Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank.

If you do tax the rich, they do very well and you also have money to pay for things like education, roads, affordable housing, medical services, scientific research .. which benefit all and lubricate the general economic market.

If you dont tax the rich, you end up with a gilded age of emperors and kings or a few robber barrons, a small rich coterie around them and the gawping masses of poor eeking it out.

Postwar 70s and 80s were a unusual period of relative lower-inequality, in which we had money in the real economy to develop things.

Garys Economics made an interesting point that inequality _itself_ is a problem - because the actual real value of the world remaining the same [ goods, energy available, land, workers, housing, technology ], when there is higher inequality, then the poor are losing a proportion of that real wealth to the rich. Extreme inequality itself starves almost all the population of a share of real wealth, for them to use their skills effectively - renovate a house, invest in stocks, get a masters degree, do a garage project, travel, have kids, install solar panels etc.

It goes further than that, it is the exact argument made by wealthy people as to why we shouldn't tax them more aggressively. Parroting that argument is ludicrous unless you're considerably wealthy yourself.

Just look back to the promises made before the election, how many were never fulfilled?

The left or right are the same side of the coins that the rich will support no matter what.

They shun people like Bernie Sanders, Picketty, etc.

In USA, social programs = socialists = commie.

That's how bad the brainwashing is.

Although, to be fair, also in the west there has been the Lastenausgleich which required owners of land to hand over 50% of its value (but it could be paid over 30 years).

Even people who want to tax the rich are skeptical about empowering / funding the IRS because there are many studies showing that the IRS disproportionately audits the poor.

If that’s true, then why would more funding help new enforcement against the rich rather than multiplying the current problem? Generally cash/support fixes material resource issues but cannot fix policy issues

We have gotten used to Congress being dysfunctional and not passing laws that we think the current laws are some unchangeable state.

I don't think further funding the agency is a completely nutty idea. Although if you truly believe the agency is broken, and that being broken isn't related to their funding, then I could understand your perspective. I lean more towards the idea that at least some, maybe even most, of the issues they have might be due to a lack of funding. That makes more sense to me than most of the criticisms I've heard of the IRS, which seem to mostly be on partisan idealism framed as otherwise.

1. Gary’s arguments for taxing the rich aren’t about taxing income. It’s about taxing wealth.

2. By his argument, most of the wealth are immovable: the rich disproportionately owns actual, physical real estates, and stocks of actual companies. As these assets are based in the country, you could tax right at the source.

My neighbor is way wealthier than me. So its ok if I take his car. He has enough he can just buy another one.

Not quite. If you are ultra wealthy because you happen to own several large buildings, fleeing the country to avoid taxes is easy. Doing so with you wealth, however, isn’t.

You make it sound as though he put a lot of his own money (somehow obtained from elsewhere) into these companies.

But that's not true at all. It is correct English to say that he is "heavily invested" in these companies in the sense that his wealth is paper wealth based on the perceived value (stock price) of these companies.

But he is not invested in them the way that a typical person has their retirement funds invested in a company or mutual fund.

It’s got to be worth a try rather than the disastrous economic policies that got us here.

In the same vein, if the US were to implement a wealth tax, the simplest way in terms of enforcement and not creating perverse incentives to shelter wealth outside the country would be to make it international in scope. Yes, people could give up their citizenship, but that's a huge sacrifice which most wealthy people would not want to make at any price, and there's already an exit tax in place for people that do this.

The problem is that people will always probe the tax code for loopholes that weren't considered. It's a cat and mouse game, except the cat is fat and lazy, and gets paid by the mouse.

Sure, a billionaire could then use their $143M estate as collateral on a loan to avoid realizing the capital gains, loophole, but since you can only have one primary home, it's a very limited loophole.

And land is something of finite quantity that is actually taken away from the rest of society. Capital is produced, and made, and is not finite like land.

This is one thing that California got really wrong, it should be taxing land heavily, and income less.

Wouldn't that inflate housing prices even more? Which disproportionally affect those in the bottom 90% or so.

I still think property taxes on stocks should be a thing. Americans pay income taxes from foreign sources, so why shouldn’t the rich also pay the same for overseas investments? Just close the loopholes with simpler tax laws. That could be like saying it isn’t hard to program some feature into software, though, so perhaps not.

Example: “Thou shalt pay 0% of all income and assets up to 20k, 10% to 50k, …, and 95% on up to 20mm.”

    > why shouldn’t the rich also pay the same for overseas investments?

https://en.m.wikipedia.org/wiki/Base_erosion_and_profit_shif...

[0] https://news.ycombinator.com/newsguidelines.html

I think a more reasonable interpretation might be "the government knows about expensive cars (i.e. that they are registered, have numberplates etc), and so charges some annual tax on the owners of those cars."

The government that is supposed to work for you thinks you have accumulated too much stuff and is trying to make it legal to take a percentage of your physical wealth annually.

This is simplistic nonsense. No, the majority of wealthy people didn't accumulate their wealth because high and mighty lord government willed it into their existence. They did it within a system of laws and regulations that government admittedly does create for fostering such wealth creation. However, this still often requires strenuous effort by these people for their own ends. If it were otherwise, many more people would be rich just by virtue of living under a government. There is a real place for giving people credit for the wealth and capital accumulate, well beyond what government offers.

It's contradictory and absurd to argue that people accumulate wealth because of the government while at the same time arguing that we live in a situation in which we need more government control of people's earnings to prevent oligarchy since government doesn't do enough.

Wealth does not exist in a vacuum. It is not some inherent trait of individuals that manifests independently of the structures around them. The wealthiest people succeed not just because of their individual effort but because they operate within a framework that provides enforceable contracts, property rights, regulated markets, financial systems, infrastructure, security, and a workforce educated by public institutions. Strip all that away, and they are no better off than anyone else in a lawless wasteland where power is dictated purely by brute force.

If wealth were purely a function of individual effort, we’d see people amassing fortunes in failed states or ungoverned regions where there is no government interference—but we don’t. In fact, in those places, the absence of government results in instability, extreme poverty, and the inability to conduct large-scale business. Conversely, the wealthiest individuals overwhelmingly exist in places with strong institutions and legal protections—because those things are prerequisites for wealth accumulation.

Your contradiction is actually the real contradiction. You claim that people become rich despite the government but then ignore the fact that wealth is unequally distributed precisely because the government does not intervene enough to prevent market capture by a small elite. A government that enables wealth creation is not the same as one that ensures it is fairly distributed. It is perfectly consistent to acknowledge that wealth requires government structures while also recognizing that unchecked capitalism leads to oligarchy.

So no, this isn't simplistic nonsense. The simplistic nonsense is pretending that wealth creation happens in a vacuum when, in reality, it is entirely contingent on the existence of an organized society with functional institutions.

strenuous effort by their employees or are you telling me that the average billionaire works 50000 hours a day?

This is most apparent in sports or the arts. Being just a little bit better at baseball can be the difference between a million dollar contract and being stuck in the minor leagues.

Of course the question of whether we should want success to follow a power law is a different matter. As is the role of luck. Going back to the sports example, being born at the right time of year can be a huge, permanent advantage[1].

[1] https://medium.com/@connorbaldwin28/why-athletes-tend-to-be-...

This is akin to saying you only achieved a high score in a video game by your own sweat and effort, and saying the video game developer had nothing to do with it. Without their work, you wouldn't have a system within which to accrue wealth. You may not even have the concept of wealth or property. Bezos wouldn't have his wealth regardless of himself creating amazon if there didn't already exist power grids to electrify his warehouses and data centers, roads upon which his delivery vans could travel, a financial sector to see him be paid for his goods, on and on and on.

The mythmaking of the self-made-wealthy has gone completely off the fucking deep end at this point with a portion of the population, as if these CEOs fell from the sky, cratered in the Earth, raised their arms and from them spawned hyperscaler businesses and cavemen left their campfires, picked up Macbooks and started writing React code.

> It's contradictory and absurd to argue that people accumulate wealth because of the government while at the same time arguing that we live in a situation in which we need more government control of people's earnings to prevent oligarchy since government doesn't do enough.

This is not contradictory at all unless you boil the points down utterly beyond recognition.

You are confusing two things thinking they aren’t highly related but they are. This statement could otherwise be written “government created a flawed system and motivated individuals achieved wealth by taking advantage of that system”. That implies a flawed system was causal. We don’t need bigger government, we need the right government. No one wants to say that those who worked hard - even by benefitting from a flawed government - should not have high wealth, but by your same argument, what did the wealthy children of these individuals do to justify their wealth? Their children? How long do we believe this chain of inheritance is sensible?

We just wanted to be the ones setting the rules.

We were quite quick to put our own stamp on the populace. https://en.wikipedia.org/wiki/Whiskey_Rebellion

It is next to impossible to hide the fact that someone owns something like real estate

In addition to real estate I might consider other property such as bank accounts, at least above a certain threshold. Presumably that cash has to be invested somewhere (or should be encouraged to do so)

If we could get a real wealth tax, I would do away with income taxes like some states have done (i.e. Texas)

Real estate can already be taxed via property taxes. Unrealized gains in securities can't be taxed the same way as their value is much more volatile, with potentially large daily swings. Texas makes up for the lack of income taxes with relatively high property taxes.

>In addition to real estate I might consider other property such as bank accounts, at least above a certain threshold.

Interest from savings accounts is already taxed. The wealthy don't hoard their wealth in bank accounts though.

It seems fair that you shouldn't be able to have it both ways—if you are getting any financial benefit from an asset, including a loan, there's a pretty strong argument that you yourself are "realizing" that value.

I think it would be more realistic to heavily tax inheritance and re-evaluate trust based loopholes.

I mean, you’re clearly moving the goalposts here. We’re talking about tax on unrealized gains for the wealthy, not sales tax, property tax, or taxes on the bank.

If you’re able to keep taking out new loans to pay off the old loans until you die, with an appreciating “unrealized” asset as collateral, then yes all that money is effectively tax free if we’re talking about income tax and capital gains.

There is no such federal tax in the USA.

And it is just ludicrous to suggest that stock holdings cannot be subject to a wealth tax. The value of stock holdings are established all the time when the wealthy provide their net worth for their business dealings.

The IRS requires me to submit the value of my IRA holdings as of the end of the year to determine how much will be taxed the next year (by forcing me to withdraw a dollar amount - determined by the asset value of my holdings - which vary minute by minute when the markets are open). So, I guess it's ok for the IRS to measure my wealth each year to enable the IRS to collect a tax on that wealth - but some how you say that's impossible to do for billionaires?

If an equity is valued at $X on some date when we lock in the value for a wealth tax or a tax on unrealized gains then sell enough of your equities on that date to pay for the tax and store that in a zero-risk asset. This can easily be done automatically.

I'm scared of 2% wealth taxes (as discussed in New Zealand) because I believe that will take 100% of retirement savings over time. And I'm no multimillionaire. Say portfolio returns 6% and drawdown(spending) is 4% then 2% takes 100% of gains.

The 1% or 2% figures sound trivial to the voting majority but they really are not trivial. Cue discussion on compounding.

The other issue is Forcing sale of private owned businesses. If you fuck with the incentives to grow a businesses, you will end up with a shitty economy and everybody suffers.

Apart from the obvious 2% * decades = lots (for low growth investments).

I could work to create new high-margin export income for New Zealand: I have the skills. But I don't work because I hate our taxation system: NZ loses.

An economy needs to incentivise everyone to work including the wealthy: otherwise it bombs. It scares me to see people in the US want to introduce features to cripple their most successful economy. I think most workers poorly understand businesses or economic incentives.

Most people just don't know about it. Due to the FIF rules. Any international investments you have get taxed like this (it's not so clear cut, but more or less). The only exceptions are NZ investments and Aussie investments, maybe. There is a tool to check if an aussie share is except from the FIF rules. e.g. Aussie ETFs aren't, even if they invest in only aussie stocks...

So everyone with a Kiwisaver (retirement scheme), aka most people, have large portion invested overseas, and thus are paying the 1.4% p.a.

It also discourages high net worth people from moving to NZ, as they usually have investments outside of NZ, which will get taxed once they move here (after a few years exception).

