9 ms·

Honest question, can anyone explain WHY this is considered to be such a big problem? Really why, not just throwing slogans around. And why it should be treated

by Murkin 10y ago

Honest question, can anyone explain WHY this is considered to be such a big problem? Really why, not just throwing slogans around. And why it should be treated before things like absolute poverty, etc.

Havoc 10y ago
Causes social tension. Source: Grew up in SA - one of the most unequal countries out there.
- Murkin 10y ago
  Wouldn't it be more important to fight absolute poverty than inequality? Social tension is important and all, but food and medicine should trump that.
  - teh 10y ago
    It seems human nature complicates things. Perception of fairness trumps reason frequently [1]. [1] https://en.wikipedia.org/wiki/Ultimatum_game https://en.wikipedia.org/wiki/Ultimatum_game
  - conanbatt 10y ago
    IT would be hard to fight absolute poverty if the income of the bottom section never grows. You could theoretically tax higher and put welfare(or basic income?) but in practice that hasn't worked out very well, for both political and economic reasons. Also, even if you give everyone a basic living with for example, basic income, income inequality is still a problem, because to get a bit more of what you want you have to sell more of what you do. This unavoidable causes tension, because labor , value and price can get distorted. But not also that, because if you were to see that income inequality is a problem on how the value is captured, not created, this means that people with skills and capacity to create a lot of value are not getting rewarded for it, which is detrimental for all the members of society, except those that get the direct benefit of the value capture.
  - coldtea 10y ago
    If you fight inequality you also fight "absolute poverty", and in a way (increased working opportunities, better wages, larger economy) that's better, and more respectful, for the absolute poor than charity.
  - Ressuder 10y ago
    Social tension is very bad for the stability that allows us to ensure that all have access to food and medicine.
  - Havoc 10y ago
    >Wouldn't it be more important to fight absolute poverty than inequality? Well that too, but the tension comes directly from the inequality. e.g. Being hungry sucks, but it sucks more if you see fellow citizens live like kings.
- yummyfajitas 10y ago
  So does racial diversity. Is that a problem as well? Or is this just a post-hoc justification that you don't really believe?
  - crdoconnor 10y ago
    You really enjoy race baiting don't you?
    - yummyfajitas 10y ago
      I'm making an argument by contradiction. Premise 1: X causes social tension is a reason for us to oppose X. Fact: Racial diversity causes social tension. Premise 2: The person I'm arguing against doesn't believe racial diversity should be opposed. Conclusion: Maybe Premise 1 is wrong. But then using premise 1 as an argument against inequality is also wrong.
      - crdoconnor 10y ago
        https://en.wikipedia.org/wiki/Association_fallacy https://en.wikipedia.org/wiki/Association_fallacy Although I'd prefer to call it "argumentum ad assume racism"
        yummyfajitas 10y ago
        No. Association fallacy is a in b, a in c therefore b = c. My argument is a -> b, a -> c, c is false therefore a must be false, and the argument for b is also flawed.
      - woodandsteel 10y ago
        You seem to be assuming that social tension has only one cause, so if racial division causes social tension, then income inequality doesn't. You also seem to be assuming it is not possible that income inequality might be one important cause of racial division.
        10y ago
teh 10y ago
There's some evidence that high inequality precedes instability (Piketty good starting point, follow his references & data). The mechanisms are somewhat nebulous and likely complex and diffuse. So no single WHY other than stability (I live in the UK and an unpredictable future is really bad for my business as we just found out).
conanbatt 10y ago
Income inequality? As I wrote in a comment above, Income inequality is in some sense, a lot worse than wealth inequality. It means that the fruit of growth is divided in a way that the lower half gets a substantially lower cut. This means that wealth disparity can only grow. Think of startups gradually removing stock options from their employees, until they are absolutely eliminated with no salary compensation. Shareholders and management will get all the big gains from the company growth. One could consider this reasonable if the separation of dividends corresponds to the value provided, but I'd argue that there is a difference in the value you create, and the ability to capture that value.
- jondubois 10y ago
  You mean income inequality is not as bad as wealth inequality (typo?)? Your explanation seems to contradict your first sentence.
  - conanbatt 10y ago
    Does it? The explanation was just to show what gradual increase in income inequality would look like (reducing the income of the lower bottom), which would eventually cause wealth inequality.
iQuercus 10y ago
This area is not exactly renowned for being a hard, mechanically measurable science, so you will get many different answers as to whether this is a problem at all or not. The wisest suggestion I've gotten with regard to this is to not fall prey to instantaneous picture. It may even be impossible to have equality in a single slice of time. Rather than looking for single point inequality, look for how the population is moving through the income inequality over time. Basically, are the same people always in the bottom, middle, and top? If so, that's probably a problem. What's the time any given person spends in the top? Bottom? Middle? As long as you have continuous movement throughout and no one is stuck, you can at least know that there is some semblance of equality in opportunity even if not outcomes.
- zo1 10y ago
  "[...]you can at least know that there is some semblance of equality in opportunity even if not outcomes." Judging from the way people go about discussing these sorts of topics, I would say that outcome is a more widely-used "determinant" of fairness than opportunity. Outcomes are always seen as proxies for opportunity (or lack of it).
cheriot 10y ago
1. The most direct reason is economic growth. Rich people save more than the middle class who save more than the poor. When wealth shifts to the rich then there's less money spent. 2. Money becomes power. More power in the hands of fewer people is not good for a democracy. I only speak for myself. I'm curious what the more idealistic among us will say. Keep in mind that income growth is a proxy. What really matters is wealth inequality. We just talk about the one that's easier to measure.
- mortehu 10y ago
  But rich people often save in the form of investments in companies, which leads to further growth.
  - ricardobeat 10y ago
    Those investments are usually a very small proportion of their wealth and very much the opposite of savings.
