Oh, by the way, Piketty wants to cap growth at $68,000 per capita, PPP adjusted. That happens to be the GDP per capita of France. Gee, what a coincidence!
How does that statement make sense? Show the quote by Picketty before attributing such non-sense. One interpretation is: world GDP/capita should not grow past $68,000 however GDP is measured and adjusted ( for "inflation" across time if we had something like a worldwide consumption basket for the "average" or "typical" ( may be median in some sense) person in the world. Really, Picketty does not want GDP per person worldwide to grow? Think again. Or be a bit more precise so I can understand what you are referring to. Is there some averaging across countries which afterall are pretty arbitrary entities ( hence there is migration of all kinds between 'countries').
I simply want to understand what you tell us Picketty is proposing means. I am not trying to pick on you.
A week or two ago, in response your piece about income inequality as discussed in the WSJ, I responded with exactly this point, "... .Second, the appropriate measure of inequality is consumption rather than wealth."
Glad you are correcting your previous oversight. Better late than never!
I fail to see how govt spending another $1 trillion is going to improve the US economy more than letting Musk invest $1 trillion directly into the economy. People like Warren, Bernie and Mandummy believe in fantasy.
Qasim Rashid , who is apparently someone up and coming on Substack and US politics wrote an extremely stupid note about taxing billionaires and trillionaires that I replied to with this - https://substack.com/@francisturner/note/c-273599687 - pointing out that the US Federal government spends $1T in under a month (IIRC it's ~2 weeks, but I haven't checked)
I agree it is far better to let Musk spend his trillion anyway he wants than let the government get another 2 weeks of funding
Irritatingly Our World In Data no longer seems to have the graph of total numbers of people in absolute poverty (the time and PPP adjusted $3/day level) that it used to have. From what I recall the number was never under 1 Billion from any time where the population was over 1.2?B in the early 19thC until the 2000s. Then in ~2010 despite there being more people than ever, the number in extreme poverty went under 1B and has stayed there ever since
All this uproar about wealth taxes in the US ( or world wide ?) when in fact we already have significant wealth taxes in the United States ( to stick with one example): called "property" or "real estate" taxes imposed by towns, counties, and other municipalities. So, surely you would argue to abolish those ( if you are opposing new, more comprehensive wealth taxes). Ironically, wealth taxes in the US in fact contribute to inequality, because they are used to pay for the services locally provided by schools ( public and at least partially also for private ones) and other municipal services like garbage collection and enforcing property rights and protecting property ( fire departments, police ) sometimes called public safety which to some degree also is supposed to enforce rules of conduct ( not to endanger other persons beyond what is acceptable by "legal codes" defining personal and civil rights. I am trying to be as abstract as possible.
Why do these property taxes strengthen inequality rather than mitigate it? Because wealthy individuals tend to move to areas where they get the school and property enforcement and protection they demand, and are willing to pay for those with a proportion of their real estate wealth ( and may also preserve them by supporting local political, school board and judicial positions to reflect those preferences). Less wealthy individuals end up in districts with lower quality of educational services, property or personal protection. The latter tends to reduce the chances ( opportunities; is there an equality of opportunities in the United States?).
Therefore a wealth tax is not necessarily redistributive, in fact it can be the source of the exact opposite.
In your essay you equalize any taxation of wealth as growth reducing or even eliminating. That does not apply to property taxation?
You also state that wealth is not equal consumption. Yes, they are 2 different things. However, there is some relationship, at least in certain aggregations. Friedman's permanent income hypothesis states that as a first approximation consumption is a "constant" or at least only slowly changing fraction of overall wealth. The flow ( consumption) is seen as a proportion "k" of the stock wealth approximating what the late Milton Friedman calls permanent income, not a bad name it seems. Therefore taxing consumption per se is not a solution for raising revenues to deliver services either then.
Economists always want taxes that they call the least distortive to economic activity ( in some perfect abstract world where common services are not needed or provided freely without resource cost).
In that economic model the only non-distortive tax is a lump sum tax which is neither related to wealth, consumption, production or income. With unlimited borrowing such a lump sum tax could be a periodic lottery where the lump sum each person in the "jurisdiction" pays is determined by a game of chance which distributed the overall tax revenue needed in a random way. Why not?
So much to the heroic claims made about wealth creating "productive" investments ( that would include inherited wealth and that gained by a lottery).
If those investments are simply to dig a hole on one day and closing the hole the next day, then those investments are not necessarily "Productive". The resulting "plant" is non-existent and might only help some worms and somebody's accumulating muscles.
If the wealth is invested in plants using fossil fuels as an energy source and are emitting methane unchecked ( like most cows do), then these investments in plants and cows can potentially in some scenario literally destroy the inhabitable earth ( inhabitable for humans that is disregarding pets and other creatures for the moment). If that were true ( just hypothetically) then we could tax that wealth used to invest in those activities to mitigate, neutralize or better reduce such investments.
