Browse by title

You are looking at 1 - 10 of 30 items :

  • Labour Economics x
  • Political Economy x
  • Economics and Finance x
  • Economics 2017 x
  • Chapters/Articles x
Clear All Modify Search
You do not have access to this content

Can we “grow the middle class?”

What Can Be Done About Wealth Inequality?

Roger A. McCain

Revisits the definition of what Piketty calls the Patrimonial Middle Class and argues that what is significant in it is that it includes a component of the (Marxian) working class, a twentieth-century transformation of capitalism. From the point of view of modern macroeconomics, the puzzle is why everyone is not a member of the “middle class.” The utopian element in this view is discussed. The chapter then addresses the puzzle, which is that a majority of the population are not included in the middle class, and addresses this with an ordinary-language exposition of a model of wealth formation that extends the standard model in modern macroeconomics by allowing for “liquidity constraint,” arguing that it may be rational for an agent to fail to save in financial terms when the rate of return to formation of human capital is greater than the rate of return on financial capital. A mathematical model is presented that corresponds to the ordinary-language discussion of liquidity constraint and the rate of return to human capital formation in Chapter 6. A simplified diagrammatic exposition is also given.

You do not have access to this content

Civilizing the corporation

What Can Be Done About Wealth Inequality?

Roger A. McCain

A corporation is a power structure. Power structures limit the freedom of some people and magnify, but direct, the power of others. Some trends in economic thought about corporations, from Adam Smith to the present, are sketched and then some alternatives to, and modifications of, the for-profit corporation are surveyed. For worker cooperatives, there is extensive evidence of overall success and some limitations. These are surveyed. Other forms discussed are ESOPs, worker participation in management, codetermination, not-for-profit enterprises, B-corporations, multi-stakeholder cooperatives, quangos, and community cooperatives. The transition from existing to modified forms of business organization is discussed.

You do not have access to this content

The future of capitalism

What Can Be Done About Wealth Inequality?

Roger A. McCain

The chapter begins by refining a definition of capitalism, drawing on Marx and Schumpeter, but reconciles this definition with the existence of what Piketty calls a “Patrimonial middle class” by restating the definition of the working class in terms of the life-cycle. Sketches and in part criticizes Piketty’s account of the concentration of wealth, and integrates some of Stiglitz’s writing on rent-seeking. Concludes that mature capitalism tends to be transformed, via concentration of wealth, into plutocratic oligarchy, with regrettable consequences.

This content is available to you

Introduction: plan and scope of the book

What Can Be Done About Wealth Inequality?

Roger A. McCain

Sketches the plan of the book. Argues that wealth inequality is the basis of many other economic problems, noting that concentrations of wealth inevitably become concentrations of political power; this concentration of political power makes political democracy increasingly difficult to sustain; concentration of wealth inevitably creates instability and differences of social status, and inequality of wealth is the major cause of income inequality.

You do not have access to this content

Piketty’s narrative and the wealth tax

What Can Be Done About Wealth Inequality?

Roger A. McCain

Piketty’s model of the increasing inequality of wealth is reviewed with some issues that have arisen from it, including the discussion of the “elasticity of substitution.” The proposal that a tax be placed on net wealth above some minimum, also present in Lewis’ proposals, is discussed, and it is suggested that such a tax be hypothecated to fund and enlarge the Social Endowment Fund. The problem of enforcement is discussed and it is suggested that some reforms of other tax laws could create a situation in which “at some stage some buyer or seller will want to report the transaction to save himself taxes,” thus making a tax system including the wealth tax essentially self-enforcing. Some related issues are discussed, along with Atkinson’s recent (much more far-reaching) proposal of public policies to limit income inequality. A simple three-factor CES model of production and growth is sketched that (1) generates the movements in capital incomes that Piketty’s model suggests, despite the fact that (2) raw labor and an aggregate of human and physical capital are complements. The model is approximately fit to data for the United States in the later twentieth century and used to project the impacts of a wealth tax and a Social Endowment Fund for a highly simplified case.

You do not have access to this content

Planning from the bottom up

What Can Be Done About Wealth Inequality?

Roger A. McCain

Idealists of the left have often called for “planning from the bottom up.” This chapter discusses the failures of Soviet-type planning, but then discusses some examples of planned resource allocation processes within a limited sphere in predominantly market economies that seem to fit the description as “planning from the bottom up.” One instance is the grant-making process of the National Science Foundation. The chapter then speculates that a similar process might be adopted by a Social Endowment Fund at a stage that it might need to function in part as a venture capitalist. Drawing on the mathematical expression of equalitarian values in the appendix to Chapter 3, this appendix derives a scheme of distributionally weighted cost-benefit analysis and speculates as to how it might be implemented in practice.

You do not have access to this content

Sir Arthur Lewis’ equalitarian vision

What Can Be Done About Wealth Inequality?

Roger A. McCain

Revisits and adapts some economic ideas of Sir Arthur Lewis. Writing for the Fabian Society at midcentury, Lewis argued against nationalization of industry and instead for redistribution of wealth through the tax system: by running an average government surplus in successive years, the government might use the surplus to buy corporate shares and similar wealth, establishing a public patrimony. This chapter suggests that a Social Endowment Fund built in this way might be run essentially as an index mutual fund, thus retaining an arm’s-length distance between economic and political decisions. Some obstacles to this program are considered and responses sketched.

You do not have access to this content

Synthesis and extension

What Can Be Done About Wealth Inequality?

Roger A. McCain

Reconsiders the proposals to form a Social Endowment Fund and expand it via a hypothecated wealth tax as a whole and considers some details. The division of the proprietary income of the Fund between reinvestment and payment of a social dividend will probably shift toward reinvestment as the Fund becomes more and more the dominant financier in the market economy. This will also be influenced by “business cycle” conditions, as would the use of the Fund to retire the public debt. The impact of the wealth tax on small business is considered. Some shifts from free government provision to efficient pricing of services are quite consistent with the program proposed here. Finally, the abstract determinants of the stability and trends of social systems are reconsidered and the proposal discussed in that light.

You do not have access to this content

To each according to need

What Can Be Done About Wealth Inequality?

Roger A. McCain

The famous slogan “to each according to need, from each according to ability” stems not from Marx but from the democratic socialist Louis Blanc, and Marx dismissed it as obsolete. Nevertheless programs of distribution according to need played a key role in the class-compromise that characterized successful developed countries in the twentieth century. The logic of “need” is discussed. Since needs are satiable, it may be that distribution according to need will play less part in the future, but health needs are an apparent exception.

You do not have access to this content

Why be concerned? Inequality and instability

What Can Be Done About Wealth Inequality?

Roger A. McCain

Discusses two reasons to favor increased equality: first, from equalitarian values, and second, from the dangers of instability that inequality creates. The first section considers, and criticizes, some traditional defenses of inequality. The second section summarizes some recent writing on secular stagnation and the associated danger of bubbles and crashes. A point which does not seem to have been noticed, and that arises from the use of a Marxist definition of class, is that consumer lending from the capitalist to the working class creates an instability similar to the instability that arises from international lending when the lender and debtor countries are within a common currency union. Extends the discussion of equalitarian values, drawing on the literature of superfairness and related models. Following exposition in terms of numerical examples, a mathematical formalization is given.