The issue is not static levels of inequality per se. The issue is why inequality should increase. If the 60%th percentile incomes grew 40%, then it is not clear why the bottom 20% percentile income also shouldn't grow 40%. The fact that it didn't is suboptimal and studying this phenomenon makes sense. That doesn't mean that every knee jerk attempt to fix this problem is good.
Let me try to explain it like this. It is a valid question to ask why, if one income bracket grew X% over 20 years, did a lower bracket only grow 1/2 X. It is not reasonable to simply dismiss this question as irrelevant by assumption. Because society should want income to grow in all brackets, if possible
There is an acceptable level of income inequality, the same as there is an acceptable level of inflation. The determination of what that level of income inequality is, is a complex social analysis task. It's somewhat arbitrary (for example we currently view 3% as an acceptable level of inflation, but that could well be 10% if we wanted it to and we could still make society work). There isn't a single level of income inequality that is bad in all situations, but for some given set of social conditions there exists a level of income inequality that is bad (even if we can't determine precisely what it is ... )
right. But we are observing both large differences in income growth for bottom brackets vs middle and top brackets AND slow growth in bottom income. And there are economic models that show that these two phenomena are not independent. So, this is something that deserves to be researched, not dismissed and has very little to do with startups, unlike what PG is talking about
And the question is how do we get to that acceptable level. One option is a progressive income tax with a universal basic income, or (equivalently) having the progressive income turn negative at low incomes.
I'm more of the opinion that a broad based consumption tax with offsets given to people on a sliding scale would be more effective (after all, people are way less likely to refuse money than they are to try and get out of paying it ... ) This would cause a (once off) inflationary bump as wages adjusted to the price increase but this could be contained with effective fiscal policy.
Taxing consumption makes more sense since ideally we want less of it, but taxing income makes less sense because we want people to work more.
I like Randall Wray's idea of taxing the volume of people's houses, too[1] :) He also talks about abolishing all company and payroll taxes, because as soon as you let go of the notion that taxes pay for things, and that the role of taxation is actually to drive demand for currency and control aggregate demand/income inequality, your fiscal policy can get pretty wild.
It's funny how MMT can seem quite "conservative" at times because of things like abolishing company tax, but when you accept the basic tenets of MMT you can see that such things can be quite progressive (and good for society)!
If possible, yes.
But, barring a technological change that affects every single field of work in such a way that everyone is making more money, it is impossible.
From skimming the links provided, my impression is that these authors or texts address increases in inequality or the importance of the middle class (which presumes inequality). Can you show more directly where someone is arguing for/against inequality per se (as opposed to an argument about the proper degree of inequality)?
There is a proper degree of inequality -- too much central planning or regulation to produce complete equality stifles innovation and leads to all sorts of problems. Too much inequality and deregulation leads to instability.
When people talk about income inequality being bad, they're talking about bad income inequality, not acceptable income inequality.
So things that increase income inequality in such a way that it is unchecked or unregulated are bad, and income inequality needs to be controlled directly through regulation and taxation, and directly through increased government spending and full employment.
When PG says "income inequality isn't bad per se" I take it to mean that he sees the current level of income inequality, for example, in the US, as not bad, which is incorrect. The levels of income inequality in the US are causing problems with stability in the economy. He also doesn't see a problem with increasing the current levels of inequality in income in the US.
If he means that some level of inequality of income is acceptable then he's not being very clear about it.
Just as some level of inflation is acceptable, some level of lead and arsenic in drinking water, and some level of sugar consumption is acceptable, so too is some level of income inequality acceptable.
EDIT: changed "inequality" to "equality" in first line ...
When PG says "income inequality isn't bad per se" I take it to mean that he sees the current level of income inequality, for example, in the US, as not bad,
Well, then you are more generous than I am. To me, it is a classic strawman and leads the whole essay astray. But I see then we do not disagree. I thought you were trying to support the strawman with your links.
