Speaker Institution: New School for Social Research (New York)
Title: Economic Inequality: Piketty versus Econophysics
Abstract: The study of income inequality is back in vogue. Thomas Piketty's empirical investigations have led him to conclude that capitalist inequality is structural, and is likely to revert to its nineteenth century, much more unequal stage of "patrimonial capitalism". For him, the best way to compensate for this intrinsic tendency is to use global capital taxation to fund national welfare states. He admits that this is an "utopian ideal”, but hopes that it could spark regional or continental moves in that direction. The classical tradition rooted in Smith, Ricardo, and Marx is grounded in a structural analysis of actual capitalism, in which the laws governing market-determined (i.e. pre-tax and transfer) labor and property incomes are fundamentally different. Yakovenko and his co-authors have shown that labor income tends to follow an exponential probability distribution, while property incomes tend to follow a power law, such as the Pareto distribution. In this approach, the overall degree of inequality, as measured by the Gini coefficient, depends on the share of property income in total personal income. The presented paper shows that, in the postwar US, the property income share is determined by the balance of power in the ongoing struggle over the relation of real wages to productivity and by the degree to which financial capital is given free rein to exercise its inherent tendency to create bubbles and troubles. From this point of view, the post 1980s increases in the profit share and the degree of financialization are political outcomes which can be reversed, so there is no need to believe that the future of inequality should look like the past.
Dr. Anwar Shaikh is Professor of Economics and Chair of Economics Department at the Graduate Faculty of Political and Social Science of the New School University in New York. He earned B.S. in Engineering at Princeton University in 1965 and Ph.D. in Economics at Columbia University in 1973. Currently he is an Associate Editor of the "Cambridge Journal of Economics", and was a Senior Scholar and member of the Macro Modeling Team at the Levy Economics Institute of Bard College from 2000-2005. His most recent book (2016) is "Capitalism: Competition, Conflict, Crises" by Oxford University Press. In 2014 he was awarded the Social Science Prize of the NordSud International Prize for Literature and Science by the Fondazione Pescarabruzzo in Italy. His intellectual biography appears in the most recent edition of the book "Eminent Economists II" published by Cambridge University Press in 2014, along with similar essays from 30 prominent economists, including seven current Nobel Prize Laureates. He is the author of three other books, including "Globalization and the Myths of Free Trade" (2007, Routledge). More information is available at http://www.anwarshaikhecon.org