Milgram experiment, off grid, open borders, purchasing power parity, randomized controlled trial, structural adjustment programs, The Wealth of Nations by Adam Smith, total factor productivity, Toyota Production System, trade liberalization, transaction costs, very high income, Washington Consensus, X Prize

This is not to say all technology has been an unalloyed good—look at the AK-47–wielding child soldier of the Lord’s Resistance Army in Uganda and that much is clear. And technology has created urgent problems for the planet—climate change, the risk of outright planetary annihilation through global thermonuclear war. Nonetheless, it has also brought immense benefits for people rich and poor in countries North and South. That technology has made quality of life ever cheaper means that very high incomes—and their associated environmental costs—are less and less a necessary element of the good life. Africa’s not-inconsiderable progress also gives the lie to notions that the region is suited for nothing but recolonization. Around the world and across the ideological spectrum there is a great deal of confidence that we “know” the cause of what ails Africa (even though Right and Left disagree on what it is we know).


pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

asset-backed security, bank run, banking crisis, Bernie Madoff, bonus culture, Bretton Woods, business cycle, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, disintermediation, diversification, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, George Santayana, global reserve currency, Home mortgage interest deduction, Isaac Newton, joint-stock company, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, margin call, market clearing, mass immigration, money market fund, moral hazard, mortgage tax deduction, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, plutocrats, Plutocrats, Ponzi scheme, profit maximization, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, The Great Moderation, the new new thing, the payments system, too big to fail, value at risk, very high income, War on Poverty, Y2K, yield curve

Try not paying your income taxes to see how effective resistance to the engine of confiscation really is. Until the Sixteenth Amendment was passed in 1913, the Constitution effectively limited Congress’s ability to impose a national tax on income. In fact, until about a century ago, taxation was almost entirely limited to consumption taxes and customs revenues. Governments everywhere only presumed to tax people’s income in time of war and then only people with very high incomes and for limited periods of time. THE GREAT TEMPTATION Now it is common for people in places like New York to work half the year and more just to pay taxes. The sovereign moral excuse for this forced taking of people’s labor and human capital is a notion of fairness that ignores the skill, effort, and sacrifice required to create wealth. Wealth is just assumed to exist and the government has not only the right but the duty to redistribute it as it sees fit.


pages: 237 words: 72,716

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

Branko Milanovic, business cycle, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

I think on a globally competitive basis it should probably be around 25%, and my guess is that receipts from corporate taxation would actually go up. I think that capital equipment and software should be expensed on day one, again not buildings because building can appreciate in value, but equipment that is wearing out from the minute you put it into service. If you want to deal with the issue of very high incomes, then just graduate the income tax rate up. I think what you would find is that people will have much more propensity to invest. By the way, I think that capital gains is a big part of this. You can’t go back on capital gains. If people aren’t going to take their income in these huge compensation packages, you’ve got to Part 2: Interviews 111 give them some incentive to put their capital to work.


pages: 322 words: 84,580

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

"Robert Solow", Airbnb, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, centre right, collective bargaining, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, future of work, gig economy, Gini coefficient, hiring and firing, income inequality, income per capita, industrial robot, intangible asset, job automation, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Martin Wolf, meta analysis, meta-analysis, mini-job, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, social intelligence, TaskRabbit, total factor productivity, universal basic income, very high income, winner-take-all economy, working poor

Indeed, this chapter and later ones explain how the “low base of the trunk” should be attributed to labour-saving technological change and misguided domestic policies, even if the “high back,” or the strong income growth of the emerging poor-country middle class, clearly is related to those countries’ inclusion in global manufacturing supply chains. The empirical criticisms are also weaker than they may seem at first glance. Adjusting the comparison of income groups over time to be more “like-for-like” and looking more closely at which countries contribute most to the characteristic shape end up buttressing the original interpretation of the data: that the global middle and the very richest enjoyed very high income growth while those in the lower part of rich-country income distributions suffered relative stagnation. See Martin Sandbu, “The Charting of Inequality Deserves Greater Scrutiny,” Financial Times, 13 September 2016, https://www.ft.com/content/9d6f9c3c-799a-11e6-a0c6-39e2633162d5; and Martin Sandbu, “Shooting an Elephant,” Financial Times, 14 September 2019, https://www.ft.com/content/6465d860-79c3-11e6-97ae-647294649b28. 4.


