There is a popular political perspective that rules on campus these days that treats wealth as something that just magically exists and is simply "redistributed" by one means or another like, say, a phase change in physics where no magnetism/charge/energy/etc. is ever created or consumed. I waited for a point in their model where people actually produced wealth and consumed it, made something or ate it, in addition to redistributing it. Not part of the model.
And the idea that things have a "true" value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the "redistribution" of bread and shoes, but it was not part of the model.
But their model (which they claim "reproduces inequality with unprecedented accuracy") could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.
It's not part of the model because, if you're studying how wealth gets distributed rather than how it is produced, it doesn't matter.
I'm guessing that your disquiet at this notion comes from the possibility that everyone is creating their own wealth, and to some extent that is no doubt true. But if you start with the simplifying assumption that everyone's wealth creation ability is equal, and you just look at distribution, and you find that your model pretty accurately reproduces the real-world distribution of wealth, it's at least some evidence that wealth-creation ability is not that different from person to person, and what's driving inequality is the distribution mechanism.
Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This casts some doubt that wealth accumulation is down to individual human ability.
Couple that with the micro-economic observation that someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical, and it seems pretty unlikely that wealth creation has much to do with the distribution we see.
I received a Ph.D. in physics in 2010, throughout my training, my anecdotal experience was that of an echo chamber. I didn't fully realize it until I left academia. Although, it was slowly becoming apparent as the years passed. My experience was of a relatively small and closed group of physicists who reaffirmed each other's assumption that they were at the absolute peak of intellectual thought. Most of the professors imparted this mindset onto their graduate students and post docs. It fits pretty well with my experience that physicists would ignore the history of economic thought and believe that they could create a simple model that would accomplish what economists and philosophers have been hitherto unable to in the prior thousand years. But economics (or praxeology to be more general) is not physics. And a simple model of coin flips with random pairings and one risk limiting function isn't economics. When you have such hubris and make such simple mistakes as to assume that value is objective, it should be embarrassing.
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I will add that I still am a physicist who likes to think about things like this. One addition I would make to the model is that the poorer a person is the larger a percentage they are willing to risk. It still doesn't get around the fact that this whole model is based around the fallacy of object value but I like playing with models.
The Earth has finite resources: finite land, finite minerals, finite water, finite energy. When people accumulate vast amounts of wealth, they place a large portion of these finite resources under their own control.
If we allow people and families to accumulate wealth indefinitely, it’s not hard to imagine a future whereby a very small elite control a vast majority of the resources. In this future, people can still create wealth by mixing their labour with raw resources... as long as they can afford to pay the rent to the rentier class.
It seems like a huge distraction to claim that this study is somehow an exemplar of problems on "campuses." There are apparently 1.6 million faculty on campuses and 76 million students [hastily-googled statistics], so to claim that they have uniform beliefs about the nature of the economy seems like an extraordinary claim to make, which I'd like to see substantiated more than this.
It should be self-evident that the accelerating inequality we’re witnessing is not the natural inequality of competition and the power law, easily explained by simple arithmetic.
An accelerating and historically high broad societal effect is naturally a product of broad and unique properties of the current regime, rather than fundamentally consistent properties, which would naturally be seen across all time.
What is more broad and far-reaching than manipulation of the money supply itself? “We have found that inflation (1) worsens income distribution; (2) increases the income share of the rich; (3) has a negative but insignificant effect on the income shares of the poor and the middle class; and (4) reduces the rate of economic growth”
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.295...
It’s not difficult to see why - under an inflationary regime, those holding currency lose out relative to those holding assets, because the former’s wealth is not preserved; and low income wages are facing a constant headwind that their earners are less equipped to navigate.
We in the US have been engaging in an experiment since 1971, which has resulted in a marked discontinuity and a shift in to whom productivity growth accrued:
https://wtfhappenedin1971.com/
This is not necessarily the true or only explanation of our accelerating and historically high inequality, but it has the properties of a realistic explanation, in that it identifies a broad, historically distinct cause.
I've noticed an increasing trend in people using phrases such as "it is trivial", "it is obvious", "it is self evident" to defend their arguments. I have yet to encounter a case where it made their argument better.
This might be off topic but it has become a pet peeve because I've even started to encounter it in real life. It is similar to starting a discussion with "if you disagree with me, you are stupid".
