“Many Areas of Appalachia and Mississippi Delta Have Lower Life Expectancy Than Bangladesh”

Trump’s unexpected Presidential win appears to have delivered a wake-up call to the economics discipline. At a major industry conference, the annual Allied Social Sciences Associations meeting, a blue-chip panel of four Nobel Prize winners, Angus Deaton, Joe Stiglitz, Roger Myerson and Edmund Phelps, was in surprising agreement that capitalism had become unmoored and in its current form was exacerbating inequality. These may seem like pedestrian observations, but the severity of the critique, as reported in the Pro-Market blog, was striking.

No video of the panel is available yet; I hope one is released soon and will post it if/when that happens.

Tellingly, even though the panelists also included a fall in innovation, globalization and secular stagnation as contributing to inequality, the discussion focused on rent-seeking.

Deaton was blistering by the normally judicious standards of the academy. Recall that he and his wife Anne Case performed the landmark study, published at the end of 2015, that showed that the death rate had increased among less educated middle aged whites, due largely to addiction and suicides. Thus the plight of economic losers is more vivid to Deaton than his peers, and he sees the disastrous human cost as a direct result of rent-seeeking and untrammeled monopolies. Key extracts:

“A lot of the inequality in the U.S. comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government…To the very considerable extent that inequality is generated by rent seeking, we could sharply reduce inequality itself if rent seeking were to be somehow reduced.”

While some forms of inequality could be linked to progress and innovation, said Deaton, inequality in the U.S. does not stem from creative destruction. “A lot of the inequality in the U.S. is not like this. It comes from rent seeking. It comes from firms and industry seeking special protection or special favors from the government,” he said.

Deaton highlighted a particularly salient example of rent seeking: the American health care system which, he said, “seems optimally designed for rent seeking and very poorly designed to improve people’s health.”

Deaton outflanked Stiglitz on the left. Stiglitz argued that taxes could help reduce inequality, in concert with other policies to curb rent extraction:

“In all areas of economics, the rules of the game are critical—that is emphasized by the fact that similar economics exhibit markedly different patterns of distribution, market income, and after tax and transfers income. This is especially so in an innovation economy, because innovation gives rise to rents—both from IPR and monopoly power. Who receives those rents is a matter of policy, and changes in the IPR regime have led to greater rents without having any effects on the pace of innovation,” said Stigltz.

Deaton begged to differ:

“I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” he said.

Deaton is clearly outraged by how opiate manufacturers (meaning Purdue Pharma) have profited by killing poor whites:

“There are around 200 thousand people who have died from the opioid epidemic, were victims of iatrogenic medicine and disease caused by the medical profession, or from drugs that should not have been prescribed for chronic pain but were pushed by pharmaceutical companies, whose owners have become enormously rich from these opioids,” said Deaton, who later advocated for a single-payer health care system in the U.S., saying: “I am a great believer in the market, but I think we need a single-payer health care system. I just don’t see any other sensible way to address it in this country.”

Mind you, the Case/Deaton study, despite its shattering findings, got front page treatment and then the press and pundits moved on to the next hot news tidbit. Matt Stoller had a tweetstorm yesterday on this issue, related to the impending revamping, which almost certainly means further crapification, of Obamacare. You can read the whole tweetstorm staring here. These were the linchpin of his argument:

Edmund Phelps, who leans conservative but is know for being eclectic, echoed Deaton’s observations:

Other than the loss of income, he said, “many men in the Rust Belt in Appalachia have lost meaningful work and are unable to find another. People want work that provides them with some agency—they want a chance to prosper, to have the satisfaction of succeeding in something. They would also appreciate the experience of developing in the course of a career, to have self expression through imagining and creating new things. The good jobs in manufacturing offered these men the prospect of some learning, some challenges, and some attendant promotions. The bottom-rung jobs in retailing services that these men are forced to take do not. In losing their good jobs, then, these men were losing the meaning of their very lives. The rise of suicide and drug related deaths among Americans might be evidence of just that sense of loss.”

The last four decades of slow growth in the U.S., said Phelps, fit Alvin Hansen’s definition of secular stagnation “to a tee.” Phelps traced the roots of this secular stagnation, characterized by slower growth and loss of innovation, to a “corporatist ideology that had come to permeate the government at all levels” starting with the 1960s, and has “replaced the individualist ideology supporting capitalism” ever since.

Even though the panelists disagreed somewhat on remedies, all were troubled by Trump’s policy proposals However, it’s still telling that even if protectionism might not be a great remedy (or would have to be applied surgically to yield meaningful net gains, something Trump’s team appears unwilling to game out), the group seemed constitutionally unable to accept that globalization had made the working classes in the US worse off…even when that is exactly what the Samuelson-Stopler theorem predicted. For instance:

Phelps, for instance, criticized Trump’s assertion that job and income losses among the American working class were caused by trade and not by losses of innovation, and the President-elect’s “assumption that supply-side measures to boost after-tax corporate profits will bring generally heightened incomes and employment to America,” which he said runs the risk of explosion in public debt and a deep recession.

