The Wealthiest 5% Grabbed Most of the America’s Gains(blogs.wsj.com)
blogs.wsj.com
The Wealthiest 5% Grabbed Most of the America’s Gains
http://blogs.wsj.com/wealth/2011/09/16/the-top-5-grabbed-most-of-the-americas-gains/
20 comments
The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn.
This is incorrect. We make plenty of things, more than in most historical periods.
http://research.stlouisfed.org/fred2/series/INDPRO
We just do it more efficiently, resulting in fewer manufacturing jobs.
http://research.stlouisfed.org/fred2/series/MANEMP
This is incorrect. We make plenty of things, more than in most historical periods.
http://research.stlouisfed.org/fred2/series/INDPRO
We just do it more efficiently, resulting in fewer manufacturing jobs.
http://research.stlouisfed.org/fred2/series/MANEMP
Not really.
http://www.ourfuture.org/blog-entry/2010020825/no-virginia-u...
Manufacturing output is up and has increased at a relatively stable clip over the past 50 years. Manufacturing productivity has increased at a faster rate, however.
http://www.ourfuture.org/blog-entry/2010020825/no-virginia-u...
Manufacturing output is up and has increased at a relatively stable clip over the past 50 years. Manufacturing productivity has increased at a faster rate, however.
More data: http://en.wikipedia.org/wiki/List_of_countries_by_exports
The US is the #3 country in terms of exports.
The US is the #3 country in terms of exports.
http://en.wikipedia.org/wiki/List_of_countries_by_current_ac...
Scroll all the way to the bottom.
Scroll all the way to the bottom.
What does that have to do with anything?
Short version: We buy more than we sell. Wealth is being transferred out.
Long version: It means we import way more than we export... In other words, we buy from others a lot more than we sell to others. In theory, this would create a strong downward pressure on US dollar, but as it is the reserve currency of the world and is backed by giant consumer economy that everyone is selling into, as well as US military might, the pressure is negated.
Some economists argue that this is extremely unhealthy and is unsustainable. I'm not qualified to say if it's true or not. One thing I would say, is look at most countries with a huge positive balance - most are oil producers or cheap(er) labor sources for less skilled stuff. Notable exceptions here is Germany. In fact, Germany is very luck that the rest of Euro zone likes to spend profusely. If not for those other countries dragging the Euro down, their currency would have appreciated exponentially, making their exports way too expensive.
Long version: It means we import way more than we export... In other words, we buy from others a lot more than we sell to others. In theory, this would create a strong downward pressure on US dollar, but as it is the reserve currency of the world and is backed by giant consumer economy that everyone is selling into, as well as US military might, the pressure is negated.
Some economists argue that this is extremely unhealthy and is unsustainable. I'm not qualified to say if it's true or not. One thing I would say, is look at most countries with a huge positive balance - most are oil producers or cheap(er) labor sources for less skilled stuff. Notable exceptions here is Germany. In fact, Germany is very luck that the rest of Euro zone likes to spend profusely. If not for those other countries dragging the Euro down, their currency would have appreciated exponentially, making their exports way too expensive.
Wealth is being transferred in - it is money that is being transferred out. The net result is that we are trading China some green pieces of paper for flat screen TV's.
I like my Chinese-made laptop more than green pieces of paper, so it sounds like a win to me.
I like my Chinese-made laptop more than green pieces of paper, so it sounds like a win to me.
Unfortunately, on the macro-scale, we've run out of green pieces of paper and are actually just issuing them IOUs at a higher value than the cost of the goods.
In layman's terms, we're cashing out our hard-earned savings for meaningless, disposable trinkets. It isn't going to last, and when it's over, it's going to _hurt_.
In layman's terms, we're cashing out our hard-earned savings for meaningless, disposable trinkets. It isn't going to last, and when it's over, it's going to _hurt_.
[deleted]
I like my Chinese-made laptop more than green pieces of paper, so it sounds like a win to me.
That's all well and good until the Chinese have all your green pieces of paper, and all you have to eat is your laptop.
That's all well and good until the Chinese have all your green pieces of paper, and all you have to eat is your laptop.
"The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn."
This makes just about as much sense as a similar statement does 100 years ago:
"The sad fact is that America is no longer a country of farmers producing food, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn."
A service economy and relative decline of manufacturing output (NOTE: I said relative - manufacturing output is at an all time high) is something to be celebrated, not bemoaned.
This makes just about as much sense as a similar statement does 100 years ago:
"The sad fact is that America is no longer a country of farmers producing food, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn."
A service economy and relative decline of manufacturing output (NOTE: I said relative - manufacturing output is at an all time high) is something to be celebrated, not bemoaned.
Except that productivity and GDP have been rising as steadily as ever. The wealth is there; it's just being entirely captured by the wealthiest citizens.
