5 ms·

The essay is truly horrible. I don't have the time to take it to bits, but a couple of starting points: - he conflates earnings and effort, as if by earning 10

by bonaldi 14y ago

The essay is truly horrible. I don't have the time to take it to bits, but a couple of starting points: - he conflates earnings and effort, as if by earning 100 times you were necessarily 100x more productive at some point. - related: wealth is categorically different. The worst chess player and the best chess player must both play the same game. But if chess were wealth, the poor guy would have to carve his own pieces and rent the hall, while the rich guy would turn up and sit while the game played itself, no effort required - he's right that the middle-classes are the true engines of wealth creation, not the rich. This is the crux of the problem: income inequality destroys the middle class. It leaves only very poor and very rich. No middle class = no wealth generation. That is why it's an issue for everyone, and no amount of "smart people who work hard deserve to control 99% of capital" changes that.

yummyfajitas 14y ago
Could you define "middle class", and perhaps explain how income inequality "destroys" it? By most common definitions, your statement can't be true. Taking a typical relative definition, if the middle class is [50-X%, 50+X%], then by definition the middle class always makes up 2X% of the nation and nothing can destroy it. If you take an absolute definition of middle class (i.e., middle class = home with X ft^2/person, tv, car, refrigerator), then inequality is pretty much unrelated to how many people are middle class. In short, for your claim to be true, you must be using some uncommon definition of middle class. It would help to explain what it is.
- irishcoffee 14y ago
  http://blogs.reuters.com/great-debate/2012/01/13/a-shrinking-middle-class-means-a-shrinking-economy/ http://blogs.reuters.com/great-debate/2012/01/13/a-shrinking... Go to figure 6.
  - yummyfajitas 14y ago
    Using that definition (people in the range of [0.5 x median, 1.5 x median]), the middle class has only shrank because more people have become rich. http://www.nationalreview.com/agenda/288306/guest-post-scott-winship-obama-administrations-questionable-mobility-claims-reihan-sal http://www.nationalreview.com/agenda/288306/guest-post-scott... The number of people who are middle class or higher has remained contant since 1970. Using Alan Krueger's definitions, all inequality has done is moved people from middle class to rich. Is that a bad thing?
    - bonaldi 14y ago
      Yes, if it leaves in its wake massive income inequality. The middle class is the engine of wealth generation. It both spends high proportions of its income and has enough income to start new enterprises. A middle class drives an economy. What you are asking is if it's OK for the middle class of merchants to shrink because many are now rich enough to be lords and kings. That may be, but it still leaves a society with no merchants: only the very poor and very rich.
      - yummyfajitas 14y ago
        It both spends high proportions of its income and has enough income to start new enterprises. Why can't a middle class person who became "rich" (although most people don't consider >1.5x median to be rich) do the same thing? Suppose my income dropped dramatically and I suddenly entered the "middle class" (by Alan Krueger's definition - I'm actually middle class by the definition of most people). How would this make it easier for me to start new enterprises?
        bonaldi 14y ago
        Why can't a middle class person who became "rich" (although most people don't consider >1.5x median to be rich) do the same thing? Starting new businesses: It's more a matter of "Don't" than "Can't." A middle-class person who became rich is either tending the business that got them there or has otherwise lost the impetus of need that drove them to start a business. If your income suddenly dropped dramatically, what would you do: adjust to your new income level and be happy, or strive immediately to retain your previous level? Spending income: It's easy to spend 99% of a median income. It's almost impossible for the very wealthy to spend anything like what they make. Additionally, there are only so many needs to be filled. It's more economically productive to have a very large number of people willing and able to buy modestly priced items than it is to have a very small number wanting to buy very highly priced items.
        yummyfajitas 14y ago
        You clearly haven't read any of the articles cited in this thread. Alan Krueger defines middle class as more than $25k/year, but less than $75k/year (at contemporary income levels). Rich is presumably $75k or more. The middle class has shrank because people have moved from $65k to $85k. This has absolutely nothing whatsoever to do with the very wealthy. If you have evidence that people going from $50k to $80k is bad for the economy, go ahead and present it. You haven't yet. All you've presented are vague misconceptions and demonstrated you don't understand the numbers under discussion.