A _lot_ of US public policy changes and economic structural changes which favour the rich have happened since 1971. The problem with trying to pin everything on inflation is that inflation has been more stable and lower in recent years than much of the Bretton Woods era...
> We have found that inflation (1) worsens income distribution
This is an interesting question, but that's [1] a terrible study.
It compares "data averaged over 5-year periods" across different countries. It's effectively a scatter plot of income inequality versus inflation.
The study's findings are better stated as "countries with high inflation have worse income distributions." Which makes sense. High-inflation countries tend to have low-quality institutions and low economic growth, factors which make being middle class difficult and poor miserable.
The right way to do this is longitudinally, studying populations over time. Even that's hard, given the number of interceding factors. At a minimum, an input must be the distribution of credit and debt, given inflation transfers wealth from the former to the latter.
It cames to my mind that that constant 2% inflation, and the constent effort to limit it to such level said to be good for economy, was indeed slowly impovishering the working class by the fact than increase rate of salary was not as high as increase in price. In short the price of good increase constantly, but we stop the inflation before it reach also salary, leading to inequal raise of cost of work (null) and cost of good (2%).
>An accelerating and historically high broad societal effect is naturally a product of broad and unique properties of the current regime, rather than fundamentally consistent properties, which would naturally be seen across all time.
You're completely correct here. Unfortunately, neither the current levels of income inequality nor the acceleration of said inequality is unique or historically high. It's not even unique in the last hundred years.
I was going to reference a similar point. There are economists out there that have predicted this and are not surprised. This isn't necessarily an "open question" but it is one that there is not the precious "consensus" that we see in other popular issues.
Very good links, thank you. Unlike a lot of people I never really saw the inherent utility in an inflationary currency system (but admit it could have existed: just that I never saw it in practice). But criticize the fed or offshoring and you're a bigoted racist who just can't grasp the bigger picture.
That graph shows productivity and compensation growing together, then diverging right in the 1970s. This would be expected if we suddenly got a large supply of labor. You can see exactly that on this other graph:
Equality is unavoidable as long as people are allowed to compete for stuff.
If people are allowed to compete for property then those that are better at competing will have more property.
It might be possible to have property equality when people have access to same things but compete for different things, for example status, choice of partners, etc.
And the most important point people seem to forget:
Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0).
And it's not just that "those that are better at competing will have more property". Every person is free to make a variety of choices for themselves, including how much they prioritize wealth creation. Since each one of us has only one life to live, and only one way to live it (i.e., the way each one of us choose to), and so many choices to make, there's no way we'll all make the same choices. Some will prioritize love, others family, others art, others business, or some mixture of these and other things. And that's just fine. We can't all pour ourselves into our work the way Elon Musk does, and we can't all only pick great ideas to pursue, and we don't all have the same talent or drive.
> Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
> Equality is unavoidable as long as people are allowed to compete for stuff.
The kind of inequality that is perceived as problematic is something different though. It's the rent collection that transfers wealth from the poor to the rich.
When success in competition increases success in competition (e.g. compound interest), the game tends to extreme inequality. And when extreme success gives you power to change the rules of the game, people start to lose their basic needs.
> and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
What you call competition, others call being useful to your fellow human beings by providing a good or service others find valuable.
I understand why we should provide basic needs for those that can't "compete", but why should we provide for those that simply don't want to? Why should someone have the right to not provide something of value to their fellow humans while still enjoying things of value (food, shelter, medical care) provided by their fellow humans?
If you can contribute and don't contribute, then you shouldn't get any contributions from others.
> Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
How?
I get that there's a lot of waste and inefficiency in those industries. Whenever zoning laws prevent a developer from building new housing, that's a third party actively preventing someone's basic needs from being satisfied. Whenever med-school admissions hold the number of new doctors below that needed to service all the uninsured, that's a third party actively preventing basic needs from being satisfied. Whenever food just gets thrown out because nobody bought it or it didn't meat the supermarket's quality standards, those were peoples' basic needs that could've been satisfied.
But in most cases this inefficiency happens because of a quality/quantity tradeoff that society has collectively made in the past. When the Bay Area was first settled in the 1930s-50s, it was common for workers to move here, setup tents, and then go to Orchard Supply Hardware, buy some lumber, and build their own houses. Can people do that today? Absolutely not - we have building codes, year-long permitting processes, zoning requirements. Much of that original housing stock still remains, and is a disaster waiting to happen in an earthquake.
