sources of obligation, sources of value

March 17, 2016 1:56 AM

an introduction to fiat money (pdf) by Steve Randy Waldman:* - "Self-reinforcing bootstrap dynamics hold as strongly for a king's token as it would for any other thing, but much more stably so, since the king can reinforce and assure the stability of his token so long as he retains the political capacity to coerce or persuade payment of tax." (via)

"The problem was that if the subsistence base was capable of supporting the population entirely, colonial subjects would not be compelled to offer their labor-power for sale. Colonial governments thus required alternative means for compelling the population to work for wages. The historical record is clear that one very important method for accomplishing this was to impose a tax and require that the tax obligation be settled in colonial currency. This method had the benefit of not only forcing people to work for wages, but also of creating a value for the colonial currency and monetizing the colony. In addition, this method could be used to force the population to produce cash crops for sale. What the population had to do to obtain the currency was entirely at the discretion of the colonial government, since it was the sole source of the colonial currency." —Matthew Forstater on monetizing colonial Africa from Taxation and Political Accumulation (pdf)

some excerpts...

• the role of the banking system: "Banks' incentives are to subsume all spheres of human activity into income-generating enterprises to which funds can be profitably advanced. It's an overstatement and a bit conspiratorial to say that banks are 'responsible' for the increasing colonization of all aspects of life by market management and control. But their incentives are certainly consistent with these developments."
• fiat money is an activity, not a thing: "For the most part, real economic value cannot be stored, it must be produced and reproduced every day. Money as a store of value is a convenience, an easy, durable claim on future value. But it is only a claim. That future value will still need to be produced."
• how fiat fails: Fiat fails when the sovereign that manages it fails... Fiat failure is never due to 'printing' alone. It represents an imbalance between printing and capacity."
• in conclusion: "The serious problems with fiat currency are ethical. Fiat currency management is an incredible lever for social control, and people at the center, in government or in the banking system, have many opportunities for corrupt self-dealing... Improving on fiat currencies, via cryptocurrencies or any other means, is a worthy project. But I hope you'll understand how fiat currencies work — and they do work — and focus on remedying their serious ethical deficiencies."

on that note...

• How does inequality 'freeze' an economy? - "Some European physicists have used a [random exchange network] model to examine how a significant change in inequality affects the overall level of exchange... What they find is troubling, although not all that surprising -- rising inequality tends to undermine exchange."

The researchers found another interesting effect -- a "trickle up" flow of wealth quite different from the usual "trickle down" picture of supply-side economics. In an economy with appreciable inequality, capital tends to flow from those with less to those with more, generating a cascade of transactions along the way. Hence, policy interventions aiming to spur economic activity should work better if they inject money into the system at the lower end, rather than from the top... Central bankers might have a more powerful and beneficial effect if they instead injected money directly into the accounts of citizens, who could then use it to pay down debts or spend as they like. The idea of such "people's quantitative easing" is gaining popularity, and for good reason. It would more directly attack the budget constraints holding back the vast number of individuals on whom economic growth depends.

• Social credit is the answer - "The solution is obvious: Social Credit. Adopt the policies of the Social Credit Party of Alberta in the 1930s. Adopt the policies of Upton Sinclair's campaign for Governor of California in the 1930s. Adopt the policies that are taken as a matter of course and are in the background of Robert A. Heinlein's 1947 novel Beyond This Horizon."

Central banks should, instead of taking all the revenue from seigniorage they create and transferring it all back to the Treasury, calculate each quarter how much of the seigniorage they hold should be distributed to citizens in the form of that quarter's helicopter drop. I am not certain about how the legal-institutional constraints bind the BoJ, and ECB, and the BoE. I believe that the Federal Reserve could start such a policy régime today:

1. Incorporate–for free–everybody with a Social Security number as a bank holding company.
2. Let everybody then have their personal bank holding company join–again for free–the Federal Reserve system as a member bank.
3. Offer every such personal bank holding company a permanent long-term open-ended infinite-duration zero-interest line-of-credit to draw on, up to some set maximum nominal amount.
4. Raise the amount of the line-of-credit maximum every quarter by that quarter's desired helicopter drop.


