4 ms·

"As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending." I'm prett

by pg 17y ago

"As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending." I'm pretty sure it isn't. The increasing power of technology is probably the biggest force driving variation in wealth, and I don't see any signs that technological progress is slowing.

ewjordan 17y ago
I'm not sure exactly what new information we're supposed to get from this article: obviously, when the stock market busts, those with the highest exposures to it are going to be hurt more in percentage terms than those with very little exposure. That this has happened does not indicate any systemic change that's likely to alter the overall concentration of wealth. There are potentially some such systemic changes occurring, of course - the middle-millionaire worker bees in the finance industry (particularly the gamblers...oops, I mean traders :) ) are probably going to see a leaner few years ahead. But the more normal pieces of our economy, where wealth is gained via production instead of positioning, are not changing in any fundamental manner. Re: your comment, I just re-read http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html, and it brought up a very important point regarding distribution of wealth, one that I'd not considered before. It's a real shame that we don't have any numerical way to measure overall wealth level across time periods, all we can do is measure relative distributions at a single time. Trivially, there's got to be an ideal distribution of resources at a given time that will maximize the expected value of total wealth as we move forward (this is true even if that "total wealth" number is calculated with some penalty for massive inequality). But what I hadn't considered before is that this optimal distribution may change significantly as the baseline rises. The usual assumption, one I've been guilty of in the past, is that a constantly shifting distribution of wealth implies that even if we hit that optimum, we're going to move right past it. But it's quite possible that with the leverage of technology coming into play, the distribution that optimizes overall wealth could continue to concentrate a higher and higher percentage of said wealth in fewer hands, and the "steady state" equilibrium that the physicist in me is desperate to solve for is actually shifting upwards over time. I wonder if there are any existing economic models that explicitly account for this effect (not an economist, so I'm not sure); it would be very nice to have a realistic model to see concretely the means by which an income gap might not be such a bad thing for everyone, and to be able to see the relative effect of controlling that gap via taxes. After all, if the net effect of chopping half the income of the top 0.01% of earners is only to reduce the net economic output by .5%, many people would find this to be a fair tradeoff, since there is some societal utility in equity. But if it's going to reduce overall output by 5% to do such a thing, forget it, we're all going to be worse off in the end.
- thstart 17y ago
  "...It's a real shame that we don't have any numerical way to measure overall wealth level across time periods, all we can do is measure relative distributions at a single time..." We are creating such database and a tool for analyzing it. The data are collected from SEC Form 4, Form 3 submissions then aggregated. The problem is the quantity of data to be analysed is enormous and COTS data bases cannot handle it. So we needed to create a new parallel columnar time series database technology from scratch in order to do that. Also in order to compare different time frames there is a need of better visualization. Here is some info here: http://www.thstart.com/THStart/trader-head-start http://www.thstart.com/THStart/trader-head-start
timr 17y ago
The question is: in which country? The title of this article should really be appended with "in the USA", because the data doesn't consider foreign wealth. Technology will continue to make people in Asia and India incredibly rich. Meanwhile, our markets are drowning in debt, the US middle class is shrinking, and the regulatory system is increasingly biased toward entrenched players in areas like intellectual property and finance and international trade. I wouldn't be surprised if it's getting harder to make money in the US, and easier in other places.
- nazgulnarsil 17y ago
  I wouldn't say "increasingly" since that has been the effect of regulation from the get go.
- yummyfajitas 17y ago
  The "middle class" now consists of virtually the entire population. Even the people classified as "poor" by the government now have more material goods and services than the middle class even a short time ago (e.g., 1970). http://www.heritage.org/research/welfare/bg1713.cfm http://www.heritage.org/research/welfare/bg1713.cfm If the middle class has shrank, it's because we have redefined the meaning of the term.
  - mistermann 17y ago
    Probably the most correct comment here...but also not quite right. The middle class in America, or to be more precise, almost everyone who hasn't gone to great lengths of destructive excess to ensure their life is screwed up (as opposed to actually going out of their way doing something worthwhile) has pretty much the highest standard in the history of the world. You can buy an awesome, huge LCD TV for $1000, DVD player for $69 ($169 if you want BluRay), a great shirt for $10, or pair of jeans for $40, shrimp for ~$8 / kg or less in the grocery store (who knows whats in it though), etc And all of this is unearned...people in China, Thailand, Malaysia, etc are working 70+ hours a week in exchange for next to nothing, enough to live on and a bit. And here in the west, we buy the fruits of their labor for pennies on the dollar, and all of our energy is expended on building nicer homes for ourself, or services (massage, nails) with no lasting value. All we have to do is push a button on a computer to print money and sent it over there, and for some reason they keep sending us manufactured goods. It's really quite amazing.
eru 17y ago
Technology equalises styles of living more than it equalises monetary income. On a tangential note: All the money in the world can't buy you better Coca Cola.
- Retric 17y ago
  You can buy a Coca Cola made from sugar vs corn syrup and in a bottle vs a can. However, going from rich to supper rich does not let you have even better Coca Cola.
btilly 17y ago
The article points out that variation in wealth began to increase when the top personal income tax rate dropped under Reagan from 70% to 35%, thereby making it far more feasible for individuals to capture great personal wealth. (If you think 70% is high, during the great expansion of the middle class post WW II the top tax rate was 93%. Coincidence?) There have been a number of signals from the Obama administration that they wish to increase the top personal income tax rate. If they increase it enough, then wealth variation WILL come down. Increasing power of technology or no. The only questions are how high they would have to raise taxes to do it, and whether they will do so. That said, the economic value created by the increasing power of technology is a great driver of wealth, and will remain so for some time to come. But government policy can certainly create a "headwind" that is sufficient to reduce the number of great fortunes created.
- anamax 17y ago
  Any discussion of taxes which concentrates on rates and ignores deductions and the like is fundamentally dishonest.
  - btilly 17y ago
    Deductions tend to grow over time as lobbyists tweak the system. Yes, they always point to loopholes closed..while opening 5 more. So historically there were fewer deductions to go with the higher rates. So including deductions makes the picture even more stark. Which brings me to my favorite tax deduction ever. If you go back to the 50s, the most useful tax exemption available to the rich was that if they donated at least their annual income to charity then they didn't have to pay taxes. (This was called the flying nun exemption because the law was passed for a very rich nun who was sworn to poverty and hence donated her whole income to the church.) How on earth was that useful? Well donations were valued at current worth, not what you paid. So invest large amounts in assets of increasing value (eg art), then a few years late donate the asset to a charity. Asset valuation could be made to grow by the simple expedient of donating large amounts of money to a charity you ran so that it could afford to buy a piece of artwork from you at inflated value. Then that set the valuation for the other pieces of art you chose to donate. If you've ever wondered how art wound up costing so much, and how America's great public museums acquired so much of it, wonder no more.
pln 17y ago
You would need to show incredible evidence for this -- the distribution of America's wealth has fluctuated greatly over the last century, and can be clearly linked to government policies, social trends, etc., and certainly has not been constantly shifting towards the wealthy, nor were the 40s to 70s devoid of technological development. (You could argue the last three decades eclipsed them, but I would have to see that argument.) More generally, throughout history, the growth of the middle class has clearly been a key driver of consumer technology.
- pg 17y ago
  Surely credible evidence would be better? Start with the Forbes 400 and look at how they each got their money.
plainspace 17y ago
Completely agreed based on the fact that we are seeing new technologies and new uses of technologies impact the amount of wealth available. Think of all of the money that Google is generating? Where did it come from? Did it exist before Google? Is that money being taken from somewhere else or is it new money?

