9 ms·

This is almost a natural law of wealth. When you have significant capital, you can do things like loan it out with interest, leverage it into getting loans to b

This is almost a natural law of wealth. When you have significant capital, you can do things like loan it out with interest, leverage it into getting loans to build more capital, etc. If one assumes that the wealthy are using their money to buy commodities and selling those commodities with the expectation of getting their initial money back plus some delta, then it becomes fairly trivial to demonstrate that the more money you start with the more money gets concentrated around you. For example, I could leverage my current house to purchase a rental property in my city and rent it at a profit. Over time I'd pay down my loans and the value of my two homes would increase. I could then leverage two properties to purchase more or larger rental properties. My wealth would increase because I had sufficient wealth to begin with.

deleted 6y ago
[deleted]
_qulr 6y ago
> This is almost a natural law of wealth. The article is about how the post-1975 period differs from the pre-1975 period. So it's demonstrably not a natural law. Natural laws don't change over time.
- koboll 6y ago
  From 1960 to 1985 the top marginal tax rate crashed from 90% to 30%. And then of course there's the demise of private sector unions, the effects of computerization, etc. Arguably, it was always a natural law, but the 1970s were an inflection point after which capital was allowed to accrue advantages at a much faster rate.
  - JumpCrisscross 6y ago
    > From 1960 to 1985 the top marginal tax rate crashed from 90% to 30% Nobody paid 90%. The tax rate reduction was countered with the closing of loopholes. (There are still a lot.) Evidence for this is the nearly constant fraction of GDP collected in taxes. The other points are correct. Also, real incomes have both increased at the top end and shifted up for the population.
  - ChrisLomont 6y ago
    Marginal rate is not effective rate. In fact, when Reagan cut the top marginal rate multiple times while also changing loopholes the effective tax rate on the top increased after some of those changes [1]. [1] https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/12-23-effectivetaxratesletter.pdf https://www.cbo.gov/sites/default/files/110th-congress-2007-...
  - readams 6y ago
    It's mostly a myth that there was a 90% marginal tax rate. It's technically true, but when the top tax rate was removed they also removed all the loopholes and deductions that were being used to reduce the effect tax rate on top earners to below 45%. All the while the proportion of tax receipts as a percentage of GDP has remained constant. Meanwhile, the proportion of taxes paid by the top quintile earners has increased from 55% in 1980 to 70% by 2013. In 2017 the top 1% of income earners paid 38.5% of all taxes, vs the bottom 90% who paid 29.9% of all taxes. The top 50% of taxpayers paid 97% of all taxes in 2017. But all this ignores the main fact, which is that actual rich people make most of their money not as income, but as unrealized capital gains. High marginal rates on income taxes affects high-earning professionals. Not the private jet crowd.
    - randomdata 6y ago
      > actual rich people make most of their money not as income, but as unrealized capital gains. Technically, they make most of their wealth as as unrealized capital gains. It doesn't become money until they realize the gains, at which point it is taxable income.
      - SigmundA 6y ago
        Then typically only taxed long term cap gains rates of 20% or less...
        jandrewrogers 6y ago
        That is just the base Federal rate. After NIIT, State, etc it can be >35%, which is actually quite high for a country where the cost basis is not inflation-adjusted. That is higher than most countries in Europe.
      - chris11 6y ago
        What's the average effective tax rate for high-net-worth+ individuals if unrealized capital gains are included as income? It seems like people get an increasing level of control over their taxes as their networth increases. Choosing when to exercise options means you have some control over AMT. If you invest in indices, it looks like direct indexing has a lot of tax benefits over an index fund. You can get variable and fixed rate loans against your investment accounts. It's not a good idea for tax minimization to be the main goal of your investment strategy, but it seems like people can get access to a large portion of their investments without actually realizing capital gains.
