Wednesday, September 11, 2013

Did No One Notice Timothy Taylor Stress This?

Doubtless there are some who did, but I'm just not aware of anyone who linked to a post I can only "chew on" for now - and discussed it in terms of excess wealth defined as housing. The problem for me is that a seemingly primary point which Timothy Taylor made about housing was dodged, in recent articles which noted his post, ("Breaking Down the Falling Labor Share of Income") While Taylor also addresses these issues in a linked video (from last year? I watched some of it again), his post does a better job of getting at the pertinent issues quickly and also has helpful graphs.

Jared Bernstein once again reminds us of the "usual suspects" in what appears as an unsolvable mystery, "Why Labor's Share of Income Is Falling". He referred to a related article by Robert Samuelson, and they both cited Taylor's post. Unfortunately I didn't glean much from the articles which Bernstein or Samuelson wrote, which is what made me appreciate Taylor's post all the more. At the very least - even though in a sense what he covers is nothing new, Taylor looks at components of housing and the rising role they play in capital holdings.

Certainly, corporate profits are a part of the picture, as something which "takes" from labor share in always debatable fashion. But not even corporate profits have risen in the way that capital holdings have in recent decades. What's more, our considerable holdings of this easily forgotten capital are not productive in the sense of corporate profit holdings, because corporate holdings can take advantage of efficiencies and innovations that are not available in our own housing holdings. That is very much a hidden aspect of lower productivity in the present, as more productive (higher income to product) endeavor is now a smaller part of aggregate wealth.

Taylor summarizes:
Some of the fall in labor's share of income is due, in a statistical sense, to less-discussed factors affecting capital income like a rise in recent decades in the value of living in a home that you own, and the fact that capital investment in informational technology has a shorter life and depreciates faster than past capital investment.
What is interesting about this is the fact that government treats owner occupied houses as rental businesses. A lot of income is generated from home ownership, with multiple effects that just are not well understood. While all of this can be considered extractive enterprise in terms of government purpose, it's not easy to look at the receipts of these interrelated institutions to figure out societal cost. Even though it's not always easy to look at receipts which pass between governments and their institutions in less developed countries in Africa for instance (Acemoglu and Robinson) the very least, one might actually find receipts that make sense.

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