The interesting question is who will make better use of the dollars, or indeed microsoft shares. And the available evidence is that the poor make much more efficient use of their money than the rich (indeed on some level they have to, because someone 1000x as rich as me certainly isn't getting 1000x the value from their money). They spend money rather than hoarding it, improving the economy, and each marginal dollar improves their lives much more than it would for a rich person.
It seems noteworthy to point out in the GP in how he expresses class warfare. When this is invoked (here and elsewhere) it's always the poor who are committing "class warfare" against the rich. When in reality, with evidence abound throughout history it is the rich who actually commit class warfare on a continuous basis against everyone else. Even HN is not immune to this propaganda.
"...growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don't work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)"
The Age of Diminished Expectations, 1990, p. 24.
http://lhrgateway.nu.edu.pk/articles/Krugman_Age_of_Diminish...
None of the facts he stated have changed. The poor have not started working. And citing the growth in inequality since the 1990s only makes his point about dollar gains/losses more stark.
There’s an implicit notion here that we’re waiting for the poor to start working. Perhaps it's coincidental, but I’d like to call out a possible conflation, because it's something I've seen expressed from time to time on Hacker News, and I think it perpetuates erroneous beliefs about poverty.
Krugman here is talking about the very poor; this is a relative statement, and it is almost a tautology to say that most of them don't work. (Rather, one should be quite scandalized that anyone who works could still be very poor.) Whatever the merit or relevance of his point may be, he’s not trying to characterize the conditions of poverty. He's trying to express the scale of the wealth disparity between rich and poor, and point out that a simple model of rent-seeking cannot account for it.
‘Poverty’ itself is a somewhat relative term, but only somewhat. People recognize hardship when they experience it, and a plateau in the relation between happiness and wealth has been identified. At some point down the sloping portion of that relation, we have to recognize poverty.
I do not think that any scholar has disputed that there are a significant number of Americans who work as much as they can, willingly, and yet live in poverty. One can argue whether most of the impoverished have work, but one cannot dismiss those that do. It is inhumane and does not honour their effort.
Maybe they are stupid people, with bad lives, who make bad decisions. Let’s allow every secret prejudice we have, just so long as we do not ignore that they work and go wanting for things we regard as essential. It is not by choice nor lack of action that they experience hardship. There is no more justice to their income than there is justice in the grades of a bell curve. They cannot work any harder or smarter than they are working already.
>citing the growth in inequality since the 1990s only makes [Krugman's (1990)] point about dollar gains/losses more stark.
Actually, nothing is different nowadays as from long ago in history: the class-warfare is still the rich (capital) waging class-warfare on the poor (labor). Krugman, whom you quote, realizes this as well and rescinded his comments from that time:
"I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications. But I think we’d better start paying attention to those implications."[1]
"The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense."[2]
[1] http://krugman.blogs.nytimes.com/2012/12/08/rise-of-the-robo...
[2] http://www.nytimes.com/2012/12/10/opinion/krugman-robots-and...
The mood affiliation is different, certainly. But I'm citing arguments, not tone.
Further, most graphs of the sort you mention compare mean productivity (you can't measure any other kind in aggregate) to median income, which is a statistical fallacy.
If you have data suggesting the poor work more than in the past, please present it.
Not true in 1990. Very true today. The Bush tax cuts inaugurated the current era of class warfare. I'd say 2010 is when it really got going.
Again, people are going to have a hard time reading this as a morally neutral statement, but the fact that taxes exist depress the value of assets on the market. It's already priced in to the value of the asset, so it doesn't look like something that is "occurring", but it's still there. This is a morally neutral statement, and yes, taxes can fund things of value that can bring wealth to the society at large, etc etc, but all of that adds to the truth, it does not somehow "undo" this fact.
Isn't the net effect what people are interested in? If you impose taxes and then do nothing useful with the money, sure, that's an easy negative. And if you tax only unproductive private-sector assets and use them for public goods, that's an easy positive. The real-world situation is that you typically tax assets or income that are at least partly productive, and use them to produce things that are at least partly valuable. You come out ahead if the things you do with the tax money are better than what would've happened absent taxation, for some value of better.
