Wealth Inequality -- a red herring?

[Cain]

*puts on political science hat*

http://www.nber.org/papers/w4486
http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8599128
http://www.jstor.org/stable/2118070?seq=1#page_scan_tab_contents
https://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf

*takes off political science hat*

tl;dr version.  Wealth inequality is correlated with political instability.  Political instability is correlated with a worsening economy.  Wealth inequality harms economic growth and in extreme cases threatens the foundation of a stable political order.

[Pergamos]

I had to go find the segment of the podcast where he's talking about this... Carlin's points: (this is all around 0h:44m in the podcast)

> The idea that you increase prosperity for the lower class by taxing the successful seems a bit punitive
> When we talk about wealth inequality, we don't really want to eliminate the wealthy, what we really want is for people at the bottom end of the scale to be doing better
> The cost of living for lower and middle class people is the real issue - and it's a systemic problem that won't be solved through taxation. Carlin thinks that wealth redistribution only addresses the problem on the surface. It's a way of telling people that you're doing something about it, without doing anything meaningful in the long term.
> If you're going to address stuff like generational poverty, you gotta focus on access to education and the ability to start a business.
> He thinks that taxing the wealthy to create prosperity needs to be proven - he is as skeptical of it as he is 'trickle down' economics.

Lets turn this question on its head: how would you prevent high net worth individuals from converting their wealth into political capital and gaining disproportionate control over the political system?

Or, let's put it another way: can you envisage a system which gives equal consideration to the opinions, wants and desires of people who own large parts of the media, manufacturing base, banks etc and people who own half a piece of string and eat boiled boots?  What would such a system look like?  Does that system compare with our current system?

I think repealing Citizens United would be a big step, but it clearly doesn't caulk the wagon and cross the river all by itself.

I am out of my element here, but doesnt' denmark socialize their news media? How does that work out?

What about strong unions? In the US we don't have unions for a lot of middle class careers.



just chewing on these thoughts, no conclusions here yet

Well, maybe some people don't really want the wealthy to be less wealthy.   I certainly do and I am not alone. There is only so much pie to go around, a certain amount of inequality may lead to a bigger pie, due to incentives, but some of that is an illusion because of ecosystem degredation at unsustainable rates to support growth.  I want more for the poor, and I also want less for the wealthy.

[Mesozoic Mister Nigel]

I had to go find the segment of the podcast where he's talking about this... Carlin's points: (this is all around 0h:44m in the podcast)

> The idea that you increase prosperity for the lower class by taxing the successful seems a bit punitive
> When we talk about wealth inequality, we don't really want to eliminate the wealthy, what we really want is for people at the bottom end of the scale to be doing better
> The cost of living for lower and middle class people is the real issue - and it's a systemic problem that won't be solved through taxation. Carlin thinks that wealth redistribution only addresses the problem on the surface. It's a way of telling people that you're doing something about it, without doing anything meaningful in the long term.
> If you're going to address stuff like generational poverty, you gotta focus on access to education and the ability to start a business.
> He thinks that taxing the wealthy to create prosperity needs to be proven - he is as skeptical of it as he is 'trickle down' economics.

Lets turn this question on its head: how would you prevent high net worth individuals from converting their wealth into political capital and gaining disproportionate control over the political system?

Or, let's put it another way: can you envisage a system which gives equal consideration to the opinions, wants and desires of people who own large parts of the media, manufacturing base, banks etc and people who own half a piece of string and eat boiled boots?  What would such a system look like?  Does that system compare with our current system?

I think repealing Citizens United would be a big step, but it clearly doesn't caulk the wagon and cross the river all by itself.

I am out of my element here, but doesnt' denmark socialize their news media? How does that work out?

What about strong unions? In the US we don't have unions for a lot of middle class careers.



just chewing on these thoughts, no conclusions here yet

Well, maybe some people don't really want the wealthy to be less wealthy.   I certainly do and I am not alone. There is only so much pie to go around, a certain amount of inequality may lead to a bigger pie, due to incentives, but some of that is an illusion because of ecosystem degredation at unsustainable rates to support growth.  I want more for the poor, and I also want less for the wealthy.

The funny thing, of course, is that the wealthiest people in the US are well past the threshold where reducing their wealth will be noticeable from a standards-of-living perspective. At this point, they're essentially just sequestering wealth away from the poor and middle class. They have become cystic.

