Chance favors the concentration of wealth UMNewsUniversity of Minnesota 612-624-5551, email@example.com July 22, 2011 Chance pushes wealth into the hands of a few, a new University of Minnesota study shows. A new model predicts that chance pushes wealth into the hands of a few By Deane Morrison Most of the wealth in our society is invested in businesses or other ventures that may or may not pan out. Thus, chance plays a role in where the wealth of a society will end up. But does chance favor the concentration of wealth in the hands of a few, or does it tend to level the playing field? "Predictions from this model about how wealth is distributed were more accurate than predictions from classic economic models," says first author Joseph Fargione, an adjunct professor of ecology, evolution and behavior. Their results have implications for economic growth, the researchers say. How it works The model predicted that the rate at which wealth concentrates depends on the variation among individual return rates.
The Greater Recession: America Suffers from a Crisis of Productivity - Derek Thompson - Business In fact, real wages for middle class men have declined by 28 percent since 1969, according to a report from the Hamilton Project. For men without a high school degree, they've fallen by a whopping 66 percent. "Stagnation is too weak a word," said Michael Greenstone, author of the report. "This is decline." "The decline in earnings shakes the core of the American Dream." Economists got it wrong, Greenstone said, because they compared wages among all working men rather than among all "working-age" men. "This decline in the earnings opportunities for men has had profound influences on American society," Greenstone said. This finding has deep implications. ALL ABOUT PRODUCTIVITY(or: If We're Working Less, Who's Working More?) Americans have a complicated relationship with productivity. Don't ask David Allen to explain this. We know where the jobs are going -- to machines, software, and foreign workers. What's so bad about 1950s wages, anyway? Poverty is overrated. It doesn't end there.
Finance & Development, December 2010 - Leveraging Inequality Finance & Development, December 2010, Vol. 47, No. 4 Michael Kumhof and Romain Rancière PDF version Long periods of unequal incomes spur borrowing from the rich, increasing the risk of major economic crises THE United States experienced two major economic crises over the past 100 years—the Great Depression of 1929 and the Great Recession of 2007. Are these two facts connected? Shifting wealth We looked at the evolution of the share of total income controlled by the top 5 percent of U.S. households (ranked by income) compared with ratios of household debt to income in the periods preceding 1929 and 2007 (see Chart 1). In the more recent period (1983–2007), the difference between the consumption of the rich and that of the poor and middle class did not widen as much as the differences in incomes of these two groups. In other words, the increase in the ratios of debt to income shown in Chart 1 was concentrated among poor and middle-class households. Modeling the facts Policy options References
The Causes of Rising Income Inequality Changes in labor's share of income play no role in rising inequality of labor income: by one measure, labor's income share was almost the same in 2007 as in 1950. It's one of the biggest socioeconomic questions in America today: Why is income inequality rising in the United States, especially between the top 10 percent of workers and everybody else? In Controversies about the Rise of American Inequality: A Survey (NBER Working Paper No. 13982) , authors Robert J. Gordon and Ian Dew-Becker provide a comprehensive survey of seven aspects of rising inequality that are usually discussed separately: changes in labor's share of income; inequality at the bottom of the income distribution, including labor mobility; skill-biased technical change; inequality among high income groups; consumption inequality; geographical inequality; and international differences in the income distribution, particularly at the top. There is little evidence on the effects of imports. Why the disparity?
Why the Rich Are Getting Richer The U.S. economy appears to be coming apart at the seams. Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression. Many of those laid off fear that the jobs they have lost -- the secure, often unionized, industrial jobs that provided wealth, security, and opportunity -- will never return. They are probably right. And yet a curious thing has happened in the midst of all this misery. This is what the political scientists Jacob Hacker and Paul Pierson call the "winner-take-all economy." To continue reading, please log in. Don't have an account? Register Register now to get three articles each month. As a subscriber, you get unrestricted access to ForeignAffairs.com. Register for free to continue reading. Registered users get access to three free articles every month. Have an account?
Finance & Development, September 2011 - Unequal = Indebted Finance & Development, September 2011, Vol. 48, No. 3 Michael Kumhof and Romain Rancière PDF version Higher income inequality in developed countries is associated with higher domestic and foreign indebtedness ECONOMISTS have long worried about the growing chasm between countries that borrow heavily internationally and those that dish out the loans. But there is another, domestic dimension to the pileup of international obligations. Why the United States has built such persistent and large deficits in its current account—which covers all noninvestment international transactions, including exports and imports, dividends and interest, and remittancese—is a matter of some debate. In current research we therefore extend the work reported in “Leveraging Inequality” (F&D, December 2010), which dealt with only the United States, to include an open-economy dimension. Modeling the facts An economic model can clearly illustrate these links between income inequality and current account deficits.
Annual income of richest 100 people enough to end global poverty four times over Downloads “We can no longer pretend that the creation of wealth for a few will inevitably benefit the many – too often the reverse is true.” Jeremy Hobbs Executive Director, Oxfam International Published: 19 January 2013 Leaders must aim to bring down global inequality at least to 1990 levels An explosion in extreme wealth and income is exacerbating inequality and hindering the world’s ability to tackle poverty, Oxfam warned today in a briefing published ahead of the World Economic Forum in Davos next week. The $240 billion net income in 2012 of the richest 100 billionaires would be enough to make extreme poverty history four times over, according Oxfam’s report ‘The cost of inequality: how wealth and income extremes hurt us all.’ The richest one per cent has increased its income by 60 per cent in the last 20 years with the financial crisis accelerating rather than slowing the process. New global deal needed Hobbs said: “We need a global new deal to reverse decades of increasing inequality.