Similarly, a common response these days to the shortage of health care and the need to provide affordable health care is for nurse practitioners to get certified (often via online courses) to be a physician's assistant, and to use PAs for much of the routine medical care (coughs, colds, rashes, etc.) that takes up the bulk of a doctor's time. I have several doctor friends who have railed at length about this practice. They have an obvious self-interest in doing so, but they also have a compelling argument: children will die. For most visits, the PA just needs to tell you to take some ibuprofen, but in some rare cases, those recurrent bloody noses are actually a sign of a serious medical condition that needs treatment ASAP. A doctor will have run across those conditions in their training & practice and know what to look for, but a PA is very likely to miss it. Thus, you are literally killing children if you relax the regulations that set the bar for becoming a licensed MD.
Many of our current societal ills come because "the perfect is the enemy of the good". Unrestricted capitalism is very effective at "good enough" solutions, where the product is good enough for you to buy but may be a little rough around the edges or have corner cases that, well, kill you if you get unlucky. To mitigate the corner cases, we've added a lot of regulations that generally prevent suppliers from killing their customers through negligence, but a side-effect is that it's dramatically reduced the population of people who could be potential suppliers. That lets those few trained practitioners dictate the terms of supplying the service, so they can raise their prices until only the wealthy can afford to pay.
I find the creation of physics-inspired sociological models distasteful. It's often a way of manufacturing certainty and authority through mathematical obsfucation.
It always runs the same way. First, you think of some political opinion you want to support. Then you come up with a mathematically trivial toy model that throws away 99% of the structure of the problem, whose few dynamical rules are artificially chosen so that they obviously will produce the result you want. (Though this part may look intimidating, it's not once you know how the game is played; I can easily cook up a toy model that "proves" any given political opinion upon request.) Then you put a lot of energy into solving the model in all kinds of cases, showing off your mathematical skills.
The end result of all such social models is a set of predictions that are only tenuously linked to reality. A common example of such a claim is "X follows a power law". But the models are usually too weak to actually calculate the power in the power law, and the data too tenuous to even show you have a power law at all. (Most of the time this is done by showing a fuzzy cloud of points on a log-log plot with a tiny range, drawing a line through it (ignoring the fact that literally anything can be fit with a line if you zoom in enough) and declaring victory.)
The point of mathematics is to make your postulates and predictions precise. If your postulates are obviously unrealistic, and your predictions are too vague to be meaningful, then the mathematics isn't serving any purpose -- except for giving your work a false authority.
This is a lot more satisfying than just r > g, which although seeming to be well supported in a rather large book somehow is dissatisfying. Specifically, I was looking for some kind of agent model like what this author is presenting here.
I've often thought about the "it's expensive to be poor" adage. What's interesting is he takes in this risk preference idea, in which you naturally expect the poor to have to be cede certain opportunities in order to secure further existence. I've played a lot of poker where you see this dynamic where the big stack guy can take chances and still win, and the cards (and skill) don't matter that much.
r>g is broadly equivalent to the ζ parameter in this model
I don't find the model itself especially compelling as a broad model of the economy myself, though it's nicely written exposition of how variance can wipe people out and largely agrees with my biases. The fact that a curve with three arbitrarily-set parameters can be made to fit empirical Lorenz curves doesn't particularly impress me, and the concept of rich people enriching themselves through wiping out poor people in zero sum trades as opposed to having the ability to transact with a lot more people in positive sum trades doesn't ring especially true of a modern economy.
I come from Eastern/Asian culture. I'm surprised to see Western culture swings. When I first got to live in Western culture, everyone was talking about equality as truth. There was equality everywhere: gender, income, race, marriage, geography. Now we talk about inequality as, maybe, the accepted truth. People talk about tail, asymmetric risk taking.
I think Eastern philosophy has a balanced view on this. There're Yin & Yang. The system eventually needs to find a balance. Stop swinging, start living.
> "388 individuals possessed as much household wealth as the lower half of the world's population combined"
My goodness! This completely shocked me. I wonder if we are all complicit in allowing this to happen. I know wealth buys power and vice versa, so it likely would be hard to change but aren't we all indirectly allowing this to happen?