The small "win" we do get is you can (cost bases) invest up to $50k overseas without the 1.4% FIF rules applying, (though dividends are still taxed). But like no one knows about it, and managed funds can't take advantage of this, so most people don't utilize this, especially not low income people, who generally aren't that well educated on finances.

Don't get me started on our lackluster retirement scheme, Kiwisaver, with near 0 tax incentives, and propping up the housing market prices.

While our NZ Super isn't asset tested, our residential care subsidy (elderly care) is asset tested, and is very expensive. When you get old and don't die suddenly, then it's likely your assets you've accumulated over the years will be used to pay for your care (though there are some way around it, but not usually cost effective unless you have a large amount of assets).

But, the elder care the govt gives you (if you can't afford it aka no assets), isn't very pleasant, so you really should plan for it while you're working age, and have investments large enough to cover the costs (which most in NZ don't do).

I don't think we have insurance here that covers elder care.

I believe the guys across the ditch (Australia), have a better retirement system setup. While in NZ our Kiwisaver by default contributions are 6% (total. 3% employer, 3% employee), been this since it started just about, while in Aussie, the current min default total is 11%. Though Aussie's govt supported retirement payments are asset tested, where as they aren't in NZ.

I think having a higher min default is probably best for everyone, as most people don't change from the default.

Also, the US has 401(k) savings plans. It is pretty similar to Kiwisave.

Says who? According to whom? Who gets to make that call?

If you don't have anything then you can avoid certain costs, or sometimes you can get subsidised.

The wealthy also get some financial boosts e.g. house appreciation. And white collar crime has cheap convictions (or you can avoid consequences)

I've never had kiwisaver because I believe in the value of optionality with my own money. I severely hate locked up money. Being able to deploy money has gained me a small house worth of money. The FIF rules are a cunt to manage and Sharsies are SHIT - they've promised to deliver an FIF report but haven't done so.

Why though? We’ve already established the end game if we don’t do this. It’s hard to imagine society willingly regressing back to feudalism. What we likely need is a sensible plan which gradually adopts wealth tax rather than a radical step change.

The problem is that such a tax must be strongly progressive, or it may affect the poor much more than the rich.

For instance, I have seen cases in some countries, where after the discussions about the usefulness of such taxes for wealth, the result was the establishing of some high taxes on property, whose only effects were that e.g. someone who were jobless for some time might be forced to sell their house, and for a disadvantageous price, for not having with what to pay the property tax, thus becoming both jobless and homeless, or someone poor who inherited a house might be forced to sell it for a disadvantageous price, for not being able to pay the inheritance tax.

The result of this kind of misguided tax was an even greater transfer of wealth from the poor to the rich.

Come on. You have fallen for cartoon-villain level smack talk. Knock it off. We've done this before in this country and we can do it again.

If the design speed of a road does not match the speed limit of the road, people will drive the design speed, cops will learn to sit there all hours of the day waiting for people to mess up, and get ticketed. Instead of just putting up the speed limit sign, city planners should design for the road to be safe without need for the speed limits to be in place. This can mean things like reducing the width of a lane, could mean speed bumps, to purposeful non-straight sections.

> that we can

Highways are designed to be unsafe by design, so without a redesign they require speed limits.

This, of course, applies just as much to the actual topic of the Economist article; new inheritance taxes are just and good, but they should be written to be enforceable, and then they should actually be enforced.

I live on major street where the speed limit is 25 to slow people down. It used to be 35, and people normally go 35-45. The problem is that people go much faster when there is no traffic because the street feels wider. I would love if they redesigned for a slower speed. But there are cars in the middle of the night that drive over 60. It doesn't matter if street is calmed, they will go super fast and only tickets with slow them down.

Those people don't care about speed limits, in part because they are generally set significantly too low. This has the effect of normalizing the scofflaws' attitude even when carried to a genuinely reckless extreme.

Conversely, if you raise the speed limit to the 85th percentile, anyone exceeding it significantly will stand out enough to catch easily.

Speeding is a victimless crime anyway. If you hit something or someone, you were doing something wrong besides speeding.

If the individual resides in Australia, how do they utilize the $980k sitting in the foreign company?

The company can buy assets in AU, such as a house, and lease it to the individual, but I'm pretty sure the ATO requires they pay the company rent at market rate, which will likely be unaffordable on a reported income of 20K pa.

See Page #3. https://australiainstitute.org.au/wp-content/uploads/2020/12...

And the reason is those same rich influence the laws to their benefit.

It would be pretty trivial to tax the wealth if a society wanted to do so. But laws are made by lobbyists, who are paid by the rich, so what should we expect.

In Washington state, they passed a capital gains tax primarilly to tax Jeff Bezos. Bezos simply left the state just before the tax took effect. So did a lot of other wealthy residents.

Capital controls are very seductive, even though they’re very authoritarian.

Of course since a consumption tax hurts the poor disproportionately, the gov't would send a refund check to them, in large enough amounts to make up for it, where the poor are basically paying zero tax.

It also fairly discourages illegal immigration because illegals wouldn't get that kickback check from the Gov't, since they're 'visitors' not 'citizens'.

There is a false assumption here, that easy to understand makes it more palatable. A flat capitation would be even easier to understand, and even less palatable, because the ease of understanding is directly connected, in its case, to the ease of opponents organizing against it. A flat consumption tax faces a similar problem, which is why the efforts to push one to replace the income and payroll taxes for decades now under the label "Fair Tax" have been unsuccessful -- easy to understand isn't a political benefit when people who understand it often don't like what they understand.

But we know one thing as a fact: MOST OF IT was WRITTEN by Washington DC lobbyists specifically to embed in it all the loopholes that make it so that the elite in this country will pay hardly any taxes at all. Basically the fox guarding the hen house.

The obvious solution is to throw it ALL out and go with something simple that everyone understands. The reason this doesn't ever happen is because those same K-Street lobbyists make very large financial "contributions" to the same politicians in DC whose votes are required for a change.

Insofar as simply "choosing to spend elsewhere (outside USA)", somehow sales-tax is something people find difficult to avoid already right? We're just talking about increasing existing sales tax amount, and then eliminating all Federal tax.

If you've really managed to generate trillions in profit without using any, including indirectly (mining, showrooms, etc), fair enough. If your economic model is quite literally rent seeking, you can fuck off and give all those proceeds to whatever government ensures that land is not overrun by whatever raiders are historically a problem in your area. If you work for a living, you should be able to spend your earnings on a fancy apartment if you wish, and if a landlord wishes to make one instead of just sitting on land, they keep the profits from that too.

"if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made"

Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked.

But rich people don't do that.

"there are fewer than 1,000 billionaires and the vast majority of them are self-made"

That's a refutation, Piketty made assertions not just about the outcome, but about the process by which that outcome would happen.

It doesn't change the thesis, which is wrong. r is not greater than g for any reasonable amount of time for individuals/families because humans have an amazing ability to behave stupidly and reduce r below g.

But inherited wealth does not dominate wealth amassed from a lifetime's labor. The largest fortunes today are dominated by people who built businesses, not by people who inherited their wealth. So if "there are fewer than 1,000 billionaires and the vast majority of them are self-made", that is a direct refutation of Pikkety's thesis.

It is hard to overstate just how bad Pikkety's arguments are. His argument assumes single inheritance of fortunes, it assumes that wealthy people don't donate significant sums to charity, it assumes that inheritors of wealth will invest that wealth as wisely as the person who created it, along with many, many other false assumptions. The most egregious one in my opinion is that it assumes the wealthy don't spend their money.

If a billionaire makes a 5% return on his billion dollars and spends $50 million dollars a year, does wealth inequality increase? No, it does not.

It's a ridiculous theory, it is directly contradicted by the facts, and I have no idea why it is taken seriously by people here other than just as an opportunity to participate in a 2 minutes hate against rich people.

Also, journalistic standards, historically, were little or not at all better than anything you see online today. Yellow journalism was a major part of media since long before the internet and newspapers pandering to very specific, dishonest biases was also pervasive, but with few genuinely unfiltered alternative viewpoints being available. The difference today is that a real plurality of opinions is finally possible and can be globally made visible. The media gatekeepers hate this and thus create contrived arguments about an imaginary golden standard of media integrity and mass misinformation.

Oh no, now it's important to stop this because some people are able to do these things while having political viewpoints that you don't like. Were you previously making the same argument against say, the New York Times, due to it's being owned by one family and following that family's specific ideological viewpoints?

Wealth inequality is an innate part of human society, and by itself has little bearing on democracy or even overall standards of living. There are also many countries with low wealth inequality in which democracy doesn't exist in any sense.

Wealth inequality is not innate; there have been plenty of civilizations with far less of it. It’s only an inherent part of free-market capitalism.

Please by all means, name these superior civilizations with minimal wealth inequality. The fact that some people are immensely rich and many others aren't is much less important than how a given society regulates individual rights to live one's life and be protected by the law. Wealth inequality is also less important than the specific question of how these rich people became what they are and how much power they have over those less wealthy than them. Ie: You can't honestly compare a modern market economy with a feudal barony.

In much of the modern "terribly" unequal market economies, a Bill Gates or Musk can be freely told to go fuck themselves by anyone less wealthy than them and their wealth has little to do with some random average person's capacity to better their own life. The same often doesn't apply to societies with low wealth inequality, which coincidentally are often poorly developed and authoritarian.

I don't really care if Warren Buffet, Zuckerberg or Ellison can buy a dozen private jets any time they like if I live in the same society with most of my legal and economic rights protected, and with the ability to create a comfortable life also respected. I would however worry about a more supposedly egalitarian state in which central authority figures have given themselves the legal right to confiscate property and earned capital for reasons of ideology.

Also, while many on this site live in a bubble in which the importance and influence of Musk's X (previously Twitter) is grossly fetishized, in the real world, it's just not that important. Musk can throw all the tantrums he likes on the site and ban whoever he pleases, and for 99% of the world, it doesn't matter enough to be worth a single shit.

It's when he obtains literal political power that I worry, and the mechanism behind the kind of authority that could confiscate earned wealth beyond a certain ideologically or politically defined point can at any time fall victim to someone with the kind of grossly egotistical personality that someone like X's owner has.

having the legal authority to prevent a rich person from owning a social media platform is much more dangerous than that rich person simply owning a social media platform (in a landscape of others that it has to increasingly compete with).

You have to go quite far back to find those civilizations, so you can't really compare them to modern ones. Also depends on what the goals of society are. It's possible that people are happier on average in a poorer but more equal society, so would it be inferior just because it has less material wealth?

> It's when he obtains literal political power that I worry,

Money is literal political power. If it wasn't, you would not be seeing a bunch of billionaires running the government. I agree that current forms of government also concentrate power too much, but there will always be some kind of entity that makes the rules, and always those with the most resources will naturally be the most able to take control over that entity and make rules that benefit them.

> having the legal authority to prevent a rich person from owning a social media platform is much more dangerous than that rich person simply owning a social media platform (in a landscape of others that it has to increasingly compete with).

I agree, but letting people amass unlimited amounts of wealth will lead to that authority anyway. Once someone or some group of people is wealthy enough that they're able to buy the government, they'll obviously use it to give themselves that and any other authority they wish. It doesn't matter if that government is small or large, weak or powerful. There will always be a rule creating and enforcing entity, and that entity becomes whatever those who control it wish it to be. It will be controlled by those with the most resources. The solution is therefore not to try to limit the functionality of the tool that is government, but to maximize the number of people that have control over it. That requires having a more equal distribution of wealth.

That wouldn't be the case if those at the top were taxed and more of their wealth transferred to those at the bottom.

https://wid.world/news-article/inequality-across-700-years/

This significantly challenges the "if America’s rich families in 1900 had invested passively in the stockmarket"

e.g. the equivalent of S&P 500 if adjusted by inflation was in 1982 was well below it's 1929 peak. Almost all growth happened after that.

This is called stability. The more stable the system - the more value have investments.

How is that possible, though?

e.g. according to

https://ofdollarsanddata.com/sp500-calculator/

adjusted by inflation the stock market only grew by 34.10% between 1900 and 1982 when adjusted and even if dividends were reinvested. And that's total growth, annualized was barely 0.36%

Their wealth wouldn't have increase at all during that period, especially if they wanted to spend 2% each year.

Of course it accelerated massively in the 80s (1900-2024 was 2.48% annualized) but using the average would make no sense.

