8 ms·

Is there any indication that people actually understand (and can mathematically demonstrate) how to fix this, or are all suggestions going to be based on econom

Is there any indication that people actually understand (and can mathematically demonstrate) how to fix this, or are all suggestions going to be based on economic or political ideologies? I'm not an expert, and I've heard many times the thought that macroeconomics is simply too complex for anybody to understand, so you constantly retreat back to "my political tribe vs your political tribe" instead of treating this as an well understood equation that has many perfectly valid solutions that can be explored.

antoineMoPa 7y ago
You would optimize the equation for whatever parameter values that your political tribe likes, so the fight between political tribes would still exist.
CydeWeys 7y ago
The fundamentals are pretty obvious. Wealth inequality is increasing. One way to fix is that more progressive taxation. It doesn't happen, though, because the rich have passed a critical tipping point where their money buys them enough influence to get their taxes lowered, thus making inequality worse (witness Trump's tax cuts).
- Consultant32452 7y ago
  >"Nobody likes to give themselves credit for this kind of messaging success, but progressive groups did a really good job of convincing people that Trump raised their taxes when the facts say a clear majority got a tax cut." ~Matthew Yglesias, Senior Correspondent for Vox This tweet has since been deleted, but there are many articles citing it if you want to verify it.
  - CydeWeys 7y ago
    Trump's tax cut disproportionately went to the very wealthy. Some data on that here: https://www.bloomberg.com/graphics/2018-tax-plan-consequences/ https://www.bloomberg.com/graphics/2018-tax-plan-consequence... The richer you are, the higher the percentage your taxes went down. And that's a higher percentage on more income, too, so if you look at total dollars per income level it's much worse.
    - Consultant32452 7y ago
      That's exactly what I would expect out of a progressive tax system, and what I think any reasonable person would expect. When there is a tax cut, the people who pay the majority of the taxes get the biggest benefit. In the chart you showed, the approximately half of the population that doesn't pay any federal income taxes still got a tax cut. How much of a tax cut do you expect a person to get when their tax bill is already <= $0? https://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24 https://www.marketwatch.com/story/45-of-americans-pay-no-fed...
      - notabee 7y ago
        That is not what progressive taxation means, by definition. When lower income earners pay a higher proportion of their income than higher income earners, that is a regressive tax structure. https://www.investopedia.com/ask/answers/042415/what-are-differences-between-regressive-proportional-and-progressive-taxes.asp https://www.investopedia.com/ask/answers/042415/what-are-dif...
        Consultant32452 7y ago
        We're talking about the federal income tax, which is the example given in that article of a progressive tax. The net result of our particular progressive income tax system is nearly half the country pays no income tax. I don't have a problem with that. I believe every reasonable voter understands that when a tax cut comes, it doesn't really benefit the people who aren't paying the tax to begin with.
        notabee 7y ago
        If the wealthiest are de facto not paying as much tax, proportionally, as the middle or poorest classes, then federal income tax is not truly progressive. It has been increasingly regressive since the peak marginal rates back in the 1950s. This includes the use of numerous loop holes in the tax code to avoid what should otherwise be a large tax, and those primarily benefit the wealthy. The overall tax burden is what counts. For instance, some states do not have income tax for anyone, but they get much of their revenue from sales tax. Sales tax is regressive because the wealthy spend a smaller proportion of their money on sales tax than those who live paycheck to paycheck.
analognoise 7y ago
I read a fascinating thing somewhere about how Communist Russia had a school of thought that was exactly that - that you could see the economy as an equation to be solved, and they tried their hardest to solve it. There were a number of issues, including getting good data on production (why tell the truth if you'll be killed or demoted for not meeting your production quota?) and that there wasn't a mechanism that allowed sufficient granularity into the types of items produced which led to all kinds of weird excesses (they mentioned pipes, specifically: that you could get a ton of some standard sizes, but others that would have to be recalibrated for and so would slow down production were simply not made, but the numbers only showed "growth in industrial pipe" - that kind of thing. The idea was that the system was too complex to really turn into a system of equations, so the free market one out. The article then theorized that a place like China, without any privacy scruples and with a semi-centrally planned economy, might actually be able to get enough data to create and solve that equation. I wish I could find the article for you, it had some really interesting historical references and links to economic thought in that kind of planned system I think you'd find fascinating. Maybe some other HN'er knows what I'm talking about!
- schoen 7y ago
  You might want to start with https://en.wikipedia.org/wiki/Economic_calculation_problem https://en.wikipedia.org/wiki/Economic_calculation_problem I think I might have seen a version of the article you're referring to, but I don't remember when or where.
- ianleeclark 7y ago
  I'm not familiar with that specific article, but the idea you're brushing up against is that of the planned economy. There was recently a book released (that I've yet to read) that concerns the modern viability of a planned economy and looks to megacorporations to prove the viability. https://www.goodreads.com/book/show/38914131-the-people-s-republic-of-walmart https://www.goodreads.com/book/show/38914131-the-people-s-re...
  - deleted 7y ago
    [deleted]
NTDF9 7y ago
At a fundamental level, incomes (and wealth) have to rise proportionate to productivity. Average employee productivity has increased a lot since 1970s but wages (and thus wealth) hasn't. The top 1% on the other hand reaped the benefits of low capital gains taxation, rates of interest an economic downturn that didn't collapse them and hoarded wealth and political power. With this hoarded wealth (and political power) and low taxes for the govt to run, they have jacked up prices of healthcare, education and housing for the masses. At the same time, they are lending more to various governments who now have to cut benefits for the masses. To fix it, just reverse it. Take a few billions off of each billionaire and subsidizing state college education would be a good start. Redistribution is important for revolutions to not happen.
