Economic wisdom from MIT (David Autor)

Notes from a Zoom talk today by David Autor, an economics professor at MIT. Whenever Democrats are in charge of the economy, I think it is worth listening to the “experts” at Harvard and MIT because that’s where the policy justifications come from.

Inequality is extreme in the U.S. and harmful, according to Autor. He did not explicitly say how he is measuring inequality, though. The charts that he presented seemed to show wages. But a previous slide showed the low and falling rate of labor force participation in the U.S. In other words, a lot of adults live in the U.S. despite $0 in earnings. What if he looked at spending power and lifestyle? Much of the U.S. welfare system is directed toward non-cash benefits, e.g., a free or low-cost apartment in public housing, a $3/month family subscription to MassHealth (Medicaid) that would be $20,000/year at market rates, SNAP (food stamps), Obamaphone, etc.. The non-working folks whom I know here in Massachusetts have a lifestyle that would cost $80-100,000 per year (after tax) to purchase at market rates (apartment in Cambridge or Boston, health insurance, etc.).

[See this Wall Street Journal piece: “The census fails to account for taxes and most welfare payments, painting a distorted picture. … In all, leaving out taxes and most transfers overstates inequality by more than 300%, as measured by the ratio of the top quintile’s income to the bottom quintile’s. More than 80% of all taxes are paid by the top two quintiles, and more than 70% of all government transfer payments go to the bottom two quintiles. … Today government redistributes sufficient resources to elevate the average household in the bottom quintile to a net income, after transfers and taxes, of $50,901—well within the range of American middle-class earnings.” See also the Work Versus Welfare Trade-Off, in which we learn that poor people are not stupid and Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare, in which employees cut their hours to be sure to maintain eligibility for free housing, health care, etc.]

Minimum wage should be much higher, according to Autor. What about the fact that employers won’t want to pay people way more than they’re worth? A friend’s Spanish language tutor, sitting at home in Guatemala with only a high school degree, on hearing about the proposed $15/year minimum wage, said “Won’t that mean a lot more unemployment since many people aren’t worth $15/hour?” Autor says that the government will invest in educating Americans to the point that they’re worth more. On a per-pupil basis and as a percentage of GDP, we already spend more than almost any other country on K-12 education; why aren’t American high school graduates already worth a lot to employers? Autor points out that the average American high school graduate is way less skilled than a high school graduate in other developed economies. “We should fix that.” Autor’s big solution for 13 years of government-run education that he says are generally ineffective is to add one more year: “universal pre-K”. With 14 years of pre-K through 12 and maybe another 5 years of taxpayer-funded college, a worker will surely find employers delighted to hire him/her/zir/them at $15/hour. (Autor also notes that many of today’s college graduates are going into personal service jobs at low wages.)

Borrowing is free. Interest rates have never been lower. We will grow our way out of any amount of borrowing that we do and, after paying back whatever we borrowed, be richer than if we hadn’t borrowed.

Apparently contradicting the above point, he says that successful Americans should pay vastly more in taxes than they’re currently paying. (Why does the government need all of this current tax revenue if borrowing is, in fact, free?) The capital gains tax rate should be much higher (but still not adjusted for inflation, so actually it would be more than 100 percent in a lot of situations, as it is already (if you bought an asset for $10,000 in 2000, for example, the BLS says you spent $15,700 in today’s mini-dollars; if you sell it for $15,000 in 2021 you’ve actually suffered a loss, but will owe capital gains tax nonetheless).

Estate taxes should be higher and there should be no step-up basis for the assets inherited.

Everything that Joe Biden is doing and has proposed is awesome and will propel the U.S. forward toward a dreamland of prosperity. “The Biden Administration is right to go all in rather than nibbling around the edges.” Can all of our dreams be achieved via bigger government? Autor would rather the government “create” better quality jobs than address inequality through the tax code. (i.e., what we really need is a planned economy, a point made by an emeritus professor and former senior MIT administrator, who asked whether Capitalism wasn’t the real source of inequality).

Autor was in sync with the folks at New Yorker magazine: “The President, channelling his inner Elizabeth Warren, pitches an American utopia after a dystopian plague year.”

