Must-Read: Martin Wolf writes a better version of my appeals than I have managed to: Martin Wolf: Inequality is a threat to our democracies: “Between 1980 and 2016, the top 1 per cent captured 28 per cent of the aggregate increase in real incomes in the US, Canada and western Europe, while the bottom 50 per cent captured just 9 per cent of it…

…But these aggregates conceal huge differences: in western Europe, the top 1 per cent captured “only” as much as the bottom 51 per cent. In North America, however, the top 1 per cent captured as much as the bottom 88 per cent….

After agriculture (and the agrarian state) was invented, elites were amazingly successful in extracting all the surplus the economy created. The limit on predation was set by the need to let the producers survive. Remarkably, many desperately poor agrarian societies approached this limit….

In the 20th century… when revolutionary regimes softened (or collapsed) or the exigencies of war faded from memory, quite similar processes to those of the old agrarian states took hold. Vastly wealthy new elites emerged, gained political power, and again used it for their own ends. Those who doubt this should look closely at the politics and economics of the tax bill now going through the US Congress. The implication of this parallel would be that, barring some catastrophic event, we are now on the way back to ever-rising inequality….

The big question,,, is whether the pressures for inequality will go on rising and the willingness to offset them generally decline. On the former, it is quite hard to be optimistic. The market value of the work of relatively unskilled people in high-income countries seems very unlikely to rise. On the latter, one can point, optimistically, to a desire to enjoy some degree of social harmony and the material abundance of modern economies, as reasons to believe the wealthy might be prepared to share their abundance…. [But] elites may become more determined to seize whatever they can for themselves. If so, that would augur badly, not just for social peace, but even for the survival of the stable universal-suffrage democracies that emerged in today’s high-income countries in the 19th and 20th centuries… “plutocratic populism”….

Mr Scheidel suggests that inequality is sure to rise. We must prove him wrong. If we fail to do so, soaring inequality might slay democracy, too, in the end.

Should-Read: Thomas Robert Malthus: Principles of Political Economy Considered with a View to Their Practical Application: “We cannot too highly respect and venerate that admirable rule of Newton, not to admit more causes than are necessary… but the rule itself implies, that those which really are necessary must be admitted…

…Before the shrine of truth, as discovered by facts and experience, the fairest theories and the most beautiful classifications must fall. The chemist of thirty years ago may be allowed to regret, that new discoveries in the science should disturb and confound his previous systems and arrangements; but he is not entitled to the rank of philosopher, if he does not give them up without a struggle, as soon as the experiments which refute them are fully established…. There are many important propositions in political economy which absolutely require limitations and exceptions…. The frequent combination of complicated causes, the action and reaction of cause and effect on each other, and the necessity of limitations and exceptions in a considerable number of important propositions, form the main difficulties of the science, and occasion those frequent mistakes which it must be allowed are made in the prediction of results.

To explain myself by an instance. Adam Smith has stated, that capitals are increased by parsimony, that every frugal man is a public benefactor, and that the increase of wealth depends upon the balance of produce above consumption. That these propositions are true to a great extent is perfectly unquestionable. No considerable and continued increase of wealth could possibly take place without that degree of frugality which occasions, annually, the conversion of some revenue into capital, and creates a balance of produce above consumption; but it is quite obvious that they are not true to an indefinite extent, and that the principle of saving, pushed to excess, would destroy the motive to production.

If every person were satisfied with the simplest food, the poorest clothing, and the meanest houses, it is certain that no other sort of food, clothing, and lodging would be in existence; and as there would be no adequate motive to the proprietors of land to cultivate well, not only the wealth derived from conveniences and luxuries would be quite at an end, but if the same divisions of land continued, the production of food would be prematurely checked, and population would come to a stand long before the soil had been well cultivated. If consumption exceed production, the capital of the country must be diminished, and its wealth must be gradually destroyed from its want of power to produce; if production be in a great excess above consumption, the motive to accumulate and produce must cease from the want of an effectual demand in those who have the principal means of purchasing.

The two extremes are obvious; and it follows that there must be some intermediate point, though the resources of political economy may not be able to ascertain it, where, taking into consideration both the power to produce and the will to consume, the encouragement to the increase of wealth is the greatest…

Should-Read: Tim Duy: Is The Fed Finishing 2017 On A Dovish Note?: “An important implication falls out of this analysis: Relative to the 2018 economic forecast changes, the projected path of policy is dovish…

…This can be explained by the surprising inflation weakness over the past year. Policymakers now believe a return to full employment requires an extended period of activity in excess of that consistent with full employment…

Should-Read: Economist: Women and economics: Inefficient equilibrium: “Donna Ginther… has found telling evidence that women… in economics… face a thicker glass ceiling…

…tenure… achieve[d]/// at a rate 12 percentage points below that of men…. even after adjusting (as much as possible) for differences in family circumstances and publication record. In American universities women who achieve tenure are promoted to full professor within seven years at a rate of 29% compared to 56% for men. Adjusting for other factors, Ms Ginther still finds a gap of 23 percentage points. In other social and natural sciences such differences are a thing of the past….