  - crdoconnor 10y ago
    Not when there's no demand for the results of that investment they don't. They just pile it into existing capital assets instead (ever wondered why SF/NYC property is so expensive?).
  - coldtea 10y ago
    Only if those companies can sell their stuff. And the majority of customers are not other rich people. It the middle/working class are getting a smaller share of the pie, then the market shrinks compared to what it could be with a more uniform distribution -- and everybody suffers.
  - e40 10y ago
    Wow, I thought "trickle down" had been exposed for the BS it was, what, 20+ years ago?
    - ende 10y ago
krampc 10y ago
The gap should be linked to rising poverty to be ciritical or very important. However, lower incomes would mean that there are more consumers not able to afford products and services. So either they don't buy, subscribe or rent OR they will take a loan. I don't have to remind us about the consequences of a bursting bubble. I don't propose socialism, but employees should be able to earn enough money to feed a family. It's strange if a business pays less to its employees and hopes to have a higher revenue even if other businesses following the business's example.
justsaysmthng 10y ago
Large layers of society unhappy and frustrated, become easy prey for radical ideas disseminated by populist politicians. When this reaches a critical mass, it becomes less risky to take up arms and eliminate the oppressors in exchange for the promise of better life. Ends in revolution and war. The upper echelons of the revolutionary class become the new upper class, while the lower classes get the same or even worse of a deal dressed up in propaganda. Adapted from "The Theory and Practice of Oligarchical Collectivism" by Emmanuel Goldstein.
- GavinMcG 10y ago
  > populist They don't have to be populist! Just effective demagogues, whether or not they really have the people's interests at heart.
- jondubois 10y ago
  A successful revolution won't be possible if the wealthy acquire too much power (in the form of media, technology and war machinery). If you have a lot of poor people revolting against a small class of wealthy people (human vs human), then the poor are bound to win - But if wealthy people have an army of machines, weapons and powerful media propaganda channels at their disposal, then the poor masses would be completely powerless. I can see the following scenarios for the future of humanity: 1. The rich own effectively everything and their media propaganda machine becomes so good that the poor masses are completely oblivious as to what is happening. When machines become good enough to replace humans, the poor class will cease to become a productive asset for the wealthy; the poor will become a liability. At this point the rich will leverage their monopoly over the media to initiate a propaganda program to bring the poor class to a slow, merciful self-extinction. 2. The rich own almost everything but because of the internet and decentralized media sources which have remained outside of their control, their media propaganda machine is not effective enough to give them full control over the masses. When the poor cease to be assets for the wealthy, the wealthy will begin to implement various complex strategies to bring the poor masses to extinction - Because of decentralized media and high standards of education among the poor, the poor will become increasingly aware of what is happening and initiate a revolution. In response, the rich will swiftly deploy an army of killer drones and exterminate the poor. 3. The rich own effectively everything. When machines/robots become good enough to replace humans, the rich will see no point in hoarding the enormous amount of free wealth created by these robots and will share all economic proceeds equally amongst the masses. In this scenario, everyone lives happily ever after... Until robots take over and bring us all to extinction.
fche 10y ago
because socialism free people aren't equal. equal people aren't free.
- coldtea 10y ago
  >free people aren't equal. equal people aren't free. Citation needed.
  - fche 10y ago
    Seriously, not needed, just look around. In the context here, "equal" refers to economic accomplishment not legal standing. But of course the left likes to equivocate this term.
    - coldtea 10y ago
      Legal standing and economic accomplishment go hand in hand. Always did. To quote Anacharsis from 25 centuries before: "[your laws] are no different from spiders' webs. They'll restrain anyone weak and insignificant who gets caught in them, but they'll be torn to shreds by people with power and wealth." Or to quote Anatole France from last century: "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." Same goes for economic accomplishments of one's family and the opportunities their offspring get in life: http://thewireless.co.nz/articles/the-pencilsword-on-a-plate http://thewireless.co.nz/articles/the-pencilsword-on-a-plate You might not want people to be exactly equal economically, but you don't want huge discrepancies either for those reasons. But of course the right, and especially in the US, has a naive child-like view of a world of equal opportunity were individual work and merit make all the difference. One might as well believe in magic fairies...
      - fche 10y ago
        "Legal standing and economic accomplishment go hand in hand. Always did." That's pretty lame, "The rich can buy a verdict." Even if that were true, that would be a bug not a feature. "world of equal opportunity were individual work and merit make all the difference" straw man
gadders 10y ago
Socialiasm has a toxic brand these days, so people have re-labelled it as "income inequality".
ThomPete 10y ago
Who buy most fridges? A billionaire or a thousand millionaires. A society where the rich has most of the money can't grow and then in the end everyone gets poorer. It is a big problem IF the gap becomes too big at the expense of the poorest. I.e. the rich get richer but the poor doesn't get richer relative to the poor. It is not a big problem if there is some undefined balance between the different income groups as this will keep the economy going. The problem we have today is mostly that the rich gets much richer, the poor doesn't really get much better and the middle class is dissepearing which erodes the prospect of any society to grow.
- yummyfajitas 10y ago
  But the poor today all have fridges. Everything you describe is a problem of poverty, not inequality. Inequality is when the poor get 2x richer, but the rich get 3x richer, in real terms (not nominal). Do you have any reason to believe this is a problem?
  - ThomPete 10y ago
    The cost of living goes up. So yes it's a problem.
    - yummyfajitas 10y ago
      You deliberately ignored the words "in real terms".
      - ThomPete 10y ago
        It goes up in real terms since salaries are not going up with the cost of living.
  - antisthenes 10y ago
