An alternative to progressive redistribution of wealth

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Re: An alternative to progressive redistribution of wealth

Postby PeterW » Sat Apr 17, 2010 5:36 am UTC

Charlie! wrote:But shareholders are unlikely to suddenly liquidate their shares and start spending. While local business owners will probably put their money right back into the local economy.
Sure they do, it's called selling their shares. When someone buys shares on the market, by definition someone is selling them. This isn't deeds to land, here.
You seem to be thinking that the important part is that the local owner is a "worthier" person to give your money to. This is not the case. What's important is that when you give your money to the local owner, they're much more likely to turn around and spend it on something in the local economy, which then benefits you if you have a job in said local economy.
1. People nationwide will spend money, and that will create jobs. Everywhere is "local" to somewhere, and if a nationwide economy can find more and better deals, people will be better off.

2. Why are locals more morally deserving than folks farther away?

3. By your argument, why not restrict it further, and only trade within a family, keeping money from leaking out of the family? If dad pays me to mow the lawn, I have nowhere else to spend it but to pay mom for dinner!

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Re: An alternative to progressive redistribution of wealth

Postby Charlie! » Sun Apr 18, 2010 10:39 pm UTC

PeterW wrote:
Charlie! wrote:But shareholders are unlikely to suddenly liquidate their shares and start spending. While local business owners will probably put their money right back into the local economy.
Sure they do, it's called selling their shares. When someone buys shares on the market, by definition someone is selling them. This isn't deeds to land, here.
If you're just moving around where your money is invested it doesn't matter to the outside economy, though. You'd need to actually withdraw money from the market and spend it on something else, which while it certainly happens is much slower than, say, a poor person going to buy food with that same money.

You seem to be thinking that the important part is that the local owner is a "worthier" person to give your money to. This is not the case. What's important is that when you give your money to the local owner, they're much more likely to turn around and spend it on something in the local economy, which then benefits you if you have a job in said local economy.
1. People nationwide will spend money, and that will create jobs. Everywhere is "local" to somewhere, and if a nationwide economy can find more and better deals, people will be better off.

2. Why are locals more morally deserving than folks farther away?

3. By your argument, why not restrict it further, and only trade within a family, keeping money from leaking out of the family? If dad pays me to mow the lawn, I have nowhere else to spend it but to pay mom for dinner!

Oh dear. We're back to the "more deserving" trap again. It's not about hoarding money on some sort of moral grounds. It's about what generates more transactions.

I'll explain this from the ground up.

When two willing people make a transaction, it's because they both think they'll be better off because of it. If they're right (barring misleading advertising or the like), then they're better off. And of course, more transactions is mo' betta! In a market that approaches the optimal (which ours doesn't, but this assumption is necessary for sanity), each dollar worth of transactions generates about the same amount of well-being. An important note here is that the total amount of money doesn't matter, it's the movement of money that's important. I can be as rich as I want, but if I don't spend any of my money it won't make me any happier.

That's kind of the hard part to grasp, from there it's all downhill: poor people can't afford *not* to buy things with their money, but relatively rich people can afford just sock it away in bonds or something. The maximum well-being is then created by an organization that pays everyone the same, while the minimum well-being is created by an organization that has huge income inequality. And remember, this isn't just well-being for the members of the organization, but for everyone they have a transaction with, and everyone *those* people have a transaction with, and so on. So you create more well-being by spending money at the local grocery store not because it's a "better place" than wal-mart, but because it creates less of an income gap and thus creates more transactions.

*note that the stock market only follows part of the above argument - at its heart is a bunch of people relying on lots of little information asymmetries to make money; transactions in the stock market are zero-sum, except when they involve actually changing the amount of money invested.
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Re: An alternative to progressive redistribution of wealth

Postby Vaniver » Sun Apr 18, 2010 11:09 pm UTC

Charlie wrote:In a market that approaches the optimal (which ours doesn't, but this assumption is necessary for sanity), each dollar worth of transactions generates about the same amount of well-being.
No- if I trade something worth $1 to me for something worth $1.05 to me with someone who feels the reverse about the objects, then the total gain in well-being is $0.10, despite the transaction's value of $1.

Charlie! wrote:An important note here is that the total amount of money doesn't matter, it's the movement of money that's important. I can be as rich as I want, but if I don't spend any of my money it won't make me any happier.
What about the future value of money? When I look at my savings account, I am reassured about the future without spending that money (though most of the money is participating in the economy through lending).

Charlie! wrote:The maximum well-being is then created by an organization that pays everyone the same, while the minimum well-being is created by an organization that has huge income inequality.
Only if utility is monotonically decreasing, which by your argument is clearly not the case. The money that moves you from the threshold of "unable to invest" to "able to invest" has massive returns, both financially and psychologically. If the jump in well-being from 'dependence' to 'independence' is large compared to the jump in well-being from an additional dollar, then the maximum current well-being is created by distributing resources such that the most people are independent and least people are dependent, not giving everyone the same (which could result in everyone being dependent). Maximum future well-being depends on a system which increases access to resources and efficiency, which is not done by paying everyone the same.

Also, do you see how having only local economies locks inequality into place? If A is more developed than B, then having no trade between the two will mean that relationship will most likely stay the same. Allowing trade (and thus monetary flow and transactions) between the two will, by linking their economies, bring them closer together- capital will flow from A to B for those industries which have lower costs in B than A, people will move between the regions, and while things may never equalize they will almost certainly draw closer together. The prime example here is the improvement in Chinese well-being after steps were taken to increase free enterprise, manufacturing, and exports to the rest of the world- beforehand, inequality between the developing world and China was growing, while afterwards it is shrinking.

Charlie! wrote:So you create more well-being by spending money at the local grocery store not because it's a "better place" than wal-mart, but because it creates less of an income gap and thus creates more transactions.
But, what makes you think the local grocery store generates more monetary flux than Wal-Mart? If we care about well-being, then efficiency is really significant, since it allows us to create more well-being with the same amount of resources.
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Re: An alternative to progressive redistribution of wealth

Postby Charlie! » Sun Apr 18, 2010 11:58 pm UTC

Vaniver wrote:
Charlie wrote:In a market that approaches the optimal (which ours doesn't, but this assumption is necessary for sanity), each dollar worth of transactions generates about the same amount of well-being.
No- if I trade something worth $1 to me for something worth $1.05 to me with someone who feels the reverse about the objects, then the total gain in well-being is $0.10, despite the transaction's value of $1.
Ah, sorry, I see how that could be unclear. The assumption is that each dollar worth of transactions generates about the same amount of well-being *as any other given dollar of transactions.* You can prove this if you assume people choose which transactions to make ideally, which they don't, but it's an approximation that shouldn't really affect the conclusion.

Charlie! wrote:An important note here is that the total amount of money doesn't matter, it's the movement of money that's important. I can be as rich as I want, but if I don't spend any of my money it won't make me any happier.
What about the future value of money? When I look at my savings account, I am reassured about the future without spending that money (though most of the money is participating in the economy through lending).
But that benefit derives from the ability to spend the money in the future. If you really never could spend your money you would have no such benefit.