The contention of people who support high taxation (as most of us in Denmark do) is that the net value is positive, and we are therefore overall better off and more prosperous than we'd be if we did not have taxation, or had much lower taxation. Partly this is because of a view that certain systemic problems can be much more efficiently solved by the public sector: it's difficult to imagine the private sector producing Copenhagen's public transit system, or the Danish healthcare system, especially for the same money. And partly it's because the prosperity we enjoy seems to generally require a backdrop of "things working well" that the state partly provides: good transit, low crime, few homeless people, safe buildings, functioning court system, educated populace, etc.
The industrial revolution was bankrolled by extreme government spending at draconian (compared to present) tax rates during the World Wars. Every technological and scientific breakthrough of the last hundred years was bankrolled by the state either directly or indirectly. This fact is lost on a generation that takes all of this for granted, because they naively believe that progress is the natural state of civilization.
Today, a president like Eisenhower would be called a hopeless bleeding heart liberal. Who cares that the USA became a dominant scientific, technological and economic powerhouse under administrations like his?
History is the best teacher. Personally, I will watch the disintegration of these naive "meritocratic" policies with great interest in the coming years. Who needs public investment in infrastructure, science or healthcare?
as a guy who's modeled and built economies for mmos, i can confidently say the more movement and activity in your economy, the healthier your economy is. consistent, steady growth and activity, rather than spikes (unbridled liquidity events) and valleys (accumulation stagnation), is the most desirable mode.
for a real world microcosm view, just look at the last six months of bitcoin activity. who on earth would consider that healthy?
There seems to be no quick way to liquidate that much wealth without destroying some in the process.
That's not actually wealth that exists being destroyed, that's a poor measure of the wealth represented by a stockpile being revealed to be poor. The quoted market price of a unit (which is basically the marginal price of the last/next unit sold) times units held is not an accurate measure of the total value (wealth) represented by a stockpile of a marketable asset.
Politics ruins another mind.
Groups who capitalise phrases like The People traditionally want to redistribute control over the means of production, ie. they would have community ownership over microsoft itself. There aren't any socialist revolutionaries who want to break open the bank vaults and just start handing out cash, except in the popular imagination.
The other side of it, the one that's actually practiced in europe etc, is income redistribution, and that's different again.
Politics ruins another mind.
Taxes are a way to put wealth on an logarithmic scale instead of an exponential one. We don't want to forcibly take money from rich people, we want to make it harder for them to make more of it. The point of the post its that wealth is related to having something that can be traded for value. Higher taxes (potentially to support a Basic Income) would leave the rich with their ”wealth” while taking only money from them, hopefully leveling the playing field for everyone else.
http://www.givedirectly.org/pdf/2012AnnualReport.pdf
These purchases are money generating assets. I think you touch on an important point though. It's much easier for a random individual to turn money into a money generating asset than it is for them to take a random money generating asset (MSFT stock) and turn it into cash. Ownership of a money generating asset requires domain knowledge, whereas you can choose to spend money where you already have domain knowledge.
Actually, no. They want to feed their families, period.
Dumping a lot of money on people's hand to buy food doesn't necessarily solve the issue because spending = inflation.
Spending does not equal inflation.
Increased money available to the consumers who have non-zero demand for a set of goods can reasonably be expected, under most circumstances, to increase the market clearing unit price for the goods -- but with most reasonable sets of assumptions the relative increase in unit price will be less than the relative increase in available funds to consumers, and redistributing money from one group of people to another will increase the latter groups purchasing power, decrease the former groups purchasing power, and increase the number of units sold of goods and services which the latter group has a greater marginal propensity to purchase than the former.
It does when it's a nanny state telling people to spend.
First, taxation is not redistribution of wealth. In practice, it's always a lot heavier on the middle class than on the elite, the later have better means to avoid taxation. Second, this money is never just handed over to the poor. Here in Brazil, for instance, it's used to back credit programs by state-owned banks, and interest rates are high.
If you want to see the result of this politic in practice instead of theory, just fly down here. The poor are buying more and drowning more in debt because wages still don't follow prices, and still have poor access to education and health. Heavy taxation and 7% "official" anual inflation rate (the real one is double that) erodes away the middle-class purchasing power. All that while banks break anual profit records.
Then the president makes an announcement claiming there aren't poor people in Brazil anymore. Mission accomplished right? They successfully moved the population from unskilled poor people to unskilled indebted people. Screw that.
This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered.
> Second, this money is never just handed over to the poor.
Concrete proposals to do just that (e.g., Unconditional Basic Income) have been made.
> Here in Brazil, for instance, it's used to back credit programs by state-owned banks.