The same institutional forces that have, since the selection Paul Volcker, kept the Federal Reserve focused on avoiding an inflationary spiral would still bind. There would be no way to gimmick such a Social Credit system to turn it into a giveaway to the bankers. It would give the Federal Reserve the power to engage in the one policy that nearly all economists are confident will always have traction on nominal demand. Once the Federal Reserve was off and rolling, other central banks would, I think, quickly find mechanisms within their current institutional-legal competence to accomplish the same ends.

• Central banks beat Bitcoin at own game with rival supercurrency - "A central bank crypto-currency is coming soon, leap-frogging Bitcoin, and that spells big trouble for the finance industry."


• The Financial System of the Future - "In this context, two relatively new interrelated ideas hold considerable appeal: that central banks should issue their own digital currency; and that financial transactions more broadly could be recorded on a decentralized ledger."


• New Zealand plans to give everyone a 'citizen's wage' and scrap benefits - "We are keen to have that debate about whether the time has arrived for us to have a system that is seamless, easy to pass through, [with a] guaranteed basic income and [where] you can move in and out of work on a regular basis."

more from SRW...

• Perspectives on a Universal Basic Income (pdf) - "A sociotechnological dividend: There is no evidence that today's 'winners' work harder or need to work harder than the extraordinary innovators or businessmen of the past. The vast increase in wealth that comes from a relatively few getting an ever greater share of an ever larger pie is not 'economically efficient' (i.e. necessary to inspire production and growth), but simply a matter of happenstance. If this is right, then the economic case for changing our institutions to alter this happenstance, not-so-great outcome is strong. Giving everybody a 'property right' on an equal share of some portion of aggregate output is a facially fair way to change our institutions in a way that resonates and is consistent with our practice of modern capitalism. The dividend stream generated by such a universal shareholding would look identical to a universal basic income."
• MMT stabilization policy - "A government's solvency constraint ultimately lies in its political capacity to levy and enforce the payment of taxes [which] depends first and foremost on the quality of the real economy it superintends. The value that a government is capable of taxing if necessary to sustain the value of its obligations increases with the value produced overall. A government that wishes to be solvent should first and foremost interact with the polity in a manner that promotes productivity. Secondly, the political capacity to levy taxes depends upon either the legitimacy of or the coercive power of the state. A government that wishes to sustain the value of its obligations must either gain the consent of those it would tax or maintain an infrastructure of compulsion... I like to imagine excessively coercive regimes are inconsistent with overall productivity."

posted by kliuless (40 comments total)

Here's another interesting perspective from, of all places, Wondermark, the Victorian clip-art comic.

At a time when Paul Krugman has publicly given up on his long-held support for Free Trade, I have to go back to my own admittedly flippant conclusion that Economics is less of a "dismal science" and more of a Pseudoscience.
posted by oneswellfoop at 3:12 AM on March 17, 2016 [3 favorites]

Because god forbid scientists should re-examine their long-held beliefs in the light of new ideas and new evidence. That's an obvious sign of quackery!
posted by firechicago at 4:24 AM on March 17, 2016 [12 favorites]

There's a lot of things to dig into here... I find myself surprisingly willing to let the central banks run a cryptocurrency, as long as it means that the entire blockchain is public, to prevent nefarious acts. Such a system would be awesome for managing stock and commodities markets as well.
I'd welcome a system that would make it impossible to sell naked shorts in the stock or precious metals markets, by design. This would obsolete the "too big to fail" banks in one fell swoop. ;-)

I learned a lot digging into the introductory PDF, loosening my grip on the thought that physical possession of precious metals was a cure-all to what ails the economy.

Thanks for the load of interesting reading material... it's going to take time to digest.
posted by MikeWarot at 4:24 AM on March 17, 2016 [1 favorite]

I learned a lot digging into the introductory PDF, loosening my grip on the thought that physical possession of precious metals was a cure-all to what ails the economy.

