The “costs of running the economic system” keep increasing …

My essay, “The Increasing ‘Costs of Running the Economic System’: Productive Power, Nonrivalry, and Exclusion Costs,” is here:

This essay argues that there is a direct link between wealth nonrivalry and the social costs of exclusion. In the mainstream literature, nonrivalry and high costs of exclusion are viewed jointly as the defining characteristics of public goods, but each of them—nonrivalry and exclusion costs—is viewed as a separate and independent attribute of goods; the presence of one need not imply (or preclude) the presence of the other. However, the expansion of society’s productive power implies, necessarily, the increased nonrivalry (or shareability) of wealth. A sparse simulation model with simple numerical values helps to show that society’s expanded productive potential and wealth nonrivalry tilt the material ground on which social interactions take place and stable social structures form. The tilting of their material ground induced by a greater wealth nonrivalry stresses the social structures in the direction of greater equity in the appropriation and ultimate use or consumption of wealth. The practical realization of these possibilities for social restructuring depends on the convergence of multiple historical factors.
All comments are welcome.

Piketty via Milanovic

Screen Shot 2014-02-17 at 9.50.27 PM

I have written a few comments on Branko Milanovic’s review of Thomas Piketty’s celebrated new book, Capital in the 21st Century.  A pdf version of my comments can be found here:

Comments are all welcome.

IMPORTANT UPDATE: My friend David Laibman, whose book Capitalist Macrodynamics anticipated some of these novel claims, just made me see an egregious misunderstanding on my part: Piketty’s claim, of course, is not that r is growing faster than g_Y, but only that r (the level of the profit rate, not its growth rate) is greater than g_Y, which is entirely possible as K/Y goes up.  In Marxian terms, \beta = K/Y, which is a way of representing the composition of capital, \alpha is a measure of the rate of exploitation.  So clearly, r > g_Y even if K/Y goes up, as long as \alpha increases.  I stand corrected!

On cost disease and “neoliberal” demagoguery


In the 1960s, William Baumol (in his book, co-written with William Bowen, Performing Arts: the Economic Dilemma, as well as in subsequent works) noticed that, almost by definition, the productivity in the “services” that required direct human interaction (e.g. schooling, certain medical procedures, performing arts, etc.) would necessarily lag behind the productivity in other branches.

He then warned that this phenomenon could be exploited by political demagogues bent in de-funding public good provision, since the cost of schooling, medical care, etc. would appear to skyrocket compared to other costs, even if there’s nothing strange or wasteful (“inefficient”) about that.

Continue reading

The Sequester and Working People*


The “sequester,” a Washington-made $85 billion package of brutal public spending cuts to hit the economy over the next few years, is expected to destroy nearly one million jobs and wreak havoc on working families and neighborhoods.  This austerity tsunami comes on top of the calamities of the Great Recession and subsequent economic stagnation, also made possible by a political establishment and an economy largely unresponsive to the needs of the 99 percent.  Adding it all together, the near-future outlook for working people is grim, especially for the most vulnerable.  This is, of course, if we do not resist and fight back with all our passion and resources.

Continue reading