Live at Boston Review on Inequality, Rents and Occupy; Plus Comments on Three Types of Rents.

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.

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12 Responses to Live at Boston Review on Inequality, Rents and Occupy; Plus Comments on Three Types of Rents.

  1. banditelli says:

    I will PERSONALLY be filled with teh sadz if you only get a tshirt

  2. chrismealy says:

    Why waste time with bank shots? The best way to deal with plutocrats is by just taking their fucking money. Sure, revenue is nice, but just taking them down is worthwhile on its own.

  3. rageahol says:

    the whole reason we’re in this mess is because we’ve pursued a development as though it were an unmitigated good for so long.

    who gives a shit if we “hurt growth” a little bit? if that’s the price we pay for a more egalitarian society, give me a baseball bat and show me where growth lives.

  4. jkudler says:

    Boy, that Reason woman is a real nut, huh?

    “Furthermore, any indictment of capitalism worth its salt has to show not just that the rich are getting richer, but that they do so by making the poor poorer. There is no evidence of that. Facebook recently floated an IPO making Mark Zuckerberg the richest 27-year-old in America. I didn’t notice my bank balance dip.

    Many progressives paraded the October Congressional Budget Office finding that between 1979 and 2007 after-tax income of the top 1 percent of households grew 275 percent. They failed to mention that the same study also found a 65 percent income gain in households in the top quintile; for those in the 21st through 80th range, 40 percent; and the bottom quintile, 18 percent. In short, no group lost ground.”

    “What’s more, America remains a highly income-mobile society where poverty is a stage of life, not a way of life. There is no permanent underclass here. A study by Thomas Garrett of the St. Louis Federal Reserve recently found that between 1996 and 2005—nine short years—roughly half of taxpayers who began in the bottom income quintile moved up to a higher one. ”

    I’m not sure what’s worse – how flagrantly incorrect her numbers are (Why stop at 2007, just before the punishing recession? “There is no permanent underclass here.”?? And again, why stop at 2005?), or how even those cooked figures are pretty dispiriting? Half of the poor stay there, and that’s ducky?

  5. simondosovitz says:

    David Gursky’s article is just plain embarrassing, as Loury points out. Somehow he believes that if elite colleges increase their positions, the signaling strength of their degrees will not change at all. Ridiculous. Also, no one mentions low skill immigration, which does unfortunately increase inequality.

  6. simondosovitz says:

    It is hard for me to see how Matt and Dean Baker’s arguments are anything other than libertarianism.

  7. Shane Taylor says:

    I think the Robert Lee Hale perspective is among the most valuable and neglected. Perhaps Philip Mirowski could be used to update Hale’s work, at least in recognizing the myriad of ways markets are constructed and could be reconstructed. Mirowski tried to define a market as “a formal automaton,” at least to the extent that it’s self operating. He described markets as being like “a specialized piece of software, which both calculates and acts upon inputs, comprised of an integrated set of algorithms.” He called them “markomata,” a neologism for markets as automata.

    One of the takeaways from Mirowski’s argument is that there is no ur-market, no singular ideal. In this sense, markets are similar to iPhone apps. Different apps are designed for different purposes. You don’t use Doodle Jump to reserve a flight. And when a given app fails to serve the desired purpose, people are open to revising the underlying code. The same could be said for markets and their reform, if changes to the laws that underpin them weren’t mistaken for distortions of nature.

  8. Peter Force says:

    Am I remembering incorrectly, or were tax rates on the highest earners during the ’50s way higher than 50% in America?


    *Humorous Record-Scratch*

    90%? Wow…that Ivy League “total socialist” would have had some pretty right wing views…even for the era of McCarthy and segregation.

  9. Pingback: Around The Dial – March 26, 2012 | South By North Strategies, Ltd.

  10. Pingback: Boston Review Forum | liamcmalloy

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