- BadassFractal 7y ago
  A couple of questions here, purely reasoning about the math: It takes something like 400k to be in the top 1%. That's a decent FAANG developer 10 years into their career, that's not exactly Andrew Carnegie level of wealth. Are those people to be taxed more? 35% federal + 10% state tax in CA. Will more taxes on that bracket make that much of a difference to the country as a whole? Let's say we were to skim a billion off of all the billionaires in the US. That's about 500 of them. Does that solve the problem altogether? The government makes 7 trillion every year, that's a one time increase of 7%. Does that make that much of a difference?
  - cyphar 7y ago
    Federal taxes don't exist to raise revenue, because the USD is a sovereign currency (the federal government is the sole issuer of the USD). They exist to avoid inflation and disincentivise certain behaviour. The real solution is to simply spend more money to elevate people out of poverty. But then the question everyone asks is "how will you pay for it?" and instead of answering with the correct answer ("deficit spending is not the original sin, the reason why we are deficit spending is the important question") most political candidates instead say they'll tax rich people. It just so happens that reducing the amount of money and influence incredibly wealthy people have has its own benefits (less corruption and lobbying power for one), but revenue raising is not one of them.
door5 7y ago
> Is there any indication that people actually understand (and can mathematically demonstrate) how to fix this, or are all suggestions going to be based on economic or political ideologies? This is an engineer's mindset, but human society is not a purely logical system. Ideology has to be a part of the conversation, because wealth inequality is about our values. Do we want a world in which a small number of people control most of the economic and political power, or do we value a world in which wealth and power are distributed more evenly? This seems like a relatively obvious question for me.
- wait_a_minute 7y ago
  Do you believe that wealth has to be distributed equally or do you believe that some people earn more of the pie because of their own skills, efforts, and risk taking?
  - door5 7y ago
    I do believe that -- in fact, I have no problem with a relatively modest income and wealth inequality. However, the wealth and income inequality that exists in the United States is far beyond that. In the United States, the top 1% controls 35% of the wealth in this country, while the bottom 40% controls less than 1%. This isn't just a difference in skills, effort, and risk-taking. This is flagrant exploitation and domination by the rich and powerful. Furthermore, I don't believe that Jeff Bezos or any CEO has a claim to their billions. I agree that "billionaires are a policy failure" -- no one person has any right to that much wealth. Amazon's success is not solely attributable to Jeff Bezos, it was the work of thousands of employees and built upon publicly-funded technology research. That wealth should be distributed to society at large, not controlled by one man. If you find yourself defending billionaires, I wonder, why? Do you think you will someday be a billionaire? If not, then billionaires are not your friend. Their money is money that is taken from your pocket, and the collective pockets of our society. The traditional argument for wealth inequality is "a rising tide lifts all boats", but that has been empirically false since the 70s -- despite a massive increase in wealth, most of it has gone to a very tiny portion of our population. And if you're not part of that population, what on earth do you have to gain from defending them?
49531 7y ago
It's less of a "tribe" thing and more of an analysis of material conditions. People don't break out the guillotines if their lives are stable and their material needs are adequately taken care of; if they don't think there is something better on the other end of the blood bath. The same way people don't join unions if they think they will make less money because of their union dues. They do these things as a means to improving their material conditions. The problem is that one "tribe"'s material conditions are at the expense of the others. You can't increase wages without decreasing profit. So the profiting "tribe" is at odds with the wage "tribe". I'm scare-quoting "tribe" because the traditional word is class which we've had ironed out of us over the last 40 years. This is class struggle and has existed for a long time.
- BadassFractal 7y ago
  Is it safe to say that, if the conditions of the lower and middle class are perfectly favorable, people are living healthy, productive, happy lives and there is upwards mobility for those who are willing to do whatever it takes to dedicate their lives to it, then wealth inequality in and of itself isn't the thing we need to optimize for? Wealth inequality seems like a proxy metric for "the lower classes are struggling". Is the correlation (or causation?) between the two well established?
  - astine 7y ago
    In general, people will put up with a lot of governmental issues so long as their own personal lives are fine. There are still issues with wealth inequality leading to some groups having an outsized influence in government which is a concern.
    - BadassFractal 7y ago
      That's totally fair. Is there a way to separate wealth inequality from power inequality? e.g. Let's say I'm ok with Steve Jobs hoarding billions of he creates something game-changing for society over decades of starting/running a business, as long as that doesn't mean his vote is more important than that of an entire state. Does this boil down to the fact that, in the current political system, wealth can be traded for political power, and if that exchange didn't exist, then wealth wouldn't be an issue in the first place?
Gatsky 7y ago
This is just overcomplicating the issue I think. How many decisions are made with a detailed macroeconomic analysis? Trump is even trying to influence the Fed’s policy to make himself look better, that is the level of macroeconomic literacy in operation today. You either decide change is necessary and make it work accepting the consequences, or just give up I suppose. Anyway, it’s not like no one has run the experiment of trying a different system regarding healthcare and minimum wages.
axilmar 7y ago
I don't know if it's mathematically sound, but increases in wages (especially at the bottom) and increase taxation at the top will certainly help alleviate the problem.
specialist 7y ago
https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient "...Gini coefficient ... is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, and is the most commonly used measurement of inequality. "

