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1. When everyone was a farmer, the difference between the best possible farmer and the worst farmer just wasn't that great. Maybe you're 2x faster at picking c

1. When everyone was a farmer, the difference between the best possible farmer and the worst farmer just wasn't that great. Maybe you're 2x faster at picking corn, or 3x better at hunting deer. But a few guys literally built a communication tool (WhatsApp) to be used by billions of people. So maybe in the old world you could pick 2x as much corn, but in today's world you can build 1 billion times the communication tools as someone else. 2. The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. The question is phrased as, "What percent of the total income pie did the 1% take" and not "How much pie did the top 1% of people produce to make the overall pie bigger?". I don't think either mentality is totally correct, but both are vitally important to understand (and the second belief is non-obvious to many). Did Steve Jobs producing the iPhone (and becoming a billionaire) take any of the poor people's money, or did it increase the overall output of the country? Steve jobs making the iPhone certainly made the country more unequal, but it also made the economy bigger and the country better off. 3. Does anyone care about equality, or do people care about poverty? Would a world where 1% of people had 100 yachts but 99% of people each had 1 yacht bother you? Would you rather live in a poor equal country or a rich unequal country?

Chinjut 9y ago
Like Steve Jobs made the iPhone with his own hands... He played a role in the creation of the iPhone, but the level and proportion of reward he received for that role is a choice we made as a society, not an intrinsic physical fact. I guarantee you, even in a world where telling other people to make iPhones doesn't make you a billionaire, there are still people who would line up at the chance to do it.
- tuna-piano 9y ago
  " the level and proportion of reward he received for that role is a choice we made as a society" I don't believe this statement to be at all accurate. We did not make that decision as a society. Millions of individual people made the decision to buy or not buy the phone based on its price and value. Millions of workers decided to work (or not work) for Apple/Foxconn based on their wages and the work. One of those workers was Steve Jobs, and the owners of Apple decided to pay him a certain amount for his work (and of course some of his wealth was derived from his ownership of Apple). A free market is a special economic system in that it's made up of completely voluntary agreements. There was no coercion involved to make Jobs wealthy.
  - Mz 9y ago
    My assumption is that the parent comment means, in part, that how we choose to do things like structure corporations and corporate compensation is a societal thing.
    - Chinjut 9y ago
      Yes. (Among a million other things. ALL the rules that determine who is a billionaire and who is a beggar are social choices, because wealth is a social relation. The fact that there even are these particular different possible ways for people to be treated is a social choice.)
      - Mz 9y ago
        "Possession is nine tenths of the law." (Though Wikipedia tells me it means something else: https://en.wikipedia.org/wiki/Possession_is_nine-tenths_of_the_law https://en.wikipedia.org/wiki/Possession_is_nine-tenths_of_t... My assumption has always been that the phrase meant that 90% of law is related to who owns what, basically.)
  - mancerayder 9y ago
    What you said, while true, is one-sided. It omits that companies like Apple are the beneficiaries of large tax breaks that ipso facto function as subsidies (because Apple is the beneficiary of tax spending in innumerable ways). It also looks at different taxation rates for individuals as well, with a capital gain tax that's far lower than ordinary income tax rates, as one example. So "as a society" applies here, in the loose sense of government decision-making. There's no market in the abstract - there are courts, tax laws, civil laws, and many other things that mediate.
    - tuna-piano 9y ago
      I would ask, what courts, tax laws, civil laws, etc are you referring to? Of course they impact the outcome, but which of those do you think is unfair or antithetical to my point about the free market? I think the tax thing is a huge misconception that just isn't backed up by reality. The US still has a progressive tax system, even after taking into account the many rules (or the mysterious and nefarious "tax breaks" that everyone alludes to). The top 1% have around 20% of the income, but pay 40% of the federal income taxes! Real federal income tax rate paid: Top 1% - 27% Top 5% - 23% Top 10% - 21% Top 25% - 18% Top 50% - 16% Bottom 50% - 3.45% https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
jackmott 9y ago
regarding #2 and 3 - there is some sort of social psychological principle where it doesn't matter if the pie has been made bigger. You will end up with discontent if the inequality happens nonetheless. So while it may not be rational, you still have to avoid it unless you want French Revolution scenarios.
- tuna-piano 9y ago
  Fair point. Maybe one of the downsides of living in a democracy is that the upper class needs to pay the lower class hush money to keep them from rioting or turning the economy into complete socialism.
- ttoinou 9y ago
  There is another social psychological fact : envy happens all the time in every society, and the more people are alike and socially close to each other, the more they envy themselves.
BearGoesChirp 9y ago
Part of the problem is that the inequality leads to behavior that protects the inequality. Disney passing lobbying for laws that will keep their work out of public domain despite how much they benefited from public domain. Drug companies lobbying to outlaw certain products that would help people but cut into profits. Enough inequality allows information control. Enough information control allows government control. Overall, if things were constantly getting better, I doubt people would care. But once things start stagnating for those at the bottom, they begin to consider not playing by the current set of rules.
- oconnor663 9y ago
