Recommended economics writing

Waldman is post is stupid. He's sticking rhetorical shorthands used in political debates into an economic model. "Capital" somehow comes to mean capitalists and "labor" becomes the proletariat. In economics, these terms aren't used to describe groups of people. Capital is "accumulated goods devoted to the production of other goods," while labor is "human activity that provides goods or services in an economy." The two are not in an antagonistic relationship with each other.

In a modern society, a worker doesn't spend his entire life providing labor. At the same time he possesses capital. Even if he doesn't have private savings, there's still capital held on his behalf by the government. When he retires, he'll be living off income derived from this capital. Now, it should be obvious why a declining labor share of income is not a bad thing. As life expectancy grows, people spend more years in retirement. If the income ratio doesn't shift in favor of capital, then it means either poverty or toil in old age.

Another way to think of it is to consider the extremes. In a caveman society, the labor share of income would be 100%. You either gather food or you die. In the world of Star Trek, the labor share of income would be 0%. You spend your whole life living off accumulated capital in the form of the replicator.

Matt Yglesias more or less states that he wants the Fed chair to ignore the legal limits on Fed authority until he's hauled away in chains. Appalling.