An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
The post-2008 environment saw the eruption of a number of blogospheric movements and outcroppings that seem to have been driven by the common impulse of saving US capitalism from radical change and the intelligent design of a new economic order, and saving wealthy individuals from new redistributive tax burdens and assaults on their wealth. These include:
1. Market Monetarism's claims for the omnipotence of central bank policy in stabilizing and optimizing the economy.
2. Warren Mosler's MMT argument that full employment can be guaranteed via an adequately-sized deficit and the operation of stimulatory demand boosts via automatic stabilizers.
3. Zero Hedge and similar libertarian sites attributing all of the problems with the economy to the problems of government fueled cronyism and market distortions.
4. New Keynesians mainstreamers doubling down on the myth of a self-optimizing economy that is held up only by "frictions" related to such things as price stickiness and the zero bound.
5. Various kinds of monetary reformers promoting such things as the Chicago plan, Positive Money, local scrip, bitcoins and other gadgets based on the idea that the main things wrong with the economic order in which we live have primarily to do with monetary mechanisms.
These are all grossly inadequate responses grounded in fear and and knee-jerk conservative reactions. The US economic model is oppressive, cruel, massively dysfunctional and incapable of guiding us toward the national and global future we urgently need to start building. Going where we need to go is going to take much more planning, organization and design that the current generation of American adults have managed to build into their ideological comfort zone during decades of neoliberal propagandizing by organized private capital and the economics establishment that works for it, and will require a redistribution and mobilization of real wealth in a way that is unavoidably threatening to the current possessors of that wealth.
This is a societal problem that is both cultural and institutional.
Addressing it adequately requires integrating social, political and economic factors.
Attempting to address it solely or chiefly with economic policy is insufficient, and it is also infeasible politically, even if it could be done to some degree.
Moreover, it is not only a US issue, since a great deal hangs on the program of neoliberal globalization that the power structure is advancing in the name of liberalism based on unwarranted assumptions — either that liberalism is equatable with economic liberalism. or that economic liberalism spontaneously results in a natural order that is optimally integrated socially, politically and economically.
Agreed Tom. Another way of putting it is that the whole idea that there is some realm of pure "economic" policy that is isolated from all of the other realms of social and political policy and change is itself a deeply conservative fraud aimed at preserving the status quo by confining the so-called economic policy options within extremely narrow bounds dictated by the institutional structure of the existing order.
Taxing rich people has next to nothing to do with:
"Going where we need to go is going to take much more planning, organization and design that the current generation of American adults have managed to build into their ideological comfort zone."
You cant even combat real resource constraints and inflation by taxing rich people. What are the hedge funders using up all the denim? Are the consuming too many big macs? too much gasoline? I havent heard any stories about product shortages/...ever. The only thing we lack is enough investment in our public, social resources. And taxing rich people is irrelevant to that task.
Set a maximum income and be done with it. taxing 50% of earnings over $500K or some such rubbish will do nothing but hurt the country. If you want to do something about inequality, tax all income over $20 Million per year at 90%, encourage unions formation, and maintain maximum full employment. Its not rocket science, and punishing doctors and small business owners who make hundreds of thousands or a couple million a year with higher taxes wont solve any problems. People who make tens or hundreds of millions of dollars are the people who cause real societal harm due to their oversized influence due to opportunities of scale.
Your incessant redistribute the wealth schtick is nothing but a huge political loser. And it only feeds the insanely destructive narrative that money grows on rich people and the Govt is helpless without their money.
Propose a national investment plan worth like $500 billion a year, restrict the hell out of private credit growth and speculation, and then adjust FICA taxes as necessary.
Auburn, it's about more than redistributing income and wealth. The system we are living under is destroying the planet, debases human life, addicts people to drugs and other cravings, fosters the growth of anti-democratic forces, creates an unchallenged plutocratic elite, destroys culture and reduces many people to penury and abject subordination - before it then kills them off entirely.
we need revolutionary social change, not just some stimulation of the lump of "demand" so that people can be "fully employed" as servants, pimps, prostitutes, pushers, bookies, thugs and mercenaries.
I dont personally advocate for doing nothing but lowering fica to increase demand. I would personally expand investment before I cut taxes. With that said, taxing rich people has nothing to do with this. which is the point I was making.
The church has been working on that stuff for centuries... seemingly to just the opposite effects... using all sorts of pleadings and coercions and various attempts at behavior modification...
