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As someone who holds a master's degree in economics, and is getting a PhD in genetics, I can tell you virtually everyone studying the "soft" sciences conflates

As someone who holds a master's degree in economics, and is getting a PhD in genetics, I can tell you virtually everyone studying the "soft" sciences conflates observations with natural laws. There is nothing stating that a Pareto distribution is optimal. It's only a distribution based on observation, and it just happens. The underlying mechanisms are not immutable.

throw0932 7y ago
Eh, what are you saying is mutable here, exactly? The only way of getting a 0.5 Gini ("absolute equality") is if everyone is earning the same, which is ridiculous. As soon as you throw any randomness in there, well, all of a sudden you get inequality. Next, there are the (totally reasonable) winner-take-all mechanics of skilled labor. Are you a better CEO (where "better" here could just mean better at pitching/selling/hiring/picking a market)? Then you can end up capturing all of the market share vs your competitors. That ends up paying nicely. You still could have rent-seekers and people who cheat, but from the article itself, the top driver is differentiation based on skills. Don't like winner-take-all mechanics? Introduce income pooling. But I wouldn't expect that to be the revolutionary change people are looking for, just a way to guarantee people on the same skill ladder end up in roughly the same outcome bracket. I don't think "guarantee top ivy leaguers make >$400k/yr" is what you're looking for.
- Applejinx 7y ago
  No, you're mistaken. There's a computer simulation that's been posted here, where you run a population and each element gives 'a dollar' to a randomly chosen other element every step, if possible. For no reason: no merit, no purpose, no meaning. This produces not just 'inequality', but the power-law distribution. The only thing you can't know is which element will be the '0.01%' master of the universe, because nothing distinguishes it from the 'poor' elements as it's only a simulation. The point this establishes experimentally is that through simple value exchange you get the same distribution people associate with meritocracy and market dynamics, without any elements of choice or distinctions of merit being applied. Skill and value have nothing to do with it: the problem is purely mechanical, the system will substantially punish and reward elements in the system quite outside of any consideration of merit. Once you introduce merit, skill etc. you're only exacerbating the problem. Wealth tax, even in very tiny amounts, is quite good at turning the power-law distribution into a more random-looking distribution as one might expect it should be. And usually people aren't talking about Gini 0.5, nor does anyone aspire to that unless it's as a form of rebellion against the extreme opposite. People will tolerate an enormous amount of inequality if their own lives aren't too acutely threatened.
  - throw0932 7y ago
    Hang on, let me try to understand your point: 1. A computer simulation where wealth is exchanged by chance has power-law behavior 2. Wealth IRL has power-law behavior 3. Therefore, wealth IRL was exchanged by chance (as opposed to skill) Is this what you were saying? If not, mind breaking down what you are saying? Needless to say, the above is affirming the consequent. The exchange mechanism random simulation is modelling need not be the actual mechanism in real life (though it may very well be a good model, viewing skill as randomly assigned to members of the population).
    - Applejinx 7y ago
      'Therefore' is the only part of that which is unjustified. I'll break it down: 1. The computer simulation demonstrates that simple exchange produces power-law wealth in the absence of value or meaning. 2. Wealth IRL is considerably in excess of this power-law behavior, to the point where it's a real impediment, because… 3. Wealth IRL owes more to capital protecting itself and rewriting the market's or government's rules to cheat. Skill has next to nothing to do with it: wealth derives from crime, manipulation and abuse, and there isn't a fortune anywhere that doesn't have blood on it. So, far from being a simple claim that 'wealth IRL does not correlate with merit/skill', I am rather claiming that wealth IRL correlates with evil, abuse, and criminality. Admittedly worse than your 'how dare you say wealth isn't correlated with merit', but there it is. Sorries :) The fact that random chance also helps some of these criminals get their start is just a sort of bonus for the criminals, and a handicap to any free market system that might otherwise be a mechanism serving to assert a sort of crude meritocracy. Skill means absolutely nothing. It's about the ability to act criminally and to exploit existing resources and personal relationships, and always has been, all the way on back into dim prehistory. When it gets too extreme, the guillotines come out or there's some sort of typically very destructive revolution that serves as a great setback to civilization in general. This, too, has happened over and over. It happens not when evil grows too great in its abuse of the peasantry (because nobody ever cares about them), but when the 10 percent or the 1 percent start to get beat up too much by that 0.01 percent, just as the original article highlights. When the 'upper middle class' starts to suffer, that's when things get dicey, because those are the people who can afford to fight their rulers and who have the time, attention and resources to do so. How's that, does that help? :)

