Secondary Sources: Peak Oil, Inequality, American Decline?

By Phil Izzo

A roundup of economic news from around the Web.

–Peak Oil: James Hamilton looks at some new research on peak oil. “We like to think that the reason we enjoy our high standards of living is because we have been so clever at figuring out how to use the world’s available resources. But we should not dismiss the possibility that there may also have been a nontrivial contribution of simply having been quite lucky to have found an incredibly valuable raw material that for a century and a half or so was relatively easy to obtain. Optimists may expect the next century and a half to look like the last. Benes and coauthors are suggesting that instead we should perhaps expect the next decade to look like the last.”

–Wealth Inequality: Michael Kinsley notes that inequality in wealth is even starker than in income. “There are some nice deals to be had in the income tax code these days, but most wealth accumulates and passes from generation to generation with no tax at all. Warren Buffett (who has selflessly taken on the role of all-purpose tape measure in these matters) is worth $45 billion or so. Do you think that all of that $45 billion, or even most of it, has appeared on any Form 1040 on its way to the cookie jar? Even at the special, low 15 percent rate the U.S. insanely confers on capital gains? Unlikely. Much of that $45 billion is unrealized capital gains — increases in the value of Buffett’s stock that have never been cashed in, and therefore have never been taxed. I’m not saying that unrealized capital gains should be taxed (although it’s a thought). I’m just noting that you only pay income tax when an investment is liquidated, and very wealthy people don’t have to liquidate until they actually need to spend the money. For most of the very rich, this time is never.”

–American Decline?: William Easterly follows up an interesting chart yesterday with a post using a parable to compare income in the U.S. and China over a long period. “Yesterday’s blog post provoked a few negative comments and suggestions that I look at other blog posts by Helmut Reisen and Gideon Rachman that prove America’s decline relative to China’s rise. Anyone questioning the orthodoxy on American decline and Chinese superiority even gets the ominous label of “denialist.” This is not to deny China’s remarkable economic miracle, just a reminder that the miracle is about growth and not about levels. And this parable suggests that growth is not necessarily a good guide to well-being and success.”

Compiled by Phil Izzo

http://blogs.wsj.com/

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