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Thomas Piketty lays it all out in "Capital in the 21st Century" Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the

by jgord 2y ago

Thomas Piketty lays it all out in "Capital in the 21st Century" Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank. If you do tax the rich, they do very well and you also have money to pay for things like education, roads, affordable housing, medical services, scientific research .. which benefit all and lubricate the general economic market. If you dont tax the rich, you end up with a gilded age of emperors and kings or a few robber barrons, a small rich coterie around them and the gawping masses of poor eeking it out. Postwar 70s and 80s were a unusual period of relative lower-inequality, in which we had money in the real economy to develop things. Garys Economics made an interesting point that inequality _itself_ is a problem - because the actual real value of the world remaining the same [ goods, energy available, land, workers, housing, technology ], when there is higher inequality, then the poor are losing a proportion of that real wealth to the rich. Extreme inequality itself starves almost all the population of a share of real wealth, for them to use their skills effectively - renovate a house, invest in stocks, get a masters degree, do a garage project, travel, have kids, install solar panels etc.

mrjin 2y ago
Even if you try to tax the riches, they have billions of ways to evade it. The tax laws are so complicated for a reason. Here in Australia, there were cases that some individuals that earned just about A$1M pa., and they paid ~A$980K to companies registered in Virgin Islands etc. for managing tax affairs. Such arrangement knocked down their taxable income to ~A$19K, and thus they paid probably a couple of dollars taxes if not not even a dime. Eye-opening, right? But those were not those super rich ones. You can just imagine what those super rich people can do. So the burden of the tax would be on mid-income people. I would expect the same in US.
- idle_zealot 2y ago
  If there were political will to tax the rich then you'd have to, in addition to changing tax law (obviously), fund IRS investigations to ensure the taxes are actually collected. Throwing up your arms and saying "well we can't tax the rich, they're too powerful and wily, and will easily commit tax fraud to evade those taxes, and in actuality you'll bring in less money" is exactly the weak attitude that stalls efforts to fund vital services. If you think people will commit tax evasion, then put more resources into investigating tax evasion. Historically, money spent recovering taxes has yielded more than the cost of said investigations.
  - CrossVR 2y ago
    > Throwing up your arms and saying "well we can't tax the rich, they're too powerful and wily, and will easily commit tax fraud to evade those taxes, and in actuality you'll bring in less money" is exactly the weak attitude that stalls efforts to fund vital services. It goes further than that, it is the exact argument made by wealthy people as to why we shouldn't tax them more aggressively. Parroting that argument is ludicrous unless you're considerably wealthy yourself.
    - mrjin 2y ago
      Those loopholes were by design, complicated enough to prevent most people like us to take advantage of it but will allow those who can afford to evade lots. I'm not sure if people is just naive or playing dumb.
      - bloppe 2y ago
        If only there were some way to change a tax code... Alas, no country has ever figured out how to do that!
        johnnyanmac 2y ago
        We have a way... oh, they have spent 20 years in gridlock arguing over political lines. And the Rich apparently won given the current proposal.
        bloppe 2y ago
        You heard it here first. There will be no tax reform from here on.
        thfuran 2y ago
        Why not? The billionaires are still paying some tax.
    - 2y ago
- smallmancontrov 2y ago
  "You can't possibly defeat me, why do you even try?" Come on. You have fallen for cartoon-villain level smack talk. Chew it up, spit it out. We've done this before and we can do it again.
- jjtheblunt 2y ago
  Can that class of scams be foiled with consumption tax ?
  - stvltvs 2y ago
    Consumption taxes are almost always regressive, hitting the poorest the hardest. Depends on how you structure them.
    - jjtheblunt 2y ago
      Good point
- frontfor 2y ago
  Two points here: 1. Gary’s arguments for taxing the rich aren’t about taxing income. It’s about taxing wealth. 2. By his argument, most of the wealth are immovable: the rich disproportionately owns actual, physical real estates, and stocks of actual companies. As these assets are based in the country, you could tax right at the source.
  - tastyfreeze 2y ago
    So the government takes physical assets? Didn't we fight a war over property rights? My neighbor is way wealthier than me. So its ok if I take his car. He has enough he can just buy another one.
    - kiwih 2y ago
      Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith.[0] [0] https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html I think a more reasonable interpretation might be "the government knows about expensive cars (i.e. that they are registered, have numberplates etc), and so charges some annual tax on the owners of those cars."
      - tastyfreeze 2y ago
        Describing wealth tax reasoning with an absurd example of the same reasoning on an individual level is an attempt to get people to understand what wealth taxes are. The government that is supposed to work for you thinks you have accumulated too much stuff and is trying to make it legal to take a percentage of your physical wealth annually.
        toomuchtodo 2y ago
        You only accumulated and maintain the wealth because of the government. Without the government and the economic system it cultivates, you’d never have it.
- bjourne 2y ago
  But laws shouldn't be set based on how easy they are to avoid. Lots of people drive too fast all the time, yet few argue that we should do away with speed limits. Besides, there is zero empirical evidence that suggests that raising rich people's taxes is ineffective. Yes, they are good at avoiding taxes, but professional tax collectors are probably even better at enforcing taxes. It's a question of political will, or lack thereof, due to not wanting to lose your biggest donors.
  - mrjin 2y ago
    You don't cut your own fingers. And that pretty much the whole story.
  - ItsMonkk 2y ago
    I understand this is a tangent but you picked a really bad example. We should be trying to remove every single speed limit that we can. If the design speed of a road does not match the speed limit of the road, people will drive the design speed, cops will learn to sit there all hours of the day waiting for people to mess up, and get ticketed. Instead of just putting up the speed limit sign, city planners should design for the road to be safe without need for the speed limits to be in place. This can mean things like reducing the width of a lane, could mean speed bumps, to purposeful non-straight sections.
    - kevinventullo 2y ago
      That’s a horrible idea. I very much like driving on straight wide roads without speed bumps, even if I’m going 25mph.
      - ItsMonkk 2y ago
        If the safe speed of the road is 25mph, and the design speed of the road is above 25mph, you will not have safety no matter what the speed limit is. Vision Zero strategies take these factors into account to ensure safety.
    - 9dev 2y ago
- merek 2y ago
  Do you have a link? If the individual resides in Australia, how do they utilize the $980k sitting in the foreign company? The company can buy assets in AU, such as a house, and lease it to the individual, but I'm pretty sure the ATO requires they pay the company rent at market rate, which will likely be unaffordable on a reported income of 20K pa.
  - mrjin 2y ago
    I remembered I read the article from Australian Financial Review, although I could not find the original link, got a more detailed one instead. See Page #3. https://australiainstitute.org.au/wp-content/uploads/2020/12/P411-Cost-of-managing-tax-affairs-FINAL.pdf https://australiainstitute.org.au/wp-content/uploads/2020/12...
- lotsofpulp 2y ago
  A land value tax would be impossible to evade. Even a business’s assets will exist somewhere on land. In the case of intellectual property, reducing copyright and agents to 10 years should solve the problem.
- jjav 2y ago
  > The tax laws are so complicated for a reason. And the reason is those same rich influence the laws to their benefit. It would be pretty trivial to tax the wealth if a society wanted to do so. But laws are made by lobbyists, who are paid by the rich, so what should we expect.
