Hudson on the Piketty Phenomenon

[vt]

Re: We need methods, not goals!

Excellent points. How do we at least reduce the huge amount of money that results in negative ads and personal attacks?

The current system hardens opposition and divides us as a nation; so we don't solve pressing problems until they become a crisis.

[Polish_Silver]

We need methods, not goals!

I've proposed elections financed ONLY with government funds ($2 million House, $5 million Senate, and $50 million per Presidential candidate). This will take a huge amount of money out of politics. It will end buying access. My other proposal is to close done lobbying. Congress will be granted funds for research of issues.

,

How do you "prohibit lobbying"? Is anyone who talks to a congressman lobbying? If congress is debating a bill about health care, shouldn't they dialog with health care providers and patients? And isn't anyone who represents those groups a "lobbyist"? How do you legally define lobbying?

I am all for public campaign financing. But I don't see how you can prevent other money from getting into the election.

Suppose a campaign is going, and I tell people that one candidate is bad. Then I organize volunteers to run a phone and internet campaign to tell voters that he is bad. Now I hold a city wide beer and pizza party which anyone can attend if they assist in the campaign. I have not paid anyone cash, but I have influenced the election outcome. If you make that illegal, aren't you restricting free speech?

How do you make a legal distinction between free speech and campaigning?

Further, under your system, the government would be the only source of campaign resources. And the government would be deciding who received those resources. Anyone else provided campaign information would be violating the law, no? Do we want the government to have a monopoly on political information?

[llanlad2]

Re: Hudson on the Piketty Phenomenon

Explain how you think this disproves the law of supply and demand. Hungary's healthcare system is controlled by the government including physician salaries. The result is that physicians are underpaid and many are leaving the country.

It's interesting you point out the bribery/gratuity system that is widespread. This is the law of supply and demand finding a way, albeit illegally, around the artificial constraints put in place by the government. The people of Hungary are willing to pay more for physicians but because of the centrally planned system they have to break the law to do so.

This is a textbook case of central planning failing because it tries to supersede the law of supply and demand. Yet somehow you reach a totally different conclusion. It boggles the mind.

I don't think the corruption of the Hungarian doctors can be attributed to central planning gone wrong. As for the doctors leaving what do you suggest they do? How can Hungary compete with US and German salaries? If their doctors earned the same as in the US and Germany and it was a private based system then you would have a ratio of about 0.5 doctors per thousand people as 90% of the population couldn't afford the healthcare. Would you consider that a good example of a free-market?

Healthcare systems are controlled by someone always. If a government controlled healthcare system results in lower costs why would you be against it? Likewise if a privately run system was cheaper I wouldn't be against it. I fail to understand that just because something is privately run it must be in my better interests. It's the private motives of people whether they are in the government or private sectors that are questionable. I want to be protected against all.

In the Uk where I'm from it is the doctors that have a strong grip on the system. There are 90000 A grade applicants a year to study medicine yet only 10000 places. A deliberate shortage of training places is maintained resulting in over inflated salaries for doctors and waiting lists. Consequently queue jumping takes place for those who can afford it. No different to Hungary but legitimate.The result is the same however in that someone is not getting treated due to the shortage. The USA has a shortage of doctors so why hasn't the "market" solved this issue? Just because the government doesn't get involved doesn't always ensure a market is free and competitive. To my mind healthcare is one area where the more free-market countries (UK and USA) are failing. There is a continuing growing demand for healthcare as populations age and yet there is a failure to meet it.

[vt]

Re: Hudson on the Piketty Phenomenon

I've proposed elections financed ONLY with government funds ($2 million House, $5 million Senate, and $50 million per Presidential candidate). This will take a huge amount of money out of politics. It will end buying access. My other proposal is to close done lobbying. Congress will be granted funds for research of issues.

We also need to simplify legislation so that it can be comprehended by at least a college student. Streamline government departments and reduce bureaucracy. Get the government to function smoothly to serve the people.

No pay offs, equal justice, objective decisions. Money will be made in a free, competitive market without special favors granted by government. Faster, cheaper, better will lead to lower costs, more jobs at higher pay, greater growth, and higher government revenue at lower taxes. FIRE will be put out, and the true economy emerge.