Literally the entire history of human beings using precious metals as money wasn't enough?
posted by Pope Guilty at 5:24 AM on March 17, 2016 [4 favorites]

Woah, somehow I have never heard of a "Social Credit" system, despite being very interested in stuff like this, and it's seriously blowing my mind right now.
posted by mayonnaises at 5:25 AM on March 17, 2016

Literally the entire history of human beings using precious metals as money wasn't enough?

Paging David Graeber...
posted by pharm at 5:30 AM on March 17, 2016 [4 favorites]

Literally the entire history of human beings using precious metals as money wasn't enough?

Yeah, I've never understood why people think that crap from the ground that has arbitrary value is any better than pieces of paper that have arbitrary value.

You can see the same fault of thinking in the design of Bitcoin, as well. It was designed to be inherently deflationary, but in practice that just makes it harder to actually use as mining got less efficient while desire to conduct transactions in Bitcoin was still growing.
posted by tobascodagama at 5:33 AM on March 17, 2016 [2 favorites]

"It was designed to be inherently deflationary, but in practice that just makes it harder to actually use as mining got less efficient while desire to conduct transactions in Bitcoin was still growing."

It was also designed with a "tipping" mechanism, under the idea that it would eventually replace new coins as the mining incentive. In techno-libertarian fantasy thought, it's great; currency is limited, preserving "value," and people will tip the miner because that will give them a higher priority (miners will be able to choose which transactions to prioritize and can do so off of the tipping amount). In the real world, tips are a horrible motivator in general, people with the least means would be unable to conduct business because they'd be unable to tip if miners actually enforced the prioritization, and when people don't know the miner personally they generally go out of their way to be stingy anyway.
posted by mystyk at 5:47 AM on March 17, 2016 [4 favorites]

capital tends to flow from those with less to those with more, generating a cascade of transactions along the way.

the central failure of economics AFAICT is its unwillingness to actually model the economy as-it-is.

Back in '49 somebody made a hydraulic computer that modeled the macro economy with flowing water (!) and that was a start.

More recently Dr Steve Keen has been working on "Minsky", a further attempt at economic simulation.

The elephant in the economics room is housing, and real estate in general. https://research.stlouisfed.org/fred2/graph/?g=3OPz shows housing has doubled from 15% of wages in the 1940s to ~30% today [some housing expense comes out of personal income and not just wages but the point is housing is a ~$2T/yr flow OUT of the paycheck economy into the rentier one].

We need to create much more housing stock in this country. We should be throwing hundreds of billions a year of public funds at that, not just the crappy Section 8 rent-subsidy programs we have.

We should have another 10 million people working here making houses, furnishings, and the white goods that go in them.

Instead of indiscriminate helicopter drops, we could print the money that supported that production (one effective way of combatting our trade deficit is to simply print the current trade deficit each quarter, currently $45B/mo)
posted by Heywood Mogroot III at 6:01 AM on March 17, 2016 [10 favorites]

I've been reading about political economy my entire adult life and I always learn a little more from your posts, kliuless. Thanks again!
posted by CincyBlues at 6:31 AM on March 17, 2016

I learned a lot digging into the introductory PDF, loosening my grip on the thought that physical possession of precious metals was a cure-all to what ails the economy.

Literally the entire history of human beings using precious metals as money wasn't enough?

Gold bugs like gold as a currency because, in theory, it controls inflation. That's it.

What exactly "ails the economy" that gold cures?

My personal theory is gold bugs like gold because it protects their existing wealth from inflation, oh and it's shiny a tradition going back millennia.