  - Ray20 2y ago
    Mostly it is other way around. People, who influence the laws - become reach.
- hcknwscommenter 2y ago
  Sounds illegal.
- audiodude 2y ago
  I often tell my friends, we can't be wealthy, we still pay taxes.
  - mrjin 2y ago
    Lol. That's probably one of the considerations while designing the tax rules.
- staticautomatic 2y ago
  This is such a "'No Way To Prevent This,' Says Only Nation Where This Regularly Happens" comment.
- WalterBright 2y ago
  > they have billions of ways to evade it In Washington state, they passed a capital gains tax primarilly to tax Jeff Bezos. Bezos simply left the state just before the tax took effect. So did a lot of other wealthy residents.
  - ericd 2y ago
    Ah, but proponents also want to make it difficult for you to leave with your money. Capital controls are very seductive, even though they’re very authoritarian.
- supernova87a 2y ago
  Why have laws either? Honest people would have not needed them anyway, and people seeking to break the law will find ways around them.
- quantadev 2y ago
  The only way to force everyone to pay is with a consumption tax. We'd tax based on consumption so those yachts, Rolexes, and home construction, etc. that the rich spend crazy amounts on gets taxed. Of course since a consumption tax hurts the poor disproportionately, the gov't would send a refund check to them, in large enough amounts to make up for it, where the poor are basically paying zero tax. It also fairly discourages illegal immigration because illegals wouldn't get that kickback check from the Gov't, since they're 'visitors' not 'citizens'.
  - ericd 2y ago
    Revenue neutral carbon taxes with all income dividended back out per capita are really the move here. It’s also one of the few really promising ways to tackle climate change effectively.
    - quantadev 2y ago
      Seems to me like that's a similar approach but a consumption tax is easier for everyone to understand and would be therefore more palatable to the public. Also the consumption tax would have a similar affect of taxing people proportional to the amount of damage they're doing to the environment. For example, we want a big tax on Rolexes but making a watch doesn't really do that much carbon consumption.
      - dragonwriter 2y ago
        > Seems to me like that's a similar approach but a consumption tax is easier for everyone to understand and would be therefore more palatable to the public. There is a false assumption here, that easy to understand makes it more palatable. A flat capitation would be even easier to understand, and even less palatable, because the ease of understanding is directly connected, in its case, to the ease of opponents organizing against it. A flat consumption tax faces a similar problem, which is why the efforts to push one to replace the income and payroll taxes for decades now under the label "Fair Tax" have been unsuccessful -- easy to understand isn't a political benefit when people who understand it often don't like what they understand.
- yodelshady 2y ago
  And that's why Georgism exists! You can't offshore a plot of land. If you've really managed to generate trillions in profit without using any, including indirectly (mining, showrooms, etc), fair enough. If your economic model is quite literally rent seeking, you can fuck off and give all those proceeds to whatever government ensures that land is not overrun by whatever raiders are historically a problem in your area. If you work for a living, you should be able to spend your earnings on a fancy apartment if you wish, and if a landlord wishes to make one instead of just sitting on land, they keep the profits from that too.
- fallingfrog 2y ago
  The solution to that might be to increase funding to the irs; currently the political elites are seeking to kneecap the irs so that it’s even easier for them to evade taxes.
rufus_foreman 2y ago
The problems with Piketty's arguments are addressed in the article: "if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made" Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked. But rich people don't do that.
- matthewdgreen 2y ago
  But wealth inequality has still grown quite a bit. Your point is not a refutation, it’s just an observation that the infection has progressed more slowly than it could have if it was completely optimal.
  - rufus_foreman 2y ago
    >> Your point is not a refutation "there are fewer than 1,000 billionaires and the vast majority of them are self-made" That's a refutation, Piketty made assertions not just about the outcome, but about the process by which that outcome would happen.
    - smallmancontrov 2y ago
      So long as rich-get-richer mechanics play out inside of a single generation they are unquestionably OK? What even is this argument?
      - danielmarkbruce 2y ago
        he didn't say it's ok. He said piketty is wrong. Anyone who studied even econ 101 and combined it with a teaspoon of common sense knows piketty is an idiot and that book is garbage. He's a politician.
smallmancontrov 2y ago
> the growth rate of wealth itself The fundamental theorem of capitalism: rich people get paid for being rich in proportion to how rich they are. This is why your savings account looks like an exponential. The thing to understand is the difference in lived experience depending on where it starts. If you are poor, the returns are a joke, you tend to ignore them. If you are middle class, the returns fund your retirement, and it seems roughly fair: you work hard and at some point you earn the right to not work any more. Only if you are rich do you see the fountain of free money (homework: calculate yearly returns for the typical 10%er, 1%er, .1%er, and centabillionaire), and of course being the beneficiary you rationalize away the possibility that this could be a problem at all. It's a tidy system. "That's an unfair characterization of capitalism!" So is the one you get in economics which bends over backwards to hide the "fundamental theorem" as I have stated it inside a choice of units: "under conditions of market equilibrium every financial asset has an equivalent risk-adjusted rate of return from the perspective of its marginal buyer." Did you miss the class warfare? It was all hidden inside the word "rate." Very clever.
- LudwigNagasena 2y ago
  How does economics bend over backwards to hide the “fundamental theorem”? Every intro to macroeconomics basically starts with a simplified conceptualisation of production as a function of labour and capital. Then it describes returns to labor and capital and so on. People who own capital get paid for that capital. It’s quite literally Economics 101.
danielmarkbruce 2y ago
Piketty is a hack. Most billionaires don't spend anything even close to their net worth. In effect, they have a bunch of IOUs from other people and never cash them in.
- deleted 2y ago
  [deleted]
- imtringued 2y ago
  So you're saying they have ever increasing influence and are keeping the rest of society in debt to them.
  - danielmarkbruce 2y ago
    "ever increasing" - no. People die, billionaires tend to stay that way for a few decades then die. In the grand scheme they are nothing, zero. Death aside, look at all the billionaires currently running to kiss the ring of Trump - a populist elected by the people of the US against the will of the so called elite. No one is in control, no one has very much power. It's a story book idea.
- pqtyw 2y ago
  How exactly do your subsequent claims prove: > Piketty is a hack. Generally those IOUs are real as a ton of gold bars or dollar bills somebody might be hoarding in their vault.
  - danielmarkbruce 2y ago
    Inequality is generally accepted as differences in material possessions acquired/consumed or access to services (eg health, travel, whatever). It's fair to aggregate it into "consumption". Jeff Bezos is literally never cashing in the vast majority of the IOUs he has. The actual difference in his life isn't anything close to that suggested by the difference in net worth between he and I. Net worth differences aren't a good proxy for actual lived differences. It's off by orders of magnitude. This isn't a groundbreaking idea, Piketty is aware. He discusses it briefly in his book, with handwavy, abstract notions about "power" and "influence", as if that's what most people care about. But, it doesn't sell the same way his nonsense does. So he pedals his nonsense.
adrianN 2y ago
Rich people generally don't keep the majority of their money as cash in a vault. When money lies in the bank, the bank invests it in the real world. Or more directly, when money lies in stocks and bonds, it is invested in the real world.
- mqus 2y ago