But that's just hair-splitting, I guess. Regardless, if we're talking about total utility in a transaction, the person who you just gave your money to now gets the benefits of having money, so those benefits are neither created nor destroyed (assuming they're linear with money) and don't much matter to the argument.

Charlie! wrote:The maximum well-being is then created by an organization that pays everyone the same, while the minimum well-being is created by an organization that has huge income inequality.
Only if utility is monotonically decreasing, which by your argument is clearly not the case. The money that moves you from the threshold of "unable to invest" to "able to invest" has massive returns, both financially and psychologically. If the jump in well-being from 'dependence' to 'independence' is large compared to the jump in well-being from an additional dollar, then the maximum current well-being is created by distributing resources such that the most people are independent and least people are dependent, not giving everyone the same (which could result in everyone being dependent). Maximum future well-being depends on a system which increases access to resources and efficiency, which is not done by paying everyone the same.

Also, do you see how having only local economies locks inequality into place? If A is more developed than B, then having no trade between the two will mean that relationship will most likely stay the same. Allowing trade (and thus monetary flow and transactions) between the two will, by linking their economies, bring them closer together- capital will flow from A to B for those industries which have lower costs in B than A, people will move between the regions, and while things may never equalize they will almost certainly draw closer together. The prime example here is the improvement in Chinese well-being after steps were taken to increase free enterprise, manufacturing, and exports to the rest of the world- beforehand, inequality between the developing world and China was growing, while afterwards it is shrinking.
All those "jumps" (whatever, I'll just keep that in quotes) happen quite early on in income, though, and create a very few special cases. The abolition of slavery is perhaps the funniest example of why they're just special cases. I'm not seriously advocating paying everyone the same, either. The point is merely that increased income inequality, when done by making a few people very rich, decreases the rate of transactions.

And, as I may have mentioned once or twice, having only local economies is not really the point. If Wal-mart had the exact same pay distribution as your local grocer, there would be no difference between them in this model. Once you put in the fact that the local grocer is more likely to also spend locally, then, since this originally came up as a thing to do for self-interested people, there would be a difference. But don't blame me for that, blame the self-interested people :P

Charlie! wrote:So you create more well-being by spending money at the local grocery store not because it's a "better place" than wal-mart, but because it creates less of an income gap and thus creates more transactions.
But, what makes you think the local grocery store generates more monetary flux than Wal-Mart? If we care about well-being, then efficiency is really significant, since it allows us to create more well-being with the same amount of resources.
Why do I think it? Well, the wall of text you just read might be a start :P Regardless of efficiency, distribution of the money determines what happens well enough for the purposes of the conclusion.
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Re: An alternative to progressive redistribution of wealth

Postby PeterW » Mon Apr 19, 2010 12:17 am UTC

I think I'm seeing your argument and where you go wrong here - you see that rich people invest money and think that that means hiding money under a pillow. Of course this is nonsense - investment is a form of economic activity! A company that contracts to build a factory generates as much economic activity as anyone else using the money. And at market rates that is a more efficient use of money than whatever a central planner could do with his limited knowledge. Repeat after me: investment is spending.

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Re: An alternative to progressive redistribution of wealth

Postby Dark567 » Mon Apr 19, 2010 6:59 pm UTC

PeterW wrote:I think I'm seeing your argument and where you go wrong here - you see that rich people invest money and think that that means hiding money under a pillow. Of course this is nonsense - investment is a form of economic activity! A company that contracts to build a factory generates as much economic activity as anyone else using the money. And at market rates that is a more efficient use of money than whatever a central planner could do with his limited knowledge. Repeat after me: investment is spending.


Yeah, investing money is a transaction. Generally the only way rich people a slowing down the rate of transactions is if they keep a ton of cash under the bed, but I don't really think that happens anymore.


Charlie! wrote:*note that the stock market only follows part of the above argument - at its heart is a bunch of people relying on lots of little information asymmetries to make money; transactions in the stock market are zero-sum, except when they involve actually changing the amount of money invested.


See the stock market isn't really zero sum, when a company earns money, the stock can pay dividends, a company can liquidate its assets etc. Basically there is another input into the equation which is people spending money on these companies goods and services. This makes the stock market non-zero sum(although it should only be viewed this way as an investment, on a day to day basis its zero sum). Every dollar an investor "wins" does not need to be some other investors "loss". It can come from a company making (or losing) money.
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Re: An alternative to progressive redistribution of wealth

Postby Charlie! » Tue Apr 20, 2010 5:47 am UTC

PeterW wrote:Repeat after me: investment is spending.

Repeat after me: it's a slower way of circulating money than giving it someone who will use it to buy necessities.
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Re: An alternative to progressive redistribution of wealth

Postby Marquee Moon » Tue Apr 20, 2010 9:14 am UTC

Charlie! wrote:
PeterW wrote:Repeat after me: investment is spending.

Repeat after me: it's a slower way of circulating money than giving it someone who will use it to buy necessities.

This sentence weirds me out a bit. Your treating people buying necessities as merely a means to an end, which is faster circulation of money. Of course, I'm sure you care greatly about people being able to buy necessities, so I guess my question is: what's so great about higher money velocity? I can see it being useful during a depression (which I suppose could be what we're in now) for giving the economy a keynesian push, but under regular economic conditions I wouldn't have a preference for high or low velocity. (I'd be interested to hear what the knowledgeable econpeeps have to say about this) But you seem to prefer high velocity to high investment, which just seems silly. Investment is what drives economic growth. Where would we be today if people in the 1800s decided to buy lots of wigs and top hats instead of building steam engines and railroads?

But shareholders are unlikely to suddenly liquidate their shares and start spending. While local business owners will probably put their money right back into the local economy.

But what happens when the rich run out of assets to sell? Then there's fewer people to buy things and the economy falls off a cliff. This is quite similar to one 'narrative' for the American economy over the last few decades. Greedy American consumers took up more and more debt to continue buying consumer goods, and now everyone's in a bad financial state and there's no consumers left to drive the economy forward. (not saying that's exactly true, but I think lots of people have heard this story before) The only difference is in your example people sell off assets instead of accumulating debt. Economic growth that depends on people worsening their balance sheets isn't sustainable.

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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Tue Apr 20, 2010 12:15 pm UTC

Investment in a company is like a "go ahead" for that company to start growing. If no one seems to put any confidence (money) in the company, then why would I ever expand my workforce? You put investment in my pocket and, while that doesn't instantly convert to revenue (that's my job as an entreprenuer), It gives me the ability to pay my bills in the meantime. If everyone stopped investing and giving to charity, I don't think there's any question where unemployment would go.

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Re: An alternative to progressive redistribution of wealth

Postby Judicator » Sun Apr 25, 2010 12:41 pm UTC

The big problem, as you pointed out the the OP, is that the poor are bad at spending money. This is part of the reason that they are poor, and there doesn't seem to be an obvious solution. The pass rate on the ICEPT (a consumer proficiency test in illinois) is pretty low statewide http://www.isbe.state.il.us/assessment/icept.htm 10-30% depending on age and race. I don't really know how much consumer education can do.

