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My version: I've always operated under the assumption that unequal wealth distribution ('fair' is a loaded word) has an economic cost, since equalities in weal

by leot 16y ago

My version: I've always operated under the assumption that unequal wealth distribution ('fair' is a loaded word) has an economic cost, since equalities in wealth (+ economic freedom) encourage economy-expanding activities like entrepreneurship. [removed the last point as it is fair one on its own, but is not entailed from the previous statements.] I could be wrong, though. Can anyone come up with an example of voluntary equal wealth distribution in a country relatively lacking in resources? There is a game-theoretic problem with voluntary wealth distribution. I'm happy to give up my income if all my peers do, but I'm really not inclined to do this if my peers don't. Anyhow, the Anglo idea-sphere seems to have a glut of free-market-is-the-best notions, and a vacuum where the counter-arguments lie. Here's one, for you, then: if there is more equal wealth distribution, then more people have more money (by definition), which almost always means that more people are better educated and have more economic opportunity. This means more people are free to invent stuff, to start businesses, and to generally innovate. It takes a particular level of education and economic opportunity to have the human capacity to support an Apple or a Google -- a level of education that is possessed by, conservatively, less than 20% of the population. Much of the American population is simply not equipped, by age 16, to have said opportunity. Imagine, then, what might happen if we doubled the size the base of people that could start/support an Apple or a Google -- wouldn't this lead to higher GDP and overall wealth? The parent's inequality=economically-good assumes that the population's entrepreneurial spirit is static, and not affected by means or opportunity (while, granted, one can succeed in spite of a lack of opportunity, it does not follow that added opportunity will not encourage entrepreneurship or innovation). My contention, thus, is: more equality ==> a greater number of empowered people ==> more and better businesses and economic activity ==> more wealth.

gyardley 16y ago
This is a plausible argument I haven't looked at before - thanks! Going to dig into this one this weekend. I wonder if we could construct a decent model incorporating education level, economic freedom, income level, income equality, and entrepreneurship.
- leot 16y ago
  I'd be very interested in hearing about what you turn up. I've been playing around with this idea as part of a prolonged debate I've had with a friend of mine over the purported benefits of inequality. His claim was essentially that it takes an obscenely wealthy patron to create a Mozart and outsized rewards to provide sufficient motivation. Presumably the first thing to figure out is what affects an individual economic agent's long-term output. There are definitely a lot of factors. Here are some off the top of my head, fwtw: - capital available - education level - area of interest - availability of good mentorship - intrinsic emotional/psychological motivating force of income inequality (this is what you referred to earlier) - individual's exposure to "culture" of innovation/productivity
HeyLaughingBoy 16y ago
Imagine, then, what might happen if we doubled the size the base of people that could start/support an Apple or a Google On the face of it: yes, it would lead to higher GDP. BUT you have to consider where that wealth to spread around came from in the first place. If I know that by becoming very wealthy I'm going to be taxed to kingdom come so my wealth can be "fairly distributed" then I don't have much of an incentive to become wealthy. Why would I, when I'd just end up back where I started? Allow me the opportunity to become wealthy and let me retain control of my wealth and then I'm just limited by personal circumstance and ambition.
- leot 16y ago
  You're making it sound like the work won't pay. It will, just less. Care to quantify "kingdom come"? This argument is effectively: "I will work my arse off if the tax rate is 5%, but not if the tax rate is, say, 45%. It's only worth it if I can become hyper-rich; super-rich just isn't good enough for me." Where is the evidence that increasing income/wealth taxes from, say, 20% to 40% causes people to work less hard? And where is the evidence that, even if this were true, it outweighs the other economic benefits of wealth redistribution?
  - HeyLaughingBoy 16y ago
    "Kingdom come" is the tax rate at which the risk of entrepreneurship is much greater than the potential after-tax reward. To your other question: whether nor not it outweighs any supposed benefits of wealth redistribution is irrelevant to the individual entrepreneur. Someone willing to work his ass off to start and run a successful venture isn't likely to think "I'll lose the majority of my profits to taxes, but I don't mind because at least it's being redistributed fairly."

by leot 16y ago

gyardley 16y ago

This is a plausible argument I haven't looked at before - thanks! Going to dig into this one this weekend. I wonder if we could construct a decent model incorporating education level, economic freedom, income level, income equality, and entrepreneurship.

leot 16y ago
I'd be very interested in hearing about what you turn up. I've been playing around with this idea as part of a prolonged debate I've had with a friend of mine over the purported benefits of inequality. His claim was essentially that it takes an obscenely wealthy patron to create a Mozart and outsized rewards to provide sufficient motivation. Presumably the first thing to figure out is what affects an individual economic agent's long-term output. There are definitely a lot of factors. Here are some off the top of my head, fwtw: - capital available - education level - area of interest - availability of good mentorship - intrinsic emotional/psychological motivating force of income inequality (this is what you referred to earlier) - individual's exposure to "culture" of innovation/productivity

HeyLaughingBoy 16y ago

Imagine, then, what might happen if we doubled the size the base of people that could start/support an Apple or a Google On the face of it: yes, it would lead to higher GDP. BUT you have to consider where that wealth to spread around came from in the first place. If I know that by becoming very wealthy I'm going to be taxed to kingdom come so my wealth can be "fairly distributed" then I don't have much of an incentive to become wealthy. Why would I, when I'd just end up back where I started? Allow me the opportunity to become wealthy and let me retain control of my wealth and then I'm just limited by personal circumstance and ambition.

leot 16y ago
You're making it sound like the work won't pay. It will, just less. Care to quantify "kingdom come"? This argument is effectively: "I will work my arse off if the tax rate is 5%, but not if the tax rate is, say, 45%. It's only worth it if I can become hyper-rich; super-rich just isn't good enough for me." Where is the evidence that increasing income/wealth taxes from, say, 20% to 40% causes people to work less hard? And where is the evidence that, even if this were true, it outweighs the other economic benefits of wealth redistribution?
- HeyLaughingBoy 16y ago
  "Kingdom come" is the tax rate at which the risk of entrepreneurship is much greater than the potential after-tax reward. To your other question: whether nor not it outweighs any supposed benefits of wealth redistribution is irrelevant to the individual entrepreneur. Someone willing to work his ass off to start and run a successful venture isn't likely to think "I'll lose the majority of my profits to taxes, but I don't mind because at least it's being redistributed fairly."