  > Part of the problem is that the inequality leads to behavior that protects the inequality. I do agree with you, but I think it's worth nitpicking the examples. Is the Disney case an inequality problem? I'm not sure that it is. Suppose we waved a magic wand, and suddenly all of Disney's employees and shareholders were middle class people. Would that change Disney Inc's incentives around IP lobbying? I think that rather than an inequality problem, cases like Disney are something like a "concentrated interests" problem. Even if every individual person had exactly the same amount of money in the bank, they wouldn't all be equally invested in the exact same things, and competing interests would still emerge. Disney's incentives follow just from the fact that it has shareholders, regardless of how much wealth those shareholders have. And for what it's worth, as a society, this is definitely the problem we want! Concentrated interests solve huge problems, like how to make a $100 million movie that everyone wants to see, but that no one person could fund on their own.
  - BearGoesChirp 9y ago
    >Suppose we waved a magic wand, and suddenly all of Disney's employees and shareholders were middle class people. Would that change Disney Inc's incentives around IP lobbying? I'm not sure the shareholders are the actual issue, since it is Disney's concentration of wealth that allows it to change the laws (and gives it incentives to do so). It doesn't much matter who owns the wealth, since the chain from owner to actual employees carrying out the actions that change the laws ends up removing most impact of the share holders.
CJefferson 9y ago
With regards 2, the gap between most people earnings and house prices, has been rising steadily for years. It looks like the pie is getting bigger while people's share grows smaller faster.
frandroid 9y ago
> The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. No. The idea of income inequality assumes that no matter the size of the pie, everyone should have a decent slice of pie that lets them live comfortably. Industrialization was supposed to reduce the amount of hours we work and increase our quality of life. We seemed to have reached a floor at 40/50 hours a week and many many people are struggling to make ends meet, even if the richest countries in the world. There's a problem.
- tuna-piano 9y ago
  And yet even the poorest in the US still have TVs and refrigerators. I don't dismiss that life is difficult for many, but I also realize that they're working hard for a higher standard of living than is possible in many other times in history and many countries today. And in actuality, the poorest quintile in the USA is the quintile that works the least hours, not the most! Why do the top 20% of Americans work so much, then they could potentially work less and earn less? Perhaps that's the tradeoff that they as a group make? http://www.epi.org/publication/ib348-trends-us-work-hours-wages-1979-2007/ http://www.epi.org/publication/ib348-trends-us-work-hours-wa...
  - Chinjut 9y ago
    Yes, poor people today have access to technology which didn't exist hundreds of years ago. What of it? Poor people everywhere in every era under every economic system have access to technology which didn't exist in the past; this is the nature of time. Paupers of the late Neolithic had access to wheels their ancestors could only dream of. The comparison of note isn't between the present and the past, but between the system in place and alternative possible systems; between the present/future that is, and the present/future that could be. (Somehow, the same folks who love to proclaim "It's Econ 101…" also always go on to compare present to past to somehow prove the poor are getting a grand deal, instead of thinking about "opportunity cost" for the poor compared to alternative presents under alternative choices for how to structure society's wealth.) As for the idea that the poorest 20% in the US are voluntarily choosing to live in poverty out of work-shyness, while the richest 20% have contrastingly simply opted-in to their different status along some trade-off curve, this is both laughably ignorant and cruelly smug.
Florin_Andrei 9y ago
> The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. No. It simply says group A has a big pile of stuff, whereas B has a small pile. Which is factually true. It's about piles, not pies. Sorry for the awkwardly mixed metaphors.
retailbuyout 9y ago
I don’t think the total size of the pie matters so much as the proportion. Also, it’s relative positioning that determines happiness—i’d much rather live in a place where I can look my neighbor in the eye than one where I can leverage my privileges to provide myself many times a better life than my neighbor. I’m american; my quality of life could plummit without affecting my happiness much at all. But I have no idea what could compensate for someone living on my stoop in a tent.
- ttoinou 9y ago
  It's all about envy, then ?
  - retailbuyout 9y ago
    How do you figure? Happiness is not enviness of those less fortunate than you....
clairity 9y ago
that's an econ 101 concept that so badly misses the point, i'm not even sure it knows what the target is. and then a false dichotomy is tacked on to boot. yes, if you are playing an ideal, rational, competitive economic game, one strategy is to "grow the pie" and as a result capture larger economic gains even if your proportion of the market remains the same (or even shrinks). but when it comes to the real world, with all its complexity, we consider many more consequences than just the economic one (the profit motive). to answer the false dichotomy (the last question), we care about both. we want fairness (not perfect equality) and we want less poverty. and yes, that's entirely possible and should be pursued rigorously and with singular focus.
conanbatt 9y ago
There is a strong case to be against relative inequality. What happens when the next difference is not yatchs, but something substantially different like access to longevity medicine, bionic instrumentation, genetic engineering, armament, whatever. The great problem of some people being subdued to others clearly stems from the difference in power between them. Marx accounts that an English capitalist of his time could command 3 thousand servants, and as soon as he took them to america, literally all of them scrambled because they didn't have a dependency on him any more. Not only that, but, there is a big question on why is this happening at all. Is it because the upper classes are better at tax dodging? Is it because its just how capitalism normally works and provides the best results? Is it because we have a crushing difference on how the State benefits one over others? These are open questions, even Capital by Piketty doesnt have clear answers.
eighthnate 9y ago