And there might be all kinds of valid critiques of that specific use of tax funds, but it would be fallacious to conclude from the validity of those critiques of that specific use that using tax as part of a policy to redistribute economic returns from the wealthy to the poor is universally improper.
What do you mean? The argument is my entire comment explaining what's happening here.
Brazil also has what would be equivalent to a basic income, it's called "Bolsa Família" and guarantees a certain income for families based on the number of members. In practice it has been used to manipulate votes, every election there are rumors the program could end so poor people keep electing the same (already proven corrupt) party that championed the program.
In theory those ideas are beautiful, but I'm not seeing it work in practice, and I'm cynical it can ever be.
No, it doesn't.
> it's called "Bolsa Família" and guarantees a certain income for families based on the number of members
Bolsa Família is a combination of a variety of traditional social welfare programs of the type that Basic Income is laid out as an alternative to, not an equivalent of Basic Income; it features a variety of means-tested and other qualification-based components. The part you seem to be referring to is a benefit with a fixed cash value per vaccinated child attending school to families whose total family income is below a certain threshold. It involves both means-testing (the family income threshold to qualify) and behavioral testing (based on vaccination status and school attendance) of exactly the type that Basic Income is laid out in opposition to.
States are not magic. Economics does not suddenly turn into a zero-sum game just because consumers are spending food stamp money instead of "real money" from jobs.
A government powerful enough to distribute all assets is super powerful, and those that control this government(the party) have all the power.
Having all the power, they have all the material resources for them, their families and friends, even when they don't have "money". They want a car, they ask for a car with any excuse and the day after they have the car, they want to travel and so on.
The rest of the society live in conditions of near slavery. They could ask for a car, as they are "equal", but it takes years to come, and when it comes, it is a horrible car you could not choose anything about.
Also corruption is levels of magnitude bigger than anything in something near capitalistic(even paying more than 40% to the state) societies. If your wife is beautiful and the people of the party wants to fuck with her, they will blackmail her with the working conditions of her family. The same party that controls the media and justice and the only company that hires people.
That was the reason my family emigrated, all at once.
Wait, you mean they have homes? As in, stable places to live that don't put them in debt peonage their whole lives?
Wow, that's a pretty big rise in their standard of living versus current-day neoliberal capitalism ;-).
The only way to arrive at an opinion like that is lack of perspective.
Some people say that living as humans in the wild is preferable to "debt slavery" or "peonage" or whatever the leftists-word-du-jour is. Would you agree with them ? Can you see that you may be suffering from a similar delusion ?
If you insist on confiscating Bill Gates' wealth, maybe you could hold the stock as an income-generating asset and redistribute the dividends.
Also, if the rich are sitting on wealth which loses values as soon as it is spent, perhaps quite a lot of the "wealth" was never really there in the first place? (although there we are perhaps getting into philosophy)
Really against wealth redistribution? Talk about a bottom up approach to tweaking our economy instead of trickle down...
50 years ago, when you said "the rich", it would mean descendants of Carnegie, Hersey, or other big name company builders who created monopolies in the late 1800s and early 1900s. The majority of "the rich" were lawyers and doctors with Ivy League degrees and long pedigrees.
Today's rich are Bill Gates, Mark Zuckerberg, Warren Buffet, Gabe Newell, Elon Musk. While you'd call them perhaps middle class, or upper middle class (Gates and Zuckerberg went to Harvard afterall), their empires are clearly self-built and self-sustained. These people did not inherit their riches like "the old rich" did.
The "new rich" suffer from boom and bust cycles. 20% of Americans will find themselves in the position of "New Rich" for at least a year, before their self-built empire falls back down to middle-class or lower status.
http://www.dallasnews.com/business/business-headlines/201312...
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I admit... this is partly because college tuition rates were much much lower for Generation X / Baby Boomers than it is today. Government programs for education were never stronger than in those years. Today's young face rising tuition rates as education costs are cut... and for-profit schools have started up to more or less steal money from today's youth.
Sorry, still plenty of rich people who earn their money the old fashion way... They inherited it.
I wasn't even talking about individuals but a system that rewards people who already have wealth over the working poor and middle class. Worse, now with the "Citizens United" ruling we are creating a plutocracy that our Founding Fathers feared more then anything.