    > Inequality is when the poor get 2x richer, but the rich get 3x richer, in real terms (not nominal). Do you have any reason to believe this is a problem? But that isn't what's happening. The bottom quartile's incomes have shrunk when adjusted for inflation and they have stagnated since the 80s. That IS a problem.
adrenalinelol 10y ago
This is a red-herring, when people no longer have the ability to fund their local communities in this country, they also lose their agency. Look at Flint, MI; Due to their tax revenue (or lack thereof) the state government put a crony in charge; who proceeded to poison the water supply and destroy the lives of hundreds of children (brain damage). The plutocrats of our country do not have the right to drain the wealth of the "under-class" so they can redistribute it to another underclass in another country... which will of course conveniently help their economic interests at the same time.
- jondubois 10y ago
  Yes, that's pretty much exactly what's happening. See http://voxeu.org/sites/default/files/image/FromMay2014/laknerfig1_2.png http://voxeu.org/sites/default/files/image/FromMay2014/lakne... From this chart, we can clearly see that the middle class of the western world (80th percentile) has been paying all the cost of globalization. What's worse is that this chart is only in terms of income growth. I think if we looked at the percentile breakdown in terms of wealth growth, it would be even worse (remember, if you're wealthy, you can reinvest most of your income and it will compound over time).
- yummyfajitas 10y ago
  I'm confused. Flint lacks tax revenue due to having nothing of value to tax. How did the "plutocrats" drain wealth from Flint if Flint doesn't have any? Wikipedia suggests Flint has had a budget deficit for many years. That means wealth is flowing into Flint, not out. https://en.wikipedia.org/wiki/Flint,_Michigan#First_financial_emergency:_2002.E2.80.932004 https://en.wikipedia.org/wiki/Flint,_Michigan#First_financia...
  - TheOtherHobbes 10y ago
    No, it just means the wealth flowed out of Flint without being taxed or invested locally. That's what oligopolies do. In a sane system a single large employer would have to contribute to building a self-sustaining independent ecosystem of businesses in an area, instead of being allowed to extract profit and then leave when there's more profit to be made elsewhere. Monocultures are an unworkable idea with toxic effects in economics just as much as they are in nature.
crdoconnor 10y ago
Are you not concerned with the rich buying out governments?
- fche 10y ago
  Not that much. I'm more concerned that the government is buyable by anyone. It should be defanged and disempowered, so it is not worth buying.
Jgrubb 10y ago
You only have to open a history book and find any bloody revolution, then flip back a few pages to see what lead up to it to find the answer to your question.
cryoshon 10y ago
here i will spell it out for you 1 money = power 2 return to 1 if a few people have most of the money, they have nearly all of the power because nobody else's share of power or money is greater than theirs, even collectively honest question, do you have an ulterior motive in asking your question?
appleflaxen 10y ago
I think it's probably hard to cite "proof" for any economic principle, but it's extremely concerning to me because it's a feed-forward type of situation, and inherently unsustainable. Any time you have a feedforward situation, there is no equilibrium condition. You have a bubble, by definition, and the only thing that can happen is for it to pop. This happens when you reach the limit of a fundamental input to the bubble. When this happens, you have dramatic, rapid changes in the economic structure of society, which have historically always been Bad. From a software standpoint, it's a bit like writing a non-determinable program with an infinite loop in an unsafe language: it's just a matter of time. The other thing is that it's a violation of the golden rule: all of the unborn individuals should have a chance at economic success. The wider the split gets, the less and less realistic that opportunity is. It's fine for all of us that won the ovarian lottery, but we can't say with a straight face that we would be successful if we were born in the fields of a third world country (or the alleys of detroit).
pdkl95 10y ago
Why? In addition to the reasons other people have already said, a key reason excessive income inequality is bad is lack of demand. The economy doesn't exist if money isn't flowing, and you need both supply and demand for the economy to work. While [many people * low income] and [few people * high income] should both be able to produce demand, it's important to remember there is a brick-wall limit at the poor end of the curve. This is similar to the flaw in the martingale[1] betting system; you have to stop playing when your cash runs out. When you have to spend every dollar you have trying - and often failing[2] - to pay for basic living requirements, you aren't spending money on the rest of the economy. Expect violence to start when the bottom end of the income curve is pushed low enough that some people starts going hungry. A proper social safety net helps both of these problems. Keeping people in the economy with realistic wages (and/or a basic income or other welfare programs) keeps money flowing through a large part of the economy. It also discourages people from looting your house. Brexit and Trump are warnings; when people are desperate they tend to attack anything they perceive is they problem. Fixing the income problem needs to happen now, so people not only have enough to live, but also have a sense that they have their fair chance to succeed. If the warning signs are ignored... as Mark Blyth said, "The Hamptons is not a defensible position"[3]. [1] https://en.wikipedia.org/wiki/Martingale_%28betting_system%29 https://en.wikipedia.org/wiki/Martingale_%28betting_system%2... [2] https://medium.com/@sarahkendzior/the-minimum-wage-worker-strikes-back-fa4c36eb306b https://medium.com/@sarahkendzior/the-minimum-wage-worker-st... [3] https://www.youtube.com/watch?v=Zzl4B3mrKQE https://www.youtube.com/watch?v=Zzl4B3mrKQE
- TheOtherHobbes 10y ago
  It's also true there are different kinds of demand. Poor people need a mass market economy. They need the support of huge economic and physical supply chains to create/grow/ship/distribute/sell food and goods. The economy of the rich tends to rely on boutique artisanal goods and services that are more likely to handcrafted, hand-made, and labour intensive - for a very much smaller volume of labour. You can't run an economy if the former networks aren't profitable because they supply essential goods and services to most of the population. They also create employment for large numbers of people. You can run an economy quite happily if no one at all is producing hyper-expensive yachts and one-off handbags. Worse, you can't run the economy of the rich without the economy of the poor to support it. The rich economy only works when it can skim profitability off the poor. If there is no profitability, everyone goes bankrupt.
jgalt212 10y ago
