Long run macroeconomics



China trickle-down

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¬†Capitalism’s failure for most Americans in the last quarter century¬†

US median and mean incomes 67-12

Unlike the top chart showing China’s strong economic growth over the last thirty years trickling down to benefit even the poorest, the typical (median) American is no better off than their parents were in 1989. Yet the American economy has grown vastly since 1989: real per capita incomes are 40% higher than 23 years ago. So who has taken all this extra income? Not the median household, or anyone poorer than them. The chart shows the richest 5% have taken half of it, and some statistics show the top 1%, or particularly the top 0.1%, have really profited, although census bureau household survey data cannot be reliable for such small samples. One notes that since Reagonomics was fully implemented, in 1989, the share of income accruing to labor (wages) has fallen and the share accruing to capital (profits) has risen, and given that capital tends to be owned mostly by the rich, this transfer has exacerbated the rise in America’s Gini coefficient for incomes. Will America ever return to the golden years before 1989 when rises in per capita GDP translated into rises in incomes for typical (median) incomes or those below? And can this happen without the share of labor in national income rising and the share of profits falling?

Is the macroeconomics that is taught actually useful?

Were the first macroeconomics courses you studied really fit for purpose? See what Paul Ormerod thinks at http://curriculumconference2013.worldeconomicsassociation.org/notes-on-a-real-world-economics-curriculum/