Laurie Macfarlane — Why Wealth Is Determined To A Greater Extent Than Past Times Ability Than Productivity

To the early on classical economists, this sort of wealth – attained past times only extracting value created past times others ­­– was deemed to survive unearned, too referred to it equally ‘economic rent’. However, always since neoclassical economic science replaced classical economic science equally the dominant schoolhouse of thinking inwards the belatedly 19th century, economical rent has been increasingly marginalised from economical discourse. To the extent that it is acknowledged, it is unremarkably viewed equally beingness peripheral to the storey of wealth accumulation, resulting from ‘market frictions’, such equally monopsony too asymmetric information, which compass ascension to surely instances of ‘market power’. For the most part, economists convey tended to focus on the acts of saving too investment which drive the existent production process. But on closer inspection, it is clear that economical rent is far from peripheral. Indeed, inwards many countries it has been the original storey of changing wealth patterns….

All statistics say a story, but stories tin flame survive told from unlike perspectives. Embedded inwards the definitions of all economical statistics are value judgements virtually what is desirable too what is undesirable, which inwards plough shape the trend nosotros retrieve virtually the economy. At the moment, the trend nosotros stair out the wealth of nations mainly reflects the fortunes of capitalists too landowners rather than workers too tenants. United Kingdom of Great Britain too Northern Ireland looks wealthier than Federal Republic of Federal Republic of Germany on paper, but this does non reverberate the lived reality for most people. While it’s of import non to overstate the extent to which statistics tin flame influence the existent world, this is of import for at to the lowest degree iii reasons.

Firstly, it illustrates how seemingly objective metrics oft convey ideological assumptions baked into them. While at that spot is already a well-established literature on alternatives to GDP, many economical metrics are used inwards economical analysis too policy appraisal without whatsoever critical appraisal of their underlying ideological assumptions. This needs to change.

Second, it highlights how newspaper wealth has inwards many places larn decoupled from productive capacity, too how conflating the 2 tin flame survive highly misleading. This is especially the illustration where aught essence rentier action is widespread, equally inwards the illustration of Britain. Such discrepancies heighten the inquiry of whether the trend that nosotros currently stair out wealth is actually the most sensible.

But most importantly, it illustrates that the distribution of wealth has picayune to create amongst contribution or productivity, too everything to create amongst politics too power. As J.W. Mason states: “It’s bargaining power, it’s politics, all the trend down.”

For economists who encounter their dependent area equally a ‘value free’ scientific discipline which is split from politics, this is uncomfortable territory. But if the aim is to empathize the economic scheme equally it actually exists, too then analysing ability beyond the narrow concept of ‘market power’ is essential. Among other things, this way grappling amongst the ability dynamics that underpin ownership too holding relations, also equally those that that drive inequalities betwixt unlike social groups too identities....

Evonomics
Why Wealth Is Determined More past times Power Than Productivity

Laurie Macfarlane | Economics Editor at openDemocracy, Associate Fellow at the Institute for Innovation too Public Purpose at University College London too onetime Senior Economist at the New Economics Foundation