I think it's a big problem because the lion's share of income inequality (at the very top) is caused by tax dodging, and has very little to with differing abilities, risk taking abilities, hard work, luck respect for Adam Smith's invisible hand, or even hustle.
amalcon 10y ago
There are two primary reasons for this, in my mind. The first is that income inequality trivially produces wealth inequality. We measure income instead because direct measures of wealth inequality can be misleading. If we define wealth as abstracted resources available, this seems obviously problematic: it reduces the size of the coalition needed to make decisions for society. To pick a crazy example, there are two ways for someone to prohibit serving falafel in their city. They can either get enough voters together to prohibit that (difficult for obvious reasons). Alternatively, they can get enough wealth together to buy or bribe all of the restaurants (or suppliers, or commercial property, etc). Naturally, we're nowhere close to my crazy example, but there are smaller examples of this effect that we're starting to see. Try going down to the store and buying a Blu-Ray player that doesn't encrypt its HDMI output. You can't, even though the majority of people who care one way or the other would like one. The other problem is that it's rather detrimental to the narrative that one's income is purely the result of the work one puts in. It's hard to explain rising income inequality if that is true. Are rich people systematically working harder (and poor people systematically working less hard) than they used to? That's implausible on its face, so what's causing the inequality to increase? There are some plausible explanations for this, which still work within the narrative that income results from work. Occam's Razor would seem to point in other directions, though.
- drivingmenuts 10y ago
  > You can't, even though the majority of people who care one way or the other would like one. The number of people who care is very small, though, which makes it economically inefficient to manufacture. While a machine could be manufactured with the feature as an add-on, that defeats the purpose of the feature in the first place.
  - amalcon 10y ago
    This would make sense if it were less expensive to manufacture a Blu-Ray player with HDCP than without, or if there were a significant number of consumers who explicitly prefer HDCP. Neither of these is true, so not using HDCP makes the device more valuable for the exact same cost (or maybe slightly less).
specialist 10y ago
To start, oversized influence. Hard to be a democracy when money == speech and some people have way more than their share.
mcguire 10y ago
Taking the US in isolation... Absolute poverty is a solved problem. People rarely starve to death in the US. It's an El Niño year; out here in not-SF we're having a bit of a drought, but no one is seriously afraid of a famine. Sure, there are things like health care that could be better, but those are second-order effects and fairly minor on the poverty scale. The actual problem is power. (That may not be a popular statement[1] in this forum, where single young adults are commonly making 2-3x the median household income and yet are fond of complaining about disenfranchisement.) Money is power, the power to do things and the power to tell others what do do. Now, I admit that the technology industry seems spectacularly bad about translating it's assets into political power, so it may not be apparent to people reading this, but I don't expect that to last forever. (C.f. Thiel and Gawker.) On the other hand, a lot of money in a small number of hands is not in the hands of the tech industry. Consider the Kochs, or Citigroup/JP Morgan/Goldman Sachs. That money buys politicians, to an extent, but it also buys agendas, access, and, rather amazingly, consensus. (Why do Americans seem to have a weird habit of voting for ideology instead of their presumably enlightened material interests?) This power held by a few people means that the actions of a country may not necessarily be in accord with the wishes of its citizens. Take a look at the third graph in the article. The peak of the England-Wales line is roughly 1825-1875, roughly the high point of the British Empire and, strangely, including things like the Irish famine. But, fortunately, for the likes of you and me, there isn't a problem. Yay. (As long as no one sets up guillotines.) [1] Dare I say it?: not a politically correct statement.
- cjlars 10y ago
  Are there any facts to substantiate your assertion about power being the problem? It would seem to me that the power of elites is trending down if anything. The rise of Trump, the Brexit vote, and the rise in taxes as a percent of GDP across most rich counties would seem to go against the selfish interests of the monied elite.
  - mcguire 10y ago
    Taking the US in isolation...[0] Donald Trump's campaign is populist, not whatever-the-political-opposite-of-elite-is. He is tied for #121 on the Forbes 400, after all.[1] I don't actually know enough about Brexit to tell what the hell is going on there (like a lot of people, apparently). I do know that some people[2a] are very unhappy that David Cameron called a referendum instead of going through parliament.[2b] See also populism. My feeling, however, is that the anti-immigration thingy has more to do with the UK's own inequality situation. Individual income taxes have been hovering between 6% and 10% of GDP since WWII; overall taxes have been between 15% and 20% of GDP since WWII.[3] Now, as far as power being the problem, to the extent of my knowledge there are no facts in politics. All I've got is that, historically, concentrating power into the hands of a small minority seems to be a poor idea; and that most of the modern "rich countries" are de facto pseudo-democracies, apparently in an effort to avoid having ultimate authority concentrated in a small minority. YMMV. Some shrinkage may occur. Not for internal use. Do not taunt Happy Fun Ball. [0] Unless someone's done gone and created a secret world government without copying me on the memo (Again, dammit!), rich countries' governmental structures should probably be treated in isolation. Particularly the US, which has remarkably little in common with "most rich countries". [1] http://www.forbes.com/forbes-400/list/2/#version:static http://www.forbes.com/forbes-400/list/2/#version:static [2a] https://next.ft.com/content/7877a0a6-3e11-11e6-9f2c-36b487ebd80a https://next.ft.com/content/7877a0a6-3e11-11e6-9f2c-36b487eb... [2b] http://www.economist.com/blogs/graphicdetail/2016/02/graphics-britain-s-referendum-eu-membership http://www.economist.com/blogs/graphicdetail/2016/02/graphic... [3] http://www.taxpolicycenter.org/statistics/source-revenue-share-gdp http://www.taxpolicycenter.org/statistics/source-revenue-sha...
ArkyBeagle 10y ago
The practical problem is that "the metric formerly known as M3" - monetary velocity - has been flat or declining for a long time now.
Xenophrenia 10y ago
Reign of Terror - Google it ;-)

