6 ms·

If the rewards for the people at the very top are disproportionate to the work and risk-taking that they've put in, that's a distortion which has negative effec

by badsock 11y ago

If the rewards for the people at the very top are disproportionate to the work and risk-taking that they've put in, that's a distortion which has negative effects on the whole system. We're talking about the "New Aristocracy". In extremis that's where you're either in the elite, or barely subsisting. It doesn't matter how meritorious the admissions to the upper class are - it's an awful way to live for nearly everyone, and where it's been implemented it's been marked by abuse and stagnation. From a motivational standpoint, of course the incentives of a great reward matter. But there has to be a reason for everyone from 2nd place downward to participate.

yummyfajitas 11y ago
In extremis that's where you're either in the elite, or barely subsisting. You are conflating inequality with poverty. To recognize that they aren't the same thing, come visit the highly equal society of India or Bangladesh. Also, the more you make a curve convex (and increasing), the more incentives it creates for everyone. Proof: convexity = u''(x). Increasing u''(x) increases u'(x)=int u''(x) dx. Since u'(x) is incentive, the proof is complete.
- badsock 11y ago
  That's not the case at all: India has a GINI of 0.43, which is above the world average of 0.39. Sweden is at 0.23. Source: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality https://en.wikipedia.org/wiki/List_of_countries_by_income_eq... And while alleviating absolute poverty is great, the point I'm making is that a large middle class is a tremendous driver of many positive societal outcomes - politically, economically, and socially. You can't just take a steepening reward structure out of that context.
  - yummyfajitas 11y ago
    You cherrypicked the one number (CIA GINI) for India that was above average, and not even above the US. India UNR/P = 8.6, WB Gini = 33.6, CIA R/P = 8.6, CIA Gini = 42.8 USA UNR/P = 15.9, WB Gini = 41.1, CIA R/P = 15, CIA Gini = 45 I have no idea what you mean by "middle class" - there are many possible definitions. Now that your claims about incentives and your conflation of poverty and inequality are debunked, you still believe that inequality is somehow bad? What facts (if any) would cause you to reject this belief?
    - badsock 11y ago
      Wait, wait. You're the one that claimed that India was a "highly equal society" - the burden of proof is on you. Your numbers are comparing India with the US, which is an unequal society, so you haven't provided it yet. And you really believe that you've "debunked" my claims by referencing what happens to a pure mathematical abstraction? I'm not even sure how to address that. You can't honestly believe that models have influence over reality, and not the other way around? And I'm not claiming that inequality is bad. It's necessary, for example, to accommodate risk. All I've said is that it matters how much inequality there is, and having too much distorts things. The only claim I've made as to what constitutes too much is the level found in aristocratic societies. Are you arguing the opposite, that the degree of inequality has no great effect on a society? Or that the repercussions aren't negative as a country approaches the level that is marked by the formation of an aristocracy?
      - yummyfajitas 11y ago
        I shouldn't have said "highly equal", since that implies some sort of absolute standard of equality. It's certainly more equal than the US or UK, and according to all the statistics we've both cited except for CIA Gini, is comparable to France or other non-Scandinavian euro nations. You made a mathematical claim about a mathematical construct (incentive): From a motivational standpoint, of course the incentives of a great reward matter. But there has to be a reason for everyone from 2nd place downward to participate. I gave a mathematical response. If you don't believe that incentives govern behavior, then why did you bring them up and make incorrect claims about them? The only argument I make is that I've seen no convincing evidence that inequality matters much. At best I've seen a few cross-country correlations between inequality and other bad things. Even left wing types don't find such evidence very convincing, or at least they don't after I replace the X axis with "% single mothers" or "% black people" (increasing both the r^2 and social unacceptability of the conclusion).
        badsock 11y ago
        Well, in my mind you've exemplified perfectly what's wrong with libertarians: they believe models over reality. What else would let them so ardently believe in an economic system that's never been actually demonstrated to work. You argue that, by mathematical definition, a steepening Pareto curve will increase motivation for everyone on it, and that: "Now that your claims about incentives and your conflation of poverty and inequality are debunked[...]" Have you considered the possibility that in the actual world the curve doesn't strictly conform to the mathematical one? That it flattens early, or that the whole thing is translated downward? Or that it's not a Pareto curve but one that is similar? Or that (as has a lot of evidence behind it) that socially-based incentives are sensitive to relative inequality, not absolute? I pointed to an abstraction for illustration, and you made claims based on that abstraction and called it proof of the real world. This is economics: there's no such thing as "debunking", there's no such thing as "proof". There's evidence, and there's models that maybe explain some aspects of it better than others, from a very narrow view. Models can't demonstrate anything, all they can do is suggest experiments to be carried out in the actual world, at which point what happens there trumps any claims that they may have made. The only thing we really have is comparative studies, across nations and through time. Everything else is just fooling ourselves with our own metaphors. So when you discard the only thing that we've got as "a few cross-country correlations between inequality and other bad things", what exactly are going going to replace that with, your theories? It must be nice to live in such a simple world.
- SamReidHughes 11y ago
  Incentive isn't u'(x), it's more like u'(x)/u(x). Scaling u''(x) doesn't change inequality anyway (as defined by measurements of u(b)/u(a) or the Gini index) so it's a poor stand-in for the kind of convexity people are complaining about.
  - yummyfajitas 11y ago
    The incentive is how much your utility increases - between state B and state A, that's u(B)-u(A) = u'(h)(B-A). Take limits and you get to u'(x) for marginal estimates. Inequality is most definitely NOT defined by ratios of a utility function. The convexity of the OP was in the utility function; he seemed to believe that convexity of reward (and hence of utility, assuming u(reward) is monotonic) would only increase the reward for those at the top.
    - SamReidHughes 11y ago
      Maybe you should have made clear in your post, then, that u is utility, not income. If u is utility and v is income, then v'(x)/v(x) ~ u'(x), more or less. Most measures of inequality involve dollar ratios, which seem to correspond to differences in utility, or at least to self-reported happiness.