  - samstave 6y ago
    Don't forget things like the Panama Papers and how companies/super-rich figured out how to create thousands of shell companies to hide wealth, and that the journalist who revealed all of this was then murdered.
- Pfhreak 6y ago
  The law might be the same, but the environment can change around the law. From tax rates and economic conditions to the power of labor can all shift how we respond to that natural law. Wealth can continue to generate wealth, which we can then tax and redistribute. The natural law hasn't changed, but how we work around it has.
- dan_quixote 6y ago
  I interpret Pfhreak's comment to mean un-checked capitalism will naturally result in wealth consolidation. The article describes how we loosened our management of this natural law and witnessed a more rapid wealth shift as a result.
- jandrese 6y ago
  The natural law is there, but there was counterbalance from the government taxation and unions. That balance has been lost so the natural law is taking over. You wouldn't say that gravity doesn't exist because someone is holding up a ball and that it suddenly appears when the person lets go of the ball. This is what happened to monetary policy in the 20th century. The government abdicated its role in the name of unfettered corporate growth and now we have billionaires.
Railsify 6y ago
The return on capital is always greater than the return on labor. Piketty does a great data driven analysis on this in his book Capital in the 21st century. This phenomenon was occurring long before the US was even a glimmer.
- jandrese 6y ago
  I've never understood why the capital gains tax is lower than the labor tax. The labor tax is theoretically adding value to the economy while capital gains is basically money you made because you had money. It seems to me it should be the opposite if you want a productive economy, encourage more people to put their money to work instead of playing games in the market.
  - chordalkeyboard 6y ago
    > The labor tax is theoretically adding value to the economy while capital gains is basically money you made because you had money. Capital adds value to the economy too, thats why people will pay to rent it. > I've never understood why the capital gains tax is lower than the labor tax. One good reason is that if the capital gains tax is higher than the marginal profit, then that business doesn’t exist. If we taxed capital at the rate that we tax labor, there would be one or two ultra-hyper-wealthy people who employed everyone, and the rest of us would be serfs working for bezos or the government, or on public assistance. > It seems to me it should be the opposite if you want a productive economy, encourage more people to put their money to work instead of playing games in the market. Investing your money is putting it to work, that is precisely why it earns a return.
  - Railsify 6y ago
    It's not because "you had money" simply having money results in 0 taxes. The capital gain comes when you lend your money to some other entity and they use the money to do work: produce a good, provide a service. Although there is a sect in the US government that wants to tax your money simply because you have it.
md_ 6y ago
Your intuition here is basically what's formalized by Piketty in "Capital in the 21st Century": that the rate of growth of capital exceeds the rate of economic growth. What's interesting is that while intuitively this makes sense (for the reasons you gave), the implication (that the rich get richer and inequality grows) is the opposite of what was hypothized by Kuznets (https://en.wikipedia.org/wiki/Kuznets_curve); https://en.wikipedia.org/wiki/Kuznets_curve); the latter hypothesis, to my limited understanding (as a non-economist), is fairly mainstream, and has influenced plenty of politics and public policy.
- Pfhreak 6y ago
  I'm halfway through reading Piketty right now, amusingly.
  - supercanuck 6y ago
    Watch the Netflix documentary. Basically cuts to the chase.
    - refurb 6y ago
      Please don’t watch entertainment (Netflix documentary) as a substitute for a book and think they are equivalent.