Comments
Nobody serious said inequality was bad or good
Lots of very serious people say that inequality is bad:
http://digitalcommons.bard.edu/hm_archive/333/
https://www.youtube.com/watch?v=cZ7LzE3u7Bw&mid=5328
http://www.economonitor.com/lrwray/2013/07/09/how-big-is-big...
http://bilbo.economicoutlook.net/blog/?p=11245
http://moslereconomics.com/2009/09/30/inequality-nothing-to-...
The issue is not static levels of inequality per se. The issue is why inequality should increase. If the 60%th percentile incomes grew 40%, then it is not clear why the bottom 20% percentile income also shouldn't grow 40%. The fact that it didn't is suboptimal and studying this phenomenon makes sense. That doesn't mean that every knee jerk attempt to fix this problem is good.
Let me try to explain it like this. It is a valid question to ask why, if one income bracket grew X% over 20 years, did a lower bracket only grow 1/2 X. It is not reasonable to simply dismiss this question as irrelevant by assumption. Because society should want income to grow in all brackets, if possible
There is an acceptable level of income inequality, the same as there is an acceptable level of inflation. The determination of what that level of income inequality is, is a complex social analysis task. It's somewhat arbitrary (for example we currently view 3% as an acceptable level of inflation, but that could well be 10% if we wanted it to and we could still make society work). There isn't a single level of income inequality that is bad in all situations, but for some given set of social conditions there exists a level of income inequality that is bad (even if we can't determine precisely what it is ... )
right. But we are observing both large differences in income growth for bottom brackets vs middle and top brackets AND slow growth in bottom income. And there are economic models that show that these two phenomena are not independent. So, this is something that deserves to be researched, not dismissed and has very little to do with startups, unlike what PG is talking about
this.
And the question is how do we get to that acceptable level. One option is a progressive income tax with a universal basic income, or (equivalently) having the progressive income turn negative at low incomes.
I'm more of the opinion that a broad based consumption tax with offsets given to people on a sliding scale would be more effective (after all, people are way less likely to refuse money than they are to try and get out of paying it ... ) This would cause a (once off) inflationary bump as wages adjusted to the price increase but this could be contained with effective fiscal policy.
Taxing consumption makes more sense since ideally we want less of it, but taxing income makes less sense because we want people to work more.
I like Randall Wray's idea of taxing the volume of people's houses, too[1] :) He also talks about abolishing all company and payroll taxes, because as soon as you let go of the notion that taxes pay for things, and that the role of taxation is actually to drive demand for currency and control aggregate demand/income inequality, your fiscal policy can get pretty wild.
It's funny how MMT can seem quite "conservative" at times because of things like abolishing company tax, but when you accept the basic tenets of MMT you can see that such things can be quite progressive (and good for society)!
[1] http://neweconomicperspectives.org/2014/06/tax-bads-goods.ht...
If possible, yes. But, barring a technological change that affects every single field of work in such a way that everyone is making more money, it is impossible.
From skimming the links provided, my impression is that these authors or texts address increases in inequality or the importance of the middle class (which presumes inequality). Can you show more directly where someone is arguing for/against inequality per se (as opposed to an argument about the proper degree of inequality)?
There is a proper degree of inequality -- too much central planning or regulation to produce complete equality stifles innovation and leads to all sorts of problems. Too much inequality and deregulation leads to instability.
When people talk about income inequality being bad, they're talking about bad income inequality, not acceptable income inequality.
So things that increase income inequality in such a way that it is unchecked or unregulated are bad, and income inequality needs to be controlled directly through regulation and taxation, and directly through increased government spending and full employment.
When PG says "income inequality isn't bad per se" I take it to mean that he sees the current level of income inequality, for example, in the US, as not bad, which is incorrect. The levels of income inequality in the US are causing problems with stability in the economy. He also doesn't see a problem with increasing the current levels of inequality in income in the US.
If he means that some level of inequality of income is acceptable then he's not being very clear about it.
Just as some level of inflation is acceptable, some level of lead and arsenic in drinking water, and some level of sugar consumption is acceptable, so too is some level of income inequality acceptable.
EDIT: changed "inequality" to "equality" in first line ...
Well, then you are more generous than I am. To me, it is a classic strawman and leads the whole essay astray. But I see then we do not disagree. I thought you were trying to support the strawman with your links.