pages: 309 words: 91,581

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

assortative mating, autonomous vehicles, blue-collar work, Bonfire of the Vanities, Branko Milanovic, business cycle, call centre, collective bargaining, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, easy for humans, difficult for computers, Erik Brynjolfsson, Everybody Ought to Be Rich, feminist movement, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, Gunnar Myrdal, income inequality, industrial robot, invisible hand, job automation, Joseph Schumpeter, longitudinal study, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, Paul Samuelson, performance metric, positional goods, post-industrial society, postindustrial economy, purchasing power parity, refrigerator car, rent control, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, Vilfredo Pareto, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

George Bailey: Comes in pretty handy down here, bub. —Frank Capra’s It’s a Wonderful Life (1946) THE DECLARATION OF INDEPENDENCE says that all men are created equal, but we know that isn’t true. George Clooney was created better-looking than me. Stephen Hawking was born smarter, Evander Holyfield stronger, Jon Stewart funnier, and Warren Buffett savvier at playing the market. All these people have parlayed their exceptional gifts into very high incomes—much higher than mine. Is that so odd? Odder would be if Buffett or Clooney were forced to live on my income, adequate though it might be to a petit bourgeois journalist. Lest you conclude my equanimity is some sort of affectation, Barbara Ehrenreich, in her 2001 book Nickel and Dimed, quotes a woman named Colleen, a single mother of two, saying much the same thing about the wealthy families whose floors she scrubs on hands and knees.


pages: 297 words: 89,206

Social Class in the 21st Century by Mike Savage

call centre, Capital in the Twenty-First Century by Thomas Piketty, Clapham omnibus, Corn Laws, deindustrialization, deskilling, Downton Abbey, financial independence, gender pay gap, Gini coefficient, income inequality, liberal capitalism, Mark Zuckerberg, megacity, moral panic, New Urbanism, Occupy movement, old-boy network, precariat, psychological pricing, Sloane Ranger, The Spirit Level, unpaid internship, upwardly mobile, very high income, winner-take-all economy, young professional

But it also has distinctive social and cultural characteristics. The strange GBCS sample skew The imprint of this ordinary wealth elite takes strange and surprising forms. We can return to reflect on the strange GBCS sample skew which we first discussed in the Introduction. There is a fascinating and hugely revealing finding here. The more that people belonged to some kind of ‘elite’ category, in any of the dimensions we might measure – e.g. earning very high incomes, attending elite universities, living in the most wealthy areas – the more likely they were to do the GBCS. Furthermore, this is not an incremental addition, but an exponential one. The most elite were much more likely to do the GBCS compared to those who were simply moderately wealthy. For instance, graduates from Oxbridge were twice as likely to do the GBCS as graduates from any other university.10 CEOs were twice as likely to do the GBCS compared to any other professional or managerial group (though we can also see another striking spike among journalists and some cultural professions).


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

"Robert Solow", 3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, BRICs, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, creative destruction, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, disruptive innovation, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, intangible asset, interchangeable parts, Internet of things, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, Marc Andreessen, mass immigration, means of production, new economy, performance metric, pets.com, post-work, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Spirit Level, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, uber lyft, very high income, working-age population

Prior to the 2000s, global income followed a bimodal, or two-peaked, distribution, with lots of people in the rich world clumped together around high incomes and lots (and lots) of people in the developing world clumped together around low incomes. Now there is something like a global middle class, and a graph of the global income distribution is just one big hump, with many people earning moderate incomes while a small share of the global population earns very high incomes. THE DIGITAL DIVERGENCE The great emerging-market boom is now over. In 2015, emerging markets grew at their slowest pace since 2001 (excepting the global-recession year of 2009). The pace of catch-up with American income levels, in terms of GDP per person, has slowed to practically nothing. The proximate cause is the inevitable slowing of the Chinese economy. China’s boom peaked in 2007, when the economy notched up an extraordinary GDP growth rate of more than 14 per cent.


words: 49,604

The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

"Robert Solow", barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, business cycle, clean water, computer age, Corn Laws, creative destruction, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, George Santayana, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invention of the sewing machine, invisible hand, Jane Jacobs, Joseph Schumpeter, Kickstarter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, mass immigration, McJob, microcredit, moral panic, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

And all those failed candidates would contribute more to the economy if they had decided to be teachers in the first place rather than competing to get a job on Wall Street. The analogy is false, of course. Land is in fixed supply; the supply of M&A jobs — or demand for lawyers — is growing. The fact that not all of them become stars does not imply that there is an inefficiently large number of lawyers. If there were, pay for lawyers at the bottom of the heap would decline. Fear of Flexibility 117 The book’s conclusion — that very high incomes should be very heavily taxed — plays well in some political circles. It would be an interesting proposition to put to the voters — should incomes over, say £100,000 a year, be taxed at 75 per cent or some equally punitive rate? Governments that tried it would probably find many of their superstars emigrating, as pop stars have long done. The US Labor Secretary Robert Reich, in his influential book The Work of Nations, noted the development of an internationally mobile elite class of highly paid professionals.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, business cycle, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