      - supercanuck 6y ago
        A documentary is more accessible to people and one can come away with the core the arguments
        themeiguoren 6y ago
        IMO understanding the arguments is useless without understanding how they were built, and what their caveats and assumptions are. Otherwise you end up parroting talking points without actually having thought about it. I’d rather people not hold an opinion on something than hold an unfounded one. A doc is not a good format for grounded understanding.
RIMR 6y ago
Sounds like a great system for everyone with generational wealth, and a terrible system for literally everyone else.
hungryhobo 6y ago
sure, but i think the focus is on the magnitude and speed at which the wealth gap is widening. And its impact might be something we haven't encountered before
- edoceo 6y ago
  Last few times were "solved" by revolution. I'm expecting something similar.
jellicle 6y ago
This proposition, discussed and shown by Piketty in his 2013 book, was not at all obvious before that and even today many people would argue (wrongly) that it isn't true. So if it's a natural law of wealth, it is a very recently proven one. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
- Pfhreak 6y ago
  Marx presented this idea back in the 1860s. He phrased it a little differently and built the idea up from the idea of exchanging commodities. In Marx's text, he discusses the history of commodity exchange, how people usually exchanged Commodities for Money which they exchanged back into other Commodities they needed. (E.g. I'll sell you my wool for coin, which I can use to buy food.) He called this CMC exchange. (Commodity-Money-Commodity). This gave rise to people who had hoards of money, and could invert the exchange -- Money into Commodities into Money + delta Money. He called this MCM exchange (Money-Commodity-Money), and posited that it could only exist if the second M was larger than the first -- why turn your money into commodities and back into money if you weren't going to get more money as a result? So it must be that if MCM exchange exists, then it must be MC(M+∆M). Once sufficient hoards are accumulated, they will continue to accumulate. Marx, of course, carries on with his own opinions about what to do with this and how society should be structured. He also bases his ideas not on data like Piketty, but on building up a model of a Capitalist economy from principles. I think it's interesting to see this line of argument presented historically and compare/contrast that with the more data driven analysis we see in Piketty. (No matter how you feel about the rest of Marx's work.) Edit: Downvotes? I feel like I'm presenting a factual response to the parent poster. I know it contains the word 'Marx', but I'm not diving into socialism/communism elements of his work, but rather the analytical dialectic of his critique of capitalism as a system.
  - chordalkeyboard 6y ago
    I don’t think this should be downvoted. Did Marx address the notion that collection of rents on capital create an incentive for the creation of more capital? How did Marx address the case of MCM transactions where the capitalist has erred and lost money?
throwawaysea 6y ago
Your example is contrived. Assets don't have to go up in value. You could also end up holding the bag in a place like Detroit. You may not end up being able to rent out your second property at a profit. You may end up with a deadbeat tenant, unforeseen expenses, or simply falling rents. These decisions involve risk and they have accordingly, an associated reward. Claiming that there's a "natural law of wealth" doesn't seem as obvious as you're making it out to be.
- Pfhreak 6y ago
  My example is not contrived, it represents an understanding of the market over the long term. Are there bubbles? Yes. Are there dips? Yes. You are making the inverse mistake of someone who looks at a large jackpot win in Vegas and thinks it's a good investment, when in reality the expected value of a bet is negative. The rate of return on capital has held relatively steady at ~4% for hundreds of years. Stop thinking about individual winners and losers, and look at the broader picture. If you have sufficient capital, you can expect to return capital + n% over time, where n is approximately 4%.
