Wages, Productivity, and Inequality

"Inequality is a euphemism, a kind of shorthand, for all of the things that have gone to make the lives of the rich so much more delicious, year on year, for the last three decades. And also for the things that have made the lives of working people so wretched and so precarious in that same time.

This word inequality. It's visible in the ever rising costs of healthcare and college, in the coronation of Wall Street, and the slow blighting of wherever it is that you happen to live. And you catch a glimpse of inequality every time you hear about someone that had to declare bankruptcy because a child got sick, or you read about the lobbying industry that drives Washington DC, or the new political requirement, the new constitutional requirement that every presidential candidate has to be a billionaire's favorite, or a billionaire themselves.

Inequality is about the way in which speculators, and even criminals, get a helping hand from Uncle Sam, while the Vietnam Vet down the street from you loses his house. Inequality is the reason that some people find such incredible significance in the ceiling height of an entrance foyer, or the hop content of a beer, while other people will never believe in anything again."

Thomas Frank


"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.  Intellectual myopia, often called stupidity, is no doubt a reason.  But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right.  The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

John Kenneth Galbraith


"Capitalism is at risk of failing today not because we are running out of innovations, or because markets are failing to inspire private actions, but because we’ve lost sight of the operational failings of unfettered gluttony.

We are neglecting a torrent of market failures in infrastructure, finance, and the environment. We are turning our backs on a grotesque worsening of income inequality and willfully continuing to slash social benefits. We are destroying the Earth as if we are indeed the last generation."

Jeffrey Sachs


"Over the last thirty years, the United States has been taken over by an amoral financial oligarchy, and the American dream of opportunity, education, and upward mobility is now largely confined to the top few percent of the population. Federal policy is increasingly dictated by the wealthy, by the financial sector, and by powerful (though sometimes badly mismanaged) industries such as telecommunications, health care, automobiles, and energy. These policies are implemented and praised by these groups’ willing servants, namely the increasingly bought-and-paid-for leadership of America’s political parties, academia, and lobbying industry.

If allowed to continue, this process will turn the United States into a declining, unfair society with an impoverished, angry, uneducated population under the control of a small, ultra-wealthy elite. Such a society would be not only immoral but also eventually unstable, dangerously ripe for religious and political extremism."

Charles Ferguson

“There are two visions of America a half century from now. One is of a society more divided between the haves and the have-nots, a country in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education, and in effect rationed health care―they hope and pray they don't get seriously sick.

At the bottom are millions of young people alienated and without hope. I have seen that picture in many developing countries; economists have given it a name, a dual economy, two societies living side by side, but hardly knowing each other, hardly imagining what life is like for the other.

Whether we will fall to the depths of some countries, where the gates grow higher and the societies split farther and farther apart, I do not know. It is, however, the nightmare towards which we are slowly marching.”

Joseph E. Stiglitz, The Price of Inequality


"Psychopaths have a grandiose self-structure which demands a scornful and detached devaluation of others, in order to ward off their envy toward the good perceived in other people."

Robert D. Hare, Without Conscience



"The worldly treasures you have hoarded will testify against you on the day of judgment.  Listen! Hear the miseries of the workers whom you have cheated through fraud from fair payment."

James 5:4


"Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating.

Today, the United States is No. 1 in corporate profits, No. 1 in CEO salaries, No. 1 in childhood poverty, and No. 1 in income and wealth inequality in the industrialized world.

Today, the top one-tenth of 1% owns nearly as much wealth as the bottom 90%. The economic game is rigged, and this level of inequality is unsustainable.

We need an economy that works for all, not just the powerful.

I think what the American people are saying is enough is enough. This country, this great country, belongs to all of us. It cannot continue to be controlled by a handful of billionaires who apparently want it all."

Bernie Sanders

The Unrestrained Rule of the Will To Power and the Death of Justice

"What is good? All that heightens the feeling of power in man, the will to power, power itself. What is bad? All that is born of weakness. What is happiness? The feeling that power is growing, that resistance is overcome.

Not contentment, but more power, not peace at all, but war; not virtue, but proficiency. The weak and poorly formed shall perish: first principle of our philanthropy. And one shall help them to do so. What is more harmful than any vice?  Active sympathy for poorly formed and the weak— Christianity."

Friedrich Nietzsche,  Der Antichrist, 1895


"He who makes a beast of himself gets rid of the pain of being a man."