  > when money lies in stocks and bonds, it is invested in the real world. Is it though? How much did Nvidia invest more, after their stock hikes? How about Tesla, Microsoft, Apple? No. They cut their staff or maybe stayed at their current investment levels.
  - yorwba 2y ago
    You have the ordering of events inverted. Companies do not automatically have more money to invest after their stock price rises, because the stock is traded between unrelated third parties. Rather, the stock price rises after the company made investments that paid off, increasing the company's expected future profit. This then retroactively provides the incentive for people to give money directly to companies to invest in exchange for partial ownership. So the question you should be asking is: How much did Nvidia invest before their stock hikes? And which companies will the original investors fund next after selling their shares at a profit?
xivzgrev 2y ago
Small surprise: top marginal tax rates used to be 70-90% from the 40s to the 70s. https://taxpolicycenter.org/statistics/historical-highest-marginal-income-tax-rates https://taxpolicycenter.org/statistics/historical-highest-ma...
- SJC_Hacker 2y ago
  There were so many deductions and ways of hiding things the effective rate was maybe 20%
  - hcknwscommenter 2y ago
    source?
    - SJC_Hacker 2y ago
      Tax revenue as a percentage of GDP historically has floated around 18% https://www.ceicdata.com/en/indicator/united-states/tax-revenue--of-gdp#:~:text=US%20Tax%20revenue%3A%20%25%20of%20GDP%20data%20is%20updated%20yearly%2C,low%20of%2013.7%20%25%20in%202009. https://www.ceicdata.com/en/indicator/united-states/tax-reve... Here's the income percentage held by the top 1% 1950-2010 http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014FiguresTables.pdf http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Fig... While its true that its higher now than it was the 1950s-1980s, its an increase of about 15%. It if was the case that the very high marginal rates were actually being paid, you would expect the percentage of income held by the top 1% to be much higher. Here's another source with more direct comparison - how much their income they actually paid in tax https://taxfoundation.org/data/all/federal/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/data/all/federal/taxes-on-the-rich...
  - deleted 2y ago
    [deleted]
  - PopAlongKid 2y ago
    Indirectly, we can point to the creation of Alternative Minimum Tax (AMT) in the 1960s to ensure that higher income taxpayers paid at least some minimum despite the plentiful deductions. Some of the things not allowed under AMT are state and local tax deductions, interest on mortgage equity debt (not acquistion debt), personal and dependent exemption deductions, deferring tax on compensation due to Incentive Stock Options (ISO), some kinds of accelerated depreciation, and so on.
scotty79 2y ago
> rich people want to invest some of it in the real world, not leave it in the bank Honestly, I have no idea why would anyone need that. Money is not value. Money is just a way of keeping track who is owed by future society how much value. It's a way of keeping tabs who gets to consume in the future. When rich people hoard their money it's not a problem, you can just print more money to replace what they sucked up and hoarded. It's exactly when they try to spend it where the problems start to show up. Because they are doing it stupidly causing at least some inflationary pressures but more often than not societal and environmental harm. Countries should make every effort to make spending their money as hard as possible for the rich people. Disincentivize them with high (and highly progressive) luxury, investment and real estate taxes. If that causes them to hide their money to avoid tax, even better. Every dollar of rich money hidden is a dollar of value not wasted by society on servicing the rich and their whims and gambling.
- SoftTalker 2y ago
  People who make their money producing luxury goods or developing real-estate may disagree. As might all the people who work in the supply chains for those activities.
- ericjmorey 2y ago
  Or just transfer their wealth to the rest of society. What they think is theirs is only true if the rest of us agree.
  - pb7 2y ago
    Please go build your communist utopia elsewhere.
MichaelDickens 2y ago
Economists mostly disagree with Piketty's thesis: https://www.kentclarkcenter.org/surveys/piketty-on-inequality/ https://www.kentclarkcenter.org/surveys/piketty-on-inequalit...
- Aromasin 2y ago
  Of course they do. They've built entire careers around the concept that the whole economy can be models on N=1. Inequality doesn't fit into their models, so they dismiss it out of hand because otherwise the 20+ years of their life they've spent devoting to their craft proves to be no more useful than a horoscope.
  - lazzlazzlazz 2y ago
    Inequality is very simply to include in these models, and they do. The problem is that the models often show that the median quality of life improves faster when there's somewhat more inequality in the system, which flies in the face of every socialist intuition. It's a lot easier to pretend we need state-enforced equality.
    - kevinventullo 2y ago
      Do their models show that the median quality of life in the US has increased in the last 20 years? Honest question.
    - smallmancontrov 2y ago
      It's simple to include, but there's no denying that the 101-level economics models steer you away from thinking about inequality harder than Vin Diesel in a car chase. Carefully omitting the fact that the economic notion of value is wealth-weighted (and you can march enough elephants through this loophole to wage a class war), drawing attention away from "rich people getting paid for being rich" dynamics by dividing out wealth wherever possible, inviting you to use averages where "rich get richer" hides "poor get poorer" -- it's a masterclass in propaganda. I have literally never in my life seen a more artful tapestry of deception than Econ 101.
dreghgh 2y ago
> Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank. I think your second sentence, and thus your explanation of Piketty's thesis, is wrong. Piketty's point was that if wealth grows faster than the economy, the total share of all assets held by the wealthy will grow and grow. I don't think he was concerned about the choice to invest 'in the real world'. In any case it's not clear what 'not investing in the real world' means or if it's meaningful. Any return on capital either comes from direct investment or from lending to someone else who will invest directly. There is a fundamental accounting equation which proves that all net saving is net investment.
- AlexandrB 2y ago
  > Any return on capital either comes from direct investment or from lending to someone else who will invest directly. Is this true? I'm not saying it's a huge portion of all saving, but holding wealth in things like precious metals or greater fool investments like Bitcoin doesn't seem like "investing" in anything productive.
  - eftychis 2y ago
    If you bury gold bars that you mined yourself in your backyard, or you bury your salary in cash there straight from your paycheck, then you remove money from the system and thus not invest it. And effectively damage the economy, mainly via lack of liquidity. It's hard making your capital inaccessible to the economy, but it's easy to not get the benefits of that working capital. For instance, any time you park your money in a regular bank account or lend it at a suboptimal rate, you don't get some of the benefits.
    - TheSpiceIsLife 2y ago
      This comment was down voted, but is a reasonable response. Further to the parent comment, if you park your money in gold or crypto, you’ve given that money to someone else, and so on and so forth. But there’s a balance to be bad, if no one actually spends anything other than acquiring investments, they starve, and the economy suffers.
WalterBright 2y ago
> the actual real value of the world remaining the same If I take raw materials, and create something with them, I have increased the real value of the world.
- ok_dad 2y ago
  Those 2025 new years glasses are going to be so valuable.
  - WalterBright 2y ago
    If you went naked into the wilderness, how long would you survive? I expect 90% would be dead within 24 hours, most likely from hypothermia.
    - ok_dad 2y ago