I don't understand the appeal.
posted by LoveHam at 8:36 AM on March 17, 2016

I've heard goldbugs also claim that their gold holdings "never lose value." Which, given the ~40% drop in price over the last four years, always brings a smile to my face. In the end, it is hard for a mineral resource to keep a price above extraction cost, which has hovered at about $400/oz for several decades. Even watching a show like Gold Rush, where the miners are gloating about millions of dollars in gold, reveals that little of that is going to end up in the miners pockets, with most of it going to the original land owner, fuel, equipment, and labor. Unless we end up with another gold bubble, I expect a lot of such miners to end up bankrupt, as the price falls to its extraction cost.
posted by Blackanvil at 8:57 AM on March 17, 2016 [2 favorites]

We need to create much more housing stock in this country. We should be throwing hundreds of billions a year of public funds at that, not just the crappy Section 8 rent-subsidy programs we have.

We should have another 10 million people working here making houses, furnishings, and the white goods that go in them.

With the caveat that there need to be price controls, and the housing needs to be built in places where demand already exists. Speculative building of suburban housing has been an absolutely devastating activity for both the economy and the environment.
posted by tobascodagama at 9:00 AM on March 17, 2016 [1 favorite]

"At a time when Paul Krugman has publicly given up on his long-held support for Free Trade"

That's an exaggeration. Stating that it's probably oversold isn't the same as saying that it's a bad idea in general.
posted by bfields at 9:03 AM on March 17, 2016 [1 favorite]

I think part of it is that so much in "free trade" packages seems to have nothing at all to do with what most people think of as free trade. Tariffs are already mostly nonexistent, TPP has only the smallest fraction of its bulk devoted to tariffs because they just aren't a thing anymore. Mostly it seems to be all about trading down social justice gains, environmental gains, guaranteeing a massive wealth transfer from the poor to the rich, and of course making copyright infinite and strangling the Internet. But free trade as it is widely understood isn't much a part of modern "free trade"agreements, which may explain Krugman's newfound indifference to them.

As an economist he's already got most of what he wants to see, tariffs being mostly gone.
posted by sotonohito at 9:17 AM on March 17, 2016 [6 favorites]

I think maybe "With the caveat that there need to be price controls," describes the entirety of my own personal economic thinking, such as it is.

Dang, though, social credit. everything old is new again. I think maybe (and I think this might be rigorously Marxist, but I dunno, it's been a while since I've read Capital), I think maybe the chief flaw in the socred idea (as with the universal basic income idea) is that it treats the way that rich people get to treat everyone else like shit under our current political-economic regime as an unfortunate side-effect of market-governed economics, rather than as the primary purpose of that regime.

Can anyone more familiar with Canadian politics explain how the socred parties up there turned so quickly into generic right wing parties that just happened to keep the Social Credit name?
posted by You Can't Tip a Buick at 9:32 AM on March 17, 2016 [1 favorite]

> capital tends to flow from those with less to those with more, generating a cascade of transactions along the way.

Also, though, this is what Marx was getting at with all the M-C-M' stuff in chapters 4-6 of Capital. Also, Piketty's Capital gets at this by empirical means with his r > g stuff. Piketty, though, treats r > g conditions as an unfortunate state that market economies can fall into, rather than as the purpose of market exchange.

am I oversimplifying? I think I'm oversimplifying...
posted by You Can't Tip a Buick at 9:35 AM on March 17, 2016

I have to go back to my own admittedly flippant conclusion that Economics is less of a "dismal science" and more of a Pseudoscience.

Hey now, let's not slander the noble professions of Astrology and Homeopathy with the association of those criminals.
posted by el io at 10:51 AM on March 17, 2016 [11 favorites]

You can see the same fault of thinking in the design of Bitcoin, as well. It was designed to be inherently deflationary, but in practice that just makes it harder to actually use as mining got less efficient while desire to conduct transactions in Bitcoin was still growing.