Yes some will get rich, but their reign will be short as unrestrained competition will create even better products, services, innovations, and inventions. The middle class will expand rapidly, as will living standards.

Get rid of corruption and there is no limit on what can be created,

[Polish_Silver]

Doctors underpaid in Europe

.. I chose Hungary because I know a Hungarian anaesthetist who told me what he earned in Hungary compared to the UK and the average wage in Hungary. .

My wife told me physicians are also underpaid in the Czech republic, though I don't know the reasons.

You also have to consider their education may have been completely paid by taxpayers, unlike in the US where they pay a fortune to get a an MD degree.

Something similar happened in Germany after World War I. They had big inflation prior to the hyperinflation. During this time, the salary of public employees was not raised. The government was running a big deficit, but would not admit the currency was depreciating. They could not raise salaries because that would be acknowledging the inflation. That is one example of how "central planning" goes wrong--decisions are made based on short term political expedience, rather than reality.

There were similar cases in Poland, were physicians would not perform work they had contracted to do unless families paid additional fees--and the patient was already on the operating table cut open!

Japan may also have an physician underpayment problem---fees are the same in the hinterlands as they are in Tokyo, so either the Beverly's are paying through the nose, or the Tokoyo-ans are getting a free ride.

I'd agree that "central planning" can easily cause distortions of this type. In fact the American system has a good deal of central planning in it, with the goal of keeping prices high. (The "planning" is done by hospitals, insurers, etc.)

[llanlad2]

Re: Hudson on the Piketty Phenomenon

I think the government (in the US) exists to protect the rights of its citizens and not to simply do whatever it wants in order to benefit society or the economy.

My opinion is that the government telling a company how much to pay it's CEO because they believe it will somehow benefit the public is overstepping it's authority. But all of this is subjective because certainly I would say that if Apple's Board of Directors decided to pay Tim Cook $5 billion a year that would be a breach of their fiduciary duty. I assume most would agree and then the question becomes where is the line drawn.

Certainly there are other instances of this type of breach. I've mentioned on itulip before the options backdating scandal of United Healthcare's former CEO, William McGuire. He at least did have to pay a penalty, although an insufficient one in my opinion.

But again, these situations already have remedies. It is mostly a question of enforcement. Is Jon Corzine really not in jail because he didn't technically break the law? Or because he has connections? I have my opinion. Others may vary in theirs.

I think we partly agree with each other. I agree with you that I don't want too much government interference, I also have no problem with people getting rich. But I do have a problem with rich people interfering with government which is what I believe is happening.

You mention that these situations have remedies. I agree the rules are there. But the reason they are not enforced is because there are so many incredibly rich people paying for the rules to be ignored. And it is because of this that I think a lot of their wealth should be taxed away. These wealthy individuals end up dictating policy to the government for their own self-interest. The politicians don't do anything because they get rich themselves and are enticed to act in their own self-interest. This is why I believe the "excessive" pay should be taxed away. If Jon Corzine and all the rest had only ever been "normal" millionaires he may well have gone to prison. These guys have gone beyond "normal" rich. Making 10 million dollar pay-offs is small change to these guys. This is why they don't go down any more. They are polluting the role of government and law enforcement to the detriment of society as a whole.


Regarding Steve Jobs- his options were worth a lot less at the time than Tim Cook's are worth now.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

I've been reading over this thread with interest. And I want to highlight one point and ask a question. Not singling you out D Spencer, you just mentioned something I thought was interesting and wanted to get the take you and others have on it.

I agree that on one makes you own company stocks but OTOH corporations exist at the whim of society, or at least they did up until the Supreme Court invented the fiction of corporate rights and took supervision of them away from the states. But it still stands that as government allows incorporation and grants certain rights to the corporation they also have a vested interest to see that this results in benefits to society.

If structuring tax codes in a certain way results in benefits for society and/or the economy at large doesn't the government have an obligation to do so? An example would be the inverse relationship between very high tax rates at the top and the funneling of corporate capital into R&D and production enhancements. Another might be the very low tax on carried interest and the ways in which very highly paid individuals pay much less taxes for some, tbh, pretty sketchy activities has increased substantially.

Just tossing that out for comment.