      I would bet at least 95% or more, personally. I'd survive okay here (until I got sick or injured) because my local environment is pretty easy to survive in, but I would die quick in a harsher wilderness, I am sure, and I am fine with admitting that! There's a happy medium between what we have today (rampant consumerism and waste) and what we had a thousand years ago (every tribe for themselves). Perhaps you and I can agree that a lot of what humans do is useful transformations of resources into things that help us (housing, food, much of our tech and manufacturing), and then there is a lot of what we do that is completely wasteful that we could be doing less of (plastic crap, driving to offices to meet on Zoom, perhaps we build houses too large, we build in bad places for humans to survive, etc.). My previous comment was a bit snarky, but my point via that comment is that not everything we do to transform resources into stuff increases the value of the world, perhaps some wasteful things even harm our world and decrease it's value in the future. You're a smart guy, you understand nuance and that wasting our natural resources, especially the non-renewable ones like oil, in a mostly closed ecosystem is a bad idea.
      - WalterBright 2y ago
        I figured it was obvious that creating something meant creating something of value. If someone else is willing to trade for it, then something of value has been created. P.S. Most people don't know how to make a fire from scratch, and will die of hypothermia in even modest environments. I know how to do it, but have never actually tried it. Doing it without even a knife will be really hard. The TV series "Alone" is instructive about how hard it is to survive, even if you're well-equipped with modern gear.
lo_zamoyski 2y ago
> invest some of it in the real world, not leave it in the bank. The richer you get, the more likely you are to engage in wealth management. This necessarily means investment. No one who's rich has that much liquidity or money just laying around. This is as stupid as hiding cash in your mattress. The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option. This is why I think one key element of restoring sanity to economies is the categorical criminalization of usury. Compound interest is theft, and it boggles the mind how easily people are intimidated into going along with the rationalizations purporting to explain that it is not (all that nonsense about opportunity cost, as if that is the borrower's problem or responsibility). Banks are important, but they are not productive per se. The only ways a bank can legitimately make money is through service fees and investments (and real investments, where there is a kind of partnership and proportionate skin in the game, not magic bailout money or some kind of weird accounting magic). Once we destroy the superstitious idea that money can be bred, stop using euphemisms for theft, and acknowledge labor as the basis of all economic value, we will see a healthy economic shift and more distributive justice. Housing markets will improve, too. The change is deep cutting. The whole discussion about inequality or taxing the rich or inheritance is confused and frankly a distraction from real problems, and I suspect at times a purposeful distraction, because it preserves perverse economic norms (making the tax simply the cost of doing business) instead of correcting them, which is the real threat.
- throwaway2037 2y ago
  > The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option. Strong words. In your model/world view: Where does investing in the stock market fit? My guess: Nearly all people on this board earn more than the median income and will probably build multi-million dollar retirement savings accounts due to long term (multi-decade) stock market investments (probably passive index ETFs).
ninetyninenine 2y ago
Gary is great laying it out for the layman but he talks as if he "thought" it all up. It's really Thomas Piketty who pointed out the issue way before Gary.
- throwaway2037 2y ago
  I think the difference with Gary is that he has experienced both sides of the coin: grew up of modest means, then became wealthy trading FX for Citibank. As much as HN hates to admit it, storytelling does help to make your points more accessible.
keybored 2y ago
I don’t understand why you need rich people in the first place. You don’t need human beings that hoard wealth that they didn’t make. It’s superfluous.
- bigstrat2003 2y ago
  You don't "need" rich people, but they are an inevitable consequence of the ideas Western civilization is built on. We generally believe that someone is entitled to keep what they have earned and do what they wish with it (property rights). So, let's say you burn down society and start over with everyone working at subsistence level. The first generation, everyone will be basically equal. By the end of the generation, some will have done better than others (through luck, or through hard work and intelligence). They will want to pass it on to their children. Now in the next generation, some people will be starting at an advantage. Some of those will take it easy, but some will use their leg up to get even further ahead. The ones who get even further ahead will want to pass that on to their children, and so on. Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots. The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do. People believe in property rights and aren't generally willing to violate them. So, you will inevitably have rich people in society.
  - keybored 2y ago
    Great. So they don’t serve any function. tl;dr: socialism over capitalism. > We generally believe that someone is entitled to keep what they have earned and do what they wish with it (property rights). This isn’t the law of the land because “we believe it” but because the burgeoisie made it so. But that’s a side note. > So, let's say you burn down society and start over with everyone working at subsistence level. Hypothetical/alternative history is not interesting. You can look at the enclosure of the commons in England. The commons that the subsistence farmers used was outright stolen. Yes, and then there’s the subsistence level. Serfs and landless famers have been exploited for millenia not because their peers had worked harder and in turn had more grain stored... but because they were landless and/or oppressed by the weaponized lordship. By the way, do you honestly think that someone will be enlightened by explaining how inheritance works? Maybe you’re just of an exceptionally patient explainer. > Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots. What this narrative seems to imply is the most direct and obvious inequality, namely some people having bigger houses, more swimming pools, and more cars than others. This is totally uninteresting. Does someone want to work 30% harder than the median over five years so that they get to install a swimming pool? Whatever, I don’t care.[1] There’s something about money though. You can use it for more stuff than buying cooler cars. You can use it as capital, i.e. to invest in means of production. Then you can buy all of the means of production. Or you can employ imperialism via the state (that you effectively own because you have money) in order to seize the means of production (or access to raw goods) in some second/third world country that wanted to naively own their own stuff. (Property rights?) Lots of things you can do with money. Then eventually all the small proprietors (small business owners that we like to put on a pedestal for propaganda purposes) have been outcompeted. The farmers have been driven off the former common land (see enclosure of the commons). All you can do to survive is to sell your labor as a commodity. So about fruits of their labor: > The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do. A small business owner that works alongside their employees is producing part of the “fruits of their labor”. A capitalist that employs a thousand workers including the managers is not part of producing the “fruits of their labor”. See how farcical that is? The fruits of their labor has got nothing to do with labor. Only about sitting on capital. Meanwhile the laborer does not get the fruits of their labor. In fact it has got nothing to do with how many fruits he bears. Only about what the market is willing to pay for the labor commodity. As well as collective bargaining if that is even in the picture. (Guess who is actively working against that.) Yeah I’m all about people getting to enjoy the fruits of their labor. In actuality. The reformist approach of things like taxation does take away people’s swimming pool expansion funds. It does. Which is an inherent side effect to how completely fungible money is; it can buy a swimming pool or capital or be put to someone’s CIA informant/collaborator stipend all the same. [1] I asked what social function rich people serve. Owning a swimming pool is fine even though it serves to social purpose. Just like a lot of other things that are fine but serve no social purpose.