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Re: An alternative to progressive redistribution of wealth

Postby hoot the mottle » Thu May 06, 2010 2:58 pm UTC

phonon266737 wrote:Given the lack of violent coercion, this natural forcing can be the result of only one thing: the proportion of personal revenues that the lower class voluntarily sends up the chain is less than the proportion of revenues that the upper class voluntarily sends down.


I disagree with that assumption. There is wealth creation that doesn't involve the transfer of personal revenues.

phonon266737 wrote:what can be done by the poor to hinder the development of a wealth gap.


Vital to both our understandings: WHY do you want to do this?
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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Thu May 06, 2010 3:56 pm UTC

The reason I began wondering about an alternative to pregessive redistribution, is that simply redistributing money doesn't work in the long run. You take dollars from the upper class, across the board, and give it to poor people, but the poor people only purchase certain goods and services and as a result, the redistribution of wealth has the end result of wealthier people who serve the needs of poor people, NOT the poor people.

It is similar to college loans - while issued in the name of providing education for kids, it's practically an earmark to take taxpayer dollars and give it to private universities, with the added bonus that the student get's to repay it + interest to the federal government during the most important time period when one should be saving (compound interest and all). The college serves the needs of the poor (provides education), and benefits immediately in the form of $20,000 / year / student, while the student doesn't realize the benefits for 10-20 years.

Now, while subsidized housing doesn't need repaid, it works in a similar manner - the money doesn't go to poor people, it goes to profits of people who provide housing to poor people. The standards of subsidized housing all but prevent certain people from recieving section 8 funds, only someone capable of meeting the requirements can recieve it. In a general sense, a select few are generating profit , while the rest of us (who fund the program equally) only benefit by having less homeless. Changing the system as to help people get OUT of poverty, not just live in it, is necessary to control costs for the rest of us, and this requires a lifestyle change on the part of the lower class. So make these lifestyle changes part of recieving welfare/housing subsidies in the first place.

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Re: An alternative to progressive redistribution of wealth

Postby Dark567 » Thu May 06, 2010 4:45 pm UTC

phonon266737 wrote:The reason I began wondering about an alternative to pregessive redistribution, is that simply redistributing money doesn't work in the long run. You take dollars from the upper class, across the board, and give it to poor people, but the poor people only purchase certain goods and services and as a result, the redistribution of wealth has the end result of wealthier people who serve the needs of poor people, NOT the poor people.

It is similar to college loans - while issued in the name of providing education for kids, it's practically an earmark to take taxpayer dollars and give it to private universities, with the added bonus that the student get's to repay it + interest to the federal government during the most important time period when one should be saving (compound interest and all). The college serves the needs of the poor (provides education), and benefits immediately in the form of $20,000 / year / student, while the student doesn't realize the benefits for 10-20 years.

Now, while subsidized housing doesn't need repaid, it works in a similar manner - the money doesn't go to poor people, it goes to profits of people who provide housing to poor people. The standards of subsidized housing all but prevent certain people from recieving section 8 funds, only someone capable of meeting the requirements can recieve it. In a general sense, a select few are generating profit , while the rest of us (who fund the program equally) only benefit by having less homeless. Changing the system as to help people get OUT of poverty, not just live in it, is necessary to control costs for the rest of us, and this requires a lifestyle change on the part of the lower class. So make these lifestyle changes part of recieving welfare/housing subsidies in the first place.



This is why Milton Friedman claimed that the best solution to poverty, was simply to give the poor more money. It has the lowest administration overhead and generally prevents requirements forming a selection process among the poor.(I.e. only semi-poor people get help, not the really poor)
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Re: An alternative to progressive redistribution of wealth

Postby hoot the mottle » Thu May 06, 2010 5:39 pm UTC

I need to re-read this thread and try to frame a proper response because it seems to me that any money you give to the poor comes from taxing the rich and then goes back into the pockets of the rich so you can't solve the OP's problem unless you natioanlise everything and remove private ownership.
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Re: An alternative to progressive redistribution of wealth

Postby Dark567 » Thu May 06, 2010 5:56 pm UTC

hoot the mottle wrote:I need to re-read this thread and try to frame a proper response because it seems to me that any money you give to the poor comes from taxing the rich and then goes back into the pockets of the rich so you can't solve the OP's problem unless you natioanlise everything and remove private ownership.


But its not like the poor are getting nothing out of it. They might be spending money right away on housing... but they are still getting housing out of the deal. So even if the money comes from the rich and goes to the rich, its not like the poor are losing out.
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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Thu May 06, 2010 8:35 pm UTC

Dark567 wrote:But its not like the poor are getting nothing out of it. They might be spending money right away on housing... but they are still getting housing out of the deal. So even if the money comes from the rich and goes to the rich, its not like the poor are losing out.


Right, but the problem is, it's not coming from the rich. It's coming from everyone, and going to only a few.
"Welfare for the poor" is just a means to the end of transferring money from the public to a the relatively few who do buisness with those who recieve it. It's in the best interest for the public if, for example, that rent subsidy was instead a motgage subsidy, because in the long run it gets someone off the subsidy.

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Re: An alternative to progressive redistribution of wealth

Postby hoot the mottle » Thu May 06, 2010 10:35 pm UTC

It is coming from the rich because public money comes from taxes. The rich pay higher taxes personally, and the assets they own pay taxes too (e.g. businesses they control).

The scheme you suggest is that taxes are used to buy someone a house. In order to do so they would require a mortgage secured on their own assets or wages. Who is going to lend to someone who cannot afford to pay their own mortgage and requires public money to pay it?

Personally I would prefer that the public money is not taken by the government in the first place. Lowering taxes means that business can retain more profit, they can grow and employ more people. They can pay wages and training for their employees, some of whom are these poor people on state benefits.
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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Fri May 07, 2010 12:46 am UTC

Hah- I'm sorry, I'm getting kind of off target. The point is that if the government is going to be making a guaranteed monthly payment (rent), then it makes sense that they should be buying houses instead of renting them. It could also take form as the govt purchasing houses to "rent", for very low prices, to needy individuals. All these models make more financial sense in the long term than paying rent forever, because it means that rather than private landlords collecting government money for profit, either the lower-class person becomes a homeowner and stops collecting subsidies, or the government is the landlord, and they can profit from whatever small amount is contributed to rent.
The point is that the current system of progressive taxation and welfare/subsidies is very inefficient, and there must be more efficient ways to take care of your poor/homeless that don't become cash cows for private entities in the end.

Case in point - I was at the grocery store today, and someone in line in front of me was purchases lunchables and pizza bagels with their food stamps credit card. Who benefits more - the person who gets to eat their lunchable, or person who got $5 for it

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Re: An alternative to progressive redistribution of wealth

Postby hoot the mottle » Fri May 07, 2010 11:01 am UTC

phonon266737 wrote:Hah- I'm sorry, I'm getting kind of off target. The point is that if the government is going to be making a guaranteed monthly payment (rent), then it makes sense that they should be buying houses instead of renting them. It could also take form as the govt purchasing houses to "rent", for very low prices, to needy individuals. All these models make more financial sense in the long term than paying rent forever, because it means that rather than private landlords collecting government money for profit, either the lower-class person becomes a homeowner and stops collecting subsidies, or the government is the landlord, and they can profit from whatever small amount is contributed to rent.
The point is that the current system of progressive taxation and welfare/subsidies is very inefficient, and there must be more efficient ways to take care of your poor/homeless that don't become cash cows for private entities in the end.

