7 ms·

Some are more equal than others

60 points by acalmon 12y ago

scott_s 12y ago
The webpage for the paper (!) has more information: http://gabriel-zucman.eu/uswealth/ http://gabriel-zucman.eu/uswealth/ There's also a slide deck for a talk on the paper: http://eml.berkeley.edu/~saez/SaezZucman14slides.pdf http://eml.berkeley.edu/~saez/SaezZucman14slides.pdf
applecore 12y ago
The full article is here: http://www.economist.com/news/finance-and-economics/21631129-it-001-who-are-really-getting-ahead-america-forget-1 http://www.economist.com/news/finance-and-economics/21631129... The 16,000 families comprising the richest 0.01%, or “1% of the 1%,” now control 11.2% of total wealth—that's over half the wealth of the rest of the 1%.
- 6stringmerc 12y ago
  Thus, as an educated man concerned with the health and longevity of the nation's economy, it is my perspective this scenario is a ridiculously inefficient use of capital. Therefore it is no surprise the only people who argue against this perspective are those holding the resources (re: Mitt Romney). To wit: So demographically, older workers have not saved enough for retirement. That drives them to maintain employment. With a lack of job opportunities (the slack), the youngest generations are presented a significant challenge – with amongst the highest debt levels and least job prospects, the youth cohort entering its first (or prime) earning years can be paired with another observed phenomenon, that of the wealth disparity. As a premise, poor people and young people spend aggressively, wealthy households invest and don’t spend proportionally to their means, and a significant number of older Americans have no retirement savings to speak of, and therefore cannot spend proportional to offset their declining economic contribution. Essentially, this is a perfect recipe to grind an economy to a halt: Wealthy people don’t spend, elderly workers don’t spend, poor people and young people love to spend but can’t without reasonable access to funding. Hi, Federal Reserve, is it comfy in between that rock and hard place? Didn't think so. Ineffectual bunch of elites.
- tzs 12y ago
  I never know what to make of numbers like those, because the articles that present them never offer anything to tell me what a good wealth distribution would be. With nothing to compare to, I have no idea if those numbers are showing something is wrong, or showing that things are fine. In any group (the whole population, or any subgroup such as the top 1%) where the are wealth differences within the group, then it is mathematically inevitable that the top X% of the group will have more than X% of the group's wealth. If there is an individual who has more wealth than any other individual, then it is also mathematically necessary that wealth_of_top(X)/X increases as X decreases.
  - syntern 12y ago
    This. Also, it is not the top that matters, rather the quality of life of the bottom percentiles. We need to raise those up, and as long as we can do that, the top doesn't really matter.
    - AnimalMuppet 12y ago
      True, but I think if we look around, we can find some fairly compelling evidence that we're not doing very well at raising the quality of life of the bottom percentiles...
  - dsr_ 12y ago
    One thing you could do is look at history. The Economist article has a nice slider graph at the top, but what they expect you to know is how the US economy was doing across the 20th Century. In general, but not exclusively, growth in the share of wealth by the 90% is correlated to growth of the overall economy and good times for all.
smoyer 12y ago
The worst implication I see find (reading between the lines and via the graphs) is that our middle class consists of only 9.9% of the population. By subtraction, the middle class holds around 56% of the country's assets. So our middle class is indeed shrinking but also moving towards being upper class.
- api 12y ago
  What's left of the middle class is sort of becoming a "lower rich" class. While this is somewhat anecdotal, what I see emerging is a kind of banded stratification: a tiny "superclass" holding a majority (>50%) of all wealth, a "lower rich" class, a very small working middle, a vast working poor, and a vast class of unemployable welfare recipients.
andrewla 12y ago
I find it hard to take this sort of analysis seriously, when the authors admit that they don't even understand the order of magnitude of the error bars on the data. Not to mention that the regulatory landscape has changed over time, and since that directly influences several classes of errors (from waiters under-reporting tips to "the 1%" hiding money in now-illegal tax shelters) estimating historical trends is an exercise in futility. And we effectively have no way to benchmark how well these different studies are doing at measuring the underlying phenomena that they're trying to measure, this is really just making up numbers and calling it "wealth distribution".