Right now, when Bill Gates wants to use some of his wealth that is tied up in Microsoft stock, he has to sell it. When he sells it, he pays a capital gains tax of 15%. If we increase that tax, Bill gets less money and more of it goes to the government to be redistributed according to the wishes of the people (in theory!). There's no question of what the government is going to do with a bunch of stock.
Yes, technically the government is inserting itself into the transaction and seizing some of the value. But that's what all taxes do.
The government is also the party that is responsible for enforcing the terms of the transaction (via the justice system) if one party where to try to defraud the other. In effect it's more like a transaction fee.
I agree that in theory it would be awesome if wealth redistribution worked the way we think it might. I'd love to live in a Trekkie world where everybody seems to have all needs and wants met. In reality, redistribution is very much like throwing money away, considering the long-term impact of such. I think people are mostly either wealth generators or destroyers. Money in the hands of a benevolent generator has the possibility of benefiting many (even though in practice only a few wealth generators actually benefit the average person). In the hands of a destroyer it benefits only them, and only for a short time. Trickle down sucks, but it might be the most realistic option.
That said, while redistribution doesn't work, getting rid of tax shelters and deductions for the wealthy would.
That's a testable hypothesis, and as it turns out it's already been refuted: research has shown that dollar-for-dollar, tax cuts are a net drag on the economy, and food stamps deliver the biggest bang for buck economic stimulus. Even investments in infrastructure don't deliver as much of a GDP boost as food stamps. Giving that $100 to a wealthy person is one of the least productive things you can do with it.
Unfortunately for people who read this as a strong endorsement for general redistribution, it is indeed the "biggest bang" and once you have filled someone's belly (and generally filled in the lower Maslow levels), you no longer have such simple options to take a bit of wealth from one and give a lot of wealth to another. At the margins that's not the choice we face; usually it looks more like my original post.
I am a libertarian, but I greatly value the social safety net. It is an incredible, incredible source of societal wealth. The problem is that there's no way to scale the safety net up beyond being a safety net, because again let me emphasize that would be awesome, but it just doesn't work.
There has been a lot of thought and data on this already. The answer is in - giving money to poor people is much "better" as the money travels much further. They buy the "necessities of life" quite quickly, and the money changes hands several times, benefiting other (mostly poor) people along the way. Wheras in the hands of a rich person the money is unlikely to do that. It mostly goes into an investment as there are no necessities of life urgently needed. (lower Marginal Propensity to Consume http://en.wikipedia.org/wiki/Marginal_propensity_to_consume#... )
http://www.vosizneias.com/36051/2009/08/02/washington-food-s...
>I'm not really a fan of trickle-down economics, but I think it's more realistic
It is not. trickle-down economics has been tried and it failed. It is not a valid model of reality.
http://en.wikipedia.org/wiki/Trickle-down_economics#Criticis...
https://www.google.com/search?q=trickle+down+economics+doesn...
This was just a guttural post, I'll probably need to re collect my thoughts and edit this or post something again more in line with the op
> Wealth, more evenly distributed, would give more people a greater chance at, in turn, creating more wealth.
Yes and no. Look at lottery winners (or other windfall recipients) as an example that the average person cannot create wealth. Some people are able to create wealth and most are not. Let's say Bill Gates does indeed give every person that shares his picture on Facebook $5000 dollars. Most people will waste it, some will use it to pay down debt, and a small percentage will create wealth from it. I think there are two groups that could potentially benefit the most from this. Upper lower class folks can easily put this money toward education and skills that would have a net positive. Upper middle class folks might potentially start new businesses and markets which have a definite impact.
If people have a problem with current wealth distribution, there is a very easy (not easy in the sense of doing it, rather in understanding it) way to reallocate it - get out of debt. Debt is one of the main ways rich people get richer, by reallocating money from the poor to the rich. Getting rid of their main source of income would force them to invest in real, tangible businesses that solve real problems (because presumably without debt, nobody is buying a new TV yearly anymore). I believe debt is the primary source of economic stratification right now, not income.
> In terms of large corporations, I do think it would be more beneficial to split the money more evenly amongst the people who helped create the wealth.
Amen to this. This culture where CEOs earn 20x the average employee salary is screwed up. Also, it would be beneficial if they didn't own every politician ever created, but that's another story.
A tornado lead to Scrooge losing all his money to everyone. This lead to everyone leaving their job and going on vacation. Soon, goods became scarce, so they had to turn to Scrooge who were selling produce from his farm at inflation-level prices. Soon everything returned to its usual equilibrium.