Samuel Johnson

The Malicious Practices Act of 1933 was introduced to rid the German state of its ‘oppressors’ and ‘enemies’. In particular, the German state imposed new legislation that made it illegal to speak wrongly of, or criticise the regime and its leaders.

Coupled with the 1934 act against 'treachery,' a law sufficiently broad and vague, and carried out by a special set of courts with their own processes and procedures outside of the national court system, became a powerful tool for state fascism in the form of terrorism directed against their own people and any form of dissent, freedom of speech, of those guilty of social differences, no matter how fundamental or how trivial those differences might be.

Stiglitz: Why Western Capitalism Has Been Failing Since 1980

As I had written some time ago in the The Fall of the American Republic: The Quiet Coup:

"I am not so optimistic that this reform is possible, because there has in fact been a soft coup d'etat in the US, which now exists in a state of crony corporatism that wields enormous influence over the media and within the government.

To be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake up call, and the tide then turns to genuine reform."

 

The article which I wrote was based on the insightful and largely ignored work by renowned economist Simon Johnson called The Quiet Coup.

 

This lecture by Stiglitz below is a little 'wonky' and uses some terminology which may be unfamiliar.

Nevertheless if you listen to it and just try to capture the main points of his discussion it will be worthwhile.

 

His basic premise is to ask why capitalism has shown a tendency to stagnation since 1980 in the United States and other parts of the West.

 

I am, as you know, an adherent to the belief that there has been a soft coup d'état in the US.  One can always quibble about the exact dates, but that is of less importance.   I have said it was shortly after Greenspan's 'irrational exuberance' speech, although the stage was certainly set for this during the 1980's with the rise of the efficient markets hypothesis, the assumption of rational wealth optimizers in the markets, and of course, the laughable supply side economics which are the old trickle down canard in drag.

 

The point, rather, is to understand what has happened, to continue to shine a light on it, and to hope that Simon Johnson is correct, that the overreach of the 'winners' will eventually provoke a reaction. 

 

Quite frankly I had thought it would have come by now.  One can rarely go wrong betting on the power of apathy and momentum, and the persistent greed of the sociopaths and their enablers.

 

After all, in the aftermath of a tragic derailment of the flagship train line in the US from Washington to Boston that could have been prevented by continuing investments in fundamental railroad infrastructure, the House of Republicans have voted to further slash Amtrak funding by $260 million. 

They are instructed to hate anything that benefits the public without putting an abundant stream of income into the pockets of their corporate money masters.  This explains their virulent animosity to Social Security, public transportation, public healthcare, public education, public infrastructure, consumer protections, environmental laws, safety regulations, product safety measures, and any sort of financial regulation that inhibits the greed and power of the Banks.

And we should be ashamed for continually standing quiet in the face of such pathological incivility.

 

But I can almost guarantee that if this crash had been the result of some sort of despicable act of terrorism for example, the public coffers would already be wide open, flowing with a Niagara of funds for homeland security and the militarization of domestic law enforcement.   Millions for the corporatized state, but little or nothing for the people.

 

I am increasingly concerned that, as has happened so many times in the past, the status quo will greet this eventual reaction for reform, justice, and equality with repression and even draconian measures to maintain what they perceive as their rightful place and power. 

 

Like apathy and momentum, it is also difficult to underestimate the self-delusion and overreach of sociopaths who would be as gods, even if they are gods of the damned.

History is replete with examples.

 

Robert Johnson: Davos Man Fears Social Instability Due to Inequality and Injustice

"No country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order."

September 30, 1934

"We must scrupulously guard the civil rights and civil liberties of all our citizens, whatever their background. We must remember that any oppression, any injustice, any hatred, is a wedge designed to attack our civilization."

January 9, 1940

Franklin Delano Roosevelt

"I swore never to be silent whenever and wherever human beings endure suffering and humiliation. We must always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented...

There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest."

Elie Wiesel

"Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe."

Frederick Douglass, Speech on the twenty-fourth anniversary of Emancipation,, April 1886

 

"Albert Camus, a great humanist and existentialist voice, pointed out that to commit to a just cause with no hope of success is absurd. But then, he also noted that not committing to a just cause is equally absurd. But only one choice offers the possibility for dignity. And dignity matters. Dignity matters."