They use a macroeconomic model to compare their investment package to ‘business as usual’: they find that not only would it increase European growth rates and employment, it would also reduce public deficits more rapidly. The chapters by Joseph Stiglitz and Colin Crouch look at two of the major gaps between orthodox economic theory and the reality of modern capitalism. Stiglitz addresses the growth of inequality over the past thirty years. He takes on the neoclassical view that wages and salaries reflect the marginal productivity of workers, showing that the very high incomes of corporate executives in fact reveal a form of ‘rent-seeking’, in which rewards are extracted without relation to productivity or economic desert. Moreover he points out—again contrary to the orthodox view—that such inequality is not the price that has to be paid for greater economic prosperity, but actually retards growth. Stiglitz offers a range of policy measures which would reverse recent trends, including changes to executive compensation schemes, macroeconomic policies to reduce unemployment, greater investment in education and the reform of capital taxation.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

This has been driven by industrial concentration and extremely lax to nonexistent antitrust enforcement. This has enormous impacts on the ability of new companies to start and compete, the ability of workers to get higher wages, and the ability for consumers to access goods cheaply. Figure 10.9 Markups in Advanced Economies Have Been Rising since the 1980s SOURCE: International Monetary Fund. Given Piketty's diagnosis is incorrect, his solutions of very high income taxes and a wealth tax are also not the appropriate responses. It is like recommending opiates to a cancer patient. It may numb the pain, but it does not attack the cause of the distress. The appropriate solutions are not higher taxes or the growth in government. The appropriate solution is more competition and more capitalism, not less. Economic inequality is a bug that can be fixed with antitrust and with greater competition.


pages: 289

Hustle and Gig: Struggling and Surviving in the Sharing Economy by Alexandrea J. Ravenelle

"side hustle", active transport: walking or cycling, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, barriers to entry, basic income, Broken windows theory, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, Clayton Christensen, clean water, collaborative consumption, collective bargaining, creative destruction, crowdsourcing, disruptive innovation, Downton Abbey, East Village, Erik Brynjolfsson, full employment, future of work, gig economy, Howard Zinn, income inequality, informal economy, job automation, low skilled workers, Lyft, minimum wage unemployment, Mitch Kapor, Network effects, new economy, New Urbanism, obamacare, Panopticon Jeremy Bentham, passive income, peer-to-peer, peer-to-peer model, performance metric, precariat, rent control, ride hailing / ride sharing, Ronald Reagan, sharing economy, Silicon Valley, strikebreaker, TaskRabbit, telemarketer, the payments system, Tim Cook: Apple, transaction costs, Travis Kalanick, Triangle Shirtwaist Factory, Uber and Lyft, Uber for X, uber lyft, ubercab, universal basic income, Upton Sinclair, urban planning, very high income, white flight, working poor, Zipcar

I have to be kind of confidential anyway. They probably think I’m going to be confidential because I’m cooking for them or something. I guess it provides them anonymity to a degree. It’s great. It’s great.” As much as Randall stressed that these experiences are “great” or that he didn’t care, the fact that they came up so readily in our conversation suggests that perhaps a part of him did care. In the United States, very-high-income employers tend to utilize “an American version of the ‘upstairs, downstairs’ segregation of master and servant” that involves a level of distance.24 Yet Randall is a professional, not a servant, and his sense of uncertainty about the rules of secrecy and familiarity came up when he discussed how the clients “probably think” their behavior warranted confidentiality owing to the cooking relationship.


pages: 267 words: 79,905

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

barriers to entry, ending welfare as we know it, financial independence, full employment, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, longitudinal study, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, spread of share-ownership, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

As a first step, the NATSIS indicators of poverty and correlates of poverty are calculated for households ranked by the overall distribution of equivalent income using the Income Distribution Survey. Despite the relatively small number of indigenous households and families in the top quintile of Australian incomes, the broad results indicated above remain unchanged. That is, over one-quarter of very high-income indigenous households and families have members with long-term health problems and about 10 per cent of members have been arrested. BENCHMARKING INDIGENOUS ARREST RATES AND CHRONIC HEALTH PROBLEMS AGAINST THE WIDER COMMUNITY The NATSIS is an extraordinarily rich survey of the multidimensional nature of indigenous poverty. The lack of readily available comparable data on non-indigenous Australians makes it difficult to identify the analogous outcomes in the rest of the Australian community.


pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

"Robert Solow", 3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, assortative mating, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, commoditize, computer age, creative destruction, debt deflation, deskilling, disruptive innovation, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, Gunnar Myrdal, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kenneth Arrow, Khan Academy, knowledge worker, labor-force participation, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, Marc Andreessen, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, Paul Samuelson, performance metric, Peter Thiel, plutocrats, Plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Rodney Brooks, Sam Peltzman, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, The Future of Employment, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, uber lyft, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

One of the implications of increasing inequality is that ever more taxable income is rising to the very top. Our taxation scheme should be restructured to mirror the income distribution. Rather than simply raising taxes across the board or on the highest existing tax bracket, a better strategy would be to introduce several new higher tax brackets designed to capture more revenue from those taxpayers with very high incomes—perhaps a million or more dollars per year. Everyone a Capitalist While I believe that some form of guaranteed income is probably the best overall solution to the rise of automation technology, there are certainly other viable ideas. One of the most common proposals is to focus on wealth, rather than income. In a future world where nearly all the income is captured by capital, and human labor is worth very little, why not simply make sure that everyone owns enough capital to be economically secure?


pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

"Robert Solow", Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, creative destruction, declining real wages, Downton Abbey, end world poverty, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty

However, the most successful group, both in the market and in politics, is the group at the very top of the income and earnings distribution, and it is to them that I turn next. Top Incomes in the United States The study of income inequality was transformed by a 2003 study by two economists, Thomas Piketty, now of the Paris School of Economics, and Emmanuel Saez of the University of California at Berkeley.24 It had long been known that the data on incomes from household surveys were not very useful for looking at very high incomes; there are too few such people to show up regularly in nationally representative surveys. (Even if approached at random, they might also be less likely to answer.) Piketty and Saez greatly extended a method that had been originally used in 1953 by Nobel laureate economist Simon Kuznets, who worked with data from income-tax records.25 The rich, like everyone else, have no choice but to file tax returns, and so they are fully represented in the income-tax data.


pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

accounting loophole / creative accounting, active measures, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, business cycle, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Powell Memorandum, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

pid=20601087&sid= aLphvT.qIqZI&refer=home. 38 Jon Bakija and Bradley T. Heim, “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data,” working paper, Williams College, Office of Tax Analysis (March 17, 2009). 39 There is a connection between the previous discussion of tax policy and the current discussion of executive compensation. The sharp fall in true tax rates on very high incomes may have stimulated the rise in executive pay, since the recipients capture so much more of any rise in compensation. Carola Frydman and Raven Saks estimate that “had tax rates been at their year 2000 level for the entire sample period, the level of executive compensation would have been 35 percent higher in the 1950s and 1960s.” Frydman and Saks, “Historical Trends in Executive Compensation,” Sloan School of Management, MIT, working paper (2005), 31. 40 Carola Frydman and Raven E.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"Robert Solow", accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Asian financial crisis, banking crisis, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, Plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Ronald Reagan, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

Within the last decade, income inequality grew even in traditionally egalitarian countries like Germany, Sweden, and Denmark. With a few exceptions—France, Japan, Spain—the top 10 percent of earners in most advanced economies raced ahead, while the bottom 10 percent fell further behind. But the trend was not universal, or inevitable. Over these same years, countries like Chile, Mexico, Greece, Turkey, and Hungary managed to reduce (in some cases very high) income inequality significantly, suggesting that inequality is a product of political and not merely macroeconomic forces. It is not true that inequality is an inevitable byproduct of globalization, the free movement of labor, capital, goods and services, and technological change that favors better-skilled and better-educated employees. Of the advanced economies, America has some of the worst disparities in incomes and opportunities, with devastating macroeconomic consequences.


pages: 459 words: 138,689

Slowdown: The End of the Great Acceleration―and Why It’s Good for the Planet, the Economy, and Our Lives by Danny Dorling, Kirsten McClure

Affordable Care Act / Obamacare, Berlin Wall, Bernie Sanders, Boris Johnson, British Empire, business cycle, capital controls, clean water, creative destruction, credit crunch, Donald Trump, drone strike, Elon Musk, en.wikipedia.org, Flynn Effect, full employment, future of work, gender pay gap, global supply chain, Google Glasses, Henri Poincaré, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, James Dyson, jimmy wales, John Harrison: Longitude, Kickstarter, low earth orbit, Mark Zuckerberg, market clearing, Martin Wolf, mass immigration, means of production, megacity, meta analysis, meta-analysis, mortgage debt, nuclear winter, pattern recognition, Ponzi scheme, price stability, profit maximization, purchasing power parity, QWERTY keyboard, random walk, rent control, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Scramble for Africa, sexual politics, Skype, Stephen Hawking, Steven Pinker, structural adjustment programs, the built environment, Tim Cook: Apple, transatlantic slave trade, trickle-down economics, very high income, wealth creators, wikimedia commons, working poor