Case in point - I was at the grocery store today, and someone in line in front of me was purchases lunchables and pizza bagels with their food stamps credit card. Who benefits more - the person who gets to eat their lunchable, or person who got $5 for it


Well in the UK we have council housing, which is essentially what you suggest. The council owns a house and lets people stay in it for rent, then after a certain number of years they have the right to buy the house. This is very inefficient and expensive for the council as they have to buy/build the house in advance, and put a lot fo money into the asset, then they can only charge a certain (low) amount to get a return.
I take exception at then idea of giving people houses, but I support the idea of subsidising their mortgage/rent as long as they contribute what they can.

In terms of other subsidies, the free market sets the price. People who accept food stamps have their profit margins squeezed by competition and food is a highly competitive business, so I dislike it when you say they are milking the "cash cow".

I was hoping you show you how the circular flow of money works. By taking taxes from people and redistributing them, you are giving money to the needy. Which is great.

But then you are unhappy with the idea of someone making a profit when this money is spent. If you can't make a profit, then why would you provide the service?
If you don't make profit you will pay no taxes.
If the government collects no taxes you and you will have nothing to give out to the needy.
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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Fri May 07, 2010 2:14 pm UTC

But certainly there are certain foods that are low profit margin, and certain foods that are high profit margin. Same for housing, clothing, etc etc. Given that those recieving the subsidy are free to shop on the open market for their housing or food, we don't have much control over this.

Look at community colleges versus private - the community college is run by the community, charges a certain low rate (no subsidty), and in general performs better financially when more people choose to attend it. The alternitve, giving people money and letting them shop in the private sector, makes the same service (education) costs much, much more, and costs increase as more people use the system. Instead of pushing to provide more loans to send kids to private schools, why not spend that money making the community colleges better? Now, with less people attending private schools, prices for private universities come down, helping everyone. Instead, the subsidies flood the private system with applicants, and providing competition for anyone who might want to attend on their own dollar, not to mention that the rich families are providing the loans to subsidised students, too.

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Re: An alternative to progressive redistribution of wealth

Postby HermanBlount » Fri May 07, 2010 3:16 pm UTC

Thanks for pointing that out, phonon266737. The subsidy issue is frequently glossed over. It seems to me that if you give everyone $100 to spend on a specific good/service, the price of said good/service will simply adjust to ($previousPrice + $100). There's a short term benefit to anyone that can spend their $100 before the cost is adjusted, but in the mean time you're only inflating the price for everyone, including those who don't receive the subsidy.

That said, most (all?) modern economies do this in one market sector or another. Are the short-term benefit worth the downsides, or is my simplistic analysis missing something crucial?
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Re: An alternative to progressive redistribution of wealth

Postby Dark567 » Fri May 07, 2010 4:31 pm UTC

HermanBlount wrote:Thanks for pointing that out, phonon266737. The subsidy issue is frequently glossed over. It seems to me that if you give everyone $100 to spend on a specific good/service, the price of said good/service will simply adjust to ($previousPrice + $100). There's a short term benefit to anyone that can spend their $100 before the cost is adjusted, but in the mean time you're only inflating the price for everyone, including those who don't receive the subsidy.

That said, most (all?) modern economies do this in one market sector or another. Are the short-term benefit worth the downsides, or is my simplistic analysis missing something crucial?


It doesn't end up ($previousPrice+$100) it ends up more like (previousPrice+ ~$99) this is because even though the increased demand raises prices, these raised prices should also increase supply. To increase the same amount as the subsidy would have to assume that the supply was completely inelastic.
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Re: An alternative to progressive redistribution of wealth

Postby hoot the mottle » Fri May 07, 2010 6:09 pm UTC

phonon266737 wrote:But certainly there are certain foods that are low profit margin, and certain foods that are high profit margin. Same for housing, clothing, etc etc. Given that those recieving the subsidy are free to shop on the open market for their housing or food, we don't have much control over this.

Look at community colleges versus private - the community college is run by the community, charges a certain low rate (no subsidty), and in general performs better financially when more people choose to attend it. The alternitve, giving people money and letting them shop in the private sector, makes the same service (education) costs much, much more, and costs increase as more people use the system. Instead of pushing to provide more loans to send kids to private schools, why not spend that money making the community colleges better? Now, with less people attending private schools, prices for private universities come down, helping everyone. Instead, the subsidies flood the private system with applicants, and providing competition for anyone who might want to attend on their own dollar, not to mention that the rich families are providing the loans to subsidised students, too.


This doesn't make any sense to me. I don't believe my reading of your statements that:
- publicly funded colleges cost less and perform better.
- the more people that attend a college, the better it performs.
- the more people that attend, the higher the cost per place. (is that what you meant?)

As Dark says, increased demand generally means increased supply where the market sees the opportunity present.
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Re: An alternative to progressive redistribution of wealth

Postby phonon266737 » Mon May 10, 2010 6:35 pm UTC

If the govt. response to "we're raising prices" is "we're making more loans avaliable to purchae your private service", then what would a rational buisness (college) do? The college doesn't have to repay the loans, the students do. In the short run, enrollment is a fixed number.

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Re: An alternative to progressive redistribution of wealth

Postby Indon » Fri May 14, 2010 3:11 pm UTC

phonon266737 wrote:Given the lack of violent coercion, this natural forcing can be the result of only one thing: the proportion of personal revenues that the lower class voluntarily sends up the chain is less than the proportion of revenues that the upper class voluntarily sends down.

I've got a complementary scenario to this.

Ownership can facilitate wealth generation for little to no effort - a literal free lunch.

Say we have two people working at Wal-Mart in the same position - but one has a million dollars invested in Wal-Mart as well.

Both individuals make a wage. But the one with the money invested also makes money when Wal-Mart stock improves, without any additional effort.

Wealth begets wealth, and thus those with wealth will tend to accumulate greater wealth than those who must work for all of their wealth. This is not an absolute, but it doesn't have to be, because we're dealing with large quantities where the statistical trends, which this is, ultimately triumph.


This was Marx's insight - the super-rich own the "means of production" and get to profit off of what everyone else is doing, without having to do anything themselves, and that this is fundamentally unjust.

Marx's suggestion as to how the poor would fix it would be to rise up, kill all the rich people, and restructure society in such a way as to remove the 'ownership is something for nothing' exploit.

Obviously, you're asking for a way the poor can fix this without using their mass collective bargaining power to impose a mandate upon others through violence, government power, etc.

I don't see it happening.

PeterW wrote:I think I'm seeing your argument and where you go wrong here - you see that rich people invest money and think that that means hiding money under a pillow. Of course this is nonsense - investment is a form of economic activity! A company that contracts to build a factory generates as much economic activity as anyone else using the money. And at market rates that is a more efficient use of money than whatever a central planner could do with his limited knowledge. Repeat after me: investment is spending.