by jgord 2y ago

mrjin 2y ago

Even if you try to tax the riches, they have billions of ways to evade it. The tax laws are so complicated for a reason. Here in Australia, there were cases that some individuals that earned just about A$1M pa., and they paid ~A$980K to companies registered in Virgin Islands etc. for managing tax affairs. Such arrangement knocked down their taxable income to ~A$19K, and thus they paid probably a couple of dollars taxes if not not even a dime. Eye-opening, right? But those were not those super rich ones. You can just imagine what those super rich people can do. So the burden of the tax would be on mid-income people. I would expect the same in US.

idle_zealot 2y ago
If there were political will to tax the rich then you'd have to, in addition to changing tax law (obviously), fund IRS investigations to ensure the taxes are actually collected. Throwing up your arms and saying "well we can't tax the rich, they're too powerful and wily, and will easily commit tax fraud to evade those taxes, and in actuality you'll bring in less money" is exactly the weak attitude that stalls efforts to fund vital services. If you think people will commit tax evasion, then put more resources into investigating tax evasion. Historically, money spent recovering taxes has yielded more than the cost of said investigations.
- CrossVR 2y ago
  > Throwing up your arms and saying "well we can't tax the rich, they're too powerful and wily, and will easily commit tax fraud to evade those taxes, and in actuality you'll bring in less money" is exactly the weak attitude that stalls efforts to fund vital services. It goes further than that, it is the exact argument made by wealthy people as to why we shouldn't tax them more aggressively. Parroting that argument is ludicrous unless you're considerably wealthy yourself.
  - mrjin 2y ago
    Those loopholes were by design, complicated enough to prevent most people like us to take advantage of it but will allow those who can afford to evade lots. I'm not sure if people is just naive or playing dumb.
    - bloppe 2y ago
      If only there were some way to change a tax code... Alas, no country has ever figured out how to do that!
      - johnnyanmac 2y ago
        We have a way... oh, they have spent 20 years in gridlock arguing over political lines. And the Rich apparently won given the current proposal.
        bloppe 2y ago
        You heard it here first. There will be no tax reform from here on.
        thfuran 2y ago
        Why not? The billionaires are still paying some tax.
  - 2y ago
smallmancontrov 2y ago
"You can't possibly defeat me, why do you even try?" Come on. You have fallen for cartoon-villain level smack talk. Chew it up, spit it out. We've done this before and we can do it again.
jjtheblunt 2y ago
Can that class of scams be foiled with consumption tax ?
- stvltvs 2y ago
  Consumption taxes are almost always regressive, hitting the poorest the hardest. Depends on how you structure them.
  - jjtheblunt 2y ago
    Good point
frontfor 2y ago
Two points here: 1. Gary’s arguments for taxing the rich aren’t about taxing income. It’s about taxing wealth. 2. By his argument, most of the wealth are immovable: the rich disproportionately owns actual, physical real estates, and stocks of actual companies. As these assets are based in the country, you could tax right at the source.
- tastyfreeze 2y ago
  So the government takes physical assets? Didn't we fight a war over property rights? My neighbor is way wealthier than me. So its ok if I take his car. He has enough he can just buy another one.
  - kiwih 2y ago
    Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith.[0] [0] https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html I think a more reasonable interpretation might be "the government knows about expensive cars (i.e. that they are registered, have numberplates etc), and so charges some annual tax on the owners of those cars."
    - tastyfreeze 2y ago
      Describing wealth tax reasoning with an absurd example of the same reasoning on an individual level is an attempt to get people to understand what wealth taxes are. The government that is supposed to work for you thinks you have accumulated too much stuff and is trying to make it legal to take a percentage of your physical wealth annually.
      - toomuchtodo 2y ago
        You only accumulated and maintain the wealth because of the government. Without the government and the economic system it cultivates, you’d never have it.
bjourne 2y ago
But laws shouldn't be set based on how easy they are to avoid. Lots of people drive too fast all the time, yet few argue that we should do away with speed limits. Besides, there is zero empirical evidence that suggests that raising rich people's taxes is ineffective. Yes, they are good at avoiding taxes, but professional tax collectors are probably even better at enforcing taxes. It's a question of political will, or lack thereof, due to not wanting to lose your biggest donors.
- mrjin 2y ago
  You don't cut your own fingers. And that pretty much the whole story.
- ItsMonkk 2y ago
  I understand this is a tangent but you picked a really bad example. We should be trying to remove every single speed limit that we can. If the design speed of a road does not match the speed limit of the road, people will drive the design speed, cops will learn to sit there all hours of the day waiting for people to mess up, and get ticketed. Instead of just putting up the speed limit sign, city planners should design for the road to be safe without need for the speed limits to be in place. This can mean things like reducing the width of a lane, could mean speed bumps, to purposeful non-straight sections.
  - kevinventullo 2y ago
    That’s a horrible idea. I very much like driving on straight wide roads without speed bumps, even if I’m going 25mph.
    - ItsMonkk 2y ago
      If the safe speed of the road is 25mph, and the design speed of the road is above 25mph, you will not have safety no matter what the speed limit is. Vision Zero strategies take these factors into account to ensure safety.
  - 9dev 2y ago
merek 2y ago
Do you have a link? If the individual resides in Australia, how do they utilize the $980k sitting in the foreign company? The company can buy assets in AU, such as a house, and lease it to the individual, but I'm pretty sure the ATO requires they pay the company rent at market rate, which will likely be unaffordable on a reported income of 20K pa.
- mrjin 2y ago
  I remembered I read the article from Australian Financial Review, although I could not find the original link, got a more detailed one instead. See Page #3. https://australiainstitute.org.au/wp-content/uploads/2020/12/P411-Cost-of-managing-tax-affairs-FINAL.pdf https://australiainstitute.org.au/wp-content/uploads/2020/12...
lotsofpulp 2y ago
A land value tax would be impossible to evade. Even a business’s assets will exist somewhere on land. In the case of intellectual property, reducing copyright and agents to 10 years should solve the problem.
jjav 2y ago
> The tax laws are so complicated for a reason. And the reason is those same rich influence the laws to their benefit. It would be pretty trivial to tax the wealth if a society wanted to do so. But laws are made by lobbyists, who are paid by the rich, so what should we expect.
- Ray20 2y ago
  Mostly it is other way around. People, who influence the laws - become reach.
hcknwscommenter 2y ago
Sounds illegal.
audiodude 2y ago
I often tell my friends, we can't be wealthy, we still pay taxes.
- mrjin 2y ago
  Lol. That's probably one of the considerations while designing the tax rules.
staticautomatic 2y ago
This is such a "'No Way To Prevent This,' Says Only Nation Where This Regularly Happens" comment.
WalterBright 2y ago
> they have billions of ways to evade it In Washington state, they passed a capital gains tax primarilly to tax Jeff Bezos. Bezos simply left the state just before the tax took effect. So did a lot of other wealthy residents.
- ericd 2y ago
  Ah, but proponents also want to make it difficult for you to leave with your money. Capital controls are very seductive, even though they’re very authoritarian.
supernova87a 2y ago
Why have laws either? Honest people would have not needed them anyway, and people seeking to break the law will find ways around them.
quantadev 2y ago
The only way to force everyone to pay is with a consumption tax. We'd tax based on consumption so those yachts, Rolexes, and home construction, etc. that the rich spend crazy amounts on gets taxed. Of course since a consumption tax hurts the poor disproportionately, the gov't would send a refund check to them, in large enough amounts to make up for it, where the poor are basically paying zero tax. It also fairly discourages illegal immigration because illegals wouldn't get that kickback check from the Gov't, since they're 'visitors' not 'citizens'.
- ericd 2y ago
  Revenue neutral carbon taxes with all income dividended back out per capita are really the move here. It’s also one of the few really promising ways to tackle climate change effectively.
  - quantadev 2y ago
    Seems to me like that's a similar approach but a consumption tax is easier for everyone to understand and would be therefore more palatable to the public. Also the consumption tax would have a similar affect of taxing people proportional to the amount of damage they're doing to the environment. For example, we want a big tax on Rolexes but making a watch doesn't really do that much carbon consumption.
    - dragonwriter 2y ago
      > Seems to me like that's a similar approach but a consumption tax is easier for everyone to understand and would be therefore more palatable to the public. There is a false assumption here, that easy to understand makes it more palatable. A flat capitation would be even easier to understand, and even less palatable, because the ease of understanding is directly connected, in its case, to the ease of opponents organizing against it. A flat consumption tax faces a similar problem, which is why the efforts to push one to replace the income and payroll taxes for decades now under the label "Fair Tax" have been unsuccessful -- easy to understand isn't a political benefit when people who understand it often don't like what they understand.
yodelshady 2y ago
And that's why Georgism exists! You can't offshore a plot of land. If you've really managed to generate trillions in profit without using any, including indirectly (mining, showrooms, etc), fair enough. If your economic model is quite literally rent seeking, you can fuck off and give all those proceeds to whatever government ensures that land is not overrun by whatever raiders are historically a problem in your area. If you work for a living, you should be able to spend your earnings on a fancy apartment if you wish, and if a landlord wishes to make one instead of just sitting on land, they keep the profits from that too.
fallingfrog 2y ago
The solution to that might be to increase funding to the irs; currently the political elites are seeking to kneecap the irs so that it’s even easier for them to evade taxes.

