Saturday, January 07, 2012

Daren Acemoglu at FiveBooks Interviews

discusses raising inequality mostly in the US (It seems "...over the last 30 years, top income shares have increased substantially in English-speaking countries and in India and China, but not in continental European countries or Japan.")
FiveBooks Interviews > Daron Acemoglu on Inequality (via 3quarksdaily).
"Inequality is one of the things that has changed quite a lot in the United States and other economies over the last three decades or so. A lot of things don’t change radically, but inequality has. Understanding why that has happened and what it implies for our society is important.....The default position of economists is that inequality reflects the unequal human capital or productive capabilities of different workers. If you start with that premise – that what people earn is commensurate with their contribution to their employer, and also perhaps to society – then greater inequality tells you something about how people’s productivities have evolved over time.....My caricature of a layman’s view is that inequality is an indication of something that is failing in society. If a group of people used to earn twice as much as another group of people, and then, over 20 years, that ratio increases to four, that’s something that is concerning and might indicate a failure of social policy. My own view is a mixture of the two."
He goes on to discuss the research of Atkinson, Piketty and Saez
"Some very interesting things have been going on in the top 10%, and especially the top 1%. Atkinson, Piketty and Saez have really been pioneers in this and this article is an overview of much of their research. What the paper shows is that concurrent with the increase in the college premium and inequality between a median worker and a worker at the bottom, there has been an even sharper increase in the share of the top 10% and top 1% in national income in the US, Canada, UK and so on...
For example, they emphasise that it’s very difficult to account for these figures with the standard labour supply, labour demand explanation that Goldin and Katz emphasise. That’s not going to work, and we really have to think about things like social policies, progressive taxation and the politics of it."
Acemoglu's own views seem to be in his book with James Robinson "Why Nations Fail", which is also discussed in the interview: "The absolutist institutions created a very unequal distribution of political power and a very unequal distribution of economic gains in society and the two became synergistic – the very unequal distribution of political power locked in a very unequal distribution of economics gains. This created a vicious circle, but the conflict it engendered sometimes led to a breaking down of the institutions that this unequal distribution depended on, opening the way for more open institutions, which are one of the engines of prosperity.

The last part of the book is the converse story, which is how these inclusive institutions, which create a more equitable distribution of political power and so a more level playing field, are going to be constantly challenged. These inclusive institutions don’t guarantee that everything is going to be equally distributed but will at least prevent the most egregious and unfair distribution of resources. They also ensure a more equal distribution of political power in society. But there is no guarantee that they will last for ever. If you are able to garner a little more support, and a little more political power, the danger that you can start tweaking these institutions to your benefit is always present. There are continuous challenges to the inclusive nature of political institutions. So in this framework you can see the threat of the increased inequality in the US as a symptom of the sorts of challenges to the fairly inclusive set of institutions that the US has had for over 200 years."

There is also a discussion in Economist's View Puward Redistribution in the US.

1 comment:

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