In most years, though, the U.S. national debt was rising rapidly, but it’s inaccurate to think that this is inevitable: not only does such debt not always accelerate, it can also fall and has fallen more often in the past ten years than at any other time in recent U.S. history. In 1835 the United States had no debts. It had paid them all off that year. Debts rose during the American Civil War and during both world wars, but tended to be paid down afterward. However, from the early 1970s onward, the U.S. government chose to raise less money in taxation and more through borrowing. In particular, top tax rates were reduced from nearly 70 percent on very high incomes in the 1970s to 50 percent in the 1980s, to as low as 25 percent in the early 1990s, and in recent years they have stood at about 35 percent.14 By borrowing from the rich, rather than taxing the rich, the U.S. government got itself into huge debt. It also borrowed greatly from abroad. In effect, when the United States could no longer afford to pay for goods from China, it began to borrow money from China to buy those goods!


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

They would also reduce the need for foreclosures. The fifth area is income redistribution. Rapidly rising inequality is one reason why rapid credit growth is needed to generate adequate demand in high-income countries. If so, income could be redistributed through the tax system to people who would actually spend it. The French economist, Thomas Piketty, recommends substantially higher taxes on very high incomes as well as a global wealth tax, beyond the land tax alone. This is unquestionably too ambitious. But movement in these directions is desirable and should even be possible.18 Not least, that would be a way to force the winners from globalization and technological innovation to provide some compensation to the losers. The final area consists of policies aimed at raising the longer-term rate of economic growth.


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, Norman Macrae, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, Sam Peltzman, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto

There is indeed no lack of social and political evidence that this shift is taking place in all advanced industrial societies, that its pace is accelerating, and that the movement is already a big one. The rewards for rare skills have increased and are increasing. This has been noted with displeasure by conventional thinkers. Consider, for example, The Winner-Take-All Society, by Robert H. Frank and Philip J. Cook.7 It documents the growing tendency for the most talented competitors in many fields in the United States to earn very high incomes. Equally, the opportunities for middle skills are falling; a substantial number of low skills now fall outside the range that is rewarded with a comfortable living, though they may still find a place in small-scale services. If the Information Age demands higher skills both at the top and bottom end, everyone except for the top 5 percent will be relatively at a disadvantage, but the top 5 percent will gain tremendously.


pages: 486 words: 150,849

Evil Geniuses: The Unmaking of America: A Recent History by Kurt Andersen

affirmative action, Affordable Care Act / Obamacare, airline deregulation, airport security, always be closing, American ideology, American Legislative Exchange Council, anti-communist, Apple's 1984 Super Bowl advert, artificial general intelligence, autonomous vehicles, basic income, Bernie Sanders, blue-collar work, Bonfire of the Vanities, bonus culture, Burning Man, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, centre right, computer age, coronavirus, corporate governance, corporate raider, COVID-19, Covid-19, creative destruction, Credit Default Swap, cryptocurrency, deindustrialization, Donald Trump, Elon Musk, ending welfare as we know it, Erik Brynjolfsson, feminist movement, financial deregulation, financial innovation, Francis Fukuyama: the end of history, future of work, game design, George Gilder, Gordon Gekko, greed is good, High speed trading, hive mind, income inequality, industrial robot, interchangeable parts, invisible hand, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jeff Bezos, jitney, Joan Didion, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, knowledge worker, low skilled workers, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, Menlo Park, Naomi Klein, new economy, Norbert Wiener, Norman Mailer, obamacare, Peter Thiel, Picturephone, plutocrats, Plutocrats, post-industrial society, Powell Memorandum, pre–internet, Ralph Nader, Right to Buy, road to serfdom, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Saturday Night Live, Seaside, Florida, Second Machine Age, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Stewart Brand, strikebreaker, The Death and Life of Great American Cities, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, union organizing, universal basic income, Unsafe at Any Speed, urban planning, urban renewal, very high income, wage slave, Wall-E, War on Poverty, Whole Earth Catalog, winner-take-all economy, women in the workforce, working poor, young professional, éminence grise