by Murkin 10y ago

Havoc 10y ago

Causes social tension. Source: Grew up in SA - one of the most unequal countries out there.

Murkin 10y ago
Wouldn't it be more important to fight absolute poverty than inequality? Social tension is important and all, but food and medicine should trump that.
- teh 10y ago
  It seems human nature complicates things. Perception of fairness trumps reason frequently [1]. [1] https://en.wikipedia.org/wiki/Ultimatum_game https://en.wikipedia.org/wiki/Ultimatum_game
- conanbatt 10y ago
  IT would be hard to fight absolute poverty if the income of the bottom section never grows. You could theoretically tax higher and put welfare(or basic income?) but in practice that hasn't worked out very well, for both political and economic reasons. Also, even if you give everyone a basic living with for example, basic income, income inequality is still a problem, because to get a bit more of what you want you have to sell more of what you do. This unavoidable causes tension, because labor , value and price can get distorted. But not also that, because if you were to see that income inequality is a problem on how the value is captured, not created, this means that people with skills and capacity to create a lot of value are not getting rewarded for it, which is detrimental for all the members of society, except those that get the direct benefit of the value capture.
- coldtea 10y ago
  If you fight inequality you also fight "absolute poverty", and in a way (increased working opportunities, better wages, larger economy) that's better, and more respectful, for the absolute poor than charity.
- Ressuder 10y ago
  Social tension is very bad for the stability that allows us to ensure that all have access to food and medicine.
- Havoc 10y ago
  >Wouldn't it be more important to fight absolute poverty than inequality? Well that too, but the tension comes directly from the inequality. e.g. Being hungry sucks, but it sucks more if you see fellow citizens live like kings.
yummyfajitas 10y ago
So does racial diversity. Is that a problem as well? Or is this just a post-hoc justification that you don't really believe?
- crdoconnor 10y ago
  You really enjoy race baiting don't you?
  - yummyfajitas 10y ago
    I'm making an argument by contradiction. Premise 1: X causes social tension is a reason for us to oppose X. Fact: Racial diversity causes social tension. Premise 2: The person I'm arguing against doesn't believe racial diversity should be opposed. Conclusion: Maybe Premise 1 is wrong. But then using premise 1 as an argument against inequality is also wrong.
    - crdoconnor 10y ago
      https://en.wikipedia.org/wiki/Association_fallacy https://en.wikipedia.org/wiki/Association_fallacy Although I'd prefer to call it "argumentum ad assume racism"
      - yummyfajitas 10y ago
        No. Association fallacy is a in b, a in c therefore b = c. My argument is a -> b, a -> c, c is false therefore a must be false, and the argument for b is also flawed.
    - woodandsteel 10y ago
      You seem to be assuming that social tension has only one cause, so if racial division causes social tension, then income inequality doesn't. You also seem to be assuming it is not possible that income inequality might be one important cause of racial division.
      - 10y ago

teh 10y ago

There's some evidence that high inequality precedes instability (Piketty good starting point, follow his references & data). The mechanisms are somewhat nebulous and likely complex and diffuse. So no single WHY other than stability (I live in the UK and an unpredictable future is really bad for my business as we just found out).

conanbatt 10y ago

Income inequality? As I wrote in a comment above, Income inequality is in some sense, a lot worse than wealth inequality. It means that the fruit of growth is divided in a way that the lower half gets a substantially lower cut. This means that wealth disparity can only grow. Think of startups gradually removing stock options from their employees, until they are absolutely eliminated with no salary compensation. Shareholders and management will get all the big gains from the company growth. One could consider this reasonable if the separation of dividends corresponds to the value provided, but I'd argue that there is a difference in the value you create, and the ability to capture that value.

jondubois 10y ago
You mean income inequality is not as bad as wealth inequality (typo?)? Your explanation seems to contradict your first sentence.
- conanbatt 10y ago
  Does it? The explanation was just to show what gradual increase in income inequality would look like (reducing the income of the lower bottom), which would eventually cause wealth inequality.

iQuercus 10y ago

This area is not exactly renowned for being a hard, mechanically measurable science, so you will get many different answers as to whether this is a problem at all or not. The wisest suggestion I've gotten with regard to this is to not fall prey to instantaneous picture. It may even be impossible to have equality in a single slice of time. Rather than looking for single point inequality, look for how the population is moving through the income inequality over time. Basically, are the same people always in the bottom, middle, and top? If so, that's probably a problem. What's the time any given person spends in the top? Bottom? Middle? As long as you have continuous movement throughout and no one is stuck, you can at least know that there is some semblance of equality in opportunity even if not outcomes.

zo1 10y ago
"[...]you can at least know that there is some semblance of equality in opportunity even if not outcomes." Judging from the way people go about discussing these sorts of topics, I would say that outcome is a more widely-used "determinant" of fairness than opportunity. Outcomes are always seen as proxies for opportunity (or lack of it).

cheriot 10y ago

1. The most direct reason is economic growth. Rich people save more than the middle class who save more than the poor. When wealth shifts to the rich then there's less money spent. 2. Money becomes power. More power in the hands of fewer people is not good for a democracy. I only speak for myself. I'm curious what the more idealistic among us will say. Keep in mind that income growth is a proxy. What really matters is wealth inequality. We just talk about the one that's easier to measure.

