8 ms·

Concentrated Wealth Is Strangling Prosperity

86 points by akg_67 9y ago

Eliezer 9y ago
I laughed at the Smaug example because it's a good analogy - wealth doesn't hurt anyone sitting in a cave. And aggregate demand is controlled by the Fed - if it's too low "because" rich people are sitting on bank accounts, everyone at the Fed should be fired for incompetence.
- xiphias 9y ago
  Why is it incompetence if Fed increases shareholder value?
  - BoiledCabbage 9y ago
    At some point people will realize it's bad too optimize the world for shareholder value.
    - partomniscient 9y ago
      But at that point, will it be too late to do anything about it? Like most things, it depends where you are in the scheme of things.
- userpass 9y ago
  Right now the fed is trying to solve this issue by giving more money to the people with the caves.
Klockan 9y ago
> people with lots of money don’t spend it. They do, they just spend it on buying things like factories, companies and real estate. This is usually called investing and will also get money back into the system since the things you buy when investing were built by workers as well.
- llukas 9y ago
  Unless you're very bad at investing you take out more than you put in to the system...
  - sevenfive 9y ago
    Take out what, precisely?
    - justicezyx 9y ago
      Wealth
    - macawfish 9y ago
      Work, energy.
  - simonh 9y ago
    True, but everybody gets more than they had before. The employees get jobs, suppliers get paid on contracts, clients get goods and services. Everybody wins. When an owner cashed out the business isn’t wound up. When Bill Gates pulled most of his wealth out of Microsoft the employees weren’t thrown on the dole and all the businesse’s properties dynamited. His shares and those of other founded and investors were sold as a going concern to new investors. It’s called economic growth. However there are risks with too much wealth tied up in too small a demographic group. It reduces the diversity among those investing, thus reducing the diversity of investments. This could distort economic development and leave productive opportunities unexplored. It could also lead to political capture by this monied elite.
    - zxcmx 9y ago
      Everybody wins, but the people with the most win the most. In the limit that means they end up controlling all the things. You would somehow need "little people" wealth growth (in aggregate) to outstrip "rich people" wealth growth for this not to happen, but it can't because the little people have to spend non-negligible fractions (or all of) their income to stay afloat. Basically, the rich win by not actually spending (proportionally) much money. Thinking of it in exponentials, assuming you invest everything you don't consume, normal people have a drag on their exponential coefficient which is their cost of living. They also tend to invest less efficiently in aggregate due to not having wealth managers and specialised tax consultants and so on. In an investment race, highest exponent wins. There is a confounding factor of population growth though.
macawfish 9y ago
You know what else is strangling prosperity? Normalization of taking debt. When someone "buys" something using debt, it must be paid for many times over. They usually don't end up paying that all on their own, even though they were responsible for taking the debt. For example, when you buy an over valued house with a mortgage, say during a housing bubble, it doesn't make sense for you to try and sell it later on for less than you originally "paid" (with your fancy loan). So you are going to hold onto it, waiting for the market to go "up", so that you can sell it to yet another person who takes out yet another loan to "pay" for this overpriced house. In the mean time, either you or some renter is busting their ass to pay the interest on that unnecessary loan. It's completely ordinary for people who who decided not too take a mortgage to get stuck paying the interest for someone who locked a house into debt. This is completely straight forward but when I try to convey how absurd it is, a lot of common sense people look at me like I'm crazy. It's considered a financially "sound investment" to buy a house and try to sell it higher. Well what if I don't want to live in a world where everyone is just playing monopoly all the time? I feel like there are much more interesting and pressing things to do with our precious human time and energy than cater to these ridiculous cycles of debt. And lot of people who take debt because it's so "smart" couldn't come up with an original exponential function if their life depended in it.
- cycrutchfield 9y ago
  > And lot of people who take debt because it's so "smart" couldn't come up with an original exponential function if their life depended in it. What does this even mean?
  - macawfish 9y ago
