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Comment by jnordwick | Hacker News Reader

What?

I tried to read this article, but sometimes it degrades into an incoherent string of words that barely make any sense.

Here is a random sentence where I stopped reading: "By viewing capital gains as transfers instead of as income, we define the long-term sustainability of capital gains and asset prices in terms of trends in disposable income plus debt growth."

It's half gibberish to me. People think because they can sprinkle citations it makes it well written.

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That's completely comprehensible to me, and I sport all of an incomplete undergraduate-level understanding of economics. And it's not citing its sources because its authors think that makes it "well-written"--it's citing its sources because it's an academic work and citing one's sources is important for future research.

I have seen a lot of middlebrow dismissals around here. (Made a few myself). It is rare to see a lowbrow one.

> That's completely comprehensible to me

OK, so then why don't you try to explain that sentence as a good rebuttal (to his assertion that the article feels like half gibberish)? You're dismissing him as much as he's dismissing the article.

I agree with you that I am dismissing his post. If he had asked for an explanation, instead of frothing that it was "gibberish", I most likely would have given him one. If you aren't (currently) capable of understanding the contents of an academic journal article, but insist on going on about how you don't understand it and how it is a failing of the authors that you do not, it requires angels of a significantly better nature than I possess to help you.

Gotta want to get it to get it, IMO.

I think you're missing a bit of jargon. A transfer (wealth transfer) is one person getting richer and another poorer without either participating in economic activity. A gift of sorts. For example, social security is a transfer from workers to retirees. The nuance is that many government policies result in transfers indirectly. For example, the mortgage interest tax deduction sounds like a transfer from taxpayers to home buyers, but its real effect is a transfer to home sellers, which is slightly different. Not surprisingly, many government policies are indirect transfers from the general population to capital holders and the elderly, because that's who give money and vote.

I suppose if you think of this as an article, then it might be seen as unapproachable, but as far as I can tell, this is actually a paper from The Journal of Economic Issues. This being the case, I'm surprised I understood it as well as I did.

It's only natural that if you're unfamiliar with the topic (and vocabulary!), you would have difficulty understanding most papers no?

rather than just that sentence, here's a tldr; for the problem the article describes.

There is a difference between a loan taken to build a fishing boat and a loan to buy an existing apartment building.

A fishing boat loan is paid off by producing real objects with real value (food) some of which wealth repays the loan.

The apartment building loan is paid of by raising rents and, rather than producing anything of value, actually takes wealth out of a productive part of the economy (consumer's pockets).

By considering both kinds of loans the same we have made a financial mess of things.

I'm actually fairly favourably impressed by the piece. I'm discounting it slightly due to the publisher (Ron Unz is a bit of a conservative political nut in California), but am crediting it for references to Frederick Soddy, principally known as a Nobel-prize winning chemist, somewhat less recognised for his work in economic theory and foundations, for which he's largely considered a bit of a nut. I think that's unfounded, and his name's been popping up in a few places lately.

If you'll consider my endorsement, from what I've read of the piece (it's long and I've not gotten fully through it), it's actually rather better than most treatments, mainstream or otherwise, of the topic.

Suppose I have a house I bought for $1000 (2015 USD), but the realtor tells me I can now sell it for $2000 (2015 USD). When I sell, that $1000 eventually comes from someone else's productive labour, which will be transferred to me.

As the buyer, I can pay the $2000 by borrowing from someone else and servicing that debt from my income.

The $1000 capitals gains that got pocketed are of course the buyer's future income.

So we can have ponzi asset bubbles in housing all we like, but right at the heart of it, the drivers are how much actual working people are willing and able to borrow, and how much they can pay to service their debts.

Put another way, their statement is that when everyone is maximally indebted and has no disposable income, the music has to stop.

The economist has no clothes!

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