The other half of the Reagan promise was that all the billions and trillions in tax savings going to the investor class and business would make America boom again as it had in the 1950s and ’60s—trickling down to regular people—by providing everybody with good jobs and a fair share of the new economic bounty. A supply-side premise—that tax rates at some very high level tend to persuade people to work less—is true. “Of course,” a pair of prominent left economists from UC Berkeley and MIT wrote recently, “increasing upper income tax rates can discourage economic activity…and potentially reduce tax collections.” Yet as Krugman says, “the optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.” Economic research shows convincingly that the self-defeating level of taxation is much higher than our highest federal income tax rate has been for the last forty years—apparently the disincentive effect doesn’t kick in until you get up to a top marginal rate of at least 48 percent and maybe not until 76 percent or higher. Meanwhile, in real life since 1980, the supply-side low-tax pay-for-itself magic has repeatedly failed to do the trick: the federal government is negligibly smaller, but the federal debt has more than tripled in real terms.* Nor has our post-1980 rich-right tax regime produced the job-creating or other sustained economic good news that it has always promised.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

In chapter 4, I explained that, contrary to the assertion of the Right, we could have a more efficient tax system that is, in fact, more progressive. Earlier I cited studies that showed, on the basis of the response of savings and labor supply, that the top tax rate should be well in excess of 50 percent, and plausibly in excess of 70 percent.6 And these studies have not fully taken into account the extent to which very high incomes arise from rents.7 Create a more effective, and effectively enforced estate tax system, to prevent the creation of a new oligarchy. The restoration of a meaningful estate tax would help in the prevention of a new American oligarchy or plutocracy, and so would the elimination of the preferential treatment of capital gains. The adverse effects are likely to be minimal: most of those who accumulate these large estates do so as a result of luck or the exercise of monopoly power, or are motivated by nonpecuniary incentives.8 Helping the Rest We can judge our system by its results, and if we do so, we have to give it a failing grade: a little while ago those at the bottom and in the middle got a glimpse of the American dream, but today’s reality is that for a large segment of the population that dream has now vanished.


Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber

active measures, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Black Swan, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War

In the spring and summer of 1998, LTCM encountered financial difficulties. The awkward handling of derivatives and unclaimed deposits by Bankers Trust and the money laundering for Russia by the Bank of New York suggest that standards are not much higher today than they were, say, in the 1920s. In the boom years of the second half of the 1990s, everyone – well, nearly everyone – was getting rich. The major investment banks had very high incomes from the fees associated with underwriting new issues of stocks and bonds, especially those of firms associated with information technologies and bio-genetics. The traditional ‘Chinese wall’ between the investment banking activities of these firms and their asset management activities was supposed to be retained after the repeal of the Glass-Steagall Act, which had become law in the early 1930s to force the separation of the traditional commercial banking activities of firms from their investment banking activities.


pages: 775 words: 208,604

The Great Leveler: Violence and the History of Inequality From the Stone Age to the Twenty-First Century by Walter Scheidel

agricultural Revolution, assortative mating, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, colonial rule, Columbian Exchange, conceptual framework, corporate governance, cosmological principle, crony capitalism, dark matter, declining real wages, demographic transition, Dissolution of the Soviet Union, Downton Abbey, Edward Glaeser, failed state, Fall of the Berlin Wall, financial deregulation, fixed income, Francisco Pizarro, full employment, Gini coefficient, global pandemic, hiring and firing, income inequality, John Markoff, knowledge worker, land reform, land tenure, low skilled workers, means of production, mega-rich, Network effects, nuclear winter, offshore financial centre, plutocrats, Plutocrats, race to the bottom, recommendation engine, rent control, rent-seeking, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, Simon Kuznets, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, transatlantic slave trade, universal basic income, very high income, working-age population, zero-sum game

The volume of tax collection relative to GDP is small by international standards, and income taxes are particularly low. At the same time, tax evasion is rife, partly because of distrust in government and partly thanks to the large size of the informal sector. The average exemption level for income tax is about twice mean per capita GDP for the region as a whole, and in several countries, progressive rates apply only at very high income levels. Lack of state revenue thus severely limits the potential for transfers. To make matters worse, some welfare schemes are conducive to net inequality. Pensions and unemployment insurance disproportionately benefit those in the top quintile of the income distribution, primarily urban workers in formal employment arrangements, and discriminate against the rural population and those in the informal sector.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, Kickstarter, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

The growth in the volume of US exports in the two decades up to 2007—even as the trade deficit accumulated—averaged a very robust 6.6 percent, leaving it only marginally behind Germany and China, the world’s largest exporters; it was the relative expansion of US imports that was the source of the growing deficit.66 The deficit, in other words, primarily came from increased US consumption, which grew faster than in other advanced capitalist countries. This was partly linked to the very high income growth and conspicuous consumption of the most well-off segments of the US population, but it was also due to much faster population growth than in Europe and Japan, the longer hours worked by much of the US population, and, very significantly, their increased consumer debt. This was supported by the international flow of funds into the US despite the size of the trade deficit. It was in good part US consumer spending that maintained effective global demand into the first years of the twenty-first century.


