Nobel prize winner Joseph Stiglitz’s research and Carnegie’s Idea on Wealth Distribution

Innovation, wealth distribution, and social mobility: the Importance of Joseph Stiglitz’s research

If you want to improve the lives of the poorest people in society, argue experts such as Nobel prize winner Joseph Stiglitz, you should take money away from the richest.

The strategy, called “progressive taxation,” has been shown to reduce economic inequality while boosting economic growth and public health.

In a recent lecture on income inequality at Stanford University in California, Stiglitz said that taxing into prosperity would reduce waste by giving poor people more money to spend. “We should tax more,” he said. “In this way, we could have less unemployment, better health, and a more inclusive society. It’s also an effective way of combating inequality.”

Stiglitz made the remarks in a lecture co-sponsored by the Stanford Institute for Economic Policy Research, a center that is dedicated to “advancing economic knowledge and solving society’s most important economic problems.”

In recent years, experts have increasingly recognized that extreme inequality can undermine economic growth and health while fueling resentment and conflict.

Several prominent economists, including Stiglitz, have proposed various plans for reducing inequality.

One of the biggest debates among economists is whether higher taxes on the rich could reduce inequality without hurting economic growth.

But even those who argue for higher taxes concede that a reduction in government revenue could be a significant problem.

In his Stanford lecture, Stiglitz argued that progressive taxation was well suited to reduce poverty and income inequality in America. “Technically, progressive taxation can do it,” he argued. “But there are lots of other issues that have to be taken into account. How you distribute the money is important.”

The debate over the best way to spread the wealth is part of a wider concern among economists about rising inequality in America.

This concern is rooted in the idea that economic growth does not trickle down equally, with the benefits of economic growth unfairly distributed.

The World Economic Forum has estimated that by 2020 the richest 10 percent of people in developed countries are likely to own 95 percent of all household wealth. That would represent a level unprecedented in history.

To prevent this, Joseph E. Stiglitz, the Nobel Prize winning economist, has proposed that the US tax the rich at a much higher rate in order to reduce inequality | Washington Post

Rising inequality has been blamed in part on globalization, which has made it easier for companies to move manufacturing jobs overseas.

But when globalization is looked at in isolation, it does not appear to explain rising inequality.

The Organisation for Economic Co-operation and Development estimates that between 1980 and 2000 there was little movement of people between rich countries compared with 20 years before when the population was about 20 percent larger.

This suggests that globalization did not increase inequality as much as many economists suggest.

However, other economists argue that globalization does not explain rising inequality. | The Guardian

On Monday’s edition of the PBS News Hour, host Judy Woodruff asked Stiglitz about his proposal to tax the wealthy at a much higher rate in order to reduce inequality. Stiglitz replied, “If you want to improve the lives of the poorest people in society, argue experts such as Nobel prize winner Joseph Stiglitz, you should take money away from the richest.” Stiglitz argued that progressive taxation was well suited to reduce poverty and income inequality in America. “Technically, progressive taxation can do it,” he argued. “But there are lots of other issues that have to be taken into account. How you distribute the money is important.”

The debate over the best way to spread the wealth is part of a wider concern among economists about rising inequality in America.

This concern is rooted in the idea that economic growth does not trickle down equally, with the benefits of economic growth unfairly distributed.

The World Economic Forum has estimated that by 2020 the richest 10 percent of people in developed countries are likely to own 95 percent of all household wealth.

That would represent a level unprecedented in history.

To prevent this, Joseph E. Stiglitz, the Nobel Prize-winning economist, has proposed that the US tax the rich at a much higher rate in order to reduce inequality, which has risen in the United States during the past 50 years.

For his part, Stiglitz is among those who believe that growth in America is linked with inequality; he argues that it makes sense to tax the rich more because they have a greater capacity to pay taxes. | International Business Times

In a recent lecture on income inequality at Stanford University in California, Stiglitz said that taxing into prosperity would reduce waste by giving poor people more money to spend. “We should tax more,” he said. “In this way we could have less unemployment, better health and a more inclusive society. It’s also an effective way of combating inequality.” | The Washington Post

The action of putting money in the hands of poor people and middle-class people is an important way to boost economic growth and improve the lives of the poorest people in society, says Nobel Prize winning economist Joseph E. Stiglitz. | The Independent

One of the biggest debates among economists is whether higher taxes on the rich could reduce inequality without hurting economic growth.

But even those who argue for higher taxes concede that a reduction in government revenue could be a significant problem.

In his Stanford lecture, Stiglitz argued that progressive taxation was well suited to reduce poverty and income inequality in America. “Technically, progressive taxation can do it,” he argued. “But there are lots of other issues that have to be taken into account. How you distribute the money is important.”