The most hazardous, said Phelps, “is the assumption that by bullying corporations, such as Ford, and stepping in to aid other corporations, such as Google, the Trump administration can achieve various objectives that will widely boost employment.”

Nevertheless, the very fact that a panel like this didn’t even dispute the claim that rent-seeking was the biggest contributor to the big jump in inequality is in and of itself a big step forward.

I wish Deaton would go a speaking tour of wealthy Democratic Party enclaves…or become regular on NPR (assuming the tote-bag carrying classes did not swiftly demand his removal). The gap between the elite professionals and the heartlands is so wide than only someone with unimpeachable credentials like his might penetrate their Panglossian bubble.

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67 comments

  1. Synoia

    The gap between the elite professionals and the heartlands is so wide than only someone with unimpeachable credentials like his might penetrate their Panglossian bubble.

    Either these words, although I am not optimistic that the greed can be punctured, or class violence, coupled with a decline and fall of Continental empire.

    The US is the only remaining 19th century empire, all the others have fallen to self-determination, and the EU appears to be falling apart for the same reasons.

    1. I Have Strange Dreams

      I am not optimistic that the greed can be punctured

      That is it in a nutshell. Greed. One destructive emotion has been elevated as the guiding principle for our Western societies. The fail is baked into the cake. We are monkeys with nuclear weapons and Donald Trump is the new leader of the Free World™. What could possibly go wrong?

      1. knowbuddhau

        > We are monkeys with nuclear weapons.

        Monkeys have tails. We’re naked apes with nukes.

        Jane Goodall reported on a chimp who hit on the novel tactic of banging fuel cans together to achieve alpha status. The noise scared his competitors witless. He didn’t know what the cans were, what they were for, or what they held, but it worked anyway. For a little while.

        There’s a lesson in there somewhere.

      2. Art Eclectic

        Honestly, greed might just be so thoroughly baked into the makeup of base instinct that it is unreachable. My Father reminds me regularly that males are intrinsically sexually competitive, which drives them to acquire territory, resources, and access to females at whatever the cost. To ask humans not to be greedy is to be tinkering with deep biological drives tied to successful reproduction.

        1. Fiver

          Except we have millions upon millions of individual instances of US men over whom greed holds no power, and scores of historical societies and even today a handful of countries so constituted and evolved over time that there simply is no comparison on a scale of ‘greed’ with what goes on in the US. Greed obviously has a biological basis, as does everything else humans do, but culture is quite capable of virtually erasing it.

  2. I Have Strange Dreams

    Calm down, everybody. It’s ok because Mr. Trump is going to make America great again. He is going to bring back slavery and genocide, yippee!

    But seriously folks, is Capitalism totally the bestest system for organizing society, like evah or what?

  3. UserFriendly

    The webcast of the nobel pannel is here:
    https://www.aeaweb.org/webcasts/2017/nobels.php

    But if you guys find a copy of this panel, also mentioned in the pro market article, please post it.

    “The Vested Interests Versus Rational Public Policy: Economists as Public Intellectuals,” Stiglitz and Baker, along with James K. Galbraith of University of Texas at Austin, Stephanie Kelton from the University of Missouri-Kansas City, and Lawrence Mishel from the Economic Policy Institute discussed competition, trade, consumer protections, and how to reach effective public policy. “We need to rewrite the rules of the market economy,” said Stiglitz during the same panel.

  4. ian

    The last thirty years have been all about “firms and industry seeking special protection or special favors from the government” while everyone has been talking about the opposite thing, “free markets”. Why has it taken so long to notice this?

    1. Left in Wisconsin

      Very effective propaganda and a complicit MSM. I will say it again: spend a day or two at any statehouse in the country and you will see that the ENTIRE business of government is doing favors for business people and their lobbyists. The notion that business people are in favor of small or non-activist government is a big lie.

      Which gets to a point that seems to get glossed over even by the better economists – that corporate “investment” in lobbying generally has a way better ROI than real investment, often times on the order of 1000-to-1 (for specific tax breaks).

      I don’t get what Deaton is saying about rent-seeking. Surely the return of the 90% tax bracket for high incomes and estates would put a dent into modern rent-seeking. When he says, “People should deal with rent seeking by stopping rent seeking, not by taxing the rich,” what kind of policies is he talking about? Does he mean single payer, and extended that kind of economic organization to other industries? Once you get outside health care, that seems kind of radical for an economist.

      1. John Zelnicker

        @Left in Wisconsin – Even with a 90% top tax bracket, the rent-seekers will find a way to continue to massively increase their wealth by structuring their activities to take advantage of any tax benefits that might be available. It would take an almost total rewrite of the tax code to have any real effect on the wealth accumulation. With lobbyists working to make sure such benefits remain available, or new ones created, raising the top rate to 90% won’t have the effect we might hope for.