Investment is a subset of spending in which you exchange wealth and time for greater wealth.

Only the time you exchange isn't actually your time, because you don't have to do anything for investments to improve. It's free, time-delayed money.

"But the time-delay has value!" someone might say. "Surely you could just spend all your money immediately to consume instead of invest!" and certainly, many people do so.

But as your wealth increases, each additional unit of wealth carries with it less pressure to spend - because you've already spent the previous units and you're increasingly more likely to simply not need/want anything else. As wealth approaches infinity, the utility of spending approaches zero. The same is not true for investment, which means that as someone becomes wealthier, even the opportunity cost of investment approaches absolutely nothing. Free money - but only for the rich.

Investment is fundamentally different from spending in this way, and this fundamental difference is advantageous to the wealthy.
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Re: An alternative to progressive redistribution of wealth

Postby Sam Adams » Fri May 14, 2010 4:26 pm UTC

Indon wrote:
phonon266737 wrote:Given the lack of violent coercion, this natural forcing can be the result of only one thing: the proportion of personal revenues that the lower class voluntarily sends up the chain is less than the proportion of revenues that the upper class voluntarily sends down.

I've got a complementary scenario to this.

Ownership can facilitate wealth generation for little to no effort - a literal free lunch.

Say we have two people working at Wal-Mart in the same position - but one has a million dollars invested in Wal-Mart as well.

Both individuals make a wage. But the one with the money invested also makes money when Wal-Mart stock improves, without any additional effort.

Actually there is effort for the investor. He has to make the decision as to whether Wal-Mart is the best place to invest his money, compared with other places that he could invest that money. If he, instead, invests in secured GM bonds and the government takes over GM, his investment is lost.

Historically, most wealth is gone in three generations. It actually takes skill and effort to hold onto money.

Wealth begets wealth, and thus those with wealth will tend to accumulate greater wealth than those who must work for all of their wealth. This is not an absolute, but it doesn't have to be, because we're dealing with large quantities where the statistical trends, which this is, ultimately triumph.

Wisely invested wealth begets wealth. Poorly invested wealth is lost.

This was Marx's insight - the super-rich own the "means of production" and get to profit off of what everyone else is doing, without having to do anything themselves, and that this is fundamentally unjust.

Marx never saw the value of people making good decisions with their wealth. If I invest my money in buying machine tools and renting factory space and hiring employees, that investment is only of value if I can produce things that people will buy. If no one buys my products, that investment in means of production is lost and the means of production will be sold for pennies on the dollar.

Therefore, the concept of "without having to do anything themselves" is flawed.

Marx's suggestion as to how the poor would fix it would be to rise up, kill all the rich people, and restructure society in such a way as to remove the 'ownership is something for nothing' exploit.

The poor are universally poor at making decisions on how to use those means of production. Neither the Soviet Union nor N Korea has ever produced a consumer product.

PeterW wrote:I think I'm seeing your argument and where you go wrong here - you see that rich people invest money and think that that means hiding money under a pillow. Of course this is nonsense - investment is a form of economic activity! A company that contracts to build a factory generates as much economic activity as anyone else using the money. And at market rates that is a more efficient use of money than whatever a central planner could do with his limited knowledge. Repeat after me: investment is spending.


Investment is a subset of spending in which you exchange wealth and time for greater wealth.

Only the time you exchange isn't actually your time, because you don't have to do anything for investments to improve. It's free, time-delayed money.

"But the time-delay has value!" someone might say. "Surely you could just spend all your money immediately to consume instead of invest!" and certainly, many people do so.

But as your wealth increases, each additional unit of wealth carries with it less pressure to spend - because you've already spent the previous units and you're increasingly more likely to simply not need/want anything else. As wealth approaches infinity, the utility of spending approaches zero. The same is not true for investment, which means that as someone becomes wealthier, even the opportunity cost of investment approaches absolutely nothing. Free money - but only for the rich.
As I noted, most family fortunes are dissipated within three generations. Since no one's pile of wealth has increased towards infinity, there is something left out of this equation.

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Re: An alternative to progressive redistribution of wealth

Postby Indon » Fri May 14, 2010 4:53 pm UTC

Sam Adams wrote:Actually there is effort for the investor. He has to make the decision as to whether Wal-Mart is the best place to invest his money, compared with other places that he could invest that money. If he, instead, invests in secured GM bonds and the government takes over GM, his investment is lost.

Historically, most wealth is gone in three generations. It actually takes skill and effort to hold onto money.

1. Diversification is a simple strategy that reduces the need to select wisely in any growing economy, and as wealth approaches infinity removes it entirely (again, in any growing economy).

2.Extreme wealth is hard to analyze statistically, because while whole economies easily demonstrate regression towards the mean, the very wealthy represent a tiny minority of the economy with a disproportionate ability to skew any analysis of their behavior (because wealth can be converted into power or influence, which changes the environment in which we are trying to analyze these wealthy).

Assuming that most wealth is gone in three generations, the reason for that could easily be, for instance, because our society enacts strong progressive redistribution of wealth every three generations to cause would would otherwise be self-perpetuating wealth engines to dry up.

We don't have much data on the behavior of wealth in a consistent, modern setting. Historically, wealth tended to interchange freely with political power, and thus be extremely self-perpetuating, but only recently have we seen this become more (not completely) independent.

What we do have is knowledge of a fairly obvious and easy to grasp trend.

My point is, rather:
Sam Adams wrote:Wisely invested wealth begets wealth. Poorly invested wealth is lost.

I don't think you can show evidence for this. I think any data you could muster over the time periods we need it is going to indicate that the most major factor in the destruction of the wealth of the extremely wealthy, historically, has been externally imposed catastrophe - invasion, rebellion, disease, and so on.

Sam Adams wrote:Marx never saw the value of people making good decisions with their wealth.

And why are you conflating wealth from ownership and wealth from exercising the ability to choose investments in the first place? Owners can hire people to do that for them, it's a service independent of ownership itself.

Ownership of an investment is independent of the skill of managing investments. An investment manager can make a wage without needing to own assets. It is a form of labor and is distinguishable from ownership.

Wealth Management =/= Wealth Ownership.

Sam Adams wrote:As I noted, most family fortunes are dissipated within three generations. Since no one's pile of wealth has increased towards infinity, there is something left out of this equation.


I have demonstrated what is left out - wealth-destroying catastrophe. Feel free to find data that proves otherwise, though I won't fault you if you don't, as I don't believe it exists.
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Re: An alternative to progressive redistribution of wealth

Postby Sam Adams » Fri May 14, 2010 5:30 pm UTC

Indon wrote:
Sam Adams wrote:Actually there is effort for the investor. He has to make the decision as to whether Wal-Mart is the best place to invest his money, compared with other places that he could invest that money. If he, instead, invests in secured GM bonds and the government takes over GM, his investment is lost.

Historically, most wealth is gone in three generations. It actually takes skill and effort to hold onto money.