My perspective on this might be too naive; but it seems wealth inequality (which is the topic of this article) is inevitable since a significant proportion of the population will spend their entire income and therefore never save.
It seems like about 19% of all Americans have zero net worth, and something like 44% of single American retirees are dependent on Social Security for 90% or more of their income, implying they saved very little throughout their entire lifetimes.
It's inevitable and a direct consequence of the labor system that we live in. The internet makes it worse but its not the problem of the internet, its a problem of the system.
In our labor system, a small number of individuals are by definition going to be payed, as employees, a small amount of the value that they add in order to make their boss wealthier.
Over time, the employees get paid a constant amount of money that they need to spend for living expenses, but the employer wealth will compound and accumulate over generations.
It's a system that comes directly from medieval serventry, designed to concentrate the wealth in the hands of the noble.
Take for example a large surface supermarket, with 100 employees making minimal wage. If those same persons would each own their small family shops and serve the same amount of customers, you would have 100 families well off making way more than minimal wage.
Serve those same customers through a supermarket, and most of the wealth will be concentrated in the hands of the supermarket owner, while the employees make only scraps.
I don't get why lately the trend it to focus in inequality instead of focusing in poverty.
I mean, if the % of poverty decreases, then economy is moving in a good direction, in spite of inequality, right? Suppose you had one million, and somebody else has one thousand millions, there would be a large gap, but I wouldn't consider it as negative.
If there are arguments against what I wrote I would gladly read them and consider them.
Have there been any efforts to quantify what level of inequality is reasonable?
For instance, the GINI coefficient ranges between 0 and 1, where 0 means everyone has the same amount, and 1 means one person at the top has everything. Depending on how it's measured, the US is somewhere between 0.4 and 0.5.
You don't want to be at either extreme, so some level of inequality is desirable. Is there an appropriate amount of inequality that is generally accepted? Has anyone tried to identify the appropriate target level?
Without inequality we would not have airplanes, transatlantic cables, jet engines, electric cars, SpaceX, cloud computing, radar, internet phones, steel, automobiles, the textile industry, fuel, plentiful food, fresh fruit year round, etc.
Of course it is...it's a natural consequence of compound interest. One's ability to accumulate additional wealth scales exponentially with their level of existing wealth.
There's been hundreds of years of writing on this subject from political and economic theory, but the article doesn't touch on it at all; it's just a weird mathematical model.
Then there's this:
You might, of course, wonder how this model, even if mathematically accurate,
has anything to do with reality. After all, it describes an entirely
unstable economy that inevitably degenerates to complete oligarchy,
and there are no complete oligarchies in the world. It is true that, by itself,
the yard sale model is unable to explain empirical wealth distributions.
To address this deficiency, my group has refined it in three ways to make it
more realistic.
So, they started with a model that made no sense, and modified it to make it match "reality", and finished with this:
Given how complicated real economies are, we find it gratifying that a simple analytical approach
developed by physicists and mathematicians describes the actual wealth distributions
of multiple nations with unprecedented precision and accuracy. Also rather curious is that
these distributions display subtle but key features of complex physical systems.
The authors can fit data better by adding parameters, which is no surprise. But these models omit an important feature of the real world: growth. "Yard sale" models are zero-sum.
Income inequality is a sign that an economy is functioning properly. For people vary greatly in their talents, ambition, tolerance for risk, vision. Some can lead, delegate and inspire, while others cannot.
Some are great at collaboration, others love confronting difficult challenges. Some are great at squeezing suppliers and others good at pushing people to adopt the next wave of technology. Some know exactly what people want and others are incredibly creative. Some never stop learning.
Some do none of the above and only want everything defined for them with no risks or growth required.
How could anyone analyze all of this incredible variability and decide whether people get too much money for their contributions?
Income inequality rewards the development of all of those qualities.
Income inequality I'm totally in favor of as a reward for creating value. Outsized value, outsized reward. With that in mind, I have a few caveats. To function properly:
- Social mobility must exist: income inequality is available for everyone based on their merits, not coupled to things like circumstances at birth.
- Wealth inequality must only exist for the generation that earned it. Passing on your largesse to your children is just as bad as the plutocracies that the founding fathers tried to escape. They should be rewarded for the value they create, not the value I created.