        Just for a start, other policies could include breaking up the oligopolies of various industries such as telecommunication, media, Internet access, entertainment, etc. Monopolies or near monopolies are the definitive creators of economic rent, along with property ownership. Another policy would be to severely limit intellectual property rights, the other definitive creator of economic rent. Real competition actually works to bring prices down to a reasonable level where the rate of profit is modest and yet is still a sufficient incentive to continue the business.

        Ronald Reagan decided that breaking up monopolies was no longer necessary. IIRC the breakup of AT&T was the last one in 1984, but it didn’t last and now we have almost the same concentration in telecommunications.

  5. ambrit

    The Mississippi Delta is just north of where we live. The “rent seeking” is mixed up with Paternalism. Each feeds off of the other. What we have seen in our multi year search for affordable living space has been an unending stream of overpriced habitats, and insularity. The Paternalism encourages an ethos of exploitation, the rent seeking finances it. At root, all these “base” motivations are “rational.” Thus, any “rational” critique undergirds the edifice of selfishness. A corollary of this is that any significant change requires a clean break with the past. An irrational ideology needs must arise, if only for long enough to nurture a radical change. As with the present American experience, an absurd excess is needed, and is looming. It sounds hardhearted, but a cleansing fire must purge the dross from out the gold of the nations soul. Before we allow horrified sentiment to deter us from this course, we must remember that the present system is itself the embodiment of hardheartedness. Why else do many cultures have a myth of a Phoenix in their socio-cultural tool kit? It has happened before. It will happen again.
    As someone more erudite than myself likes to say; “Kill it with fire.”

    1. I Have Strange Dreams

      Could anybody translate “Kill it with fire” into Latin as I am in the mood for a new tattoo. Or perhaps the original has more bite?

      1. Kukulkan

        immolabitque eam igni

        Though perdere et igni (destroy by fire) sounds a little better — especially since perdo also means “to lose”.

      2. Andrew

        There’s also Greek … pseudo-Apollodorus’ words in the imperative (from his account of Hercules’ slaughter of the Hydra, Bibliotheca 2.5.2) gives us

        – ἐπικαῖε τὰς ἀνατολὰς τῶν κεφαλῶν

        or in the Latin alphabet, if the Greek characters don’t come through:

        – epikaie tas anatolas ton kephalon

        “Burn the roots of its heads!”

        https://el.wikisource.org/wiki/%CE%92%CE%B9%CE%B2%CE%BB%CE%B9%CE%BF%CE%B8%CE%AE%CE%BA%CE%B7/%CE%92#v.CE.92_5.2C2

    2. diptherio

      “The thornbush is the old obstacle in the road. It must catch fire if you want to go further” ~F. Kafka

  6. PlutoniumKun

    My only worry is that when mainstream economists start accepting the problem of rent seeking, their solution is usually ‘better, freer markets’. Its this logic which did so much damage to the national electricity networks of Europe and the UK railway system and (my personal bugbear), the domestic waste collection system in Europe. There is sometimes a fine distinction between highly regulated markets which benefit both private companies and the consumer (for example, in electricity generation and distribution), and manipulated regulated markets which benefit only the seller, such as with medicines.

    1. cocomaan

      Plus, from what I am gathering from the summary, statements about how it was innovation that destroyed jobs and not globalization seem to ignore the fact that the retraining and skills reeducation that’s supposed to happen after “disruption” has become… rent seeking.

      Education has become a massive, government controlled, rent seeking operation in the form of student loans. Anyone seeking to better themselves with education now has become a victim.

      Are taxes going to solve that, according to Stiglitz? As you say, is it going to be a “freer markets” solution? I don’t know.

      1. Art Eclectic

        Innovation destroyed jobs because Silicon Valley investors realized that corporations would pay HUGE dollars for new processes that eliminated people. Human labor is an enormous cost, not just in wages but in support (that useless HR team), benefits, and worst of all – pensions. The goal of the modern corporation is to reduce head count, not to make better and more innovative products/services. Once the investment community clued in on that, it was all about finding new ways to eliminate jobs.

        Andy Kessler’s book “Eat People” is all about this topic.

        1. AmyInNH

          Tech has created a lot of jobs. The damage from tech industry comes from a few techniques, which are not unique to tech industry.
          – Import cheap visa indentured “temporary” labor. There is no “skills shortage”. Federal employer tax breaks for immigrant labor and captive for up to 17 years, if F1/OPT/H1B visas used continuously. $2 million in wage theft from H1B immigrants reported in the first two years alone, during 1998 to 2000, in the major uptick in using this visa. Spread into education, medical, government. Blue collar variant, “jobs Americans won’t do”, illegal immigrant employment. Both of these have emboldened wage theft from citizen labor (McDonalds, Walmart, Wells Fargo, etc.).
          – Offshoring work. Companies claiming to be “American”, to use federal services: Import/Export Bank, US Treasury, US diplomacy, patent law, etc. when a) most of their workers/production are not in the US and worse, b) Irish at tax time. Likely much of their “ownership”, stockholders, aren’t “American” either.
          – Remittances. Enormous amounts of money being sent out of the country by immigrants.
          All of this is of benefit to very few, for record profits. The net result is downward spiral for the US economy, and by that, I don’t mean ONLY GDP. The US engine, the economic circulatory system is being drained of its medium, cash circulation. And of its long term mechanics, innovation. (ex: Steve Jobs didn’t “invent” in a vacuum. As do most, he saw Xerox’s work and thought, I can do better than this.) And with industry offshoring, the mechanics of innovation has been offshored. Only a matter of time before they ditch their US corp. masters.