    I mean that a lot of people don't understand how to write down an exponential function intuitively. A lot of people can write down the formula for compounding interest, but don't understand what it means or how to come up with it from scratch. People rely on math that they vaguely understand to govern their financial and economic relationships.
- conanbatt 9y ago
empath75 9y ago
This will only get worse as jobs get replaced by ais and robots, which will be owned by the wealthiest people as well. The darkest timeline is one in which the wealthy decide that the vast number of humans are unnecessary surplus to be eliminated, as the wealthy retreat into secure enclaves guarded by robot armies, leaving the rest to serve as slaves or to starve and die.
- conanbatt 9y ago
  The concept of surplus population is well accounted for in Das Capital as a way for manufacturers to absorb people from the farm lands at meager wages. The world however is not so dark, even at our worst.
- MrBuddyCasino 9y ago
  Traditionally the way to cull surplus population has been war. This is not possible anymore with two children per family on average, you just can't maintain popular support for that in a democracy. With ever bigger numbers of unemployed people's life going nowhere, that could change.
- averagewall 9y ago
  You're describing present day America, as well as all developed countries. They protect their "enclaves" from the masses of poor outside their borders using their armies.
- wbillingsley 9y ago
  They won't eliminate you. Just ignore you to play videogames in your parents' basement until it is clear that your future is gone. After all, in parts of most western countries, that is already what they are doing to local youth. Starvation, elimination, or enslavement? Why would they bother. They'll probably be quite generous with the foodstamps -- you're less likely to act up if they toss you a tin of beans now and again, and they can bemoan the ungrateful idleness of today's youth.
- pdkl95 9y ago
  We've been the path to the "darkest timeline". Mark Blyth (Prof. of political economy at Brown) has been warning his hedge fund friends that that, "the Hamptons is not a defensible position. ... Eventually people will come for you."[1] [1] https://www.youtube.com/watch?v=Zzl4B3mrKQE https://www.youtube.com/watch?v=Zzl4B3mrKQE
averagewall 9y ago
The author seems to have the forgone conclusion that high concentration of wealth is bad but doesn't put any real effort into explaining why. It's going to make people who agree it's bad feel supported and people who disagree feel frustrated at still not having an answer. The best reason I've heard is that is leads to violence. People (specifically men) can't cope with knowing they can never succeed in the competitive race to be the richest so they turn to other ways to gain power - like intimidating and beating people. But that seems to be more the fault of those individuals not the people they're jealous of. Maybe we should educate kids to not feel jealous of rich people and that would solve the problem.
- polotics 9y ago
  Wow, just wow. The biggest flaw is ignoring shared biology: the meanest virus/bacteria bred in the deepest helpless squalor of absolute 3rd+ world poverty can and will infect any 1st- world billionaire at the first opportunity. Add climate change and associated vector spread (west-nile, zika,...) and those opportunities multiply. Solidarity may be the optimal approach, even with a pure self-serving outlook.
  - conanbatt 9y ago
    If solidarity does give the best results, there isnt much to promote other than information. People will naturally act on their own behalf.
  - Sacho 9y ago
    The effect is the other way around; diseases like aids, malaria, polio were/are the scourges of the third world, because the poor do not have the means to treat them; the viruses/bacteria in the third world suffer low evolutionary pressure because the humans only fight back with their immune systems. In the first world, we grow super resistant bacteria due to evolutionary pressure from our modern medical treatment. It's the first world that we should fear from a "shared biology" standpoint.
    - polotics 9y ago
spodek 9y ago
Reagan won. At least his policies got what he wanted. He probably did love this country but didn't consider the consequences.
- blunte 9y ago
  He was an actor! He did well to surround himself with "experts" and then listen to them. Unfortunately his experts were wrong.
Aron 9y ago
Keep in mind folks, over by the green button: 'DONATING = CHANGING ECONOMICS. AND CHANGING THE WORLD.'
rbanffy 9y ago
And all that because accumulation of wealth is the best strategy to ensure long-term survival. Would we want to do it if we knew for sure we would always be able to live in nice houses, in nice, safe, clean neighborhoods, have good food and have healthy kids that go to good schools an colleges and repeat this same cycle? I wouldn't. I'd do what I do best, not what pays more.

