Carrying on from:
Really just creating this so we don’t forget. Not sure where we are, but I think we haven’t yet discussed ch 9.
Will add some quotes etc tomorrow but I liked it. Less historical data, more considering the current levels of inequality (esp. the U.S.) and reasons for that.
As promised, some quotes I liked:
Is it really the case that inequality of individual skills and productivities is greater in the United States today than in the half-illiterate India of the recent past (or even today) or in apartheid (or postapartheid) South Africa? If that were the case, it would be bad news for US educational institutions, which surely need to be improved and made more accessible but probably do not deserve such extravagant blame.
It is also possible that the explosion of top incomes can be explained as a form of “meritocratic extremism,” by which I mean the apparent need of modern societies, and especially US society, to designate certain individuals as “winners” and to reward them all the more generously if they seem to have been selected on the basis of their intrinsic merits rather than birth or background.
If executive pay were determined by marginal productivity, one would expect its variance to have little to do with external variances and to depend solely or primarily on nonexternal variances. In fact, we observe just the opposite: it is when sales and profits increase for external reasons that executive pay rises most rapidly. This is particularly clear in the case of US corporations: Bertrand and Mullainhatan refer to this phenomenon as “pay for luck.”
Thanks! I never got around to posting some comments on 9, but I will also do so soon. I just finished up 10 too (but we can discuss that next week) and I think we’re starting to see his argument come together in a way that will be more interesting to discuss…
I need something to read, so I might just jump straight into 10 anyway.
Who else is still playing?
I got so far behind, and then couldn’t hold open the book for weeks, and basically my summer imploded, so I’m appreciating reading the posts of those of you who have stayed the course! Fortunately I know enough about economics that I can follow your discussion despite not having RTFB.
I am even more hopelessly behind. I have occasional time to fart around on the BBS during odd moments at work, but when I eventually get home, I fall into bed before I can read anything. Still, I feel guilty about it.
This is Donald:
He is a very sorry flake.
I’m pretty far behind, but still interested. For awhile it was pretty straightforward with little to talk about, just a hint that the later chapters would be more discussable. Sounds like some of you are reaching that point so I’m going to try to catch up.
I’m still interested, but stuck reading a stack of papers for another project. I’m at Ch10, but haven’t had anything to say …
In this chapter, he’s discussing the growth of labor income inequality specifically, leaving aside the question of wealth inequality from other factors (capital investments and inheritance, which he tackles later). He starts by pointing out where economic theoretical models often fail- because they ignore policy-making and other social factors when discussing wages and how they grow over times through factors other than supply and demand in the market-place for labor. Institutions have a role to play in why we saw the gap growing in recent years. On 309-10 he discusses minimum wage stagnation in the US, and how that was a political decision. Even greater access to education does not guarantee that wages will keep pace with costs of living for many workers (although he agrees education is critical, even with it’s limited impact see 313 - 14) … The problem is not just an explosion of technology with education racing to keep up (321). Most of the countries he has sources for saw similar technologies (information technologies in this case) emerge around the same time.
He contrasts the US with the French example, which had a much more active and unified labor union movement in the years after the Second World War that continues to exert political pressure on lawmakers. One argument against a state-enforced minimum wage is that it will cause stagnation in the number of jobs available, which Piketty completely rejects as being true (313).
So, the culprit seems to be in part that the executives are setting their own salaries and writing their own mythologies about how their labor is somehow more unique or not as replicable as your average factory worker (331)… I like this particular quote about it “It maybe be excessive to accuse senior executives of having their “hand in the till” but the metaphor is probably more apt than Adam Smith’s metaphor of the market’s “invisible hand.” In practice, the invisible hand does not exists, anymore than “pure and perfect” competition does, and the market is always embodied in specific institutions such as corporate hierarchies and compensation committees.” (332)
I wonder if one way to deal with this might be to have unions or some other kind of employee representative to be on such committees?
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