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Is income inequality an issue for economists?

Thomas Piketty's Capital in the Twenty-First Century has caused somewhat of a stir in the economics profession. The author's main thesis - that inequality tends to increase because return on capital is greater than economic growth as a whole, leading to a greater concentration of wealth - has come under intense scrutiny. It seems everyone has an opinion on the subject!

You can read all about it here: http://www.economist.com/news/finance-and-economics/21603022-latest-controversy-around-thomas-pikettys-blockbuster-book-concerns-its

While much of the debate has largely focussed on the stats, in this event we will discuss more generally whether income inequality is good or bad for economic growth, and if economic policies should be introduced to distribute wealth more evenly across society. 

Please note this event has been rescheduled to August 5th (sorry, the venue double booked).

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  • Mike

    Big attendances are welcome! Don't knock them.

    The meeting was fine. It's not a LSE highly structured debate for professionals but a little bit of a knockabout with a theme. Fine by me! Very social afterwards too. It's a meetup. I can't see why anyone would complain. Would those who RSVP for the next one please turn up as they did this time. The curse of meetups is no shows.

    Nothing wrong with an initial presentation.

    August 6, 2014

  • Christian M.

    It was a good meeting. Thanks to the organisers.
    To make the next meetings even better, I would suggest 3 improvements:

    – make sure the speaker knows the title of the advertised debate (not read a long text on a different subject)
    – make sure the speaker presents a short introduction, and not give a lecture (this is a debating society, after all)
    – and possibly limit attendance

    I know the organisers could not have anticipated the first two points, but it would be appropriate to remind the next speakers of the format of these meetings. Regarding attendance there were so few souls at previous events that yesterday’s crowd was a surprise, but if there such an appetite for these debates, it would be better to hold them more often and limit numbers to, say, 15 – first registered (with a little overbooking, for inevitable last minute cancellations), and then waiting list, as is done successfully at other groups. Again, an enjoyable evening nonetheless
    Thanks to all
    Christian

    August 6, 2014

  • David R.

    Hi Yusuf,
    Absolutely I will help you set up the venue. I am working in Canary Wharf at the moment I finish around 5 so should be with you by 5:40 depending on how the DLR is. Looking forward to seeing you there. David

    August 4, 2014

  • Ivo

    Great! I'm looking forward to it too!

    August 4, 2014

  • Yusuf Y.

    Yes! I look forward to your presentation Ivo. We have a record attendance for this debate. See you all tomorrow!

    1 · August 4, 2014

  • Ivo

    Am reckoning on presenting tomorrow evening - is that the general idea? The paper will be on Inequality and Banking: the general idea being the effect of the allocation of new money, and of interest payments, on 'Who owns what'. If anyone wants to see a summary I'll have one by the end of today.

    1 · August 4, 2014

  • Ivo

    I'd be very pleased to present, and would be happy to forward a copy to anyone who wants to take a look or challenge (it's still a work-in-progress)

    July 18, 2014

  • Yusuf Y.

    Ivo, I'd be very interested to hear your presentation. Would anyone like to challenge him?

    July 17, 2014

  • Ivo

    Sounds good to me!

    July 14, 2014

  • Mike

    Too many issues for brief replies. Created money does enhance asset prices if lent for that purpose sure. Very easy for the banks. So likely to increase inequality. Those with assets get richer compared to those with none. Sure seen that with property since I got mine! But with full reserves there could still be lots of lending on say property forcing up prices yes? With the same effects. The only difference between FRB and full reserves from the viewpoint of a depositor is the degree of liquidity. Everything else is the same. As for the spread if FRB were banished it seems likely to me that there would a greater spread since the banks could probably not lend so easily so could charge more for the product in short supply. The banks might well lend less but with a greater profit per unit lent. No one really knows what would happen!

    Things to discuss in person in a debate. Trickle up is sure going on one way or another.

    July 13, 2014

  • Ivo

    Mike: re your third paragraph, I can't tell if you're saying I'm wrong about 'trickle up'. Banks create money because they make a profit. If there's no interest differential, there will be no profit. If there's an interest differential, a borrower would have to be nuts to leave borrowed money in a savings deposit, making a permanent ongoing loss.
    The creation of inequality via bank-money is not just the interest rate differential, however. Created money also enhances asset prices, ie makes rich people richer. My paper is about: his and a number of other factors. But basically, given that money is created and rented out to the public by private corporations, I guess it takes a huge leap of faith to imagine this has no effect upon who-owns-what.
    Lastly, a bank does not lend its hard cash, or base money: it lends a claim on base money. Base money, with the exception of notes-and-coins, goes from bank to bank as the claims are met (as customers spend from their deposits).

    July 13, 2014

  • Mike

    Globalisation has also hollowed out a lot of the better paying jobs in the west while increasing profits.

    Paul Craig Roberts is very good on this which is particularly prevalent in the US where around 50 million are on food stamps.

    Software will now likely hollow out a lot of middle-class jobs in the west since it's beginning to be able to replace the cognitive abilities of humans rather than increasing their arm strength. Big difference!

    That was one of the themes in my recent presentation about whether the future will be jobless. As regards bank created money causing trickle up, even with 100% reserves banks can lend endlessly from the same stock of hard cash going in a circle provided people are willing to tie up their deposits as savings they can't instantly spend. You can still have say property booms as people see a big profit in saving and go for it.

    July 13, 2014

  • Ivo

    It is only recently that the 'trickle-up' effect of bank-created money has been ignored. That, and the unleashing of 'shadow banking' and derivatives, and the 'dark pools' of banking corporations, are what has driven the huge increase in inequality. For a taste of what used to be common knowldge, see John Taylor of Caroline's An Inquiry into the Principles and Policy of the Government of the United States (1814) which was much admired by Presidents Adams and Jefferson.

    July 13, 2014

  • Christian M.

    Given the size of political interference in economic life, through regulation, licensing, taxes, bailouts, subsidies and monetary policies, I agree that 'political economy' is a more appropriate designation of the field than 'economics'

    July 11, 2014

  • Mike

    Income inequality is a part of 'political economy' - a more old fashioned but far better title than 'economics'.

    July 11, 2014

  • Mike

    Globalisation is designed to create a transfer of wealth to the richer end in my view when it was sold as raising all boats. Discuss income inequality and you are into globalisation which is very much a topical issue.

    July 10, 2014

  • Ivo

    I'd be happy to present, arguing that entrusting the creation of the money supply to banks has created inequality and a new elite. I did a talk on the same subject as part of the London Technology Week and wrote the book 'In The Name Of The People' which included a chapter on the same subject.

    July 10, 2014

  • Yusuf Y.

    Any volunteers want to present their argument?

    July 9, 2014

  • Mike

    Plenty of choice there. I did the last presentation so it's for someone else to have a go next time. May I suggest a quarter hour or twenty minutes? You can't formalise the basics of any of the topics in less.

    July 5, 2014

  • Christian M.

    Good topics already. I would add

    -- Is economic inequality an issue for economists?
    (to continue the conversation on Piketty)

    -- What is Austrian economics?

    -- What is Neoliberalism?

    I could briefly introduce the last two subjects

    July 3, 2014

  • Ivo

    The fact that banks create money turns democracy into kleptocracy.

    July 3, 2014

  • Mike

    Three good topics!

    July 2, 2014

  • Mike

    Will the economic recovery falter?

    Lack of business investment, reliant on property values and personal spending increased by decreasing cash saving.

    July 2, 2014

  • Jonathan James H.

    Bitcoin the future of money?

    July 2, 2014

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