Timely next installment in Economics 101

 

One last point about Economics 101 may be the most important, but it is likely to be overlooked or even denied in the U.S. today. Economists claim they can show that if all their assumptions are true – perfect information, willing sellers and willing buyers, perfect competition, no externalities – the hypothetical free market will create what is called a Pareto optimum. That is a situation in which no person can be made better off without making someone else worse off. This is the basis of the claim that the free market allocates resources “efficiently.” But there can be a Pareto optimum in which everybody has an equal or close to equal share; and one in which one person has 90% of the wealth and the remaining million people have 10%. The latter is actually much closer to the situation we’re in right now.

There is nothing in the theory of the market to support a claim that whatever distribution results is just, or fair, or desirable. If you don’t think it’s fair that one person has 90% of the wealth, there is no reason in the theory of the market why you shouldn’t tax much of that wealth away and share it with everybody else. Maybe you can think of arguments against doing this, but they aren’t to be found in introductory economics. The question is simply ignored.

 

So, I now turn it over to Paul Campos:

A big lacuna in American political discourse is the absence of the classic idea that the rentier class consists of a bunch of social parasites, who collectively are about as useful as fleas on a dog. The evident fact that an enormous percentage of the plutocracy’s actual membership consists of people who do literally nothing but consume social resources at a decadent and depraved rate, while contributing nothing to society themselves, is something that the American class structure does a remarkable job of concealing from hundreds of millions of people who appear to believe quite sincerely that the ultra-rich are who they are because of a combination of their native talents and their commitment to “hard work.”  . . .

It needs to be repeated often that the vast majority of the people populating our plutocracy do literally no work whatsoever, that their “careers” if any are simply financial Potemkin villages designed to hide that they live off almost always unearned capital — if I had a dollar for every “consultant” “working” on his MacBook in a Boulder cafe while drawing his dividends I wouldn’t have to work for Farley and Lemieux — and that they belong to a social class that, for reasons flowing from a delightful confluence of considerations of social justice and economic efficiency, ought to be taxed, regulated, and criminalized out of existence altogether.