  7. Normal

    I’m not an economist but even I can see that trade can increase average income while decreasing incomes at the bottom of the distribution. Am I missing the point or are the Nobel laureates missing it?

    Do they think that some new industry will appear by magic to fill the void?

    1. weinerdog43

      Only sort of tongue in cheek, but what about private prisons? Job opportunities for folks near the bottom (guards) policing those at the very bottom. Profit!

        1. Sluggeaux

          Oh, and the guards are retraining to become prisoners. Google some of the Santa Clara County (California) jail scandals of the past couple of years. Stockholm Syndrome is alive and well for low-paid, non-sworn, “correctional officers.”

          I can also speak personally to Stieglitz’s habitation of the “Panglossian bubble” after taking him to task at a book tour for touting “PhD’s for All” as the solution to re-training workers displaced by “innovation” (while ignoring globalization as the real cause of their misery). I suggested that as a professor of economics he should be able to understand that since conferral of a PhD is reserved to the top 1 percent of academic achievement, even in the best of all possible worlds it is mathematically impossible for everyone to be conferred with a PhD!

    2. AmyInNH

      The official policy of US bastardized neoliberalism is that poverty is irrelevant. And this is what is being taught at Ivy League business curriculum.
      The US is addicted to cheap and free labor – it’s in the country’s fiscal DNA, right from the start, and that hasn’t changed. Originally free slave labor and indentured immigrants. Same thing now, free slave labor is now indoors, convict labor. Indentured labor is now illegal immigrants, “temporary” visa indentured and ex-con, felonized. 50% of the US population now lives in poverty.
      The US has traditionally used immigration to produce a labor glut to douse wage rates.
      If you look at the number of immigrants in the labor market, it’s the same as approaching 1929. It is used to extract more of the value of labor to sole benefit of the wealthy and enormous amounts of money is sent out of the country via remittances. Overall effect, an economy can’t run on empty (lesser and lesser cash in circulation). It equates to the Middle Ages “bleeding” of patients, which often killed the patient.

  8. Kat

    Wow! If this is what it takes to capture the attention of the American elites then I think this society needs to think really hard about what’s up with it.

  9. jbougearel

    Quotes from “Angus Deaton,” refreshing, like a new kid on the block (since I haven’t heard his name before). Thanks for the quotes, Yves, may you get your wish that Deaton embarks on a dog and pony show.

  10. KurtisMayfield

    I wish Deaton would go a speaking tour of wealthy Democratic Party enclaves…or become regular on NPR (assuming the tote-bag carrying classes did not swiftly demand his removal). The gap between the elite professionals and the heartlands is so wide than only someone with unimpeachable credentials like his might penetrate their Panglossian bubble.

    You are never going to get the 10% to admit that their lifestyles are not possible without the underlying economic conditions described at this website. All you have to do is look at Massachusetts and see what “liberalism” has become there to understand this. The NIMBYism is rampant, and the isolation of minorities and people of other classes is so obvious that no one can deny that it happens. Most of the employment is so dependent on the rent seeking (Education, Biotech and Pharma, Technology, Medical) that there is no way that they could be convinced of another way.

    1. Carolinian

      I believe you are right and the hysteria after the recent election demonstrates this resistance to change (even if in the current case it may turn out to be bad change). The whole rationale of our so-called democracy is to allow change at the top without resorting to violence which is why attacks on the democratic process itself are the most sinister. Therefore the most interesting story of 2016 may not be the dreary two year slog itself but what happened afterwards. One comes to suspect that large portions of the “progressive” left have even less interest in democracy than the Republicans do. If only those pesky proles could be kept down the comfortable middle class of Boston could rest easy.

      It’s probably true that only when those middle class professionals themselves start to feel economic pain that we will see more enthusiasm for leveling and social cohesion. A crash in the stock market might do it or–god forbid–riots and chaos but it doesn’t seem like there’s a painless way out.

  11. allan

    Deaton highlighted a particularly salient example of rent seeking: the American health care system which, he said, “seems optimally designed for rent seeking and very poorly designed to improve people’s health.”

    There is rent seeking even within sectors. Yesterday’s Links had an article about large layoffs at one of the premier academic cancer centers, driven by losses due to overruns in implementing an electronic health records system.
    Sh*t flows to the bottom and money floats to the top.