- eksith 12y ago
  I assure you, "waiters under-reporting tips" is a mere rounding error compared to the money hidden in tax shelters; their legality notwithstanding.
- phillmv 12y ago
  Welcome to problems with social science! >this is really just making up numbers and calling it "wealth distribution". We can go deeper. Almost everything you hear about the "economy" is based on a mathematical model that makes a variety of assumptions. What is income? What is wealth? Who are the people participating? How does information get transmitted? What is a "good" outcome and what is a "bad" outcome? Further, "waiters undereporting tips" is a tiny problem next to "wealth is somewhat unmeasurable since we don't survey it or tax it". The best we can do is measure what we can and try to make reasonable inferences. But it's not an exercise in making up numbers. It's an exercise in interpreting what the numbers we have are saying.
jprince 12y ago
It is interesting that OP uses a line meant to denigrate socialism to critique capitalism. I think that the graph is misleading - the average poor person today has 3 wide screen TVs, an Xbox, a smart phone and air conditioning. Poor people in 1916 would sometimes starve during the winters. To compare 1916 to 2014 as if they are equal highs in inequality is meaningless: Overall, everybody is much, much better off.
- chadgeidel 12y ago
  "the average poor person today has 3 wide screen TVs, an Xbox, a smart phone and air conditioning." [citation needed] I'm not disputing your claim that everyone is much, much better off, but the "poor people have lots of stuff!" kind of thinking pollutes the discussion.
  - xrange 12y ago
    >the "poor people have lots of stuff!" kind of thinking pollutes the discussion. ...doesn't that go right to the core of the issue? Some people think that relative "wealth" is the proper measure of "well-being". And others think that absolute "wealth" is the proper measure of "well-being". All the arguments around this issue seem to boil down to this essence.
    - chadgeidel 12y ago
      Dismissing the discussion out-of-hand because of certain items that one thinks are "luxury goods" is the problem. I have no quarrel with discussions of what weatlth or well being means. I do disagree with the blanket statement of "since a person has X they aren't really poor".
- sharemywin 12y ago
  what's an average poor person? what you saw on TV? Did you actually spend some time in a poor neighborhood? Pretty easy to make stuff up to win arguments.
- a_gentle_autist 12y ago
dominotw 12y ago
I recommend this NPR podcast, you'd be surprised by the results. "INCOME INEQUALITY IMPAIRS THE AMERICAN DREAM OF UPWARD MOBILITY" http://intelligencesquaredus.org/debates/past-debates/item/1159-income-inequality-impairs-the-american-dream http://intelligencesquaredus.org/debates/past-debates/item/1...
api 12y ago
To argue that this is purely meritocratic requires you to argue that some individuals are thousands to tens to even hundreds of thousands of times more productive, intelligent, or hard-working than everyone else. While differences do exist, framing the question that way makes it obvious that the very highest levels of the income ladder are largely a result of network effects and leverage rather than productive activity. Another way of framing the question: was Mark Zuckerberg's contribution to computer networking more than a million times more valuable than that of Tim Berners-Lee? I'm starting to see the rise of "market fundamentalism" over the past 35-ish years as part of the general trend toward the naturalistic fallacy over the same time period. If it's "natural," it's by definition good. So if the "natural" free market concentrates >50% of all wealth in <0.1% of hands, well dag nabbit that's what nature obviously intended and who are you to argue with nature? Wealth redistribution or other mitigating strategies are sort of like vaccination and GMO foods-- tampering with nature and "playing God."
- onion2k 12y ago