(Trump’s fantasy was that Americans might not be rich enough to afford the work-free utopia that we desire; Biden is grounded enough to realize that utopia can be ours if we tax and borrow a little more.)

Readers: Have you been following Biden’s latest proposals, e.g., in last night’s speech? Are you as excited about bigger government as Professor Autor?

Related:

43 thoughts on “Economic wisdom from MIT (David Autor)

  1. The most analogous time in modern American history would be LBJ’s “Great Society.” Then like now you had a weak president who wanted to make a name for himself by curing society’s ills through spending tax payer money on all sorts of nonsense. LBJ’s objective was “to end poverty” which according to the guy you quote still hasn’t happened. The best and the brightest of that day thought this & the Vietnam War were both brilliant ideas. The upshot was stagflation, wage and price controls, shortages of this and that. The little gauze masks of that day were the people who wore WIN buttons — “Whip Inflation Now” to show their belief in the efficacy of wage and price controls. I don’t recall there was anywhere to hide from the dismal economic results — though people who bought treasuries when Treasuries were yielding 16% or so did quite well when Reagan and Volker took over.

  2. “family subscription to MassHealth (Medicaid) that would be $20,000/year at market rates,” – where was there a free market for insurance that we would know market pricing? That what not happened to contractors at my company when I was one, in most cases price of state insurance was considered less then $700 / month fake non-paying for hospitals and surgeries but Obamacare compliant family “prevention procedures” insurance + non-medical casualty cancer and cardio-vascular insurance ($30/month).
    Response to MIT economic proposals in short: we are pretty screwed for next 4 to 100 years.
    But there will be many opportunities to create tax shelters in Democrat financial industry. Asset managers will hire for those lucky to attend MIT pre-K. So MIT should be OK.

  3. There’s a curious slogan that’s had some currency lately, “It’s expensive to be poor,” which is usually accompanied by examples of high fees on overdrawn checking accounts, interest rates at payday loan outlets, etc. Explain to people that, for those poor folk who work the system, after getting Section 8, SNAP, Medicaid, SSDI, food bank handouts, etc, being poor is basically free. Whatever money you bother to earn can go towards Bud Lite and lottery tickets.

    I won’t blame anyone for working the system, but I wish people in the middle class (and up) knew what they were paying for. Or at least drop the guilt. Or at least stop hinting that I belong in the Gulag every time I mention this stuff.

  4. I have a friend who runs a small restaurant here in MA, making Tex-mex. He has not been able to fill his single open cashier’s position with a reliable employee for two months now, despite offering $18/hour on Indeed, for a totally unskilled candidate that he will train. Why? “They tell me: ‘Why go back to work when I’m collecting $700 a week in unemployment?”

    • I went to a Mexican restaurant in Asheville, North Carolina (Biltmore Village, actually) on Monday evening. The sign on the door: “We are very short staffed and no one wants a job right now. … ITS THE NEW PANDEMIC! Most of us are working doubles everyday.. PLEASE BE KIND to the ones that did show up for their job today!!”

      https://www.nytimes.com/interactive/2020/04/23/business/economy/unemployment-benefits-stimulus-coronavirus.html says that, as of mid-2020, collecting unemployment paid the same as the average wages for a worker in North Carolina.

    • And here in Oregon, our local school district sent out an email this week to inform parents that, while we are finally getting kids back into classrooms on a limited basis, we should expect a smattering of unplanned cancelled school days for the rest of the year because of a shortage of bus drivers. Starting pay for drivers is $16.78 – $18.37 (depending on experience).

  5. These people are all living in the stratosphere on another planet, and all they care about is keeping the gravy train going. It’s a crime. They should be in jail.

  6. Continuedly helping the poor with no conditions, or even worse, with no ending is a sure way to further sink the poor AND the middle class into oblivion. And if that’s not enough, you will take the country down to. Why? It is the middle class that pays for government programs; it is those making under $1 million who will be impacted the most, not the 1, 2, 3 or top N%’er or even those who make few millions.

    Any program for it to be successful must be timed with measurable result and deadline. This is no different from continuedly providing drug to a drug addict or alcohol to an alcoholic. The easier it is for them to get more of what they want with no end in sight, the deeper they will sink down the rathole and bring down with them everyone around them.

