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You should read Capital in the Twenty-First Century by Thomas Piketty. It deals with this concept extensively.

by jonknee 11y ago

toomuchtodo 11y ago
Seconded for Capital in the Twenty-First Century.
forinti 11y ago
This is an interesting book. It gives a different angle on the ideia in Yanis Varoufakis' book The Global Minotaur which is that money has to circulate in order for the economy to function with stability. You just can't let it pile up too much in one place.
- yummyfajitas 11y ago
  Most of the wealth held by the rich isn't money failing to circulate. It's productive capacity producing goods for others. Elon Musk's wealth isn't a vault full of gold coins. It's a factory producing cars that other people get to drive. Piketty's book describes this phenomenon as well - his book is fundamentally about the world moving from a situation of having a $1M factory producing $100k in income to a situation of a $2M factory producing $150k in income. (I.e., r=2, g=1.5.)
  - Florin_Andrei 11y ago
    > Elon Musk's wealth isn't a vault full of gold coins. Elon is one of the very few people who put their money to excellent use. But for every Elon Musk out there, there are hundreds of Paris Hiltons.
    - yummyfajitas 11y ago
      It's Paris Hilton, the self-made millionaire you are referring to, right? The one disowned by her family, but who leveraged an entertaining personality into her own brand of fashion and and entertainment products? From what I can tell, most of her wealth is in the form of jewelry production and sales. Had she kept her inherited wealth it would be mostly in the form of hotels rather than money.
      - Locke1689 11y ago
        The parent I think is clearly going down the wrong road. Almost by definition, if you've heard of the person to cite then they have an outsized impact on wealth circulation. The people to look at are, say, Peter Oppenheimer, former CFO of Apple (picked at random). I'm sure his net worth is in the hundreds of millions and he has a few very nice houses -- but what's the likelihood that a significant portion of his wealth is reintroduced into the economy? I really know nothing about him, so maybe I'm being unfair and he spends lavishly on yachts and mansions, or is an angel investor in 100s of startups, but I think the prototypical Fortune 500 C-level is probably someone who lives very well, but not lavishly and not up to their very generous means. I should also note I'm excluding passive investment in mutual or hedge funds for the sake of argument, but I'm not sure whether they produce sufficient results to count as "reintroducing" money into the market.
        yummyfajitas 11y ago
        It's highly unlikely that Oppenheimer is sitting on large piles of cash. Most likely his wealth is again in productive assets - e.g. shares of SPY. As an owner of shares of SPY, he then owns small percentages of factories, airplanes, hotels, logistics and similar things. Virtually no one is actually sitting on money because that's a really dumb thing to do. Investing in productive capacity just provides a lot more money.
        Locke1689 11y ago
        I specifically excluded SPY in the last paragraph as a "productive" investment, but only for the sake of argument -- I admit I'm inclined to agree with you that even passive investment of this type is productive. I think the problem pointed out by the original article is that they don't like this because it tends to produce oligopolies (i.e., "chains"). Unfortunately, I think that's just because non-colluding oligopolies are efficient. So the market is "working," some just don't like the outcome.
        jonknee 11y ago
        Buying someone else's shares of a public company isn't super productive. You're buying a stake in future cash flows at companies, not investing in growth. Especially the way buybacks have been going lately,
danharaj 11y ago
Not to mention Capital itself. Whether or not you agree with it, and its historiography is mostly proved bunk by now, its analysis has value. The linked article is kind of boring because it explicitly does not analyze the structural conditions of capitalism which make the phenomena it criticizes inevitable. You can't fight these trends within the framework of capitalism.
- ArkyBeagle 11y ago
  I tend to rely ( probably too much ) on Adam Smith for my ideas about capitalism, and so far as they go these phenomena are not that. Specifically land leads to Ricardian rents, and historical examples of taxing land rents abound. Japan went from medeviel backwater to industrial giant in ... decades through the use of land taxation. At some point, they decided the classical Japanese values were more important and that is when the industrialists took over as an update to the Samurai and the rest is history. I don't blame them - classical/medieval Japanese culture is extraordinarily beautiful. But the Bushido Code does not mix with machine guns. Generally, capitalism if practiced by ... Vulcans or robots would not result in most of what we attribute to it as ills. But humans love to cheat, and the cost of prosecuting all that cheating is probably too high. We also seem unable to develop a media culture that does not fawn all over the rich and powerful. Actual Capitalist ethics emphasize consumer surplus most of all. Whether the externalities are what we think they are is a much richer discussion. Quite difficult. It is important to realistically believe you are serving your fellow man in this way.
  - Kalium 11y ago
    Our media culture seems to have two modes - aspiration and spite. Either we aspire to be like more "successful" people or we spite them for being more "successful" than us. I suspect this maps well to an ingroup/outgroup divide.
  - zo1 11y ago
    >"We also seem unable to develop a media culture that does not fawn all over the rich and powerful." They get the opposite as well. I've seen so much sheer, unreasoned hatred of the rich, simply for being rich. Almost as if it is assumed that they only got that way by some illegal/immoral means. Then, you get the other half of that side of the coin. That even if the rich did earn their money using legal/ethical means, they don't deserve it (or to keep/use it). It's inherent in all discussions of wealth inequality. Really, it's not enough to just let it be, but everyone wants to play social-engineer with progressively richer individuals. One additional thing, that you can see running in this discussion. That legality is not somehow an indicator of fairness/justice. A few commentators here have noted that rich people use tax "holes" and legal financial constructs to "evade" tax, as if it's a bad thing, and as if it's not something that was put in place by legal, democratic means. At this point, I'm inclined to believe that these individuals are content with circular reasoning because none of these points can be proven by themselves, and rather always rely on some other piece of the landscape to deflect critique.