by pg 17y ago

ewjordan 17y ago

I'm not sure exactly what new information we're supposed to get from this article: obviously, when the stock market busts, those with the highest exposures to it are going to be hurt more in percentage terms than those with very little exposure. That this has happened does not indicate any systemic change that's likely to alter the overall concentration of wealth. There are potentially some such systemic changes occurring, of course - the middle-millionaire worker bees in the finance industry (particularly the gamblers...oops, I mean traders :) ) are probably going to see a leaner few years ahead. But the more normal pieces of our economy, where wealth is gained via production instead of positioning, are not changing in any fundamental manner. Re: your comment, I just re-read http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html, and it brought up a very important point regarding distribution of wealth, one that I'd not considered before. It's a real shame that we don't have any numerical way to measure overall wealth level across time periods, all we can do is measure relative distributions at a single time. Trivially, there's got to be an ideal distribution of resources at a given time that will maximize the expected value of total wealth as we move forward (this is true even if that "total wealth" number is calculated with some penalty for massive inequality). But what I hadn't considered before is that this optimal distribution may change significantly as the baseline rises. The usual assumption, one I've been guilty of in the past, is that a constantly shifting distribution of wealth implies that even if we hit that optimum, we're going to move right past it. But it's quite possible that with the leverage of technology coming into play, the distribution that optimizes overall wealth could continue to concentrate a higher and higher percentage of said wealth in fewer hands, and the "steady state" equilibrium that the physicist in me is desperate to solve for is actually shifting upwards over time. I wonder if there are any existing economic models that explicitly account for this effect (not an economist, so I'm not sure); it would be very nice to have a realistic model to see concretely the means by which an income gap might not be such a bad thing for everyone, and to be able to see the relative effect of controlling that gap via taxes. After all, if the net effect of chopping half the income of the top 0.01% of earners is only to reduce the net economic output by .5%, many people would find this to be a fair tradeoff, since there is some societal utility in equity. But if it's going to reduce overall output by 5% to do such a thing, forget it, we're all going to be worse off in the end.