- The bottom line is pulled up to the extent that you can live a comfortable life even if you fail.
tl;rd if you always bet x% on a fair coin you are going to lose in the long run, ex. 0.95*1.05 = 0.9974999999999999 < 1 (you will win and lose the same number of bets)
so if world is a casino, where everything is a bet for utility with someone else, since the best strategy is not betting (or betting the less %) the richer is always in an advantageous position, and on the long run will have anything: this is intuitively true, but it has to be said that this passive force is way inferior compared to the active skill of a good better, that can completely override this force (that on a single life span would be like 1% of the force coming from skills). Basically the system is too chaotic to even notice this little force.
Interesting idea, but this one from margrit kennedy https://vimeo.com/71074210 is even better, here it's another passive force, but with way more impact than that, can be considered a real case of the general idea that "inequality" is a natural phenomena (that is a quite lazy concept cause it makes humans totally dumb and with no free will, like, sure, even war is natural, and murder, etc etc).
honestly these ideas are so basic that shouldn't have names on them, and surely they are not the first people to have notice that.
[+] [-] SiVal|6 years ago|reply
And the idea that things have a "true" value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the "redistribution" of bread and shoes, but it was not part of the model.
But their model (which they claim "reproduces inequality with unprecedented accuracy") could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.
[+] [-] vannevar|6 years ago|reply
I'm guessing that your disquiet at this notion comes from the possibility that everyone is creating their own wealth, and to some extent that is no doubt true. But if you start with the simplifying assumption that everyone's wealth creation ability is equal, and you just look at distribution, and you find that your model pretty accurately reproduces the real-world distribution of wealth, it's at least some evidence that wealth-creation ability is not that different from person to person, and what's driving inequality is the distribution mechanism.
Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This casts some doubt that wealth accumulation is down to individual human ability.
Couple that with the micro-economic observation that someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical, and it seems pretty unlikely that wealth creation has much to do with the distribution we see.
[+] [-] wuliwong|6 years ago|reply
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I will add that I still am a physicist who likes to think about things like this. One addition I would make to the model is that the poorer a person is the larger a percentage they are willing to risk. It still doesn't get around the fact that this whole model is based around the fallacy of object value but I like playing with models.
[+] [-] chongli|6 years ago|reply
If we allow people and families to accumulate wealth indefinitely, it’s not hard to imagine a future whereby a very small elite control a vast majority of the resources. In this future, people can still create wealth by mixing their labour with raw resources... as long as they can afford to pay the rent to the rentier class.
[+] [-] notJim|6 years ago|reply
[+] [-] Empact|6 years ago|reply
An accelerating and historically high broad societal effect is naturally a product of broad and unique properties of the current regime, rather than fundamentally consistent properties, which would naturally be seen across all time.
What is more broad and far-reaching than manipulation of the money supply itself? “We have found that inflation (1) worsens income distribution; (2) increases the income share of the rich; (3) has a negative but insignificant effect on the income shares of the poor and the middle class; and (4) reduces the rate of economic growth” http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.295...
It’s not difficult to see why - under an inflationary regime, those holding currency lose out relative to those holding assets, because the former’s wealth is not preserved; and low income wages are facing a constant headwind that their earners are less equipped to navigate.
We in the US have been engaging in an experiment since 1971, which has resulted in a marked discontinuity and a shift in to whom productivity growth accrued: https://wtfhappenedin1971.com/
This is not necessarily the true or only explanation of our accelerating and historically high inequality, but it has the properties of a realistic explanation, in that it identifies a broad, historically distinct cause.
[+] [-] dre54673|6 years ago|reply
This might be off topic but it has become a pet peeve because I've even started to encounter it in real life. It is similar to starting a discussion with "if you disagree with me, you are stupid".
[+] [-] notahacker|6 years ago|reply
[+] [-] JumpCrisscross|6 years ago|reply
This is an interesting question, but that's [1] a terrible study.
It compares "data averaged over 5-year periods" across different countries. It's effectively a scatter plot of income inequality versus inflation.
The study's findings are better stated as "countries with high inflation have worse income distributions." Which makes sense. High-inflation countries tend to have low-quality institutions and low economic growth, factors which make being middle class difficult and poor miserable.