> But a few guys literally built a communication tool (WhatsApp) to be used by billions of people. So maybe in the old world you could pick 2x as much corn, But the problem is that anyone can build whatsapp. It's not technologically sophisticated or difficult to do. > but in today's world you can build 1 billion times the communication tools as someone else. Which depends on market access, free time ( wealth ) and most importantly - access to capital. Most people in the world don't have access to it. > 2. The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. That is an argument. But it really doesn't matter if the pie grows if a small fraction of the population gets a greater share of the larger pie. > 3. Does anyone care about equality, or do people care about poverty? Would a world where 1% of people had 100 yachts but 99% of people each had 1 yacht bother you? Yes, if yachts = power. The problem in america is that money = power and more importantly, now money = speech. > Would you rather live in a poor equal country or a rich unequal country? Neither? You are offering a false dichotomy. It's the same argument posed by monarchists centuries ago. Either we have divine right monarchy or anarchy/complete chaos. How about democratic representative government? You are offering us two extremes and falsely claiming those are our only two options. It isn't. Extreme poverty and extreme economic inequality are both terrible systems.
ako 9y ago
The total size of the pie influences prices: if people have more money this by itself can cause inflation. See for example housing in San Francisco. Some people are forces to move, eventhough they have lived in the same house for years. Housing prices in the neighbourhood go up, because potential buyers have a large piece of the pie. This causes average house prices to rise, which causes taxes to rise. Suddenly the original piece of the pie is no longer enough to afford the house you always lived in.
Nokinside 9y ago
>2. The whole idea of inequality, while potentially useful, kind of assumes a fixed pie This is incorrect assumption. The idea behind too much inequality being bad assumes feedback loop. If you want to grow the pie, every non zero-sum investment into production and innovation must be matched by equivalent increase in consumption that creates the ROI. Post industrial economies are 60-70% private consumption, rest is government spending. All busines-to-business earnings flow from these two if you follow the money. Every product and industry has their money flowing trough private consumption or government spending, including WhatsApp. If too much of the money flows into the richest people, they only consume fraction of what they earn. Rest of their money is spend buying property or investments (increasing property prices or recusing P/E values). Economy turns into rent seeking, ROI decreases and the pie stops growing. All innovations that grow economy must pay themselves by producing money flow goes into the private consumers or to the governments pay collecting taxes. If private consumption is reduced, then either governments must step up and pay welfare benefits and invest into stuff like military or else the real economy slows down. Growth economy is not a pipeline that has the beginning and the end. It's a loop where money flows to other direction and products flow to the opposite direction. Income equality is not categorically bad. __too_much__ income inequality creates a stunt that directs too much money into capital goods and reduces the overall flow.
Chinjut 9y ago
No matter how large the pie is, we might question how it is to be carved up. The size of the pie doesn't answer the question of who gets to eat it. If it grows and grows, we still make a decision as to how to distribute that growth.
s17n 9y ago
1. True 2. Wealth isn't a fixed pie, but power is (also, real estate). 3. In fact, happiness correlates more strongly with relative income than absolute income. As an aside, I think that multigenerational wealth is particularly corrosive to society - I would be happy to accept extremely high inequality as long as it couldn't be inherited.
WalterBright 9y ago
When the income comes from free trade, then the value comes from increasing the pie. When the income comes from forcible exchanges (such as taxation) then the value comes from transference.
balance_factor 9y ago
1) Capitalism is creating commodities, like corn, and then shipping them. Picking one billion corn stalks is a lot more cost and effort than picking one corn stalk. With software nowadays, you create the first product, and then with the push of a button, can duplicate and distribute it to billions, almost instantly, almost for free. What this means is you are not really making a commodity any more. Which means that in those parts of societies where this mode of production prevails, you're not even really working within a system of capitalism any more. The system of production outgrows the economic system it is in, just like town trade and manufacture outgrew feudalism centuries ago. 2/3) The helpful thing is to look at what is actually happening, as in a scientific experiment. The real world is not people sitting on top of piles of money, like a dragon in some fairy tale. Those who get the fruit of other's labor by rentier means - landlords, lenders and most importantly stockholders and owners, can only spend so much on luxury goods. They also need only so much as that aforementioned stacks of Credit Suisse gold bars stored somewhere for a rainy day. Most of the money is reinvested. Where is the money invested? New construction projects, new companies, new loans - or further capital for existing projects. At companies owned, San Francisco apartments etc., more and more of wages go to profit and rent, as that is necessary for inequality. So the worker has less money to buy commodities. But more and more capital is being spent to build more and more commodities. The workers/consumers can not buy these increasing commodities made by the more enriched investors. Credit can kick the can down the road for a time, but if things don't go back to equilibrium, things get worse (see the 2008 taxpayer TARP bailout of banks, 2000 dot-bomb crash etc.) There's a documentary called the One Percent, where a conversation between Bill Gates Sr., Warren Buffett and Chuck Collins (Oscar Meyer heir) is retold. He is talking about the inheritance tax (now corporate spinned to be called the death tax) and says if things are as unequal as they are now without an inheritance tax, what will happen when one does happen? I myself don't think there's some liberal, social democratic solution. Idle class heirs have this self-destructive tendency to pull more and more power to themselves, to the point where they begin to undermine their own long-term power. At some point a very radical change comes. That has been the history of the past centuries. The US depression of the 1930s was so long ago, it's hard for Americans to fathom it, and I would guess most people think it could never happen again, but it could. It could even be worse.

