Courtesy of Mish.
Here is the question of the day: What’s Behind Gross Inequalities In Income Distribution?
I ask the question after reading three incorrect answers in the article Inequality and the Second Gilded Age on the Real-World Economics Review Blog.
Misguided Notions on Commodity Values
Writer David Ruccio kicks things off by stating “The only way you can answer that question is based on a theory of value — a theory of how commodity values are determined and how the resulting flows of value are distributed to different participants in the economy.”
Ruccio gets off on the wrong foot because there is no such a thing as “commodity value” that can be measured.
Here are a few snips straight from chapter 2 “On the Measurement of Value” from The Theory of Money and Credit by Ludwig von Mises.
Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. … Acts of valuation are not susceptible of any kind of measurement. … But subjective valuation, which is the pivot of all economic activity, only arranges commodities in order of their significance; it does not measure this significance.
Misguided Notions on Skill-Based Technology
Ruccio goes on to state “Brad DeLong, who admits that he was wrong to presume that the late-20th century America would be ‘a much more equal place than early 20th century America,’ focuses on exogenous factors such as winner-take-all markets in an increasingly globalized world and skill-based technical change to explain growing inequalities in the Second Gilded Age.“
Clearly there is a “winner-take-all” concept in the markets, but it should be equally clear that winner-take-all is not primarily based on technical skills.
Did Mitt Romney really have any “technical skills” or did he learn how to use leverage to his advantage? Most top executives of financial companies have no “technical skills” to speak of although many do have “analytical skills”.
Many one-percenters were nothing more than huge gamblers. Get enough people gambling, and the law of averages says some will strike it big. Some were just plain lucky.
Misguided Notions on Changing Attitudes Towards Unions…
