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A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distributio

A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. I find it odd that those of us who make this observation, and follow it thru to its natural outcomes, are lambasted for the consequential opinions we hold thereon.

selmnoo 13y ago
That is a particularly useless observation. What about when wealth distribution is done not through simply handing poor people money, but through providing more social programs, mental healthcare, high-quality education, etc. to people most in need of it? Most people who point out economic inequality would rather like to see long-term social stability programs, not just handing people money until we reach a good wealth curve across the population.
lutusp 13y ago
> Poverty/wealth is, on the whole, a consequence of chosen behavior. That's very true, but an equally important factor is compound interest, which tends to amplify what might initially be very small differences in wealth. I once wrote an article (http://arachnoid.com/example/#Compound_Interest_Example http://arachnoid.com/example/#Compound_Interest_Example) in which, as an example, at age 20 a prudent person invests an inheritance of $20,000 for his retirement at age 60, expecting to withdraw $45.00 each week for walking-around money. In the experiment, if the investor withdrew 38 cents more each week, he ended up flat broke at age 60. If he withdrew 38 cents less, he doubled his money. Another factor is that being poor is expensive, there's no other way to put it. When a rich person uses a credit card, he gets a free 30-day loan. That service is being paid for by those at the bottom, who have a constant balance on their cards. A poor person has to buy insurance for his house and car, because they're both on bank loans, and the banks require insurance (and the bank loans sometimes double the cost of the purchases). A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. Let's face it -- overall, being poor is a very bad business policy. But the point is that an old adage about the rich getting richer and the poor getting poorer is backed up by simple economics.
- ctdonath 13y ago
  being poor is a very bad business policy I contend the reverse is more often the case: bad [personal] business policy is a primary (though not exclusive) cause of poverty. The smarter you are with money, the easier it is to acquire more of it; likewise the reverse. Pretty much everyone understands the primary principle: spending > revenue has, on the whole, obvious results. Rectify that. Yes, you can...you must.
  - lutusp 13y ago
    >> being poor is a very bad business policy > I contend the reverse is more often the case: bad [personal] business policy is a primary (though not exclusive) cause of poverty. Yes, I agree actually -- I was being a bit ironic in my original post. There's plenty of personal responsibility in poverty, at least in Western, democratic countries. People could take a number of constructive steps to better themselves, like shred their credit cards, don't fall for some of the more obvious economic traps like borrowing money for unnecessary possessions, thinks like that. And I also completely agree with your other point -- that understanding how money works is critical.
- smsm42 13y ago
  >>> A poor person has to buy insurance for his house and car, We're doing pretty good here if a poor person is implied to have a house worth insuring (implying either ownership or rental of sufficient value, containing sufficient assets) and a car, and is eligible for bank loans for both. In some countries, a person rich enough to have a house, a car and to qualify for bank loans for both is considered pretty well-to-do. >>> A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. I'm pretty sure most people, not only poor people, use car insurance. It's more convenient and usually (unless you drive exotic or super-expensive cars) cheaper than surety bonds that are usually required, and same with cash deposits (since cash deposited at DMV can't be used for anything else). For businesses having massive fleets, OTOH, it may make sense to self-insure since they get the same risk distribution as insurers, but without the middleman. >>> overall, being poor is a very bad business policy It's bad business, but you may have a lot of incentives for it, given that welfare subsidies and services you may get in many US localities pay more than minimum wage job and in some localities more than average wage job. http://www.cato.org/publications/commentary/why-get-welfare http://www.cato.org/publications/commentary/why-get-welfare http://www.cato.org/publications/white-paper/work-versus-welfare-trade http://www.cato.org/publications/white-paper/work-versus-wel... >>> rich getting richer and the poor getting poorer is backed up by simple economics. It may be but it definitely is not backed up but what you said. The thing is that statistics that talk about "rich getting richer" makes you assume that same people that were rich 20 years ago got even richer now, and same people that were poor 20 years ago are even poorer now. In fact, nothing in this statistics point to it - what statistics can tell you is that some people were rich 20 years ago, and some different people are rich now, but it usually says nothing about how many of people rich today were rich or poor 20 years ago. It is completely normal for a person to be piss-poor while being a young student and become quite well established when retiring. Usually it comes from working hard and making a number of right choices on the way. Including, yes, saving diligently and having long-term view, which leverages the power of compound interest - but for this you need the right behavior.
cia_plant 13y ago
That is not, strictly speaking, an observation but a supposition. An observation is something that you see in reality, and this experiment has not been tried in reality as far as I know (if you've observed such an experiment, I and I'm sure many others would be curious to read the detailed results).
rayiner 13y ago