If you were still very rich in 1982 you would have made a massive amount of money since then. e.g. somebody like Trump invested all of his inherited wealth (and everything his dad gave him before) into the stock market instead of pretending that he was a very "successful" businessman he would have been much, much richer than he was in 2016 and wouldn't have had to be so ashamed about realising his tax returns.

The fundamental theorem of capitalism: rich people get paid for being rich in proportion to how rich they are.

This is why your savings account looks like an exponential. The thing to understand is the difference in lived experience depending on where it starts. If you are poor, the returns are a joke, you tend to ignore them. If you are middle class, the returns fund your retirement, and it seems roughly fair: you work hard and at some point you earn the right to not work any more. Only if you are rich do you see the fountain of free money (homework: calculate yearly returns for the typical 10%er, 1%er, .1%er, and centabillionaire), and of course being the beneficiary you rationalize away the possibility that this could be a problem at all. It's a tidy system.

"That's an unfair characterization of capitalism!"

So is the one you get in economics which bends over backwards to hide the "fundamental theorem" as I have stated it inside a choice of units: "under conditions of market equilibrium every financial asset has an equivalent risk-adjusted rate of return from the perspective of its marginal buyer." Did you miss the class warfare? It was all hidden inside the word "rate." Very clever.

Every intro to macroeconomics basically starts with a simplified conceptualisation of production as a function of labour and capital. Then it describes returns to labor and capital and so on. People who own capital get paid for that capital. It’s quite literally Economics 101.

> Piketty is a hack.

Generally those IOUs are real as a ton of gold bars or dollar bills somebody might be hoarding in their vault.

Jeff Bezos is literally never cashing in the vast majority of the IOUs he has. The actual difference in his life isn't anything close to that suggested by the difference in net worth between he and I.

Net worth differences aren't a good proxy for actual lived differences. It's off by orders of magnitude. This isn't a groundbreaking idea, Piketty is aware. He discusses it briefly in his book, with handwavy, abstract notions about "power" and "influence", as if that's what most people care about. But, it doesn't sell the same way his nonsense does. So he pedals his nonsense.

e.g.

https://upload.wikimedia.org/wikipedia/commons/thumb/1/1e/19...

I agree that this is probably a better metric. Easier to visualize and interpret than Gini.

> his nonsense

You could actually try making some coherent arguments before coming out with such conclusions?

The argument is clear - net worth is a bad proxy for consumption and lived experience. You just can't read. Piketty can, he just doesn't like that it makes his argument significantly less potent so he tries to paper over it with "power" and "influence" as if 99% of the world could care less about those things.

Because it's simply not. It's a very good proxy. I understand what you said and only think you are somewhat right if talking about people who are at the very tail of the distribution (yes, when it comes to "consumption and lived experience" it hardly matters if you have 100 millions, 500 or even a billion).

For those in the the 99.X% it's certainly (and obviously backed by all kinds of data) good indicator.

Talking about the "lived" part. Here is another indicator http://www.equality-of-opportunity.org/health/. Of course now you'll claim that living for significantly longer does not say much about the "experience" part or some other nonsense.

> You just can't read.

Or have a low tolerance of ideologically driven demagoguery.

>doesn't like that it makes his argument significantly less potent

I'm still waiting for you to elaborate on that besides just claiming it as fact or "proving" that it doesn't apply if you're in the 0.1% (which is hardly relevant).

The difference in life expectancy is 15%. That's 1.15x. And that's including that steepest part right at the front.

You've been bamboozled by the y axis not starting at 0. Someone making 10x more than someone else gets a few % extra life expectancy. Significantly less than just taking a 30 min run a few times a week.

Which is huge. Life expectancy in the US increased by ~15% between 1955 and now. Surely you would be entirely content with receiving the same level of care as was available back then and inhaling some lead now and then?

> You've been bamboozled by the y axis not starting at 0

It must be fun being so absurdly obtuse. The whole line of reasoning in your comment is so silly that it's hardly worth commenting on.

There is a massive difference between dying before you reach 72 vs living for another 15 years.

The difference in avg. life expectancy between Germany and Ethiopia is less than that.

Again, surely there is no measurable difference between living in either place when you are making median income?

It seems by your standards nothing is. Yet if you add it all together instead of looking at a single indicator money is inarguably (if you have any arguments or data please share them) statistically the biggest differentiator compared to anything else besides congenital diseases and other health conditions we can't treat yet.

> And that's the tiny bit of common sense required

Well having more than a "tiny bit" of common sense would made it obvious than it's not the case.

> For 50x chance in income.

Directly comparing wealth/income ratios and absolute differences in life expectancy or other indicator just makes no sense and claiming that it somehow proves something. Having only a tiny bit of knowledge about statistics would make that obvious.

Is it though? How much did Nvidia invest more, after their stock hikes? How about Tesla, Microsoft, Apple? No. They cut their staff or maybe stayed at their current investment levels.

So the question you should be asking is: How much did Nvidia invest before their stock hikes? And which companies will the original investors fund next after selling their shares at a profit?

https://taxpolicycenter.org/statistics/historical-highest-ma...

https://www.ceicdata.com/en/indicator/united-states/tax-reve...

Here's the income percentage held by the top 1% 1950-2010

http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Fig...

While its true that its higher now than it was the 1950s-1980s, its an increase of about 15%.

It if was the case that the very high marginal rates were actually being paid, you would expect the percentage of income held by the top 1% to be much higher.

Here's another source with more direct comparison - how much their income they actually paid in tax

https://taxfoundation.org/data/all/federal/taxes-on-the-rich...

The effective tax rate on the top 1% has been quite stable in the post war era.

For the richest tax is optional to the point where that get loans against their shares rather than pay capital gains tax. It’s an absolute disgrace and it’s got to a point where governments need to taxing them properly.

Giving money to politicians is like giving whiskey and car keys to teenage boys.

The very to extremely wealthy run nations, why would giving them control of more money, someone else’s money, be a reasonable idea.

I suppose the argument is tax the rich more, and the poor less.

Nah, there’s got to be a better way, like maybe tax everyone less.

Honestly, I have no idea why would anyone need that. Money is not value. Money is just a way of keeping track who is owed by future society how much value. It's a way of keeping tabs who gets to consume in the future.

When rich people hoard their money it's not a problem, you can just print more money to replace what they sucked up and hoarded. It's exactly when they try to spend it where the problems start to show up. Because they are doing it stupidly causing at least some inflationary pressures but more often than not societal and environmental harm.

Countries should make every effort to make spending their money as hard as possible for the rich people. Disincentivize them with high (and highly progressive) luxury, investment and real estate taxes. If that causes them to hide their money to avoid tax, even better. Every dollar of rich money hidden is a dollar of value not wasted by society on servicing the rich and their whims and gambling.

Carefully omitting the fact that the economic notion of value is wealth-weighted (and you can march enough elephants through this loophole to wage a class war), drawing attention away from "rich people getting paid for being rich" dynamics by dividing out wealth wherever possible, inviting you to use averages where "rich get richer" hides "poor get poorer" -- it's a masterclass in propaganda. I have literally never in my life seen a more artful tapestry of deception than Econ 101.

In any case, this is also matter of historical record: the purge of left-wing thought from economics and politics at the end of the New Deal Era was loud and vicious. It didn't stop at ensuring capitalist principles got top billing, it scorched the earth until even the most earnest self-examination of capitalism's largest weakness was cause for cancellation. You bury it, or you wear the scarlet letter. Most chose to bury it, and here we are.

If anything, I think economists have grossly underestimated how large increasing levels of inequality have had such a corrosive effect on our social cohesion and political systems, and that obviously does have a huge impact on eventual economic outcomes. This societal/political breakdown is not something that economists usually model well.

I certainly think, that regardless of the underlying hard numbers, there's a very strong perception that life is getting harder for the average person, and that most of that is due to their money going towards things that they resent. Exactly how and what will vary from person to person and depend on their information diet and political leanings, but there's a big undercurrent of discontent with the status quo and a strong belief it's due to a relative few benefiting from it, and this especially jives poorly with any assertion that "actually, the numbers show most people are just fine!"

I would, if I had the time, like to dive deeper into this sentiment: there's a decent amount of evidence that people are better off, on average (and median, so not prone to distortion by the hyper wealthy), than ever before, and yet this isn't how the average person perceives it. What I don't know is whether this is because said evidence is wrong or misleading, because inequality matters more psychologically than the absolute wealth, whether expectations have simply grown above the growth in wealth, or whether it's because there's been a flattening of the curve where historically disadvantaged groups have gotten better off but advantaged groups have become worse off.

IANAE, but this sounds about as implausible as claiming that developers aren’t interested in building sustainable codebases

Worst code quality: AI devs

Best code quality: Game devs

LOL I just read something yesterday (possibly a tweet by Carmack?) that game devs optimize for public perception of their game and that is it. Certainly not long term maintainability unfortunately!

Economists disagree with Piketty about the causes of this inequality: that is true.

Economists agree with Piketty however about the extent of inequality, by and large. That is, no one is arguing "inequality isn't real" or even "inequality is decreasing."

So there is disagreement about what's causing the inequality, yes. But on what (to me) is the bigger question - is inequality real and increasing? - there is a consensus that it is.

It's all there in the historical record, and as a trend, it's huge.

"It is the mechanic and teaching assistant in the middle who have the best claim to having missed the party: median real income rose by 57% from 1990 to 2019. But that is still a healthy 1.6% per year—a far cry from the stagnation in median earnings that is sometimes alleged".

For the record, I think inheritance tax should be way higher, and allowing the value of money to outstrip the value of labor is a travesty, but it's important to keep in mind that people across the income spectrum are getting richer in real terms. It's better to be poor in America than median income in most countries.

The 57% growth is after inflation:

>>...median real income rose by 57% from 1990 to 2019.

('real' income means after inflation, 'nominal' income means before inflation.)

Again: These number are already adjusted for inflation.

Perhaps. So what? Their wealth/incomes were increasing much slower than worker productivity. Technological progress compensates for the massively increasing inequality to some extent.

Also other figures show that median and bottom 10th percentile incomes were almost completely stagnant between 1967 and 2014.

https://www.census.gov/library/visualizations/2015/demo/real...

Of course real median income increased massively (compared to previous decades) in the last 10 years but it's not clear yet how sustainable is that

I am NOT an economist, and wonder what you mean here? It feels contradictory to me, given a system that makes labor fungible with money.

I've armchair puzzled over this aspect of capitalism and human nature. It seems to me that we, as individuals in this system, most fundamentally want to be able to use capital to time-shift the fruits of our labor, i.e. for rainy days, retirement, and unforeseen events. We need to be able to convert labor to capital, hold it, then convert it back to gain benefits of someone else's labor later.

But it seems inherent that this ability to make labor and capital fungible will enable some to amass and wield much more capital than others. In a population with differing wages, lifestyles, life events, and appetites for risk, it seems inevitable that the integral of these net savings effects will be divergent.

If you introduce a "reset" or leveling function, it seems like it will contradict this stored labor feature. It pushes us back on the continuum towards living hand-to-mouth, since our stored efforts are diminished in the future. And, I think human nature is such that we will "optimize" to stop trying to store effort that we can't expect to get back...

Is this an inherent feature of economics (or of society)? Do we need a fiction of security and potential future wealth to motivate our contributions, yet eventually need discontinuity to terminate the outcomes of this fiction?

That part seems fine to me. The thing that feels intuitively "wrong" is that it's possible to amass money/capital way out of proportion to the amount of labor input.

The example of the "four hour work week" concept comes to mind, where the goal is explicitly to minimize the ratio of input labor to output capital. Why should 4 hours of my work now entitle me to, say, 40 (or 400, or 4000...) hours of someone else's work later?

I am also not an economist, so perhaps someone else can explain what other mechanism is working alongside your "labor is fungible with capital" that leads to this result, and whether it's a feature or a buy of the economic machine...

And eventually, once you have enough capital, your new job becomes managing your capital instead of whatever you did before. There's two ways to look at that. Your labor is research and planning of your own investments. Alternatively, you are "selling" capital to others who are seeking investments, and they are "buying" it with labor. But the same story as above holds true. The price of capital (in terms of labor) becomes what the market will bear rather than a minimized "cost plus" pricing.

This duality is what it means for labor and capital to be fungible, right?