  - throwawaysea 6y ago
    No it hasn't remained "steady". You're quoting an average and claiming it is steady but there are periods where your savings would have not seen that growth and even seen negative return. Example analysis: http://archive.nytimes.com/www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://archive.nytimes.com/www.nytimes.com/interactive/2011/... I'm also not sure what you mean by "sufficient capital". You can by shares one at a time. You don't have to be wealthy to have access to growth in assets.
    - Pfhreak 6y ago
      > You don't have to be wealthy to have access to growth in assets You have to be wealthy to see an appreciable growth in assets. Both the absolute and percentage amounts matter. Yes, anyone can get a 3% return on their investments over time, but that doesn't really matter when you can only invest $1. Living has a certain minimum set of fixed costs, those with sufficient capital can pay for those fixed costs through the growth of their capital and still see a net increase in wealth . Someone making $30k a year in wages will never achieve that, even if they see some growth in assets. > You're quoting an average and claiming it is steady but there are periods where your savings would have not seen that growth and even seen negative return. You are making a pedantic semantic argument. I acknowledged the presence of dips and bubbles. But on "average" you will see a return on capital, especially a diversified market. That analysis only looked at the S&P 500, which is a tiny share of the economy and not at all representative of the growth of capital over time. What about housing, bonds, precious metals, commodities, short positions, international funds, etc. Move up one level of abstraction and look at the forest, not the trees.
calebm 6y ago
It's called the power law (https://en.wikipedia.org/wiki/Power_law https://en.wikipedia.org/wiki/Power_law)
User23 6y ago
> This is almost a natural law of wealth. When you have significant capital, you can do things like loan it out with interest It is a natural law of usury, which is what you describe. This is why we used to ban usury as unjust.
- throwaway123x2 6y ago
  Again, what's the alternative?
  - tehjoker 6y ago
    Democratic control of the economy.
    - virmundi 6y ago
      That would be absolutely terrifying. The economy we have now is due to experts tinkering. Allowing the masses, who can't organize their own lives, to attempt to organize the economy will lead to more deaths and misery than the current system. Would you want a democratically elected airplane pilot with no training?
      - User23 6y ago
        Plenty of people think it's important that airplane pilots be democratically representative[1]. [1] https://www.ksby.com/news/national/new-law-looks-to-attract-more-diverse-pilots-to-the-skies https://www.ksby.com/news/national/new-law-looks-to-attract-...
        beervirus 6y ago
        Plenty of people believe ridiculous things, story at 9.
      - tehjoker 6y ago
        Not even sure where to start with this level of elitism, but Elon Musk is certainly an expert in batteries, automotive production, rocketry and telemetry, and financial services all at once and not just a brand. The kind of sentiment you are expressing is directly antithetical to having any kind of real democracy. If you've ever met the people in power, many of them are quite dumb. It's easy to listen to experts (or not) and give commands. How often do you hear that executives don't know what's happening in their companies but the people on the line know exactly what to do but were not consulted seriously? To answer your question about airline pilots, I would probably accept (and in fact do, the FAA) a system designed by what is allegedly a democracy. Usually people don't have direct popular elections for technical positions, but design rules in consultation with people familiar with the field. If the voters were in fact other airline personnel, a direct election could be viable though I would require some qualifying criteria (e.g. people with XXXX hours of flight time).
ffggvv 6y ago
yeah but eventually home prices/rent can go down and you can get wiped out (see 2008) but the fed and treasury wont allow that to happen i guess because they prefer inequality as long as it produces a wealth effect