Chinjut 9y ago

Like Steve Jobs made the iPhone with his own hands... He played a role in the creation of the iPhone, but the level and proportion of reward he received for that role is a choice we made as a society, not an intrinsic physical fact. I guarantee you, even in a world where telling other people to make iPhones doesn't make you a billionaire, there are still people who would line up at the chance to do it.

tuna-piano 9y ago
" the level and proportion of reward he received for that role is a choice we made as a society" I don't believe this statement to be at all accurate. We did not make that decision as a society. Millions of individual people made the decision to buy or not buy the phone based on its price and value. Millions of workers decided to work (or not work) for Apple/Foxconn based on their wages and the work. One of those workers was Steve Jobs, and the owners of Apple decided to pay him a certain amount for his work (and of course some of his wealth was derived from his ownership of Apple). A free market is a special economic system in that it's made up of completely voluntary agreements. There was no coercion involved to make Jobs wealthy.
- Mz 9y ago
  My assumption is that the parent comment means, in part, that how we choose to do things like structure corporations and corporate compensation is a societal thing.
  - Chinjut 9y ago
    Yes. (Among a million other things. ALL the rules that determine who is a billionaire and who is a beggar are social choices, because wealth is a social relation. The fact that there even are these particular different possible ways for people to be treated is a social choice.)
    - Mz 9y ago
      "Possession is nine tenths of the law." (Though Wikipedia tells me it means something else: https://en.wikipedia.org/wiki/Possession_is_nine-tenths_of_the_law https://en.wikipedia.org/wiki/Possession_is_nine-tenths_of_t... My assumption has always been that the phrase meant that 90% of law is related to who owns what, basically.)
- mancerayder 9y ago
  What you said, while true, is one-sided. It omits that companies like Apple are the beneficiaries of large tax breaks that ipso facto function as subsidies (because Apple is the beneficiary of tax spending in innumerable ways). It also looks at different taxation rates for individuals as well, with a capital gain tax that's far lower than ordinary income tax rates, as one example. So "as a society" applies here, in the loose sense of government decision-making. There's no market in the abstract - there are courts, tax laws, civil laws, and many other things that mediate.
  - tuna-piano 9y ago
    I would ask, what courts, tax laws, civil laws, etc are you referring to? Of course they impact the outcome, but which of those do you think is unfair or antithetical to my point about the free market? I think the tax thing is a huge misconception that just isn't backed up by reality. The US still has a progressive tax system, even after taking into account the many rules (or the mysterious and nefarious "tax breaks" that everyone alludes to). The top 1% have around 20% of the income, but pay 40% of the federal income taxes! Real federal income tax rate paid: Top 1% - 27% Top 5% - 23% Top 10% - 21% Top 25% - 18% Top 50% - 16% Bottom 50% - 3.45% https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...