1. Diversification is a simple strategy that reduces the need to select wisely in any growing economy, and as wealth approaches infinity removes it entirely (again, in any growing economy).

Just because diversification is a simple strategy, doesn't mean that the wealth owner doesn't need to make that decision, and since economies aren't always growing, that strategy needs to be re-evaluated with time.

2.Extreme wealth is hard to analyze statistically, because while whole economies easily demonstrate regression towards the mean, the very wealthy represent a tiny minority of the economy with a disproportionate ability to skew any analysis of their behavior (because wealth can be converted into power or influence, which changes the environment in which we are trying to analyze these wealthy).

Would you like data? The US treasury department did an analysis of taxpayers over ten year periods. They watched who moved up the scale and who moved down the scale. Google "income mobility study US treasury."
Assuming that most wealth is gone in three generations, the reason for that could easily be, for instance, because our society enacts strong progressive redistribution of wealth every three generations to cause would would otherwise be self-perpetuating wealth engines to dry up.

Or it could be that kids and grandkids don't have the same skills that the old man had for building wealth. If you review the Forbes list of the very wealthy, the same names are there only for a time, replaced over time with others. Bill Gates isn't there by accident.
We don't have much data on the behavior of wealth in a consistent, modern setting. Historically, wealth tended to interchange freely with political power, and thus be extremely self-perpetuating, but only recently have we seen this become more (not completely) independent.

Read the treasury study. The data is there.

Sam Adams wrote:Wisely invested wealth begets wealth. Poorly invested wealth is lost.

I don't think you can show evidence for this. I think any data you could muster over the time periods we need it is going to indicate that the most major factor in the destruction of the wealth of the extremely wealthy, historically, has been externally imposed catastrophe - invasion, rebellion, disease, and so on.

Are you suggesting that people cannot lose the wealth that they or their ancestors built up? How many families that were wealthy from 100 years ago are still wealthy today? I suspect we can name most of them. There are many factors that can destroy or dissipate wealth. Creating wealth and maintaining wealth requires skill and discipline. That's what Marx didn't get. Maybe you don't get it either.

Sam Adams wrote:Marx never saw the value of people making good decisions with their wealth.

And why are you conflating wealth from ownership and wealth from exercising the ability to choose investments in the first place? Owners can hire people to do that for them, it's a service independent of ownership itself.

Ownership of an investment is independent of the skill of managing investments. An investment manager can make a wage without needing to own assets. It is a form of labor and is distinguishable from ownership.

People who hire good investment managers maintain and sometimes grow their wealth. Those that hire poor managers lose their wealth. Don't you think that hiring a good manager is a skill?

Wealth Management =/= Wealth Ownership.
What happens to rich people who don't manage their wealth well, even if that means that they hire someone to do it for them?

Ever hear of Bernie Maddoff?

Sam Adams wrote:As I noted, most family fortunes are dissipated within three generations. Since no one's pile of wealth has increased towards infinity, there is something left out of this equation.


I have demonstrated what is left out - wealth-destroying catastrophe. Feel free to find data that proves otherwise, though I won't fault you if you don't, as I don't believe it exists.

Forbes list, Treasury Department study. The data is there.

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Re: An alternative to progressive redistribution of wealth

Postby Indon » Fri May 14, 2010 5:46 pm UTC

Sam Adams wrote:Just because diversification is a simple strategy, doesn't mean that the wealth owner doesn't need to make that decision, and since economies aren't always growing, that strategy needs to be re-evaluated with time.

It's a negligable decision to make, and no, it doesn't need to be reevaluated. In fact, that need to reevaluate decreases, again, as wealth increases.

Sam Adams wrote:Or it could be that kids and grandkids don't have the same skills that the old man had for building wealth. If you review the Forbes list of the very wealthy, the same names are there only for a time, replaced over time with others. Bill Gates isn't there by accident.

The Forbes list doesn't keep track of what happens to people's wealth, unless Forbes maintains data I'm not aware of. It keeps track of the absolute most wealthy people in everywhere.

Which means that your list primarily tracks the beneficiaries of the largest windfalls in the economy. Since it's a big economy, and you can expect new such windfalls occasionally, you can expect some rotation through that list even if none of those rich people ever lost wealth.

You should consider your data sources for appropriateness.

Sam Adams wrote:Are you suggesting that people cannot lose the wealth that they or their ancestors built up?

No, I'm not.

As I said earlier, it's not an absolute - merely a trend. It doesn't need to be an absolute to be a problem.

And you have no evidence that maintaining wealth actually requires any skill on the part of the person who possesses the wealth.

Sam Adams wrote:What happens to rich people who don't manage their wealth well, even if that means that they hire someone to do it for them?

Ever hear of Bernie Maddoff?

So we should count on fraud to close the wealth gap, as if fraud somehow disproportionately targets the wealthy over the poor?

I should think not.

PS - a successful multi-billion-dollar fraud that hits even people who could clearly manage their assets (judging from how they did before they got Madoffed) is not a trap for people who 'don't manage their wealth well' like you're implying will cause money to go away - he's a successful fraud, and if you weren't aware fraud is when you lie to people to decieve them so they can't actually know if what they're doing is a good idea or not because you've lied to them, and their actions are not based in reality but upon the fraudulent information you have given them.

And when a factor is destroying wealth regardless of if a person is good or bad at managing their wealth, then it behaves like catastrophic, rather than systemic, wealth destruction - and it further demonstrates my points.

Sam Adams wrote:Forbes list, Treasury Department study. The data is there.


And it is irrelevant.

You have completely ignored my point in this regard: That the most likely culprit for wealth mobility of the extremely wealthy over time are catastrophic external factors, not any attribute of wealth or wealth management in and of itself.

This is simply because a society isn't going to exist for an extremely long time without major catastrophe.
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Re: An alternative to progressive redistribution of wealth

Postby Vaniver » Sat May 15, 2010 3:57 am UTC

Indon wrote:I don't think you can show evidence for this. I think any data you could muster over the time periods we need it is going to indicate that the most major factor in the destruction of the wealth of the extremely wealthy, historically, has been externally imposed catastrophe - invasion, rebellion, disease, and so on.
I'm not convinced; lots of people lose everything / almost everything in market crashes, and it's strange to call that an externally imposed catastrophe when talking about wealth management. Living beyond one's means is more difficult when you're extremely wealthy; but people definitely manage to do it. I'd agree that externally imposed catastrophes are a major factor- I just don't think we have enough data to call it the most major.
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Re: An alternative to progressive redistribution of wealth

Postby Sam Adams » Sat May 15, 2010 8:09 am UTC

Indon wrote:
Sam Adams wrote:Just because diversification is a simple strategy, doesn't mean that the wealth owner doesn't need to make that decision, and since economies aren't always growing, that strategy needs to be re-evaluated with time.

It's a negligable decision to make, and no, it doesn't need to be reevaluated. In fact, that need to reevaluate decreases, again, as wealth increases.

Sam Adams wrote:Or it could be that kids and grandkids don't have the same skills that the old man had for building wealth. If you review the Forbes list of the very wealthy, the same names are there only for a time, replaced over time with others. Bill Gates isn't there by accident.