    Also, we keep talking about how the very rich has takes advantage of tax loopholes and all. Sure, they do. But what about the poor? Aren’t they too taking advantage of government programs and keep getting all sort of free money? Is there a research / data out there that shows how much we spent on programs for the poor vs. how much the top % avoids paying taxes? I would like to see this data if someone can find it.

    And another thing. We keep hearing how corporations use all sort of loopholes to avoid paying taxes. Fair enough. What about States and Local governments giving tax breaks and all sort of incentives to overbid and attract companies to their State, Cities and Town? Why offer those “evil” corporations ANY break to bring them to your State when they are not paying their fair share of taxes already?

    • George: How could “conditions” be applied and evaluated? You talk about “measurable result and deadline”. That sounds like a management task. Wouldn’t there end up being two government-paid condition evaluators for every person on welfare?

    • @Phil, you are right, just like a public school teacher cannot be measured, evaluated and fired no matter how incompetent s/he is, the same applies to those on government programs.

      Our government doesn’t have anything in place to measure social programs for success or failure and I think this is intentional. If they do, they will expose themselves and even worse alienate those on the programs. So, the only solution I can think of is to limit social programs as such they weird off for the recipient after 2-3 years. You are welcome to come back onto the program 2 or 3 more times during your lifetime but after that you are on your own. Of course, we both know this would never pass because it would be consider “cruel and unusual punishment”.

    • We keep hearing how corporations use all sort of loopholes to avoid paying taxes. ”

      “Loopholes” are just the Stupid Party’s (Republicans) method of thinking they pulled one over on the Democrats.

    • So, the only solution I can think of is to limit social programs as such they weird off for the recipient after 2-3 years. You are welcome to come back onto the program 2 or 3 more times during your lifetime but after that you are on your own.”

      Didn’t Bill Clinton end “welfare as we know it” when he implemented a 5-year lifetime limit on TANF (i.e. “welfare”)? (On the other hand, I believe there’s no time limitation/expiration on government-subsidized housing, food, and health care.)

    • @Deplorable, and because there is no real time limit on other government-subsidized programs such as housing, food, and health care, having TANF implies yet more free money. Thus, TANF didn’t work, isn’t working and will never work. TANF is just another welfare program on top of the many, no-string-attached, welfare programs our government has.

  7. The government should buy us 30 years of school. It would have been a lot easier than commuting for 10 years. The lion kingdom was ahead of its time in using school to avoid having to make money.

  8. The professor is in tune with the times. (Otherwise he’d be an unperson no one has ever heard of, like John Ioannidis.) Five years ago, young people didn’t like capitalism. I expect the dislike has only grown (is there a more up to date poll?).

    What’s disappointing though is the lack of boldness. If seeking profits is bad, why not simply abolish money and have all resources allocated by the Harris administration’s efficient and caring experts? Hard to make dollar profits if there are no longer any dollars! It’s not theoretical: money has been abolished before now, during a brave experiment. True, the experiment is not well regarded (yet?) but isn’t that just the capitalist press at work?

    • Phol Pot did that with expected results. People starved. I am sad about how successful the communist propoganda machine is and how unsuccessfully marketed are Milton Freidman’s Free Market theories. …How the American miracle of the 20th century is not compared directly to the Russian or Cuban experiments in the opposite of Free Markets. Can we call Marxism ‘coerced markets’?

    • Despite bold progressiveness of the good professor capitalist press subverted his deserved recognition and I have not heard about him prior to this talk. Can not wait for his talk posting and looking forwards towards adding him to my mental pantheon of progressive academics between Marx and Lenin.
      But I am not sure, the good economist seem to contradict 2 Albert Einstein;s quotes:
      “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” ( the MIT economics professor seems to imply that paying interest is earning it)
      “Many of the things you can count, don’t count. Many of the things you can’t count, really count.” (MIT professor support monetary supremacy, without sharing own money of course, as most good socialists and communists)
      “I am absolutely convinced that no wealth in the world can help humanity forward, even in the hands of the most devoted worker in this cause. The example of great and pure characters is the only thing that can produce fine ideas and noble deeds. Money only appeals to selfishness and always tempts its owners irresistibly to abuse it” (the MIT economics professor thinks that spending yet more money on universal pre-K will radically improve prospects of pupils of already world most expensive educational system)
      As a rule of thumb people who contradict Einstein do not do well in science, with their careers being complete jokes (see recent super-luminous speed neutrino work by bozos from CERN)

  9. It is more than a little bit grating to have a member of the most illiberal segment of our society, the University, lecturing us on how to spend our money — as the University is most prominent in our society for furthering racism and sexism, limiting free speech and furthering illiberal objectives.

