Jim Pethokoukis provides a convenient summary of the various theories for why productivity growth has slowed. His list, however, doesn’t contain my theory. In my book The Upside of Inequality: How Good Intentions Undermine the Middle Class, I argue that the economy has a finite capacity and willingness to bear risk, and that the economy is often at or near its risk-bearing limit. When the economy discovers unexpected risks, the threat of terrorism after 9/11 or the ... Read More
IMF Study Finds Deep Flaws in Key Piketty Hypothesis
A new IMF study, Testing Piketty’s Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics, by Carlos Góes finds flaws in Thomas Piketty’s famous R > G hypothesis that returns to capital exceeding the growth rate increases inequality. Looking at 19 advanced economies over the last 30 years Góes finds: "…no evidence to corroborate the idea that the r-g gap drives the capital share in national income. There are endogenous ... Read More
Rent Seeking by Any Name Isn’t a Key Driver of Income Inequality
Craig Pirrong shows that Robert Reich’s, Joe Stiglitz and Larry Summers’s claim that rising oligopolistic industry concentrations are responsible for growing income inequality is farfetched. He writes "....The numbers just don’t work out. In 2015, after-tax corporate income represented only about 10 percent of US national income. Market power rents represented only a fraction of those corporate profits. Market power rents that could be affected by more rigorous antitrust ... Read More