There is every chance that that this lack of diversity constrains or distorts the field’s intellectual development…. If, on the other hand, women have a similar range of innate potential and inclination towards the subject as men, but are avoiding or leaving it because it treats them worse, then the burden is on economists to change. And that is the way that the evidence currently points….

The women who graduate in economics go into PhD programmes at roughly the same rate as men; they tend to drop out of them at the same rate, too. But once they move on to seeking tenure, women are much more readily lost…. One common suggestion is that women do not like the famously combative style of economics seminars. Motherhood may also be an issue. American academics usually have the option to pause their tenure clock when they have a child. Heather Antecol of Claremont McKenna College and Kelly Bedard and Jenna Stearns of the University of California, Santa Barbara have found that this family-friendly policy disadvantages female economists. Women in the field taking advantage of the extra time mostly use it for child care; men often use it for focused research undistracted by students. The effect has been to lower the chances of a woman getting tenure in her first job by 22 percentage points….

Because people research things based on their experiences, greater representation of women in the field would change it in a number of ways. For one thing, it would take gender more seriously. Men have not proved particularly interested in understanding gender disparity; almost all of the research on gender discrimination within economics is done by women. There may be deep structural barriers to break through. Historians note that, over the course of the 20th century, economics was butched up. In 1920, 19% of doctorates listed in the American Economic Review were being written by women. By 1940 the number had fallen to 7%. This coincided with a redefinition of the field towards mathematics and the world of paid and thus predominantly male labour. Concerns such as social work and home economics, in which women tended to specialise, were sidelined….

On the basis that economics does have a problem, various interventions might help. Approaches to family leave that don’t privilege men; scrutiny of the higher drop-out rate of female undergraduates; explicit description of each author’s contribution to co-authored papers, as is common in other disciplines; frank discussion of implicit biases. Some such interventions are easier than others. For example, studies show that having more women on the faculty is a powerful encouragement for women seeking postgraduate positions. But if the number of women on faculties could readily be raised, the problem would already have been solved.

Should-Read: Free Exchange: A decade after it hit, what was learnt from the Great Recession?: “The success of those policies, and the relatively bearable recession that resulted, allowed governments to avoid more dramatic interventions…

…of the sort which, after the 1930s, gave the world half a century of (relative) economic calm. By reducing the need for radical innovation, the speed and efficacy of the response left the world economy less reformed and so vulnerable to the same forces that made the crisis possible in the first place. Several shortcomings stand out. In dealing with the Depression, governments ultimately discarded the gold standard, the global currency regime that helped propagate the disaster…. That would be less troubling had the world made itself more robust to future crises…. The stabilisation policies used in the Great Recession were vastly superior to those of the Depression. But today’s governments have done a worse job of learning from experience than did their forebears…. The Depression enabled radical change by discrediting untrammelled capitalism and the elites who supported it…. Ten years on, the hopes of radical reform are all but dashed. The sad upshot is that the global economy may have the opportunity to relearn the lessons of the past rather sooner than hoped.

Should-Read: Nicholas Crafts: The Postwar British Productivity Failure: “British productivity growth disappointed during the early postwar period…

…inadequate investment in equipment and skills but also… inefficient use of inputs. Weak management, dysfunctional industrial relations, and badly-designed economic policy were all implicated. The policy framework was partly the result of seeking low unemployment through wage restraint by appeasement of organized labour. A key aspect was weak competition. This exacerbated corporate governance and industrial-relations problems in the British ‘variety of capitalism’ which sustained low effort bargains and managerial incompetence. Other varieties of capitalism were better placed to achieve fast growth but were infeasible for Britain given its history…

Should-Read: Friedrich von Hayek was very clear that a market distribution of income has little to do with “deserve”, even putting to one side the idea that perhaps we have not done anything to “deserve” our talents and our industriousness. IMHO, the conservative deference to wealth is rooted not in any moral claim to the justice of wealth distributions but rather to a very different claim—that churn is simply bad: Brink Lindsey and Steve Teles: The Conservative Inequality Paradox: “Conservatives have two intellectual commitments that are increasingly incompatible…

…They believe that the American economy is clogged up with crony-capitalist corruption that hands out special favors and protections to organized interests. They also hold that economic inequality—in particular, the surging share of total income earned by those at the very top—is morally justified by the rights of property and the tendency of free markets to raise living standards overall…. If our economy really is riddled with cronyism, then the beneficiaries must have pocketed large amounts of ill-gotten loot. The existing distribution of income and wealth, therefore, does not deserve the deference it would be due if all gains were derived from spontaneous, unregulated market transactions. Call it the conservative inequality paradox: Either conservatives have overstated the amount of crony capitalism, or their dismissal of the concept of inequality as envy is misplaced…