Lots of activities captured in GDP are simply actions to fix or reduce the damage caused by such investments ( and as such are productive), while the damaging part of the investment is not recorded as a negative ( humankind might have accumulated negative wealth by reducing the ozone layers around the globe). Hypothetically!
Is GDP/Capita a measure of productivity? A significant portion is not ( at least acknowledge that that is possible).
Simple examples are "overinvesting"in housing ( like China presumably did), although I acknowledge that a precise definition of overinvestment is difficult ( however constantly claimed by many serious economists). Ok, China is certainly not a fully competitive "Capitalistic" market economy. Which country is ? The US? The US federal government is paying investors in electricity generating wind capture projects almost one billion USD ( adding them all up). Are wind power plants productive investments- looking at states like Texas they certainly are ( and do is solar in Texas: producing electric power when needed the most: in summer for Air conditioning and so on).
Are tar sand projects in Alberta, Canada productive investments ? According to some calculations ( I will need to find those citations again) Canada and the US ( the latter as consumers and refiners of this tar to convert tar into oil and then use pipelines to transport the resulting products) the whole process of digging out, transporting and refining tar sand into useful fossil fuel takes more energy than most uses of that energy get out of the resulting refined products!
Productive investments? By the "private sector"? Alberta is so fearful that the central Canadian government may one day discover the energy wasting and environmentally dangerous activity that Alberta is having a referendum to split off from Canada!
The crux in my view is to view all wealth --> investment --> desired consumption as "productive" in some abstract economically super efficient model while totally ignoring the framework that makes an economic "jurisdiction" often loosely called a "country" actually function as such: the costless supply of a legal, consensus building political entity with social cohesion that can "produce" such outcomes within that jurisdiction and in cooperation ( hopefully not war like "cooperation, I.e. attempted coercion) --> such a costless supply simply does not exist anywhere on this globe. Striving to find models of jurisdictions with institutions and norms that generate productive outcomes without damaging other jurisdictions or the global environment ( only as an example: there are other global elements needed like voluntary organisations and institutions which allow consensus building on global concerns such as infectious deseases and peace building processes, and so on).
The motive for the wealth tax is envy.
Oh, by the way, Piketty wants to cap growth at $68,000 per capita, PPP adjusted. That happens to be the GDP per capita of France. Gee, what a coincidence!
How does that statement make sense? Show the quote by Picketty before attributing such non-sense. One interpretation is: world GDP/capita should not grow past $68,000 however GDP is measured and adjusted ( for "inflation" across time if we had something like a worldwide consumption basket for the "average" or "typical" ( may be median in some sense) person in the world. Really, Picketty does not want GDP per person worldwide to grow? Think again. Or be a bit more precise so I can understand what you are referring to. Is there some averaging across countries which afterall are pretty arbitrary entities ( hence there is migration of all kinds between 'countries').
I simply want to understand what you tell us Picketty is proposing means. I am not trying to pick on you.
A week or two ago, in response your piece about income inequality as discussed in the WSJ, I responded with exactly this point, "... .Second, the appropriate measure of inequality is consumption rather than wealth."
Glad you are correcting your previous oversight. Better late than never!
I fail to see how govt spending another $1 trillion is going to improve the US economy more than letting Musk invest $1 trillion directly into the economy. People like Warren, Bernie and Mandummy believe in fantasy.
Qasim Rashid , who is apparently someone up and coming on Substack and US politics wrote an extremely stupid note about taxing billionaires and trillionaires that I replied to with this - https://substack.com/@francisturner/note/c-273599687 - pointing out that the US Federal government spends $1T in under a month (IIRC it's ~2 weeks, but I haven't checked)
I agree it is far better to let Musk spend his trillion anyway he wants than let the government get another 2 weeks of funding
Federal budget is ~$7 trillion. 7½ weeks, two months.
Oops I sit corrected. Still doesn't alter the overall argument though
Irritatingly Our World In Data no longer seems to have the graph of total numbers of people in absolute poverty (the time and PPP adjusted $3/day level) that it used to have. From what I recall the number was never under 1 Billion from any time where the population was over 1.2?B in the early 19thC until the 2000s. Then in ~2010 despite there being more people than ever, the number in extreme poverty went under 1B and has stayed there ever since
All this uproar about wealth taxes in the US ( or world wide ?) when in fact we already have significant wealth taxes in the United States ( to stick with one example): called "property" or "real estate" taxes imposed by towns, counties, and other municipalities. So, surely you would argue to abolish those ( if you are opposing new, more comprehensive wealth taxes). Ironically, wealth taxes in the US in fact contribute to inequality, because they are used to pay for the services locally provided by schools ( public and at least partially also for private ones) and other municipal services like garbage collection and enforcing property rights and protecting property ( fire departments, police ) sometimes called public safety which to some degree also is supposed to enforce rules of conduct ( not to endanger other persons beyond what is acceptable by "legal codes" defining personal and civil rights. I am trying to be as abstract as possible.