David Simon

 

Related: 

Robert Johnson:  US System Is Broken and Heading Towards Social Conflict

Robert Johnson:  Ugly Money Politics

Robert Johnson:  The Convergence of Finance and Politics

 

David Cay Johnston: Keynote Address to Symposium on Wealth Disparity In America

David Cay Johnston is an American investigative journalist and author, a specialist in economics and tax issues, and winner of the 2001 Pulitzer Prize for Beat Reporting.

Since 2009 he has been a Distinguished Visiting Lecturer who teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management.' From July 2011 until September 2012 he was a columnist for Reuters, writing, and producing video commentaries, on worldwide issues of tax, accounting, economics, public finance and business. Johnston is the board president of Investigative Reporters and Editors.

US 2nd District Court of Appeals Issues the Economic Equivalent of the Dred Scott Decision

SEC. 20A. (a) PRIVATE RIGHTS OF ACTION BASED ON CONTEMPORANEOUS TRADING.

Any person who violates any provision of this title or the rules or regulations thereunder by purchasing or selling a security while in possession of material, non-public information shall be liable in an action in any court of competent jurisdiction to any person who, contemporaneously with the purchase or sale of securities that is the subject of such violation, has purchased (where such violation is based on a sale of securities) or sold (where such violation is based on a purchase of securities) securities of the same class.

Securities and Exchange Act of 1934

In their zeal to exonerate some Wall Street wiseguys associated with the infamous insider trading ring involving SAC Capital, the sophists on the 2nd US Court of Appeals, located in lower Manhattan near Wall Street, just issued the equivalent of the Dred Scott decision for US markets.

"Although the government might like the law to be different, nothing in the law requires a symmetry of information in the nation's securities markets."

Barrington Parker, 2nd U.S. Circuit of Appeals Judge

Are you kidding me?  Equal protection under the law?   Who says we have to do that? We can do whatever we want, and just try and stop us.  We own the lawmakers and we own the courts.

Symmetry of information, also known as a 'level playing field,' is the cornerstone and underlying principle of US Securities laws since 1933.

"Information symmetry is a condition in which all relevant information is known to all parties involved. For example, in the stock market, stock information has a full public disclosure, and all investors are in the same position to share information."

"In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and information monopoly."

Is this the point where the pigmen take the masks off and say, 'what the hell, we really are just robbing and cheating you. So what are you going to do about it?  We own the system, and can have our sophists rationalize just about anything.'

Some judicial propeller head was encouraged to put themselves into super-literalist, laser-beam mode, and twist the letter of the law hard enough to find a reason for excusing some particularly blatant insider trading, and the substance of the law be damned.

As long as the exchanging of favors is sufficiently soft and undocumented, and not the explicit exchange of cash, videotaped and posted to Youtube, it's all good.  Cry havoc, and let slip the dogs of financial fraud on the general public.

The purpose of information symmetry is to prevent certain market actors from engaging in control frauds. This principle taken to a perfect and natural ideal was a cornerstore of one of the great economic canards that justified deregulating the markets. 

"In finance, the efficient-market hypothesis asserts that financial markets are 'informationally efficient'. In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made."

And now they are dropping the pretext. Are they counting on most people not understanding what 'symmetry of information' means?   Are they counting on you doing nothing about this?

Information symmetry means that some analyst or CEO cannot tell his friends that they are going to give downward guidance in a week, so that they can all sell their stock and even short it ahead of the public.

It means that the most powerful players in the market cannot traffic in private knowledge, presenting two sorts of datastreams, one for the public and one for themselves.

It's a big club.  And you aren't in it.

I expect this decision to be reversed, because otherwise there can be no confidence in US markets any longer, and no one who is not an insider can no longer believe in their impartiality and honesty.  They are worse than any casino, because the dealer can signal some of the players when he has an ace in the hole.

The basis of the reversal will be the judgement that the 2nd Court has misapplied the principles in Dirks v SEC.   In this case the Supreme Court sought to exonerate the recipient of information from a whistleblower who wished to exposed a corporate fraud, and in doing so released information to Dirks, who while passing it on to the Wall Street Journal, also passed it on to clients who used it to sell their stock in advance of the fraud and stock sell off. 

This led to the establishment of 'The Dirks Test' by the SEC:

A standard used by the Securities and Exchange Commission (SEC) to determine whether someone who receives and acts on insider information (a tippee) is guilty of insider trading. The Dirks Test looks for two criteria

1. Whether the individual breached the company's trust
2. Whether the individual did so knowingly

Tippees can be found guilty of insider trading if they know or should know that the tipper has committed a breach of fiduciary duty.