It's been discussed before here but I find that part of the Bitcoin design - or the way it's played out - very interesting, because on one hand it seems to have been a brilliant decision from the standpoint of driving early adoption. Especially given the known fixations of the online libertarian types who were likely to be intrigued by cryptocurrency in the first place. On the other hand it's a mess from the standpoint of long term viability - but the underlying technology is out there now.
posted by atoxyl at 12:22 PM on March 17, 2016 [1 favorite]

The Bitcoin stuff can easily start turning into a derail, but one last comment from me on it: the deflationary aspect of the design is one of the things that always made me think of it as a pyramid scheme more than a genuine attempt at establishing a useful cryptocurrency. It's incredibly well-calibrated to attract technolibertarians, increase the value of any mining done by early-adopters, and makes Bitcoins practically worthless as a true currency rather than just a tool for ransomware writers.
posted by tobascodagama at 12:25 PM on March 17, 2016 [1 favorite]

1. Incorporate–for free–everybody with a Social Security number as a bank holding company.

With the side benefit of driving sovereign citizen types absolutely nuts.
posted by eruonna at 12:41 PM on March 17, 2016 [2 favorites]

Is this....

Is this Whuffie? It sounds like Whuffie...
posted by lumpenprole at 1:01 PM on March 17, 2016 [1 favorite]

It's been discussed before here but I find that part of the Bitcoin design - or the way it's played out - very interesting, because on one hand it seems to have been a brilliant decision from the standpoint of driving early adoption.

-and-

The Bitcoin stuff can easily start turning into a derail, but one last comment from me on it: the deflationary aspect of the design is one of the things that always made me think of it as a pyramid scheme more than a genuine attempt at establishing a useful cryptocurrency.

Virtually every cryptocurrency scheme works the same way as Bitcoin- the creator and earliest adopters grab the early, super-easy-to-mine coins, and then everybody else gets in later to either devote massive resources to mining new coins or pay exorbitant amounts of money to the first few users for existing coins. It reminds me of 1990's comic book companies printing foil variant covers.
posted by Pope Guilty at 1:37 PM on March 17, 2016 [2 favorites]

fwiw, dogecoin, unlike most cryptocurrencies, is inflationary by design.
posted by You Can't Tip a Buick at 1:56 PM on March 17, 2016

IIRC dogecoin was created specifically to be silly and fun rather than as the moneymaking scheme other cryptocurrencies want to be.
posted by Pope Guilty at 1:58 PM on March 17, 2016

I would argue that the chief difference between dogecoin and other cryptocurrencies is that the creators of dogecoin know that their currency is a joke.
posted by You Can't Tip a Buick at 1:59 PM on March 17, 2016 [7 favorites]

That's why it's able to go to the moon and not only to the ER for treatment of preventable heatstroke.
posted by Pope Guilty at 2:17 PM on March 17, 2016

is this something fans of graeber's debt, the first 5000 years, would be sympatico with?

also advocated for by Albert and Hahnel's ParEcon vision, which is my go-to for utopian economic thinking.

quoted:

"In a society of an hundred thousand families, there will perhaps be one hundred who don’t labour at all, and who yet, either by violence, or by the more orderly oppression of law, employ a greater part of the labour of society than any other ten thousand in it. The division of what remains, too … is by no means made in proportion to the labour of each individual.

On the contrary those who labour most get least. The opulent merchant, who spends a great part of his time in luxury … enjoys a much greater proportion of the profits … than all the Clerks and Accountants who do the business. These last, again, enjoying a great deal of leisure, and suffering scarce any other hardship besides the confinement of attendance, enjoy a much greater share of the produce, than three times an equal number of artisans, who, under their direction, labour much more severely .....

The artisan again, tho’ he works generally under cover, protected from the injuries of the weather … and assisted by the convenience of innumerable machines, enjoys a much greater share than the poor labourer who has the soil and the seasons to struggle with, and, who while he affords the materials for supplying the luxury of all the other members of the common wealth, and bears, as it were, upon his shoulders the whole fabric of human society, seems himself to be buried out of sight in the lowest foundations of the building."
— Adam Smith
posted by eustatic at 2:34 PM on March 17, 2016 [3 favorites]

I've always thought "trickle down" was a near perfect description of observable reality as long as you envision wealth distribution as a giant pyramid balanced on its tip ( I suspect there's a hole in the bottom too),
posted by Alter Cocker at 2:38 PM on March 17, 2016 [2 favorites]

that the petro dollar is backed by violence is the thesis of this very funny skit
posted by eustatic at 2:52 PM on March 17, 2016