Let's say you can get a risk-free 5% return on capital and the average wage for labor is $80k. If you have $1.6M, then you can generate $80k in income every year without lifting a finger and without diminishing your principle. The richer you are, the more "free income" you get. Very rich people never have to work and they still get richer faster than the average laborer working full time. That's bad for society.

This is not an inherent feature of capitalism. A progressive capital gains tax regime can correct this. There has to be some return on capital, because otherwise it would be impossible find investors and secure loans when you need it, but that return should not be enough to mean the rich don't have to work at all and still get richer. The travesty is that effective capital gains taxes are often lower than income taxes in America, making this problem especially pronounced.

Your "reset" concept sounds like a wealth tax, not a capital gains tax. Alas, I'm not an economist either, but I believe wealth taxes are much more controversial than capital gains taxes among economists.

Yes, but once income inceeases beyond starvation levels, relative deprivation predicts misery more than absolute deprivation, so in a relatively developed country, that's still a bad thing.

The extreme example is NYC where 1 in 3 spend more than 50% of their income on rent, and rent has appreciated there much faster than nationwide. So those people experiencing far higher inflation than the national average.

It's also pretty easy to overestimate how easy previous generations had it. It's called survivorship bias. This recent bout of inflation is bad, but it doesn't hold a candle to what happened in the 70s / 80s, which is still regarded as the good ole days by some

[0] https://www.youtube.com/watch?v=CivlU8hJVwc

Well Piketty being wrong doesn't fit in many people's models either. Economists routinely do talk about inequality and I think it's intellectually dishonest to paint the whole field as wrong just because some parts of it don't agree with your pet theory.

To agree with the opposite views mean to disprove their thesis and career.

    > Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank.

Is this true? I'm not saying it's a huge portion of all saving, but holding wealth in things like precious metals or greater fool investments like Bitcoin doesn't seem like "investing" in anything productive.

It's hard making your capital inaccessible to the economy, but it's easy to not get the benefits of that working capital.

For instance, any time you park your money in a regular bank account or lend it at a suboptimal rate, you don't get some of the benefits.

Further to the parent comment, if you park your money in gold or crypto, you’ve given that money to someone else, and so on and so forth.

But there’s a balance to be bad, if no one actually spends anything other than acquiring investments, they starve, and the economy suffers.

Banks can and do then lend out deposited money to other customers, who can then spend it in the economy as they see fit.

1. Deposits often fund loans. If deposits were never used to fund loans as you describe, most banks would have at least as many cash or HQLAs as they do deposit liabilities. Check any deposit-taking bank's balance sheet to see that this is not the case.

2. If banks do buy government bonds with deposits, that still does not negate the funds being invested. The government now has the money and will spend it. Again, you can quickly check the governments do not hold piles of cash and the vast majority of the money that they borrow is spent on their activities.

3. It is axiomatically untrue that 'savings are removed from the economy'. Savings means that someone consumes less than they produce. That production must either be consumed by someone else, or add to the stock of capital. It cannot disappear.

Essentially banks are only required to have a fraction of their deposit liabilities as liquid assets and can loan out the rest. If I remember correctly, this is actually how a substantial amount of money is created in the US and likely most of the world. If you deposit $100, a bank could make a $1000 loan assuming the reserve rate is 10%, which leads to an increase in the money supply of $900.

Money supply is definitely not the same as the size of the economy, but it is incorrect to say that bank deposits are just sitting stagnant. Banks are quite active with those deposits - how else would bankers make all that money!

It is not true that most countries do not have reserve requirements.

There's not much point me discussing this further with your since you're so wrong. Take care and good luck with your enquiries.

I do think that your original argument that bank deposits don’t contribute to economic growth is wrong though. As you point out, they are a cheap form of liquidity for lenders. I think you’d agree that loans play a key role in economic growth.

These deposits can move between banks along with an associated asset.

Balance sheets always balance. Most of the balancing asset against a deposit is a loan. This is how banks make money and arguably their purpose. You can see the balance sheet of HSBC here (page 12): https://www.hsbc.com/-/files/hsbc/investors/hsbc-results/202...

It's clear that the majority of their assets are loans as expected. Then a fair chunk of reserves which reflects transfers from other banks (which hold a corresponding loan asset) or payments from the government. Finally there's a smallish quantity of financial investments that includes government bonds.

Bonds are just a floating price asset swap for reserves so the reserves must exist (have been spent) before the bond sale can happen. That is, governments don't borrow money until after the spend. In the case of the UK, this is shown in the following paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4890683

You seem to be of the understanding that there's a one to one correspondence between stuff and money, which a moments consideration of the endogenous nature of money (as described into BoE paper) would highlight as flawed. If you're suggesting something else by your point that savings imply a drop in consumption, please do clarify.

It feels like your understanding comes from an economics course, which generally bears no relation to actual monetary operations and understanding, rather reflecting the particular philosophical bent of the economic school.

What does this mean? "Bonds are just a floating price asset swap for reserves so the reserves must exist (have been spent) before the bond sale can happen."

Are you able to explain what your understanding of liquidity is?

Do you know what it means for loans to be funded by deposits?

Do you know the origin of the equation between investments and savings and how it is justified?

You are giving the exact impression of someone who used to believe a flawed theory of money creation, watched the Netflix documentary about bank money and has lost it a little bit.

When a customer (customer A) deposits $10 of cash at a bank, the bank has a new $10 asset (the cash), and a new $10 liability (the deposit it owes to the customer).

If another customer (customer B) then comes in and asks for some cash in the form of a loan, the bank can loan that customer the $10 cash, at which point the bank goes from having a $10 asset in the form of cash, to a $10 asset in the form of an outstanding loan.

This new asset is less liquid than the cash, but the bank's balance sheet still balances.

> which always happens through new money creation

You are correct here - bank lending is the process through which the vast majority of money is created. Before the loan, customer A thinks they have $10. After the loan, customer A and customer B both think they have $10. In this sense, $10 of new money is created.

Interest rates moderate the rate at which banks lend and the rate at which money is created, and the Central Bank acts as one of the most important price-setters in the economy.

> They do buy short duration government bonds with it because they're not stupid and can get a better return than on reserves, and bonds are acceptably liquid. Nothing they do can be construed as investment. Savings really are savings and are effectively removed from the economy.

Even if you believe that banks only buy short duration government bonds (which is provably not the case[1]), this is still a form of lending, as it effectively finances government borrowing, and the Government can spend their borrowed money as they see fit (such as for building infrastructure).

[1] See JP Morgan's consolidated balance sheet as an example, page 206 - https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chas...

If I take raw materials, and create something with them, I have increased the real value of the world.

I expect 90% would be dead within 24 hours, most likely from hypothermia.

There's a happy medium between what we have today (rampant consumerism and waste) and what we had a thousand years ago (every tribe for themselves). Perhaps you and I can agree that a lot of what humans do is useful transformations of resources into things that help us (housing, food, much of our tech and manufacturing), and then there is a lot of what we do that is completely wasteful that we could be doing less of (plastic crap, driving to offices to meet on Zoom, perhaps we build houses too large, we build in bad places for humans to survive, etc.).

My previous comment was a bit snarky, but my point via that comment is that not everything we do to transform resources into stuff increases the value of the world, perhaps some wasteful things even harm our world and decrease it's value in the future. You're a smart guy, you understand nuance and that wasting our natural resources, especially the non-renewable ones like oil, in a mostly closed ecosystem is a bad idea.

If someone else is willing to trade for it, then something of value has been created.

P.S. Most people don't know how to make a fire from scratch, and will die of hypothermia in even modest environments. I know how to do it, but have never actually tried it. Doing it without even a knife will be really hard. The TV series "Alone" is instructive about how hard it is to survive, even if you're well-equipped with modern gear.

The richer you get, the more likely you are to engage in wealth management. This necessarily means investment. No one who's rich has that much liquidity or money just laying around. This is as stupid as hiding cash in your mattress.

The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option.

This is why I think one key element of restoring sanity to economies is the categorical criminalization of usury. Compound interest is theft, and it boggles the mind how easily people are intimidated into going along with the rationalizations purporting to explain that it is not (all that nonsense about opportunity cost, as if that is the borrower's problem or responsibility). Banks are important, but they are not productive per se. The only ways a bank can legitimately make money is through service fees and investments (and real investments, where there is a kind of partnership and proportionate skin in the game, not magic bailout money or some kind of weird accounting magic).

Once we destroy the superstitious idea that money can be bred, stop using euphemisms for theft, and acknowledge labor as the basis of all economic value, we will see a healthy economic shift and more distributive justice. Housing markets will improve, too. The change is deep cutting.

The whole discussion about inequality or taxing the rich or inheritance is confused and frankly a distraction from real problems, and I suspect at times a purposeful distraction, because it preserves perverse economic norms (making the tax simply the cost of doing business) instead of correcting them, which is the real threat.

   > The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option.

Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots. The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do. People believe in property rights and aren't generally willing to violate them. So, you will inevitably have rich people in society.

tl;dr: socialism over capitalism.

> We generally believe that someone is entitled to keep what they have earned and do what they wish with it (property rights).

This isn’t the law of the land because “we believe it” but because the burgeoisie made it so. But that’s a side note.

> So, let's say you burn down society and start over with everyone working at subsistence level.

Hypothetical/alternative history is not interesting. You can look at the enclosure of the commons in England. The commons that the subsistence farmers used was outright stolen.

Yes, and then there’s the subsistence level. Serfs and landless famers have been exploited for millenia not because their peers had worked harder and in turn had more grain stored... but because they were landless and/or oppressed by the weaponized lordship.

By the way, do you honestly think that someone will be enlightened by explaining how inheritance works? Maybe you’re just of an exceptionally patient explainer.

> Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots.

What this narrative seems to imply is the most direct and obvious inequality, namely some people having bigger houses, more swimming pools, and more cars than others.

This is totally uninteresting. Does someone want to work 30% harder than the median over five years so that they get to install a swimming pool? Whatever, I don’t care.[1]

There’s something about money though. You can use it for more stuff than buying cooler cars. You can use it as capital, i.e. to invest in means of production. Then you can buy all of the means of production. Or you can employ imperialism via the state (that you effectively own because you have money) in order to seize the means of production (or access to raw goods) in some second/third world country that wanted to naively own their own stuff. (Property rights?) Lots of things you can do with money.

Then eventually all the small proprietors (small business owners that we like to put on a pedestal for propaganda purposes) have been outcompeted. The farmers have been driven off the former common land (see enclosure of the commons).

All you can do to survive is to sell your labor as a commodity. So about fruits of their labor:

> The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do.

A small business owner that works alongside their employees is producing part of the “fruits of their labor”. A capitalist that employs a thousand workers including the managers is not part of producing the “fruits of their labor”. See how farcical that is? The fruits of their labor has got nothing to do with labor. Only about sitting on capital.

Meanwhile the laborer does not get the fruits of their labor. In fact it has got nothing to do with how many fruits he bears. Only about what the market is willing to pay for the labor commodity. As well as collective bargaining if that is even in the picture. (Guess who is actively working against that.)

Yeah I’m all about people getting to enjoy the fruits of their labor. In actuality.

The reformist approach of things like taxation does take away people’s swimming pool expansion funds. It does. Which is an inherent side effect to how completely fungible money is; it can buy a swimming pool or capital or be put to someone’s CIA informant/collaborator stipend all the same.

[1] I asked what social function rich people serve. Owning a swimming pool is fine even though it serves to social purpose. Just like a lot of other things that are fine but serve no social purpose.

All either studied hard in school and went on to get a degree or left school at 18 and apprenticed in a trade or got specific qualifications.

I read so much about declining wealth and how each generation is worse off that I have to assume I’m in a lucky bubble because it’s not the case for me.

None of us are rich but the system appears to be working from a sample of say 30 people aged 25 to 45 from different parts and backgrounds in the UK.

I feel like software has been an outlier here for a decade; the only place where traditional economic intuitions still apply (semi-smart people can work hard, learn a technical skill, find a job in their field, pay off their loans, make more than their parents, afford a house, and have a comfortable personal life and relatively fulfilling work life)

Everything I've heard from the rest of the economy is that this model is dead

So a real mix

In the US? Real Disposable Personal Income has been growing very consistently over time [1]. The rate of growth did stagnate between 2000 and 2013 but the trend has been remarkably consistent.