One thing we have NOT tried is operation of our material/provisioning systems under correct/competent administration of our numismatic systems to go along with it... this has NOT been tried...
There is no reason for taxing "rich people" fro being rich. But there are good reasons from taxing them on other reasons.
First, economic rent is inefficient and uneconomic and should be reduced and ideally eliminated even under the most conventional economics. Economists are also pretty well agreed about what constitutes economic rents and rent-seeking. The disagreement is over particular cases. But just taxing away the most egregious economic rents would be sufficient, since it would integrate with the second big reason.
The second big reason is plutonomy. Economic rent contributes heavily to concentration of wealth that underlies concentration of power. This is poison for liberal democracy and results in a privileged class and growing inequality in all spheres of life, poisoning the entire culture.
This kind of behavior in unnecessary for capitalism to work. In fact, leveling the playing field increases competition and provides greater individual opportunity. No need even to bring in "socialistic" arguments, since economic rent is a perversion of capitalism.
Monetary policy was devised not so much to address "the failures of Keynesianism," that is, the use of fiscal policy as a major tool, as to provide reasons that fiscal policy was ineffective, inefficient, redundant, etc.
The idea behind monetarism conceived as using interest rates as the lever to direct NGDP as the chief measure of growth is replacing democratic control of economic policy by elected politicians with unelected technocrats.
The contradiction that many have pointed out is that Libertarian Milton Friedman embraces technocratic command and control of the interest rate, which monetarism regards the economic lever, even magic wand. This is clearly the institution of a command system that is completely at odds with Hayek's insight into market price as the invisible hand and his insistence on market price being the directing force in a highly complex information system. Setting the most important price (in the view of monetarists) would be the ultimate command system, which in Hayek's analysis was likely to produce substandard results if not eventual disaster, as Austrians are now saying in their call to abolish the Fed.
My contention is history shows that most of this is the working out of a dialectic about economic rent that began with classical economics, was purposely sidetracked by the marginal revolution and neoclassical economics and Austrian economics, and solidified in place by Friedman's monetarism in the 70's, which still persists although it has gone through some iterations.
So I don't think that is possible to reform political economy without addressing economic rent, and it is also central to both sociology and poli sci, since the consequences of an economy system that encourages rent-seeking have led to the fundamental issues affecting neoliberal societies.
In fact, the basis of neoliberal society may be said to be see no rent, hear no rent, speak no rent.
IMHO competition is just as important to focus on in order to reduce "rent" (whatever that means) as taxation, if not more so in some cases. Of course I know you agree with that....just stating the obvious.
Why do the free market fundamentalist types focus so much on Govt regulation hurting the consumer and economy, and yet barely a word is ever spoken about keeping markets competitive, not just free from the tyranny of the referee?
Theoretically competition reduces rent and tends toward eliminating it. However, economies of scale and asymmetry of power work against it.
Market fundamentalists seek to eliminate market imperfections to create competitive markets in which entry, information, power etc are symmetrical. That's not possible in a modern monetary production economy base on organization and technology.
It's also naïve to try to exclude governance from markets in that societies are governed either by the rule of law or by the power of men. A level playing field is the sine qua non of perfect competition and some governance requiring rule-making and enforcement is required.
Thus far, the debate has not been conducted on a very realistic or practical level in most instances.
"But there are good reasons from taxing them on other reasons. "
Generally you should see taxation as a failure of your distribution and social security systems. Essentially competition isn't good enough so people are getting income streams that are not distributional acceptable and people are saving too much which means they don't think the social security and insurance facilities are good enough to make them feel safe and secure (or they're bonkers and hoarding).
You're always going to have to use tax to fix things after the fact - because of all the problems of wealth and power concentrations that happen in a monetary economy. - but if you're relying entirely on that then you are missing a whole load of other tools in the box.
At that point you're back to the problem of "if your only tool is a hammer everything looks like a nail".
I'm very tired of the Holy Power of Taxation argument. It is based on anger and revenge not sensible progressive thought. It's the financial equivalent of bombing Syria.
I agree that they are other ways to reduce economic rent and rent-seeking and they should all be used. Taxation should be a mop up operation. For example, its difficult to address wealth accumulation without a capital gains tax and dynastic wealth without an inheritance tax. Land rent is also difficult to address without an LTV.
The operative principle under neoliberalism is to tax income from work and to untax other gains and asset accumulation "in order to promote capital formation, which is the sine qua non of growth and prosperity," that is, trickle down, along with the claim that TINA.