> A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. This is unsubstantiated hand-waving. I agree that you'd see quite a bit of inequality, but you have no evidence that "we'd soon return to the economic disparity & distribution we see now." > Poverty/wealth is, on the whole, a consequence of chosen behavior. While "chosen behavior" might be a component of outcomes, there's no good evidence as to how much impact it has on outcomes as compared to other factors. Also, how do you define "chosen behavior?" Are you including IQ? Impulse control? Personality traits? Are any of those "chosen behaviors?" My personal experience with life is that those three things + parental wealth are a bigger components of outcomes than "chosen behaviors." It's easy to make the "right choices" when they're laid out right there in front of you, and easy to get back on the "right course" when you have those factors, which are the result of the grand lottery of life, on your side. What is the equilibrium income/wealth distribution in a system where everyone is genetically engineered, taken from their parents at birth and raised and educated in identical conditions? That'd be the scientific way to isolate the impact of "chosen behaviors." I don't know any more than you do, but I bet its a lot narrower than what we "see now." > I find it odd that those of us who make this observation, and follow it thru to its natural outcomes, are lambasted for the consequential opinions we hold thereon I don't know your particular opinions, but I'm going to hazard a guess and say you're overstating how much of your process of "follow[ing] it thru to its natural outcomes" is based on analytical logic versus handwaving moralizing.
- VMG 13y ago
  recommended reading: Shocking Behavior : Random Wealth in Antebellum Georgia and Human Capital Across Generations: http://home.uchicago.edu/~bleakley/Bleakley_Ferrie_Intergen.pdf http://home.uchicago.edu/~bleakley/Bleakley_Ferrie_Intergen.... The Ticket to Easy Street? The Financial Consequences of Winning the Lottery: http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00114 http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00114
  - rayiner 13y ago
_delirium 13y ago
> A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. Do you have any evidence for this assertion?
- ctdonath 13y ago
  Every time I help the poor up close & personal, I observe behaviors which clearly lead to destruction of wealth and/or avoidance of opportunity. No, it's not scientific, but personal anecdotes can be personally persuasive. The real eye-opener was when I spent an afternoon helping a poor family a variety of ways. I was repairing their couch, a bit puzzled at the damage thereto but continued fixing it; when almost done, the early-teen girls came to me and asked for a large sheet of plastic. "Uh, don't think I have any...what do you need it for?" "We just tore out the screens in the bedroom." I don't know if that means anything to you, but I was startled at the notion that these kids were deliberately destroying their home. I realized, with plenty of confirmation in other poverty-assistance encounters, that much of poverty can be linked directly to ongoing patterns of self-destructive behavior. Yes, many poor are there as a result of "not their fault" circumstances (abuse, IQ, financial/medical disaster, etc.). But many of them will overcome poverty precisely because, whatever their condition/situation, they still embody self-improving behavior. Yes, they need help/food/money, and I try to provide it as possible. Now, with those points in mind, it's pretty obvious that if you give everyone the same wealth and income, some will squander it unto poverty, and others will make wise choices - with financial results reflecting their personal choices.
dragonwriter 13y ago
> A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. That's not an "observation", its a claim. Actually, its two separate claims: one a claimed effect of a hypothetical action, and one a claimed mechanism of the claimed effect. And while I see plenty of reason to suspect that the claimed effect would be true if a point-in-time redistribution occurred, the evidence from, oh, looking around at places that have different observed distributions of wealth and what factors correlate with them is that its not because degree of poverty and wealth are consequences of chosen behavior of individuals, but because the distribution of wealth toward which a society tends are determined largely by the policies (tax, social support, etc.) present in the society on an ongoing basis, such that a point in time redistribution will, over time, be eroded back to the distribution favored by policy (it might, actually, remix who is where on the distribution, but not what the actual distribution looks like over the long term.)
- rhizome 13y ago
  the distribution of wealth toward which a society tends are determined largely by the policies (tax, social support, etc.) present in the society on an ongoing basis, such that a point in time redistribution will, over time, be eroded back to the distribution favored by policy To put a bit of a finer point on it, it has to do with the things that would not be affected by a point-in-time redistribution of currency: access to education and social connections that affect policy. This returns us to a huge component that GP ignores in attributing poverty to choices: luck. As far as choices go, there is also a huge amount of effort spent in ensuring that the unlucky stay that way.
sytelus 13y ago
I'm not sure why people have problem with this "observation". I can't pull it out but there is a connection with chaos theory as well. Let's say you equalize everyone's income but after that some people would use their income to start new business, some would buy lottery, some would spend it all out and so on. Outliers would be rare and ultimately the distribution would settle in to Gaussian. The width of the bell shrinking as time passes. For some phenomenons there is upper bound to the shrinkage and for others width might oscillate between extremes.
- shawndumas 13y ago
  it'd be a power law curve
jcampbell1 13y ago
I am quite certain you don't know what the word "observation" means, as you use it incorrectly twice. For that, you should be lambasted.
oscargrouch 13y ago
> Poverty/wealth is, on the whole, a consequence of chosen behavior So the poor can only blame for themselves for their own poverty? really? This is the common liberal speech so popular in america.. Thats what the 1% tell to other people so they can rule over them, and rise their profit margins using this meek labor force.. but the bad in all this is the 99%, repeating this out loud.. like if it was some sort of inherent truth.. This leads to the conformism of the lower classes, this make them work like a dog for the upper class.. pure and simple
- deleted 13y ago
  [deleted]
asabjorn 13y ago
> if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. This claim is very america-centric and it does not hold if you look to countries with different social and legal structures. Examples of such countries are Canada, Finland, Norway, Sweden, Denmark, and Germany.