  10. Everybody keeps complaining about the poor on food stamps, obamaphones and etc, but you all keep missing the main target which is rent seeking in the economy. Lawyers, investment bankers, management consultants, and other rent seekers are much more harmful to economy, because they extract much more money from productive people in the society than people on food stamps. The top 1%, of which the majority are rent seekers, own about 35% of the wealth in the US, most of which was generated through rent seeking on the productive class. The bottom 50% with their food stamps and obamaphones own less than 1% of the wealth. Somewhere in the middle you have the people that actually produce wealth in the country, the manufactures, farmers, engineers, construction workers, energy and other productive enterprises, the rent seekers take away much more wealth from the producers than the poor on food stamps.

    • ” Lawyers, investment bankers, management consultants, and other rent seekers are much more harmful to economy, because they extract much more money from productive people in the society than people on food stamps”

      Very good, comrade. Clearly, you studied the “Oсновы научного коммунизма” (Scientific communism) course very well, either at your college or on your own. You pass with flying colors.

      Marx, Das Capital:

      “It[capitalist mode of production] reproduces a new aristocracy of finance, a new sort of parasites in the shape of promoters, speculators and merely nominal directors; a whole system of swindling and cheating by means of corporation juggling, stock jobbing, and stock speculation”

      Lenin, PARASITISM AND DECAY OF CAPITALISM
      “Государство-рантье есть государство паразитического, загнивающего капитализма” (The rentier state is a state of parasitic, decaying capitalism).

      ibid:
      Hence the extraordinary growth of a class, or rather, of a stratum of rentiers, i.e., people who live by “clipping coupons”, who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies.

    • Comrade Ivan, I am very much in support of free private enterprise, but the US does not have a free capitalist economy, if the economy is controlled by the politburo or investment bankers it is still centrally controlled. A large part of the US economy is centrally controlled through the investment banking sector which greatly benefits the 1%. In the US, it is impossible to get a small business to a large company without the involvement of the investment banks.

      There is very little incentive to create anything of value, if it is much easier to rent seek and make money through “financial instruments”.

      The economic incentives for production and innovation have to be greater than rent seeking for long term stability of society. If the implementation of capitalism does not result in greater incentive for production and innovation over rent seeking, then it will collapse just like communism.

    • Comrade Pavel Корчагин, can you elaborate more on “it is impossible to get a small business to a large company without the involvement of the investment banks” If you say without complying with government preferred vendors point then I agree. And nevertheless in the past 30 years in the USA large companies came into existence that first were ridiculed by Wall Street and Investment Banker were brought at moment of IPO, some refusing participate. AMZN, GOOG and FB are coming to mind, Along with Acamai Technologies: “Akamai Technologies entered the 1998 MIT $50K competition with a business proposition based on their research on consistent hashing,[8] and were selected as one of the finalists.” Financial industry of course huge and influential but it possible never intersect with it and create good products – constrained by skills, resources available and of course government regulation. And of curse it is very hard to compete with China on price as long as regular manufacturing is concerned. That is more of a natural economic constraint. Where is the perfect place to create new companies that make unicorns or anything interesting with no start-up capital?