The right way to do this is longitudinally, studying populations over time. Even that's hard, given the number of interceding factors. At a minimum, an input must be the distribution of credit and debt, given inflation transfers wealth from the former to the latter.
[1] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.295...
[+] [-] w1nst0nsm1th|6 years ago|reply
[+] [-] lifty|6 years ago|reply
[+] [-] ameister14|6 years ago|reply
You're completely correct here. Unfortunately, neither the current levels of income inequality nor the acceleration of said inequality is unique or historically high. It's not even unique in the last hundred years.
[+] [-] WalterBright|6 years ago|reply
[+] [-] wuliwong|6 years ago|reply
[+] [-] specialist|6 years ago|reply
https://en.wikipedia.org/wiki/File:US_Historical_Inflation.s...
I don't doubt that inflation is a factor. Duh. It's just a tax by another name.
But it takes extreme incredulity to ignore the biggest policy change (pink elephant): shifting the tax burden from capital (assets) to labor (income).
PS- Your cites note Bretton Woods. What's your position on the gold standard?
[+] [-] snagglegaggle|6 years ago|reply
[+] [-] tropo|6 years ago|reply
https://en.wikipedia.org/wiki/File:Chart_of_foreign_born_in_...
[+] [-] Bostonian|6 years ago|reply
[+] [-] jonfw|6 years ago|reply
[+] [-] lmilcin|6 years ago|reply
Equality is unavoidable as long as people are allowed to compete for stuff.
If people are allowed to compete for property then those that are better at competing will have more property.
It might be possible to have property equality when people have access to same things but compete for different things, for example status, choice of partners, etc.
And the most important point people seem to forget:
Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
[+] [-] cryptonector|6 years ago|reply
And it's not just that "those that are better at competing will have more property". Every person is free to make a variety of choices for themselves, including how much they prioritize wealth creation. Since each one of us has only one life to live, and only one way to live it (i.e., the way each one of us choose to), and so many choices to make, there's no way we'll all make the same choices. Some will prioritize love, others family, others art, others business, or some mixture of these and other things. And that's just fine. We can't all pour ourselves into our work the way Elon Musk does, and we can't all only pick great ideas to pursue, and we don't all have the same talent or drive.
> Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
Indeed!
[+] [-] praptak|6 years ago|reply
The kind of inequality that is perceived as problematic is something different though. It's the rent collection that transfers wealth from the poor to the rich.
[+] [-] taneq|6 years ago|reply
It’s deeper than that. Inequality is unavoidable as long as people are allowed to own some proportion of the fruits of their labour.
[+] [-] jampekka|6 years ago|reply
When success in competition increases success in competition (e.g. compound interest), the game tends to extreme inequality. And when extreme success gives you power to change the rules of the game, people start to lose their basic needs.
[+] [-] malandrew|6 years ago|reply
What you call competition, others call being useful to your fellow human beings by providing a good or service others find valuable.
I understand why we should provide basic needs for those that can't "compete", but why should we provide for those that simply don't want to? Why should someone have the right to not provide something of value to their fellow humans while still enjoying things of value (food, shelter, medical care) provided by their fellow humans?
If you can contribute and don't contribute, then you shouldn't get any contributions from others.
[+] [-] noonespecial|6 years ago|reply
We do have to keep in mind that right now nothing enhances one's ability to compete for property more than already having property.
[+] [-] kjhkhkj|6 years ago|reply
People are already complaining about inequality of status and partners. Why is inequality of wealth less just than those other things?
> Inequality does not mean we need to have people who can't satisfy their most basic things
I honestly don't understand why and moral arguments are not convincing.
[+] [-] 300bps|6 years ago|reply
http://www.tnellen.com/cybereng/harrison.html
[+] [-] nostrademons|6 years ago|reply
How?
I get that there's a lot of waste and inefficiency in those industries. Whenever zoning laws prevent a developer from building new housing, that's a third party actively preventing someone's basic needs from being satisfied. Whenever med-school admissions hold the number of new doctors below that needed to service all the uninsured, that's a third party actively preventing basic needs from being satisfied. Whenever food just gets thrown out because nobody bought it or it didn't meat the supermarket's quality standards, those were peoples' basic needs that could've been satisfied.