  12. Norb

    The elites should worry the day when the mob turns from destructive introspection, to directed agency at an external foe. That foe being the rent seekers and economic manipulators of injustice. Propaganda and monopoly violence don’t last forever, and the hysterical response of the bourgeoisie to this possibility is what we are witnessing.

    We need a new term or word for the class of people dedicated to the spread of inequality. The terms bourgeoisie, corporatists, capitalists, and fascists have been rendered ineffectual in raising the consciousness of working people to their plight. Occupy brought the 1% into consciousness, but there still is a lingering faith that somehow the business community can provide the necessities for a good life, if only “something” can be done to “free” their creative potential. My take on the Fake News phenomenon is yet another phase to keep the working population even more confused and misdirected. It is a strategy to double down on propaganda. Propaganda questioning the validity of propaganda.

    In America, the psychic health of the nation is coming into question. Leadership that can provide a vestige of calm amid the rising storm brought about by economic uncertainty will easily gain followers. The crisis of leadership is daily becoming more acute.

    Maybe a better strategy would be to come up with a new term for the 80% ruthlessly exploited by the current system. A new term is needed because all others have been corrupted into impotence.

    1. Eclair

      “In American, the psychic health of the nation is coming into question.”

      We are confused, in denial, projecting furiously … Freud would have a field-day exploring our cognitive dissonance. All this ‘fake news’ has begun to undermine our vision of ourselves as ‘the exceptional nation;’ our mental pictures of soldiers handing out candy bars to starving child refugees have morphed into drone operators taking out toddlers at wedding parties.

      We have elders preaching the American virtues of ‘self reliance,’ ‘personal responsibility,’ and the dangers of being coddled by an inefficient nanny state, while enjoying the benefits of a guaranteed monthly social security check deposited into their bank accounts, and having their hip replacements and open heart surgeries paid for by Medicare.

      We are still entranced by our national narrative of ‘go west, young man,’ with acres of fertile prairie and lush coastal valleys ours for the taking; all we need to follow is our sacred ‘work ethic’ and success will be ours. Well, all the land is posted ‘Private’ and the water is in the process of being purchased by faceless corporate entities. And the native Americans, whose land we stole, are pissed and getting organized.

      Spot on, Norb. We need new words, a new national narrative, a new vision of where we are, what crimes we committed to get here, how we have managed to bring the planet to the brink of destruction and, finally, how we can salvage what remains and forge a new identity, a better and more sustainable story.

      Until then, the next few years (decades?) will be messy. But filled with promise.

  13. oho

    for all of the Media/Academia Left’s obsession w/identity politics, the issues facing poor, rural African-Americas are forgotten and “uncool” to address—just as with Appalachian whites.

    sad.

  14. flora

    Over several months many commenters have said something like the following: there can’t be any real deflation because prices keep going up. Food, health care, rents, etc. If there’s deflation why aren’t prices coming down?

    My opinion is you can have real deflation *and* increasing prices at the retail level if those prices are determined by monopoly pricing power – price jacking and uncontrolled rent seeking, which is what I think we have now. Iinstead of lowering prices for the little guy deflation increases the profits for the monopolists and rentiers through lowered base costs for them coupled with higher selling prices for customers, plus fees and other purely extractive costs. Monopolists and rentiers have deformed various markets in a way such that deflation *and* higher selling/access prices can co-exist, imo.

    Great post. Thanks

  15. flora

    Longer comment lost in modland. Shorter: It’s possible to have both deflation and rising sale prices if monopolists and rentiers are setting the sale price. imo.

    Great post. Thanks.

  16. Paul Whittaker

    I keep hearing the idea that innovation can provide jobs: algorithms and robots consume many more than they produce, AI is taking jobs from insurance agents in Japan, all seem to point the other way. So the response is a basic minimum income, but with so much wealth off shored to tax havens and the rest building bombs to replace the ones being dropped daily, where do the experts see the money coming from? Sooner or later the mass’ will have to stop buying the glossy widgets which pays for the yachts and mansions.

  17. dbk

    Yves, thanks very much for this. Speaking for myself, I’d really appreciate more posts/guest posts on this and related topics.

    I’m currently reading Joe Bageant’s Deer Hunting with Jesus, which addresses the desperation of small-town northern Virginia – I knew Bageant’s work (had read his essays), but the book is great. Separate chapters, btw, on the mortgage scam in his hometown (for trailers, for heavens’ sake) and on the health care system and how that’s working out in rural Virginia (it’s not, and it’s a national disgrace).

