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You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age pe

You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0). And it's not just that "those that are better at competing will have more property". Every person is free to make a variety of choices for themselves, including how much they prioritize wealth creation. Since each one of us has only one life to live, and only one way to live it (i.e., the way each one of us choose to), and so many choices to make, there's no way we'll all make the same choices. Some will prioritize love, others family, others art, others business, or some mixture of these and other things. And that's just fine. We can't all pour ourselves into our work the way Elon Musk does, and we can't all only pick great ideas to pursue, and we don't all have the same talent or drive. > Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied. Indeed!

lmilcin 7y ago
I never said inequality is bad (by itself). Inequality is driving progress. Historically, people made little progress in circumstances where they could not amass and defend wealth. Property rights and working public institutions is what allows people to stop spending their entire time defending what little they have and instead figure out how to improve what they amassed (in other words progress).
- tremon 7y ago
  Precisely. Inequality only drives progress when people people believe it can be overcome. That's the basis for the American Dream. When people no longer believe that, as is the case in large parts of the US and EU, it only breeds resentment and drives down productivity and societal progress.
ska 7y ago
Isn't it also important to note that wealth acquisition activities and wealth creation activities are not the same thing?
- lmilcin 7y ago
  This is excellent point. If it is too easy to gather wealth so you can gather wealth without actually having to create any value (through corruption, extortion, monopoly, theft, deception, enslavement, etc.) then you will have the bad kind of inequality where most people are not compelled to put hard work to create value for others in order to create wealth for themselves. Again, GINI does not differentiate between the good and the bad kind of inequality, so two countries with same GDP and same GINI might be very different. One may be on the rise, with a number of enterpreneurs creating huge progress and value and the other might have couple of oligarchs who were able to amass their wealth with corruption.
  - amelius 7y ago
    > (through corruption, extortion, monopoly, theft, deception, enslavement, etc.) rent-seeking should be there too
    - ndarwincorn 7y ago
      In the financialized world we live in rent seeking should be the top of the list.
- wuliwong 7y ago
  There's also a number of activities that neither create, destroy or exchange wealth. This is why Mises sought to expand the study to praxeology and not simply economics.
- cryptonector 7y ago
  It's difficult to acquire wealth without creating it. The most obvious way is inheritance / gifts, or else crime (fraud, theft). Most wealth is created though, not inherited. E.g., most notable American billionaires (Gates, Buffet, Bezos, ...) of today created most of their wealth. Down the ranks from billionaires we might find more inheritance / less wealth creation, but I suspect that in general you'll find that in mature, open, liberal market economies, wealth is mostly created, not "acquired". EDIT: Ah yes, rent-seeking is a problem. That was identified by Adam Smith, and it's a problem that's as yet unsolved.
coldtea 7y ago
>You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0). The "growing of the pie" is also a fairy tale though to mask the realities... For one, the "growing pie" still manages to give some people not just most of the pie, but also to live the majority with smaller (in absolute size) slices than before -- stagnant inflation adjusted wages for decades, higher rents and houses, higher education costs, higher health costs, etc. Second, even if the "larges slices to the average person compared to before" was true, we shouldn't accept a minority to hoard increasingly more of the growing pie. For one, because money is power, so those elites would have increasingly more power over the rest damaging democracy. Second, because people should be compensated (for increased productivity etc) relatively to the size of the pie, not just larger than before. If an economy was scaled at 10 and now is scaled at 1000 (units of money), then it's not enough that those making 0.0001 now make 0.0002. Doesn't have to be equally distributed to all, but people in such a society should make closer to (1000/10)x not just 2x. Wealth in society is relative like that, not mere absolute. I don't think those proposing otherwise would be happy to be paid 2x what a peasant made in 1700 (inflation adjusted of course), just because it's "more". They expect their compensation to raise in accordance with the wealth level of their society and relatively to the size of the pie, not merely as a larger slice than some past in absolute terms.
- SamReidHughes 7y ago