rufus_foreman 2y ago

The problems with Piketty's arguments are addressed in the article: "if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made" Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked. But rich people don't do that.

matthewdgreen 2y ago
But wealth inequality has still grown quite a bit. Your point is not a refutation, it’s just an observation that the infection has progressed more slowly than it could have if it was completely optimal.
- rufus_foreman 2y ago
  >> Your point is not a refutation "there are fewer than 1,000 billionaires and the vast majority of them are self-made" That's a refutation, Piketty made assertions not just about the outcome, but about the process by which that outcome would happen.
  - smallmancontrov 2y ago
    So long as rich-get-richer mechanics play out inside of a single generation they are unquestionably OK? What even is this argument?
    - danielmarkbruce 2y ago
      he didn't say it's ok. He said piketty is wrong. Anyone who studied even econ 101 and combined it with a teaspoon of common sense knows piketty is an idiot and that book is garbage. He's a politician.

smallmancontrov 2y ago

> the growth rate of wealth itself The fundamental theorem of capitalism: rich people get paid for being rich in proportion to how rich they are. This is why your savings account looks like an exponential. The thing to understand is the difference in lived experience depending on where it starts. If you are poor, the returns are a joke, you tend to ignore them. If you are middle class, the returns fund your retirement, and it seems roughly fair: you work hard and at some point you earn the right to not work any more. Only if you are rich do you see the fountain of free money (homework: calculate yearly returns for the typical 10%er, 1%er, .1%er, and centabillionaire), and of course being the beneficiary you rationalize away the possibility that this could be a problem at all. It's a tidy system. "That's an unfair characterization of capitalism!" So is the one you get in economics which bends over backwards to hide the "fundamental theorem" as I have stated it inside a choice of units: "under conditions of market equilibrium every financial asset has an equivalent risk-adjusted rate of return from the perspective of its marginal buyer." Did you miss the class warfare? It was all hidden inside the word "rate." Very clever.

LudwigNagasena 2y ago
How does economics bend over backwards to hide the “fundamental theorem”? Every intro to macroeconomics basically starts with a simplified conceptualisation of production as a function of labour and capital. Then it describes returns to labor and capital and so on. People who own capital get paid for that capital. It’s quite literally Economics 101.

danielmarkbruce 2y ago

Piketty is a hack. Most billionaires don't spend anything even close to their net worth. In effect, they have a bunch of IOUs from other people and never cash them in.

deleted 2y ago
[deleted]
imtringued 2y ago
So you're saying they have ever increasing influence and are keeping the rest of society in debt to them.
- danielmarkbruce 2y ago
  "ever increasing" - no. People die, billionaires tend to stay that way for a few decades then die. In the grand scheme they are nothing, zero. Death aside, look at all the billionaires currently running to kiss the ring of Trump - a populist elected by the people of the US against the will of the so called elite. No one is in control, no one has very much power. It's a story book idea.
pqtyw 2y ago
How exactly do your subsequent claims prove: > Piketty is a hack. Generally those IOUs are real as a ton of gold bars or dollar bills somebody might be hoarding in their vault.
- danielmarkbruce 2y ago
  Inequality is generally accepted as differences in material possessions acquired/consumed or access to services (eg health, travel, whatever). It's fair to aggregate it into "consumption". Jeff Bezos is literally never cashing in the vast majority of the IOUs he has. The actual difference in his life isn't anything close to that suggested by the difference in net worth between he and I. Net worth differences aren't a good proxy for actual lived differences. It's off by orders of magnitude. This isn't a groundbreaking idea, Piketty is aware. He discusses it briefly in his book, with handwavy, abstract notions about "power" and "influence", as if that's what most people care about. But, it doesn't sell the same way his nonsense does. So he pedals his nonsense.

adrianN 2y ago

Rich people generally don't keep the majority of their money as cash in a vault. When money lies in the bank, the bank invests it in the real world. Or more directly, when money lies in stocks and bonds, it is invested in the real world.

mqus 2y ago
> when money lies in stocks and bonds, it is invested in the real world. Is it though? How much did Nvidia invest more, after their stock hikes? How about Tesla, Microsoft, Apple? No. They cut their staff or maybe stayed at their current investment levels.
- yorwba 2y ago
  You have the ordering of events inverted. Companies do not automatically have more money to invest after their stock price rises, because the stock is traded between unrelated third parties. Rather, the stock price rises after the company made investments that paid off, increasing the company's expected future profit. This then retroactively provides the incentive for people to give money directly to companies to invest in exchange for partial ownership. So the question you should be asking is: How much did Nvidia invest before their stock hikes? And which companies will the original investors fund next after selling their shares at a profit?

xivzgrev 2y ago

Small surprise: top marginal tax rates used to be 70-90% from the 40s to the 70s. https://taxpolicycenter.org/statistics/historical-highest-marginal-income-tax-rates https://taxpolicycenter.org/statistics/historical-highest-ma...