antoineMoPa 7y ago

You would optimize the equation for whatever parameter values that your political tribe likes, so the fight between political tribes would still exist.

CydeWeys 7y ago

The fundamentals are pretty obvious. Wealth inequality is increasing. One way to fix is that more progressive taxation. It doesn't happen, though, because the rich have passed a critical tipping point where their money buys them enough influence to get their taxes lowered, thus making inequality worse (witness Trump's tax cuts).

Consultant32452 7y ago
>"Nobody likes to give themselves credit for this kind of messaging success, but progressive groups did a really good job of convincing people that Trump raised their taxes when the facts say a clear majority got a tax cut." ~Matthew Yglesias, Senior Correspondent for Vox This tweet has since been deleted, but there are many articles citing it if you want to verify it.
- CydeWeys 7y ago
  Trump's tax cut disproportionately went to the very wealthy. Some data on that here: https://www.bloomberg.com/graphics/2018-tax-plan-consequences/ https://www.bloomberg.com/graphics/2018-tax-plan-consequence... The richer you are, the higher the percentage your taxes went down. And that's a higher percentage on more income, too, so if you look at total dollars per income level it's much worse.
  - Consultant32452 7y ago
    That's exactly what I would expect out of a progressive tax system, and what I think any reasonable person would expect. When there is a tax cut, the people who pay the majority of the taxes get the biggest benefit. In the chart you showed, the approximately half of the population that doesn't pay any federal income taxes still got a tax cut. How much of a tax cut do you expect a person to get when their tax bill is already <= $0? https://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24 https://www.marketwatch.com/story/45-of-americans-pay-no-fed...
    - notabee 7y ago
      That is not what progressive taxation means, by definition. When lower income earners pay a higher proportion of their income than higher income earners, that is a regressive tax structure. https://www.investopedia.com/ask/answers/042415/what-are-differences-between-regressive-proportional-and-progressive-taxes.asp https://www.investopedia.com/ask/answers/042415/what-are-dif...
      - Consultant32452 7y ago
        We're talking about the federal income tax, which is the example given in that article of a progressive tax. The net result of our particular progressive income tax system is nearly half the country pays no income tax. I don't have a problem with that. I believe every reasonable voter understands that when a tax cut comes, it doesn't really benefit the people who aren't paying the tax to begin with.
        notabee 7y ago
        If the wealthiest are de facto not paying as much tax, proportionally, as the middle or poorest classes, then federal income tax is not truly progressive. It has been increasingly regressive since the peak marginal rates back in the 1950s. This includes the use of numerous loop holes in the tax code to avoid what should otherwise be a large tax, and those primarily benefit the wealthy. The overall tax burden is what counts. For instance, some states do not have income tax for anyone, but they get much of their revenue from sales tax. Sales tax is regressive because the wealthy spend a smaller proportion of their money on sales tax than those who live paycheck to paycheck.