    • Comrade Trotsky, Google did try to limit the influence of investment bankers in the IPO and create a wider investment base, but they are an anomaly, they did not change the issuing of IPOs. The investment banks still control the IPO process. Amazon, Google and Facebook (aka Pravda) IPOs were underwritten by Morgan Stanley. Akamai was underwritten by Deutsche Bank. Amazon, Google, Facebook and Akamai have two top common investment management shareholders, Vanguard Group and BlackRock, which of course will have insider information to make sure that they never loose. The success of these companies will largely benefit a very small number of people at the top of the centralized investment banking politburo plus a handful of people that the politburo needs to run the companies. High level technical employees at Amazon and etc, will be paid a good wage, but they will still be paid less than the investment bankers rent seeking on the profits. It is much more economically rewarding to be working as an apparatchik for the investment bankers than a technical lead at Amazon.

      The investment banking politburo is very aware that it must keep control, a great example of this was with the GameStop short squeeze, where a large number of investors tried to take on the investment bankers, this uprising was quickly controlled by brokerages halting the purchases of GameStop and other shorted stocks.

      As for the perfect place to create new companies with no start up capital? There is none, Google did have the right idea by trying to create a much wider investment base, but this did not change the investment banking control of the large companies. In the US, starting around 1950 and continuing just before the 1980s, income gains were shared more equally and the income inequality was much lower compared with today, labor was also much more valued, . It looks like some of the crowd funding initiatives are successful at raising capital from a large base of investors, without investment banks or venture capitalists, but these are very small scale, that would not even pay for a lunch at an investment bank. The solution would be to somehow remove and decentralize the control from the investment banks, giving individual investors more control. Of course with the income inequality and decreasing value of labor, the number of possible individual investors is getting smaller, a large number of people are just trying to survive the week, let alone worry about where to invest. Productive innovation and labor need to be valued over rent seeking by society for long term stability. If a solution is not found and implemented, eventually the income inequality will cause society in the US to collapse.

    • The menace from the north will never stop! Pavel we know what you have done.

    • The point is that mentioned companies want to become public trading companies, with all possible pluses and minuses, and immediate jump in market valuation and shareholder (owners, early private investors and top employees) gain. Google already was a company with leading web search market share before IPO. I guess once people stepped over some moral threshold it is never enough $$. Google revenue is in adverbs, and adverbs were acquired bu Google technical capitalists by the way. Accusing venture capitalists is beyond the point. Many of them had themselves been technical pioneers of Silicon Valley and their track record s very strong, they made Silicon Valley.

    • Comrade Trotsky, the venture capitalists still need the investment bankers to go public and cash out. In venture capitalists in most cases were just the middle man between the founders and the investment banks. In the end the venture capitalists work for the investment bankers. It is easy, just follow the money trail.

      Can you please provide a link to support your claim that many of the venture capitalists had been technical pioneers of Silicon Valley?

      It looks like the majority of venture capitalists were not silicon valley pioneers, but well connected bankers.
      https://www.institutionalinvestor.com/article/b150qd9g0wp6yv/venture-capitals-early-pioneers

      Google, Facebook and Amazon maybe valuable, but the real technology innovators in the silicon valley were companies like Intel, Apple, Linear Technology, and Sun Microsystems.

    • “Can you please provide a link to support your claim that many of the venture capitalists had been technical pioneers of Silicon Valley?” Thiel comes to mind. As of Intel funding Kleiner Perkins venture capital firm comes to mind. Silicon Valley pioneer https://en.wikipedia.org/wiki/Eugene_Kleiner and HP research manager https://en.wikipedia.org/wiki/Thomas_Perkins_(businessman) with MIT degree. My understanding that even now venture capital firms tend to hire and promote those with science and engineering background. I think you confuse “investor bankers” with investors. Investors are those who made or inherited money and they do not like to pay large fees to investment bankers. There are few highly innovative billionaires in hedge funds, one of them top mathematician https://en.wikipedia.org/wiki/Jim_Simons_(mathematician) , and that’s it . Rich people invest into venture capital.

  11. Got a love it when Republicans pass a tax break that mostly benefits the rich and then cry when the Democrats want a $15.00 minimum wage.

    You can understand why people collecting $700.00 per week unemployment don’t want to return to work. They would only get $600.00 per week for 40 hours @ $15.00 per hour…before taxes.

    Not to worry, unemployment will soon run out and the minions will be forced to beg for scraps soon enough.