deleted 6y ago

[deleted]

_qulr 6y ago

> This is almost a natural law of wealth. The article is about how the post-1975 period differs from the pre-1975 period. So it's demonstrably not a natural law. Natural laws don't change over time.

koboll 6y ago
From 1960 to 1985 the top marginal tax rate crashed from 90% to 30%. And then of course there's the demise of private sector unions, the effects of computerization, etc. Arguably, it was always a natural law, but the 1970s were an inflection point after which capital was allowed to accrue advantages at a much faster rate.
- JumpCrisscross 6y ago
  > From 1960 to 1985 the top marginal tax rate crashed from 90% to 30% Nobody paid 90%. The tax rate reduction was countered with the closing of loopholes. (There are still a lot.) Evidence for this is the nearly constant fraction of GDP collected in taxes. The other points are correct. Also, real incomes have both increased at the top end and shifted up for the population.
- ChrisLomont 6y ago
  Marginal rate is not effective rate. In fact, when Reagan cut the top marginal rate multiple times while also changing loopholes the effective tax rate on the top increased after some of those changes [1]. [1] https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/12-23-effectivetaxratesletter.pdf https://www.cbo.gov/sites/default/files/110th-congress-2007-...
- readams 6y ago
  It's mostly a myth that there was a 90% marginal tax rate. It's technically true, but when the top tax rate was removed they also removed all the loopholes and deductions that were being used to reduce the effect tax rate on top earners to below 45%. All the while the proportion of tax receipts as a percentage of GDP has remained constant. Meanwhile, the proportion of taxes paid by the top quintile earners has increased from 55% in 1980 to 70% by 2013. In 2017 the top 1% of income earners paid 38.5% of all taxes, vs the bottom 90% who paid 29.9% of all taxes. The top 50% of taxpayers paid 97% of all taxes in 2017. But all this ignores the main fact, which is that actual rich people make most of their money not as income, but as unrealized capital gains. High marginal rates on income taxes affects high-earning professionals. Not the private jet crowd.
  - randomdata 6y ago
    > actual rich people make most of their money not as income, but as unrealized capital gains. Technically, they make most of their wealth as as unrealized capital gains. It doesn't become money until they realize the gains, at which point it is taxable income.
    - SigmundA 6y ago
      Then typically only taxed long term cap gains rates of 20% or less...
      - jandrewrogers 6y ago
        That is just the base Federal rate. After NIIT, State, etc it can be >35%, which is actually quite high for a country where the cost basis is not inflation-adjusted. That is higher than most countries in Europe.
    - chris11 6y ago
      What's the average effective tax rate for high-net-worth+ individuals if unrealized capital gains are included as income? It seems like people get an increasing level of control over their taxes as their networth increases. Choosing when to exercise options means you have some control over AMT. If you invest in indices, it looks like direct indexing has a lot of tax benefits over an index fund. You can get variable and fixed rate loans against your investment accounts. It's not a good idea for tax minimization to be the main goal of your investment strategy, but it seems like people can get access to a large portion of their investments without actually realizing capital gains.
- samstave 6y ago
  Don't forget things like the Panama Papers and how companies/super-rich figured out how to create thousands of shell companies to hide wealth, and that the journalist who revealed all of this was then murdered.
Pfhreak 6y ago
The law might be the same, but the environment can change around the law. From tax rates and economic conditions to the power of labor can all shift how we respond to that natural law. Wealth can continue to generate wealth, which we can then tax and redistribute. The natural law hasn't changed, but how we work around it has.
dan_quixote 6y ago
I interpret Pfhreak's comment to mean un-checked capitalism will naturally result in wealth consolidation. The article describes how we loosened our management of this natural law and witnessed a more rapid wealth shift as a result.
jandrese 6y ago
The natural law is there, but there was counterbalance from the government taxation and unions. That balance has been lost so the natural law is taking over. You wouldn't say that gravity doesn't exist because someone is holding up a ball and that it suddenly appears when the person lets go of the ball. This is what happened to monetary policy in the 20th century. The government abdicated its role in the name of unfettered corporate growth and now we have billionaires.

Railsify 6y ago

The return on capital is always greater than the return on labor. Piketty does a great data driven analysis on this in his book Capital in the 21st century. This phenomenon was occurring long before the US was even a glimmer.

jandrese 6y ago
I've never understood why the capital gains tax is lower than the labor tax. The labor tax is theoretically adding value to the economy while capital gains is basically money you made because you had money. It seems to me it should be the opposite if you want a productive economy, encourage more people to put their money to work instead of playing games in the market.
- chordalkeyboard 6y ago
  > The labor tax is theoretically adding value to the economy while capital gains is basically money you made because you had money. Capital adds value to the economy too, thats why people will pay to rent it. > I've never understood why the capital gains tax is lower than the labor tax. One good reason is that if the capital gains tax is higher than the marginal profit, then that business doesn’t exist. If we taxed capital at the rate that we tax labor, there would be one or two ultra-hyper-wealthy people who employed everyone, and the rest of us would be serfs working for bezos or the government, or on public assistance. > It seems to me it should be the opposite if you want a productive economy, encourage more people to put their money to work instead of playing games in the market. Investing your money is putting it to work, that is precisely why it earns a return.
- Railsify 6y ago
  It's not because "you had money" simply having money results in 0 taxes. The capital gain comes when you lend your money to some other entity and they use the money to do work: produce a good, provide a service. Although there is a sect in the US government that wants to tax your money simply because you have it.

md_ 6y ago

Your intuition here is basically what's formalized by Piketty in "Capital in the 21st Century": that the rate of growth of capital exceeds the rate of economic growth. What's interesting is that while intuitively this makes sense (for the reasons you gave), the implication (that the rich get richer and inequality grows) is the opposite of what was hypothized by Kuznets (https://en.wikipedia.org/wiki/Kuznets_curve); https://en.wikipedia.org/wiki/Kuznets_curve); the latter hypothesis, to my limited understanding (as a non-economist), is fairly mainstream, and has influenced plenty of politics and public policy.