throw0932 7y ago

Eh, what are you saying is mutable here, exactly? The only way of getting a 0.5 Gini ("absolute equality") is if everyone is earning the same, which is ridiculous. As soon as you throw any randomness in there, well, all of a sudden you get inequality. Next, there are the (totally reasonable) winner-take-all mechanics of skilled labor. Are you a better CEO (where "better" here could just mean better at pitching/selling/hiring/picking a market)? Then you can end up capturing all of the market share vs your competitors. That ends up paying nicely. You still could have rent-seekers and people who cheat, but from the article itself, the top driver is differentiation based on skills. Don't like winner-take-all mechanics? Introduce income pooling. But I wouldn't expect that to be the revolutionary change people are looking for, just a way to guarantee people on the same skill ladder end up in roughly the same outcome bracket. I don't think "guarantee top ivy leaguers make >$400k/yr" is what you're looking for.

Applejinx 7y ago
No, you're mistaken. There's a computer simulation that's been posted here, where you run a population and each element gives 'a dollar' to a randomly chosen other element every step, if possible. For no reason: no merit, no purpose, no meaning. This produces not just 'inequality', but the power-law distribution. The only thing you can't know is which element will be the '0.01%' master of the universe, because nothing distinguishes it from the 'poor' elements as it's only a simulation. The point this establishes experimentally is that through simple value exchange you get the same distribution people associate with meritocracy and market dynamics, without any elements of choice or distinctions of merit being applied. Skill and value have nothing to do with it: the problem is purely mechanical, the system will substantially punish and reward elements in the system quite outside of any consideration of merit. Once you introduce merit, skill etc. you're only exacerbating the problem. Wealth tax, even in very tiny amounts, is quite good at turning the power-law distribution into a more random-looking distribution as one might expect it should be. And usually people aren't talking about Gini 0.5, nor does anyone aspire to that unless it's as a form of rebellion against the extreme opposite. People will tolerate an enormous amount of inequality if their own lives aren't too acutely threatened.
- throw0932 7y ago
  Hang on, let me try to understand your point: 1. A computer simulation where wealth is exchanged by chance has power-law behavior 2. Wealth IRL has power-law behavior 3. Therefore, wealth IRL was exchanged by chance (as opposed to skill) Is this what you were saying? If not, mind breaking down what you are saying? Needless to say, the above is affirming the consequent. The exchange mechanism random simulation is modelling need not be the actual mechanism in real life (though it may very well be a good model, viewing skill as randomly assigned to members of the population).
  - Applejinx 7y ago
    'Therefore' is the only part of that which is unjustified. I'll break it down: 1. The computer simulation demonstrates that simple exchange produces power-law wealth in the absence of value or meaning. 2. Wealth IRL is considerably in excess of this power-law behavior, to the point where it's a real impediment, because… 3. Wealth IRL owes more to capital protecting itself and rewriting the market's or government's rules to cheat. Skill has next to nothing to do with it: wealth derives from crime, manipulation and abuse, and there isn't a fortune anywhere that doesn't have blood on it. So, far from being a simple claim that 'wealth IRL does not correlate with merit/skill', I am rather claiming that wealth IRL correlates with evil, abuse, and criminality. Admittedly worse than your 'how dare you say wealth isn't correlated with merit', but there it is. Sorries :) The fact that random chance also helps some of these criminals get their start is just a sort of bonus for the criminals, and a handicap to any free market system that might otherwise be a mechanism serving to assert a sort of crude meritocracy. Skill means absolutely nothing. It's about the ability to act criminally and to exploit existing resources and personal relationships, and always has been, all the way on back into dim prehistory. When it gets too extreme, the guillotines come out or there's some sort of typically very destructive revolution that serves as a great setback to civilization in general. This, too, has happened over and over. It happens not when evil grows too great in its abuse of the peasantry (because nobody ever cares about them), but when the 10 percent or the 1 percent start to get beat up too much by that 0.01 percent, just as the original article highlights. When the 'upper middle class' starts to suffer, that's when things get dicey, because those are the people who can afford to fight their rulers and who have the time, attention and resources to do so. How's that, does that help? :)