    • @Jim, someone who is making $600 a week, should be making a whole lot more IF he/she takes his/her job seriously, arrives to work on time, pays attention to details, works hard and makes sure to keep his/her boss happy. He/she will then build a work ethic, skills and relationship. He/she can then apply for a better paying job with more responsibility and thus get paid $1000 a week and even far more over time.

      The irony of it all? You really don’t need a college degree to move up in live. You just need a good work ethic and be responsible.

    • Jim,
      Last Republican tax cut was fairly productive, resulted in more jobs and capital re-importation. Wish it were followed by more tax cuts vs what we have now. Set minimum wage at $100 / hour, – it will not matter. Unemployment is going to skyrocket along with cost of basic goods. Rich people did not drive cost of gallon of milk from $1.40 in 2000 to $4.00 today – but minimum wage was one of the factors. If raising minimum wage worked why suggest just $15/hour? Rich people will remain rich and drive prices of luxury goods – Ferrari, Lamborghini cars and private jet planes, totally irrelevant for me for example, There will be many more “poor” – unemployed supported by remaining workforce to the tune of average income which will nominally shift upwards but not as fast as common good prices due to administrative overhead that is always increasing. In second half of 19th – yearly 20th century there was no minimum wage, prices were decreasing and money supply deflating and it was time of economic revolutionary changes and life improvement for all Americans – automobile revolution, electricity revolution, central water in houses and buildings, refrigeration going mainstream, airplanes invented and mass-produced, revolutionary medical improvements, all with food prices falling. And financial industry with lawyers and landlords thrived while people there were working shorter workdays.

    • George A….Sorry, but what world are you living in? The employers paying minimum wage are doing that for a reason.

      I agree that a good work ethic may get you ahead in some professions, but minimum wage payers just move on to the next applicant. If you work hard you might get another 25 cents an hour…thanks!

      Comrade T…you’re just spouting a load of hyperbole. The folks surviving on minimum wages have problems you’re not even aware off, or you can relate to. Yeah, let’s pay them less so the price of milk stays low…right.

    • @Jim, of course the employers who are paying minimum wages are doing it for a reason. Those are jobs that require no skill and are not meant to be a life long courier job. If someone by his/her late 20’s, or into 30’s is still at a job that requires no skill and is still getting paid $15 an hour or even $25, that is the fault of the employee, not the employer.

      Your good work ethic isn’t for your current low paying job with no skill requirement employers to pay you more. The good work ethic is for you and only you to use to move to the next job that pays more. That’s where and how you get the $25 pay raise and more and more vs stuck at $0.25 raise or even less.

    • Jim, I was starting-up too, with my base capital stolen by comrades Lenin and Stalin, and there were times when $15/hour was a decent living wage and something to look up to, not that long time ago, back when minimum wage was well below $5. I do not say pay less – I say pay more! If it helps, it will not, it will put millions more out of work and set-off another wave of inflation. Minimum wage should be set by mutual agreement between employee and the employer and not out of blue sky by well paid government bureaucrat. Either employee or employer can hold advantage at some point and negotiate. And I am for international competitiveness of US workforce being protected by elected government because macroeconomic and political issues affect it. But new US government takes opposite approach – triple down on inflationary pressures in the US and open US workforce not for completion of skill only which I support but for competition with deflationary economies where goods and living are much cheaper and thus agreed wages are lower.

  12. ” The folks surviving on minimum wages have problems you’re not even aware off, or you can relate to”

    The reality was and is exactly the opposite to what you claim.

    I surmise that Comrade Trotsky and I, having lived through the happy years of the Soviet economic miracle/paradise, experienced the lifestyle that “the folks surviving on minimum wages are not even aware of or can relate to”. E.g. after Khrushchev’s agriculture reforms, one had to stand in a line for hours to buy a loaf of bread without any guarantee of success, no matter what one’s salary was, minimum or maximum. People in Venezuela can probably relate to that quite well.

    In comparison to the Soviet Union or Venezuela, the life of “the folks surviving on minimum wages” in this country is one of the luxury and hedonism.

    As a pure speculation on my part, Comrade Pavel’s ignorance of where the Marxist-Leninist ideas he seems to like so much may lead a society can probably be explained by his growing up in the post-Soviet space and thus avoiding a healthy dose of anti-marxist vaccine that would have protected him from getting infected by the commie virus caught likely in one of Canada’s nice colleges.