[1] https://fred.stlouisfed.org/series/DSPIC96

it claims that the average person has 50k usd in disposable yearly income - there's no way that's after housing and other non optional expenses have been accounted for.

using this measurement, if wages go up 5% but rent goes up 50%, it would still look as if people have more money to spend than before.

the rich are taking The Lion's share of productivity growth

https://www.epi.org/publication/charting-wage-stagnation/#:~...

Which economy? In the US, healthcare, public schools in some states, and B2B sales come to mind as decent jobs. But I agree with the general sentiment - there do not seem to be great choices that support a nice life. Quite a few of my friend have to work multiple jobs or double shifts to make it work.

Things that aren’t improving outcomes are ultimately why healthcare is expensive in the US.

Granted I understand what you mean, but it’s kind of like saying managers make good money while ignoring all the shift managers at fast food joints.

As to inequality, we’ve made this much worse intentionally via things like a tax code that massively favors high income earners. It’s not even that this tradeoff has increased GDP growth or anything the country was growing faster with higher tax rates on corporations and dividends.

Even just theoretically it’s suboptimal because jobs catering to or trying to extract money from high income people don’t lend themselves to automation. Long term everyone rich or poor has been worse off.

I lived through it. We can talk a lot about, but the fact is equality doesn't work. Maximum it gets to is everyone equally poor. And as a result of it there are no startups. You need middle class for this and motivation. Government controlled and own monopolies is also the result of equality. Nobody else has the resources. So commies had to create the economy, few bigger things are easier to manage. Managers aren't interested in risk taking, it's not worth it. Finally everything stalled and fell far behind the rest of the world. There were bright spots, but that's it. Like North Korea today can build missiles and not much else.

Just look around. Probably only Cuba and North Korea are still in true socialism. In both there is a small super-rich class and the rest is, yes, equally poor. Super-rich are pretending to be poor too and invent theories to keep the rest under control. BTW, I'm not sure Cuba still has strong ideology today.

The USSR didn’t actually have economic equality.

The US has drastically lower tax rates for capital gains.

Finally, arguing for equal taxation isn’t arguing for equal pay.

More or less it had. Except for privileged commie bosses everyone poor. "Rich" had cars (!) Having noticeable business was prohibited. Selling own potatoes on flea market, or growing chicken and pigs was fine.

> The US has drastically lower tax rates for capital gains.

In Mass. it's 10% to begin with.

> I’m saying economic growth is slowed through the economic inefficiency resulting from unequal taxation.

Not sure about this. Do you have examples when equal taxation helps?

By modern standards sure, but they were much better off than medieval peasants who most of their recent ancestors where.

As to equality the economy isn’t just the legal economy. A cop accepts a bribe is making more than a clean cop and greasing the wheels of bureaucracy was really common as was a rather extensive black market fed by production being diverted etc.

It’s quite consistent how effectively people learn to leverage what they have to get what they want.

> Do you have examples where equal taxation helps.

You can look at tax rates vs long term GDP growth and see trends but economic growth isn’t clear cut. The best example is cases where tax breaks for the wealthy has been harmful is the UK which is still doing alright but had massive advantages from it’s early industrialization and colonies that it quite effectively squandered.

My point -- even being slightly lower middle class now would feel like a good jump over my parents. That's just pointing out that comparisons to parental income is very relative.

That phenomenon was not always apparent. Growing up, I was told specifically to avoid those sorts of jobs and go for white collar, informed by a generation where those sorts of jobs were a lot more dangerous and less compensated. In some companies over the last century we went from say building floors of modestly paid draftsmen and a few highly paid white collar classes managing them to floors of modestly paid white collar people fiddling with excel and a few highly paid certified engineers doing the actual technical work. The dynamic has changed.

But lately after reading and observing around quite a bit I come to realize due to being ended up in a fast growing sector at least a minimum level of success was guaranteed. I see same thing at my company where a lot of VPs, Sr VPs and above reached to that level primarily they started a decade or two earlier than me and growth was much faster than compare to when I joined in mid 2000s.

They can talk down to me just like I can talk down to more juniors about value of hard work, drive and so on. However, joining a growing sector early was best thing career wise. No amount of hard work will help if one is starting at a middling IT job in middling company in 2025 like I did in 2005.

Not refuting your point but there is a selection bias here. You are in contact with people who did in fact achieve VP or higher levels. Lots more also joined the industry 10 or 20 years before you and burned out, failed, hated it, got fired, whatever. The people who succeeded may not be particularly exceptional in terms of talent, brainpower, innovative thinking, etc, (lots was luck, or being in the right place at the right time, surely) but it's also not true that everyone they worked with back then became a big success.

Those of us who work in tech, and many of the people we find ourselves bonding with and staying close to in our adulthood, are lucky to have taken up in a sector that happened to see disproportionate growth during our careers and admitted many people from modest backgrounds.

But people who didn't stumble onto that path, or perhaps hoped to follow their parents into professions that were more flat or failing (medicine, education, academia, farming, manufacturing, "the trades"). In aggregate, some of those people are still doing okay, some are doing well, and some are flailing in desperation for having made the wrong bet.

Of the people I grew up with in a modest blue collar community, I don't know anyone besides the few most ambitious and capable that were able to find the security that their parents had. And as one of those more ambitious and capable people who later circled with people of fancier backgrounds, I similarly don't know anyone who pursued things like academia or medicine and found what they expected there either.

Appreciate what you have! Many don't share it.

To be clear: I’m not saying they’re bad people or anything— most people think their experiences are more representative than they are. But, from outside, some of the assumptions software folks make about the world just seem utterly ridiculous. Consider that on average, junior developers make more money than a first year medical resident that has a PhD in perhaps the highest demand field in the US and works shifts of 16-30 hours with many consistently logging 80 hours per week, and occasionally end up working much more. Ask that medical resident what a really bad day, and a really bad week at work looks like for them and ask a developer with the same amount of post-school experience the same question, and then consider how much more school it took… and then ask that same question to an aircraft mechanic, a chef with a culinary degree, a construction worker, a public defender, a commercial fisherman, a firefighter, a nurse… the software industry is more than an aberration — it’s a different planet. The kind of shit I’ve seen developers say they’re going to “pivot to” if the software industry falls apart is, frankly, flabbergasting. If we see the sort of sustained job losses some fear in software, there are going to be a whole lot of people learning some extremely bitter, difficult truths about the world outside.

It's about margins. Software has the 2nd highest margins of any sector (highest is High Finance), so it's easy to pay competitively in software compared to other fields.

I'm just saying the only reason SWEs (and IBs) get paid the big bucks is primarily because of market economics, even if plenty of other high stress roles (eg. Nursing, EMT, Teaching) get paid a relative pittance.

I think a lot of us members of the tech industry need to cut down on our hubris and respect other industries and jobs, and understand that we are cogs inasmuch as anyone else.

I get it, because it sucks, but it's still tone deaf for people in the top income brackets, 401Ks, and plenty of disposable income.

Most Americans (employed or unemployed) don't get any of those kinds of benefits.

The dev world’s baseline for what constitutes good treatment, bad treatment, and fairness from employers, an acceptable amount of disposable income, acceptable housing expenses, etc. is completely detached from the rest of the working world. Now that the demand is dramatically changing, that will probably also dramatically change, and that’s going to be rough. If it does, maybe it will recover. It has before, but this seems like a much more significant change.

They were part of a generation that benefited from enormous house price appreciation due to a combination of falling interest rates went from almost 15% down to under 5% (this is about 3x on its own) and the fall in house building which drove up prices and rents generally.

This effect is somewhat less pronounced outside of southern England.

Thinking of one (not me) it’s delivery driver -> enlisted service -> mid level finance (not London)

Hmmm, food for thought, thank you

That is unarguably true of our parents' and grandparents' generations, but I don't think it is as true of people of my age or younger (born in early 1980s.)

There was a huge expansion of higher skilled jobs after the war with large numbers of people moving into the middle classes. For me and everyone I know our mothers (born 1950s) worked. We all grew up in dual income families.

My great-grandfather was a miner. His son, my grandfather enlisted in the forces during the war, seems to have been recognised as being technically apt and worked with radar, became an officer and in the early 1960s left to be a manager at an engineering company.

His daughter, my mum, became a teacher (first in family to go to college) and his son did not go to college but became an IT manager (married a teacher). All of us grandchildren went to university but basically have similar jobs to our parents' generation.

Several of my siblings and cousins own houses but they got help from parents or partners' parents and mostly bought outside the south east. Renting a flat in London as a fairly highly paid IT contractor I had to pay six months up front because my parents didn't earn enough to be guarantors.

I have a similar sample, all middle class in their 30's. The only ones who have bought houses have been given significant assistance from their parents, now none of them are poor by any stretch, but few have any significant assets.

That's a typical confirmation bias: you worked hard and got successful, so you're tempted to think that it's because you worked hard. Some don't work hard and get successful, many work hard and don't get successful.

The one thing that you clearly can't rule out is luck. Tell people in Gaza that if they work hard they will end up in a situation similar as yours...

all who don't try fail

Obviously, if you don't do, you don't do.

> to use that to question the impact of a human's agency on their own life outcomes

I'm not doing that at all. I am not saying that the effort put into achieving something is worth nothing. What I am saying is that whenever someone is successful, it means that they have been incredibly lucky (and on top of that they worked a lot, maybe). Whenever they compare themselves to someone else who also worked hard but was not successful, the first conclusion to make is that this someone else was not as lucky.

But the first thing that happens when someone gets successful is that they forget how lucky they are, and just start talking about merit. My point is just that whenever you talk about merit, just remember that you were not born in a poor family in a war zone, and that does not make you more deserving.

In the US, my anecdotes seem to show that things have stayed neutral or declined slightly. It seems harder to get a decent job than our parents. It seems that fewer of us have bought homes, or delayed buying due to financial reasons. Seems like more of us are working multiple jobs too. I think the aggregate measures showed real income only trending up slightly over the past couple generations.

> all of us are better off than our parents at the same age and their parents are better off than their parents

These are conflicting statements. Your group are all beneficiaries of generational wealth by this description. Maybe it isn’t as overt as a trust fund, but you definitely inherited wealth and opportunity from your parents.

I just think you'd have to be so willfully in denial as to miss the darkness we are descending into. To miss how bitterly the GOP and the wealthy are building empires of lies and bespoke manufactured realities to make up down and left right, to cover for horrible treacherous actions against the possibility of the individual, stacking the deck for empire and inherited wealth. (And Dems are frequently unwilling to bite the donor class that makes winning elections possible, after the courts have obstructed democratic funding reforms.) Are actively opposing the possibility of people doing good for themselves & the world.

I strongly recommend folks go read one of the darkest periods of America, before enough was enough Adam Hochschild's American Midnight (2022) tells an amazing story of a circa-WW1 state that had radicalized against people, that had been totally overrun by well monied powers. Of Hoover using the full power of the police state to surveil as Ralph Van Demand had done during the Philippines civil war, of of the postal service run by someone using it for information control, of American Defense vigilanism.

Its not a tale of what happened next, how that broke, just a long amazing story of how dark America got, how badly the state was an extension of capital and power, and how deeply it subverted the individual, the union, any attempt for everyday humans to make any claim to life liberty, or pursuit of happiness.

We face today not quite such amassed power, but a completely warped infosphere where these bespoke realities create lifestyle beliefs where people are on board with incredible trains of lies crafting false enemies, supporting the opposite of the signalling they claim. Its different than dark; the world today is overloaded by hell's din, by monsters of abuse, doing their worst to harm us for greed and for the possibility of undoing the good of the world.

I doubt we're typical, is my point.

That's it, you're outliers.

In which case you were able to save a deposit within 6 years of graduating? When i was at that stage my outgoings (rent, food, council tax, car, insurance) were probably 90% of my salary.

We aren't yet. Our projection is that we will be in 5-7 years. I'm turning forty soon.

Just to give you an anchor point.

The system works fine if you don't need nonstop luxuries

I'm happy to see that your friend made it work for himself, but his was a much harder path than most people saw in prior generations.

