Results for “piketty” 171 found
5. Non-compete agreements, non-poaching, and incentives to train (pdf). And here is Evan Starr’s home page.
8. Catherine Rampell has a new WaPo blog. Economics with, we hope, a bit of theater.
2. This story about wealthy Raelian charity is stranger than you might expect.
3. Mercados por todo: un hotel para cadáveres.
2. Suzanne Scotchmer has passed away. In addition to her research achievements, during her time at Harvard she was one of the most popular professors with the graduate students and also one of the most helpful.
4. “(There is in fact no bowl.)” — how would we cover the Super Bowl if it were an event in another country? Recommended.
1. EpsteinUniversity: “Epstein speaks quickly, so pay close attention and rewind frequently.”
3. Josh Barro on….California hamburgers, if you know what I mean. And you know what, he’s right. Let’s puncture another myth about SoCal.
5. “What we have right now is four labor markets.” Interesting piece by Conor Sen.
6. Alfred Hitchcock documentary on the Holocaust (link includes a video of footage).
Many of you have been asking me about the forthcoming Thomas Piketty book. I am writing a 2500-word review of it for…elsewhere…so mum’s the word until then. For now I’ll just say it is a book to buy, read, and indeed study. Here is one good piece on the book from The Economist. It’s already a splendid year for the published word.
3. Robin Harding FT piece on Piketty and inheritance: “In France, Prof Piketty charts how the annual flow of inheritances was between 20 per cent and 25 per cent of national disposable income in the 19th century. It fell to about 5 per cent in the middle of the 20th century after two world wars destroyed most of the inheritable capital stock, followed by rapid growth, high taxes on capital, inflation that eroded existing financial wealth and labour-friendly laws.
But the flow of inheritances in the country is now back to 19th-century levels; it is heading that way in the US and UK too.”
1. Six case studies of writers who changed their minds. On what basis were they picked to contribute? And when you like the writer but not the books.
6. Leading economists endorse Christmas presents, sort of. And Times Higher Ed best books list, deep and broad.
2. Should your children be learning how to code? My views on that topic.
4. Izabella Kaminska on the role of fiscal distribution effects (FT Alphaville).
5. The Thought Leader. Is this the cynical David Brooks? The Straussian David Brooks? Both? Something else altogether? And here is a good recent David Brooks interview, more depth than most interviews get to.
That is my latest New York Times column, and it starts with this:
IF you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much.
The mathematical reality is that wealth is becoming more important, relative to income. In a new paper, “Capital Is Back: Wealth-Income Ratios in Rich Countries 1700-2010,” Professors Thomas Piketty and Gabriel Zucman of the Paris School of Economics have performed the heroic task of measuring wealth for eight leading economies: the United States, Canada, Britain, France, Italy, Germany, Japan and Australia.
Their estimates reveal some striking trends. For instance, wealth accumulation in these eight countries has risen relative to yearly production. Wealth-to-income ratios in these nations climbed from a range of 200 to 300 percent in 1970 to a range of 400 to 600 percent in 2010. Behind the changing ratios is some bad news, namely that slow productivity growth and slow population growth have depressed income growth, but also some good news — that relative peace and capital gains have preserved wealth.
I would say that we have much become much more efficient in preserving old wealth than in creating new wealth, and this is overall a worrying trend.
I argue that debt to wealth ratios are usually manageable, even in the case of Japan. The real issue is that politics can make it very difficult to tax wealth and in that sense fiscal problems remain real and are fundamentally tied to governance, not debt to gdp ratios.
Overall I favor consumption taxes myself, for the traditional reasons. But with rising wealth to income ratios, governments are sure to look where the money is. I expect this to be a major battle, as it already is in Italy with the recent debate over the IMU property taxes.
There is much more in the column, you can read the whole thing here.
2. U. Michigan economics Ph.d student running for Congress, web site here.
Remember Paul Krugman’s forays into “the wage reflects what the top earners are really worth” topic, and the surrounding debates? Why should this discussion be such a fact-free zone? Why so little discussion of tax incidence?
Let’s start with the literature.
Read this paper by Kevin Murphy (pdf), especially pp.33-38. Admittedly the paper is from 1999 and it won’t pick up the more recent problems with the financial sector. But most of the data are from plain, ol’ garden variety CEOs. In many of the estimations we see CEOs picking up less than one percent of the value they create for the firm, and all of the estimates of their value capture are impressively small, albeit rising over time. Never is the percentage of value capture anything close to one hundred percent. “One percent value capture” is an entirely plausible belief.
You might think this sounds whacky but it makes theoretical sense. For instance often CEO performance is motivated by equity and options, but few CEOs are wealthy enough to own more than a very small chunk of the company (risk-aversion may be a factor too), and that will mean their pay won’t reflect value created at the margin. It’s a standard result of agency theory, stemming from first principles.
Maybe you’re suspicious of this work but the way these estimates are done is quite straightforward, and results of this kind have not been overturned. You can formulate a “pay isn’t closely enough linked to performance” critique from these investigations, but not a “they’re paid as much as they contribute” conclusion or anything close to that. (And, if it matters, the “conservative” and also WSJ Op-Ed page view has embraced these results for almost two decades, at least since the original Jensen-Murphy JPE piece; Krugman identified the conservative position with the Clarkian perfect competition w = mp stance but that is incorrect.)
You might be thinking “Ha! Burn on Krugman!,” but not so fast. Like Wagner’s music, Krugman’s position here is “better than it sounds,” though not nearly as strong as Krugman would like it to be.
Let’s turn to taxation of the top 0.1 percent, and focus on these CEOs. If the tax rate on their income/K gains goes up, the firm will compensate by giving them more equity/options, to keep them working hard. In other words, the tax rate on the top earners can be hiked without much effect on CEO effort because there is an offset internal to the firm. At some margin the firm’s shareholders will be reluctant to chop off more equity/options to the CEO, but the marginal value created by maintaining the incentive seems to be very high, for reasons presented above, and so the net CEO incentives will be maintained, even in light of new and higher taxes on CEO earnings.
But here’s the problem, if that’s the right word. The incidence of that tax is going to fall on shareholders in general and thus on capital in general. These top CEOs could even get off scot-free, if the shareholders up the equity/options participation of the CEO to offset completely the effects of the new and higher tax rate. This is also relevant to the Piketty-Saez-Stantcheva analysis that everyone has been talking about; they don’t see these mechanisms with sufficient clarity.
Moral of the story: it’s harder to tax the top earners than you think.
The second moral is that tax incidence remains a neglected topic, even among top economists.
The third moral is that too many people, including both Krugman and his critics on this point, have been neglecting the literature.
By the way, other assumptions can be made and other results generated, but I am focusing on one of the core cases.