[PEN-L:139] Re: Re: The Left and Inequality

[Fellows, Jeffrey]

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From: Gar W. Lipow:

I appreciate the  correction. It reinforces my point -- if income was
divided up more or less equally a more than 80% would be better off in
immmediate material terms (not mention the benefits of reduced
insecurity, lower crime rates )

Two questons

1). To get a feel for how more or less equal incomes would compare to
the way  people live now now, don't you have to substract capital
spending, ? Thus the revelevent figure would not be either real GDP or
direct wages, but real GDP less capital investment. When I say
revelevent, I mean to this particular aspect -- the material
advantages of equality.

My response: Capital spending by one firm is revenue to another firm, so
subtracting capital spending on investment goods would be inappropriate.
Capital depreciation may be an issue, but accurately measuring it is
very difficult. I also left the issue of unutilized capacity out of the
analysis. Certainly, the GDP/labor year figures have relevance only
insofar as we think GDP reflects the realization of new value. GDP
doesn't do a thing for nonmarket productive activities, particularly
those that do have use value but remain outside the scope of the market
(household production or reproduction).

My purpose in developing these estimates is to include future production
losses in calculating the cost-effectiveness of public health prevention
strategies (an emportant concern for my employer). I wanted to use
output per labor hour, instead of market earnings, as a basis for the
calculation. I assumed commodity market prices were the technical
measure of productivity, not earnings, and that a nonsubstitution
principle held, i.e., that a lost life represented a loss of a technical
potential to produce social wealth. In this way, I tried to avoid the
problems of marginalist theory vis-a-vis measuring technical
productivity, including the incompatability between wage rates and
productivity levels at the micro level, causal direction at the
macro-level, race/gender biases in wages and occupation, and the
inability of employers to redistribute capital among workers (related to
the first two issues). By using GDP/capita (age-weighted by relative
productivity [used median earnings of FTEs for each age group] and
average annual hours), researchers can make (I think) a more complete
case for health promotion and disease/injury prevention, at least in the
terms that most public health policy folks are used to considering. In
mainstream circles, it can be used to say "look, employers are losing
out too, and once they do substitute for a lost worker the remaining
loss, dare I say deadweight loss, is absorbed by society at large." In
left circles, with a nod given to my nondifferentiation between
productive and unproductive labor, I hope these estimates will be useful
for progressive research and purposes.

One issue I am still wrestling with is determining the best estimate for
future productivity growth. The post-WWII data says roughly 2 percent.
All of the middle-road future estimates say 1 percent. However, it seems
the 1 percent is too low. Has anyone seen anything that considers this
issue in a way that could support choosing one rate over the other? It
is not trivial, since it may mean a $200,000 difference in potential
lifetime output per capita. It is also important since my guess is that
about .4 percent of the increase will be necessary just to overcome the
potential demand problems associated with population aging.

Any help would be greatly appreciated.

I would also send anyone a draft of the paper for prepublication
comments.

2) I'd be curious to get a similar feel for what would happen if
income was redistributed among the worlds population.  The world GDP
figures I've heard are about $5,000-$6,000 per person -- which  might
not be advantagous in the industrialized world but would be a heck of
an improvement for 80% or 90% of humanity.

Jeff: Such comparisons depend largely on using purchasing power
parities, or similar method, to translate wealth in one currency to
wealth in another (like rupies to dollars). These methods don't work
well at all, so any comparison is fruitless. PPP-based comparisons may
work pretty well for USA-to-rich European country analyses.