I believe this is one of those cases where courts can and will argue about reasonableness. Is it more reasonable to expect a trader who is licensed under Securities Laws to know the difference between legitimate information and material non-public information, moreso than an unlicensed amateur?

 And I think that the 2nd District Court has overreached in declaring that the prosecution ought to demonstrate that the tipper received personal benefit, rather than violated fiduciary trust of the corporation, and that the tippees needed to know this fact, rather than understanding the difference, as a professional, between gossip, information, and material non-public information which provides them a trading advantage which has been obtained in some manner which most certainly involves the violation of fiduciary responsibility in the chain of communication.
 

The most rational response from the rest of the world will be to shun US markets, and take steps to prevent the contagion of this abuse of privilege.

The only law the moneyed interests recognize is 'Do what you will,' and just don't document the evidence of wrongdoing and post it on the internet for bragging rights.

This is the kind of situation where the locker room talk at the Country Club gets leaked out in public, and the Very Important People who do it are suddenly exposed for exactly who and what they really are, and what they really believe. 

 

And brother, its a brave new world if this decision stands. 

David Cay Johnston: The Perils of Our Growing Inequality

“Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many."

Adam Smith, The Wealth of Nations

This helps to explain why there will be no sustainable recovery. 

It is a matter of un-official policy.

Green Slime: The Return of Franken-Money

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

Andrew Jackson

The reason that there is a 'currency war' underway globally, and why there is increasing civil and political tension domestically, is not because of an envy for the Anglo-American one percent's way of life.

The reason is that the monetary system and the Western economies have gone off the rails with financialization and speculation, and there is a commensurate revulsion from it from those who are in a position to seek alternatives wherever they may. Those who cannot will be victims.

This system is fragile, and will not cohere.

This is why the precious metals have spiked, and will contain to struggle against the very obvious financial repression that is being driven by the Banks.  It is an exercise in the abuse of power and the corruption of governance.

This does not mean that austerity or repression are the solution, anymore than mindless stimulus in pursuit of a top-down recovery of a corrupt, wealth transfer system is either. 

The nature of the cure is in equal justice and significant reform, the protection of the weak from the overreach and encroachments of the powerful and the wealthy, whether they are allied in a foul bargain with the state or not.

We may try scheme after scheme, from clever gimmicks to 'new' theories, until we will stand exhausted on a wreckage of our own devices. There is no substitute for transparency, justice, and reform.

Related: Money Supply, A Primer

 

PBS Frontline: To Catch a Trader

“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect, persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

Adam Smith

Got inside trading information?

Got a co-located high speed trading server?

Got a privileged position of trust in society or even better, in the game itself?

Then buddy, you got edge.

Related: The Taming of the Trading Monster

The Fruits of 'Free Markets' and Inequality: Female Mortality Rates In the US

"There is a frightening graph in a recent article in Health Affairs by David Kindig and Erika Cheng. Kindig and Cheng looked at trends in male and female mortality rates from 1992–96 to 2002–06 in 3,140 US counties.

What they found was that female mortality rates increased in 42.8% of counties (male mortality rates increased in only 3.4%). The counties are mapped below: red means that female mortality worsened.

You can see a strong regional pattern: just about every county showed had worsened female mortality in several southern states, while no county showed such decline in New England. There are many questions about what explains this pattern. For example, did healthier women migrate out of the south from 1992 to 2006?

Nevertheless, the map depicts a shocking pattern of female hardship, primarily in the southeast and midwest."

Read the rest from Bill Gardner posting at The Incidental Economist here.

And although they are certainly not the same as overall female mortality rates, here are the latest CIA World Factbook figures on maternal mortality rates (MMR) per hundred thousand. Obviously the lower the number the better.

Hey, don't complain, thank God we're not like Chad or Somalia right?   And how come all those socialist single payer countries are nearer the bottom, and they do it so much more cheaply?

Perhaps some neo-liberal hack can explain the economic principles of freedom involved to the child of a dead mother.

I know what comrade Stalin's or Herr Hitler's answer would have been about deaths and large numbers with regard to the needs of the state. Funny how the extremes tend to converge

Moyers and Wolff: Capitalism Has 'Hit the Fan'

"Even as President Obama’s talking points champion the middle class and condemn how our economy caters to the very rich, modern American capitalism is a story of continued inequality and hardship.