mortehu 10y ago
But rich people often save in the form of investments in companies, which leads to further growth.
- ricardobeat 10y ago
  Those investments are usually a very small proportion of their wealth and very much the opposite of savings.
- crdoconnor 10y ago
  Not when there's no demand for the results of that investment they don't. They just pile it into existing capital assets instead (ever wondered why SF/NYC property is so expensive?).
- coldtea 10y ago
  Only if those companies can sell their stuff. And the majority of customers are not other rich people. It the middle/working class are getting a smaller share of the pie, then the market shrinks compared to what it could be with a more uniform distribution -- and everybody suffers.
- e40 10y ago
  Wow, I thought "trickle down" had been exposed for the BS it was, what, 20+ years ago?
  - ende 10y ago

krampc 10y ago

The gap should be linked to rising poverty to be ciritical or very important. However, lower incomes would mean that there are more consumers not able to afford products and services. So either they don't buy, subscribe or rent OR they will take a loan. I don't have to remind us about the consequences of a bursting bubble. I don't propose socialism, but employees should be able to earn enough money to feed a family. It's strange if a business pays less to its employees and hopes to have a higher revenue even if other businesses following the business's example.

justsaysmthng 10y ago

Large layers of society unhappy and frustrated, become easy prey for radical ideas disseminated by populist politicians. When this reaches a critical mass, it becomes less risky to take up arms and eliminate the oppressors in exchange for the promise of better life. Ends in revolution and war. The upper echelons of the revolutionary class become the new upper class, while the lower classes get the same or even worse of a deal dressed up in propaganda. Adapted from "The Theory and Practice of Oligarchical Collectivism" by Emmanuel Goldstein.

GavinMcG 10y ago
> populist They don't have to be populist! Just effective demagogues, whether or not they really have the people's interests at heart.
jondubois 10y ago
A successful revolution won't be possible if the wealthy acquire too much power (in the form of media, technology and war machinery). If you have a lot of poor people revolting against a small class of wealthy people (human vs human), then the poor are bound to win - But if wealthy people have an army of machines, weapons and powerful media propaganda channels at their disposal, then the poor masses would be completely powerless. I can see the following scenarios for the future of humanity: 1. The rich own effectively everything and their media propaganda machine becomes so good that the poor masses are completely oblivious as to what is happening. When machines become good enough to replace humans, the poor class will cease to become a productive asset for the wealthy; the poor will become a liability. At this point the rich will leverage their monopoly over the media to initiate a propaganda program to bring the poor class to a slow, merciful self-extinction. 2. The rich own almost everything but because of the internet and decentralized media sources which have remained outside of their control, their media propaganda machine is not effective enough to give them full control over the masses. When the poor cease to be assets for the wealthy, the wealthy will begin to implement various complex strategies to bring the poor masses to extinction - Because of decentralized media and high standards of education among the poor, the poor will become increasingly aware of what is happening and initiate a revolution. In response, the rich will swiftly deploy an army of killer drones and exterminate the poor. 3. The rich own effectively everything. When machines/robots become good enough to replace humans, the rich will see no point in hoarding the enormous amount of free wealth created by these robots and will share all economic proceeds equally amongst the masses. In this scenario, everyone lives happily ever after... Until robots take over and bring us all to extinction.

fche 10y ago

because socialism free people aren't equal. equal people aren't free.

coldtea 10y ago
>free people aren't equal. equal people aren't free. Citation needed.
- fche 10y ago
  Seriously, not needed, just look around. In the context here, "equal" refers to economic accomplishment not legal standing. But of course the left likes to equivocate this term.
  - coldtea 10y ago
    Legal standing and economic accomplishment go hand in hand. Always did. To quote Anacharsis from 25 centuries before: "[your laws] are no different from spiders' webs. They'll restrain anyone weak and insignificant who gets caught in them, but they'll be torn to shreds by people with power and wealth." Or to quote Anatole France from last century: "In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." Same goes for economic accomplishments of one's family and the opportunities their offspring get in life: http://thewireless.co.nz/articles/the-pencilsword-on-a-plate http://thewireless.co.nz/articles/the-pencilsword-on-a-plate You might not want people to be exactly equal economically, but you don't want huge discrepancies either for those reasons. But of course the right, and especially in the US, has a naive child-like view of a world of equal opportunity were individual work and merit make all the difference. One might as well believe in magic fairies...
    - fche 10y ago
      "Legal standing and economic accomplishment go hand in hand. Always did." That's pretty lame, "The rich can buy a verdict." Even if that were true, that would be a bug not a feature. "world of equal opportunity were individual work and merit make all the difference" straw man

gadders 10y ago

Socialiasm has a toxic brand these days, so people have re-labelled it as "income inequality".

ThomPete 10y ago

Who buy most fridges? A billionaire or a thousand millionaires. A society where the rich has most of the money can't grow and then in the end everyone gets poorer. It is a big problem IF the gap becomes too big at the expense of the poorest. I.e. the rich get richer but the poor doesn't get richer relative to the poor. It is not a big problem if there is some undefined balance between the different income groups as this will keep the economy going. The problem we have today is mostly that the rich gets much richer, the poor doesn't really get much better and the middle class is dissepearing which erodes the prospect of any society to grow.

yummyfajitas 10y ago
But the poor today all have fridges. Everything you describe is a problem of poverty, not inequality. Inequality is when the poor get 2x richer, but the rich get 3x richer, in real terms (not nominal). Do you have any reason to believe this is a problem?
- ThomPete 10y ago
  The cost of living goes up. So yes it's a problem.
  - yummyfajitas 10y ago
    You deliberately ignored the words "in real terms".
    - ThomPete 10y ago
      It goes up in real terms since salaries are not going up with the cost of living.
- antisthenes 10y ago
  > Inequality is when the poor get 2x richer, but the rich get 3x richer, in real terms (not nominal). Do you have any reason to believe this is a problem? But that isn't what's happening. The bottom quartile's incomes have shrunk when adjusted for inflation and they have stagnated since the 80s. That IS a problem.

