Thanks for the great video I'm curious to hear, what are the things that you think Austrian's fundamentally misunderstand? I am trying to learn more about different economic theories
Making labor more productive in order to better share in profits has not worked lately. My understanding is labor participated in productivity gains up until the mid-1970s . . . since then not-so-much. There is little reason to suggest they may be linked again in the near future. I also believe income and wealth inequality has and will continue to adversely affect the economy. You mention you’re not sure how to handle this problem of vast capital accumulations. It would seem a sufficiently progressive income tax code would go a long way toward solving the income part of the problem.
Hey John, I agree with a lot of what you've written. I can clarify a few things though. When I say productivity growth is the key, I am speaking of real output, not nominal. If we want to be able to provide a robust safety net, with challenging demographics, then labor must learn to produce more as the demands on the programs rise. I have not run the data, but I suspect that a large part of the decoupling of wages and productivity is due to a growing social safety net (among other things that have reduced labor bargaining power). The growth in nominal costs of Social Security and Medicare means that labor _must_ necessarily consume a smaller proportion of real output. If social programs consume 30% of GDP, than labor can only consume 70%, regardless of nominal wages. Wealth inequality is a serious problem from a "rent-seeking" and debt perspective, rather than real output. The Rich consume more real output than your average joe, but not much more. Since such a large part of their income in invested, absent a policy change, it means ever greater debt burdens on the private sector to offset the savings. Gov can play a key roll in preventing overly burdensome private debt, but I'm not sure that a progressive tax system is a complete answer (although I certainly support some sort of progressive system). It was a major dilemma that Piketty tried to address in his work "Capital." He essentially believed a progressive tax system was futile unless all global governments developed a unified system (not likely). Otherwise, the rich simply take their wealth to another country. One alternative that I am fond of is a _basic income_. Have government mail a monthly check to every citizen to help labor reduce debt (ie reduce the dependence on borrowing and rent-seeking). There are challenges with this system as well, but it seems the least disruptive of the ideas I've come across so far. Thanks for watching, and thanks for the comment! :) Wayne
@@TheBalancedAmerican The decoupling of wages of the 1970s happened in the anglosphere, but not in other countries. The "what happened in 1974" effect for example is not observable in France or Germany, but prominent for the UK and Australia.
UBI and technological growth will not work, because the rentier class captures an increasingly large portion of the capital, all of it in the limit, leaving only as much as needed for the productive forces to barely survive. That is law of wages and is as true for company towns and serfs as for futuristic cyberpunk societies. You can not solve moral and political problems with economic means, just like you can't fight a robber by producing more, he'll simply have more money and you'll be more tired. The current "laying down" and "great resignation" movements are the same as silent revolt of slaves who will do the least possible work as they don't own the upside. The solution is also the same - competition among political systems, with the one which guarantees workers that they keep the upside winning the top talent. Distributing the capital ownership more broadly, like the US has done many times before and will probably do again, brings in the most productive talent, and incentivises them to work hard. If the US does not do it - some other country or corporation will impose draconian measures preventing capital concentration, and you and I will be in that country real soon. In fact, that is what FAANG are trying to do and this is why they have captured top talent.
"wage share of labour is going to decline as a total share of income". Ok i understtod that it came as a result of acummulated capital assets, but dont anuderstand why and what it actually means ?
+Zvone st Much of the impact greatly depends on productivity growth. If productivity (real GDP) growth stalls, than inequality can lead to a reduction in the standard of living of the working population, offset by an increase in the relative standard of living of The Rich, and retired. Workers will need to work harder and harder for less and less. This scenario would cause significant political and economic volatility. On the other hand, if productivity soars, than the _real_ standard of living of everyone can increase, although there will still be a shift of aggregate _real_ wealth to The Rich, and retired. In this scenario, people may not notice or care about growing inequality, because everyone is stilling 'winning.' Basically, if the gap between savers and producers continues to growth, the only thing that will prevent a complete breakdown is technology, enabling workers to produce ever greater _real_ abundance. Unfortunately, productivity growth has slowed significantly in the last ten years. fred.stlouisfed.org/series/PRS88003093 From a finance perspective, growing inequality should result in ever declining nominal rates, as more-and-more savings is searching for fewer-and-fewer borrowers, since workers incomes can only take on so much debt before they reach a debt-ceiling. The Central Bank will push the debt-ceiling up by reducing nominal rates, but this faces its limits when interest rates reach zero. Declining borrowers typically means rising financial asset prices as savers bid up equity, instead of using the money for productive investment or consumption. This is essentially the position we're in now...low nominal rates, and increasing asset prices. This is why the Stock Market has soared during the recession, savers have nowhere else to put their money. Even worse, savers are levering into equities, borrowing money to purchase financial assets, which produces no gain for real GDP. In general, disequilibrium between savings and _productive_ borrowing is a big deal, and economists are still unsure of all the consequences, or how to fix it. =/
These videos are awesome man. I will share the shit out of this.