pages: 518 words: 170,126

City for Sale: The Transformation of San Francisco by Chester W. Hartman, Sarah Carnochan

affirmative action, Albert Einstein, Bay Area Rapid Transit, big-box store, business climate, Golden Gate Park, Haight Ashbury, housing crisis, illegal immigration, John Markoff, Loma Prieta earthquake, manufacturing employment, new economy, New Urbanism, profit motive, Ralph Nader, rent control, Ronald Reagan, Silicon Valley, South of Market, San Francisco, strikebreaker, union organizing, urban planning, urban renewal, very high income, young professional

It’s a Bust; to the Artist It’s Finished,” San Francisco Examiner, 4 December 1981. 22. The tax-exempt feature of such bonds, while resulting in considerable savings to the agency in terms of the lower interest rates they produce, at the 430 / Notes to Pages 197–199 same time creates one of the income tax system’s greatest loopholes. The recipients of state and local bond interest income (and hence of the tax shelter they provide) are persons in very high income brackets. See David J. Ott and Attiat F. Ott, “The Tax Subsidy through Exemption of State and Local Bond Interest” in The Economics of Federal Subsidy Programs, A Compendium of Papers Submitted to the Joint Economic Committee, Congress of the United States, Pt. 3, “Tax Subsidies,” 15 July 1972, 305 – 16. 23. “Report on Yerba Buena Convention and Exhibition Center,” submitted by Roger Boas, chief administrative officer, 9 May 1978, 28. 24.


The Rise and Fall of the British Nation: A Twentieth-Century History by David Edgerton

active measures, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, British Empire, business cycle, call centre, centre right, collective bargaining, colonial exploitation, Corn Laws, corporate governance, deglobalization, deindustrialization, dematerialisation, deskilling, Donald Davies, double helix, endogenous growth, Etonian, European colonialism, feminist movement, first-past-the-post, full employment, imperial preference, James Dyson, knowledge economy, labour mobility, land reform, land value tax, manufacturing employment, means of production, Mikhail Gorbachev, Neil Kinnock, new economy, non-tariff barriers, North Sea oil, offshore financial centre, old-boy network, packet switching, Philip Mirowski, Piper Alpha, plutocrats, Plutocrats, post-industrial society, rising living standards, road to serfdom, Ronald Reagan, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, trade liberalization, union organizing, very high income, wages for housework, wealth creators, Winter of Discontent, women in the workforce, working poor

The central political issue was not the raising of taxes in itself, or whether they were used for welfare or warfare – it was the form of taxation that mattered. The Conservative opposition wanted tariffs to fund both the armed forces and the social services while the Liberals wanted income taxes and excise duties instead. The budget went through, ignoring these views and entrenching taxes rather than tariffs as sources of state income. The best-known increases in taxes were those on very high incomes, a proposed land value tax and death duties, which affected only the very rich. In fact, the increase in these was roughly matched by increases in excise duties, paid largely by the working class. The so-called People’s Budget financed the controversial 1909 naval programme. The Liberal government had first proposed starting four battleships in the 1909–10 financial year. In March 1909 the government said it might add another four as a result of immense pressure from the Conservative opposition and public agitation, with its chant of ‘we want eight and we won’t wait’.


pages: 870 words: 259,362

Austerity Britain: 1945-51 by David Kynaston

Alistair Cooke, anti-communist, British Empire, Chelsea Manning, collective bargaining, continuous integration, deindustrialization, deskilling, Etonian, full employment, garden city movement, hiring and firing, industrial cluster, invisible hand, job satisfaction, labour mobility, light touch regulation, mass immigration, moral panic, Neil Kinnock, occupational segregation, price mechanism, rent control, reserve currency, road to serfdom, Ronald Reagan, shared worldview, stakhanovite, strikebreaker, the market place, upwardly mobile, urban planning, urban renewal, very high income, wage slave, washing machines reduced drudgery, wealth creators, women in the workforce, young professional

Yet the fact was that a significant part – perhaps even the majority – of the respectable middle class, and indeed of the respectable working class, simultaneously condemned and used the black market, without which they would have been hard pressed to maintain an even barely recognisable quality of life. Some even found themselves succumbing to the temptation of coupon fraud. ‘I suspect there’s more dishonesty in this country today than for many years,’ Hodson reflected in May 1946. ‘Rationing, controls of material, very high income tax [9 shillings in the pound], a feeling of despair at the state of the world – all these contribute to it.’ Returning servicemen could, in this as other ways, find it particularly difficult. Thomas Hanley, 28 and just married, decided to try his luck in Devon. Half a century later, his memories were still sharp and painful: I found business, even in a small seaside resort [probably Paignton], was run on chicanery and spivvery.


