Only the top 20% saves.

Originally published at Wealth Economics

Newly released data series from the Bureau Economic Analysis have revealed a pretty eye-popping economic reality that’s been invisible in the national accounts…forever. Subtract households’ Personal Taxes and Personal Outlays from Personal Income to yield Personal Saving, and it turns out that the bulk of U.S. households don’t save. Quite the contrary: the bottom 80% spends more than its income, year in and year out. Only the top 20% consistently saves.1

This reality was invisible before publication of the Distribution of Personal Income Accounts (here, the “DPIAs”), first released in December 2020 and now in its fourth (greatly improved) prototype version, released December

(Not) Thinking About Money, Wealth Economics, Steve Roth (substack.com)

It’s tempting to abolish the word entirely.

Reprint from Wealth Economics.

J.W. Mason offers a bang-up post on economists’ thinking about “money,” how economists have thought and talked about it over decades and centuries. There’s even a class syllabus and reading list from his class for his John Jay MA econ students. It’s a very deep dive. (“Thirteen Ways of Looking at Money,” eek.) Highly recommended.

But as one who’s spent nigh-on two decades struggling and studying to understand all these writers using that key term in different, overlapping, and conflicting ways, I’d recommend starting with simple, clear definitions (plural) for that vexed word. It’s multivalent

Steve Roth  (at Asymptosis)

I just had occasion, in replying to a correspondent, to reiterate much of the thinking in my recent MMT Conference presentation. I thought it might be a useful and comprehensible form for some readers, so I’m reproducing it here.

I’ve also explained this at somewhat painful length here.

Correct me if I am wrong but what you are saying extends MMT into the private sector. The govt boosts balance sheets with stimulative fiscal policy. The private sector boosts balance sheets through asset price appreciation. Each creates “money” out of nowhere.

That’s one way of saying it. It adds a mechanism for asset (money) creation beyond “outside” (gov) and “inside” (bank) money issuance.

I’d say: MMT largely and

Modeling the numbers on bottom-up and middle-out economics.

How Redistribution Makes Us All Richer, Wealth Economics, Steve Roth

You hear a lot about bottom-up and middle-out economics these days, as antidotes to a half-century of “trickle-down” theorizing and rhetoric. You’re even hearing it, prominently, from Joe Biden.

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They’re compelling ideas: put more wealth and income in the hands of millions, or hundreds of millions, and you’ll see more economic activity, more prosperity, and more widespread prosperity. To its proponents, it seems downright intuitive or even obvious, a formula for The American Dream.

But curiously, you don’t find much nuts and bolts economic theory supporting that view of how economies work.

The decline in workers’ share of the total pie is far more extreme than standard measures suggest.

Total Income, and the Collapse of the Household Labor Share, Wealth Economics, Steve Roth

The best way to start this post is with a graph that many will find surprising, even eye-popping. The graph kind of speaks for itself — pretty dismayingly, especially post-covid. The rest of this post just explains it.

This graph answers a question that standard measures of labor share don’t and can’t answer. As households accumulate new assets, wealth, how of much of that newly-created wealth goes to workers, for working? As the wealth pie got bigger, what happened to labor’s slice of that pie? Did all the wealth boats rise together?

To answer that

Asymptosis » Economic Origin Stories and the State of the World, Steve Roth.

Origin stories and creation myths pack a pretty hefty weight of import in human understandings of the world. Examples are too numerous to mention. What I’ve noticed in the field of economics is such origin stories are often taken (mistakenly) to fully explain the current state of affairs. I’m going to discuss two examples here.

1. Why Money Has Value. The “double coincidence of wants” money-origin story, retailed by Adam Smith among many others, has been quite thoroughly debunked over the past century. But the better stories that have emerged continue to be seen by many economists — problematically in my opinion — as significant explanations of how things work right

Personal income, so Personal saving, ignore a huge part of Total Return — the income-from-assets measure used by every modern portfolio investor. Guess what’s missing?