Rising inequality is no accident of history — it is the direct result of economic policies over the last several decades. | International Business Times

The Carnegie Commission on Teaching about Economics notes:

The dominant idea of the twentieth century was that social justice would be achieved by giving even greater rewards.

The idea that government should distribute goods to the fortunate and impose burdens on the less fortunate is not new, but it is considered old-fashioned today.

The dominant idea of today’s economics textbooks is that markets should be allowed to operate without restriction.

The main focus of this book is how various economic policies have created an increasing concentration of economic power at both national and international levels since 1980.

The main purpose is to explain why economic growth has not reached (or even approached) sustainable levels, despite increasing globalization and other efforts to make it happen.

We discuss economic policies (often called government policy) which, done in isolation, appear effective, but when combined with the other factors, lead to the creation of a historic concentration of power — that is why they are called “crony capitalism.”

The policies discussed here are not necessarily anti-capitalist.

Many free-market economists support them because they strengthen markets and create greater wealth for all.

Others support them because they provide more convenience or faster growth.

However, it is the manner in which these policies protect the wealthy that ultimately opens the door for crony capitalism to occur.

Economists have failed to explain clearly how different economic policies interact with each other over time.

To do so is extremely difficult, as an institution’s long-term success or failure may be due to a combination of forces that changed over time.

Since each policy alone appears to be productive, and since each policy favors different groups, it is easy for politicians and economists to become confused — indeed, deliberately confuse the public — in order to get legislation passed or implemented.

The intention is not necessarily to create crony capitalism; it may simply be a byproduct of what appear to be good economic policies designed to help everyone (and themselves).

A core belief in free-market capitalist societies is that the economy must grow.

We cannot allow the economy to stagnate or decline; we must continually add more jobs and raise wages.

What makes the economy grow? If you ask an economist, they will tell you that it is a combination of capital, labor, and productivity.

Productivity is, supposedly, the engine of growth.

The more productive we are the greater our ability to produce a higher output with a given set of resources — in other words, labor and capital.

If one extra worker adds 100 oranges to a harvest total in one day, he or she is 100 percent more productive than if he or she had not worked.

Productivity increases when an additional worker helps create new tools or machinery that make it possible to produce more; in this case, there is both capital and technology involved in increasing productivity.

Productivity can also be increased if labor is used more efficiently — i.e. if the group uses its labor time better.

If the same number of workers produce an output of 100 oranges in one day, they are using their labor more efficiently, and they are using capital to produce 100 oranges with less use of additional inputs (i.e., less land, energy, or other resources).

The tools or machines that help increase productivity can be physical or mental. Physical tools include tractors, power saws, and computers; mental tools include education and training.

When government policies favor certain industries by subsidizing them, providing loans or other assistance, these industries grow to dominate the economy — they become “too big to fail.

Perhaps the most common of all government policies is to give a tax break for money spent in a particular industry.

Such subsidies can be either explicit or hidden.

An example of an explicit subsidy is when the government reduces the tax rate on dividends from a corporation that has been given a tax cut.

In this case, the government is directing people to invest in these companies and reducing the cost of investment for those who comply with what the government says they should do.

There are also hidden subsidies, which we mention later in this chapter.

There are many ways that the market distorts the economy, causing it to grow in inappropriate ways.

These include flaws in financial markets, the way money is created, privatization of profit but the socialization of cost, and using property rights laws to transfer income from third parties to those who own or control the property.

Finally, there are many economic policies that protect the wealthy from the consequences of their actions on others — sometimes at the expense of everyone else.

The protection of property rights, which allows individuals to utilize property without regard for other people who might be affected, is a key element of crony capitalism.

The economics profession is now dominated by single-minded free-market economists, whose main philosophy is the belief that if left alone, market forces will lead to efficient and optimal results.

However, the theory of equilibrium (where everyone has enough) has never existed in practice — and probably never could exist because of inherent limitations in human nature.

Human beings will always want more than they have, and they will take it if they can find a way to get it — the best definition of which is “greed.”

The theory of equilibrium is an idealistic construct, not a model of human behavior. It has no basis in reality, and it has never been observed by any researcher or observer.

As evidence for this assertion, it is instructive to look at the history of the American economy over the past twenty years.

Since the late 1990s, America’s economy has heated up, but not necessarily for everyone.

The real median income of full-time workers only rose 5 percent by 2006 (while CEO pay rose by more than 400 percent during that period), while overall income growth was particularly strong for those at the top.

The top 1 percent of income earners received the majority of the income growth, and they also benefited disproportionately from the stock market boom that took place during the same period.

A final point: We don’t know what will happen to these statistics in the future.

The economy has performed poorly for various types of workers since the turn of the century, and we don’t know where it will go next.

However, the fact that the economy has performed so well for some people while others have struggled (and in many cases, found it difficult to make ends meet) is a clear signal that there is something wrong with this system.

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