(Scrooge owns a lot of businesses, anyway, so that would be another avenue for him to recoup his losses.)
It also perpetuates the right-wing myth/prejudice that poor people are lazy and can't handle larger amounts of money than they "need", which has been proven wrong repeatedly.
You automatically take me for a fool when all I did was present the story, not my interpretation of it. Fiction can be interpreted in many different ways, independent of the author. I think the story is saying that there is more to wealth than just money; that you can't just throw money at things or people and magically get the equivalent amount of wealth.
How is it about power? Scrooge recouped his money by just working on a farm and selling the produce. If it was about power and/or assets, he would have recouped it through his businesses (of which he owns a considerable amount of), as I hinted at in my post.
> It also perpetuates the right-wing myth/prejudice that poor people are lazy and can't handle larger amounts of money than they "need", which has been proven wrong repeatedly.
Maybe it does. I think it has more to do with the fact that you can't just inject money (or redistribute it) into an economic system that is more-or-less closed (there is a more or less fixed amount of labour in the system and so on) and get the desired effect. Without some restructuring of the system, you're probably going to get a lot of undesirable effects like inflation, which might just return you to where you were (or leave you in a worse state). Scrooge had been hoarding all of that money for decades... to put it back into the system has the same effect as to print money.
If the story was motivated by some right-wing philosophies, I think it was more motivated by the simplistic model of human motivation for wealth and and incentives (everyone immediately goes on vacation when they have met a windfall). Scrooge is more motivated by money itself than wealth so he was able to buckle down and get his money back.
But I'm not an economist so my opinions might be wrong. Nonetheless I don't consider myself a "right-wing", which is a rather vague concept in this discussion since you're from Brazil and I'm from Norway.
The whole economy could go bust and society revert to bartering, yet Scrooge would still come out ahead because he owns the means of production (the farm/businesses) - assuming he has the power to uphold his ownership either by force or politics.
Re. motivation, I wasn't implying it's intentional, cultural/social context is carried into everything we do. An alternative ending would have people starting their own businesses, producing value and growing the economy as a whole. If written by a norwegian, maybe Scrooge would have found oil within the city borders and distributed the proceeds to all residents :)
Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wealth confiscated for the good of The People. For simplicity, let's assume that 100% of his wealth is in Microsoft stock. So, The People United take all of his stuff. What do they get? Well, they don't several billion dollars. They get "several billion dollar's worth" of Microsoft stock. Well... that didn't accomplish much. We can't clothe or feed the people Microsoft stock. We need to liquidate it into money to get anywhere, and The People aren't too happy about the filthy capitalist stench of suddenly owning that much stock anyhow, so they immediately sell it all. Of course, dumping all that stock on the market at once immediately sends the price plunging; depending on how foolish The People in terms of wanting to be rid of it immediately it could well plunge to nearly zero. The People destroyed billions of dollars of wealth to obtain probably hundreds of millions of dollars, and quite possibly destroyed Microsoft in the process, hardly a net gain. The stock was as valuable as it was partially because it was in Bill Gates' hands.
In practice, you can't just "claw" wealth from the wealthy and hand it to "the poor" and have the effect you're expecting. You can certainly destroy large amounts of wealth, and yes, the poor will come away with something, but it's far less efficient than the "it's all just money" model leads you to believe. You aren't taking "$100 dollars" away from the wealthy and giving "$100 dollars" to the poor; at scale, you're moving a $100 asset out of the hands of "the wealthy" and into the hands of "the poor", and that's not going to produce the results you were looking for. And again, let me emphasize, it does work to an extent, it just doesn't work as well as you might naively think.
Politics being what they are, people are going to assume that I'm a fan of this truth because I'm saying it. I'm not. It would actually be really cool if redistribution worked as easily as people thought it does! I mean, seriously, awesome. How wonderful it would be if equality could be engineered so trivially! And let me be clear, no sarcasm there. However, it is still true, and it is something we ignore at our own peril. Also, does that mean all our social engineering schemes are hopeless? Well, no, again regardless of whether I'm a fan of them or not, but it does mean that, again, it's harder than we'd like to produce the results we're looking for, and it's a lot easier to overestimate the benefit to the poor and underestimate the damage to the wealthy and the general societal wealth (and even if you don't really care about the wealthy, you ought to care about the general societal wealth) that such schemes can have.