But in most cases this inefficiency happens because of a quality/quantity tradeoff that society has collectively made in the past. When the Bay Area was first settled in the 1930s-50s, it was common for workers to move here, setup tents, and then go to Orchard Supply Hardware, buy some lumber, and build their own houses. Can people do that today? Absolutely not - we have building codes, year-long permitting processes, zoning requirements. Much of that original housing stock still remains, and is a disaster waiting to happen in an earthquake.
Similarly, a common response these days to the shortage of health care and the need to provide affordable health care is for nurse practitioners to get certified (often via online courses) to be a physician's assistant, and to use PAs for much of the routine medical care (coughs, colds, rashes, etc.) that takes up the bulk of a doctor's time. I have several doctor friends who have railed at length about this practice. They have an obvious self-interest in doing so, but they also have a compelling argument: children will die. For most visits, the PA just needs to tell you to take some ibuprofen, but in some rare cases, those recurrent bloody noses are actually a sign of a serious medical condition that needs treatment ASAP. A doctor will have run across those conditions in their training & practice and know what to look for, but a PA is very likely to miss it. Thus, you are literally killing children if you relax the regulations that set the bar for becoming a licensed MD.
Many of our current societal ills come because "the perfect is the enemy of the good". Unrestricted capitalism is very effective at "good enough" solutions, where the product is good enough for you to buy but may be a little rough around the edges or have corner cases that, well, kill you if you get unlucky. To mitigate the corner cases, we've added a lot of regulations that generally prevent suppliers from killing their customers through negligence, but a side-effect is that it's dramatically reduced the population of people who could be potential suppliers. That lets those few trained practitioners dictate the terms of supplying the service, so they can raise their prices until only the wealthy can afford to pay.
[+] [-] empath75|6 years ago|reply
https://news.ycombinator.com/item?id=16618385
[+] [-] knzhou|6 years ago|reply
It always runs the same way. First, you think of some political opinion you want to support. Then you come up with a mathematically trivial toy model that throws away 99% of the structure of the problem, whose few dynamical rules are artificially chosen so that they obviously will produce the result you want. (Though this part may look intimidating, it's not once you know how the game is played; I can easily cook up a toy model that "proves" any given political opinion upon request.) Then you put a lot of energy into solving the model in all kinds of cases, showing off your mathematical skills.
The end result of all such social models is a set of predictions that are only tenuously linked to reality. A common example of such a claim is "X follows a power law". But the models are usually too weak to actually calculate the power in the power law, and the data too tenuous to even show you have a power law at all. (Most of the time this is done by showing a fuzzy cloud of points on a log-log plot with a tiny range, drawing a line through it (ignoring the fact that literally anything can be fit with a line if you zoom in enough) and declaring victory.)
The point of mathematics is to make your postulates and predictions precise. If your postulates are obviously unrealistic, and your predictions are too vague to be meaningful, then the mathematics isn't serving any purpose -- except for giving your work a false authority.
[+] [-] anotherone15|6 years ago|reply
[+] [-] lordnacho|6 years ago|reply
I've often thought about the "it's expensive to be poor" adage. What's interesting is he takes in this risk preference idea, in which you naturally expect the poor to have to be cede certain opportunities in order to secure further existence. I've played a lot of poker where you see this dynamic where the big stack guy can take chances and still win, and the cards (and skill) don't matter that much.
[+] [-] notahacker|6 years ago|reply
I don't find the model itself especially compelling as a broad model of the economy myself, though it's nicely written exposition of how variance can wipe people out and largely agrees with my biases. The fact that a curve with three arbitrarily-set parameters can be made to fit empirical Lorenz curves doesn't particularly impress me, and the concept of rich people enriching themselves through wiping out poor people in zero sum trades as opposed to having the ability to transact with a lot more people in positive sum trades doesn't ring especially true of a modern economy.
[+] [-] viburnum|6 years ago|reply
[+] [-] _7fvc|6 years ago|reply
I think Eastern philosophy has a balanced view on this. There're Yin & Yang. The system eventually needs to find a balance. Stop swinging, start living.
[+] [-] ryeguy_24|6 years ago|reply
My goodness! This completely shocked me. I wonder if we are all complicit in allowing this to happen. I know wealth buys power and vice versa, so it likely would be hard to change but aren't we all indirectly allowing this to happen?