analognoise 7y ago

I read a fascinating thing somewhere about how Communist Russia had a school of thought that was exactly that - that you could see the economy as an equation to be solved, and they tried their hardest to solve it. There were a number of issues, including getting good data on production (why tell the truth if you'll be killed or demoted for not meeting your production quota?) and that there wasn't a mechanism that allowed sufficient granularity into the types of items produced which led to all kinds of weird excesses (they mentioned pipes, specifically: that you could get a ton of some standard sizes, but others that would have to be recalibrated for and so would slow down production were simply not made, but the numbers only showed "growth in industrial pipe" - that kind of thing. The idea was that the system was too complex to really turn into a system of equations, so the free market one out. The article then theorized that a place like China, without any privacy scruples and with a semi-centrally planned economy, might actually be able to get enough data to create and solve that equation. I wish I could find the article for you, it had some really interesting historical references and links to economic thought in that kind of planned system I think you'd find fascinating. Maybe some other HN'er knows what I'm talking about!

schoen 7y ago
You might want to start with https://en.wikipedia.org/wiki/Economic_calculation_problem https://en.wikipedia.org/wiki/Economic_calculation_problem I think I might have seen a version of the article you're referring to, but I don't remember when or where.
ianleeclark 7y ago
I'm not familiar with that specific article, but the idea you're brushing up against is that of the planned economy. There was recently a book released (that I've yet to read) that concerns the modern viability of a planned economy and looks to megacorporations to prove the viability. https://www.goodreads.com/book/show/38914131-the-people-s-republic-of-walmart https://www.goodreads.com/book/show/38914131-the-people-s-re...
- deleted 7y ago
  [deleted]

NTDF9 7y ago

At a fundamental level, incomes (and wealth) have to rise proportionate to productivity. Average employee productivity has increased a lot since 1970s but wages (and thus wealth) hasn't. The top 1% on the other hand reaped the benefits of low capital gains taxation, rates of interest an economic downturn that didn't collapse them and hoarded wealth and political power. With this hoarded wealth (and political power) and low taxes for the govt to run, they have jacked up prices of healthcare, education and housing for the masses. At the same time, they are lending more to various governments who now have to cut benefits for the masses. To fix it, just reverse it. Take a few billions off of each billionaire and subsidizing state college education would be a good start. Redistribution is important for revolutions to not happen.

BadassFractal 7y ago
A couple of questions here, purely reasoning about the math: It takes something like 400k to be in the top 1%. That's a decent FAANG developer 10 years into their career, that's not exactly Andrew Carnegie level of wealth. Are those people to be taxed more? 35% federal + 10% state tax in CA. Will more taxes on that bracket make that much of a difference to the country as a whole? Let's say we were to skim a billion off of all the billionaires in the US. That's about 500 of them. Does that solve the problem altogether? The government makes 7 trillion every year, that's a one time increase of 7%. Does that make that much of a difference?
- cyphar 7y ago
  Federal taxes don't exist to raise revenue, because the USD is a sovereign currency (the federal government is the sole issuer of the USD). They exist to avoid inflation and disincentivise certain behaviour. The real solution is to simply spend more money to elevate people out of poverty. But then the question everyone asks is "how will you pay for it?" and instead of answering with the correct answer ("deficit spending is not the original sin, the reason why we are deficit spending is the important question") most political candidates instead say they'll tax rich people. It just so happens that reducing the amount of money and influence incredibly wealthy people have has its own benefits (less corruption and lobbying power for one), but revenue raising is not one of them.