Personal Saving Makes More than 40% of Property Income . . . Invisible. Think Total Return, Wealth Economics, Steve Roth

Matthew Klein and Joey Politano have been singularly responsible in their discussions of “excess saving” in the covid era — not least by always putting that term in “so-called” quotes. It’s saving in excess of what would have happened if pre-covid linear trends had continued (with the trend based on some chosen range of preceding quarters or years). It’s an estimate. Great.

They sometimes also discuss the accumulated stock of “excess savings,” which can only

Asymptosis » Actually, Only Banks Print Money, Steve Roth

I’m thinking this headline will raise some eyebrows in the MMT community. But it’s not really so radical. It’s just using the word money very carefully, as defined here.

Starting with the big picture: 

You can compare the magnitude of these asset-creation mechanisms here. (Hint: cap gains rule.)

The key concept: “money” here just means a particular type of financial instrument, balance-sheet asset: one whose price is institutionally pegged to the unit of account (The Dollar, eg). The price of a dollar bill or a checking/money-market one-dollar balance is always…one dollar. This class of instruments is what’s tallied up in monetary aggregates.

A key tenet of MMT, loosely

Having gone from trump to Biden. a person who I thought would never make a good president makes Steve’s argument on Bad Government being the problem when trump was the president.

Asymptosis » Government is Not the Problem. Bad Government is the Problem, Steve Roth.

And the solution to bad government is … good government.

A lot of people — maybe even most Americans — think that making government smaller will make it better.

But that reminds of the time when I was little kid that I got in trouble for pouring water out of a glass down a heat register in our house.

Why down a heat register? I can only say that it seemed like a good idea at the time.

Why was I pouring water out of a glass? Because the water was warm, and I wanted cold

Been looking around for a few, new, and good writers to add to Angry Bear. I know we have Robert, New Deal democrat, and Joel amongst us now. I ran into Steve Roth since he posted to Tom Walker’s post. He is allowing me to poach from his new substack Wealth Economics and an older blog site Asymptosis. Happy about this as it allows me to write more freely too. Anyway, this commentary of Steves’ I like.

Do We Wildly Underestimate GDP? Wealth Economics, Steve Roth.

Our production minus our consumption doesn’t come close to explaining our wealth accumulation. Do the asset markets know better?

In national accounting, there are two ways of estimating what all our real-world stuff is worth. They’re both market measures, based on what people pay for

By Steve Roth (originally published at Evonomics)
You Don’t Own That! The Evolution of OwnershipGet off my lawn.  (repost)
In a recent post on the “evolution of money,” which concentrated heavily on the idea of (balance-sheet) assets, I promised to come back to the fundamental idea behind “assets”: ownership. Herewith, fulfilling that promise.
There are a large handful of things that make humans uniquely different from animals. In many other areas — language, abstract reasoning, music-making, conceptions of self and fairness, large-scale cooperation, etc. — humans and animals vary (hugely) in degree and kind. But they still share those phenotypic behavioral traits.
I’d like to explore one of those unique differences: ownership of property. Animals don’t

I’ve been quite troubled lately by voices I’ve been hearing from my compatriots on the Left discussing the Job Guarantee — especially in relation to an alternative, Universal Basic Income. A new Jacobin article by Mark Paul, William Darity Jr., and Darrick Hamilton displays several of the aspects that make me uncomfortable.
Get the Math Right. Right off the bat, I’m troubled by the article’s flawed arithmetic — not what I would like to be seeing from left economists who need to be scrupulous in their role as authoritative voices for the left.
…we argue for a FJG that would pay a minimum annual wage of at least $23,000 (the poverty line for a family of four), rising to a mean of $32,500. … In comparison, many of the UBI proposals promise around $10,000 annually to every citizen…half the rate that would be available under the FJG.
$10K per citizen versus $23K per worker is not “half the rate.”
How do the two policies actually compare? I have no idea. This is exactly the kind of difficult calculation that we need economists to do for us (it’s way beyond our abilities), so we can evaluate different policies. Absent analysis with clearly stated parameters (Who counts as a citizen? Children? Etc.) this kind of statement carries no import or information value.
These analyses have been done by economists. I’ve seen them around.