Thanks for the great video
I'm curious to hear, what are the things that you think Austrian's fundamentally misunderstand?
I am trying to learn more about different economic theories
Making labor more productive in order to better share in profits has not worked lately. My understanding is labor participated in productivity gains up until the mid-1970s . . . since then not-so-much. There is little reason to suggest they may be linked again in the near future.
I also believe income and wealth inequality has and will continue to adversely affect the economy. You mention you’re not sure how to handle this problem of vast capital accumulations. It would seem a sufficiently progressive income tax code would go a long way toward solving the income part of the problem.
Hey John,
I agree with a lot of what you've written. I can clarify a few things though.
When I say productivity growth is the key, I am speaking of real output, not nominal. If we want to be able to provide a robust safety net, with challenging demographics, then labor must learn to produce more as the demands on the programs rise.
I have not run the data, but I suspect that a large part of the decoupling of wages and productivity is due to a growing social safety net (among other things that have reduced labor bargaining power). The growth in nominal costs of Social Security and Medicare means that labor _must_ necessarily consume a smaller proportion of real output. If social programs consume 30% of GDP, than labor can only consume 70%, regardless of nominal wages.
Wealth inequality is a serious problem from a "rent-seeking" and debt perspective, rather than real output. The Rich consume more real output than your average joe, but not much more. Since such a large part of their income in invested, absent a policy change, it means ever greater debt burdens on the private sector to offset the savings.
Gov can play a key roll in preventing overly burdensome private debt, but I'm not sure that a progressive tax system is a complete answer (although I certainly support some sort of progressive system). It was a major dilemma that Piketty tried to address in his work "Capital." He essentially believed a progressive tax system was futile unless all global governments developed a unified system (not likely). Otherwise, the rich simply take their wealth to another country.
One alternative that I am fond of is a _basic income_. Have government mail a monthly check to every citizen to help labor reduce debt (ie reduce the dependence on borrowing and rent-seeking). There are challenges with this system as well, but it seems the least disruptive of the ideas I've come across so far.
Thanks for watching, and thanks for the comment! :)
Wayne
@@TheBalancedAmerican The decoupling of wages of the 1970s happened in the anglosphere, but not in other countries. The "what happened in 1974" effect for example is not observable in France or Germany, but prominent for the UK and Australia.
UBI and technological growth will not work, because the rentier class captures an increasingly large portion of the capital, all of it in the limit, leaving only as much as needed for the productive forces to barely survive. That is law of wages and is as true for company towns and serfs as for futuristic cyberpunk societies.
You can not solve moral and political problems with economic means, just like you can't fight a robber by producing more, he'll simply have more money and you'll be more tired.
The current "laying down" and "great resignation" movements are the same as silent revolt of slaves who will do the least possible work as they don't own the upside.
The solution is also the same - competition among political systems, with the one which guarantees workers that they keep the upside winning the top talent. Distributing the capital ownership more broadly, like the US has done many times before and will probably do again, brings in the most productive talent, and incentivises them to work hard.
If the US does not do it - some other country or corporation will impose draconian measures preventing capital concentration, and you and I will be in that country real soon.
In fact, that is what FAANG are trying to do and this is why they have captured top talent.
"wage share of labour is going to decline as a total share of income". Ok i understtod that it came as a result of acummulated capital assets, but dont anuderstand why and what it actually means ?
+Zvone st
Much of the impact greatly depends on productivity growth. If productivity (real GDP) growth stalls, than inequality can lead to a reduction in the standard of living of the working population, offset by an increase in the relative standard of living of The Rich, and retired. Workers will need to work harder and harder for less and less. This scenario would cause significant political and economic volatility.
On the other hand, if productivity soars, than the _real_ standard of living of everyone can increase, although there will still be a shift of aggregate _real_ wealth to The Rich, and retired. In this scenario, people may not notice or care about growing inequality, because everyone is stilling 'winning.' Basically, if the gap between savers and producers continues to growth, the only thing that will prevent a complete breakdown is technology, enabling workers to produce ever greater _real_ abundance. Unfortunately, productivity growth has slowed significantly in the last ten years. fred.stlouisfed.org/series/PRS88003093
From a finance perspective, growing inequality should result in ever declining nominal rates, as more-and-more savings is searching for fewer-and-fewer borrowers, since workers incomes can only take on so much debt before they reach a debt-ceiling. The Central Bank will push the debt-ceiling up by reducing nominal rates, but this faces its limits when interest rates reach zero.
Declining borrowers typically means rising financial asset prices as savers bid up equity, instead of using the money for productive investment or consumption. This is essentially the position we're in now...low nominal rates, and increasing asset prices. This is why the Stock Market has soared during the recession, savers have nowhere else to put their money. Even worse, savers are levering into equities, borrowing money to purchase financial assets, which produces no gain for real GDP.
In general, disequilibrium between savings and _productive_ borrowing is a big deal, and economists are still unsure of all the consequences, or how to fix it. =/
thank You !