Where Is Our Oil Price Collapse? From Jim Quinn of The Burning Platform Where Is Our Oil Price Collapse? Make no mistake about it, without plentiful, cheap, and easy to access oil, the United States of America would descend into chaos and collapse. The fantasies painted by “green” energy dreamers only serve to divert the attention of the non critical thinking masses from the fact our sprawling suburban hyper technological society would come to a grinding halt in a matter of days without the 18 to 19 million barrels per day needed to run this ridiculous reality show. “The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. In the six years since this report there has been unprecedented oil price volatility as the world has reached the undulating plateau of peak cheap oil. But, a funny thing happened on the way to another oil price collapse. Some short term factors will continue to support higher oil prices. Surging Developing World Demand A Plunging US Dollar
Free exchange: All men are created unequal INEQUALITY is one of the most controversial attributes of capitalism. Early in the industrial revolution stagnant wages and concentrated wealth led David Ricardo and Karl Marx to question capitalism’s sustainability. Twentieth-century economists lost interest in distributional issues amid the “Great Compression” that followed the second world war. But a modern surge in inequality has new economists wondering, as Marx and Ricardo did, which forces may be stopping the fruits of capitalism from being more widely distributed. “Capital in the Twenty-First Century” by Thomas Piketty, an economist at the Paris School of Economics, is an authoritative guide to the question. The book suggests that some 20th-century conventional wisdom was badly wrong. The centrepiece of Mr Piketty’s analysis is the ratio of an economy’s capital (or equivalently, its wealth) to its annual output. Pre-1914 economies were very unequal. Victorian values
Income inequality, the issue that won't go away The Rise and Consequences of Inequality in the United States Alan B. Krueger Chairman, Council of Economic Advisers January 12, 2012 Edited Remarks as Prepared for Delivery The topic I will address today is inequality. Although I have done much research in my career on inequality, I used to have an aversion to using the term inequality. But the rise in income dispersion – along so many dimensions – has gotten to be so high, that I now think that inequality is a more appropriate term. My theme in this talk is that the rise in inequality in the United States over the last three decades has reached the point that inequality in incomes is causing an unhealthy division in opportunities, and is a threat to our economic growth. President Obama summarized the rise of inequality very succinctly in his Osawatomie, Kansas speech, when he said, “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk.” But we do not.
The art of business and the science of economics Business and economics are tied up together in lots of people's minds. After all, they're both about money, aren't they? An awful lot of people seem to believe that economics is Big Business and business is small economics. (Even the generally reliable Economist magazine seems to use this definition in deciding what should go in its business or economics sections.) The failure to keep the two apart leads to some bizarre misconceptions in the popular understanding. Business is the art of commerce. Sure there are skills that are important for successful business life - like managing people well, knowing how to make a spreadsheet, giving great powerpoint - but there’s nothing academic about them. So why does business studies exist as an independent academic subject? Secondly, business professionals want a useable economics and are willing to pay for it. Economics is scientific in the sense that its positive goal is the disinterested study of economic phenomena. Two kinds of utilitarianism
Desigualdad, ¿El problema social de los próximos años? - Econstuff | Econstuff Durante los últimos días la econosfera ha puesto el foco en la desigualdad, un tema de creciente interés tanto por su relación con la actividad económica como por el problema social que representa, en un momento en el que parece que dejamos una crisis económica atrás mientras la crisis social permanece como una parte cada vez más relevante de la nueva realidad que se está gestando. Ya en la reunión que tuvo Janet Yellen con los senadores, un tema recurrente por parte de estos fue preguntarle sobre la desigualdad y lo que se podía hacer para solucionar un problema que a veces no se remedia únicamente con aumentos continuados del PIB. Janet Yellen (1): This is a very serious problem, it’s not a new problem, it’s a problem that really goes back to the 1980s, in which we have seen a huge rise in income inequality En el anterior gráfico podemos ver la evolución de dos ratios para el caso Español. Fuente: Inequality from generation to generation: the United States in Comparison
Wealth doesn't trickle down – it just floods offshore, research reveals | Business | The Observer The world's super-rich have taken advantage of lax tax rules to siphon off at least $21 trillion, and possibly as much as $32tn, from their home countries and hide it abroad – a sum larger than the entire American economy. James Henry, a former chief economist at consultancy McKinsey and an expert on tax havens, has conducted groundbreaking new research for the Tax Justice Network campaign group – sifting through data from the Bank for International Settlements (BIS), the International Monetary Fund (IMF) and private sector analysts to construct an alarming picture that shows capital flooding out of countries across the world and disappearing into the cracks in the financial system. Comedian Jimmy Carr became the public face of tax-dodging in the UK earlier this year when it emerged that he had made use of a Cayman Islands-based trust to slash his income tax bill. "These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network.
John Lanchester · The Non-Scenic Route to the Place We’re Going Anyway: The Belgian Solution · LRB 8 September 2011 Quarterly GDP data don’t, on the whole, tend to make the person studying them laugh out loud. The most recent set, however, are an exception, despite the fact that the general picture is of unrelieved and spreading economic gloom. Instead of the surge of rebounding growth which historically accompanies successful exit from a recession, we have the UK’s disappointing 0.2 per cent growth, the US’s anaemic 0.3 per cent and the glum eurozone average figure of 0.2 per cent. That number includes the surprising and alarming German 0.1 per cent, the desperately poor French 0 per cent and then, wait for it, the agreeably frisky Belgian 0.7 per cent. Why is that, if you’ve been following the story, laugh-aloud funny? Because Belgium doesn’t have a government. I’m told that the cliché du jour in financial markets involves reference to ‘uncharted territory’. A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. Would that matter?