by badsock 11y ago

yummyfajitas 11y ago

In extremis that's where you're either in the elite, or barely subsisting. You are conflating inequality with poverty. To recognize that they aren't the same thing, come visit the highly equal society of India or Bangladesh. Also, the more you make a curve convex (and increasing), the more incentives it creates for everyone. Proof: convexity = u''(x). Increasing u''(x) increases u'(x)=int u''(x) dx. Since u'(x) is incentive, the proof is complete.

badsock 11y ago
That's not the case at all: India has a GINI of 0.43, which is above the world average of 0.39. Sweden is at 0.23. Source: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality https://en.wikipedia.org/wiki/List_of_countries_by_income_eq... And while alleviating absolute poverty is great, the point I'm making is that a large middle class is a tremendous driver of many positive societal outcomes - politically, economically, and socially. You can't just take a steepening reward structure out of that context.
- yummyfajitas 11y ago
  You cherrypicked the one number (CIA GINI) for India that was above average, and not even above the US. India UNR/P = 8.6, WB Gini = 33.6, CIA R/P = 8.6, CIA Gini = 42.8 USA UNR/P = 15.9, WB Gini = 41.1, CIA R/P = 15, CIA Gini = 45 I have no idea what you mean by "middle class" - there are many possible definitions. Now that your claims about incentives and your conflation of poverty and inequality are debunked, you still believe that inequality is somehow bad? What facts (if any) would cause you to reject this belief?
  - badsock 11y ago
    Wait, wait. You're the one that claimed that India was a "highly equal society" - the burden of proof is on you. Your numbers are comparing India with the US, which is an unequal society, so you haven't provided it yet. And you really believe that you've "debunked" my claims by referencing what happens to a pure mathematical abstraction? I'm not even sure how to address that. You can't honestly believe that models have influence over reality, and not the other way around? And I'm not claiming that inequality is bad. It's necessary, for example, to accommodate risk. All I've said is that it matters how much inequality there is, and having too much distorts things. The only claim I've made as to what constitutes too much is the level found in aristocratic societies. Are you arguing the opposite, that the degree of inequality has no great effect on a society? Or that the repercussions aren't negative as a country approaches the level that is marked by the formation of an aristocracy?
    - yummyfajitas 11y ago
      I shouldn't have said "highly equal", since that implies some sort of absolute standard of equality. It's certainly more equal than the US or UK, and according to all the statistics we've both cited except for CIA Gini, is comparable to France or other non-Scandinavian euro nations. You made a mathematical claim about a mathematical construct (incentive): From a motivational standpoint, of course the incentives of a great reward matter. But there has to be a reason for everyone from 2nd place downward to participate. I gave a mathematical response. If you don't believe that incentives govern behavior, then why did you bring them up and make incorrect claims about them? The only argument I make is that I've seen no convincing evidence that inequality matters much. At best I've seen a few cross-country correlations between inequality and other bad things. Even left wing types don't find such evidence very convincing, or at least they don't after I replace the X axis with "% single mothers" or "% black people" (increasing both the r^2 and social unacceptability of the conclusion).
      - badsock 11y ago
        Well, in my mind you've exemplified perfectly what's wrong with libertarians: they believe models over reality. What else would let them so ardently believe in an economic system that's never been actually demonstrated to work. You argue that, by mathematical definition, a steepening Pareto curve will increase motivation for everyone on it, and that: "Now that your claims about incentives and your conflation of poverty and inequality are debunked[...]" Have you considered the possibility that in the actual world the curve doesn't strictly conform to the mathematical one? That it flattens early, or that the whole thing is translated downward? Or that it's not a Pareto curve but one that is similar? Or that (as has a lot of evidence behind it) that socially-based incentives are sensitive to relative inequality, not absolute? I pointed to an abstraction for illustration, and you made claims based on that abstraction and called it proof of the real world. This is economics: there's no such thing as "debunking", there's no such thing as "proof". There's evidence, and there's models that maybe explain some aspects of it better than others, from a very narrow view. Models can't demonstrate anything, all they can do is suggest experiments to be carried out in the actual world, at which point what happens there trumps any claims that they may have made. The only thing we really have is comparative studies, across nations and through time. Everything else is just fooling ourselves with our own metaphors. So when you discard the only thing that we've got as "a few cross-country correlations between inequality and other bad things", what exactly are going going to replace that with, your theories? It must be nice to live in such a simple world.
SamReidHughes 11y ago
Incentive isn't u'(x), it's more like u'(x)/u(x). Scaling u''(x) doesn't change inequality anyway (as defined by measurements of u(b)/u(a) or the Gini index) so it's a poor stand-in for the kind of convexity people are complaining about.
- yummyfajitas 11y ago
  The incentive is how much your utility increases - between state B and state A, that's u(B)-u(A) = u'(h)(B-A). Take limits and you get to u'(x) for marginal estimates. Inequality is most definitely NOT defined by ratios of a utility function. The convexity of the OP was in the utility function; he seemed to believe that convexity of reward (and hence of utility, assuming u(reward) is monotonic) would only increase the reward for those at the top.
  - SamReidHughes 11y ago
    Maybe you should have made clear in your post, then, that u is utility, not income. If u is utility and v is income, then v'(x)/v(x) ~ u'(x), more or less. Most measures of inequality involve dollar ratios, which seem to correspond to differences in utility, or at least to self-reported happiness.