jackmott 9y ago

regarding #2 and 3 - there is some sort of social psychological principle where it doesn't matter if the pie has been made bigger. You will end up with discontent if the inequality happens nonetheless. So while it may not be rational, you still have to avoid it unless you want French Revolution scenarios.

tuna-piano 9y ago
Fair point. Maybe one of the downsides of living in a democracy is that the upper class needs to pay the lower class hush money to keep them from rioting or turning the economy into complete socialism.
ttoinou 9y ago
There is another social psychological fact : envy happens all the time in every society, and the more people are alike and socially close to each other, the more they envy themselves.

BearGoesChirp 9y ago

Part of the problem is that the inequality leads to behavior that protects the inequality. Disney passing lobbying for laws that will keep their work out of public domain despite how much they benefited from public domain. Drug companies lobbying to outlaw certain products that would help people but cut into profits. Enough inequality allows information control. Enough information control allows government control. Overall, if things were constantly getting better, I doubt people would care. But once things start stagnating for those at the bottom, they begin to consider not playing by the current set of rules.

oconnor663 9y ago
> Part of the problem is that the inequality leads to behavior that protects the inequality. I do agree with you, but I think it's worth nitpicking the examples. Is the Disney case an inequality problem? I'm not sure that it is. Suppose we waved a magic wand, and suddenly all of Disney's employees and shareholders were middle class people. Would that change Disney Inc's incentives around IP lobbying? I think that rather than an inequality problem, cases like Disney are something like a "concentrated interests" problem. Even if every individual person had exactly the same amount of money in the bank, they wouldn't all be equally invested in the exact same things, and competing interests would still emerge. Disney's incentives follow just from the fact that it has shareholders, regardless of how much wealth those shareholders have. And for what it's worth, as a society, this is definitely the problem we want! Concentrated interests solve huge problems, like how to make a $100 million movie that everyone wants to see, but that no one person could fund on their own.
- BearGoesChirp 9y ago
  >Suppose we waved a magic wand, and suddenly all of Disney's employees and shareholders were middle class people. Would that change Disney Inc's incentives around IP lobbying? I'm not sure the shareholders are the actual issue, since it is Disney's concentration of wealth that allows it to change the laws (and gives it incentives to do so). It doesn't much matter who owns the wealth, since the chain from owner to actual employees carrying out the actions that change the laws ends up removing most impact of the share holders.

CJefferson 9y ago

With regards 2, the gap between most people earnings and house prices, has been rising steadily for years. It looks like the pie is getting bigger while people's share grows smaller faster.

frandroid 9y ago

> The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. No. The idea of income inequality assumes that no matter the size of the pie, everyone should have a decent slice of pie that lets them live comfortably. Industrialization was supposed to reduce the amount of hours we work and increase our quality of life. We seemed to have reached a floor at 40/50 hours a week and many many people are struggling to make ends meet, even if the richest countries in the world. There's a problem.