  Basically, everybody is mooching off of prior inventors' work due to patent expiration. The point about higher rents, education, health costs, etc, is a miscalculation of inflation. There's a difference between two things: (1) the undesirability of a 1000x/2x split due to increased demand for the fixed supply of land and genius doctors, which means the 1000x/2x didn't properly account for inflation, and (2) the fact that it'd be way cooler to have a properly-inflation-adjusted 990x/12x income split than 1000x/2x, among 50%/50% of the population. On the other hand, Haiti and the Dominican Republic have equal populations and a 10x income difference, and I'm not shedding a single tear over it.
  - coldtea 7y ago
Retric 7y ago
Per capita GDP increased less from the Stone Age to now than you might think. Even if you discount all goods other than food to zero, it’s less than 100x growth in the last ~5-10,000 years. That’s less than 0.1% per year growth over that timeframe. Though valuing ancient goods at equivalent modern prices is debatable, it seems like a reasonable metric.
- eej71 7y ago
  The core point remains which is - wealth is not static. It is _created_.
  - eberkund 7y ago
    I believe the answer lies somewhere in the middle. Economic output is not entirely static, but it is not completely accurate to say a creative hard-working person who comes along and amasses a lot of wealth has created all of that wealth either. This should not be a controversial statement. Imagine a simple scenario where Walmart alone, represents the economy and they sell 100 units per year. Then Amazon comes along and starts competing and after a while Walmart is only selling 50 units a year and Amazon is selling 60 units per year. You could now argue that 10 units/year of wealth have been created. Maybe I am misunderstanding you but it seems you are arguing that 60 units/year of wealth were created in this scenario? Of course this is only a simple scenario where all the variables are fixed, in the real world there are thousands variables (or more) interacting with each other. Which is why IMO, it's overly simplistic to say that one person's prosperity is zero-sum but also equally simplistic to say that wealth is created independently of the rest of the economy.
    - NovemberWhiskey 7y ago
      I don't think that's what's being argued here at all. The point is primarily one about productivity growth and that causes the economy to grow. Consider agriculture. When we were all out in the fields plowing them with oxen the whole time, and grinding flour by hand with stones, we didn't have much time to be doing anything else. The invention of water- and wind-powered mills reduced the amount of time spent milling. Add (in no particular order) the seed drill, the horse-drawn reaper, pesticides, crop rotation, scientific theories of plant breeding, combine harvesters, nitrogen-based fertilizers, insect-resistant bio-engineered crops etc. Productivity in agriculture in the developed world has DOUBLED since the 1960s. John Deere invented the self-scouring steel plow and became famous and wealthy as a result. Some of that wealth came as a result of people buying his plow instead of buying someone else's; but the economic growth that resulted from his innovation was in terms of improved efficiency in farming in the plains of the Mid-West.
tw04 7y ago
It absolutely IS fixed. We may not have reached its peak, but until we managed to start settling other planets we have a finite amount of: Clean Water Land Natural resources You can take your pick about which one runs out first/be consumed by a small group of ultra-wealthy, but one of them WILL run out first.
- wuliwong 7y ago
  How can something be fixed but not have reached its peak? You are saying that there is some theoretical maximum that is fixed but that is not in disagreement with the comment you are responding to.
- taneq 7y ago
  Many countries are creating clean water through desalination or reprocessing. Some countries have created land by building islands or reclaiming coastal shelf area. Natural resources available are increased by better tech making more available. So yeah, they’re less fixed than you think.
  - tw04 7y ago
    They really aren’t. We have no way to meaningfully increase the surface area of the earth, it’s fixed. Even if we were to drain the oceans entirely, you’re just kicking the can down the road (ignoring the fact we’d likely all die). Increasing our effectiveness removing natural resources doesn’t increase the amount on earth, so again, fixed. We will eventually run out. Desalination assumes that the ocean is clean water. Micro plastics would like to have a word with you.
    - taneq 7y ago
      You're moving the goalposts on land area. We can increase available land area (in your extreme scenario) by 200% without leaving the planet, and we're a lot closer to colonizing Mars than doing this. We're so far off using anywhere near all of even the easily available natural resources on Earth that considering it as a limited quantity is fatuous. By the time we legitimately run out of materials on Earth we'll be able to colonize other planets or just create whatever we need through fusion and chemical synthesis. Desalination for potable water includes filtration which removes microplastics along with everything else.