Will

I think the government (in the US) exists to protect the rights of its citizens and not to simply do whatever it wants in order to benefit society or the economy.

My opinion is that the government telling a company how much to pay it's CEO because they believe it will somehow benefit the public is overstepping it's authority. But all of this is subjective because certainly I would say that if Apple's Board of Directors decided to pay Tim Cook $5 billion a year that would be a breach of their fiduciary duty. I assume most would agree and then the question becomes where is the line drawn.

Certainly there are other instances of this type of breach. I've mentioned on itulip before the options backdating scandal of United Healthcare's former CEO, William McGuire. He at least did have to pay a penalty, although an insufficient one in my opinion.

But again, these situations already have remedies. It is mostly a question of enforcement. Is Jon Corzine really not in jail because he didn't technically break the law? Or because he has connections? I have my opinion. Others may vary in theirs.

[Penguin]

Re: Hudson on the Piketty Phenomenon

I agree that companies often structure CEO pay in a way that is detrimental to the company. But again, nobody forces me to own those companies. When the government forces me to bail them out with my tax dollars, I have a huge problem with that but that's not the same issue...

I've been reading over this thread with interest. And I want to highlight one point and ask a question. Not singling you out D Spencer, you just mentioned something I thought was interesting and wanted to get the take you and others have on it.

I agree that on one makes you own company stocks but OTOH corporations exist at the whim of society, or at least they did up until the Supreme Court invented the fiction of corporate rights and took supervision of them away from the states. But it still stands that as government allows incorporation and grants certain rights to the corporation they also have a vested interest to see that this results in benefits to society.

If structuring tax codes in a certain way results in benefits for society and/or the economy at large doesn't the government have an obligation to do so? An example would be the inverse relationship between very high tax rates at the top and the funneling of corporate capital into R&D and production enhancements. Another might be the very low tax on carried interest and the ways in which very highly paid individuals pay much less taxes for some, tbh, pretty sketchy activities has increased substantially.

Just tossing that out for comment.

Will

[DSpencer]

Re: Hudson on the Piketty Phenomenon

As for Tim Cook's salary. Ok he took home 46 milllion dollars but he was given 365 million dollars worth of options some of which vest in 2016. It's true I do not have to own Apple's stock but it is absolutely not true to state that there is no consequence to him being paid that much. There are huge ramifications and knock on effects.Disharmony is created. Every CEO demands higher pay. Public sector bosses demand huge compensation for their unmeasurable pen pushing performance. He does not receive his pay in a Apple sealed vacuum packed box. Apple did not become a successful company by paying large amounts of money to its CEOs. No company gets wealthy doing this please, show me one that has. It's interesting that Steve Jobs is given as as an example as it is well known that his salary was $1 a year. I don't deny Steve Jobs deserved his wealth-but he is the exception rather than the norm. His original share options were not worth anything like so much when he took over and clearly earned it over a number of years. His goal was not personal wealth but a by-product of intellect, leadership, innovation and good fortune.

I've been asked to show evidence of how CEO pay does not lead to improved shareholder performance. Almost every bank boss would have seen his shareholders and bondholders wiped out without government intervention and yet we are told they need to be compensated for their unique talents. Survey after survey shows that CEO pay is not a predictor of performance and several show that there is no real market for CEOs because successful companies generally do better when they promote from within.I would link but wouldn't know which one to choose.

Another polluting aspect of high CEO pay is the power and influence they wield with it. A good example is the disgraced Chairman of Enron Ken Lay. He had the ear of politicians, was on government energy advisory boards and donated(bribed) political parties.Enron was 5 times Fortune innovative company of the year. Its executives were nothing short of rock stars and yet it was fraudulent. I am not jealous of wealth fairly gained however if it is allowed to accumulate to excess it will damage society and is used to bribe officialdom.

Steve Jobs didn't need a salary because he was a huge shareholder in the company. It's not like he didn't make an absolute fortune working as the CEO of Apple, he just did it in a different way.

I agree that companies often structure CEO pay in a way that is detrimental to the company. But again, nobody forces me to own those companies. When the government forces me to bail them out with my tax dollars, I have a huge problem with that but that's not the same issue.