tuna-piano 9y ago
And yet even the poorest in the US still have TVs and refrigerators. I don't dismiss that life is difficult for many, but I also realize that they're working hard for a higher standard of living than is possible in many other times in history and many countries today. And in actuality, the poorest quintile in the USA is the quintile that works the least hours, not the most! Why do the top 20% of Americans work so much, then they could potentially work less and earn less? Perhaps that's the tradeoff that they as a group make? http://www.epi.org/publication/ib348-trends-us-work-hours-wages-1979-2007/ http://www.epi.org/publication/ib348-trends-us-work-hours-wa...
- Chinjut 9y ago
  Yes, poor people today have access to technology which didn't exist hundreds of years ago. What of it? Poor people everywhere in every era under every economic system have access to technology which didn't exist in the past; this is the nature of time. Paupers of the late Neolithic had access to wheels their ancestors could only dream of. The comparison of note isn't between the present and the past, but between the system in place and alternative possible systems; between the present/future that is, and the present/future that could be. (Somehow, the same folks who love to proclaim "It's Econ 101…" also always go on to compare present to past to somehow prove the poor are getting a grand deal, instead of thinking about "opportunity cost" for the poor compared to alternative presents under alternative choices for how to structure society's wealth.) As for the idea that the poorest 20% in the US are voluntarily choosing to live in poverty out of work-shyness, while the richest 20% have contrastingly simply opted-in to their different status along some trade-off curve, this is both laughably ignorant and cruelly smug.

Florin_Andrei 9y ago

> The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. No. It simply says group A has a big pile of stuff, whereas B has a small pile. Which is factually true. It's about piles, not pies. Sorry for the awkwardly mixed metaphors.

retailbuyout 9y ago

I don’t think the total size of the pie matters so much as the proportion. Also, it’s relative positioning that determines happiness—i’d much rather live in a place where I can look my neighbor in the eye than one where I can leverage my privileges to provide myself many times a better life than my neighbor. I’m american; my quality of life could plummit without affecting my happiness much at all. But I have no idea what could compensate for someone living on my stoop in a tent.

ttoinou 9y ago
It's all about envy, then ?
- retailbuyout 9y ago
  How do you figure? Happiness is not enviness of those less fortunate than you....

clairity 9y ago

that's an econ 101 concept that so badly misses the point, i'm not even sure it knows what the target is. and then a false dichotomy is tacked on to boot. yes, if you are playing an ideal, rational, competitive economic game, one strategy is to "grow the pie" and as a result capture larger economic gains even if your proportion of the market remains the same (or even shrinks). but when it comes to the real world, with all its complexity, we consider many more consequences than just the economic one (the profit motive). to answer the false dichotomy (the last question), we care about both. we want fairness (not perfect equality) and we want less poverty. and yes, that's entirely possible and should be pursued rigorously and with singular focus.

conanbatt 9y ago

There is a strong case to be against relative inequality. What happens when the next difference is not yatchs, but something substantially different like access to longevity medicine, bionic instrumentation, genetic engineering, armament, whatever. The great problem of some people being subdued to others clearly stems from the difference in power between them. Marx accounts that an English capitalist of his time could command 3 thousand servants, and as soon as he took them to america, literally all of them scrambled because they didn't have a dependency on him any more. Not only that, but, there is a big question on why is this happening at all. Is it because the upper classes are better at tax dodging? Is it because its just how capitalism normally works and provides the best results? Is it because we have a crushing difference on how the State benefits one over others? These are open questions, even Capital by Piketty doesnt have clear answers.

eighthnate 9y ago

> But a few guys literally built a communication tool (WhatsApp) to be used by billions of people. So maybe in the old world you could pick 2x as much corn, But the problem is that anyone can build whatsapp. It's not technologically sophisticated or difficult to do. > but in today's world you can build 1 billion times the communication tools as someone else. Which depends on market access, free time ( wealth ) and most importantly - access to capital. Most people in the world don't have access to it. > 2. The whole idea of inequality, while potentially useful, kind of assumes a fixed pie. That is an argument. But it really doesn't matter if the pie grows if a small fraction of the population gets a greater share of the larger pie. > 3. Does anyone care about equality, or do people care about poverty? Would a world where 1% of people had 100 yachts but 99% of people each had 1 yacht bother you? Yes, if yachts = power. The problem in america is that money = power and more importantly, now money = speech. > Would you rather live in a poor equal country or a rich unequal country? Neither? You are offering a false dichotomy. It's the same argument posed by monarchists centuries ago. Either we have divine right monarchy or anarchy/complete chaos. How about democratic representative government? You are offering us two extremes and falsely claiming those are our only two options. It isn't. Extreme poverty and extreme economic inequality are both terrible systems.

ako 9y ago

The total size of the pie influences prices: if people have more money this by itself can cause inflation. See for example housing in San Francisco. Some people are forces to move, eventhough they have lived in the same house for years. Housing prices in the neighbourhood go up, because potential buyers have a large piece of the pie. This causes average house prices to rise, which causes taxes to rise. Suddenly the original piece of the pie is no longer enough to afford the house you always lived in.