Just read the whole pdf and noticed this;
— For the most part, real economic value cannot be stored, it must
be produced and reproduced every day
Makes me wonder - again- about the tower of cash being held by the big techs and others.
I still don't get why, and it doesn't seem consistent with this theory.
Or, i just don't get it.
posted by Alter Cocker at 3:35 PM on March 17, 2016 [1 favorite]

"Trickle down" is actually just a rehashing of the 1890's "Horse and Sparrow" theory of supply side economics.

John Kenneth Galbraith being the one to make the connection:
"Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: 'If you feed the horse enough oats, some will pass through to the road for the sparrows.'"

It is interesting that today in the modern culture, these criticisms have been glommed together into their own meme, where the criticisms of supply-side economics has been collectively subsumed into just calling it all "trickle down", when in reality, that phrase was one of many criticisms. In 1992, Ross Perot was the one to enter the phrase "voodoo economics" to describe Bush Sr.'s economic policy, which was just a continuation of Reagan's economic policy, i.e. supply-side economics.

The major problem with supply-side is that you have to have supply in order to even begin to participate. It fundamentally breaks the balance of almost all supply and demand equations, which leads to crashes and recessions. I mean, it's great if you start out in a position where being on the supply-side works for you. It just eventually topples over, as the last 40 years of boom and bust cycle will pretty much show you, even with a cursory glance at the factors involved.

Makes me wonder - again- about the tower of cash being held by the big techs and others.
I still don't get why, and it doesn't seem consistent with this theory.

The purpose of hordes of cash is to be in on the supply-side when the next crash happens. "Weathering" the troubled times, as it were. The last thing you want is to have all your cash tied up in non-liquid assets. Just ask Donald Trump. Remember, he has gone bankrupt how many times? First bankruptcy, 1991. Second bankruptcy, 1992. Third bankruptcy, 2004. Fourth bankruptcy, 2009. It wasn't because he did not have assets. It was because he was holding illiquid assets that could not be converted into cash quickly or easily when the economy fell over, which it was going to do every time the supply-demand equation was tipped beyond where there was enough demand to support the supply in the whole system. Especially in real estate, which is almost all done through financing (i.e. taking out huge loans that carry a lot of interest), and the whole goal of real estate is to be a rentier (making money from people paying you to use your real estate). When the demand for your real estate is too low to cover the cost of paying those loans, the options are sell or declare bankruptcy, which forces your creditors to wait for you to pay them. If you do it right, you still make millions of dollars in profit while leaving those banks holding the bag. Actually, there are a whole bunch of corporations that do this, only they aren't as stupid as Trump, in that they sell their assets well before the signs of the coming economic downturn (aka, lower demand) begin, and just hold the cash until it is easier to reinvest.

Of course, all of this requires sitting on a horde of capital to start.
posted by daq at 5:28 PM on March 17, 2016 [2 favorites]

In 1992, Ross Perot was the one to enter the phrase "voodoo economics" to describe Bush Sr.'s economic policy, which was just a continuation of Reagan's economic policy, i.e. supply-side economics.

Nope, that was Bush Sr on Reagan ca. 1980, actually.
posted by Heywood Mogroot III at 6:01 PM on March 17, 2016 [3 favorites]

so basically the down-side of capitalists hoarding as money in anticipation of a crash is that that hoarding itself can lead to a crash, but the up-side is that the capitalists who hoarded money in anticipation of a crash make an absolute killing (in both literal and metaphorical terms) when the crash happens.
posted by You Can't Tip a Buick at 6:10 PM on March 17, 2016 [1 favorite]

If you're really smart (aka lucky) you can turn a small pile into a large pile by doing just that. The problem is one of timing. Lots of people, including myself, (along with pretty much everyone whose income didn't depend on the music never stopping) thought it completely obvious in the middle 2000s that asset prices had to have a correction. Lucky for me, I didn't short anything in 2006 when I thought it was becoming completely untenable, as I would have been wiped the fuck out long before the crash finally happened.