door5 7y ago

> Is there any indication that people actually understand (and can mathematically demonstrate) how to fix this, or are all suggestions going to be based on economic or political ideologies? This is an engineer's mindset, but human society is not a purely logical system. Ideology has to be a part of the conversation, because wealth inequality is about our values. Do we want a world in which a small number of people control most of the economic and political power, or do we value a world in which wealth and power are distributed more evenly? This seems like a relatively obvious question for me.

wait_a_minute 7y ago
Do you believe that wealth has to be distributed equally or do you believe that some people earn more of the pie because of their own skills, efforts, and risk taking?
- door5 7y ago
  I do believe that -- in fact, I have no problem with a relatively modest income and wealth inequality. However, the wealth and income inequality that exists in the United States is far beyond that. In the United States, the top 1% controls 35% of the wealth in this country, while the bottom 40% controls less than 1%. This isn't just a difference in skills, effort, and risk-taking. This is flagrant exploitation and domination by the rich and powerful. Furthermore, I don't believe that Jeff Bezos or any CEO has a claim to their billions. I agree that "billionaires are a policy failure" -- no one person has any right to that much wealth. Amazon's success is not solely attributable to Jeff Bezos, it was the work of thousands of employees and built upon publicly-funded technology research. That wealth should be distributed to society at large, not controlled by one man. If you find yourself defending billionaires, I wonder, why? Do you think you will someday be a billionaire? If not, then billionaires are not your friend. Their money is money that is taken from your pocket, and the collective pockets of our society. The traditional argument for wealth inequality is "a rising tide lifts all boats", but that has been empirically false since the 70s -- despite a massive increase in wealth, most of it has gone to a very tiny portion of our population. And if you're not part of that population, what on earth do you have to gain from defending them?

49531 7y ago

It's less of a "tribe" thing and more of an analysis of material conditions. People don't break out the guillotines if their lives are stable and their material needs are adequately taken care of; if they don't think there is something better on the other end of the blood bath. The same way people don't join unions if they think they will make less money because of their union dues. They do these things as a means to improving their material conditions. The problem is that one "tribe"'s material conditions are at the expense of the others. You can't increase wages without decreasing profit. So the profiting "tribe" is at odds with the wage "tribe". I'm scare-quoting "tribe" because the traditional word is class which we've had ironed out of us over the last 40 years. This is class struggle and has existed for a long time.

BadassFractal 7y ago
Is it safe to say that, if the conditions of the lower and middle class are perfectly favorable, people are living healthy, productive, happy lives and there is upwards mobility for those who are willing to do whatever it takes to dedicate their lives to it, then wealth inequality in and of itself isn't the thing we need to optimize for? Wealth inequality seems like a proxy metric for "the lower classes are struggling". Is the correlation (or causation?) between the two well established?
- astine 7y ago
  In general, people will put up with a lot of governmental issues so long as their own personal lives are fine. There are still issues with wealth inequality leading to some groups having an outsized influence in government which is a concern.
  - BadassFractal 7y ago
    That's totally fair. Is there a way to separate wealth inequality from power inequality? e.g. Let's say I'm ok with Steve Jobs hoarding billions of he creates something game-changing for society over decades of starting/running a business, as long as that doesn't mean his vote is more important than that of an entire state. Does this boil down to the fact that, in the current political system, wealth can be traded for political power, and if that exchange didn't exist, then wealth wouldn't be an issue in the first place?

Gatsky 7y ago

This is just overcomplicating the issue I think. How many decisions are made with a detailed macroeconomic analysis? Trump is even trying to influence the Fed’s policy to make himself look better, that is the level of macroeconomic literacy in operation today. You either decide change is necessary and make it work accepting the consequences, or just give up I suppose. Anyway, it’s not like no one has run the experiment of trying a different system regarding healthcare and minimum wages.

axilmar 7y ago

I don't know if it's mathematically sound, but increases in wages (especially at the bottom) and increase taxation at the top will certainly help alleviate the problem.

specialist 7y ago

https://en.wikipedia.org/wiki/Gini_coefficient https://en.wikipedia.org/wiki/Gini_coefficient "...Gini coefficient ... is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, and is the most commonly used measurement of inequality. "