Ken Lay was convicted of fraud. The problem now is that nobody ever gets convicted.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

And here are the average wages of workers.The average worker in Hungary earns more than a doctor. My friend informed me that this was the case for GPs and surgeons. Surgeons did however supplement their income by taking bribes to move people up waiting lists. However these bribes did not make their way through to the anaesthetist.

Explain how you think this disproves the law of supply and demand. Hungary's healthcare system is controlled by the government including physician salaries. The result is that physicians are underpaid and many are leaving the country.

It's interesting you point out the bribery/gratuity system that is widespread. This is the law of supply and demand finding a way, albeit illegally, around the artificial constraints put in place by the government. The people of Hungary are willing to pay more for physicians but because of the centrally planned system they have to break the law to do so.

This is a textbook case of central planning failing because it tries to supersede the law of supply and demand. Yet somehow you reach a totally different conclusion. It boggles the mind.

[llanlad2]

Re: Hudson on the Piketty Phenomenon

The law of supply and demand "doesn't really hold up" because you claim that in "some countries" a surgeon earns less than a manual worker? With no actual data or source, no indication of the supply and demand of either profession in those countries and without even specifying which countries you make this claim. Why should anyone take that kind of "argument" even remotely seriously?

So in your personal opinion the CEO of Apple has no impact on Apple's performance as a company? That's wonderful. It's ironic given that in many people's opinion Apple is the perfect example of how much impact a successful CEO can have, but since a random person on the internet claims it's all BS I guess we should all be convinced.

Maybe Tim Cook will be a failure as CEO, but that doesn't prove that you or Joe Blow off the street would do any better or that paying high salaries to attract talent is robbing the shareholders.

I'll be the first to admit that I don't always like how public companies are run. But guess what! Nobody forces you or I to own shares in Apple. If you don't like that Apple pays Tim Cook millions of dollars then don't buy their stock! It's not really robbery if you willingly go along with it. It's not like this was some surprise move where suddenly they hire the chairman's 20 year old nephew who works at McDonalds and pay him 2 billion dollars a year.

Ok it is fair enough to ask for evidence. I chose Hungary because I know a Hungarian anaesthetist who told me what he earned in Hungary compared to the UK and the average wage in Hungary. Anyway here is the evidence below from this website http://medlines.org/they-pay-less-fo...laries-europe/

1. Here is the chart for minimum and maximum wages for medical doctors across the EU





And here are the average wages of workers.The average worker in Hungary earns more than a doctor. My friend informed me that this was the case for GPs and surgeons. Surgeons did however supplement their income by taking bribes to move people up waiting lists. However these bribes did not make their way through to the anaesthetist.



As for Tim Cook's salary. Ok he took home 46 milllion dollars but he was given 365 million dollars worth of options some of which vest in 2016. It's true I do not have to own Apple's stock but it is absolutely not true to state that there is no consequence to him being paid that much. There are huge ramifications and knock on effects.Disharmony is created. Every CEO demands higher pay. Public sector bosses demand huge compensation for their unmeasurable pen pushing performance. He does not receive his pay in a Apple sealed vacuum packed box. Apple did not become a successful company by paying large amounts of money to its CEOs. No company gets wealthy doing this please, show me one that has. It's interesting that Steve Jobs is given as as an example as it is well known that his salary was $1 a year. I don't deny Steve Jobs deserved his wealth-but he is the exception rather than the norm. His original share options were not worth anything like so much when he took over and clearly earned it over a number of years. His goal was not personal wealth but a by-product of intellect, leadership, innovation and good fortune.

I've been asked to show evidence of how CEO pay does not lead to improved shareholder performance. Almost every bank boss would have seen his shareholders and bondholders wiped out without government intervention and yet we are told they need to be compensated for their unique talents. Survey after survey shows that CEO pay is not a predictor of performance and several show that there is no real market for CEOs because successful companies generally do better when they promote from within.I would link but wouldn't know which one to choose.

Another polluting aspect of high CEO pay is the power and influence they wield with it. A good example is the disgraced Chairman of Enron Ken Lay. He had the ear of politicians, was on government energy advisory boards and donated(bribed) political parties.Enron was 5 times Fortune innovative company of the year. Its executives were nothing short of rock stars and yet it was fraudulent. I am not jealous of wealth fairly gained however if it is allowed to accumulate to excess it will damage society and is used to bribe officialdom.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

And why should we be content with the decisions on how it is currently redistributed?