SJC_Hacker 2y ago
There were so many deductions and ways of hiding things the effective rate was maybe 20%
- hcknwscommenter 2y ago
  source?
  - SJC_Hacker 2y ago
    Tax revenue as a percentage of GDP historically has floated around 18% https://www.ceicdata.com/en/indicator/united-states/tax-revenue--of-gdp#:~:text=US%20Tax%20revenue%3A%20%25%20of%20GDP%20data%20is%20updated%20yearly%2C,low%20of%2013.7%20%25%20in%202009. https://www.ceicdata.com/en/indicator/united-states/tax-reve... Here's the income percentage held by the top 1% 1950-2010 http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014FiguresTables.pdf http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Fig... While its true that its higher now than it was the 1950s-1980s, its an increase of about 15%. It if was the case that the very high marginal rates were actually being paid, you would expect the percentage of income held by the top 1% to be much higher. Here's another source with more direct comparison - how much their income they actually paid in tax https://taxfoundation.org/data/all/federal/taxes-on-the-rich-1950s-not-high/ https://taxfoundation.org/data/all/federal/taxes-on-the-rich...
- deleted 2y ago
  [deleted]
- PopAlongKid 2y ago
  Indirectly, we can point to the creation of Alternative Minimum Tax (AMT) in the 1960s to ensure that higher income taxpayers paid at least some minimum despite the plentiful deductions. Some of the things not allowed under AMT are state and local tax deductions, interest on mortgage equity debt (not acquistion debt), personal and dependent exemption deductions, deferring tax on compensation due to Incentive Stock Options (ISO), some kinds of accelerated depreciation, and so on.

scotty79 2y ago

> rich people want to invest some of it in the real world, not leave it in the bank Honestly, I have no idea why would anyone need that. Money is not value. Money is just a way of keeping track who is owed by future society how much value. It's a way of keeping tabs who gets to consume in the future. When rich people hoard their money it's not a problem, you can just print more money to replace what they sucked up and hoarded. It's exactly when they try to spend it where the problems start to show up. Because they are doing it stupidly causing at least some inflationary pressures but more often than not societal and environmental harm. Countries should make every effort to make spending their money as hard as possible for the rich people. Disincentivize them with high (and highly progressive) luxury, investment and real estate taxes. If that causes them to hide their money to avoid tax, even better. Every dollar of rich money hidden is a dollar of value not wasted by society on servicing the rich and their whims and gambling.

SoftTalker 2y ago
People who make their money producing luxury goods or developing real-estate may disagree. As might all the people who work in the supply chains for those activities.
ericjmorey 2y ago
Or just transfer their wealth to the rest of society. What they think is theirs is only true if the rest of us agree.
- pb7 2y ago
  Please go build your communist utopia elsewhere.

MichaelDickens 2y ago

Economists mostly disagree with Piketty's thesis: https://www.kentclarkcenter.org/surveys/piketty-on-inequality/ https://www.kentclarkcenter.org/surveys/piketty-on-inequalit...

Aromasin 2y ago
Of course they do. They've built entire careers around the concept that the whole economy can be models on N=1. Inequality doesn't fit into their models, so they dismiss it out of hand because otherwise the 20+ years of their life they've spent devoting to their craft proves to be no more useful than a horoscope.
- lazzlazzlazz 2y ago
  Inequality is very simply to include in these models, and they do. The problem is that the models often show that the median quality of life improves faster when there's somewhat more inequality in the system, which flies in the face of every socialist intuition. It's a lot easier to pretend we need state-enforced equality.
  - kevinventullo 2y ago
    Do their models show that the median quality of life in the US has increased in the last 20 years? Honest question.
  - smallmancontrov 2y ago
    It's simple to include, but there's no denying that the 101-level economics models steer you away from thinking about inequality harder than Vin Diesel in a car chase. Carefully omitting the fact that the economic notion of value is wealth-weighted (and you can march enough elephants through this loophole to wage a class war), drawing attention away from "rich people getting paid for being rich" dynamics by dividing out wealth wherever possible, inviting you to use averages where "rich get richer" hides "poor get poorer" -- it's a masterclass in propaganda. I have literally never in my life seen a more artful tapestry of deception than Econ 101.

dreghgh 2y ago

> Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank. I think your second sentence, and thus your explanation of Piketty's thesis, is wrong. Piketty's point was that if wealth grows faster than the economy, the total share of all assets held by the wealthy will grow and grow. I don't think he was concerned about the choice to invest 'in the real world'. In any case it's not clear what 'not investing in the real world' means or if it's meaningful. Any return on capital either comes from direct investment or from lending to someone else who will invest directly. There is a fundamental accounting equation which proves that all net saving is net investment.

AlexandrB 2y ago
> Any return on capital either comes from direct investment or from lending to someone else who will invest directly. Is this true? I'm not saying it's a huge portion of all saving, but holding wealth in things like precious metals or greater fool investments like Bitcoin doesn't seem like "investing" in anything productive.
- eftychis 2y ago
  If you bury gold bars that you mined yourself in your backyard, or you bury your salary in cash there straight from your paycheck, then you remove money from the system and thus not invest it. And effectively damage the economy, mainly via lack of liquidity. It's hard making your capital inaccessible to the economy, but it's easy to not get the benefits of that working capital. For instance, any time you park your money in a regular bank account or lend it at a suboptimal rate, you don't get some of the benefits.
  - TheSpiceIsLife 2y ago
    This comment was down voted, but is a reasonable response. Further to the parent comment, if you park your money in gold or crypto, you’ve given that money to someone else, and so on and so forth. But there’s a balance to be bad, if no one actually spends anything other than acquiring investments, they starve, and the economy suffers.