13 comments:
The post-2008 environment saw the eruption of a number of blogospheric movements and outcroppings that seem to have been driven by the common impulse of saving US capitalism from radical change and the intelligent design of a new economic order, and saving wealthy individuals from new redistributive tax burdens and assaults on their wealth. These include:
1. Market Monetarism's claims for the omnipotence of central bank policy in stabilizing and optimizing the economy.
2. Warren Mosler's MMT argument that full employment can be guaranteed via an adequately-sized deficit and the operation of stimulatory demand boosts via automatic stabilizers.
3. Zero Hedge and similar libertarian sites attributing all of the problems with the economy to the problems of government fueled cronyism and market distortions.
4. New Keynesians mainstreamers doubling down on the myth of a self-optimizing economy that is held up only by "frictions" related to such things as price stickiness and the zero bound.
5. Various kinds of monetary reformers promoting such things as the Chicago plan, Positive Money, local scrip, bitcoins and other gadgets based on the idea that the main things wrong with the economic order in which we live have primarily to do with monetary mechanisms.
These are all grossly inadequate responses grounded in fear and and knee-jerk conservative reactions. The US economic model is oppressive, cruel, massively dysfunctional and incapable of guiding us toward the national and global future we urgently need to start building. Going where we need to go is going to take much more planning, organization and design that the current generation of American adults have managed to build into their ideological comfort zone during decades of neoliberal propagandizing by organized private capital and the economics establishment that works for it, and will require a redistribution and mobilization of real wealth in a way that is unavoidably threatening to the current possessors of that wealth.
Well said, Dan.
This is a societal problem that is both cultural and institutional.
Addressing it adequately requires integrating social, political and economic factors.
Attempting to address it solely or chiefly with economic policy is insufficient, and it is also infeasible politically, even if it could be done to some degree.
Moreover, it is not only a US issue, since a great deal hangs on the program of neoliberal globalization that the power structure is advancing in the name of liberalism based on unwarranted assumptions — either that liberalism is equatable with economic liberalism. or that economic liberalism spontaneously results in a natural order that is optimally integrated socially, politically and economically.
Agreed Tom. Another way of putting it is that the whole idea that there is some realm of pure "economic" policy that is isolated from all of the other realms of social and political policy and change is itself a deeply conservative fraud aimed at preserving the status quo by confining the so-called economic policy options within extremely narrow bounds dictated by the institutional structure of the existing order.
Dan
Taxing rich people has next to nothing to do with:
"Going where we need to go is going to take much more planning, organization and design that the current generation of American adults have managed to build into their ideological comfort zone."
You cant even combat real resource constraints and inflation by taxing rich people. What are the hedge funders using up all the denim? Are the consuming too many big macs? too much gasoline? I havent heard any stories about product shortages/...ever. The only thing we lack is enough investment in our public, social resources. And taxing rich people is irrelevant to that task.
Set a maximum income and be done with it. taxing 50% of earnings over $500K or some such rubbish will do nothing but hurt the country. If you want to do something about inequality, tax all income over $20 Million per year at 90%, encourage unions formation, and maintain maximum full employment. Its not rocket science, and punishing doctors and small business owners who make hundreds of thousands or a couple million a year with higher taxes wont solve any problems. People who make tens or hundreds of millions of dollars are the people who cause real societal harm due to their oversized influence due to opportunities of scale.
Your incessant redistribute the wealth schtick is nothing but a huge political loser. And it only feeds the insanely destructive narrative that money grows on rich people and the Govt is helpless without their money.
Propose a national investment plan worth like $500 billion a year, restrict the hell out of private credit growth and speculation, and then adjust FICA taxes as necessary.
Auburn, it's about more than redistributing income and wealth. The system we are living under is destroying the planet, debases human life, addicts people to drugs and other cravings, fosters the growth of anti-democratic forces, creates an unchallenged plutocratic elite, destroys culture and reduces many people to penury and abject subordination - before it then kills them off entirely.
we need revolutionary social change, not just some stimulation of the lump of "demand" so that people can be "fully employed" as servants, pimps, prostitutes, pushers, bookies, thugs and mercenaries.
Dan-
I dont personally advocate for doing nothing but lowering fica to increase demand. I would personally expand investment before I cut taxes. With that said, taxing rich people has nothing to do with this.
which is the point I was making.
Dan,
The church has been working on that stuff for centuries... seemingly to just the opposite effects... using all sorts of pleadings and coercions and various attempts at behavior modification...
