4 ms·

>Why care about wealth inequality as a first-order concern? Because, markets behave in a zero sum manner when limiting constraints are reached (ie room for gro

by Rury 4y ago

>Why care about wealth inequality as a first-order concern? Because, markets behave in a zero sum manner when limiting constraints are reached (ie room for growth has run out), and many economies aren't really growing all that much right now. As a simple example, there is only so much land in Manhattan (all of which is already owned; some of which might be for sale). That means if you ever wish to own land in Manhattan and currently do not, you must take it from someone else who already owns land in Manhattan (making it their loss). This makes owning land in Manhattan a zero sum market. Granted you wouldn't take it in a literal sense, but trade for it. The point here is that you can't just magically make yourself some land in Manhattan. Rather you must trade for it, and beat competing offers from other market participants. Which brings me to my next point... >If my median income is going up, why should I root for periods that decrease it, even if it means that the wealthy are being hurt more than I am? In short, focusing solely on your own income is too short-sighted. As the price of everything is dictated by the collective market (ie other market participants who also have disposable income). If you don't acknowledge this, then there's potential for you to be priced out of markets even if your income is growing, but growing slower relative to everyone else. Hence, if your income falls, but at a slower pace than everyone else, you will be better off in markets, because effectively, your earnings will trade relatively for more despite your income having decreased.

whimsicalism 4y ago
Don't have time right now to respond in a long-form manner, but you seem to have missed that I am talking about real (not nominal) median income already, which accounts for the concerns that you are talking about. Also, during a supply-driven recession, then both your income falls and the price of goods increases.
- Rury 4y ago
  >I am talking about real (not nominal) median income already, which accounts for the concerns that you are talking about It actually doesn't account for what I'm talking about. It dismisses it without much substance and avoids the topic that we're talking about which is: >Why care about wealth inequality as a first-order concern? If you equalize income inequality, it's impossible for real median income to fall when it's below the real average income. If you can't see why, keep reading. >Also, during a supply-driven recession, then both your income falls and the price of goods increases. This is a straw man which I'm not going to address, but let's relate it back to the topic. If we're running out of supply, you're running out of something (and are closer to a zero sum scenario). If you are to ever acquire something in a zero sum game, you must take it from someone else (the wealthy owners of said supply). That's why you should be concerned about wealth inequality in such a scenario. If we take from the wealthy who have that supply and equalized it, real median wealth wouldn't actually fall. To further demonstrate why, let's take my Manhattan scenario. Median ownership of Manhattan land is 0 Manhattan land. If we take all that Manhattan land from people who own Manhattan land, and equally distributed it amongst everyone, median ownership of Manhattan land would actually rise (not fall) to a minuscule, but non 0 amount. The previously wealthy Manhattan land owners however would lose tremendously.
  - whimsicalism 4y ago
    > If we're running out of supply, you're running out something (becoming closer to a zero sum scenario) ...or structure policy such that supply increases? > It actually doesn't account for what I'm talking about. It dismisses it without much substance while avoiding the topic that we're talking about which is: It directly accounts for it - "if you don't acknowledge this, then there's potential for you to be priced out of markets even if your income is growing, but growing slower relative to everyone else" -> A purely nominal, non-real effect.
    - Rury 4y ago
      >...or structure policy such that supply increases? You could. But how does that refute anything I stated? >It directly accounts for it No it doesn't because real median income can’t fall when it’s below real average income and wealth is redistributed equally. It is not a purely nominal, non-real effect.
      - whimsicalism 4y ago
        Let's take a step back now that I have more time to respond. There are 3 claims that have been made in this thread (not all by you) that I'd like to talk about: 1. "focusing solely on your own income is too short-sighted. As the price of everything is dictated by the collective market (ie other market participants who also have disposable income). If you don't acknowledge this, then there's potential for you to be priced out of markets even if your income is growing, but growing slower relative to everyone else." 2. Redistribution can always increase median income when the average income is higher and we should redistribute to increase utility for this reason. 3. Recessions can be good because they decrease wealth inequality. On your point #1, my claim is that the fact that I am citing real income directly addresses this point - people's incomes are rising even when you account for markets getting more crowded and people bidding up the price of goods. You say: "no, it doesn't account for point #2", which I agree with - I wasn't intending on responding to that point. On your point #2 - this is one one where I mostly (although not fully) agree with you. Obviously there is no disputing the point around mean and median in the short term: that's just basic math. The issue is that there is no such thing as a "lump sum" transfer in a vacuum. If we could immediately do a transfer like the one you are suggesting without a shift in behavior, we absolutely should do it. But transfers impact expectations. It is telling that you have picked land in Manhattan as an example since the supply is fixed so the effects I'm discussing don't play in - but for most goods and services people enjoy, the supply is not fixed despite your assertions. The US economy doubles in real output roughly every ~35 years or so (this may be slowing, ofc). If you do a lump sum transfer to increase median income = average income, you will lessen supply in the future, causing a decrease in real incomes (supply-push inflation, as well as just economic downturn). Which brings us to point #3: >>...or structure policy such that supply increases? > You could. But how does that refute anything I stated? This is my response to point #3 which was the original point I was disagreeing with. In a recession where supply decreases, that makes everyone worse off - there are fewer goods for dollars to competing over, nominal income typically drops, etc. etc. There is no redistribution happening here - everyone is becoming poorer. It even makes the point you are making worse - if the average income/wealth is dropping faster than the median income in a recession (which is the point the original commentator was making), then the upside from redistribution only lessens. ie. if the rich are materially worse off, there is less to redistribute from them to the poor.