- batista 14y ago
  >Could you define "middle class", and perhaps explain how income inequality "destroys" it? It's political economy 101. I don't understand your bizarro counter-arguments. Take the first for example: >Taking a typical relative definition, if the middle class is [50-X%, 50+X%], then by definition the middle class always makes up 2X% of the nation and nothing can destroy it. It cannot destroy the existence of the category named "middle class", but it can very much destroy its living conditions. It's not just being in the 50%+-X range, it's also what that range represents in purchase power. >If you take an absolute definition of middle class (i.e., middle class = home with X ft^2/person, tv, car, refrigerator), then inequality is pretty much unrelated to how many people are middle class. Only in a bizarro world where the wealth is magically readjusted to account for inequality. In the real world this inequality is caused by wealth moving from the middle to the upper classes. For example, a company moves its factories to China. The middle class families making a living around the US factory and the nearby city are devastated, but the company executives get even richer because of the higher margins.
  - yummyfajitas 14y ago
    It's not just being in the 50%+-X range, it's also what that range represents in purchase power. In the US, the purchasing power of that range has dramatically increased over the years. We live in bigger houses, consume better medicine, more food, more education, more and better electronics and entertainment, etc. I think you'll be hard pressed to find a single category in which contemporary Americans have less than 1970's Americans, for any reasonable value of x. If you dispute this, go ahead and find that single category. Only in a bizarro world where the wealth is magically readjusted to account for inequality. In the real world this inequality is caused by wealth moving from the middle to the upper classes. Are you seriously calling a world of economic growth and technological process "bizarro world"? We have become vastly wealthier than we were at any historical period, ignoring short term fluctuations (e.g., recessions). In the 1970s, the bottom 11% didn't have flush toilets. http://www.digitalhistory.uh.edu/database/article_display.cfm?HHID=372 http://www.digitalhistory.uh.edu/database/article_display.cf... For example, a company moves its factories to China. The middle class families making a living around the US factory and the nearby city are devastated, but the company executives get even richer because of the higher margins. Hahaha! Now I know you are writing a parody of something - first complaining about inequality, then complaining about wages becoming more equal.
pg 14y ago
he conflates earnings and effort, as if by earning 100 times you were necessarily 100x more productive at some point No I don't: "When we talk about "unequal distribution of income," we should also ask, where does that income come from? Who made the wealth it represents? Because to the extent that income varies simply according to how much wealth people create, the distribution may be unequal, but it's hardly unjust."
- bonaldi 14y ago
  "I explicitly say that variation in productivity is only one source of variation in income [...] where does that income come from? Who made the wealth it represents?" This shows the same problem -- productivity (effort) of the individual is not identical with wealth creation (earnings) and hence the two have different consequences for the individual's compensation and its justification. A person (your CEO) who is a 100x more productive (which I do have difficulty conceiving) does not necessarily generate 100x more wealth. Jobs was replaced by Tim Cook, and Apple continues to create astonishing amounts of wealth. Is that because Cook is actually as productive as Jobs? Was Jobs in fact replaceable? No, it's actually that the wealth created by Apple was attributable to Apple. Yes, it took a particular person to start Apple and forge it into a wealth-creating machine, but that forms a different kind of compensation argument. Sever that link between an individual's productivity/effort and the earnings of their company, and it becomes vastly harder to justify a CEO earning 100x more than an employee. I realise the difference is subtle, and that's why it's often missed. But the output of a person and the output of a thing they created are not identical, and you can't conflate the output of the creation with the creator's effort.
  - msellout 14y ago
    Why not? If I grow some wheat on a farm, don't I get to take credit for photosynthesis and perhaps the nearby river? How is creating a company any different from growing plants?
    - bonaldi 14y ago
      Because other people are involved. EG If you hire three farm hands, you can no longer say that the revenue of the farm is directly related to your productivity. It is now related to the productivity of the farm.

