Wednesday, January 10, 2018

"Inequality is a symptom"

Remember when we mixed metric and English units back in 1999 and crashed our Mars orbiter? The universe didn't care.

At Quartz: A Nobel Prize-winning economist thinks we’re asking all the wrong questions about inequality, 27 December 2017:
America is trying to come to terms with its economic inequality. Does inequality spur growth or kill it? Is it a necessary evil—or necessarily bad? Angus Deaton, an economics professor at Princeton, and the recipient of the 2015 Nobel Prize in economics, is asked questions like these all the time—and he doesn’t see the point.

“These are questions I am often asked,” Deaton writes in a column (paywall) for Project Syndicate. “But, truth be told, none of them is particularly helpful, answerable, or even well posed.”

Deaton believes the biggest misconception about inequality is that it causes certain economic, political, and social processes. But that’s backward. Economic inequality is a symptom ...

That's right. For people, inequality may be a problem. But for the economy inequality is just the way things worked out, given the policies and policy errors (GASP! Did I really say that?) of the last 40 years and more.

28 Feb 2011, The Usefulness of Good and Bad:

unemployment and foreclosures are problems for people. Not for the economy. If you want to fix the economy, you have to look at the economy’s problems.

You have to look for the things that produce the results you don't like. You have to track down causes. Why do you think I have so many posts saying "the debt didn't 'explode' after 1980", and so many posts about the gap between productivity and compensation, and stuff like that? Because that explosion and that gap and that stuff typically started long before 1980, long before 1974, long before the dates people usually identify as the start of those problems.

Sure, because people identify it as a problem when it becomes a problem for people. But if you want to fix it, you have to look back in time to when it was first a problem for the economy. You have to see the birth of the problem, and then you know what to fix.

21 May 2016, Self-correcting? What do you mean by that?:

I say things like: Jobs? You think 'jobs' is the problem?? Okay. But it's our problem. A problem for people. It's not a problem for the economy. If you want jobs from the economy, you have to give the economy what it wants.

I say things like: The economy does not care about inflation or unemployment. Those are not problems for the economy. They are problems for people. For the economy, they are simply ways to correct imbalances.

I say things like: We should use policy to keep the ratio of private debt to public debt at a low level, a level where the economy constantly wants to grow vigorously.

The economy doesn't care that you don't like inequality and unemployment and slow growth. It doesn't care about such things. If you want to fix those things, you have to do it by tweaking things the economy does care about.

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