The Forbes list doesn't keep track of what happens to people's wealth, unless Forbes maintains data I'm not aware of. It keeps track of the absolute most wealthy people in everywhere.

Which means that your list primarily tracks the beneficiaries of the largest windfalls in the economy. Since it's a big economy, and you can expect new such windfalls occasionally, you can expect some rotation through that list even if none of those rich people ever lost wealth.

You should consider your data sources for appropriateness.
This is the list of the richest people in 2000. http://www.forbes.com/lists/results.jhtml?passListId=10&passYear=2000&passListType=Person&searchParameter1=&searchParameter2=&resultsStart=1&resultsHowMany=25&resultsSortProperties=-numberfield1%2C%2Bstringfield1&resultsSortCategoryName=worth+%28%24bil%29&category1=&category2=
This is the list from 2010. http://www.forbes.com/lists/results.jhtml?passListId=10&passYear=2000&passListType=Person&resultsStart=1&resultsHowMany=25&resultsSortProperties=-numberfield1%2C%2Bstringfield1&resultsSortCategoryName=worth
It is interesting to search for the same names between those lists. Bill Gates has done pretty well for himself; he can hire the best managers. Over a ten year period his net worth went from $60 billion to $56 billion. So he only lost $4 billion.
Let's look for Jon Huntsman. In 2000, he was worth $6.6 billion and he was number 47 on the list. In 2010, he was worth $1.0 billion and was number 937 on the list.
Let's look at George Soros. He is currently worth $14 billion and was number 35 this year. In 2000, he had a net worth less than a billion dollars.

Sure seems that it is pretty hard to stay near the top or even maintain the level of wealth that you had once you got to the top. Sure looks less than a trivial task based upon this data.
Sam Adams wrote:Are you suggesting that people cannot lose the wealth that they or their ancestors built up?

No, I'm not.

As I said earlier, it's not an absolute - merely a trend. It doesn't need to be an absolute to be a problem.

And you have no evidence that maintaining wealth actually requires any skill on the part of the person who possesses the wealth.
OK, let's examine your basic premise. You have suggested that wealth accumulates, and that more wealth accumulates faster than less wealth. Is that right?

By that reasoning, a person with 10 million dollars will have their wealth grow at a faster rate than a person with 1 million dollars. To support that premise, that means that the richest person will retain their position as the richest person, and their wealth will grow at a faster rate than the next richest guy, etc. Therefore, the guy with his name at the top of the Forbes list of wealthiest guys should, ten years later, not only remain at the top but would even be proportionately richer than the next richest guy, etc., especially since the richer you are, the less effort is required to accumulate and retain wealth.

Why isn't that true?
Sam Adams wrote:What happens to rich people who don't manage their wealth well, even if that means that they hire someone to do it for them?

Ever hear of Bernie Maddoff?

So we should count on fraud to close the wealth gap, as if fraud somehow disproportionately targets the wealthy over the poor?

I should think not.
No, that's not the argument I am making. I am making the argument that maintaining wealth is a far from trivial problem. There are a huge number of events and decisions that result in wealth being lost, and very few events and decisions that result in retaining and growing wealth.

PS - a successful multi-billion-dollar fraud that hits even people who could clearly manage their assets (judging from how they did before they got Madoffed) is not a trap for people who 'don't manage their wealth well' like you're implying will cause money to go away - he's a successful fraud, and if you weren't aware fraud is when you lie to people to decieve them so they can't actually know if what they're doing is a good idea or not because you've lied to them, and their actions are not based in reality but upon the fraudulent information you have given them.

And when a factor is destroying wealth regardless of if a person is good or bad at managing their wealth, then it behaves like catastrophic, rather than systemic, wealth destruction - and it further demonstrates my points.
Bernie wasn't a catastrophic factor. He was simply an effective factor at separating good wealth managers from not so good wealth managers. Obviously, the problem of detecting his scheme as fraudulent was a non-trivial problem.
Sam Adams wrote:Forbes list, Treasury Department study. The data is there.


And it is irrelevant.

Do you usually reject data without reviewing it?
http://www.treasury.gov/press/releases/hp673.htm
November 13, 2007
hp-673

Treasury Releases Income Mobility Study

Washington DC--The Treasury Department today released a study on income mobility of U.S. taxpayers from 1996 through 2005.

The study showed that, just as in the previous 10-year period, a majority of American taxpayers move from one income group to another over time. The study also recognizes that the dynamism of the U.S. economy significantly contributes to income mobility.

The key findings of the study included:

* Income mobility of individuals was considerable in the U.S. economy during the 1996 through 2005 period with roughly half of taxpayers who began in the bottom quintile moving up to a higher income group within 10 years.
* About 55 percent of taxpayers moved to a different income quintile within 10 years.
* Among those with the very highest incomes in 1996--the top 1/100 of one percent--only 25 percent remained in the group in 2005. Moreover, the median real income of these taxpayers declined over the study period.
* The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
* Economic growth resulted in rising incomes for most taxpayers over the study period:
*
Median real incomes of all taxpayers increased by 24 percent after adjusting for inflation;
*
Real incomes of two-thirds of all taxpayers increased over this period; and
*
Median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the high income groups.

REPORTS

* http://www.treasury.gov/cgi-bin/redirect.cgi?http://www.treas.gov/offices/tax-policy/library/incomemobilitystudy03-08revise.pdf

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Let's put it in graphic terms:
Image
So, over a ten year period, about 50% of those in the lowest income group moved into a higher income group. Over the same period, only 25% of the highest income group stayed in the highest income group.

Sorry, that is completely contrary to the "wealthy become more wealthy" theory.

You have completely ignored my point in this regard: That the most likely culprit for wealth mobility of the extremely wealthy over time are catastrophic external factors, not any attribute of wealth or wealth management in and of itself.

This is simply because a society isn't going to exist for an extremely long time without major catastrophe.
You want to support that with some sort of reference?

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Re: An alternative to progressive redistribution of wealth

Postby Indon » Mon May 17, 2010 6:25 pm UTC

Vaniver wrote:I'm not convinced; lots of people lose everything / almost everything in market crashes, and it's strange to call that an externally imposed catastrophe when talking about wealth management. Living beyond one's means is more difficult when you're extremely wealthy; but people definitely manage to do it. I'd agree that externally imposed catastrophes are a major factor- I just don't think we have enough data to call it the most major.


That was rather my point about the data - that we don't have enough to conclusively determine things one way or the other. A 75-year timespan is simply going to include too many catastrophes of various kinds to provide meaningful information of the impact independently of them.

What we do have, is a solid understanding of the trends that should, logically, be occuring independent of such catastrophes.

As for market crashes, well, are the wealthy responsible for such market crashes? Do market crashes disproportionately affect the more wealthy versus the less wealthy? Is this a factor that can actually be counted upon to disproportionately diminish extreme wealth?

Sam Adams wrote:Sure seems that it is pretty hard to stay near the top or even maintain the level of wealth that you had once you got to the top. Sure looks less than a trivial task based upon this data.