Despite this, I can not afford to buy the house I grew up in; a 3 bedroom SFH with a decent sized yard and a pool, around 1400 square feet, 45 minutes away from downtown without traffic in a hot real estate market. My father was able to purchase this home as a tradesman with 4 kids, being the only parent who worked outside the home.

Similar case for my wife. Her parents bought in 2000 with a combined household salary of less than mine alone. The mortgage would be twice our monthly rent. Fortunately we stand to inherit that house, which sort of proves the article's point.

I ended up getting a good degree at a top uni and started my career at Amazon but definitely couldn't have amassed the necessary amount for a down payment for a place in London by the time I was 26.

By the time my dad was 35 he had two kids and my mum was a full time mum.

This doesn't sound remotely close to the reality of my numerous banking, lawyer, accountant, engineering and doctor friends.

The only people I know who are remotely close to being able to own a property in London and have only one breadwinner work in hedge funds.

There certainly would have been locations where your dad would not have been able to afford property, and conversely there certainly are places where you can afford property.

Point being, things change, but this anecdote doesn't illustrate that you're worse off than a previous generation.

Perhaps you generation is better off than their parents were in terms of everything except real estate. But their parents are also better off now than they used to be when they were their age, because everything (except housing) is much cheaper (relatively) than it used to be thanks to optimizations in production and economies of scale of last 5 decades.

There's a lot of doom and gloom but it doesn't seem consistent with the data.

There's a weird tendency to zoom in on particular data points that paint a particularly negative story and leave out the rest. For example, we look at housing and will say that its prices outpaced inflation. And that's true, sort of. But it's also completely untrue. For example, if I look at my own situation compared to my parents: I have a 1.5% interest rate on my mortgage, my parents paid 15%. Homes are now about 50-75% bigger than my parents' generation, on average. And the average home is shared by 33% fewer people than my parents' generation. So the cost to rent the money to buy a certain area of home for 1 person, i.e. housing costs, has actually gone down, despite the average price of a house having gone up.

In all fairness I wouldn't want to trade with the average person in past generations.

Personal income does not include capital gain.

Wealth grow is not included in either of these dataset.

CEO unrealized gain is huge and represents a huge chunk of his/her eventual hidden income that becomes wealth.

I think about how much is it worth for me to work remote vs working at the same factory for 40 years like my father. Some people pretend like this is just a given in the modern world and basically worthless. In reality, it is hard to put a price tag on because the difference is so valuable to me. I actually could have been the 4th generation working at a flour mill if I had wanted. Even if the flour mill paid double what it does, my life is so much more grand than what that would have been, it isn't even close.

That’s part of the challenge in the populous understanding this issue. Many people are better off than their parents, but for being the richest country in the world most people should be far better off.

Anyone not familiar with it needs to look up Georgism.

This transfer happens primarily via housing costs and rent payments.

The stratification of the rich happens via investment opportunities, but the core underlying mechanism for the majority of the population is via housing costs and Ricardo's law of rent.

Housing needs to stop increasing in price for a number of generations. Surely the rich can find someplace else for their money.

The YIMBY movement is pushing in the right direction, but doesn't have the political power that they need. Particularly in California. And, as long as they don't, those with houses will continue to win against those who don't.

False.

You can depress the land-based monopolistic component of housing via a land value tax. If speculating on land values stops being a good investment strategy, the price will drop.

Many economists/nobel prize winners have been quietly pointing this out for over a century at this point. Here is a pretty good primer: https://www.youtube.com/watch?v=smi_iIoKybg

A land value tax could indeed help with housing costs - but that's because it encourages development. It is the construction that makes the really big difference here.

> housing to stop INCREASING in price

Land value tax would immediately start decreasing the housing price. You are correct that it would stay high until demand and supply rebalanced, but it would start decreasing.

In fact, you actually pointed out a second mechanism that could lead to decreasing prices in your comment: a decrease in demand. As you mentioned, that decrease in demand could come from a decline in population. However, it could also come from a decrease in that population's capability to match their existing level of spend. People can't spend more than they have so if that amount goes down then prices would also have to go down as a result.

In fact, prices for housing are far more sensitive to changes in demand than for normal goods. Land supply supply is fixed and cannot increase. But likewise, it cannot decrease either and this is what makes land value tax so amazing! Normally, a decrease in price would lead to a decrease in production, but with land, supply never changes so you get a larger decrease in price.

Economists refer to this property as having zero deadweight loss, and it is what makes land value tax the most efficient theoretical tax possible as was mentioned by Adam Smith over 100 years ago. Effectively, you can tax land up to its full theoretical rental value and supply will never change.

Land is an economic edge case. It's like a massive glitch in normal economic assumptions. And that glitch is literally the largest asset class globally and makes up the majority of bank lending. It needs special attention that it's not currently being given.

Practically speaking, land value tax advocates are not proposing full rental capture, but rather first replacing property taxes, and slowly increasing the tax rate while decreasing other taxes.

A land value tax by itself would not suffice to immediately change this dynamic.

My claim that land value tax would decrease property prices does admittedly depend on the tax rate. Do you dispute the fact that there is some tax rate where house prices would decrease? For example, going above 100% tax rates would actually force people off land so to me this seems obvious because clearly nobody would want to hold property if it cost more to hold than they could afford... So obviously there is some tax rate lower than 100% where property prices would start to decrease even accounting for other growth factors. Heck, you could even ignore it being a land value tax. This would happen with a property tax as well.

Does that make sense?

Keep in mind that the number that you quote there in the article would obviously change depending on the price of housing. People move out of cities or countries all the time due to cost of living.

EDIT: this seems pretty straightforward to me. It's a net present value calculation with an annual payment. Obviously there is some annual payment where net present value will decrease...

In theory this is net neutral on costs. In practice, it is likely to be an increase immediately because housing prices tend to be "sticky". So it takes time for land value to drop because of the tax.

> For housing to stop increasing in price, a lot of it has to be built.

As

"For housing costs to stop increasing, a lot of it has to be built."

It's difficult and ambiguous either way though... Costs being plural and price being singular is maybe what threw me off as well?

Thanks for clarifying!

If there's 1 million people that want to live in a city with only 700,000 housing units, the only way to keep housing affordable is to construct more housing. No amount of regulation or tax changes will overcome the pidgeonhole principle.

There is excess supply of housing which is intentionally kept empty, hence this is not applicable.

Similarly, college has become a thing that went from <40% of high school graduates prior to the 1950s, to 80-90%+ today. The demand has increased enormously, so of course prices has gone up.

Isn’t the point of markets to provide feedback and change behaviors? Live in a smaller house, go into trades instead of college, etc. (like many in the last generations did, in reality). Instead, everyone is trying funnel into the patterns that had the most success in the past, leading those to become oversubscribed and not working as well.

I don’t think a civil war in the us is possible but I think advertisers taking advantage of the divisiveness to see chaos is likely (and already happening).

Edit: I meant “adversaries” instead of “advertisers” but I think advertisers works equally well so left it in.

Clear, obvious initial battle lines are not a prereauisite for a civil war. The American Civil War, where the conflict was largely motivated by an issue which had a geographical split among subordinate polities was kimd of a special case.

The US is setting up to make this worse by cutting services for the average person (like the CFPB and OSHA) and continuing to give tax breaks to the wealthy...again.

This is after the same group of people set off sky-rocketing inflation by injection almost a trillion dollars of new money into the economy by way of the PPP program, of course hurting the average person more than their wealthy financial backers.

End of life care is a giant vacuum cleaner designed to move wealth out of families. It is incredibly depressing. Because Medicare does not fully cover nursing homes, you have basically two choices:

1. Give up a huge percentage of your family’s assets (home, retirement savings etc.) so that it never gets handed down to kids and grandkids. 2. Gift those assets early (at least five years I think) so you are technically broke and then can qualify for Medicaid.

Even if you don’t gift those assets early, many people will still run out of money because they aren’t wealthy. So they’ll also end up on Medicaid.

People have the very dangerous impression that “Medicaid is for the poor and Medicare is for the rich” and oh hell are they about to make a terrible mistake.

Medicare does _not_ cover nursing and long-term care facilities for the elderly. That is covered by Medicaid.

If the riches were conscious enough, they would return a fair share to the poor and the eventual crash will be deferred much longer. But you know, everyone wants more money, no exception for the riches. It looks the only thing we learn from the history is that we learn nothing from history. So here we are: the same drama of empires' rise and fall, the only differences are the locations and the actors.

I get really worried when I see people glamorize equality post-war...post-war times are not good times for the middle class. The most equal wealth humanity has ever had is during caveman times, but that is not the goal.

war does not make things better folks, I hope that's not what OP was trying to say, but just in case let's be very very clear about how awful war is for progress and humanity.

War destroys existing structures and gives them a chance to evolve again.

The economy is growth dependent and can only perform its basic functions under growth, even if that growth is fake. By basic functions I also include all functions that do not depend on growth.

are you suggesting that destroying things, results in improvement in the long run? I don't know that I could be farther from agreeing with that. If starting from scratch was better, why wouldn't we be doing it voluntarily at frequent intervals? It just seems easily dismissed as entirely incorrect.

> The economy is growth dependent and can only perform its basic functions under growth, even if that growth is fake.

I don't think this describes the economy, it just describes some of the metrics we use to gauge the health of the economy. burning down the internet and killing everyone that understands it might result in another dotcom boom, but would you say the economy is more healthy than some other reality where the internet continued to exist with no reset and only has smaller incremental gains?

"Capital in the 21st Century" by Piketty does a good job arguing that the historical normal condition is for wealth to concentrate bc the returns on capital are greater than overall economic growth. It's depressing, but creating the kind of world that a lot of us and our parents enjoyed takes special conditions (and political will?) ... but the flip side of this view is that intense inequality can endure for long periods of time and doesn't necessarily lead to political instability.

The difference is that medieval peasants knew their manorial lords had bigger houses and ate more meat, but the visible local differences were small and religion could operate (for worse or better) as a stabilizing force. People tolerated a caste system because they were information poor.

There’s no reason today, though, for people to put up with the kind of inequality that is not only extreme and senseless but constantly being shoved in their faces via social media. The only way the rich stay out of the guillotines is by creating new, weird cultural spectacles like litter boxes in schools (not even a real thing) for “furry kids.”

I think the latter is worse, because it means those in power now have an information lever they can use to manipulate the masses. When there were no broadcast or network media sources, those levers didn't exist and the powerful had fewer tools to control people.

By which you mean the most recent 1% or so of human history.

Before that societies were a lot more egalitarian [0].

0 - https://medium.com/inside-of-elle-beau/yes-our-ancient-ances...

A closely related variation is the appeal the current oligarch class is making to men all over the world: let us rule over you and tax you and we will keep women in their place and set things up so you have most of the power in relationships. Men get to rule over women, and in exchange the oligarchs get to rule over men and take most of their productivity in rent and taxes. You're poor, but your wife can't leave.

Well no. Peasant rebellions/uprisings happened all the time. People tolerated the feudal system because those rebellions could at best pressure for greater leniency within the system, while it took the later historical developments of urbanization and increasing labor productivity to actually overthrow the system.

Relentless propaganda on social and legacy medias funded by billionaires succeeded in creating the most overtly pro-billionaire government ever.

They are now giving themselves massive tax cuts, implementing austerity and straight up picking in the treasury, and a lot of Americans are still defending them.

I think it's more that war has a tendency to literally destroy capital which is effectively a tax on the rich. When factories get bombed, factory owners lose out more than people who don't own factories.

War is horrible but it historically has at least been somewhat of an economic equalizer.

One of the real tragedies of the pandemic was that it turned that upside down. The virus didn't touch capital but destroyed humans, and the humans hit the worst were those in "essential" but low-paying jobs who couldn't socially isolate. The effect was that the pandemic increased economic inequality.

The humans worst hit were by far the elderly, and the elderly tend to have more assets than the young in industrialized countries.

Among working-age people, lower-paid "essential" workers were exposed to more risk, but by a significant margin, old people are the ones who died more.

Yes, the wide majority of economic data suggests this.

"Billionare" is not a word which should exist.

"Everything feels increasingly like a scam," she said. "Not only are grocery prices going up, but it's like everything has a fee and a surcharge. And I think that anger is put out at government."

Because that's a really strange way to look at it.

(* driven largely by increased regulation, unionization, etc... all the dirty words for modern conservatives)

No that is not my argument really.

