Our Growing Political Dysfunction – What’s to Be Done?

[Mikebert]

(12-18-2016, 03:46 PM)Warren Dew Wrote:

(12-17-2016, 04:17 PM)Mikebert Wrote:

(10-28-2016, 12:16 PM)Warren Dew Wrote: I wonder if there's still a connection to demographics.  Even in an industrial society, population growth should result in oversupply of labor and a decrease in the wage to capital ratio.

Why?

Basic economics.  Natural population growth results in an increase in the number of people of working age, and thus in the supply of labor.  Since it doesn't increase the supply of capital, that makes labor relatively more plentiful and thus less valuable.  Wages will fall, while the return on capital will rise.

 You are making an assumption here that the supply of capital is limiting.  If this were true then capital would be highly priced (i.e. dividends would be high, 4-5%)  Are they?  Seems to me they are about 2%, less than government bonds.  Capitalists would not be deploying capital for a 2% return if they had other options.  Capital has been in surplus and has been since dividend yields fell below 3% in 1992.

This is probably why the Phillips curve stopped working in the early 1990's as I discussed almost 20 years ago. (This page has been gone for more than a decade, but I found it on the wayback machine):

http://web.archive.org/web/2004020302481...llips.html