Why do these property taxes strengthen inequality rather than mitigate it? Because wealthy individuals tend to move to areas where they get the school and property enforcement and protection they demand, and are willing to pay for those with a proportion of their real estate wealth ( and may also preserve them by supporting local political, school board and judicial positions to reflect those preferences). Less wealthy individuals end up in districts with lower quality of educational services, property or personal protection. The latter tends to reduce the chances ( opportunities; is there an equality of opportunities in the United States?).
Therefore a wealth tax is not necessarily redistributive, in fact it can be the source of the exact opposite.
In your essay you equalize any taxation of wealth as growth reducing or even eliminating. That does not apply to property taxation?
You also state that wealth is not equal consumption. Yes, they are 2 different things. However, there is some relationship, at least in certain aggregations. Friedman's permanent income hypothesis states that as a first approximation consumption is a "constant" or at least only slowly changing fraction of overall wealth. The flow ( consumption) is seen as a proportion "k" of the stock wealth approximating what the late Milton Friedman calls permanent income, not a bad name it seems. Therefore taxing consumption per se is not a solution for raising revenues to deliver services either then.
Economists always want taxes that they call the least distortive to economic activity ( in some perfect abstract world where common services are not needed or provided freely without resource cost).
In that economic model the only non-distortive tax is a lump sum tax which is neither related to wealth, consumption, production or income. With unlimited borrowing such a lump sum tax could be a periodic lottery where the lump sum each person in the "jurisdiction" pays is determined by a game of chance which distributed the overall tax revenue needed in a random way. Why not?
So much to the heroic claims made about wealth creating "productive" investments ( that would include inherited wealth and that gained by a lottery).
If those investments are simply to dig a hole on one day and closing the hole the next day, then those investments are not necessarily "Productive". The resulting "plant" is non-existent and might only help some worms and somebody's accumulating muscles.
If the wealth is invested in plants using fossil fuels as an energy source and are emitting methane unchecked ( like most cows do), then these investments in plants and cows can potentially in some scenario literally destroy the inhabitable earth ( inhabitable for humans that is disregarding pets and other creatures for the moment). If that were true ( just hypothetically) then we could tax that wealth used to invest in those activities to mitigate, neutralize or better reduce such investments.
Lots of activities captured in GDP are simply actions to fix or reduce the damage caused by such investments ( and as such are productive), while the damaging part of the investment is not recorded as a negative ( humankind might have accumulated negative wealth by reducing the ozone layers around the globe). Hypothetically!
Is GDP/Capita a measure of productivity? A significant portion is not ( at least acknowledge that that is possible).
Simple examples are "overinvesting"in housing ( like China presumably did), although I acknowledge that a precise definition of overinvestment is difficult ( however constantly claimed by many serious economists). Ok, China is certainly not a fully competitive "Capitalistic" market economy. Which country is ? The US? The US federal government is paying investors in electricity generating wind capture projects almost one billion USD ( adding them all up). Are wind power plants productive investments- looking at states like Texas they certainly are ( and do is solar in Texas: producing electric power when needed the most: in summer for Air conditioning and so on).
Are tar sand projects in Alberta, Canada productive investments ? According to some calculations ( I will need to find those citations again) Canada and the US ( the latter as consumers and refiners of this tar to convert tar into oil and then use pipelines to transport the resulting products) the whole process of digging out, transporting and refining tar sand into useful fossil fuel takes more energy than most uses of that energy get out of the resulting refined products!
Productive investments? By the "private sector"? Alberta is so fearful that the central Canadian government may one day discover the energy wasting and environmentally dangerous activity that Alberta is having a referendum to split off from Canada!
The crux in my view is to view all wealth --> investment --> desired consumption as "productive" in some abstract economically super efficient model while totally ignoring the framework that makes an economic "jurisdiction" often loosely called a "country" actually function as such: the costless supply of a legal, consensus building political entity with social cohesion that can "produce" such outcomes within that jurisdiction and in cooperation ( hopefully not war like "cooperation, I.e. attempted coercion) --> such a costless supply simply does not exist anywhere on this globe. Striving to find models of jurisdictions with institutions and norms that generate productive outcomes without damaging other jurisdictions or the global environment ( only as an example: there are other global elements needed like voluntary organisations and institutions which allow consensus building on global concerns such as infectious deseases and peace building processes, and so on).
Sorry for some typos! I hope they don't destroy the line of thinking ( are "unproductive"). May try to fix them tomorrow.