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Monday, December 21, 2015

Upward redistribution of income: are rents the story?

Dean Baker - working paper on rents. Why yes, of course economic rents are the mechanism for upward redistribution of income. How the hell else do you expect the kleptocratic ruling class to make money? Wise investment and hard work?

Ha ha ha ha ha!


This paper argues that the bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.

Wait. Wait a sec. You're saying this is a paper by an actual economist?

Yes, apparently Dean Baker is a former professor of macroeconomics, as well as a founder of CEPR.

So hasn't this guy heard of Douglass North? That's kinda an important economist there, and he explains in detail how rents are produced by institutions. You could basically sum up the entire paragraph above, and much of the rest of the paper, as "go read Douglass North".

The people with power influence the political process to gain the ability to confiscate wealth from the economy. Basic fact. So obviously the ability to confiscate rents has nothing to do with capitalism, per se, but is actually just a feature of corrupt societies in general.

You don't have to limit your analysis to patents, financial sector, CEO pay and professional organizations, either; basically every institutional structure in every economy can be altered to feed more money to the kleptocrats. Union-busting legislation in the US, government subsidy of subsistence wages at Walmart, 2%-20% hedge fund fee structures, corn ethanol subsidies, and the military-industrial complex are all areas where money is taken out of the American economy and handed over to a kleptocratic elite who provide nothing of value.

In fact, given John Kenneth Galbraith's explanation of the positive effects of oligopoly, the problem is not so much government granting of oligopolistic power to corporations: the real problem is government granting of kleptocratic power to the rentier class.

So I guess the article isn't actually a paper by an economist as it is just another political screed. Oh well, that's fine. I guess that's what CEPR does.

1 comment:

  1. I don't know if it's intrinsic to capitalism. Ism's of various stripes often seem to be convenient cover for whatever sick human behavior is being foisted on others by those with power. The predatory spirit lives and sees its fellow man as prey. Merry Christmas!