Kathmandu— A prominent economist responds to Nobel laureate Paul Krugman's recent analysis of American oligarchy, arguing that the root cause of wealth concentration lies not in tax policy but in state-created economic privileges that pre-distribute wealth before taxation occurs.

Reframing Economic Analysis

The author calls for a fundamental shift in economic analysis, urging economists to "formalize the study of state-granted privilege" and quantify "special giveaways to corporations and the ultra-rich." This would include examining not just tax credits but also intellectual property rights, land transfers, and professional licensing barriers.

The proposed analytical paradigm shift would measure "pre-distribution" by comparing current inequality to a counter-factual situation of "actually-competitive markets without special privilege and with widely distributed property." This approach would move beyond examining "after-the-fact inequalities of income and wealth" to analyzing the structural rents built into the political and economic system before taxation occurs.

The author concludes that while Krugman correctly identifies policy choices as driving wealth concentration, the focus should shift from tax policy to examining the structural privileges that create inequality before taxation occurs.

(With inputs from CounterPunch)

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Originally published on abcnews.com.np.