  Another way of framing the question: was Mark Zuckerberg's contribution to computer networking more than a million times more valuable than that of Tim Berners-Lee? A spurious argument - Zuckerberg's money isn't from computer networking. Berner-Lee is essentially the inventor of the wheel while Zuckerberg created a Ferrari. So a better question would be "Has Zuckerberg made a significant contribution to ad sales and market intelligence data gathering?", in which case the answer would be an obvious yes. Obviously that leads on to a question about whether the inventor of an enabling technology such as the web should be significantly remunerated for their work, which society would apparently answer with a resounding no.
  - api 12y ago
    This creates a problem though: If you are a highly intelligent and motivated person, you have many choices about what to do. This suggests that doing the kind of basic R&D work that might lead to the invention of the WWW is a sucker's game. You shouldn't invent wheels. Instead you should invent Ferrari's using other peoples' wheels. This over time will lead to brain drain from the realms of basic research and invention. I'd posit this as a possible explanation for the decline of fundamental innovation since roughly 1970, which coincidentally is the era when the groundwork for this shift in wealth distribution really got laid with the emergence of the "new left" and the "new right." (What I call the reactionary left and the reactionary right -- note that in both cases the naturalistic fallacy is a cornerstone of these belief systems.) I'd count myself among the drained. I decided not to do a Ph.D partly because I didn't want to take a vow of poverty to do work to make other people rich. Free markets reward things exponentially as they near the point of consumption. The person who puts the icing on the cake is rewarded exponentially more than the person who baked it, who in turn is rewarded exponentially more than the person who made the flour, and so on. The folks rewarded exponentially most of all are the financiers who simply move money around to fund these activities. This seems unfair in virtually every case, but it's incredibly unfair in the realm of ideas, invention, science, and technology. In ordinary manual labor the difficulty of each step tends to be similar, while in intellectual realms the fundamental steps of invention and discovery are often exponentially harder than the ones closer to the end of the line. So for intellectual work, the relationship between difficulty and importance and compensation is really pathologically skewed.
doki_pen 12y ago
The biggest lie told today is that we have less wealth in the world and we can't afford things like social security and welfare. There is more wealth now than there has ever been. Modern productivity is insanely high.
- humanrebar 12y ago
  > There is more wealth now than there has ever been. And the role is government is bigger than ever. Back in the day if there was an earthquake, people didn't storm Congress asking what they would do about the earthquake problem. More significantly, people attributed bad health to nature, not bad insurance policies. Also, demographic have changed a lot. Now we have: * fewer productive adults per household due to demographic trends (single parenthood, divorce, etc.) * fewer children per household that grow up and contribute payroll taxes * fewer people dying at their prime (and contributing to pensions, etc. without drawing anything) * higher standards of living (bigger houses, multiple TVs, grandma lives across instead of upstairs, obesity outweighs starvation as a problem, etc.)
  - aswanson 12y ago
    Funny how you didn't address the increase in productivity bullet point. Guess it didn't fit your worldview/agenda.
refurb 12y ago
I'd be very interested to see the impact of baby boomers on the distribution of wealth. Remember: (1) wealth tends to be correlated with age and (2) baby boomers make up a much larger percentage of the population (i.e. age distribution is not equal). If you have a large bolus of folks moving through their careers, the graph follows the typical wealth trajectory. Right now, baby boomers are at or near the peak of their wealth.
- 6stringmerc 12y ago
  If you're interested in this subject, ZeroHedge has been compiling some very useful data regarding employment. Here's a link to two graphs that show the "age skew" at play in hiring for the past several years: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/Workers%20aged%2055%20and%20over.jpg http://www.zerohedge.com/sites/default/files/images/user5/im... http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/55%20older%20younger_0.jpg http://www.zerohedge.com/sites/default/files/images/user5/im... Full article: http://www.zerohedge.com/news/2014-10-03/hiring-grandparents-only-230k-september-were-added-55-69-age-group-10k-lost-prime-25 http://www.zerohedge.com/news/2014-10-03/hiring-grandparents...