Anyway, back to the topic at hand, I'm glad to see MMT getting the airing it deserves. Like all economic theory, it is at best an approximation of reality, but it seems to be a damn good framework for understanding how modern economies actually function, despite Krugman's years-long derision of the project.

It also pleases me to see that the idea that supply-side economics in general were a serious diversion from the reality of how economies work. It got traction because it does have predictive power in the specific economic conditions which birthed it (in its most recent incarnation), and we would do well to remember that should we find ourselves back there at some point in the future. Of course, as long as the vast majority of the wealth is being sucked up by the folks at the top, that won't happen. We are and have been in a primarily demand limited scenario for two decades or more now. Supply don't mean shit if nobody can afford to buy. Similarly, demand is irrelevant when there is nothing to buy, but that is a problem for a decade from now, or longer if the idea of helicopter drops or vastly increased taxation (preferably on wealth, HFT, and other things that distract from productive uses of assets) doesn't take root in the near term.

The problem is less to do with income and more to do with accumulated wealth. Granted, the former can become, but we should endeavor to prevent that from happening beyond a rational level of saving to get an individual or family or whatever unit of society through a rough patch, like farmers through winter or laborers through a stint of unemployment. Of course, in the longer term we will have to confront the fact that a large part of that labor is now (and increasingly) excess to our needs. Somehow we will have to support those who are driven from the labor force by automation and economic dislocations caused by trade. (Even truly fair trade will over time lead to shifts in the labor market that put some people out of work and make it difficult to impossible to find alternative employment)

Someday, we will all have to become comfortable with the idea that half or fewer of us will have to support the remainder, simply because there will not be enough work to do. We aren't there yet in the US, especially with so much needed infrastructure investment, but we will be there someday in the not too distant future, just like the finance bubble had to pop in 2007-2008. (And will again)
posted by wierdo at 3:21 AM on March 18, 2016 [1 favorite]

daq, you forgot the punch line to that theory - it's horse shit.
posted by wilful at 3:46 AM on March 18, 2016 [1 favorite]

The researchers found another interesting effect -- a "trickle up" flow of wealth quite different from the usual "trickle down" picture of supply-side economics.

Trickle down economics: a golden shower of prosperity.
posted by sjswitzer at 10:58 AM on March 18, 2016 [1 favorite]

gets at this by empirical means with his r > g stuff. Piketty, though, treats r > g conditions as an unfortunate state that market economies can fall into, rather than as the purpose of market exchange.

I think this is a misreading of Piketty - I think he should be taken as saying that r > g is the normal state of economies, in the absence of intense political effort to make it otherwise, and that the postwar period that most contemporary economic theory takes as a baseline is in fact exceptional.
posted by PMdixon at 2:59 PM on March 18, 2016 [3 favorites]

point taken — I acknowledge that I apparently only have space in my brain for one gigantic book titled "Capital."
posted by You Can't Tip a Buick at 4:04 PM on March 18, 2016 [2 favorites]

I always thought it was disturbing that the whole concept of trickle down didn't get an immediate pushback from the American people as a whole, it seems to me that it illustrates how devoted to the idea of a social hierarchy many Americans really are.

The way it was always presented, as if it was a good thing for the lower classes was:

1) Give lots and lots of money to the wealthiest Americans.

2) They'll spend that money.

3) A tiny fraction of the money given to the wealthiest Americans in step one will, eventually, reach you the working class in the form of tips and possibly even a $0.04/hour raise!

And the lower class and middle class Republican voters saw no problem with this plan. They thought that starting out by giving away a crapton more money to the richest people on the planet was good. Because, for many of the Republican voters there's a firmly held belief that the upper classes simply deserve to be hyper rich, and that the lower classes (including themselves) simply deserves to be ground down in poverty.

I find that deeply disturbing.
posted by sotonohito at 5:40 PM on March 18, 2016 [2 favorites]