    Your uninformed statements “on the world you are living in” are entirely unsurprising but regrettable, your being a product of this country education system from the kindergarten to college.

    • Comrade Ivan, do not lecture me, as I was born in Prague, I am fully aware of the communist menace. As for my education, I went through engineering school in Canada, where in one engineering school they used to parade a naked stripper on a horse (“Lady Godiva”) to celebrate the start of the academic year. In Canada, I am considered a right wing capitalist by friends who went through a liberal arts education.

      Once you get beyond your PTSD from having to wait in a bread line up, you will realize that I am not arguing for communism, I am pointing out the dangers of an elite class controlling a significant amount of wealth in a country and driving the majority to poverty through income inequality. It does not matter if this elite class is the politburo or the investment bankers the end result is the same, and just like the USSR, the US will collapse.

      And just like in the old USSR, currently in the US there is very little economic mobility between the classes. You cannot have a capitalist economy if you do not have economic mobility.

      Below is a link to the economic mobility ranking (aka the opportunity to succeed through hard work). You would probably consider the top 5, Denmark, Norway, Finland, Sweden and Iceland communist countries, correct? The US is rated at number 27, behind the Czech Republic at 19. Russia is at 39 and China is at 45.

      https://www.visualcapitalist.com/ranked-the-social-mobility-of-82-countries/

    • Panel, I am not trying to lecture to someone like you or Jim because it would be an exercise in futility as evidenced by your statements that almost verbatim match Marx/Lenin utterances on “parasitic classes”.

      That is not surprising because you did grow up in the post-Soviet space, then were subjected to some/substantial viral load by your lefty college pals/professors, and are not entirely aware of where ideas you espouse may lead to, therefore. That’s a pity.

    • “surviving” in this context means not be able afford nice apartment in a coastal city in the United States. Thanks God it does not mean not having enough food. Sorry Pavel but some BS-y socialist graphics will not do. Nobody is leaving USA for Czech Republic although beer is great, thanks for giving us habit of Pilzner under patriotic name of Zhigulevskoye. It took decades to cure PTSD of Pilzner. It happen that I have a friend who moved to the top of business /sales/ management tiers in Czech Republic from a proverbial zero. Standards of living for him is not really comparable to not only his American piers but also to those who achieved less in America. I will spare details but they would be funny for anyone living in the USA. Top tier is the USA means Mr. Bezos, Mr. Zuckerberg, etc… By he way, Czech minimum wage too is a little over a half of current US minimum wage, and without surprises it is reflected almost 1 to 1 in the price of milk, Czech milk price being 59% those in the USA https://www.costtotravel.com/cost/milk-in-czech-republic

    • Ivan, it is obvious that you have no knowledge of economics. You keep saying the blaming parasitic classes makes me a Marx/Lenin, this is not a logical argument. Adam Smith covered rent seeking before Marx/Lenin. Do you consider Adam Smith a communist? Parasitic classes are not very helpful to capitalist economies, if they get significantly larger than the productive part of the economy then the incentive to produce value/wealth is removed. In order for a capitalist economy to grow, there needs to be an incentive to produce value / wealth.

      Can you explain, how a large parasitic class is helpful to a capitalist economy?

      An article on rent seeking / parasitic classes by a professional engineer
      https://medium.com/swlh/the-economy-is-broken-rent-seeking-broke-it-c1a4a94d77a6

      Comrade Trotsky, if you are comparing the 1%, yes then in the US the 1% have the most power and wealth compared with most of the 1% in the world. Some of my relatives in the Czech republic have done reasonable well running their own small business over the years, but yes, they are much more limited in growth potential compared to the US, which is due to the protected markets in the EU and the much smaller size of the market in Czech Republic. I would predict that they are in general more happy than the average small business owner in the US, even if their net worth is smaller. I would also predict that the lower middle class in the Czech Republic is better off than the lower middle class in the US. The Czech Republic is still in a transition, it will be very interesting what the economic situation will be in 10 years compared with the EU and the US.