60 points by acalmon 12y ago

The webpage for the paper (!) has more information: http://gabriel-zucman.eu/uswealth/ http://gabriel-zucman.eu/uswealth/ There's also a slide deck for a talk on the paper: http://eml.berkeley.edu/~saez/SaezZucman14slides.pdf http://eml.berkeley.edu/~saez/SaezZucman14slides.pdf

applecore 12y ago

The full article is here: http://www.economist.com/news/finance-and-economics/21631129-it-001-who-are-really-getting-ahead-america-forget-1 http://www.economist.com/news/finance-and-economics/21631129... The 16,000 families comprising the richest 0.01%, or “1% of the 1%,” now control 11.2% of total wealth—that's over half the wealth of the rest of the 1%.

6stringmerc 12y ago
Thus, as an educated man concerned with the health and longevity of the nation's economy, it is my perspective this scenario is a ridiculously inefficient use of capital. Therefore it is no surprise the only people who argue against this perspective are those holding the resources (re: Mitt Romney). To wit: So demographically, older workers have not saved enough for retirement. That drives them to maintain employment. With a lack of job opportunities (the slack), the youngest generations are presented a significant challenge – with amongst the highest debt levels and least job prospects, the youth cohort entering its first (or prime) earning years can be paired with another observed phenomenon, that of the wealth disparity. As a premise, poor people and young people spend aggressively, wealthy households invest and don’t spend proportionally to their means, and a significant number of older Americans have no retirement savings to speak of, and therefore cannot spend proportional to offset their declining economic contribution. Essentially, this is a perfect recipe to grind an economy to a halt: Wealthy people don’t spend, elderly workers don’t spend, poor people and young people love to spend but can’t without reasonable access to funding. Hi, Federal Reserve, is it comfy in between that rock and hard place? Didn't think so. Ineffectual bunch of elites.
tzs 12y ago
I never know what to make of numbers like those, because the articles that present them never offer anything to tell me what a good wealth distribution would be. With nothing to compare to, I have no idea if those numbers are showing something is wrong, or showing that things are fine. In any group (the whole population, or any subgroup such as the top 1%) where the are wealth differences within the group, then it is mathematically inevitable that the top X% of the group will have more than X% of the group's wealth. If there is an individual who has more wealth than any other individual, then it is also mathematically necessary that wealth_of_top(X)/X increases as X decreases.
- syntern 12y ago
  This. Also, it is not the top that matters, rather the quality of life of the bottom percentiles. We need to raise those up, and as long as we can do that, the top doesn't really matter.
  - AnimalMuppet 12y ago
    True, but I think if we look around, we can find some fairly compelling evidence that we're not doing very well at raising the quality of life of the bottom percentiles...
- dsr_ 12y ago
  One thing you could do is look at history. The Economist article has a nice slider graph at the top, but what they expect you to know is how the US economy was doing across the 20th Century. In general, but not exclusively, growth in the share of wealth by the 90% is correlated to growth of the overall economy and good times for all.

smoyer 12y ago

The worst implication I see find (reading between the lines and via the graphs) is that our middle class consists of only 9.9% of the population. By subtraction, the middle class holds around 56% of the country's assets. So our middle class is indeed shrinking but also moving towards being upper class.

api 12y ago
What's left of the middle class is sort of becoming a "lower rich" class. While this is somewhat anecdotal, what I see emerging is a kind of banded stratification: a tiny "superclass" holding a majority (>50%) of all wealth, a "lower rich" class, a very small working middle, a vast working poor, and a vast class of unemployable welfare recipients.