thstart 17y ago
"...It's a real shame that we don't have any numerical way to measure overall wealth level across time periods, all we can do is measure relative distributions at a single time..." We are creating such database and a tool for analyzing it. The data are collected from SEC Form 4, Form 3 submissions then aggregated. The problem is the quantity of data to be analysed is enormous and COTS data bases cannot handle it. So we needed to create a new parallel columnar time series database technology from scratch in order to do that. Also in order to compare different time frames there is a need of better visualization. Here is some info here: http://www.thstart.com/THStart/trader-head-start http://www.thstart.com/THStart/trader-head-start

timr 17y ago

The question is: in which country? The title of this article should really be appended with "in the USA", because the data doesn't consider foreign wealth. Technology will continue to make people in Asia and India incredibly rich. Meanwhile, our markets are drowning in debt, the US middle class is shrinking, and the regulatory system is increasingly biased toward entrenched players in areas like intellectual property and finance and international trade. I wouldn't be surprised if it's getting harder to make money in the US, and easier in other places.

nazgulnarsil 17y ago
I wouldn't say "increasingly" since that has been the effect of regulation from the get go.
yummyfajitas 17y ago
The "middle class" now consists of virtually the entire population. Even the people classified as "poor" by the government now have more material goods and services than the middle class even a short time ago (e.g., 1970). http://www.heritage.org/research/welfare/bg1713.cfm http://www.heritage.org/research/welfare/bg1713.cfm If the middle class has shrank, it's because we have redefined the meaning of the term.
- mistermann 17y ago
  Probably the most correct comment here...but also not quite right. The middle class in America, or to be more precise, almost everyone who hasn't gone to great lengths of destructive excess to ensure their life is screwed up (as opposed to actually going out of their way doing something worthwhile) has pretty much the highest standard in the history of the world. You can buy an awesome, huge LCD TV for $1000, DVD player for $69 ($169 if you want BluRay), a great shirt for $10, or pair of jeans for $40, shrimp for ~$8 / kg or less in the grocery store (who knows whats in it though), etc And all of this is unearned...people in China, Thailand, Malaysia, etc are working 70+ hours a week in exchange for next to nothing, enough to live on and a bit. And here in the west, we buy the fruits of their labor for pennies on the dollar, and all of our energy is expended on building nicer homes for ourself, or services (massage, nails) with no lasting value. All we have to do is push a button on a computer to print money and sent it over there, and for some reason they keep sending us manufactured goods. It's really quite amazing.

eru 17y ago

Technology equalises styles of living more than it equalises monetary income. On a tangential note: All the money in the world can't buy you better Coca Cola.

Retric 17y ago
You can buy a Coca Cola made from sugar vs corn syrup and in a bottle vs a can. However, going from rich to supper rich does not let you have even better Coca Cola.

btilly 17y ago

The article points out that variation in wealth began to increase when the top personal income tax rate dropped under Reagan from 70% to 35%, thereby making it far more feasible for individuals to capture great personal wealth. (If you think 70% is high, during the great expansion of the middle class post WW II the top tax rate was 93%. Coincidence?) There have been a number of signals from the Obama administration that they wish to increase the top personal income tax rate. If they increase it enough, then wealth variation WILL come down. Increasing power of technology or no. The only questions are how high they would have to raise taxes to do it, and whether they will do so. That said, the economic value created by the increasing power of technology is a great driver of wealth, and will remain so for some time to come. But government policy can certainly create a "headwind" that is sufficient to reduce the number of great fortunes created.

anamax 17y ago
Any discussion of taxes which concentrates on rates and ignores deductions and the like is fundamentally dishonest.
- btilly 17y ago
  Deductions tend to grow over time as lobbyists tweak the system. Yes, they always point to loopholes closed..while opening 5 more. So historically there were fewer deductions to go with the higher rates. So including deductions makes the picture even more stark. Which brings me to my favorite tax deduction ever. If you go back to the 50s, the most useful tax exemption available to the rich was that if they donated at least their annual income to charity then they didn't have to pay taxes. (This was called the flying nun exemption because the law was passed for a very rich nun who was sworn to poverty and hence donated her whole income to the church.) How on earth was that useful? Well donations were valued at current worth, not what you paid. So invest large amounts in assets of increasing value (eg art), then a few years late donate the asset to a charity. Asset valuation could be made to grow by the simple expedient of donating large amounts of money to a charity you ran so that it could afford to buy a piece of artwork from you at inflated value. Then that set the valuation for the other pieces of art you chose to donate. If you've ever wondered how art wound up costing so much, and how America's great public museums acquired so much of it, wonder no more.

pln 17y ago

You would need to show incredible evidence for this -- the distribution of America's wealth has fluctuated greatly over the last century, and can be clearly linked to government policies, social trends, etc., and certainly has not been constantly shifting towards the wealthy, nor were the 40s to 70s devoid of technological development. (You could argue the last three decades eclipsed them, but I would have to see that argument.) More generally, throughout history, the growth of the middle class has clearly been a key driver of consumer technology.

pg 17y ago
Surely credible evidence would be better? Start with the Forbes 400 and look at how they each got their money.

plainspace 17y ago

Completely agreed based on the fact that we are seeing new technologies and new uses of technologies impact the amount of wealth available. Think of all of the money that Google is generating? Where did it come from? Did it exist before Google? Is that money being taken from somewhere else or is it new money?