selmnoo 13y ago

That is a particularly useless observation. What about when wealth distribution is done not through simply handing poor people money, but through providing more social programs, mental healthcare, high-quality education, etc. to people most in need of it? Most people who point out economic inequality would rather like to see long-term social stability programs, not just handing people money until we reach a good wealth curve across the population.

lutusp 13y ago

> Poverty/wealth is, on the whole, a consequence of chosen behavior. That's very true, but an equally important factor is compound interest, which tends to amplify what might initially be very small differences in wealth. I once wrote an article (http://arachnoid.com/example/#Compound_Interest_Example http://arachnoid.com/example/#Compound_Interest_Example) in which, as an example, at age 20 a prudent person invests an inheritance of $20,000 for his retirement at age 60, expecting to withdraw $45.00 each week for walking-around money. In the experiment, if the investor withdrew 38 cents more each week, he ended up flat broke at age 60. If he withdrew 38 cents less, he doubled his money. Another factor is that being poor is expensive, there's no other way to put it. When a rich person uses a credit card, he gets a free 30-day loan. That service is being paid for by those at the bottom, who have a constant balance on their cards. A poor person has to buy insurance for his house and car, because they're both on bank loans, and the banks require insurance (and the bank loans sometimes double the cost of the purchases). A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. Let's face it -- overall, being poor is a very bad business policy. But the point is that an old adage about the rich getting richer and the poor getting poorer is backed up by simple economics.

