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NotDualismbutTrialismMatters
LanceTaylorINETEdinburgh23October
Triality intheUSEconomy
• Basedonthewell-knownCBOdistributionstudy,NIPA,andFedfinancialdata,theUSAhasathree-classeconomy.• Mainincomesourcesoftop1%ofhouseholdsarefromcapitalgains,proprietors’incomes,interest,anddividends.Includingcapitalgainstheyhavea50+%savingrate,and40%oftotalwealth.• Householdsbetweenthe60th and99th percentilesget70%oftheirincomefromwages,~10%eachfromfiscaltransfers,finance,andproprietors’incomes.Theysavelessthan10%,andhold60%ofwealth(mostlyhousing).• Bottom60%getalmost50%ofincomefromwages,45%fromgovernmenttransfers.Theyhavenegativereportedsaving(trueforotherOECDeconomies),negligiblewealth.
Figure1a:PalmaRatiosBasedontotalIncomeperhouseholdusingCBOdata
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Figure1b:PalmaRatiosBasedonDisposableincomeperhousehold
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Figure3:RealperHouseholdincomestop1%
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Figure4:IndexesofLaborCompensation
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Figure5:DeterminationofBusinessSector ValuationRatioq
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Figure6:DistributionofWealth,2014
HowdothesedatarelatetoServaas’spaper?
• BasicmodelwasanticipatedbyCodrina RadainherNewSchoolthesis– thekeyideaisthatpeopleinthestagnantsectorhavetogainincomesomehow.Aretheythebottom60%?• Isdemandindynamicsectorwage- orprofit-led?YouneedthelatterifstrongerKaldor-Verdoorn effectsaretoleadtofasteremploymentgrowth,pullinglaboroutof“mediocrejobs”.Withwage-leddemand,fasterproductivitygrowthwillleaddynamicsectoremploymenttofall.• Schultz-Sendebate(1960s):doesstagnantsectoroutputfalliflabordeparts?Sensaid“No”becauseofjob-sharing, i.e.laborproductivityvariesinverselywithemployment.
ServaasII
• Butthenawage-leddynamicsectorcangotogetherwithaSeneffecttoproducealow-leveltrap.• Offsetscanincludeexpansionarypolicyinthedynamicsector,policiestopromoteproductivitygrowthinthestagnantsector(China’s“landreform”ofthe1970s).• Policycoordinationmatters.Beyond“policy”asunderstoodbyeconomists,doinstitutionalstepstooffsetmonopolypower(pricesriseagainstwages,nowpopularideainthemainstream)andlabormarketmonopsony(wagesfallagainstprices– Servaas’sGreenspanquote).
MarioI
• Niceinstitutional-historicalanalysis,drawingonPolanyipère etfille.Butletmeworryaboutthenumbersregardingincomesupport.• In2014,UStransfersfromgovernment(alllevels,all60programsincludingSocialSecurity,Medicare,Medicaid,…)tothe3classeswerebottom60%,$1.92trillion;middleclass,$550billion;top1%,$20billion.• USworkingagepopulationisaround200million.Iftheyweretoreceive$10,000each,thetotalwouldbe$2trillion,intherangeofexistingprograms.
MarioII
• Ofcourse,someprogramscouldbecutback.ButasMarioobserves(andashaslongbeenemphasizedintheliteratureonpoverty)therearecomplicatedissuesoftaxation.• Annualsocialsecuritypaymentstosomebody(likeme)whothroughoutlifehasbeenatthecut-offearningslevelarearound$40,000.Togettoevenaquarterofthatlevel,majorfiscalengineeringwouldberequired.
BillI
• Perfectlycorrectinnotingthesurgeinstock-basedpaysincearound1980.Ontheotherhand,totallaborcompensationofthetop1%iscomparabletocapitalgains,andlessthanproprietors’incomes,andinterestanddividends.Their“wages”arenotthedominantincomesource.• Thekeypointisthatthetop1%basicallyreliesonincomefromcapitalbroadlyinterpreted,whilethelowerclassesrelyonwagesandtransfers.[Ineconophysics,BarkleyRosserandVictorYakovenkoarguethatthesizedistributionshiftsfromBoltzmann-Gibbs(exponential)toParetoataroundthe98th percentile,somaybethe“capitalist”classisbiggerthan1%.]
BillII
• Animportantpointisthatmaximizingshareholdervalue(MSV)ismorethanaprescriptivetheoryofthefirm– itisapowerfulideologywhichjustifiesnon-altruisticbehavior[seeforexampleKarenHo’sLiquidated,anethnographyofWallStreetwhichdescribeshowtradersfallbackon“creatingvalue”asajustificationforanti-socialbehavior].• Can“innovativeenterprise”replaceMSVasanideologytosustainwidespreadchangesinbusinessbehavior?Let’sleaveitasaquestion.
Mariana
• Ifinnovativeenterprisesaretobestimulated,publicsectorinvolvementhastoenter.WearebacktoHamilton,List,Gerschenkron,andAmsden.• Ican’taddmuchtoMariana’sdiscussionexcepttopointouttraditionaltoolsofindustrialpolicy– cutunitlaborcostbyraisingproductivity,notreducingwages;seekcostreductionbyexploitingincreasingreturns(apointthatLazonick alsomakes),searchforproductsandprocesseswithgrowingdemand.• Indeed,employmentgrowthisimpossibleunlessgrowthindemandoutstripsproductivity– notnecessarilyeasytoattain.
Inclosing,takealookatthefollowingslidesbasedonaGoodwin-Kaldor-Pasinettisimulationmodel
• Palmaratioswillnotcomedownunless(i)wagegrowthforlowerincomegroupsexceedsproductivitygrowth,(ii)proprietors’incomeforthetop1%falls;financialtransferstothetop1%fall.• Evenso,thewealthshareofthetop1%willrisefrom40%toaround60%.Apossibleoffsetcouldbeawealthfund,possiblyfinancedbyacapitalgainstax,whichtransfersmoneydownwardandbuildsupitsownresourceswhichcouldbeusedtofinanceinnovationàlaLazonick andMazzucato.
Palmaratiosforcombinedeffectsofrealwagegrowthfornon-richhouseholdsanddownwardtrendsinfinancialandproprietors’incomesforthetoponepercent.
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10 20 30 40t
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p1) Palma Y3/Y1
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p4) Palma DYh3 / DYh2
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10 20 30 40t
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p1) Palma (Yh3/Yh1)
10 20 30 40t
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p2) Palma (DYh3/DYh1)
10 20 30 40t
2468101214
p3) Palma (Yh3/Yh2)
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24681012
p4) Palma (DYh3/DYh2)
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0.10.20.30.40.50.6
s1) Middle Class Wealth Ratio
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s2) Top 1 %Wealth Ratio
10 20 30 40t
0.020.040.060.080.100.120.14
s3)Wealth Fund's Wealth Ratio
Palmaandwealthratiosfromcombineddistributivepoliciesandawealthfundwitha50%taxoncapitalgainswhichtransfers2%ofitsassetstothebottomsixtypercentofhouseholds