adrenalinelol 10y ago

This is a red-herring, when people no longer have the ability to fund their local communities in this country, they also lose their agency. Look at Flint, MI; Due to their tax revenue (or lack thereof) the state government put a crony in charge; who proceeded to poison the water supply and destroy the lives of hundreds of children (brain damage). The plutocrats of our country do not have the right to drain the wealth of the "under-class" so they can redistribute it to another underclass in another country... which will of course conveniently help their economic interests at the same time.

jondubois 10y ago
Yes, that's pretty much exactly what's happening. See http://voxeu.org/sites/default/files/image/FromMay2014/laknerfig1_2.png http://voxeu.org/sites/default/files/image/FromMay2014/lakne... From this chart, we can clearly see that the middle class of the western world (80th percentile) has been paying all the cost of globalization. What's worse is that this chart is only in terms of income growth. I think if we looked at the percentile breakdown in terms of wealth growth, it would be even worse (remember, if you're wealthy, you can reinvest most of your income and it will compound over time).
yummyfajitas 10y ago
I'm confused. Flint lacks tax revenue due to having nothing of value to tax. How did the "plutocrats" drain wealth from Flint if Flint doesn't have any? Wikipedia suggests Flint has had a budget deficit for many years. That means wealth is flowing into Flint, not out. https://en.wikipedia.org/wiki/Flint,_Michigan#First_financial_emergency:_2002.E2.80.932004 https://en.wikipedia.org/wiki/Flint,_Michigan#First_financia...
- TheOtherHobbes 10y ago
  No, it just means the wealth flowed out of Flint without being taxed or invested locally. That's what oligopolies do. In a sane system a single large employer would have to contribute to building a self-sustaining independent ecosystem of businesses in an area, instead of being allowed to extract profit and then leave when there's more profit to be made elsewhere. Monocultures are an unworkable idea with toxic effects in economics just as much as they are in nature.

crdoconnor 10y ago

Are you not concerned with the rich buying out governments?

fche 10y ago
Not that much. I'm more concerned that the government is buyable by anyone. It should be defanged and disempowered, so it is not worth buying.

Jgrubb 10y ago

You only have to open a history book and find any bloody revolution, then flip back a few pages to see what lead up to it to find the answer to your question.

cryoshon 10y ago

here i will spell it out for you 1 money = power 2 return to 1 if a few people have most of the money, they have nearly all of the power because nobody else's share of power or money is greater than theirs, even collectively honest question, do you have an ulterior motive in asking your question?

appleflaxen 10y ago

I think it's probably hard to cite "proof" for any economic principle, but it's extremely concerning to me because it's a feed-forward type of situation, and inherently unsustainable. Any time you have a feedforward situation, there is no equilibrium condition. You have a bubble, by definition, and the only thing that can happen is for it to pop. This happens when you reach the limit of a fundamental input to the bubble. When this happens, you have dramatic, rapid changes in the economic structure of society, which have historically always been Bad. From a software standpoint, it's a bit like writing a non-determinable program with an infinite loop in an unsafe language: it's just a matter of time. The other thing is that it's a violation of the golden rule: all of the unborn individuals should have a chance at economic success. The wider the split gets, the less and less realistic that opportunity is. It's fine for all of us that won the ovarian lottery, but we can't say with a straight face that we would be successful if we were born in the fields of a third world country (or the alleys of detroit).

pdkl95 10y ago

Why? In addition to the reasons other people have already said, a key reason excessive income inequality is bad is lack of demand. The economy doesn't exist if money isn't flowing, and you need both supply and demand for the economy to work. While [many people * low income] and [few people * high income] should both be able to produce demand, it's important to remember there is a brick-wall limit at the poor end of the curve. This is similar to the flaw in the martingale[1] betting system; you have to stop playing when your cash runs out. When you have to spend every dollar you have trying - and often failing[2] - to pay for basic living requirements, you aren't spending money on the rest of the economy. Expect violence to start when the bottom end of the income curve is pushed low enough that some people starts going hungry. A proper social safety net helps both of these problems. Keeping people in the economy with realistic wages (and/or a basic income or other welfare programs) keeps money flowing through a large part of the economy. It also discourages people from looting your house. Brexit and Trump are warnings; when people are desperate they tend to attack anything they perceive is they problem. Fixing the income problem needs to happen now, so people not only have enough to live, but also have a sense that they have their fair chance to succeed. If the warning signs are ignored... as Mark Blyth said, "The Hamptons is not a defensible position"[3]. [1] https://en.wikipedia.org/wiki/Martingale_%28betting_system%29 https://en.wikipedia.org/wiki/Martingale_%28betting_system%2... [2] https://medium.com/@sarahkendzior/the-minimum-wage-worker-strikes-back-fa4c36eb306b https://medium.com/@sarahkendzior/the-minimum-wage-worker-st... [3] https://www.youtube.com/watch?v=Zzl4B3mrKQE https://www.youtube.com/watch?v=Zzl4B3mrKQE

TheOtherHobbes 10y ago
It's also true there are different kinds of demand. Poor people need a mass market economy. They need the support of huge economic and physical supply chains to create/grow/ship/distribute/sell food and goods. The economy of the rich tends to rely on boutique artisanal goods and services that are more likely to handcrafted, hand-made, and labour intensive - for a very much smaller volume of labour. You can't run an economy if the former networks aren't profitable because they supply essential goods and services to most of the population. They also create employment for large numbers of people. You can run an economy quite happily if no one at all is producing hyper-expensive yachts and one-off handbags. Worse, you can't run the economy of the rich without the economy of the poor to support it. The rich economy only works when it can skim profitability off the poor. If there is no profitability, everyone goes bankrupt.

jgalt212 10y ago

I think it's a big problem because the lion's share of income inequality (at the very top) is caused by tax dodging, and has very little to with differing abilities, risk taking abilities, hard work, luck respect for Adam Smith's invisible hand, or even hustle.