86 points by akg_67 9y ago

I laughed at the Smaug example because it's a good analogy - wealth doesn't hurt anyone sitting in a cave. And aggregate demand is controlled by the Fed - if it's too low "because" rich people are sitting on bank accounts, everyone at the Fed should be fired for incompetence.

xiphias 9y ago
Why is it incompetence if Fed increases shareholder value?
- BoiledCabbage 9y ago
  At some point people will realize it's bad too optimize the world for shareholder value.
  - partomniscient 9y ago
    But at that point, will it be too late to do anything about it? Like most things, it depends where you are in the scheme of things.
userpass 9y ago
Right now the fed is trying to solve this issue by giving more money to the people with the caves.

Klockan 9y ago

> people with lots of money don’t spend it. They do, they just spend it on buying things like factories, companies and real estate. This is usually called investing and will also get money back into the system since the things you buy when investing were built by workers as well.

llukas 9y ago
Unless you're very bad at investing you take out more than you put in to the system...
- sevenfive 9y ago
  Take out what, precisely?
  - justicezyx 9y ago
    Wealth
  - macawfish 9y ago
    Work, energy.
- simonh 9y ago
  True, but everybody gets more than they had before. The employees get jobs, suppliers get paid on contracts, clients get goods and services. Everybody wins. When an owner cashed out the business isn’t wound up. When Bill Gates pulled most of his wealth out of Microsoft the employees weren’t thrown on the dole and all the businesse’s properties dynamited. His shares and those of other founded and investors were sold as a going concern to new investors. It’s called economic growth. However there are risks with too much wealth tied up in too small a demographic group. It reduces the diversity among those investing, thus reducing the diversity of investments. This could distort economic development and leave productive opportunities unexplored. It could also lead to political capture by this monied elite.
  - zxcmx 9y ago
    Everybody wins, but the people with the most win the most. In the limit that means they end up controlling all the things. You would somehow need "little people" wealth growth (in aggregate) to outstrip "rich people" wealth growth for this not to happen, but it can't because the little people have to spend non-negligible fractions (or all of) their income to stay afloat. Basically, the rich win by not actually spending (proportionally) much money. Thinking of it in exponentials, assuming you invest everything you don't consume, normal people have a drag on their exponential coefficient which is their cost of living. They also tend to invest less efficiently in aggregate due to not having wealth managers and specialised tax consultants and so on. In an investment race, highest exponent wins. There is a confounding factor of population growth though.

macawfish 9y ago

You know what else is strangling prosperity? Normalization of taking debt. When someone "buys" something using debt, it must be paid for many times over. They usually don't end up paying that all on their own, even though they were responsible for taking the debt. For example, when you buy an over valued house with a mortgage, say during a housing bubble, it doesn't make sense for you to try and sell it later on for less than you originally "paid" (with your fancy loan). So you are going to hold onto it, waiting for the market to go "up", so that you can sell it to yet another person who takes out yet another loan to "pay" for this overpriced house. In the mean time, either you or some renter is busting their ass to pay the interest on that unnecessary loan. It's completely ordinary for people who who decided not too take a mortgage to get stuck paying the interest for someone who locked a house into debt. This is completely straight forward but when I try to convey how absurd it is, a lot of common sense people look at me like I'm crazy. It's considered a financially "sound investment" to buy a house and try to sell it higher. Well what if I don't want to live in a world where everyone is just playing monopoly all the time? I feel like there are much more interesting and pressing things to do with our precious human time and energy than cater to these ridiculous cycles of debt. And lot of people who take debt because it's so "smart" couldn't come up with an original exponential function if their life depended in it.

