Don't Try to Make Income Inequality Irrelevent

At least not before you address the portion due to rent seeking. Income inequality is a problem if it is due to corporations or individuals using their government connections to secure more and strengthen current economic rents.

When income inequality is high, it's not a reflection of how it should be in a free market. Conservatives should be asking "Why is the market not evening out incomes more?". If one person can make 60 billion dollars on a product, why hasn't someone who is satisfied with making 50 billion tried to compete with them?

Absurd

We can't fix our high unemployment with inflation, because inflation is hard to get rid of once it's in the system. How do you get rid of high inflation? Volker did it by causing a huge demand glut, which caused unemployment.

So the problem of unemployment cannot be solved by increasing demand (and thus inflation) because if it works, we might overshoot and then have to do something that causes high unemployment again when the Fed reduces demand to get rid of it.

The problem I hope is obvious, if we do NOTHING we are GUARANTEED the bad outcome that would result in having to fix high inflation expectations, not just the chance of it. Everyone accepts that unemployment was necessary to bring down inflation expectations. Why can no one accept that higher inflation is necessary to bring down unemployment expectations?

Wow!

This is very promising.

One huge complaint I have as a "small time" investor is that my good investment choices are dwindling. Management of current public companies seem to be paying themselves rather than their shareholders. A good reason for this is the lack of will to go public given the paperwork nightmare.

Go Galt, Peter Schiff part 2

To make my point another way:

There's really no way to "Go Galt" with a result that in any way that will prove your point.

What Peter Schiff would most likely do is hand the reins of Euro Pacific Capital to a capable person, keep his wealth as equity in the company, and the employees would be fine.

Or he could sell Euro Pacific Capital and, Euro Pacific Capital being really just a fantastic collection of 150 employees, they'd still be fine.

If he was really really stupid, he would dissolve the company. If Peter Schiff laid off everyone at Euro Pacific Capital, he would lose an enormous amount of wealth. Why? Because a good part of the value of Euro Pacific Capital IS that it has a fantastic set of employees and will continue to add them and grow. In this case his employees would probably be hired elsewhere, and several would start their own firms to become billionaires so that they too can threaten to "go Galt".

CPI is Maddeningly Wrong

Matt Yglesias points out that CPI is justifiably different for everyone depending on what they view as better quality. Scott Sumner, in another inflation targeting smack-down, again points out the shelter component of CPI has been steadily on the rise even though actual housing has probably yet to bottom out.

It is a huge problem when people just assume CPI is right before they proceed to justify inflation targeting as a policy.

EITC is Good

Means tested welfare and EITC should be designed in a way that an incentive is created to get out of the safety net.

Say a single mom is on SNAP, section 8 housing, and Medicaid. If I were to pay her 30k, she would be worse off because she would lose access to all those means tested programs. If I were to pay her 36k she might not be so bad off. The only problem is she is inexperienced and not worth 36k. What if the government ponied up that 6k (but also didn't have to pay 6k worth of means tested benefits for a net cost of 0).

All of the sudden she has an incentive to get off welfare over an above her ethic, and two years later may even be making 50k because she's got some good experience under her belt.

(the numbers are not exact, but you get the idea. A good EITC would soften the implied marginal tax rates that are the result of losing access to a means tested benefit). It is a really bad policy to get rid of EITC instead of just streamlining it and the myriad means tested programs.

Go Galt, Peter Schiff

Peter Schiff employs 150 people, how many do you employ?

Fine. In my perfect world, Schiff would have 300 employees and enjoy less consumption because our tax system made it more advantageous to invest more and consume less, though.

But - he also said, if his taxes go up he may just decide to stop working and lay off those 150 people.

Peter Schiff is very wealthy. It is insulting to those 150 people to imply they are charity cases. In other words, a good deal of his wealth is due to the returns generated by a good portion of those employees. He is probably a very good judge of employees; so good in fact, that I'm quite certain they will find jobs. Several of them may even risk it all, venture out and grow their own 150 employee companies when faced with the loss of their cushy Peter Schiff job. They will almost certainly be fine without Peter Schiff, perhaps better off in some cases. Peter Schiff would probably be racing to invest in the startups of his most promising employees.

Steve Jobs died, yet the world kept turning. If we can survive without Steve Jobs, we can certainly live without a working Peter Schiff.

There's a Lot Of Rent Seeking in the 1%

My only problem with Brad Plumer's piece on whether online piracy is really hurting the industry is this word:

earning record profits overseas

Let's call it what it is: "rents", not profits. Let us not forget that a government granted monopoly should be balanced with the actual capital cost of creating and distributing the product. Technical advances have made content far cheaper to produce, and practically free to distribute, yet consumers do not see the benefits as copyrights have become more restrictive rather than the other way around. I do not condone piracy, but it is probably responsible for all recent legal innovations in distribution.

The Redistribution of Wealth We Should Care About

The biggest wealth transfers in America occur between people without a lot of wealth to people with a lot of wealth. This is in the form of Social Security and Medicare.

The EITC is a very efficient way to redistribute consumption, it encourages the poor to work more instead of staying on welfare, and used to be championed by conservative economists.

The rhetoric on the Right wants to keep middle class wealth redistribution, and eliminate an efficient consumption redistribution. This is, in a word, stupid.

I Don't Have the Facts to Back This Up, but

I think Democrat's have underestimated how much benefits extensions and cobra subsidies are contributing to the unemployment rate. A lot of the unemployed have other options. For instance, a 17 year old would gladly collect unemployment benefits for the full 99 weeks while attending school. Same with college students, or people with working spouses who don't really need to work. I know some other people who regularly exhaust their benefits before even looking for another job.

The 5 unemployed for every opening argument is compelling, but are there REALLY 5 people actively looking for those positions and not just staying "unemployed" so they can continue to collect benefits until they are exhausted.

In other words, is the unemployment rate inflated because we are giving benefits to people who would otherwise not bother being counted as "unemployed"?

Yes, I realize this is exactly the opposite of what I said in a previous post.