Nokinside 9y ago

>2. The whole idea of inequality, while potentially useful, kind of assumes a fixed pie This is incorrect assumption. The idea behind too much inequality being bad assumes feedback loop. If you want to grow the pie, every non zero-sum investment into production and innovation must be matched by equivalent increase in consumption that creates the ROI. Post industrial economies are 60-70% private consumption, rest is government spending. All busines-to-business earnings flow from these two if you follow the money. Every product and industry has their money flowing trough private consumption or government spending, including WhatsApp. If too much of the money flows into the richest people, they only consume fraction of what they earn. Rest of their money is spend buying property or investments (increasing property prices or recusing P/E values). Economy turns into rent seeking, ROI decreases and the pie stops growing. All innovations that grow economy must pay themselves by producing money flow goes into the private consumers or to the governments pay collecting taxes. If private consumption is reduced, then either governments must step up and pay welfare benefits and invest into stuff like military or else the real economy slows down. Growth economy is not a pipeline that has the beginning and the end. It's a loop where money flows to other direction and products flow to the opposite direction. Income equality is not categorically bad. __too_much__ income inequality creates a stunt that directs too much money into capital goods and reduces the overall flow.

Chinjut 9y ago

No matter how large the pie is, we might question how it is to be carved up. The size of the pie doesn't answer the question of who gets to eat it. If it grows and grows, we still make a decision as to how to distribute that growth.

s17n 9y ago

1. True 2. Wealth isn't a fixed pie, but power is (also, real estate). 3. In fact, happiness correlates more strongly with relative income than absolute income. As an aside, I think that multigenerational wealth is particularly corrosive to society - I would be happy to accept extremely high inequality as long as it couldn't be inherited.

WalterBright 9y ago

When the income comes from free trade, then the value comes from increasing the pie. When the income comes from forcible exchanges (such as taxation) then the value comes from transference.

balance_factor 9y ago

1) Capitalism is creating commodities, like corn, and then shipping them. Picking one billion corn stalks is a lot more cost and effort than picking one corn stalk. With software nowadays, you create the first product, and then with the push of a button, can duplicate and distribute it to billions, almost instantly, almost for free. What this means is you are not really making a commodity any more. Which means that in those parts of societies where this mode of production prevails, you're not even really working within a system of capitalism any more. The system of production outgrows the economic system it is in, just like town trade and manufacture outgrew feudalism centuries ago. 2/3) The helpful thing is to look at what is actually happening, as in a scientific experiment. The real world is not people sitting on top of piles of money, like a dragon in some fairy tale. Those who get the fruit of other's labor by rentier means - landlords, lenders and most importantly stockholders and owners, can only spend so much on luxury goods. They also need only so much as that aforementioned stacks of Credit Suisse gold bars stored somewhere for a rainy day. Most of the money is reinvested. Where is the money invested? New construction projects, new companies, new loans - or further capital for existing projects. At companies owned, San Francisco apartments etc., more and more of wages go to profit and rent, as that is necessary for inequality. So the worker has less money to buy commodities. But more and more capital is being spent to build more and more commodities. The workers/consumers can not buy these increasing commodities made by the more enriched investors. Credit can kick the can down the road for a time, but if things don't go back to equilibrium, things get worse (see the 2008 taxpayer TARP bailout of banks, 2000 dot-bomb crash etc.) There's a documentary called the One Percent, where a conversation between Bill Gates Sr., Warren Buffett and Chuck Collins (Oscar Meyer heir) is retold. He is talking about the inheritance tax (now corporate spinned to be called the death tax) and says if things are as unequal as they are now without an inheritance tax, what will happen when one does happen? I myself don't think there's some liberal, social democratic solution. Idle class heirs have this self-destructive tendency to pull more and more power to themselves, to the point where they begin to undermine their own long-term power. At some point a very radical change comes. That has been the history of the past centuries. The US depression of the 1930s was so long ago, it's hard for Americans to fathom it, and I would guess most people think it could never happen again, but it could. It could even be worse.