andrewla 12y ago

I find it hard to take this sort of analysis seriously, when the authors admit that they don't even understand the order of magnitude of the error bars on the data. Not to mention that the regulatory landscape has changed over time, and since that directly influences several classes of errors (from waiters under-reporting tips to "the 1%" hiding money in now-illegal tax shelters) estimating historical trends is an exercise in futility. And we effectively have no way to benchmark how well these different studies are doing at measuring the underlying phenomena that they're trying to measure, this is really just making up numbers and calling it "wealth distribution".

eksith 12y ago
I assure you, "waiters under-reporting tips" is a mere rounding error compared to the money hidden in tax shelters; their legality notwithstanding.
phillmv 12y ago
Welcome to problems with social science! >this is really just making up numbers and calling it "wealth distribution". We can go deeper. Almost everything you hear about the "economy" is based on a mathematical model that makes a variety of assumptions. What is income? What is wealth? Who are the people participating? How does information get transmitted? What is a "good" outcome and what is a "bad" outcome? Further, "waiters undereporting tips" is a tiny problem next to "wealth is somewhat unmeasurable since we don't survey it or tax it". The best we can do is measure what we can and try to make reasonable inferences. But it's not an exercise in making up numbers. It's an exercise in interpreting what the numbers we have are saying.

jprince 12y ago

It is interesting that OP uses a line meant to denigrate socialism to critique capitalism. I think that the graph is misleading - the average poor person today has 3 wide screen TVs, an Xbox, a smart phone and air conditioning. Poor people in 1916 would sometimes starve during the winters. To compare 1916 to 2014 as if they are equal highs in inequality is meaningless: Overall, everybody is much, much better off.

chadgeidel 12y ago
"the average poor person today has 3 wide screen TVs, an Xbox, a smart phone and air conditioning." [citation needed] I'm not disputing your claim that everyone is much, much better off, but the "poor people have lots of stuff!" kind of thinking pollutes the discussion.
- xrange 12y ago
  >the "poor people have lots of stuff!" kind of thinking pollutes the discussion. ...doesn't that go right to the core of the issue? Some people think that relative "wealth" is the proper measure of "well-being". And others think that absolute "wealth" is the proper measure of "well-being". All the arguments around this issue seem to boil down to this essence.
  - chadgeidel 12y ago
    Dismissing the discussion out-of-hand because of certain items that one thinks are "luxury goods" is the problem. I have no quarrel with discussions of what weatlth or well being means. I do disagree with the blanket statement of "since a person has X they aren't really poor".
sharemywin 12y ago
what's an average poor person? what you saw on TV? Did you actually spend some time in a poor neighborhood? Pretty easy to make stuff up to win arguments.
a_gentle_autist 12y ago

dominotw 12y ago

I recommend this NPR podcast, you'd be surprised by the results. "INCOME INEQUALITY IMPAIRS THE AMERICAN DREAM OF UPWARD MOBILITY" http://intelligencesquaredus.org/debates/past-debates/item/1159-income-inequality-impairs-the-american-dream http://intelligencesquaredus.org/debates/past-debates/item/1...

api 12y ago

To argue that this is purely meritocratic requires you to argue that some individuals are thousands to tens to even hundreds of thousands of times more productive, intelligent, or hard-working than everyone else. While differences do exist, framing the question that way makes it obvious that the very highest levels of the income ladder are largely a result of network effects and leverage rather than productive activity. Another way of framing the question: was Mark Zuckerberg's contribution to computer networking more than a million times more valuable than that of Tim Berners-Lee? I'm starting to see the rise of "market fundamentalism" over the past 35-ish years as part of the general trend toward the naturalistic fallacy over the same time period. If it's "natural," it's by definition good. So if the "natural" free market concentrates >50% of all wealth in <0.1% of hands, well dag nabbit that's what nature obviously intended and who are you to argue with nature? Wealth redistribution or other mitigating strategies are sort of like vaccination and GMO foods-- tampering with nature and "playing God."