Remember the context of this discussion is wealth created and maintained by massive, systemic fraud as part of a giant criminal enterprise. It is wealth that to date has stymied and distorted the law, its enforcement, our electoral politics and democratic institutions, and even how the news of it all is reported.

And fundamentally we are talking about wealth based on rent, land rent, natural resource rent, monopoly rent and the disasters of FIRE. We speak here of multi-generational wealth deep in black pools largely free of the scrutiny of economists and the tax man, and certainly not subject to the degree of taxation suffered by the wage earner and small business owner. And wealth employed to goals and tasks contrary to the country's social and economic development.

I think what some dislike most about Piketty, Hudson and others who share their view is that they have opened the conversation on how this wealth is created and maintained. Knowing what we do about that, it seems to me thinking about how to redirect economics to meet human ends is entirely appropriate given how terribly misdirected it continues to be. In my view raising the specter of redistribution seems not at all appropriate if our goal is to maintain and advance the incentives of a healthy and sustainable economy. It seems more appropriate to maintaining the status quo.

Neither Hudson nor Piketty (and certainly no one here) call for a broad brush confiscatory taxing of fortunes, but rather a focus on particular kinds of wealth and particular kinds of fortune making that are predatory, deflationary and guaranteed to produce mass misery. iTulipers don't need a lesson on the pitfalls of rentier economies and the virtues of productive ones. I mean, EJ wrote the book on it and for God's sake I wish the world were discussing the ideas in The Post-Catastrophe Economy than in Capital in the 21st Century.

If the wealth is created through a criminal enterprise and we know who the culprits are then the solution is very simple: Put them in jail and fine them.

If we refuse to enforce the laws then it doesn't matter what they say anyway so why debate how to precisely construct them?

I didn't miss the news about Jon Corzine going to jail did I?

[Woodsman]

Re: Hudson on the Piketty Phenomenon

I'm referring to the position that Piketty and Hudson apparently advocate:

“Well, you need to somehow tax the wealth away”. Well, that’s true, but that’s for another book in the future.

Or maybe you take issue with the "give it to ourselves" part of my comment. If so, all I can say is that is implied because it is always the M.O. Whether directly or through reduced taxes for others the end goal is always the same. This isn't like the scene from Batman where the joker burns a pile of money. They obviously want to redistribute it. Even if they did burn (or delete) it, it would be a deflationary way of accomplishing the same thing.

And why should we be content with the decisions on how it is currently redistributed?

Remember the context of this discussion is wealth created and maintained by massive, systemic fraud as part of a giant criminal enterprise. It is wealth that to date has stymied and distorted the law, its enforcement, our electoral politics and democratic institutions, and even how the news of it all is reported.

And fundamentally we are talking about wealth based on rent, land rent, natural resource rent, monopoly rent and the disasters of FIRE. We speak here of multi-generational wealth deep in black pools largely free of the scrutiny of economists and the tax man, and certainly not subject to the degree of taxation suffered by the wage earner and small business owner. And wealth employed to goals and tasks contrary to the country's social and economic development.

I think what some dislike most about Piketty, Hudson and others who share their view is that they have opened the conversation on how this wealth is created and maintained. Knowing what we do about that, it seems to me thinking about how to redirect economics to meet human ends is entirely appropriate given how terribly misdirected it continues to be. In my view raising the specter of redistribution seems not at all appropriate if our goal is to maintain and advance the incentives of a healthy and sustainable economy. It seems more appropriate to maintaining the status quo.

Neither Hudson nor Piketty (and certainly no one here) call for a broad brush confiscatory taxing of fortunes, but rather a focus on particular kinds of wealth and particular kinds of fortune making that are predatory, deflationary and guaranteed to produce mass misery. iTulipers don't need a lesson on the pitfalls of rentier economies and the virtues of productive ones. I mean, EJ wrote the book on it and for God's sake I wish the world were discussing the ideas in The Post-Catastrophe Economy than in Capital in the 21st Century.