WalterBright 2y ago

> the actual real value of the world remaining the same If I take raw materials, and create something with them, I have increased the real value of the world.

ok_dad 2y ago
Those 2025 new years glasses are going to be so valuable.
- WalterBright 2y ago
  If you went naked into the wilderness, how long would you survive? I expect 90% would be dead within 24 hours, most likely from hypothermia.
  - ok_dad 2y ago
    I would bet at least 95% or more, personally. I'd survive okay here (until I got sick or injured) because my local environment is pretty easy to survive in, but I would die quick in a harsher wilderness, I am sure, and I am fine with admitting that! There's a happy medium between what we have today (rampant consumerism and waste) and what we had a thousand years ago (every tribe for themselves). Perhaps you and I can agree that a lot of what humans do is useful transformations of resources into things that help us (housing, food, much of our tech and manufacturing), and then there is a lot of what we do that is completely wasteful that we could be doing less of (plastic crap, driving to offices to meet on Zoom, perhaps we build houses too large, we build in bad places for humans to survive, etc.). My previous comment was a bit snarky, but my point via that comment is that not everything we do to transform resources into stuff increases the value of the world, perhaps some wasteful things even harm our world and decrease it's value in the future. You're a smart guy, you understand nuance and that wasting our natural resources, especially the non-renewable ones like oil, in a mostly closed ecosystem is a bad idea.
    - WalterBright 2y ago
      I figured it was obvious that creating something meant creating something of value. If someone else is willing to trade for it, then something of value has been created. P.S. Most people don't know how to make a fire from scratch, and will die of hypothermia in even modest environments. I know how to do it, but have never actually tried it. Doing it without even a knife will be really hard. The TV series "Alone" is instructive about how hard it is to survive, even if you're well-equipped with modern gear.

lo_zamoyski 2y ago

> invest some of it in the real world, not leave it in the bank. The richer you get, the more likely you are to engage in wealth management. This necessarily means investment. No one who's rich has that much liquidity or money just laying around. This is as stupid as hiding cash in your mattress. The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option. This is why I think one key element of restoring sanity to economies is the categorical criminalization of usury. Compound interest is theft, and it boggles the mind how easily people are intimidated into going along with the rationalizations purporting to explain that it is not (all that nonsense about opportunity cost, as if that is the borrower's problem or responsibility). Banks are important, but they are not productive per se. The only ways a bank can legitimately make money is through service fees and investments (and real investments, where there is a kind of partnership and proportionate skin in the game, not magic bailout money or some kind of weird accounting magic). Once we destroy the superstitious idea that money can be bred, stop using euphemisms for theft, and acknowledge labor as the basis of all economic value, we will see a healthy economic shift and more distributive justice. Housing markets will improve, too. The change is deep cutting. The whole discussion about inequality or taxing the rich or inheritance is confused and frankly a distraction from real problems, and I suspect at times a purposeful distraction, because it preserves perverse economic norms (making the tax simply the cost of doing business) instead of correcting them, which is the real threat.

throwaway2037 2y ago
> The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option. Strong words. In your model/world view: Where does investing in the stock market fit? My guess: Nearly all people on this board earn more than the median income and will probably build multi-million dollar retirement savings accounts due to long term (multi-decade) stock market investments (probably passive index ETFs).

ninetyninenine 2y ago

Gary is great laying it out for the layman but he talks as if he "thought" it all up. It's really Thomas Piketty who pointed out the issue way before Gary.

throwaway2037 2y ago
I think the difference with Gary is that he has experienced both sides of the coin: grew up of modest means, then became wealthy trading FX for Citibank. As much as HN hates to admit it, storytelling does help to make your points more accessible.

keybored 2y ago

I don’t understand why you need rich people in the first place. You don’t need human beings that hoard wealth that they didn’t make. It’s superfluous.

bigstrat2003 2y ago
You don't "need" rich people, but they are an inevitable consequence of the ideas Western civilization is built on. We generally believe that someone is entitled to keep what they have earned and do what they wish with it (property rights). So, let's say you burn down society and start over with everyone working at subsistence level. The first generation, everyone will be basically equal. By the end of the generation, some will have done better than others (through luck, or through hard work and intelligence). They will want to pass it on to their children. Now in the next generation, some people will be starting at an advantage. Some of those will take it easy, but some will use their leg up to get even further ahead. The ones who get even further ahead will want to pass that on to their children, and so on. Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots. The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do. People believe in property rights and aren't generally willing to violate them. So, you will inevitably have rich people in society.
- keybored 2y ago
  Great. So they don’t serve any function. tl;dr: socialism over capitalism. > We generally believe that someone is entitled to keep what they have earned and do what they wish with it (property rights). This isn’t the law of the land because “we believe it” but because the burgeoisie made it so. But that’s a side note. > So, let's say you burn down society and start over with everyone working at subsistence level. Hypothetical/alternative history is not interesting. You can look at the enclosure of the commons in England. The commons that the subsistence farmers used was outright stolen. Yes, and then there’s the subsistence level. Serfs and landless famers have been exploited for millenia not because their peers had worked harder and in turn had more grain stored... but because they were landless and/or oppressed by the weaponized lordship. By the way, do you honestly think that someone will be enlightened by explaining how inheritance works? Maybe you’re just of an exceptionally patient explainer. > Repeat this cycle enough times and you will wind up with rich people and poor people, even if you started with a perfectly level playing field. It's an inescapable outcome. Some people will always do better than others, even starting from nothing, and as that advantage accretes through generations it will mean you wind up with the haves and have-nots. What this narrative seems to imply is the most direct and obvious inequality, namely some people having bigger houses, more swimming pools, and more cars than others. This is totally uninteresting. Does someone want to work 30% harder than the median over five years so that they get to install a swimming pool? Whatever, I don’t care.[1] There’s something about money though. You can use it for more stuff than buying cooler cars. You can use it as capital, i.e. to invest in means of production. Then you can buy all of the means of production. Or you can employ imperialism via the state (that you effectively own because you have money) in order to seize the means of production (or access to raw goods) in some second/third world country that wanted to naively own their own stuff. (Property rights?) Lots of things you can do with money. Then eventually all the small proprietors (small business owners that we like to put on a pedestal for propaganda purposes) have been outcompeted. The farmers have been driven off the former common land (see enclosure of the commons). All you can do to survive is to sell your labor as a commodity. So about fruits of their labor: > The only way to prevent it is to enforce limits on what people can do with the fruits of their labor - and that is something most are not willing to do. A small business owner that works alongside their employees is producing part of the “fruits of their labor”. A capitalist that employs a thousand workers including the managers is not part of producing the “fruits of their labor”. See how farcical that is? The fruits of their labor has got nothing to do with labor. Only about sitting on capital. Meanwhile the laborer does not get the fruits of their labor. In fact it has got nothing to do with how many fruits he bears. Only about what the market is willing to pay for the labor commodity. As well as collective bargaining if that is even in the picture. (Guess who is actively working against that.) Yeah I’m all about people getting to enjoy the fruits of their labor. In actuality. The reformist approach of things like taxation does take away people’s swimming pool expansion funds. It does. Which is an inherent side effect to how completely fungible money is; it can buy a swimming pool or capital or be put to someone’s CIA informant/collaborator stipend all the same. [1] I asked what social function rich people serve. Owning a swimming pool is fine even though it serves to social purpose. Just like a lot of other things that are fine but serve no social purpose.