cycrutchfield 9y ago
> And lot of people who take debt because it's so "smart" couldn't come up with an original exponential function if their life depended in it. What does this even mean?
- macawfish 9y ago
  I mean that a lot of people don't understand how to write down an exponential function intuitively. A lot of people can write down the formula for compounding interest, but don't understand what it means or how to come up with it from scratch. People rely on math that they vaguely understand to govern their financial and economic relationships.
conanbatt 9y ago

empath75 9y ago

This will only get worse as jobs get replaced by ais and robots, which will be owned by the wealthiest people as well. The darkest timeline is one in which the wealthy decide that the vast number of humans are unnecessary surplus to be eliminated, as the wealthy retreat into secure enclaves guarded by robot armies, leaving the rest to serve as slaves or to starve and die.

conanbatt 9y ago
The concept of surplus population is well accounted for in Das Capital as a way for manufacturers to absorb people from the farm lands at meager wages. The world however is not so dark, even at our worst.
MrBuddyCasino 9y ago
Traditionally the way to cull surplus population has been war. This is not possible anymore with two children per family on average, you just can't maintain popular support for that in a democracy. With ever bigger numbers of unemployed people's life going nowhere, that could change.
averagewall 9y ago
You're describing present day America, as well as all developed countries. They protect their "enclaves" from the masses of poor outside their borders using their armies.
wbillingsley 9y ago
They won't eliminate you. Just ignore you to play videogames in your parents' basement until it is clear that your future is gone. After all, in parts of most western countries, that is already what they are doing to local youth. Starvation, elimination, or enslavement? Why would they bother. They'll probably be quite generous with the foodstamps -- you're less likely to act up if they toss you a tin of beans now and again, and they can bemoan the ungrateful idleness of today's youth.
pdkl95 9y ago
We've been the path to the "darkest timeline". Mark Blyth (Prof. of political economy at Brown) has been warning his hedge fund friends that that, "the Hamptons is not a defensible position. ... Eventually people will come for you."[1] [1] https://www.youtube.com/watch?v=Zzl4B3mrKQE https://www.youtube.com/watch?v=Zzl4B3mrKQE

averagewall 9y ago

The author seems to have the forgone conclusion that high concentration of wealth is bad but doesn't put any real effort into explaining why. It's going to make people who agree it's bad feel supported and people who disagree feel frustrated at still not having an answer. The best reason I've heard is that is leads to violence. People (specifically men) can't cope with knowing they can never succeed in the competitive race to be the richest so they turn to other ways to gain power - like intimidating and beating people. But that seems to be more the fault of those individuals not the people they're jealous of. Maybe we should educate kids to not feel jealous of rich people and that would solve the problem.

polotics 9y ago
Wow, just wow. The biggest flaw is ignoring shared biology: the meanest virus/bacteria bred in the deepest helpless squalor of absolute 3rd+ world poverty can and will infect any 1st- world billionaire at the first opportunity. Add climate change and associated vector spread (west-nile, zika,...) and those opportunities multiply. Solidarity may be the optimal approach, even with a pure self-serving outlook.
- conanbatt 9y ago
  If solidarity does give the best results, there isnt much to promote other than information. People will naturally act on their own behalf.
- Sacho 9y ago
  The effect is the other way around; diseases like aids, malaria, polio were/are the scourges of the third world, because the poor do not have the means to treat them; the viruses/bacteria in the third world suffer low evolutionary pressure because the humans only fight back with their immune systems. In the first world, we grow super resistant bacteria due to evolutionary pressure from our modern medical treatment. It's the first world that we should fear from a "shared biology" standpoint.
  - polotics 9y ago

spodek 9y ago

Reagan won. At least his policies got what he wanted. He probably did love this country but didn't consider the consequences.

blunte 9y ago
He was an actor! He did well to surround himself with "experts" and then listen to them. Unfortunately his experts were wrong.

Aron 9y ago

Keep in mind folks, over by the green button: 'DONATING = CHANGING ECONOMICS. AND CHANGING THE WORLD.'

rbanffy 9y ago

And all that because accumulation of wealth is the best strategy to ensure long-term survival. Would we want to do it if we knew for sure we would always be able to live in nice houses, in nice, safe, clean neighborhoods, have good food and have healthy kids that go to good schools an colleges and repeat this same cycle? I wouldn't. I'd do what I do best, not what pays more.