Pfhreak 6y ago
I'm halfway through reading Piketty right now, amusingly.
- supercanuck 6y ago
  Watch the Netflix documentary. Basically cuts to the chase.
  - refurb 6y ago
    Please don’t watch entertainment (Netflix documentary) as a substitute for a book and think they are equivalent.
    - supercanuck 6y ago
      A documentary is more accessible to people and one can come away with the core the arguments
      - themeiguoren 6y ago
        IMO understanding the arguments is useless without understanding how they were built, and what their caveats and assumptions are. Otherwise you end up parroting talking points without actually having thought about it. I’d rather people not hold an opinion on something than hold an unfounded one. A doc is not a good format for grounded understanding.

RIMR 6y ago

Sounds like a great system for everyone with generational wealth, and a terrible system for literally everyone else.

hungryhobo 6y ago

sure, but i think the focus is on the magnitude and speed at which the wealth gap is widening. And its impact might be something we haven't encountered before

edoceo 6y ago
Last few times were "solved" by revolution. I'm expecting something similar.

jellicle 6y ago

This proposition, discussed and shown by Piketty in his 2013 book, was not at all obvious before that and even today many people would argue (wrongly) that it isn't true. So if it's a natural law of wealth, it is a very recently proven one. https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

Pfhreak 6y ago
Marx presented this idea back in the 1860s. He phrased it a little differently and built the idea up from the idea of exchanging commodities. In Marx's text, he discusses the history of commodity exchange, how people usually exchanged Commodities for Money which they exchanged back into other Commodities they needed. (E.g. I'll sell you my wool for coin, which I can use to buy food.) He called this CMC exchange. (Commodity-Money-Commodity). This gave rise to people who had hoards of money, and could invert the exchange -- Money into Commodities into Money + delta Money. He called this MCM exchange (Money-Commodity-Money), and posited that it could only exist if the second M was larger than the first -- why turn your money into commodities and back into money if you weren't going to get more money as a result? So it must be that if MCM exchange exists, then it must be MC(M+∆M). Once sufficient hoards are accumulated, they will continue to accumulate. Marx, of course, carries on with his own opinions about what to do with this and how society should be structured. He also bases his ideas not on data like Piketty, but on building up a model of a Capitalist economy from principles. I think it's interesting to see this line of argument presented historically and compare/contrast that with the more data driven analysis we see in Piketty. (No matter how you feel about the rest of Marx's work.) Edit: Downvotes? I feel like I'm presenting a factual response to the parent poster. I know it contains the word 'Marx', but I'm not diving into socialism/communism elements of his work, but rather the analytical dialectic of his critique of capitalism as a system.
- chordalkeyboard 6y ago
  I don’t think this should be downvoted. Did Marx address the notion that collection of rents on capital create an incentive for the creation of more capital? How did Marx address the case of MCM transactions where the capitalist has erred and lost money?

throwawaysea 6y ago

Your example is contrived. Assets don't have to go up in value. You could also end up holding the bag in a place like Detroit. You may not end up being able to rent out your second property at a profit. You may end up with a deadbeat tenant, unforeseen expenses, or simply falling rents. These decisions involve risk and they have accordingly, an associated reward. Claiming that there's a "natural law of wealth" doesn't seem as obvious as you're making it out to be.