[Mesozoic Mister Nigel]

*puts on political science hat*

http://www.nber.org/papers/w4486
http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8599128
http://www.jstor.org/stable/2118070?seq=1#page_scan_tab_contents
https://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf

*takes off political science hat*

tl;dr version.  Wealth inequality is correlated with political instability.  Political instability is correlated with a worsening economy.  Wealth inequality harms economic growth and in extreme cases threatens the foundation of a stable political order.

Cain smackdown; thread over.

[Faust]

Wealth inequality with a minimum standard of living mitigates many of the problems.

Free healthcare, dentistry and education go a hell of a long way towards making the situation less urgent if not less unfair.

[Edward Longpork]

*puts on political science hat*

http://www.nber.org/papers/w4486
http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8599128
http://www.jstor.org/stable/2118070?seq=1#page_scan_tab_contents
https://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf

*takes off political science hat*

tl;dr version.  Wealth inequality is correlated with political instability.  Political instability is correlated with a worsening economy.  Wealth inequality harms economic growth and in extreme cases threatens the foundation of a stable political order.

A few of those succinctly counter the narrative that growth is driven purely by the ultra-rich. Certainly it is, to a degree, but for sustainable growth you need everybody pushing.

Thanks

[Cain]

It's also the case that you wont invest in a country which is politically unstable.  Given the correlation between political instability and wealth inequality....well, there is a reason that Portugal gets more FDI than all of Yemen.

The only counterexamples are countries which have invested strongly in political stability by other means, such as China or Saudi Arabia.  And I would argue, given the "mass incidents" and "terrorism" that occur in each, despite the spending of and powers of the security services, that any long-term investment in those countries is potentially at risk.

[thewake]

Wealth inequality seems to be a symptom of 2 things:

1. differences in the production of wealth, driven by a myriad of things like education, intelligence, ownership of capital, even culture and geography to a degree, etc.
2. seizing what others have produced, via the political process, theft, etc.

I'll acknowledge that, depending on what you consider theft, one could conceivably class things differently. A Marxian would class profits derived from a factory as #2, whilst I would (in most cases) class it as #1.

To understand inequality, one needs to address why the poorest generally seem to produce so little. And they do produce less as valued in the market (and if you take umbrage at that being our measure of value, well, that's a different debate. I don't claim that it's objectively just, but that's how we operate.) in comparison to people who have a lot of wealth (I'm talking general trends here, with inheritances being an exception). So, I think the most pertinent question is, how does one create a situation where those who produce much less of economic value currently are able to produce more? And that's where things like education, culture, geography, political rules, and etc come into play.

And I think this has somewhat been touched on here before, but too little wealth inequality may be a bad thing as much as too much wealth inequality is. Like the Laffer curve stating that the optimal tax rate (for max revenue) is somewhere between 0% and 100%, the optimal amount of wealth inequality for economic growth is somewhere between a Gini coefficient of 0 and 1.

[The Good Reverend Roger]

To understand inequality, one needs to address why the poorest generally seem to produce so little. And they do produce less as valued in the market (and if you take umbrage at that being our measure of value, well, that's a different debate. I don't claim that it's objectively just, but that's how we operate.) in comparison to people who have a lot of wealth (I'm talking general trends here, with inheritances being an exception).

[LMNO]

To understand inequality, one needs to address why the poorest generally seem to produce so little. And they do produce less as valued in the market (and if you take umbrage at that being our measure of value, well, that's a different debate. I don't claim that it's objectively just, but that's how we operate.) in comparison to people who have a lot of wealth (I'm talking general trends here, with inheritances being an exception).

That has to be one of the more amusing things I've ever read.

And by amusing, I mean 

[thewake]

They do produce very little on the margin. The addition of one more low-skilled laborer doesn't add as much in terms of production as the addition of one more highly-skilled laborer. People don't tend to get paid more than their marginal revenue product.

I'm not making a morally judgemental statement whatsoever, or calling them lazy. Quite a lot of the working poor work very, very hard. To give an extreme example, subsistence farmers work very hard, but they produce very little.

[LMNO]

You really don't stop talking, do you?

[thewake]

You really don't stop talking, do you?

There's an ignore function on this board. If I'm bothering you, use it.

[LMNO]

Nah, it's fun watching you flail.

[The Good Reverend Roger]

Keep digging.