Thanks for agreeing with me, kubb.

No, you did way worse that that.

The Jungle led to an era of reform over nearly a century in which laissez faire and caveat emptor were displaced, largely to positive results, by appropriate regulation.

That regulatory turn had been opposed, increasingly dismantled since the Reagan administration, and in the past month and some has been outright dynamited. The consequences are beginning to show.

If that is your argument, it would benefit by more precise communication.

She realized prices are going up just now?

I've long wondered why so many economists get inequality so incredibly wrong without any hint of self-awareness whatsoever, and the answer (in part 3 of that series) was mind-blowing. So, so well put together.

I won't give the spoilers here, but do watch it. It's an experience.

Where did the poor get their dimes in the first place?

Are you attempting to make a “they provide jobs” argument? Because they wouldn’t if they didn’t have to. Jobs are an unwanted byproduct of a successful business.

I think you know at least some of the reasons Gabe. There is a series of filters: intelligence, early skill development, a supportive environment, elite networking, risk tolerance, strong vision, perfect market timing, and a business model benefiting from network effects in a market that can only sustain a few winners.

This list might be incomplete. Would you like to supplement it, or do you prefer to continue with the socratic method? I'd like if you did the former, because the latter comes across as arrogant and condescending.

Success depends on some combination of hard work / talent / luck. You can have an extreme amount of all three and get an extreme outcome like being a billionaire, you can have moderate amounts of 2 / 3 and still be quite well off. You can have extreme amounts of one and be successful from very little.

Access to resources helps, obviously, but it is neither necessary nor sufficient.

To your original question about the wealth transfer, this isn't just the rich selling their subscription services to the poor or something like that. It's a much broader subject.

Some ways in which it can happen include inflation eroding wages while increasing asset values, high-interest debt, tax loopholes favoring capital over labor, financialization driving up costs of essentials, government bailouts benefiting corporations, privatization shifting public assets into private hands.

You'll probably agree that some of these things have been happening for decades, and some people want to accelerate the rate at which they're happening.

To claim that it’s not happening is not believable. Why wouldn’t they protect and expand their wealth and power at the expense of the serfs if nobody is stopping them?

Things that can be produced with machines rather than labor have become more affordable over time. Electronics, travel, clothes, and even food are cheaper than they used to be relative to wages. Then there are fields like education, childcare, and construction, which have not seen substantial productivity gains. The prices of their outputs can be expected to rise at the same rate as wages. (And then there is healthcare, which is complicated.)

But what has actually happened that increased housing costs have eaten the productivity gains for many people. Largely because of deliberate policy. Desirable areas often discourage new construction. When new construction is allowed, they prioritize single-family homes. And if really pressed, rental complexes.

As a rule of thumb, if you can afford to rent, you can afford to buy. If you expect to stay longer than a couple of years, you should buy. But in many places, if you can't afford a large home, you have to rent a small apartment. Because there is a shortage of small condos to buy. If the units available for purchase grow larger while the price per square foot grows at the same rate as wages, housing becomes less affordable.

https://archive.is/DguLm

I too was the best trader in the world when I got some skittles from my friend in the playground for free and sold them to another kid for a dollar making an infinity percent profit, but I didn’t feel the need to make a YouTube career out of it.

The oddity is that it has taken so long for them to find YouTube.

Felt like he's working out his problems on YouTube rather than therapy (after first trying to in a trading career). I really dislike his (and most progressive's) narrative that others are distinctly out to get you. It shrouds the real complex machinery, and papers it over with intent. Which impedes meaningful progress i think.

I've only heard of him because of this sort of Hacker News comments, and my general impression is that he is usually so off the mark that it is hard to have relevant conversations.

He makes money selling books and having an Youtube channel.

The universal dismay of humanity is that we actually built and held onto Democracy for a time.

Not perfectly, but better than suffering any dictatorship by "royalty" and oligarchs.

The transnational petroleum business was never going to go quietly into energy decline. Its component interests are flexing their influence.

It blows my mind why pension funds continue to invest any money at all in PE and Hedge Funds. It's a straight up wealth transfer from the working class to the investor class. States should pass max fee laws for their own pension fund allocations.

> Gini Index: https://en.wikipedia.org/wiki/Gini_coefficient

Find 1980 on this chart of wealth inequality in the US:

> GINI Index for the United States: https://fred.stlouisfed.org/series/SIPOVGINIUSA

Are there additional measures of wealth inequality?

World Inequality Database: https://en.wikipedia.org/wiki/World_Inequality_Database

USA!: https://wid.world/country/usa/

Economic inequality: https://en.wikipedia.org/wiki/Economic_inequality :

> Economic inequality is an umbrella term for a) income inequality or distribution of income (how the total sum of money paid to people is distributed among them), b) wealth inequality or distribution of wealth (how the total sum of wealth owned by people is distributed among the owners), and c) consumption inequality (how the total sum of money spent by people is distributed among the spenders).

What we have is a social crisis that billionaire class used to exploit the nation for classist gains, with the collateral effect of damaging the nations memory, identity and values.

By definition, the poor have almost no money to transfer.

Wouldn't you have to transfer from the middle class - which is shrinking in relative terms?

The poor have never had anything and still largely have nothing. It is literally in the definition.

I don't see how it's possible to enrich yourself (when the amount you need to grow by even small percentages is enormous) from a class with nothing to take.

And for those who will say, "Then the government should just build more houses", let me point out that we might run out of space before the appetite for real estate investment dies out.

The people who are ACTUALLY poor, don't have such things.

It's very common for people living in traditional working-class neighbourhoods to own a house and suddenly become paper rich when gentrification happens (e.g. Venice Beach in LA). They might find themselves in a situation where, in theory, they have a lot of wealth from the house but don't participate in the economy at the same level.

There are homeless people.

People who are barely able to rent a room in a crack house.

You are NOT POOR if you own a single family house in Englewood. End of discussion. Sorry.

Sell your house and live off the annuity for life at > median income after taxes in perpetuity. If you don't, there is literally no excuse for your situation other than your own choosing.

What's different here - that is critical - the actual poor HAVE NO CHOICES.

IMO the main thing they extract from the working poor is time - what they're stealing is the excess value between their labor and the value is creates, and technology has made it easy to do this at a massive scale. So it's less $1 from each person, it's 8 hours per day from a million people makes 1 person a billionaire.

For one, there aren't 100m poor people in the US. Not even close.

Second, billionaires have almost $7T in wealth - the top .1% are at about ~$20T.

They didn't get any meaningful percentage of that by taking pennies off of 45M. You'd need to take thousands. And they just don't have it. That's almost $450k per "poor" person.

That's more than the median HH wealth in the US.

If you look at the "actual poor" - you're likely looking >$1M per person.

You simply cannot "steal" that from the "poor" (who have almost nothing to steal, by definition).

Even if you amortize that over decades - it is just not how it happened.

This is just not true.

At least in the U.S., people of all income tiers have seen their incomes grow[0] while their working hours shrunk[1].

Inequality is a problem in itself, but equating unequal gains with "transferring money from the poor" seems like bad faith.

[0] - https://www.pewresearch.org/race-and-ethnicity/2024/05/31/th...

[1] - https://ourworldindata.org/grapher/annual-working-hours-per-...

[0]: https://ourworldindata.org/explorers/inequality?tab=chart&Da...

The person I responded to suggested that only the rich saw income growth, and that they were achieving this by taking from the poor, which is wrong.

Income growth in real dollars had been stagnant since the late 1970s for most deciles.

No wonder you guys constantly post about unhappiness. You are obsessed with keeping up with the Joneses.

Much more joy if you instead care only about absolute living standards. My life has improved a lot and if Jeff Bezos appears before me and will make me 10x as wealthy if he is 100x I will gladly choose that.

We live as long as kings, with greater variety of food and drink, greater variety of entertainment, and big comfortable houses. I'd take this trade 10/10 times.

Yes if the demands on our personal resources (inc hours, energy, cognition) far outstrip our quality of life gains.

Me (gen x) vs my parents (silent gen): Parenting time went from a few hours per week to 24/7 adulting while kids growth resources (free range+adult free) was nearly eradicated.

My parents had tons of leisure time. I had none.

Mundane activities are unimaginably complicated now - needs that once had a couple of factors to consider now has dozens of compounding factors, each with their own subgroups to work through.

Consumer choices are flooded with bad options; long research is needed to avoid the never-ending line of traps.

> We live as long as kings, with greater variety of food and drink, greater variety of entertainment, and big comfortable houses.

What's left out of the "Live Better Than Kings" spiel is that gains turn into mandates (electricity, internet). They're required to meet basic needs like housing and not having kids taken away.

> I'd take this trade 10/10 times.

Draw up the entire list of factors that a poor American has to work through. Drop a king into that life for a month and have them report back.

You can also have lots of leisure time. That's a choice. I do.

You could drop me into the life of a poor American, and a month later I wouldn't be one. I know that's true because I came to San Francisco with nothing in my bank account and a $10/day bed-on-a-couch paid for for 2 weeks.

At first glance, this declaration seems ignorant. You plainly lack the details of my parenting years and they are fully required to make that judgment.

In context, it looks like hubris.

But then again you implicitly validated my claims (24/7 adulting due to free range loss); you reassigned the cause of kids adult-free time.

With acceptance of the demands on modern parents' time, your declaration appears to be self-contradictory.

> You could drop me into the life of a poor American, and a month later I wouldn't be one.

This bit seems to confirm my hubris suspicions and I'm a bit divided on which way to respond. I could be less judgy, given my own years of low-wisdom confidence or I could jump right into exampling ignorance that leads to poor assumptions about fortune and poverty.

In the interest of time, I'll roll it all together.

Below is what actual lives look like.

I'll presume you're above average at opportunity farming and pulling rabbits from hats. I'll further assume your desire to excel includes being a high quality parent and spouse.

You are now married and you have children in lower+upper grades. How many children you have is tied to your confidence in providing for them.

Your spouse is a few years into the medical condition that converted her from supportive parent to +3 children in time, +many children in expenses - which are eating thru your single-income-savings faster than you can add to them.

You keep switching employers because they unexpectedly go under (exec scandal), are bought out+resized or are moved overseas. Or you are self-employed and your product/service keeps not landing where it is clearly needed.

Nevertheless you are confident that your will+skill is enough to see you through. You know your efforts will eventually yield result. Those critical uncontrollable factors (~luck) will eventually turn in your favor!

In the mean time your owned home has succumbed to an event (radon/extreme weather/sinkhole/whatever) and isn't habitable so you are forced to take on a 2nd housing expense while the insurance begins an ordeal that will take a decade to resolve.

Once you+wife+kids are relocated, your wife's medical insurance company pulls out of the market, mid-treatment. You are left scrambling to match a new provider to the full suite of options she needs.

This is when you develop Menieres disease. The tinnitus is annoying but the recurring vertigo takes you out of play for a day at a time. It's a permanent addition to your life. Your employer is understanding - at first.

Parenting during vertigo attacks is tough. Doubly so, given that your own parents died before you married. And since your job took you away from your one functional sibling, you don't have a lot of support.

Your kids still need to be transported to their before-school private classes, to their schools, home from schools, to their after school activities and to the other events that are a poor (but best available) substitute for their eradicated free range/time. They need help with homework. They need routine medical visits and not so routine visits for your oldest who has an ongoing condition of their own.

FF to 20y later and your luck hasn't turned yet. At least not nearly enough for you to get a real footing. You are poor. You're over 50 in tech so good luck finding employment even without all the baggage.

Throughout the 20ys you had a daily choice to care for your family at the level they need or invest time in trying to craft opportunities that would fit your medically-adjusted lifestyle.

Over that 20ys, you more+more opted to not neglect your family's needs. You reduced your opportunity-gardening to being opportunity-aware. You saw some but they required an amount of time that was impossible to budget properly. Or at least that became clear after you jumped into them for a while.

> You can also have lots of leisure time. That's a choice. I do.

Life can and does take that choice away. It's a pure spin of the wheel whether your number is the one that comes up.

So for these people it's bad luck, sucks to be them. For your success, it's all hard work.

Meniere's is a placeholder illness; it was there to help frame the scenario. It is curious that you didn't understand that.