    Also apropos, yesterday I followed a post/thread on LGM (I know a few commenters here also follow them, I’m a big Erik Loomis fan). Post here: http://www.lawyersgunsmoneyblog.com/2017/01/the-philosophy-of-the-new-gilded-age#comments

    It riffed off a piece by some person called Ben Shapiro, who was venting about health care being a consumer product (he compared it to buying expensive furniture). I think I finally realized that there are some people whose understanding of the value of human life and the basic rights of man differ so much from my own that the divide cannot be bridged, ever. (He also sort of compared sb who needs medical treatment but can’t afford it to … stealing bread. Made me wonder if he and his physician-wife had recently caught a production of Les Miserables.) I was so appalled at his thinking I couldn’t even comment on the post.

    I can’t see how rent-seeking is to be reduced given the incoming regime, which appears to me to be filled with rent-seekers of the highest order.

    It’s heartening to see renowned economists identifying these issues (poverty/unemployment/increasing morbidity-mortality rates) as a genuine crisis – which it is, and it’s only going to get worse; in a few years, it won’t be the lower and middle classes that are affected, but the white-collar professional classes as well (i.e. the top 10%).

    But as my Dad used to say, it’s somehow “a day late and and a dollar short” – the Dems should have been addressing this crisis years ago – if a humble citizen-observer like this commenter saw it as a serious issue ten years ago, why didn’t the professional policy guys?

  18. juliania

    I wouldn’t just credit the Trump candidacy for shining the light on rent seekers, but kudos to Yves for hosting economists who have also done this, among them Michael Hudson and (to a lesser degree) Bill Black.

    At the risk of seeming un-intellectual, I confess to having been also enlightened by library reading the works of John Grisham – his theme is often how lawyers profit or do not profit from big pharma medications that are introduced with great fanfare only to be discovered as the cause of injury and/or death a few miles down the road. At which point the victims are rounded up by low-income lawyers seeking a big windfall. One only has to be aware of certain tv commercials to realize this is still happening, and it happens to low income people for the most part. In the novels they are always the ultimate victims, no matter what the outcome of the lawsuits. The money changes hands, but the poor get shafted.

    1. dbk

      juliana – I like Grisham a lot, too; the fact that he is himself a native of the “poor south” (Arkansas, Mississippi) lends a gritty realism to his novels. More members of the credentialed classes should read him, maybe they’d understand what’s happening in the heartland better.

      1. sleepy

        I’ve never much cared for his legal thrillers, but I was really impressed by his semi-autobiographical novel, “A Painted House” set in rural east Arkansas in the 50s. My mother was from a small farm in that area and I grew up not far away in Memphis and visited east Arkansas often as a kid in the 50s and 60s. I am Grisham’s age and the novel was spot on in my experience

  19. juliania

    By the way, the Bangladeshis are currently playing some very good cricket in windy Wellington, New Zealand. There’s a message there somewhere, maybe one of hope for this country, and the world.

    Well done on your first day of a test match in brutal conditions, Bangladesh!

  20. PKMKII

    Thinking out loud here, so take with a grain of salt: could IPR-related rents be fixed by switching the “carrot” from monopoly on the IP to tax credits? Instead of “You are the only one that gets to sell this for X years, unless others pay you a fee,” the creator of the IP gets a tax credit equal to a certain % of sales and/or profits that others make from use of said IP. This would, of course, be a non-transferable right to the credit; some company cannot come along and buy it out from the creator, nor can it be passed along to next of kin. Creator gets compensation, consumers avoid the artificial rent cost, and by opening up the IP to the market, competition and refinements can begin immediately.

  21. ralph m

    I’ve been a fan of Naked Capitalism for at least five years now, and have been checking in two or three times per week to try to get a read on what is/and is not important in the news, and which sites I can trust…and what should be discarded.

    Now here’s the problem: If you’re going to run a screaming, sensational headline “Many Areas of Appalachia and Mississippi Delta Have Lower Life Expectancy Than Bangladesh” I expect to see Bangladesh show up somewhere in the article!

    The only reference to Bangladesh is in comments further down about some pointless comments on the non-sport of cricket. I get that US mortality rates are rising fast in poor, abandoned areas of the Nation; but when I see that kind of headline, I expect to see some comparison with the poverty zones outside the US! If it’s not there, that’s misdirection I can find anywhere online today! And worse, that it’s being reposted by other bloggers who likely took it on face value also, expecting to find what was promised on the outside of the box!

      1. ralph m

        Pardon me grammer snob! But, I’m from the class of people who do actual real work/ not sitting at a desk with a computer. Goes to show professional liberals like to feign concern for working people, but don’t want to hear from them!

    1. flora

      shorter: current Bangladesh life expectancy is: males – ~ 70, females – ~73, total – ~71, world rank – 99th.

      The declining life expectancy for too many rural US populations, especially for females, is caused by increased deaths in the 45-55 age range. Fewer are reaching the age of 60 or 70. Ergo, these areas have lower than Bangladesh’s overall life expectancy. These early US deaths are numerous enough to lower the overall life expectancy of the US cohort, which is shocking.