      As for “BS-y socialist graphics”, can you please elaborate? Calling a graph socialist just because it does not agree with your view is not a logical argument. What is your view on economic mobility, do you think it is important for a capitalist economy?

      “The American dream” was based on economic mobility, if this is gone, then “The American dream” is dead.

      I would predict that the middle classes, lower middle classes and poor in Denmark, Norway, Finland, Sweden, Iceland and Canada are much better off than the corresponding classes in the US.

    • Pavel, creators of BS-y socialist graphics, de-facto modern bureaucrat-priests, is a major part pf modern rent sicker class. I think that you burying American dream is overkill, most our top 0.001 percent came from middle class and some from statistical “poor” (not poor comparable to other societies). And US surviving non-millennial “poor” posses automobiles, not bicycles aka Netherlander lower middle class. I wish best to Czech Republic and it is interesting how it did remarkably well in post – Eastern block era. You yourself called growth constraint for Czech economy – “due to the protected markets in the EU ” – modern bureaucrat rent-seekers. Singapore has very small internal market and did remarkably well nevertheless, not bothering to looking for capital-providing rent seekers excuse. I agree that the moment those making money by assuming risk got their bad bets covered from public treasury they became modern rent-seekers and I agree that US is going into wrong direction now but adding “engineers” and “technical leads” to those above competition is not the solution. Technocracy leads to incompetency, just look at EU and our own Dr. Fauci.

    • Pavel, the graphics reminded me old Soviet graphics on how USSR had beaten America in producing steel and pig iron and railroad cars and how America is on its last legs. May happen now under Brezhnev’s contemporary US president but it was premature back than

    • Pavel,

      It is unfortunate that you continue to criticise the matters you (and the “engineer”) seem to know so little about and offer remedies that are worse than the disease. As another exercise in futility (one of many !), let us focus on just two examples.

      1. The “engineer” from your article states the following: “Investing in futures or derivatives has taken many forms throughout history. In 1998 OTC stock derivatives were introduced in the United States. Here again, we have another example of rent-seeking.”

      Anyone who bothered to learn something about derivatives knows that they are just a tool that provides ability to hedge against losses, facilitate the underlying asset price discovery, improve market efficiency, etc. As any tool, like a knife, they can be abused, of course, but the benefits outweigh the drawbacks.

      According to the “engineer” logic, a typical Northeastern homeowner signing a seasonal oil delivery contract with a guaranteed price is a parasite because he engages in future trading (technically “forward”, a custom form of futures).

      2. GME. “this uprising was quickly controlled by brokerages halting the purchases of GameStop and other shorted stocks”

      The brokerages halted trading due to inability to post the large collateral requested by the DTCC to protect the DTCC from possible settlement losses. Posting the collateral is everyday business practice, the only difference was the huge amount of the collateral in this case. For a simple explanation, see
      https://www.coindesk.com/what-really-happened-when-robinhood-suspended-gamestop-trading

      One could argue that modern technology makes T+0 settlement already possible (instead of T+2), but if one reads more that the Communist Manifesto on the subject one might realize that shortening the settlement period may lead to other than inability to settle risk exposure situations. Th DTCC, by the way, is pushing for T+1.

      In short, there was no sinister plot on the part of the evil brokerages that decided to sacrifice trading revenues in order to quell the brave individual investors uprising but rather an unfortunate but arguably predictable (to Robingood) course of events that led to the situation.

      https://www.bloomberg.com/news/articles/2021-02-06/robinhood-s-collateral-crunch-explanation-puzzles-wall-street

    • Landlords are not the real issue here, rent seekers are.

      More and more young folks, at a younger age, are now seeking to move out on their own and rent vs. staying home to build an income to buy a home. That creates a rental market demand and demand sets rent prices.

      Also, since renters today are spending far more of their income on other things then just rent. They want to keep up with their friends and social network. They eat out more, attend events and parties, have expansive devices (smart phone, game stations, etc.), go on vacations, et. al. This takes more money out of their income. And of course they have student loan and car loan to pay too.

      As a result, renters cannot save enough for a down-payment to buy their own home. They will remain renters and that further drives up the rent market as more renters come to the market.

Leave a Reply

Your email address will not be published.