Seriously? That's your example? Bill Gates is intentionally spending his money for charity. So's Huntsman. The fact that you're associating these things with wealth management even though both of these individuals are attempting to actively divest their wealth rather clearly implies the strength of my assertation: That external factors dominate the data in that regard, beyond and distinct from the nature of that wealth itself - the nature that I am discussing.

Sam Adams wrote:To support that premise, that means that the richest person will retain their position as the richest person, and their wealth will grow at a faster rate than the next richest guy, etc.

Uh, no.

You clearly didn't understand the part where I discussed catastrophic external factors. Maybe you should go back and re-read that to learn what an external factor is.

You're trying to claim that the behavior of extreme amounts of wealth is due to the nature inherent to that wealth (because that's what would be required to actually contradict my point). There is no evidence substantiating this, and the logic, which nobody has contested, implies otherwise.

Sam Adams wrote:No, that's not the argument I am making. I am making the argument that maintaining wealth is a far from trivial problem.

But Madoff was a fairly trivial problem, considering the scale of investment in the US today, and even he was an extreme statistical outlier.

While Madoff destroyed wealth he was given, trillions more equally callously invested dollars generated immense profits. I should in fact say that with the exception of economy-crashing events, most events do result in retaining and growing wealth - and only during those economy-crashing events is it the other way around.

Sam Adams wrote:Bernie wasn't a catastrophic factor. He was simply an effective factor at separating good wealth managers from not so good wealth managers. Obviously, the problem of detecting his scheme as fraudulent was a non-trivial problem.

Uh, seriously?

Dude, if you could blame victims for being defrauded, that kind of fraud wouldn't be a crime, it'd just be a bad deal. Your claim here is absolutely ridiclous.

The very fact that Madoff is held legally accountable for his actions demonstrates that his victims are not responsible for having fallen victim to his scam.

Sam Adams wrote:Do you usually reject data without reviewing it?

I do if it's irrelevant!

I told you what the basis is! In order to demonstrate your claim that wealth behaves in a way that the logic indicates it shouldn't behave, you wouldn't just need income mobility data, you would need income mobility data cross-referenced with data regarding a variety of wealth-destroying catastrophes outside of the individual's control, and the aggregate would need to demonstrate that greater concentrations of wealth decay disproportionately with lesser concentrations.

Not only did you obviously not provide this, but you don't even seem to understand why you should.

Sam Adams wrote:You want to support that with some sort of reference?

I don't need to! You're the one saying the data supposedly disagrees with the argument I've made and that you apparently have no problem with, you're the one responsible for compiling that data.

And more importantly, you're responsible for actually understanding my argument so that you can understand what data to provide in the first place in order to demonstrate it in counterexample. You have clearly failed in this.
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Re: An alternative to progressive redistribution of wealth

Postby Ixtellor » Mon May 17, 2010 6:35 pm UTC

phonon266737 wrote:
"a few barely useful suggestions to mollify the fact that you're getting hosed"


If you have identified paths that the upper class use to get the lower class' money, please share them!


I got beat to the punch, but thought I would add:

No-Bid Government contracts.


Also this:

While it is true that social mobility is rising, so is the concentration of wealth. If you take it back further, it just gets worse and worse. The rich are getting richer even if the names are changing.

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Re: An alternative to progressive redistribution of wealth

Postby styrofoam » Mon May 17, 2010 10:55 pm UTC

Ixtellor wrote:If you take it back further, it just gets worse and worse.

Please do go back further. All I can see is that it was highest in 1983, valleyed, then leveled off, lower than before. Was 1983 a peak, or the end of a long drop?
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Re: An alternative to progressive redistribution of wealth

Postby Charlie! » Tue May 18, 2010 3:42 am UTC

Google it for yourself is you're really interested. There's even a wikipedia page on it. The results are interesting - apparently world war 2 was a big game-changer.
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Re: An alternative to progressive redistribution of wealth

Postby Vaniver » Tue May 18, 2010 6:24 am UTC

Ixtellor wrote:While it is true that social mobility is rising, so is the concentration of wealth. If you take it back further, it just gets worse and worse. The rich are getting richer even if the names are changing.
The argument, though, is that the names aren't changing. The issues of equality of outcome and equality of opportunity are very different; increased concentration of wealth can be consistent with equality of opportunity. Especially since this data is computed by sorting everyone each year, then counting out the quintiles.

It's not really that surprising that, as the return to capital, skills, and education increase, the wealth held by people with capital, skills, and education increases. I mean, only ~30% of Americans have a college degree, and 40% of Americans hold ~96% of the wealth in the country.
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Re: An alternative to progressive redistribution of wealth

Postby Sam Adams » Tue May 18, 2010 6:56 am UTC

Vaniver wrote:
Ixtellor wrote:While it is true that social mobility is rising, so is the concentration of wealth. If you take it back further, it just gets worse and worse. The rich are getting richer even if the names are changing.
The argument, though, is that the names aren't changing. The issues of equality of outcome and equality of opportunity are very different; increased concentration of wealth can be consistent with equality of opportunity. Especially since this data is computed by sorting everyone each year, then counting out the quintiles.

It's not really that surprising that, as the return to capital, skills, and education increase, the wealth held by people with capital, skills, and education increases. I mean, only ~30% of Americans have a college degree, and 40% of Americans hold ~96% of the wealth in the country.

Some folks have large incomes and wealth simply because they are worth more than others. Oprah is worth 100 million dollars. Why did she get that? Because people voluntarily decided to give her their money. Same thing with Steven Speilberg; he makes entertainment worth watching.

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Re: An alternative to progressive redistribution of wealth

Postby Indon » Tue May 18, 2010 3:03 pm UTC

Vaniver wrote:The argument, though, is that the names aren't changing.

No, the argument is that the names aren't changing through any factor directly related to wealth ownership, that is to say, that wealth ownership promotes wealth ownership through the nature of wealth ownership.
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Re: An alternative to progressive redistribution of wealth

Postby Vaniver » Tue May 18, 2010 6:42 pm UTC

Indon wrote:No, the argument is that the names aren't changing through any factor directly related to wealth ownership, that is to say, that wealth ownership promotes wealth ownership through the nature of wealth ownership.
Right, that is more correct; but I still think Ixtellor is bringing up a separate issue which doesn't bear on equality of opportunity, which seems to be the driving factor behind caring about income mobility.
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Re: An alternative to progressive redistribution of wealth

Postby Indon » Tue May 18, 2010 6:52 pm UTC

Vaniver wrote:Right, that is more correct; but I still think Ixtellor is bringing up a separate issue which doesn't bear on equality of opportunity, which seems to be the driving factor behind caring about income mobility.


Well, yeah, it's not related to the previous points, but I think it could still have bearing on equality of opportunity - if the wealth discrepancy provided a significant opportunity to some that it did not to others, or a significant impairment (like the bottom 40% in 1989, who apparently collectively had negative net worth apparently?).

As a theoretical example, let's say that there was a significant environmental influence factor to consumer habits, awareness, etc. Being born to a negative net worth household would then presumably significantly impact equality of opportunity, don't you think?
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