Pfhreak 6y ago
My example is not contrived, it represents an understanding of the market over the long term. Are there bubbles? Yes. Are there dips? Yes. You are making the inverse mistake of someone who looks at a large jackpot win in Vegas and thinks it's a good investment, when in reality the expected value of a bet is negative. The rate of return on capital has held relatively steady at ~4% for hundreds of years. Stop thinking about individual winners and losers, and look at the broader picture. If you have sufficient capital, you can expect to return capital + n% over time, where n is approximately 4%.
- throwawaysea 6y ago
  No it hasn't remained "steady". You're quoting an average and claiming it is steady but there are periods where your savings would have not seen that growth and even seen negative return. Example analysis: http://archive.nytimes.com/www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://archive.nytimes.com/www.nytimes.com/interactive/2011/... I'm also not sure what you mean by "sufficient capital". You can by shares one at a time. You don't have to be wealthy to have access to growth in assets.
  - Pfhreak 6y ago
    > You don't have to be wealthy to have access to growth in assets You have to be wealthy to see an appreciable growth in assets. Both the absolute and percentage amounts matter. Yes, anyone can get a 3% return on their investments over time, but that doesn't really matter when you can only invest $1. Living has a certain minimum set of fixed costs, those with sufficient capital can pay for those fixed costs through the growth of their capital and still see a net increase in wealth . Someone making $30k a year in wages will never achieve that, even if they see some growth in assets. > You're quoting an average and claiming it is steady but there are periods where your savings would have not seen that growth and even seen negative return. You are making a pedantic semantic argument. I acknowledged the presence of dips and bubbles. But on "average" you will see a return on capital, especially a diversified market. That analysis only looked at the S&P 500, which is a tiny share of the economy and not at all representative of the growth of capital over time. What about housing, bonds, precious metals, commodities, short positions, international funds, etc. Move up one level of abstraction and look at the forest, not the trees.

calebm 6y ago

It's called the power law (https://en.wikipedia.org/wiki/Power_law https://en.wikipedia.org/wiki/Power_law)

User23 6y ago

> This is almost a natural law of wealth. When you have significant capital, you can do things like loan it out with interest It is a natural law of usury, which is what you describe. This is why we used to ban usury as unjust.

throwaway123x2 6y ago
Again, what's the alternative?
- tehjoker 6y ago
  Democratic control of the economy.
  - virmundi 6y ago
    That would be absolutely terrifying. The economy we have now is due to experts tinkering. Allowing the masses, who can't organize their own lives, to attempt to organize the economy will lead to more deaths and misery than the current system. Would you want a democratically elected airplane pilot with no training?
    - User23 6y ago
      Plenty of people think it's important that airplane pilots be democratically representative[1]. [1] https://www.ksby.com/news/national/new-law-looks-to-attract-more-diverse-pilots-to-the-skies https://www.ksby.com/news/national/new-law-looks-to-attract-...
      - beervirus 6y ago
        Plenty of people believe ridiculous things, story at 9.
    - tehjoker 6y ago
      Not even sure where to start with this level of elitism, but Elon Musk is certainly an expert in batteries, automotive production, rocketry and telemetry, and financial services all at once and not just a brand. The kind of sentiment you are expressing is directly antithetical to having any kind of real democracy. If you've ever met the people in power, many of them are quite dumb. It's easy to listen to experts (or not) and give commands. How often do you hear that executives don't know what's happening in their companies but the people on the line know exactly what to do but were not consulted seriously? To answer your question about airline pilots, I would probably accept (and in fact do, the FAA) a system designed by what is allegedly a democracy. Usually people don't have direct popular elections for technical positions, but design rules in consultation with people familiar with the field. If the voters were in fact other airline personnel, a direct election could be viable though I would require some qualifying criteria (e.g. people with XXXX hours of flight time).

ffggvv 6y ago

yeah but eventually home prices/rent can go down and you can get wiped out (see 2008) but the fed and treasury wont allow that to happen i guess because they prefer inequality as long as it produces a wealth effect