ctdonath 13y ago
being poor is a very bad business policy I contend the reverse is more often the case: bad [personal] business policy is a primary (though not exclusive) cause of poverty. The smarter you are with money, the easier it is to acquire more of it; likewise the reverse. Pretty much everyone understands the primary principle: spending > revenue has, on the whole, obvious results. Rectify that. Yes, you can...you must.
- lutusp 13y ago
  >> being poor is a very bad business policy > I contend the reverse is more often the case: bad [personal] business policy is a primary (though not exclusive) cause of poverty. Yes, I agree actually -- I was being a bit ironic in my original post. There's plenty of personal responsibility in poverty, at least in Western, democratic countries. People could take a number of constructive steps to better themselves, like shred their credit cards, don't fall for some of the more obvious economic traps like borrowing money for unnecessary possessions, thinks like that. And I also completely agree with your other point -- that understanding how money works is critical.
smsm42 13y ago
>>> A poor person has to buy insurance for his house and car, We're doing pretty good here if a poor person is implied to have a house worth insuring (implying either ownership or rental of sufficient value, containing sufficient assets) and a car, and is eligible for bank loans for both. In some countries, a person rich enough to have a house, a car and to qualify for bank loans for both is considered pretty well-to-do. >>> A rich person can buy things in cash, and then self-insure using his assets to cover accidental losses. I'm pretty sure most people, not only poor people, use car insurance. It's more convenient and usually (unless you drive exotic or super-expensive cars) cheaper than surety bonds that are usually required, and same with cash deposits (since cash deposited at DMV can't be used for anything else). For businesses having massive fleets, OTOH, it may make sense to self-insure since they get the same risk distribution as insurers, but without the middleman. >>> overall, being poor is a very bad business policy It's bad business, but you may have a lot of incentives for it, given that welfare subsidies and services you may get in many US localities pay more than minimum wage job and in some localities more than average wage job. http://www.cato.org/publications/commentary/why-get-welfare http://www.cato.org/publications/commentary/why-get-welfare http://www.cato.org/publications/white-paper/work-versus-welfare-trade http://www.cato.org/publications/white-paper/work-versus-wel... >>> rich getting richer and the poor getting poorer is backed up by simple economics. It may be but it definitely is not backed up but what you said. The thing is that statistics that talk about "rich getting richer" makes you assume that same people that were rich 20 years ago got even richer now, and same people that were poor 20 years ago are even poorer now. In fact, nothing in this statistics point to it - what statistics can tell you is that some people were rich 20 years ago, and some different people are rich now, but it usually says nothing about how many of people rich today were rich or poor 20 years ago. It is completely normal for a person to be piss-poor while being a young student and become quite well established when retiring. Usually it comes from working hard and making a number of right choices on the way. Including, yes, saving diligently and having long-term view, which leverages the power of compound interest - but for this you need the right behavior.

cia_plant 13y ago

That is not, strictly speaking, an observation but a supposition. An observation is something that you see in reality, and this experiment has not been tried in reality as far as I know (if you've observed such an experiment, I and I'm sure many others would be curious to read the detailed results).

rayiner 13y ago

> A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. This is unsubstantiated hand-waving. I agree that you'd see quite a bit of inequality, but you have no evidence that "we'd soon return to the economic disparity & distribution we see now." > Poverty/wealth is, on the whole, a consequence of chosen behavior. While "chosen behavior" might be a component of outcomes, there's no good evidence as to how much impact it has on outcomes as compared to other factors. Also, how do you define "chosen behavior?" Are you including IQ? Impulse control? Personality traits? Are any of those "chosen behaviors?" My personal experience with life is that those three things + parental wealth are a bigger components of outcomes than "chosen behaviors." It's easy to make the "right choices" when they're laid out right there in front of you, and easy to get back on the "right course" when you have those factors, which are the result of the grand lottery of life, on your side. What is the equilibrium income/wealth distribution in a system where everyone is genetically engineered, taken from their parents at birth and raised and educated in identical conditions? That'd be the scientific way to isolate the impact of "chosen behaviors." I don't know any more than you do, but I bet its a lot narrower than what we "see now." > I find it odd that those of us who make this observation, and follow it thru to its natural outcomes, are lambasted for the consequential opinions we hold thereon I don't know your particular opinions, but I'm going to hazard a guess and say you're overstating how much of your process of "follow[ing] it thru to its natural outcomes" is based on analytical logic versus handwaving moralizing.