[gwynedd1]

Re: Hudson on the Piketty Phenomenon

It's total, unmitigated bullshit, this idea that the very rich are "giving" their wealth away. It's part and parcel of the long discredited notion that philanthropy is a sufficient replacement for public action and investment.

One would imagine most anyone considering putting forth such an argument would self-censor to avoid certain embarrassment at revealing their credulity, but such is the heady mix of ideology, self-interest and faith that lies at its base. In my opinion, there's not a popular article, speech, video, book, or scholarly monograph that would put the slightest dent in the certainty of the people who advance this idea.

Now there's no question that nominal amount of dollars going into philanthropy has increased along with the fortunes of the top out of sight rich, but so has every metric associated with that tiny minority community. And all things being equal - which they certainly aren't - it is better to encourage philanthropy than to discourage it. It can and has been transformative when focused on specific organizations and select groups of people.

But in terms of resolving vexing social challenges like extreme inequality, it makes the problem worse. The very rich may be selfish and immoral, they may be small minded and provincial, but what they are not is ignorant of those actions and arrangements that keep them wealthy. Does one imagine they actively pursue lines that threaten their position? Of course they don't. They use philanthropy to strengthen those arrangements that make extreme inequality possible in the first place. To them it is part of the arsenal of class warfare. The very rich use philanthropy as a carrot to win people over to their ideology and as a complement to their stick of political largess.

By far the finest example of this approach are those charities and advocacy groups founded by David and Charles Koch. The tens of millions they spend yearly on federal and state lobbying goes hand-in-glove with their nonprofits’ public advocacy, and all for reasons having everything to do with the brothers’ sprawling business and ideological interests. Far from helping the public, this brand of misanthrope philanthropy is a form of self-therapy for the world’s very rich. The world’s wealthiest in the end give to nobody but themselves.

Yeah I love that whole give away crap. I have a lot in common with this idea. As one who consumes wild , feral and weedy sources of food, I have lots of assets around me that are not in my name. A name is often as much a source of malediction as it is a blessing. Parking tickets in your name; property in you name, that can become the bases of the enforcement of ordinances, regulations, taxes due and law suits. I do not use my name here, knowing its typically nothing but an essential ingredient in spells and incantations, the music for the dancing ritual calling for the storm clouds of my doom. An address is a coordinate for a cross-hair, and a target's maw eats from the spring tips of arrows.

These foundations created by the rich are the fields of their Elysium, not in their name but provided for their benefits by the gods. They pick from the tree as they please but are not responsible to maintain it.

[DSpencer]

Re: Hudson on the Piketty Phenomenon

I agree with you there is a particular relationship between a person's income and their value to society. It's inverse. The more useful a person is to society the less they generally get paid. As for the supply and demand argument it doesn't really hold up. In some countries a surgeon earns 10x a manual worker whilst in others they may earn less. There was no shortage of people who could have been or wanted to be CEO of APPLE. Tim Cook could stay at home 365 days a year and Apple would still make billions-so why does he get paid 365 million dollars a year? I would have done it for far less. If he was taxed 90% on that it would be called "government robbery". Yet he along with the board are are allowed to rob the shareholders for their own personal gain and be respected for it?

The law of supply and demand "doesn't really hold up" because you claim that in "some countries" a surgeon earns less than a manual worker? With no actual data or source, no indication of the supply and demand of either profession in those countries and without even specifying which countries you make this claim. Why should anyone take that kind of "argument" even remotely seriously?

So in your personal opinion the CEO of Apple has no impact on Apple's performance as a company? That's wonderful. It's ironic given that in many people's opinion Apple is the perfect example of how much impact a successful CEO can have, but since a random person on the internet claims it's all BS I guess we should all be convinced.

Maybe Tim Cook will be a failure as CEO, but that doesn't prove that you or Joe Blow off the street would do any better or that paying high salaries to attract talent is robbing the shareholders.

I'll be the first to admit that I don't always like how public companies are run. But guess what! Nobody forces you or I to own shares in Apple. If you don't like that Apple pays Tim Cook millions of dollars then don't buy their stock! It's not really robbery if you willingly go along with it. It's not like this was some surprise move where suddenly they hire the chairman's 20 year old nephew who works at McDonalds and pay him 2 billion dollars a year.