      1. flora

        adding: while the lowered overall US life expectancies are still above overall Bangladesh’s, in US counties with these large increased death rates in the 45-55 age cohort the the counties life expectancy is lower than Bangladesh. There are so many of these US counties and such a large percentage of the population that the overall US life expectancy has tilted down.

        1. MyLessThanPrimeBeef

          If the life expectancy of someone born in 2016 is, say, 80, that assumes the eco-system, that is the planet, is still around in 2096.

          That’s not a bad assumption.

          Less safe is the assumption is that it will be as hospitable as it has been in the last 80 years.

          My question, I guess, is, do they factor in Global Warming in calculating life expectancies?

        2. ralph m

          Thank you flora! That’s the kind of information I was looking for in the article. I wasn’t saying it was made up, but trying to get the point across that the lack of comparison implied in the title, is exactly what neoliberals pounce on to deflect attention from issues like rising inequality and increasing poverty.

  22. mrheem

    I suggest reading ‘Deep South’ by Paul Theroux for a scorching look at the day-to-day life of the denizens of this area. That it might, in some areas, be compared to the ‘Third World’ is, tragically, a compliment. How can these conditions exist in the richest country in the world? And how can one be an American and tolerate this?

  23. Tim

    What were the economic conditions in Cambodia prior to Pol Pot and the killing fields? I’m too young, but I that seemed to be a more modern tail of the 90% taking out the top 10%.

    There has to be some shred of truth to drive people to eliminate an entire swath of their population along economic lines only.

  24. DOY

    Agree that this panel is very good news.

    But the term “rent seeking” doesn’t have much punch. To a moderately well educated reader, It sounds like something we would all do in a “capitalistic” system and therefore, in some sense, rational, and exempt from the jaundiced, deep consideration it deserves.

    I believe that much of what ails us in the larger effort to make changes in (what’s left of) the Republic, is our more or less universal aversion to using the proper vocabulary to address how one goes about “rent seeking,” which is to engage in wholesale, long term and systematic bribery of public officials who can (and will) enshrine our sought for “market” advantages.

    When did “bribery” morph into “campaign finance”? There may have been a time and place in American history when there could be fine distinctions, maybe even legitimate distinctions, drawn between the two, but today? Any trip to “the Hill” or our state legislatures, to advocate for a policy or law—unsupported by a major league checkbook—will convince a person that the Congress, etc. has devolved into a massive “system” for soliciting money in exchange for agreeing to vote against the public interest.

    In short, I’d like to advocate that we bring back bribery into the “civic lexicon.” The sooner the better.

    1. Eclair

      “But the term “rent seeking” doesn’t have much punch.”

      Brilliant observation, DOY! To me (and I understand the concept intellectually) it always conjures up the image of a landlord knocking on the door at the beginning of the month.

      But, we know that ‘bribery’ and the attendant corruption, occur only in other countries.

      1. different clue

        How about toll-extorting? Or highway toll-robbing? Or chokepoint-skimming?

        I’m doing my best to come up with better words. If enough other people do likewise, perhaps we can come up with a better word than rent-seeking. And by “better”, I mean better for normal people as against University Academic Intellectual Superiority-Displayers.

    2. Julie

      Thanks for pointing this out. “Rent-seeking” sounded better to economists than “privilege-seeking.”

  25. Binky

    In a post-Reagan/Bush environment the third way Democrats simply adopted what seemed moderate in relation to the zeitgeist.

    The failure of all those poor rural people to pick up and move to where the jobs were is a choice which they must have rationally assessed the cost/benefit of and made decisions as autonomous adults.

    Their failure to educate and train for the jobs of the future was a choice. They were warned. Like we are being warned now that we are redundant or soon to be, replaceable by peasants from abroad or algorithms at home.

    I don’t think we are going to get the Star Trek economy. I think we are getting the Logan’s Run, Aldous Huxley, Eloi vs. Morlock economy.

  26. Winston

    It is not globalization. It is bad leadership. US lost more manufacturing jobs than other industrialized countries.
    http://www.industryweek.com/ workforce/why-americas- manufacturing-job-loss- greater-other-industrialized- countries
    Why is America’s Manufacturing Job Loss Greater than Other Industrialized Countries?
    https://finance.yahoo.com/ news/routine-jobs- disappearing-150000919.html
    ‘Routine’ Jobs Are Disappearing
    Germany kicks US ass in innovation. Oh and already US has heavy dependence on foreigners for innovation.
    “About 76% of the patents at the top 10 patent-producing U.S. universities in 2011 had at least one foreign-born inventor, according to a new study by The Partnership for a New American Economy.
    Foreign nationals were listed as inventors in over 84% of the IT patents and 79% of the patents for pharmaceutical drugs or drug compounds”
    http://www.renewoureconomy.org/news/foreign-born-dominate-u-s-patent-holders-study/
    Foreign Born Dominate U.S. Patent Holders: Study

    http://www.inc.com/jeremy-quittner/foreign-patents-and-united-states-innovation.html
    Not Made in America: Where U.S. Innovation Really Comes From
    Many of the country’s best and brightest ideas? Well, they’re not exactly home-grown.