pages: 913 words: 299,770

A People's History of the United States by Howard Zinn

active measures, affirmative action, agricultural Revolution, Albert Einstein, American ideology, anti-communist, Bartolomé de las Casas, Bernie Sanders, British Empire, clean water, colonial rule, death of newspapers, desegregation, equal pay for equal work, feminist movement, friendly fire, full employment, God and Mammon, Howard Zinn, illegal immigration, jobless men, land reform, Mercator projection, Mikhail Gorbachev, minimum wage unemployment, Monroe Doctrine, new economy, New Urbanism, Norman Mailer, offshore financial centre, plutocrats, Plutocrats, profit motive, Ralph Nader, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, Rosa Parks, Silicon Valley, strikebreaker, Telecommunications Act of 1996, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, very high income, War on Poverty, Works Progress Administration

The richest 1 percent of the country had gained over $1 trillion in the eighties and nineties as a result of tax breaks. A “wealth tax”—something not yet done as national policy, but perfectly feasible—could retrieve that trillion dollars, for instance, at $100 billion dollars a year for ten years, and still leave that 1 percent very, very rich. In addition, a truly progressive income tax—going back to the post–World War II levels of 70–90 percent on very high incomes—could yield another $100 billion a year. Clinton did raise taxes on the super-rich, by a few percentage points, changing the top rate from 31 percent to 37 percent, and corporate taxes from 34 percent to 35 percent. But this was a pitifully small step in view of the need. With the four or five hundred billion dollars gained each year by progressive taxation and demilitarization, there would be funds available to pay for a universal health-care system funded by the government as Medicare is administered, as the health-care system in Canada is handled, without the profit-taking by insurance companies.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

Airbnb, Akira Okazaki, big-box store, Black Swan, book scanning, British Empire, business cycle, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, clean water, Columbian Exchange, conceptual framework, correlation does not imply causation, Costa Concordia, creative destruction, crony capitalism, dark matter, Dava Sobel, David Graeber, David Ricardo: comparative advantage, deindustrialization, demographic transition, Deng Xiaoping, Donald Trump, double entry bookkeeping, en.wikipedia.org, epigenetics, Erik Brynjolfsson, experimental economics, Ferguson, Missouri, fundamental attribution error, Georg Cantor, George Akerlof, George Gilder, germ theory of disease, Gini coefficient, God and Mammon, greed is good, Gunnar Myrdal, Hans Rosling, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, immigration reform, income inequality, interchangeable parts, invention of agriculture, invention of writing, invisible hand, Isaac Newton, Islamic Golden Age, James Watt: steam engine, Jane Jacobs, John Harrison: Longitude, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labor-force participation, lake wobegon effect, land reform, liberation theology, lone genius, Lyft, Mahatma Gandhi, Mark Zuckerberg, market fundamentalism, means of production, Naomi Klein, new economy, North Sea oil, Occupy movement, open economy, out of africa, Pareto efficiency, Paul Samuelson, Pax Mongolica, Peace of Westphalia, peak oil, Peter Singer: altruism, Philip Mirowski, pink-collar, plutocrats, Plutocrats, positional goods, profit maximization, profit motive, purchasing power parity, race to the bottom, refrigerator car, rent control, rent-seeking, Republic of Letters, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scientific racism, Scramble for Africa, Second Machine Age, secular stagnation, Simon Kuznets, Social Responsibility of Business Is to Increase Its Profits, spinning jenny, stakhanovite, Steve Jobs, The Chicago School, The Market for Lemons, the rule of 72, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, total factor productivity, Toyota Production System, transaction costs, transatlantic slave trade, Tyler Cowen: Great Stagnation, uber lyft, union organizing, very high income, wage slave, Washington Consensus, working poor, Yogi Berra

That is, the zooming out of the curves in the diagram, not the attainment of an efficient equilibrium, matters most. There are limits. North Korea, again, shows what can be achieved by truly idiotic governance. Mao’s Great Leap Forward beginning in 1958, with its communal kitchens and backyard blast furnaces, caused thirty to forty million deaths from starvation. It was gross misallocation, idiocracy. It may be possible, that is, to reduce even a very high income to $1 a day if the government goes completely insane, as governments have with some regularity been doing since they first came into existence. Witness Assad’s Syria, or Nero’s Rome, or the conquering Mongol’s original plan (they soon came to their senses) of turning the rich agricultural fields of China into depopulated grazing grounds for their horses. But in the other direction of change, by the quantitative standard of the Great Enrichment, a government can do little but get out of the way.