Month: November 2011

Inequality and Occupy Wall Street 6: tax principles for occupiers

~ MilesCorak ~ 5 Comments

Believe it or not, there is such a thing as a good tax.

A good tax raises the required government revenue by not only treating equals equally, but also by requiring more from those who will be hurt the least.

However, that is not all: a good tax is also a tax that is administered simply, transparently, and in a “neutral” way.

“Neutral” means it does not cause individuals and corporations to behave differently; in other words, the tax respects the outcomes of the marketplace (unless of course prices do not accurately reflect the true costs and benefits of an activity. In this case the tax might be used to explicitly correct these market failures.)

This confronts Occupiers with a dilemma.

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Diane Finley and Rebecca Blank meet Adam Smith: moving poverty lines are in

~ MilesCorak ~ 17 Comments

President Obama appointed Rebecca Blank—a capable, no-nonsense, PhD in economics, and a former Dean at the University of Michigan—to his new administration, and told her to answer a simple question: how should the United States measure poverty?

Diane Finley, the Conservative government’s Minister responsible for social policy, is not exactly Canada’s Becky Blank. She might certainly be capable, and she might certainly be no-nonsense, but to be honest she doesn’t seem to have a lot in common with the American academic turned policy-maker: except, of course, that in Canada Ms. Finley is ultimately the person responsible for poverty measurement.

Both women have pulled off quiet revolutions by recognizing that the poverty line should evolve over time: as the things needed to participate normally in society change, so should the poverty line.

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Inequality and Occupy Wall Street 5: decline of the American Dream

~ MilesCorak ~ 11 Comments

There is nothing wrong with inequality … until it starts limiting opportunity.

Well that might be a bit too strongly put, but it is certainly one thing to live in an unequal society where the chances of changing places with the rich, of seeing your children move on and upward, are high. Indeed, if this is the case we may even want a certain degree of inequality: people would have both the incentive and the possibility to better their situation.

But it is another thing altogether to live in an unequal society where there is little chance of moving on, where there are barriers preventing our talents and energies from being rewarded, where the accident of birth determines a child’s life chances.

This type of inequality should worry Occupiers and the 99% because it cuts sharply against what we commonly understand to be the American Dream.

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Inequality and Occupy Wall Street 4: daddy put you in the top 1% !

~ MilesCorak ~ 43 Comments

rupert-and-james-murdoch

It was almost a sad sight to see Rupert Murdoch’s son sitting beside the famed newspaper publisher in the televised committee hearings conducted by the British parliament last July.

James seems so out of depth.

Superstar salary he certainly has, but superstar talent?

If the members of the top 1% are there because of connections or political power—rather than by the force of their talent, energy, and motivation—then we should be rightly critical about claims that they merit their fortunes, and question the contribution they make to economic productivity.

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Inequality and Occupy Wall Street 3: the top 1% are superstars

~ MilesCorak ~ 3 Comments

To explain the fact that the top 1% now take home a larger share of total earnings than they ever have since the 1940s Occupiers need to understand the economics of superstars.

Talent is unique. Or as the late University of Chicago economist Sherwin Rosen stated, “hearing a succession of mediocre singers does not add up to a single outstanding performance.” When he was at his best there was only one Wayne Gretzky, and I guess that is why they nicknamed him “the Great One.” To those of us listening to the opera, or watching the hockey game, the superstar is one-of-a-kind. And because there are no substitutes they get paid much more than even the second best.

This only explains that there is a top 1%, and that as the most talented they get paid a good deal more than the rest of us. It does not explain what has changed, why have they been taking away a bigger and bigger slice of the pie since about 1980.

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Inequality and Occupy Wall Street 2: the facts are fertile soil

~ MilesCorak ~ 3 Comments

The Occupiers have their facts right.

There has been an unprecedented increase in earnings inequality in the United States, with significant shares of total earnings increasingly going to the very top.

Let’s be clear on this: we are not talking about inherited wealth, but rather “earnings”, the stuff we get from being an “employee”.

The only group to see their average earnings rise over the course of the last three decades or so are highly educated, older, men. And this is driven by the select few. It is not an exaggeration to say that it is the top 1%.

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