You should read Capital in the Twenty-First Century by Thomas Piketty. It deals with this concept extensively.

by jonknee 11y ago

You should read Capital in the Twenty-First Century by Thomas Piketty. It deals with this concept extensively.

toomuchtodo 11y ago

Seconded for Capital in the Twenty-First Century.

forinti 11y ago

This is an interesting book. It gives a different angle on the ideia in Yanis Varoufakis' book The Global Minotaur which is that money has to circulate in order for the economy to function with stability. You just can't let it pile up too much in one place.

yummyfajitas 11y ago
Most of the wealth held by the rich isn't money failing to circulate. It's productive capacity producing goods for others. Elon Musk's wealth isn't a vault full of gold coins. It's a factory producing cars that other people get to drive. Piketty's book describes this phenomenon as well - his book is fundamentally about the world moving from a situation of having a $1M factory producing $100k in income to a situation of a $2M factory producing $150k in income. (I.e., r=2, g=1.5.)
- Florin_Andrei 11y ago
  > Elon Musk's wealth isn't a vault full of gold coins. Elon is one of the very few people who put their money to excellent use. But for every Elon Musk out there, there are hundreds of Paris Hiltons.
  - yummyfajitas 11y ago
    It's Paris Hilton, the self-made millionaire you are referring to, right? The one disowned by her family, but who leveraged an entertaining personality into her own brand of fashion and and entertainment products? From what I can tell, most of her wealth is in the form of jewelry production and sales. Had she kept her inherited wealth it would be mostly in the form of hotels rather than money.
    - Locke1689 11y ago
      The parent I think is clearly going down the wrong road. Almost by definition, if you've heard of the person to cite then they have an outsized impact on wealth circulation. The people to look at are, say, Peter Oppenheimer, former CFO of Apple (picked at random). I'm sure his net worth is in the hundreds of millions and he has a few very nice houses -- but what's the likelihood that a significant portion of his wealth is reintroduced into the economy? I really know nothing about him, so maybe I'm being unfair and he spends lavishly on yachts and mansions, or is an angel investor in 100s of startups, but I think the prototypical Fortune 500 C-level is probably someone who lives very well, but not lavishly and not up to their very generous means. I should also note I'm excluding passive investment in mutual or hedge funds for the sake of argument, but I'm not sure whether they produce sufficient results to count as "reintroducing" money into the market.
      - yummyfajitas 11y ago
        It's highly unlikely that Oppenheimer is sitting on large piles of cash. Most likely his wealth is again in productive assets - e.g. shares of SPY. As an owner of shares of SPY, he then owns small percentages of factories, airplanes, hotels, logistics and similar things. Virtually no one is actually sitting on money because that's a really dumb thing to do. Investing in productive capacity just provides a lot more money.
        Locke1689 11y ago
        I specifically excluded SPY in the last paragraph as a "productive" investment, but only for the sake of argument -- I admit I'm inclined to agree with you that even passive investment of this type is productive. I think the problem pointed out by the original article is that they don't like this because it tends to produce oligopolies (i.e., "chains"). Unfortunately, I think that's just because non-colluding oligopolies are efficient. So the market is "working," some just don't like the outcome.
        jonknee 11y ago
        Buying someone else's shares of a public company isn't super productive. You're buying a stake in future cash flows at companies, not investing in growth. Especially the way buybacks have been going lately,

danharaj 11y ago

Not to mention Capital itself. Whether or not you agree with it, and its historiography is mostly proved bunk by now, its analysis has value. The linked article is kind of boring because it explicitly does not analyze the structural conditions of capitalism which make the phenomena it criticizes inevitable. You can't fight these trends within the framework of capitalism.

ArkyBeagle 11y ago
I tend to rely ( probably too much ) on Adam Smith for my ideas about capitalism, and so far as they go these phenomena are not that. Specifically land leads to Ricardian rents, and historical examples of taxing land rents abound. Japan went from medeviel backwater to industrial giant in ... decades through the use of land taxation. At some point, they decided the classical Japanese values were more important and that is when the industrialists took over as an update to the Samurai and the rest is history. I don't blame them - classical/medieval Japanese culture is extraordinarily beautiful. But the Bushido Code does not mix with machine guns. Generally, capitalism if practiced by ... Vulcans or robots would not result in most of what we attribute to it as ills. But humans love to cheat, and the cost of prosecuting all that cheating is probably too high. We also seem unable to develop a media culture that does not fawn all over the rich and powerful. Actual Capitalist ethics emphasize consumer surplus most of all. Whether the externalities are what we think they are is a much richer discussion. Quite difficult. It is important to realistically believe you are serving your fellow man in this way.
- Kalium 11y ago
  Our media culture seems to have two modes - aspiration and spite. Either we aspire to be like more "successful" people or we spite them for being more "successful" than us. I suspect this maps well to an ingroup/outgroup divide.
- zo1 11y ago
  >"We also seem unable to develop a media culture that does not fawn all over the rich and powerful." They get the opposite as well. I've seen so much sheer, unreasoned hatred of the rich, simply for being rich. Almost as if it is assumed that they only got that way by some illegal/immoral means. Then, you get the other half of that side of the coin. That even if the rich did earn their money using legal/ethical means, they don't deserve it (or to keep/use it). It's inherent in all discussions of wealth inequality. Really, it's not enough to just let it be, but everyone wants to play social-engineer with progressively richer individuals. One additional thing, that you can see running in this discussion. That legality is not somehow an indicator of fairness/justice. A few commentators here have noted that rich people use tax "holes" and legal financial constructs to "evade" tax, as if it's a bad thing, and as if it's not something that was put in place by legal, democratic means. At this point, I'm inclined to believe that these individuals are content with circular reasoning because none of these points can be proven by themselves, and rather always rely on some other piece of the landscape to deflect critique.