Boston Review has put their forum from their most recent magazine, What To Do About Inequality, online. My contribution is here. Check out the rest of the articles as well – Anne Astott’s contribution in particular was excellent.
The lead essay by David B. Grusky argues that Occupy (and his audience of left liberals) should focus less on taxation and more on “rents.” They should abandon a “tax-based redistributive agenda” and focus instead on the way that “corruption, bottlenecks, and sweetheart deals” embedded in our markets give rise to rents that generate inequality. Grusky finds “The concept of rent is tailor-made for the OWS argument that power and privilege are built into our markets.”
The exchange is fun because he gets attacked from every possible angle – libertarians who are mad that inequality is even discussed as a problem to liberals who think taxes are being sidelined too quickly in this argument.
A few additional points I didn’t get a chance to make in the article. First off, taxes are a fine tool for the 1%. Contra Grusky’s argument that CEOs capture their salaries, I think the evidence is more convincing that they earn their marginal product but that pay is still a rent, and could be taxed at a high rate with no allocation loss.
(Fun aside: a friend who teaches economics at an Ivy League school once told me that, after telling his intro students that Saez’s numbers say that high-end taxes could be over 70% without hurting growth – Saez’s argument is also in the Boston Review forum – a student approached him and said “I’m a total socialist, but that tax rate is far too high.” Oh Ivy League kids…)
Meanwhile the rent examples in Grusky’s essay aren’t all that threatening or aggressive in regards to inequality. It doesn’t invoke the three concepts of rents and the way that the government affects the distribution of income that left-liberals needs to be concerned about, ones I’d like to get a preliminary map on here.
The first rents are the ones that actually squeeze workers in the price of necessary goods, like the housing rents in Matt Yglesias’ e-book. That discussion tends to be wonky and heavily focused on zoning regulations. I think that’s great, but it could use more visualizations of rents like this old brilliant editorial cartoon reproduced on this anarchist economics book cover:
(Why wasn’t this Yglesias’ e-book cover? Also I may need to get a tattoo of that image, or at least a t-shirt.)
The second is the kind Dean Baker brings up in his excellent End of Loser Liberalism, which is the argument that the government has a massive influence on the pre-transfer distribution of income. When Baker says that 10 million jobs are missing and this is a choice we’ve made on how to deal with the Great Recession, this has massive consequences for inequality and the wages of workers – far beyond technical changes to corporate board composition. The way the government sets up laws surrounding patents, the right to unionize, free trade and a whole host of issues influences the distribution of wealth well before we’ve taxed or transfered a single income.
A third related rent issue follows Robert Hale and notes that there’s no easy out of these situation – the whole enforcement of contracts, property rights and the creation of markets requires some sort of government project. How the fruits of these arrangements and subsequent rents get shared is a project that needs to be addressed democratically, and that’s what I try to address in my essay contribution. I had high hopes that Grusky would approach his issue more that way – with the way that the government really contributions to inequality – but he ends up reifying an abstract market.