onion2k 12y ago
Another way of framing the question: was Mark Zuckerberg's contribution to computer networking more than a million times more valuable than that of Tim Berners-Lee? A spurious argument - Zuckerberg's money isn't from computer networking. Berner-Lee is essentially the inventor of the wheel while Zuckerberg created a Ferrari. So a better question would be "Has Zuckerberg made a significant contribution to ad sales and market intelligence data gathering?", in which case the answer would be an obvious yes. Obviously that leads on to a question about whether the inventor of an enabling technology such as the web should be significantly remunerated for their work, which society would apparently answer with a resounding no.
- api 12y ago
  This creates a problem though: If you are a highly intelligent and motivated person, you have many choices about what to do. This suggests that doing the kind of basic R&D work that might lead to the invention of the WWW is a sucker's game. You shouldn't invent wheels. Instead you should invent Ferrari's using other peoples' wheels. This over time will lead to brain drain from the realms of basic research and invention. I'd posit this as a possible explanation for the decline of fundamental innovation since roughly 1970, which coincidentally is the era when the groundwork for this shift in wealth distribution really got laid with the emergence of the "new left" and the "new right." (What I call the reactionary left and the reactionary right -- note that in both cases the naturalistic fallacy is a cornerstone of these belief systems.) I'd count myself among the drained. I decided not to do a Ph.D partly because I didn't want to take a vow of poverty to do work to make other people rich. Free markets reward things exponentially as they near the point of consumption. The person who puts the icing on the cake is rewarded exponentially more than the person who baked it, who in turn is rewarded exponentially more than the person who made the flour, and so on. The folks rewarded exponentially most of all are the financiers who simply move money around to fund these activities. This seems unfair in virtually every case, but it's incredibly unfair in the realm of ideas, invention, science, and technology. In ordinary manual labor the difficulty of each step tends to be similar, while in intellectual realms the fundamental steps of invention and discovery are often exponentially harder than the ones closer to the end of the line. So for intellectual work, the relationship between difficulty and importance and compensation is really pathologically skewed.

doki_pen 12y ago

The biggest lie told today is that we have less wealth in the world and we can't afford things like social security and welfare. There is more wealth now than there has ever been. Modern productivity is insanely high.

humanrebar 12y ago
> There is more wealth now than there has ever been. And the role is government is bigger than ever. Back in the day if there was an earthquake, people didn't storm Congress asking what they would do about the earthquake problem. More significantly, people attributed bad health to nature, not bad insurance policies. Also, demographic have changed a lot. Now we have: * fewer productive adults per household due to demographic trends (single parenthood, divorce, etc.) * fewer children per household that grow up and contribute payroll taxes * fewer people dying at their prime (and contributing to pensions, etc. without drawing anything) * higher standards of living (bigger houses, multiple TVs, grandma lives across instead of upstairs, obesity outweighs starvation as a problem, etc.)
- aswanson 12y ago
  Funny how you didn't address the increase in productivity bullet point. Guess it didn't fit your worldview/agenda.

refurb 12y ago

I'd be very interested to see the impact of baby boomers on the distribution of wealth. Remember: (1) wealth tends to be correlated with age and (2) baby boomers make up a much larger percentage of the population (i.e. age distribution is not equal). If you have a large bolus of folks moving through their careers, the graph follows the typical wealth trajectory. Right now, baby boomers are at or near the peak of their wealth.

6stringmerc 12y ago
If you're interested in this subject, ZeroHedge has been compiling some very useful data regarding employment. Here's a link to two graphs that show the "age skew" at play in hiring for the past several years: http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/Workers%20aged%2055%20and%20over.jpg http://www.zerohedge.com/sites/default/files/images/user5/im... http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/55%20older%20younger_0.jpg http://www.zerohedge.com/sites/default/files/images/user5/im... Full article: http://www.zerohedge.com/news/2014-10-03/hiring-grandparents-only-230k-september-were-added-55-69-age-group-10k-lost-prime-25 http://www.zerohedge.com/news/2014-10-03/hiring-grandparents...