by Rury 4y ago

whimsicalism 4y ago

Don't have time right now to respond in a long-form manner, but you seem to have missed that I am talking about real (not nominal) median income already, which accounts for the concerns that you are talking about. Also, during a supply-driven recession, then both your income falls and the price of goods increases.

Rury 4y ago
>I am talking about real (not nominal) median income already, which accounts for the concerns that you are talking about It actually doesn't account for what I'm talking about. It dismisses it without much substance and avoids the topic that we're talking about which is: >Why care about wealth inequality as a first-order concern? If you equalize income inequality, it's impossible for real median income to fall when it's below the real average income. If you can't see why, keep reading. >Also, during a supply-driven recession, then both your income falls and the price of goods increases. This is a straw man which I'm not going to address, but let's relate it back to the topic. If we're running out of supply, you're running out of something (and are closer to a zero sum scenario). If you are to ever acquire something in a zero sum game, you must take it from someone else (the wealthy owners of said supply). That's why you should be concerned about wealth inequality in such a scenario. If we take from the wealthy who have that supply and equalized it, real median wealth wouldn't actually fall. To further demonstrate why, let's take my Manhattan scenario. Median ownership of Manhattan land is 0 Manhattan land. If we take all that Manhattan land from people who own Manhattan land, and equally distributed it amongst everyone, median ownership of Manhattan land would actually rise (not fall) to a minuscule, but non 0 amount. The previously wealthy Manhattan land owners however would lose tremendously.
- whimsicalism 4y ago
  > If we're running out of supply, you're running out something (becoming closer to a zero sum scenario) ...or structure policy such that supply increases? > It actually doesn't account for what I'm talking about. It dismisses it without much substance while avoiding the topic that we're talking about which is: It directly accounts for it - "if you don't acknowledge this, then there's potential for you to be priced out of markets even if your income is growing, but growing slower relative to everyone else" -> A purely nominal, non-real effect.
  - Rury 4y ago
    >...or structure policy such that supply increases? You could. But how does that refute anything I stated? >It directly accounts for it No it doesn't because real median income can’t fall when it’s below real average income and wealth is redistributed equally. It is not a purely nominal, non-real effect.
    - whimsicalism 4y ago
      Let's take a step back now that I have more time to respond. There are 3 claims that have been made in this thread (not all by you) that I'd like to talk about: 1. "focusing solely on your own income is too short-sighted. As the price of everything is dictated by the collective market (ie other market participants who also have disposable income). If you don't acknowledge this, then there's potential for you to be priced out of markets even if your income is growing, but growing slower relative to everyone else." 2. Redistribution can always increase median income when the average income is higher and we should redistribute to increase utility for this reason. 3. Recessions can be good because they decrease wealth inequality. On your point #1, my claim is that the fact that I am citing real income directly addresses this point - people's incomes are rising even when you account for markets getting more crowded and people bidding up the price of goods. You say: "no, it doesn't account for point #2", which I agree with - I wasn't intending on responding to that point. On your point #2 - this is one one where I mostly (although not fully) agree with you. Obviously there is no disputing the point around mean and median in the short term: that's just basic math. The issue is that there is no such thing as a "lump sum" transfer in a vacuum. If we could immediately do a transfer like the one you are suggesting without a shift in behavior, we absolutely should do it. But transfers impact expectations. It is telling that you have picked land in Manhattan as an example since the supply is fixed so the effects I'm discussing don't play in - but for most goods and services people enjoy, the supply is not fixed despite your assertions. The US economy doubles in real output roughly every ~35 years or so (this may be slowing, ofc). If you do a lump sum transfer to increase median income = average income, you will lessen supply in the future, causing a decrease in real incomes (supply-push inflation, as well as just economic downturn). Which brings us to point #3: >>...or structure policy such that supply increases? > You could. But how does that refute anything I stated? This is my response to point #3 which was the original point I was disagreeing with. In a recession where supply decreases, that makes everyone worse off - there are fewer goods for dollars to competing over, nominal income typically drops, etc. etc. There is no redistribution happening here - everyone is becoming poorer. It even makes the point you are making worse - if the average income/wealth is dropping faster than the median income in a recession (which is the point the original commentator was making), then the upside from redistribution only lessens. ie. if the rich are materially worse off, there is less to redistribute from them to the poor.