by bonaldi 14y ago

yummyfajitas 14y ago

Could you define "middle class", and perhaps explain how income inequality "destroys" it? By most common definitions, your statement can't be true. Taking a typical relative definition, if the middle class is [50-X%, 50+X%], then by definition the middle class always makes up 2X% of the nation and nothing can destroy it. If you take an absolute definition of middle class (i.e., middle class = home with X ft^2/person, tv, car, refrigerator), then inequality is pretty much unrelated to how many people are middle class. In short, for your claim to be true, you must be using some uncommon definition of middle class. It would help to explain what it is.

irishcoffee 14y ago
http://blogs.reuters.com/great-debate/2012/01/13/a-shrinking-middle-class-means-a-shrinking-economy/ http://blogs.reuters.com/great-debate/2012/01/13/a-shrinking... Go to figure 6.
- yummyfajitas 14y ago
  Using that definition (people in the range of [0.5 x median, 1.5 x median]), the middle class has only shrank because more people have become rich. http://www.nationalreview.com/agenda/288306/guest-post-scott-winship-obama-administrations-questionable-mobility-claims-reihan-sal http://www.nationalreview.com/agenda/288306/guest-post-scott... The number of people who are middle class or higher has remained contant since 1970. Using Alan Krueger's definitions, all inequality has done is moved people from middle class to rich. Is that a bad thing?
  - bonaldi 14y ago
    Yes, if it leaves in its wake massive income inequality. The middle class is the engine of wealth generation. It both spends high proportions of its income and has enough income to start new enterprises. A middle class drives an economy. What you are asking is if it's OK for the middle class of merchants to shrink because many are now rich enough to be lords and kings. That may be, but it still leaves a society with no merchants: only the very poor and very rich.
    - yummyfajitas 14y ago
      It both spends high proportions of its income and has enough income to start new enterprises. Why can't a middle class person who became "rich" (although most people don't consider >1.5x median to be rich) do the same thing? Suppose my income dropped dramatically and I suddenly entered the "middle class" (by Alan Krueger's definition - I'm actually middle class by the definition of most people). How would this make it easier for me to start new enterprises?
      - bonaldi 14y ago
        Why can't a middle class person who became "rich" (although most people don't consider >1.5x median to be rich) do the same thing? Starting new businesses: It's more a matter of "Don't" than "Can't." A middle-class person who became rich is either tending the business that got them there or has otherwise lost the impetus of need that drove them to start a business. If your income suddenly dropped dramatically, what would you do: adjust to your new income level and be happy, or strive immediately to retain your previous level? Spending income: It's easy to spend 99% of a median income. It's almost impossible for the very wealthy to spend anything like what they make. Additionally, there are only so many needs to be filled. It's more economically productive to have a very large number of people willing and able to buy modestly priced items than it is to have a very small number wanting to buy very highly priced items.
        yummyfajitas 14y ago
        You clearly haven't read any of the articles cited in this thread. Alan Krueger defines middle class as more than $25k/year, but less than $75k/year (at contemporary income levels). Rich is presumably $75k or more. The middle class has shrank because people have moved from $65k to $85k. This has absolutely nothing whatsoever to do with the very wealthy. If you have evidence that people going from $50k to $80k is bad for the economy, go ahead and present it. You haven't yet. All you've presented are vague misconceptions and demonstrated you don't understand the numbers under discussion.
batista 14y ago
>Could you define "middle class", and perhaps explain how income inequality "destroys" it? It's political economy 101. I don't understand your bizarro counter-arguments. Take the first for example: >Taking a typical relative definition, if the middle class is [50-X%, 50+X%], then by definition the middle class always makes up 2X% of the nation and nothing can destroy it. It cannot destroy the existence of the category named "middle class", but it can very much destroy its living conditions. It's not just being in the 50%+-X range, it's also what that range represents in purchase power. >If you take an absolute definition of middle class (i.e., middle class = home with X ft^2/person, tv, car, refrigerator), then inequality is pretty much unrelated to how many people are middle class. Only in a bizarro world where the wealth is magically readjusted to account for inequality. In the real world this inequality is caused by wealth moving from the middle to the upper classes. For example, a company moves its factories to China. The middle class families making a living around the US factory and the nearby city are devastated, but the company executives get even richer because of the higher margins.
- yummyfajitas 14y ago
  It's not just being in the 50%+-X range, it's also what that range represents in purchase power. In the US, the purchasing power of that range has dramatically increased over the years. We live in bigger houses, consume better medicine, more food, more education, more and better electronics and entertainment, etc. I think you'll be hard pressed to find a single category in which contemporary Americans have less than 1970's Americans, for any reasonable value of x. If you dispute this, go ahead and find that single category. Only in a bizarro world where the wealth is magically readjusted to account for inequality. In the real world this inequality is caused by wealth moving from the middle to the upper classes. Are you seriously calling a world of economic growth and technological process "bizarro world"? We have become vastly wealthier than we were at any historical period, ignoring short term fluctuations (e.g., recessions). In the 1970s, the bottom 11% didn't have flush toilets. http://www.digitalhistory.uh.edu/database/article_display.cfm?HHID=372 http://www.digitalhistory.uh.edu/database/article_display.cf... For example, a company moves its factories to China. The middle class families making a living around the US factory and the nearby city are devastated, but the company executives get even richer because of the higher margins. Hahaha! Now I know you are writing a parody of something - first complaining about inequality, then complaining about wages becoming more equal.

pg 14y ago

he conflates earnings and effort, as if by earning 100 times you were necessarily 100x more productive at some point No I don't: "When we talk about "unequal distribution of income," we should also ask, where does that income come from? Who made the wealth it represents? Because to the extent that income varies simply according to how much wealth people create, the distribution may be unequal, but it's hardly unjust."

bonaldi 14y ago
"I explicitly say that variation in productivity is only one source of variation in income [...] where does that income come from? Who made the wealth it represents?" This shows the same problem -- productivity (effort) of the individual is not identical with wealth creation (earnings) and hence the two have different consequences for the individual's compensation and its justification. A person (your CEO) who is a 100x more productive (which I do have difficulty conceiving) does not necessarily generate 100x more wealth. Jobs was replaced by Tim Cook, and Apple continues to create astonishing amounts of wealth. Is that because Cook is actually as productive as Jobs? Was Jobs in fact replaceable? No, it's actually that the wealth created by Apple was attributable to Apple. Yes, it took a particular person to start Apple and forge it into a wealth-creating machine, but that forms a different kind of compensation argument. Sever that link between an individual's productivity/effort and the earnings of their company, and it becomes vastly harder to justify a CEO earning 100x more than an employee. I realise the difference is subtle, and that's why it's often missed. But the output of a person and the output of a thing they created are not identical, and you can't conflate the output of the creation with the creator's effort.
- msellout 14y ago
  Why not? If I grow some wheat on a farm, don't I get to take credit for photosynthesis and perhaps the nearby river? How is creating a company any different from growing plants?
  - bonaldi 14y ago
    Because other people are involved. EG If you hire three farm hands, you can no longer say that the revenue of the farm is directly related to your productivity. It is now related to the productivity of the farm.