Even a modest increase in the minimum wage — as suggested by the president — faces opposition from those who seem to show allegiance first and foremost to America’s wealthy and powerful."

Bill Moyers, Taming Capitalism Run Wild

A symphony of greed.

I would lay the failure of capitalism, or more properly the lapse of market capitalism into crony capitalism and corporatism, at altar of the triumvirate of the false gods of modern economics: globalization, fiat currencies, and naturally efficient markets.

And of course the fact that it is no longer socially unacceptable to be a lying, cheating conman, as long as you are sucessful at it. Greed is good, and so the achievement of wealth by any means available, as long as you beat the system and don't get indicted, is the epitome of human achievement and worth.

The most insidious trend is the adoption of the 'just-world hypothesis' and a Darwinian rationalization in blaming the victims for the outcome of this flawed set of policies and sanctifying of success.

This will very possibly result in yet another century of turmoil, degradation, and blood.

Wages: The Median and the Mean

The 'mean' is the average of all wages.

The 'median' is the wage in the middle, that is, what is earned by those people in the numerical middle of the population.

And the ratio of the median to the mean continues to fall, as the rich get richer, and a large part of the country is left behind, as a matter of policy.

This is the plight of 'the 47%.'



Source: SSA

Brad DeLong Vs. Jim Grant on the Need for QE 3 - Will the Tide Turn Before the Next Crisis?

Notice that the need for reform and rebalancing the system never really comes up in the discussion. This is old thinking, and its killing the economy.

As you know, I think both 'expansionary austerity' and 'stimulative easing' are missing the point and ineffective, because the economic, financial, and global trade system is broken, corrupted, and badly in need of reform and structuring.

What the Fed is doing is keeping the zombie banks upright at the expense of the long suffering middle class and savers. Michael Hudson has called it 'the endowing of a financial elite to rule in the 21st century.' The monied interests are gorging themselves on malinvestment, public policy failures, and a well financed campaign of economic propaganda such as that which led to the tragic lapses of regulation and the overturn of Glass-Steagall.

The effective tax rates of the super wealthy are less than 15 percent, because they draw a major portion of their annual increase in wealth from capital gains and dividends, and unrecognized entitlements. as well as a wide menu of tax avoiding schemes.

And while they moan about the nominal headline tax rates, paid only by the 'little people' even if they do not know they are little, corporations and the truly wealthy have not enjoyed just low effective tax rates in the post WW II era. And yet it is still not enough.

In light of the severe unemployment problems plaguing a large portion of families, austerity seems like a cruel joke, a coup de grâce delivered by the bankers to the income producing classes who depend on labor in the creation and delivery of real products, and not artificial arbitrage and gaming the system.

But on the other hand, stimulus seems just another excuse for the special interests to put on the feedbag once again to the detriment of the many of the next generation. There is no comparison between the Obama Administration and the New Deal in terms of real change and productive innovation.

There has been a very strong recovery in corporate profits in the non-financial sector, and the financiers barely missed a beat in distributing a healthy chunk of GDP to themselves in bonuses, while the ashes of the financial crises which they caused still glowing.  And their behaviour in the mortgage and derivatives markets has been despicable.  I am appalled that people put up with this sort of thing, much less defend it out of some mistaken belief in neoliberal 'free markets.'

The people should never have to bailout reckless banks who engaged in speculative self-interest, and particular when they did so with the intent to personally enrich themselves, come what may.

"The UK Chancellor of the Exchequer's guiding philosophy is refreshingly pro-market: 'All banks should be allowed to fail safely without affecting vital banking serviceswithout imposing costs on the taxpayer.'" George Osborne

UK Considers Separating Retail and Investment Banking

The second chart gives some indication of the nature of the problem. The US enjoyed an extraordinary period of productivity and expansion, and the middle class was thrown under a bus. And now they are expected to pay to subsidize the unsustainable bonuses and lifestyles of the monied interests.




h/t Mark Thoma

GDP Deflator at a Five Decades Low While Income Inequality Is at Record Highs

From this chart sent out this morning by David Rosenberg, we can see that the GDP deflator is at a five decades low.

I tend to believe that the modifications to the inflation measures, including the deflator, that have accumulated by the federal bureaucracy over the past ten years are greatly understating the actual inflation in the economy.

