The Eighth Way to Think Like a 21st-Century Economist
by Steve Roth
The Eighth Way to Think Like a 21st-Century Economist
The teams at Rethinking Economics and Doughnut Economics have launched a contest for entries, asking “What’s the 8th Way to Think Like a 21st Century Economist?” It builds on Kate Raworth’s seven ways, here.
Here’s my entry:
8. Widespread prosperity both causes and is greater prosperity: From false tradeoffs to collective well-being.
“Okun’s Tradeoff” — the idea that inequality is necessary for economic prosperity and growth — is baked into 20th-century economic thinking. It probably carries some significant truth in a generally egalitarian economy. But in the 21st century, with wealth and income concentrations beyond even what we saw in the 1920s, with that era’s disastrous denouement, it just doesn’t hold water.
Today’s extreme concentrations cause us all, collectively — especially our children — to have less. (Excepting those few who are lucky enough to extract, hoard, and benefit from multigenerational dynastic wealth along the way.)
Broadly dispersed wealth and income offer up opportunity, prosperity, economic security, well-being, and a springboard for success to hundreds of millions, billions of people and families. And it uses less of our earth’s limited resources in distorted production markets delivering low-value, absurdly priced luxury goods and services demanded by those with astronomical wealth and income. With the same amount of wealth, broadly dispersed — and the increased spending that broader prosperity delivers (spending on higher-value goods) — we can enjoy a vastly better life for ourselves. And we can deliver likewise to those who come after us.
At least today, the equality-vs-growth tradeoff is wrong by 180 degrees. The choice is not a difficult one. In fact it’s not even a choice we have to make. Widespread prosperity both causes and is greater prosperity.
8). “Wait, oh wait Mr. Mutant Zombie Bike Gang leader, please don’t sodomize me before killing me a serving my carcass to your gang. I could calculate the LIBOR for you…”
It’s especially weird since the data clearly show that greater equality is associated with faster growth. Anyone looking at the 30 years post-WWII remarks on this, but somehow or another economists dismiss the obvious as they are paid to.
See this is why a socialist capitalism model would work more in the western world. Redistribution of wealth to the lower percentiles allows the abject poverty rate to decline, allowing the free cash flows in excess of basic operating needs of households to give rise to disposable income to either create the next Apple, or at the very least allow a household to offer stimulus to the economy by way of purchasing goods in excess of basic needs. This whole idea of billionaires amassing huge piles of money and then sitting on it for decades is dumb. The money, in that instance, has no way of moving around the system and buoying the ebbs and flows of the economic cycle, and without high marginal tax rates, the cash continues to build exponentially.
RIDICULOUS!!!!
There are a bunch of things in our current economy that are vestigial at best. I my opinion, a lot of them are associated strongly with the capital concept.
Trickle-down economics, stock portfolios, low tax rates on various types of capital generated income, are all associated with the fallacy (?) that our economy is in need of capital investment, beyond those best provided by government for common wealth.
Why do companies need to be large in a post-manufacturing era? What is the purpose of Google, Facebook, etc, why are they large? How is tying money up in the stock market even directing capital to those companies instead of just taking generational rents in the form of never-ending dividends? The ownership of companies is so distributed now that no person or group of persons (or entities) is able to manage corporate behavior at the board level.
We have created inefficient and socially maladaptive giants while worshiping the bearded, bespectacled hippies who created the modern world out of their garages and dorm-rooms in the last century.