Tuesday, April 15, 2014

Meet Thomas Piketty Live In The US

Thomas Piketty was given an opportunity to share his ideas with a sophisticated audience.  After his presentation a panel discussion, which included Nobel Prize winner Robert Solow, responded to some the questions raised in his book.  The video is quite long but the response by Robert Solow, as well as Piketty's answers to a couple of questions, is well worth the time.  Solow dealt with the deeper issues raised by Piketty as one might expect from one of the best economists that we have produced in America.  The rest of the panel focused primarily on policies that might increase the equality of opportunity to become a rentier, and how to take greater advantage of wasted human capital.  One of the most obvious ways to deal with the concentration of income is to restore the inheritance tax that was cut dramatically in the US.  That came up at the end of the discussion only as an aside.

Piketty has been pessimistic about our chances to increase the tax on wealth but he made a good point about making the system we have more progressive.  One way is to alter the property tax in the US which is very regressive.  For example, suppose that we have two homeowners that own a $500,000 home.  One person has no mortgage on the home, the other homeowner has a $400,000 mortgage and therefore, has only a $100,000 ownership in the property.  They would both be taxed, however, at the assessed value of the home even though there is a 5:1 ratio in their property ownership.  Piketty argues that they should not pay the same tax.

There was some discussion about the implications of rising inequality.  Some argued for policy changes such as a higher minimum wage, fewer restrictions on unionization,  increased income redistribution, etc.  These are all worth doing but Piketty raised the more serious problem with rising income inequality.  It is hard to have rising income inequality and maintain a democratic society.  Some might disagree with Piketty,  none of the other concerns came close to the threat to a democratic form of government.  We may not expect democracy to work perfectly.  The wealthy will usually have influence on government.  On the other hand, trends in the US suggest that democracy is not working as well as it has in the past. 

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