There are very positive benefits for the government to do this. The lower the deflator, the better and higher the real GDP figures will appear. And a low measure of official inflation reduces increases in payments in Social Security and other programs with Cost of Living Adjustments (COLA), including official debt payments on the bonds and the TIPS.



Gold gives the lie to this, which is why it is so hated by financial engineers and statists.

On the other hand, the inequality of income distribution in the US is at level not seen since the 1920's.



There is some good reason to think that government tax and fiscal policies, as well as the monopolistic makeup and subsidized growth of the Banking sector facilitates this wealth transfer and concentration, which has a highly negative impact on real economic growth.

There will be a change, and the trends will be reversed. How they are reversed and what changes will accompany those reversals are very much open to debate, and divergent historical examples. But these changes almost invariably involve a shift from individualism to statism.

"Those who make peaceful revolution impossible make violent revolution inevitable."

John F. Kennedy

Change will come if the system remains as unsustainable as it is now. And what gives me a somewhat pessimistic view is that people never seem to learn the lessons of history.

Wealth Dispersion and General Thoughts on the Future of Economics on a Saturday Afternoon

Here is an interesting graph of wealth distribution, or dispersion, as I call it from Cherchez La Verite.

I am not sure I agree with his conclusions or even his premise, not because I disagree but because it requires some thinking and leisure to digest it. But the data is most interesting.

I wonder if any of the quant economists have performed simulations on virtual populations, and then examined the results of varying different tax rates, and concentrations of wealth because of fiscal policy and regulatory structure, among other things.

I have an hypothesis that great concentrations of wealth lead to economic stagnation, but I am afraid that I have not the means or the talent anymore to conduct that type of research.

The difficulty in a study like this is that the assumptions are greatly magnified into the results. If you assume certain buying, spending, and savings behaviours, the downstream impact can greatly alter, and even distort, the outcomes.

And when people reason through this verbally, rather than perform a structured simulation based on transactions, the distortions increase by an order of magnitude or more based on their own biases.

I used to create simulations like this all the time, for industrial and commercial purposes, and also did a decent amount of econometric modeling. So I am sure someone is doing it somewhere. But I suspect they are doing it in think tanks and places where the outcome is predetermined by the basis of their grant.

Concentrated wealth magnifies the needs and predispositions of the holder. Since the amount they require for basic necessities can only consume so much, one would think that the amount spend on the aggregate of necessities will eventually be reduced. And what they do with their excess of necessity wealth is going to be greatly influenced by their character. Are they a gambler, who inherited the wealth? Are they productive and beneficent? Are they dissolute and venal?

And what about government? Taxation can concentrate enormous wealth in the government. What sort of government does one have, or does one assume? Are they warlike, productive, redistributive, and how corrupt? What about corporations? They can be like small governments, and levy taxes through monopoly and persistent frauds. How are they managed? Corporations are not rational machines, as the efficient market hypothesis would probably presume. Indeed, corporations are often much worse than governments in terms of sheer blockheadedness, greed, and short-termism.

Hard to say. But there is a related field of study in decision making theory, which looks not at wealth but the distribution of decision making power in organizations. It is concerned with the validity and effectiveness of decisions made across a range of broader consensus to a narrow oligopoly and even a great man dictatorship.

The general observation I came to in this study was that decisions tend to be more valid depending on the quality of the information, the facility of the evaluation of it, or intelligence/learning/experience, less the biases and distortions.

A decision becomes a little better if the information is more widely dispersed and a variety of actors can exchange freely in increasing and refining it. There is a point of decision dispersion where the returns not only diminish, but become counterproductive because of the noise and inability of new actors to add value, and actually detract from the process. But finally what I found interesting is that in the aggregate personal error, bias and distortions tends to diminish quickly as a detractor from the result, assuming a non-homogeneous population with some independence of thought.

So too this same sort of study can be applied to the concentration of wealth, since wealth is power. But it is even more interesting because spending habits will vary since the percentage of spending on essentials changes much more slowly than wealth can increase.

And how one assesses the outcomes is also essential. What is thought to be a 'good outcome?' Not necessarily in a rough measure like aggregate GDP, but perhaps GDP with modifiers like the median wage, and a poverty level of essential spending. This is important because so often economic policy arguments are presented with the goal of optimizing short term GDP.

Alas, I have little hope that this will be done now, for the US has had a leadership role in quantitative economic studies, and their work has been twisted generally into the service of whores, robber barons, and gamblers as the speculative society reaches a crescendo. But some day this too will change.