    This is just from a survey:
    https://itif.org/publications/2016/02/24/demographics-innovation-united-states
    Germany is looking like even more the bigger achiever than the US now.
    https://hbr.org/2014/05/why-germany-dominates-the-u-s-in-innovation/
    Why Germany Dominates th US in innovation
    US education system stinks. I suggest you check out Hanushek’s webpage about education.

    The United States has two achievement gaps to be bridged—the one between the advantaged and the disadvantaged and the one between itself and its peers abroad. Neither goal need be sacrificed to attain the other.”

    http://educationnext.org/us-students-educated-families-lag-international-tests/
    U.S. Students from Educated Families Lag in International Tests

    http://hanushek.stanford.edu/publications/knowledge-capital-imperative
    The knowledge capital imperative
    Student Achievement and Every State’s Economic Future

    http://hanushek.stanford.edu/publications/economic-impact-good-schools

    The Economic Impact of Good Schools

    If you keep in mind that there is now a majority of poor kids in public schools (in an education system defined by its inequity), US is well on its way to becoming a neo- Saudi Arabia-in that a country that has native born people with such low capacity it is heavily reliant on capable foreigners!

    I know someone who couldn’t handle MIT science and math classes despite being honors student in a NJ school! Lost confidence and didn’t go onto grad school!

    Meanwhile girls more likely to grad college and more girs in law school. US also has a wayward boys problem. I have witnessed this problem, so know it exists. Boys need attentive father. I saw saw what happened when fathers became attentive. Complete turn around. Also saw what happened when a father was distant parent-lost two boys to wayward boys problems;and also when a father was attentive and didn’t experience the wayward boys problem with his son. And these exampl;es were all upper middle class families.

    Bill Bennet has mentioned the problem;but problem is not culture, from what I saw it is inattentve fathers.

    http://blogs.edweek.org/ edweek/whyboysfail/2011/10/ william_bennett_culture_is_ the_problem.html

    Why Boys Fail
    William Bennett: ‘Culture’ Is the Problem

  27. Winston

    When factories left NE for Midwest, what did NE do about that rust belt? Nothing! Still festering. When factories left MW for South what did MW do?

    You should stop scapegoating foreigners. The problem lies within.

  28. Winston

    Please note Europe (barring UK) and China have revived their rust belts. How did they do it? One they did not allow problems to fester!

    Americans whine and blame others. Time to look in mirror and learn how others revived their rust belts.

  29. JaaaaayCeeeee

    I am mystified by Deaton saying that tax reform is not part of reducing rents and regulating monopolies, as though Stiglitz is saying that tax reform is how to reduce rent seeking.

    If rent seeking behavior is supported by patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionism, then isn’t both tax reform AND regulation necessary?

    Stiglitz is practically blacked out from news media for for telling inconvenient truths already. Why would Deaton say, “I don’t think that rent seeking, which is incredibly profitable, is very sensitive to taxes at all. I don’t think taxes are a good way of stopping rent seeking. People should deal with rent seeking by stopping rent seeking, not by taxing the rich.” ? To keep from being blacked out by news media? What am I missing?

    Good policy making often requires more than one leg propping it up, whether to prevent a nuclear holocaust, provide health care, make sure that the EITC does not become just another subsidy for low wage employers, or make the economy functional and productive (including cleaning up rent seeking).

    Maybe Deaton was making a subtle point that I am missing?

    1. Waking Up

      It seems to me that Angus Deaton made a good point when he said, “I don’t think taxes are a good way of stopping rent seeking”. Even if you taxed the rich at 100% of their income, most would still have more than sufficient funds to lobby and buy off politicians and other government officials for their personal needs. While higher taxes on the rich may be a better way to “spread the wealth” to improve conditions of our society at large, it wouldn’t stop rent seeking. For that, “we the people” need to see some major policy shifts by our government at all levels…local, state, and federal. The non-stop corruption by the wealthy in collusion with government officials (rent seeking) needs to end. If not, then it won’t be just Appalachia and the Mississippi Delta that have a lower life expectancy than Bangladesh. It will continue spreading to all areas of the country.

  30. Davidt

    The cause and result of income inequality pointed out by economists is comparable to a 3 year old not wanting to share a new toy with others. They want to keep it for and to them self. A 3 year old may hide the toy, pretend it is theirs only, or do all manner of things to keep others away or uninterested if possible. Economists are acting this way also. Economists present the problems as an economic not criminal.

    Income inequality is driven by criminal activity. It is companies, industries, individuals and politicians that do not adhere to law, regulation, statutes, ordinances and rules of order. Economists are not prosecutors. They should come down hard by pointing out the illegal activities by those involved and call for the prosecution of these criminal.

    Economists then may participate in ideas to unwind the damage done by these illegal activates but economic change must follow criminal curtailment.

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