VMG 13y ago
recommended reading: Shocking Behavior : Random Wealth in Antebellum Georgia and Human Capital Across Generations: http://home.uchicago.edu/~bleakley/Bleakley_Ferrie_Intergen.pdf http://home.uchicago.edu/~bleakley/Bleakley_Ferrie_Intergen.... The Ticket to Easy Street? The Financial Consequences of Winning the Lottery: http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00114 http://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00114
- rayiner 13y ago

_delirium 13y ago

ctdonath 13y ago
Every time I help the poor up close & personal, I observe behaviors which clearly lead to destruction of wealth and/or avoidance of opportunity. No, it's not scientific, but personal anecdotes can be personally persuasive. The real eye-opener was when I spent an afternoon helping a poor family a variety of ways. I was repairing their couch, a bit puzzled at the damage thereto but continued fixing it; when almost done, the early-teen girls came to me and asked for a large sheet of plastic. "Uh, don't think I have any...what do you need it for?" "We just tore out the screens in the bedroom." I don't know if that means anything to you, but I was startled at the notion that these kids were deliberately destroying their home. I realized, with plenty of confirmation in other poverty-assistance encounters, that much of poverty can be linked directly to ongoing patterns of self-destructive behavior. Yes, many poor are there as a result of "not their fault" circumstances (abuse, IQ, financial/medical disaster, etc.). But many of them will overcome poverty precisely because, whatever their condition/situation, they still embody self-improving behavior. Yes, they need help/food/money, and I try to provide it as possible. Now, with those points in mind, it's pretty obvious that if you give everyone the same wealth and income, some will squander it unto poverty, and others will make wise choices - with financial results reflecting their personal choices.

dragonwriter 13y ago

> A recurring observation about wealth distribution is that if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. Poverty/wealth is, on the whole, a consequence of chosen behavior. That's not an "observation", its a claim. Actually, its two separate claims: one a claimed effect of a hypothetical action, and one a claimed mechanism of the claimed effect. And while I see plenty of reason to suspect that the claimed effect would be true if a point-in-time redistribution occurred, the evidence from, oh, looking around at places that have different observed distributions of wealth and what factors correlate with them is that its not because degree of poverty and wealth are consequences of chosen behavior of individuals, but because the distribution of wealth toward which a society tends are determined largely by the policies (tax, social support, etc.) present in the society on an ongoing basis, such that a point in time redistribution will, over time, be eroded back to the distribution favored by policy (it might, actually, remix who is where on the distribution, but not what the actual distribution looks like over the long term.)

rhizome 13y ago
the distribution of wealth toward which a society tends are determined largely by the policies (tax, social support, etc.) present in the society on an ongoing basis, such that a point in time redistribution will, over time, be eroded back to the distribution favored by policy To put a bit of a finer point on it, it has to do with the things that would not be affected by a point-in-time redistribution of currency: access to education and social connections that affect policy. This returns us to a huge component that GP ignores in attributing poverty to choices: luck. As far as choices go, there is also a huge amount of effort spent in ensuring that the unlucky stay that way.

sytelus 13y ago

I'm not sure why people have problem with this "observation". I can't pull it out but there is a connection with chaos theory as well. Let's say you equalize everyone's income but after that some people would use their income to start new business, some would buy lottery, some would spend it all out and so on. Outliers would be rare and ultimately the distribution would settle in to Gaussian. The width of the bell shrinking as time passes. For some phenomenons there is upper bound to the shrinkage and for others width might oscillate between extremes.

shawndumas 13y ago
it'd be a power law curve

jcampbell1 13y ago

I am quite certain you don't know what the word "observation" means, as you use it incorrectly twice. For that, you should be lambasted.

oscargrouch 13y ago

> Poverty/wealth is, on the whole, a consequence of chosen behavior So the poor can only blame for themselves for their own poverty? really? This is the common liberal speech so popular in america.. Thats what the 1% tell to other people so they can rule over them, and rise their profit margins using this meek labor force.. but the bad in all this is the 99%, repeating this out loud.. like if it was some sort of inherent truth.. This leads to the conformism of the lower classes, this make them work like a dog for the upper class.. pure and simple

deleted 13y ago
[deleted]

asabjorn 13y ago

> if everyone's income & wealth were equalized, we'd soon return to the economic disparity & distribution we see now. This claim is very america-centric and it does not hold if you look to countries with different social and legal structures. Examples of such countries are Canada, Finland, Norway, Sweden, Denmark, and Germany.