amalcon 10y ago

There are two primary reasons for this, in my mind. The first is that income inequality trivially produces wealth inequality. We measure income instead because direct measures of wealth inequality can be misleading. If we define wealth as abstracted resources available, this seems obviously problematic: it reduces the size of the coalition needed to make decisions for society. To pick a crazy example, there are two ways for someone to prohibit serving falafel in their city. They can either get enough voters together to prohibit that (difficult for obvious reasons). Alternatively, they can get enough wealth together to buy or bribe all of the restaurants (or suppliers, or commercial property, etc). Naturally, we're nowhere close to my crazy example, but there are smaller examples of this effect that we're starting to see. Try going down to the store and buying a Blu-Ray player that doesn't encrypt its HDMI output. You can't, even though the majority of people who care one way or the other would like one. The other problem is that it's rather detrimental to the narrative that one's income is purely the result of the work one puts in. It's hard to explain rising income inequality if that is true. Are rich people systematically working harder (and poor people systematically working less hard) than they used to? That's implausible on its face, so what's causing the inequality to increase? There are some plausible explanations for this, which still work within the narrative that income results from work. Occam's Razor would seem to point in other directions, though.

drivingmenuts 10y ago
> You can't, even though the majority of people who care one way or the other would like one. The number of people who care is very small, though, which makes it economically inefficient to manufacture. While a machine could be manufactured with the feature as an add-on, that defeats the purpose of the feature in the first place.
- amalcon 10y ago
  This would make sense if it were less expensive to manufacture a Blu-Ray player with HDCP than without, or if there were a significant number of consumers who explicitly prefer HDCP. Neither of these is true, so not using HDCP makes the device more valuable for the exact same cost (or maybe slightly less).

specialist 10y ago

To start, oversized influence. Hard to be a democracy when money == speech and some people have way more than their share.

mcguire 10y ago

Taking the US in isolation... Absolute poverty is a solved problem. People rarely starve to death in the US. It's an El Niño year; out here in not-SF we're having a bit of a drought, but no one is seriously afraid of a famine. Sure, there are things like health care that could be better, but those are second-order effects and fairly minor on the poverty scale. The actual problem is power. (That may not be a popular statement[1] in this forum, where single young adults are commonly making 2-3x the median household income and yet are fond of complaining about disenfranchisement.) Money is power, the power to do things and the power to tell others what do do. Now, I admit that the technology industry seems spectacularly bad about translating it's assets into political power, so it may not be apparent to people reading this, but I don't expect that to last forever. (C.f. Thiel and Gawker.) On the other hand, a lot of money in a small number of hands is not in the hands of the tech industry. Consider the Kochs, or Citigroup/JP Morgan/Goldman Sachs. That money buys politicians, to an extent, but it also buys agendas, access, and, rather amazingly, consensus. (Why do Americans seem to have a weird habit of voting for ideology instead of their presumably enlightened material interests?) This power held by a few people means that the actions of a country may not necessarily be in accord with the wishes of its citizens. Take a look at the third graph in the article. The peak of the England-Wales line is roughly 1825-1875, roughly the high point of the British Empire and, strangely, including things like the Irish famine. But, fortunately, for the likes of you and me, there isn't a problem. Yay. (As long as no one sets up guillotines.) [1] Dare I say it?: not a politically correct statement.

cjlars 10y ago
Are there any facts to substantiate your assertion about power being the problem? It would seem to me that the power of elites is trending down if anything. The rise of Trump, the Brexit vote, and the rise in taxes as a percent of GDP across most rich counties would seem to go against the selfish interests of the monied elite.
- mcguire 10y ago
  Taking the US in isolation...[0] Donald Trump's campaign is populist, not whatever-the-political-opposite-of-elite-is. He is tied for #121 on the Forbes 400, after all.[1] I don't actually know enough about Brexit to tell what the hell is going on there (like a lot of people, apparently). I do know that some people[2a] are very unhappy that David Cameron called a referendum instead of going through parliament.[2b] See also populism. My feeling, however, is that the anti-immigration thingy has more to do with the UK's own inequality situation. Individual income taxes have been hovering between 6% and 10% of GDP since WWII; overall taxes have been between 15% and 20% of GDP since WWII.[3] Now, as far as power being the problem, to the extent of my knowledge there are no facts in politics. All I've got is that, historically, concentrating power into the hands of a small minority seems to be a poor idea; and that most of the modern "rich countries" are de facto pseudo-democracies, apparently in an effort to avoid having ultimate authority concentrated in a small minority. YMMV. Some shrinkage may occur. Not for internal use. Do not taunt Happy Fun Ball. [0] Unless someone's done gone and created a secret world government without copying me on the memo (Again, dammit!), rich countries' governmental structures should probably be treated in isolation. Particularly the US, which has remarkably little in common with "most rich countries". [1] http://www.forbes.com/forbes-400/list/2/#version:static http://www.forbes.com/forbes-400/list/2/#version:static [2a] https://next.ft.com/content/7877a0a6-3e11-11e6-9f2c-36b487ebd80a https://next.ft.com/content/7877a0a6-3e11-11e6-9f2c-36b487eb... [2b] http://www.economist.com/blogs/graphicdetail/2016/02/graphics-britain-s-referendum-eu-membership http://www.economist.com/blogs/graphicdetail/2016/02/graphic... [3] http://www.taxpolicycenter.org/statistics/source-revenue-share-gdp http://www.taxpolicycenter.org/statistics/source-revenue-sha...

ArkyBeagle 10y ago

The practical problem is that "the metric formerly known as M3" - monetary velocity - has been flat or declining for a long time now.

Xenophrenia 10y ago

Reign of Terror - Google it ;-)