lmilcin 7y ago

I never said inequality is bad (by itself). Inequality is driving progress. Historically, people made little progress in circumstances where they could not amass and defend wealth. Property rights and working public institutions is what allows people to stop spending their entire time defending what little they have and instead figure out how to improve what they amassed (in other words progress).

tremon 7y ago
Precisely. Inequality only drives progress when people people believe it can be overcome. That's the basis for the American Dream. When people no longer believe that, as is the case in large parts of the US and EU, it only breeds resentment and drives down productivity and societal progress.

ska 7y ago

Isn't it also important to note that wealth acquisition activities and wealth creation activities are not the same thing?

lmilcin 7y ago
This is excellent point. If it is too easy to gather wealth so you can gather wealth without actually having to create any value (through corruption, extortion, monopoly, theft, deception, enslavement, etc.) then you will have the bad kind of inequality where most people are not compelled to put hard work to create value for others in order to create wealth for themselves. Again, GINI does not differentiate between the good and the bad kind of inequality, so two countries with same GDP and same GINI might be very different. One may be on the rise, with a number of enterpreneurs creating huge progress and value and the other might have couple of oligarchs who were able to amass their wealth with corruption.
- amelius 7y ago
  > (through corruption, extortion, monopoly, theft, deception, enslavement, etc.) rent-seeking should be there too
  - ndarwincorn 7y ago
    In the financialized world we live in rent seeking should be the top of the list.
wuliwong 7y ago
There's also a number of activities that neither create, destroy or exchange wealth. This is why Mises sought to expand the study to praxeology and not simply economics.
cryptonector 7y ago
It's difficult to acquire wealth without creating it. The most obvious way is inheritance / gifts, or else crime (fraud, theft). Most wealth is created though, not inherited. E.g., most notable American billionaires (Gates, Buffet, Bezos, ...) of today created most of their wealth. Down the ranks from billionaires we might find more inheritance / less wealth creation, but I suspect that in general you'll find that in mature, open, liberal market economies, wealth is mostly created, not "acquired". EDIT: Ah yes, rent-seeking is a problem. That was identified by Adam Smith, and it's a problem that's as yet unsolved.

coldtea 7y ago

>You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0). The "growing of the pie" is also a fairy tale though to mask the realities... For one, the "growing pie" still manages to give some people not just most of the pie, but also to live the majority with smaller (in absolute size) slices than before -- stagnant inflation adjusted wages for decades, higher rents and houses, higher education costs, higher health costs, etc. Second, even if the "larges slices to the average person compared to before" was true, we shouldn't accept a minority to hoard increasingly more of the growing pie. For one, because money is power, so those elites would have increasingly more power over the rest damaging democracy. Second, because people should be compensated (for increased productivity etc) relatively to the size of the pie, not just larger than before. If an economy was scaled at 10 and now is scaled at 1000 (units of money), then it's not enough that those making 0.0001 now make 0.0002. Doesn't have to be equally distributed to all, but people in such a society should make closer to (1000/10)x not just 2x. Wealth in society is relative like that, not mere absolute. I don't think those proposing otherwise would be happy to be paid 2x what a peasant made in 1700 (inflation adjusted of course), just because it's "more". They expect their compensation to raise in accordance with the wealth level of their society and relatively to the size of the pie, not merely as a larger slice than some past in absolute terms.

