Quote Originally Posted by Fuchs View Post
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I'm always amused when I see such stats showing the U.S. so far ahead in national income. It's ridiculous, but the PPP method doesn't reveal it.

Two men paying no VAT for washing each others' hand pay each other a gazillion dollars for washing hands once and do so as part of business expenses - and do so on Nauru.
Boom! Nauru is now the biggest economy in the world!

Such services-inflated GDP stats are a joke, but I guess the time hasn't come to make this visible to the mainstream.
I prefer to look at the physical economy and the services trade balance instead.
I do not agree, at least not fully but I will have to tackle that another time.

________
About Krugman; it's astonishing, but he misses the wood while walking past trees. (Yeah, I totally forgot how the saying works in English.)

I suppose the decisive influence factor at work is simply power asymmetry. He's totally in a dead end with his look at who owns the capital. This decides who gets the capital income, not how much of the income becomes allocated to the capital owners. He probably needs more sleep or something.
What the man wrote earlier:

But there’s another possible resolution: monopoly power. Barry Lynn and Philip Longman have argued that we’re seeing a rapid rise in market concentration and market power. The thing about market power is that it could simultaneously raise the average rents to capital and reduce the return on investment as perceived by corporations, which would now take into account the negative effects of capacity growth on their markups. So a rising-monopoly-power story would be one way to resolve the seeming paradox of rapidly rising profits and low real interest rates.
He is just a good economist, looking at the evidence and then around what might explain it and can be tested against:

As they say, this calls for more research; but the starting point is to realize that there’s something happening here, what it is ain’t exactly clear, but it’s potentially really important.
Last but not least:

I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.
Anyway I agree that power asymmetry should be a bigger topic in general. Why nations fail did really put the link between politics and economics on the 'agenda 2012'. We have of course many models of markets up to monopolies but the political impact on the framework of the economy has been not given much attention in the last twenty years. In the US and Europe the reforms and policies of the last thirty years have certainly not weakened (large) capital relative to labour...