But okay. If it helps make the lives of others easier to understand, then please choose one of the other thousands of life-altering illnesses. How about Lupus? Or Trigeminal Neuralgia, Ataxia, Fibromyalgia, Gaucher's disease, schizophrenia, Guillain–Barré syndrome, Parkinson's, Lyme's disease - any debilitating illness you want.

Because that's what happens to people. Not all but certainly not a tiny minority.

Some people receive few enough challenges that their A-Game + luck is enough to secure a stable life. The countless others work with what they have and make the best that can be made from that.

No one, anywhere has a choice of whether or not the uncontrollable challenges of life will exceed their very best.

That doesn't stop me from saying that the distribution of wealth within the US economy is immoral, and detrimental to our politics, our health, our environment and more. And it doesn't stop other people from saying so either:

https://www.responsiblewealth.org/

Those folks are hardly obsessed with keeping up with anyone.

I'm glad that your life has "improved a lot". But that's not a reason to give up on fairness, decency and even just plain old self-interest. It's a better society for everyone if there's less inequality, even those at the top.

It's unsurprising that one conveniently draws the line at one's own wealth as decent and fair but it should also be unsurprising when others do the same with their own larger amounts.

The average Indian (the modal nationality in the world), as an example, must work 200 years to gain the wealth you did at the age of 33. Show us your commitment to fairness and decency. I am curious to see you achieve parity with him.

25+ years writing open source software. Will that do?

I'll leave you to fill in the rest of the story.

Flat out concluding that everyone can make their own happiness by just being open to a system that constrains many others along the way, feels like regressing not progressing.

https://www.aei.org/carpe-diem/chart-of-the-day-or-century-8...

> During the most recent 22.5-year period from January 2000 to June 2022, the CPI for All Items increased by 74.4% and the chart displays the relative price increases over that time period for 14 selected consumer goods and services, and for average hourly wages. Seven of those goods and services have increased more than the average inflation rate of 74.4%, led by huge increases in hospital services (+220%), college tuition (+178%), and college textbooks (+162%), followed by increases in medical care services (+130%), child care (+115%), food and beverages (82%) and housing (80%). Average hourly earnings have also increased more than average inflation since January 2000 — by nearly 100% — indicating that hourly wages have increased 25% more over the last two decades that the average increase in consumer prices.

> The other seven price series have been flat or have declined since January 2000, led by TVs (-97%), toys (-72%), computer software (-70.5%), and cell phone service (-41%). The CPI series for new cars, household furnishings (furniture, appliances, window coverings, lamps, dishes, etc.), and clothing have remained relatively flat for the last 22 years while average consumer prices increased by 74.4% and wages by 99.6%, although all three series (TVs, toys, and software) have

What kind of happiness demands billions of dollars? These things go both ways.

> No wonder you guys constantly post about unhappiness. You are obsessed with keeping up with the Joneses.

As opposed to the ultrarich who have actively pursued this inequality? Curious, it consistently only goes one way in your mind.

> Much more joy if you instead care only about absolute living standards. My life has improved a lot and if Jeff Bezos appears before me and will make me 10x as wealthy if he is 100x I will gladly choose that.

Who said that Bezos could do that? Who said that wealth is created by the ultrarich? No one, but your mind seems to think so for some reason. Well, I’m sure you could find supposed evidence of it on X and the Washington Post, for whatever reason that might be.

> We live as long as kings, with greater variety of food and drink, greater variety of entertainment, and big comfortable houses. I'd take this trade 10/10 times.

So? This is a forum visited by high-earning US software engineers (that’s not me but a lot are). Not the kinds of people that the last four decades have hurt (the most). Which is why you get these surprise comments in these threads. “Woah guys, I’ve been reading these numbers lately and people are actually poor out there.”

No, I don’t think that it’s the Microsoft staff engineers that are personally mad about the state of things.

2. How have living expenses grown?

Unequal gains is the problem, and your intuition can help inform why: the 2023 dollar index used is based on what rate of inflation? CPI? RPI? Something else? Why is it that in 1970 a median income household could buy a home on a single income and raise a family (including sending kids to college), on a 2023-dollar income of $66k, but that's mostly not possible on $106k in actual 2023 for most households.

When you adjust for real buying power using a less favourable means of assessing inflation and taking into account housing costs more fully, I sense you'll find that the bottom two brackets are behind their 1970-adjusted counterparts, and the upper income bracket is significantly better off, especially if you then break that upper segment up a little into more categories.

And, without something happening to adjust this, the effect is going to just get worse and worse, and everyone knows it.

Obviously, if you give more weight to housing, you're going to get different results. But it would distort the actual change in expenditure.

My apologies for not knowing offhand everything that goes into the CPI, and not googling it for more context, I was just asking questions on the internet instead. I should've known better than to hope for learning something from my fellow humans.

As Adam Driver points out in Ferrari, "two objects cannot occupy the same place at the same time". A view some might find counterintuitive.

$1 in 1970 == $7.54 in 2022

That 1970 middle-classer would be making around $450k in 2022 dollars, which sounds insane, but I also know my parents had normal jobs and were able to buy a house shortly after getting out of college.

https://www.bls.gov/data/inflation_calculator.htm

(yes we all have more luxuries than back then, toys got cheaper, necessities exploded in cost)

The extreme wealth gap and corruption paired with the loss of virtue (integrity seems to hold very little social value these days) seems like a bad mix to me if you like stability, let alone shared prosperity. Moreover, the response to the United healthcare assassination showed us that a bunch of folks don't think there is justice left in the system. The reactions to covid were a stark example of how a huge swath of people not only won't lift a finger to help their fellow citizens but will actively oppose it and be offended by the suggestion itself. This year the purges of non-straights or non-whites from all positions (and even from some records!) began and we don't yet know where that will end. Politically we've spent this year alienating our allies and generally acting like bullies.

I'm worried we'll be in a war in 3.5 years (real or manufactured) and "need" to delay the next election for a while, "in the name of national security".

Who defines what is “fair”? If it’s people, people are imperfect AF and centralized planning economies tend to fail spectacularly.

I would agree that a system can be unfair, but what changes to the system are sustainable while still incentivizing risk-taking and achievement?

1. The poor don't have money to be transferred to the rich

2. The top 1% pay 40% of the Federal income taxes

3. Medicare, Medicaid, Education and Social Security are wealth transfers to the poor

The wealthy businessmen created their wealth, it was not transferred to them.

[0] researchgate.net/figure/US-Productivity-and-Hourly-Compensation-Source-Bureau-of-Labor-Statistics_fig1_270640833

Centralized systems are more efficient by definition, it’s why the public sector can seemingly magically multiply money where the private sector cannot.

In the past (centuries ago), it seems like people simply accepted other classes were better and they could never be their equals. That’s how you end up with royal families, etc.

So in the future, people will simply work to the bone, find whatever pleasures they can when possible, and maybe just not wake up ever again on some morning before their shift starts. They will live in small simple residential units mostly for sleep, eating, bathing and watching some content on a screen.

The rich will segregate themselves away to enjoy a finer life somewhere that they can be shielded from the plight of the poor.

This is what I've been struggling to articulate more succinctly since my college days, when I started really getting into macro-level systems analysis and long-term planning. Much of the Western world ceded pieces of its sovereignty to external entities without regard to the long-term consequences of said actions. Stuff like outsourcing domestic labor abroad, to countries like China (refining, manufacturing) or India (knowledge work) means those countries now have an outsized influence on domestic affairs that aren't easily clawed back. Ceding sovereignty of infrastructure (be it data centers, roads, hospitals, schools, etc) to private enterprise means those entities have dictatorial say over how those pieces of infrastructure are operated, maintained, and replaced.

In essence, the limited sovereignty the West retained was broadly centered around consumption and wealth, opposing ends of a larger economic system that are now grossly out of balance. It's at the point where there is no singular "silver bullet" to fix it, either. Taxing the wealthy will help, but absent meaningful reshoring of industry and jobs domestically, it won't actually right the economic ship. It's also not merely an American problem, but one largely affecting the neoliberal West that spent decades outsourcing, offshoring, contracting-out, and generally doing everything possible to min-max cost vs returns, quarter after quarter. I think the only country not substantially affected might be Germany, but there's still talk of automakers shuttering factories there in favor of using Chinese labor and shipping the vehicles back to save on costs.

We have created a global economy but without global regulation, which in turn has resulted in artificially depressed consumption prices (relative to actual local costs) and artificially increased wealth extraction through rampant exploitation. Absent a singular global currency and standard of living (which, let's be real is centuries away at the earliest), the only practical solution is a domestic rebuild of labor markets, supply chains, and industries, with a goal of refocusing national exports on what a country uniquely excels at rather than simply offshoring to whichever country has the optimal labor pool and exchange rate relative to your specific industry.

It's a hot mess to be sure, but not unsolvable. Reshoring industry gives us an opportunity to re-evaluate supply chains and resource management with a focus on closed-loops and renewables. Reshoring work will boost wages and living standards, which in turn will boost birth rates and economic growth. Diversifying the economy back into regions and localities will promote specialization and innovation, rather than the fad-copying of today. There's a lot of good to be had in facing the problem head-on rather than giving into fascist ideology and demagogues promoting "one easy trick" to fixing things, but all of it involves hard, honest work, which some folks will naturally be hostile toward.

Either way, we'll all find out together, I guess.

The fundamentals used to be closer to the Bible's. They shifted to subjectivity, nationalism, authoritarianism (unchecked), and capitalism. Then, new groups around 1900 shifted to more subjectivity and atheism. Add pleasure-driven culture from the sequel revolution onward. Then, evolution, intersectionality, and feelings over facts.

As I look at these, I see a dangerous combo of not seeing individuals with inherent worth, thinking people are like animals, believe/do whatever without long term consequences, and do what maximizes selfish gain, money or pleasure. Our problems are inevitable under that mindset.

Let's look at specific examples in your post. The rich should take more wealth for themselves since that's maximizing selfish gain. The poor (or scheming) should also try to take their wealth by theft or welfare. If people get hurt, it's an unavoidable problem in a workd of conflict where the fittest survive. No objective morals even exist.

Fortunately, we're seeing a growing rejection of those values leading to life transformations. That's a huge part of Trump getting elected since his policies are appealing to such people. The Spirit of Christ is also causing revivals across the country with thousands to tens of thousands gathered trying to change at the core. Inner change leads to outward effects.

Right now, our college students are taught conflict theory, favoring specific geoups, subjectivism, work against our natural design no matter the losses, and pleasure/money/intellect are god.

What will happen when college students instead are taught objective truth, doing what's right above all, building on our natural design, loving others with sacrifices made, helping those in need onto their feet, unity despite our differences, and building companies that are profitable within those virtues?

I think the results will be beautiful. I've already seen places like that on a small scale. For big ones, Chic-fil-A and Hobby Lobby are pretty close. Part of God's design is some people will be rich and eventually generous. So, that won't change in most places.

How does this work? Where do the poor get wealth, on a continual basis, for the rich to take? If the poor have so little, and have had their fraction of the wealth taken by the rich for three decades, assuming things have got worse for the poor since the end of the eighties, where’s all this wealth coming from?

I’m not singling out here, this is a question for the general audience.

What I like about NFL, NBA, MLB etc is that they will tweek the rules to make things competitive so the rich don’t get too rich and win it all too much. We should have a “DOGE” system for rule tweeting to even things out once in a while

no amount of graffiti and stickers will change what the numbers have always said since the days of theocracy and the deluge

luigi sadly is not a revolutionary but a substitute for the car crash in Oklahoma :)

Maybe an alternative is we'll figure out how to change and fix these corrupt systems as more and more people wake up to how bad they really are.

   Estimating the Marginal Propensity to Consume Using

From https://www.bostonfed.org/-/media/Documents/Workingpapers/PD... Recent studies of economic inequality almost always separately examine income, consumption, and wealth inequality and, hence, miss the important synergy among the three measures explicit in the life-cycle budget constraint. Using Panel Study of Income Dynamics data from 1999 through 2013, we examine whether these changes are more dramatic at higher or lower levels of wealth and find that the marginal propensity to consume is lower at higher wealth quintiles. This suggests that low-wealth households cannot smooth consumption as much as other households do, which further implies that increasing wealth inequality likely reduces aggregate consumption and limits economic growth.