[+] [-] NovemberWhiskey|6 years ago|reply
It seems like about 19% of all Americans have zero net worth, and something like 44% of single American retirees are dependent on Social Security for 90% or more of their income, implying they saved very little throughout their entire lifetimes.
[+] [-] vfc1|6 years ago|reply
In our labor system, a small number of individuals are by definition going to be payed, as employees, a small amount of the value that they add in order to make their boss wealthier.
Over time, the employees get paid a constant amount of money that they need to spend for living expenses, but the employer wealth will compound and accumulate over generations.
It's a system that comes directly from medieval serventry, designed to concentrate the wealth in the hands of the noble.
Take for example a large surface supermarket, with 100 employees making minimal wage. If those same persons would each own their small family shops and serve the same amount of customers, you would have 100 families well off making way more than minimal wage.
Serve those same customers through a supermarket, and most of the wealth will be concentrated in the hands of the supermarket owner, while the employees make only scraps.
[+] [-] sdfin|6 years ago|reply
I mean, if the % of poverty decreases, then economy is moving in a good direction, in spite of inequality, right? Suppose you had one million, and somebody else has one thousand millions, there would be a large gap, but I wouldn't consider it as negative.
If there are arguments against what I wrote I would gladly read them and consider them.
[+] [-] tunesmith|6 years ago|reply
For instance, the GINI coefficient ranges between 0 and 1, where 0 means everyone has the same amount, and 1 means one person at the top has everything. Depending on how it's measured, the US is somewhere between 0.4 and 0.5.
You don't want to be at either extreme, so some level of inequality is desirable. Is there an appropriate amount of inequality that is generally accepted? Has anyone tried to identify the appropriate target level?
[+] [-] WalterBright|6 years ago|reply
[+] [-] danhak|6 years ago|reply
[+] [-] peterwwillis|6 years ago|reply
Then there's this:
So, they started with a model that made no sense, and modified it to make it match "reality", and finished with this: Yeah... curious....[+] [-] beefman|6 years ago|reply
The authors can fit data better by adding parameters, which is no surprise. But these models omit an important feature of the real world: growth. "Yard sale" models are zero-sum.
[1] http://nbviewer.ipython.org/url/norvig.com/ipython/Economics...
[+] [-] anm89|6 years ago|reply
Is it possible to enforce that 8 billion people be and have exactly the same? Seems pretty obviously absurd.
[+] [-] stretchwithme|6 years ago|reply
Some are great at collaboration, others love confronting difficult challenges. Some are great at squeezing suppliers and others good at pushing people to adopt the next wave of technology. Some know exactly what people want and others are incredibly creative. Some never stop learning.
Some do none of the above and only want everything defined for them with no risks or growth required.
How could anyone analyze all of this incredible variability and decide whether people get too much money for their contributions?
Income inequality rewards the development of all of those qualities.
[+] [-] selfishgene|6 years ago|reply
Then what policy conclusions are we supposed to draw?
[+] [-] arcticbull|6 years ago|reply
- Social mobility must exist: income inequality is available for everyone based on their merits, not coupled to things like circumstances at birth.
- Wealth inequality must only exist for the generation that earned it. Passing on your largesse to your children is just as bad as the plutocracies that the founding fathers tried to escape. They should be rewarded for the value they create, not the value I created.
- The bottom line is pulled up to the extent that you can live a comfortable life even if you fail.
[+] [-] pietrod|6 years ago|reply
so if world is a casino, where everything is a bet for utility with someone else, since the best strategy is not betting (or betting the less %) the richer is always in an advantageous position, and on the long run will have anything: this is intuitively true, but it has to be said that this passive force is way inferior compared to the active skill of a good better, that can completely override this force (that on a single life span would be like 1% of the force coming from skills). Basically the system is too chaotic to even notice this little force.
Interesting idea, but this one from margrit kennedy https://vimeo.com/71074210 is even better, here it's another passive force, but with way more impact than that, can be considered a real case of the general idea that "inequality" is a natural phenomena (that is a quite lazy concept cause it makes humans totally dumb and with no free will, like, sure, even war is natural, and murder, etc etc). honestly these ideas are so basic that shouldn't have names on them, and surely they are not the first people to have notice that.