SamReidHughes 7y ago
Basically, everybody is mooching off of prior inventors' work due to patent expiration. The point about higher rents, education, health costs, etc, is a miscalculation of inflation. There's a difference between two things: (1) the undesirability of a 1000x/2x split due to increased demand for the fixed supply of land and genius doctors, which means the 1000x/2x didn't properly account for inflation, and (2) the fact that it'd be way cooler to have a properly-inflation-adjusted 990x/12x income split than 1000x/2x, among 50%/50% of the population. On the other hand, Haiti and the Dominican Republic have equal populations and a 10x income difference, and I'm not shedding a single tear over it.
- coldtea 7y ago

Retric 7y ago

Per capita GDP increased less from the Stone Age to now than you might think. Even if you discount all goods other than food to zero, it’s less than 100x growth in the last ~5-10,000 years. That’s less than 0.1% per year growth over that timeframe. Though valuing ancient goods at equivalent modern prices is debatable, it seems like a reasonable metric.

eej71 7y ago
The core point remains which is - wealth is not static. It is _created_.
- eberkund 7y ago
  I believe the answer lies somewhere in the middle. Economic output is not entirely static, but it is not completely accurate to say a creative hard-working person who comes along and amasses a lot of wealth has created all of that wealth either. This should not be a controversial statement. Imagine a simple scenario where Walmart alone, represents the economy and they sell 100 units per year. Then Amazon comes along and starts competing and after a while Walmart is only selling 50 units a year and Amazon is selling 60 units per year. You could now argue that 10 units/year of wealth have been created. Maybe I am misunderstanding you but it seems you are arguing that 60 units/year of wealth were created in this scenario? Of course this is only a simple scenario where all the variables are fixed, in the real world there are thousands variables (or more) interacting with each other. Which is why IMO, it's overly simplistic to say that one person's prosperity is zero-sum but also equally simplistic to say that wealth is created independently of the rest of the economy.
  - NovemberWhiskey 7y ago
    I don't think that's what's being argued here at all. The point is primarily one about productivity growth and that causes the economy to grow. Consider agriculture. When we were all out in the fields plowing them with oxen the whole time, and grinding flour by hand with stones, we didn't have much time to be doing anything else. The invention of water- and wind-powered mills reduced the amount of time spent milling. Add (in no particular order) the seed drill, the horse-drawn reaper, pesticides, crop rotation, scientific theories of plant breeding, combine harvesters, nitrogen-based fertilizers, insect-resistant bio-engineered crops etc. Productivity in agriculture in the developed world has DOUBLED since the 1960s. John Deere invented the self-scouring steel plow and became famous and wealthy as a result. Some of that wealth came as a result of people buying his plow instead of buying someone else's; but the economic growth that resulted from his innovation was in terms of improved efficiency in farming in the plains of the Mid-West.

tw04 7y ago

It absolutely IS fixed. We may not have reached its peak, but until we managed to start settling other planets we have a finite amount of: Clean Water Land Natural resources You can take your pick about which one runs out first/be consumed by a small group of ultra-wealthy, but one of them WILL run out first.

wuliwong 7y ago
How can something be fixed but not have reached its peak? You are saying that there is some theoretical maximum that is fixed but that is not in disagreement with the comment you are responding to.
taneq 7y ago
Many countries are creating clean water through desalination or reprocessing. Some countries have created land by building islands or reclaiming coastal shelf area. Natural resources available are increased by better tech making more available. So yeah, they’re less fixed than you think.
- tw04 7y ago
  They really aren’t. We have no way to meaningfully increase the surface area of the earth, it’s fixed. Even if we were to drain the oceans entirely, you’re just kicking the can down the road (ignoring the fact we’d likely all die). Increasing our effectiveness removing natural resources doesn’t increase the amount on earth, so again, fixed. We will eventually run out. Desalination assumes that the ocean is clean water. Micro plastics would like to have a word with you.
  - taneq 7y ago
    You're moving the goalposts on land area. We can increase available land area (in your extreme scenario) by 200% without leaving the planet, and we're a lot closer to colonizing Mars than doing this. We're so far off using anywhere near all of even the easily available natural resources on Earth that considering it as a limited quantity is fatuous. By the time we legitimately run out of materials on Earth we'll be able to colonize other planets or just create whatever we need through fusion and chemical synthesis. Desalination for potable water includes filtration which removes microplastics along with everything else.