One thing we have NOT tried is operation of our material/provisioning systems under correct/competent administration of our numismatic systems to go along with it... this has NOT been tried...
We have to try something new...
There is no reason for taxing "rich people" fro being rich. But there are good reasons from taxing them on other reasons.
First, economic rent is inefficient and uneconomic and should be reduced and ideally eliminated even under the most conventional economics. Economists are also pretty well agreed about what constitutes economic rents and rent-seeking. The disagreement is over particular cases. But just taxing away the most egregious economic rents would be sufficient, since it would integrate with the second big reason.
The second big reason is plutonomy. Economic rent contributes heavily to concentration of wealth that underlies concentration of power. This is poison for liberal democracy and results in a privileged class and growing inequality in all spheres of life, poisoning the entire culture.
This kind of behavior in unnecessary for capitalism to work. In fact, leveling the playing field increases competition and provides greater individual opportunity. No need even to bring in "socialistic" arguments, since economic rent is a perversion of capitalism.
Monetary policy was devised not so much to address "the failures of Keynesianism," that is, the use of fiscal policy as a major tool, as to provide reasons that fiscal policy was ineffective, inefficient, redundant, etc.
The idea behind monetarism conceived as using interest rates as the lever to direct NGDP as the chief measure of growth is replacing democratic control of economic policy by elected politicians with unelected technocrats.
The contradiction that many have pointed out is that Libertarian Milton Friedman embraces technocratic command and control of the interest rate, which monetarism regards the economic lever, even magic wand. This is clearly the institution of a command system that is completely at odds with Hayek's insight into market price as the invisible hand and his insistence on market price being the directing force in a highly complex information system. Setting the most important price (in the view of monetarists) would be the ultimate command system, which in Hayek's analysis was likely to produce substandard results if not eventual disaster, as Austrians are now saying in their call to abolish the Fed.
My contention is history shows that most of this is the working out of a dialectic about economic rent that began with classical economics, was purposely sidetracked by the marginal revolution and neoclassical economics and Austrian economics, and solidified in place by Friedman's monetarism in the 70's, which still persists although it has gone through some iterations.
So I don't think that is possible to reform political economy without addressing economic rent, and it is also central to both sociology and poli sci, since the consequences of an economy system that encourages rent-seeking have led to the fundamental issues affecting neoliberal societies.
In fact, the basis of neoliberal society may be said to be see no rent, hear no rent, speak no rent.
Tom-
IMHO competition is just as important to focus on in order to reduce "rent" (whatever that means) as taxation, if not more so in some cases. Of course I know you agree with that....just stating the obvious.
Why do the free market fundamentalist types focus so much on Govt regulation hurting the consumer and economy, and yet barely a word is ever spoken about keeping markets competitive, not just free from the tyranny of the referee?
Theoretically competition reduces rent and tends toward eliminating it. However, economies of scale and asymmetry of power work against it.
Market fundamentalists seek to eliminate market imperfections to create competitive markets in which entry, information, power etc are symmetrical. That's not possible in a modern monetary production economy base on organization and technology.
It's also naïve to try to exclude governance from markets in that societies are governed either by the rule of law or by the power of men. A level playing field is the sine qua non of perfect competition and some governance requiring rule-making and enforcement is required.
Thus far, the debate has not been conducted on a very realistic or practical level in most instances.
"But there are good reasons from taxing them on other reasons. "
Generally you should see taxation as a failure of your distribution and social security systems. Essentially competition isn't good enough so people are getting income streams that are not distributional acceptable and people are saving too much which means they don't think the social security and insurance facilities are good enough to make them feel safe and secure (or they're bonkers and hoarding).
You're always going to have to use tax to fix things after the fact - because of all the problems of wealth and power concentrations that happen in a monetary economy. - but if you're relying entirely on that then you are missing a whole load of other tools in the box.
At that point you're back to the problem of "if your only tool is a hammer everything looks like a nail".
I'm very tired of the Holy Power of Taxation argument. It is based on anger and revenge not sensible progressive thought. It's the financial equivalent of bombing Syria.
I agree that they are other ways to reduce economic rent and rent-seeking and they should all be used. Taxation should be a mop up operation. For example, its difficult to address wealth accumulation without a capital gains tax and dynastic wealth without an inheritance tax. Land rent is also difficult to address without an LTV.
The operative principle under neoliberalism is to tax income from work and to untax other gains and asset accumulation "in order to promote capital formation, which is the sine qua non of growth and prosperity," that is, trickle down, along with the claim that TINA.
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