- Lynn Parramore interviews Joseph Stiglitz about the spread of inequality, along with the need for a strengthened labour movement to reverse the trend:
LP: In your paper, you indicate that the power of the 1 percent to exploit the rest seems to be increasing. Why is this happening? Are there limits to this exploitation?- Matthew Yglesias notes that inequality makes "market-based" solutions unfair as the people with the least means to make choices for themselves bear the burden of directives from above:
JS: In a more careful, academic way of putting it I would say that one of the explanations of what is going on is increased exploitation. You see the ratio of wages to productivity going way down, and that certainly is consistent with increased exploitation. And you see that the ratio of CEO pay to worker pay has gone up. So what I would say is that some of the explanations have to do with weakened worker bargaining power, weaker unions, asymmetric state liberalization where capital moves but labor can’t move, corporate governance laws that provide relatively little check on abuses of corporate power by CEOs, and an increase of monopoly power because of network externalities. So there are certainly a number of factors that would lead one to suggest that overall there is an increase in market power. There are some things where there’s more competition — because of the Internet, for example, there’s more competition on the price side, but overall, when you look at the ratio of wages to productivity, there’s a marked increase in market power.
Probably there are limits — sometimes the degree of exploitation is expressed as the ratio of wages to marginal productivity of labor, and when that ratio gets down to zero – that’s a limit! What I would say is that things could get much worse if we don’t do something. That’s a relevant issue. What’s important is whether or not we’re on a path that’s looking worse and worse.
Microeconomics tends to tell us, again and again, that life is best when sellers can set prices to rise and fall with the ups and downs of supply and demand. The idea is that markets should "clear." Everything that's produced should be sold, but you shouldn't have shortages that force people to wait around forever and ever.- And as an example on point, Hilary Osborne writes about poverty in the UK, and finds evidence of large number of people being forced to limit their food and heating in order to pay rent.
This is an appealing idea, but as Steve Randy Waldman has written, it tends to brush distributional issues under the rug.
When people say that a price-based scheme for rationing water is most efficient, they mean that prices will deliver the most efficient distribution of dollars and water. The idea is that how much people are willing to spend on something is a good proxy for how much they care about it, or how important it is to their well-being. Different people like different things, but you can buy all kinds of different stuff with dollars, and seeing what people choose to spend their money on tells you a lot about their preferences.
But dollars aren't a perfect proxy for well-being, because money means different things depending on how rich or poor you are.
To the extent that inequality undermines arguments for efficient price-based schemes, the correct conclusion is to reject inequality, not reject pricing. It's probably no coincidence that the three countries to really embrace congestion pricing are either egalitarian (Norway and Sweden) or dictatorial (Singapore). Efficiency-enhancing economic schemes often simply assume a background where there's not too much inequality, in part because, in many cases, they were hatched during the decades when the income distribution was much more even. But to actually implement these schemes in the real world, we need to also deliver the equality.
There's an old saw in the economics profession that there's a tradeoff between egalitarian outcomes and efficient ones, but empirical research consistently fails to find evidence that inequality boosts growth or redistribution slows it. One reason is that needs conditions of macro-equality to make micro-efficient schemes tolerable.
- Kyle Chayka discusses how we're headed toward the destruction of almost all jobs in the (recent) historic sense of the word. And Jim Tankersley points out that the massive gap in pay and security between the financial sector and nearly all other options is pushing far too many of the world's best and brightest into destructive jobs.
- Gareth Kirkby follows up on the Cons' attacks on charities. And Bruce Campbell assures us that the Canadian Centre for Policy Alternatives (for one) won't be silenced by Conservative bullying.
- Finally, Mike De Souza reports that the CRA is being put behind a veil of secrecy, as the Cons are trashing both existing work texts and the capacity to collect future ones. And Jim Bronskill exposes Tony Clement's asinine excuse for refusing to release public data in usable forms.