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Old 03.29.2016, 08:44 PM   #1
Robert Schunk
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Join Date: Feb 2007
Location: East Coast, USA
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This piece excerpts, in part relevant to the central argument in my earlier thread "US Bottom-Tier Shoppers Too Poor To Shop (at: http://www.sonicyouth.com/gossip/sho...d.php?t=113252), a recent article by Didier Jacobs entitled: Are Billionaires Fat Cats or Deserving Entrepreneurs? published by the Center for Popular Economics:

"The 62 richest people
in the world own as much wealth as half of humanity. Such extreme
wealth conjures images of both fat cats and deserving entrepreneurs. So
where did so much money come from?

"It turns out, three-fourths of extreme wealth in the US falls on the fat cat side.

"A key empirical question in the inequality debate is to what extent
rich people derive their wealth from “rents”, which is windfall income
they did not produce, as opposed to activities creating true economic
benefit.

"Economists define “rent” as the difference between what people are paid
and what they would have to be paid to do the work anyway. The classical
example is the farmer who owns particularly fertile land. With the same
effort, she can produce more than other farmers working on land of
average productivity. The extra income she gets is a rent. Monopolists
also get rent by overcharging customers as compared to what they could
charge in competitive markets. More generally, economists have
identified a series of “market failures”, which are situations where
full competition does not prevail and where someone can therefore
overcharge – they would be ready to do the work for less, but lack of
competition allows them to make a quick extra buck. Government can
alleviate market failures through proper economic regulation; or it can
make them worse. Political scientists define “rent-seeking” as
influencing government to get special privileges, such as subsidies or
exclusive production licenses, to capture income and wealth produced by
others."

***

"The bottom-line is that extreme wealth is not broad-based: it is
disproportionately generated by a small portion of the economy. Economic
theory predicts that activities that are prone to rent-seeking or
market failures will concentrate wealth, and that is what we observe.

"This finding has important moral, economic, and policy implications.
To the extent that it is driven by rents as opposed to productive
activities, the extreme concentration of wealth we observe is not fair
according to a meritocratic conception of social justice. Moreover,
because rents do not compensate productive activities, redistributing
them through taxes or regulation does not harm the economy, and could
even boost economic growth. As wealth inequality has become so extreme,
even modest redistribution could have significant positive impact for
the poor and the middle class."

***

Notice how the last two sentences quoted agree with the observation of Moody's Vice President Charles O'Shea quoted in my earlier thread: "Until the health of the lower-to-middle-income consumer improves, Walmart will continue to face macroeconomic headwinds in the US."

Hmmm.





 
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