GDP is currently less than 2%. It is every decreasing for this decade and especially in last few years. Not sure where you are getting your numbers from.
[deleted]
It's not even investment banking anymore, GS might as well just be a prop trading firm - how many companies are raising cash now or doing private placements.
I know this is wealth and not income, but I get sick of the media (and politicians) using the "top 1%" or "top 5%" label.
When it comes to income, the top 1% includes an attorney making $250K and a hedge fund manager making $10M. I imagine its similar for wealth. My guess is that distribution curves spike somewhere past the 1% mark.
Maybe I'm biased because I barely make the cut and don't want to pay more taxes, but it seems odd to use such an arbitrary cutoff for reporting and (especially) policy decisions.
And please tell me if I'm wrong or off here–I'm geniunely interested in this.
EDIT: downvoted? Seriously?
When it comes to income, the top 1% includes an attorney making $250K and a hedge fund manager making $10M. I imagine its similar for wealth. My guess is that distribution curves spike somewhere past the 1% mark.
Maybe I'm biased because I barely make the cut and don't want to pay more taxes, but it seems odd to use such an arbitrary cutoff for reporting and (especially) policy decisions.
And please tell me if I'm wrong or off here–I'm geniunely interested in this.
EDIT: downvoted? Seriously?
I think one of the problems of wealth distribution and attitudes about it in the U.S. is that it does shoot up so rapidly in the upper 1%. We're a very upward-looking society so it's easy for someone making $250K a year to say "I'm not rich, I still have a mortgage, I have to work for a living I can't just spend whatever I want, whenever I want -- I know there are people further up the latter than me who have so much more money, I must be middle class."
Absolute percentiles are useful because they do show you where you stand in relation to the rest of society. Families making $250K may not be Scrooge McDuck-style super-rich, but they're indisputably in the top few percent of the nation in terms of income. It's hard for those folks to claim to be middle class when 90+ percent of their fellow citizens make less.
It's also worth noting that people's lifestyles and "necessities" expand to fit their income, particularly if their income goes up relatively gradually. I've literally heard people say, "Well, I make $400K a year but I'm not rich because it costs a lot of money to pay mortgage and taxes in Westchester County and send my kids to private school and drive a nice car." They think that "rich" means "disposable income I can spend a whim," when in fact living in Westchester and sending the kids to private school is part of being rich.
Absolute percentiles are useful because they do show you where you stand in relation to the rest of society. Families making $250K may not be Scrooge McDuck-style super-rich, but they're indisputably in the top few percent of the nation in terms of income. It's hard for those folks to claim to be middle class when 90+ percent of their fellow citizens make less.
It's also worth noting that people's lifestyles and "necessities" expand to fit their income, particularly if their income goes up relatively gradually. I've literally heard people say, "Well, I make $400K a year but I'm not rich because it costs a lot of money to pay mortgage and taxes in Westchester County and send my kids to private school and drive a nice car." They think that "rich" means "disposable income I can spend a whim," when in fact living in Westchester and sending the kids to private school is part of being rich.
I should add that I'm not definitely not exempting myself from this set of attitudes. When I was in grad school in my early 20s (in the mid-late '90s, so it's not like inflation makes a huge difference here) I made less than $17K a year for several years, but I never felt particularly deprived and don't particularly recall not doing things I wanted to do because of money worries. Now my wife and I make more than $100K combined (putting us in the top 25 percent of US workers) and yet we are constantly bumping up against the limits of our income, particularly because we enjoy travelling. I don't feel rich but I know I'm better off than a significant majority of Americans.
If you only barely make the cut, you'll only be paying barely more in taxes. Only your income above the cut is taxed at the higher rate. It's not like if you make $239,999 and you get one more dollar in income you lose money. Only that dollar is taxed at the higher rate.
This isn't something that's communicated very well in our society. I didn't realize it until I actually did the math on the tax tables.
It's not about being communicated imo, it's about most people not being numerically literate enough to be able to understand (not saying you aren't, just in general). I'm convinced that more than half of the population simply isn't capable of truly understanding progressive taxation, just like they cannot comprehend time value of money or similar things. When you spell it out on a sheet of paper most people will say 'oh yeah', but they cannot really internalize it, and never will.
Of course this is a problem, because how can you expect people to abide by law they cannot understand? Worse, how can you communicate to people that they're incapable of understanding without being (or even just 'coming across as') condescending? I don't know, I don't have an answer. But when people like this: http://www.nytimes.com/2009/05/03/magazine/03european-t.html... show being absolutely oblivious to the mechanism (people who are for the rest presumably quite intelligent, and who - professionally - spend quite a bit of time on a piece like this), how can we expect the average citizen to really understand?
I guess it's a recent problem too - just 50 years ago people just listened to their banker about financial things and their doctor on medical things, and believed whatever they said, but we've long passed that point.
Of course this is a problem, because how can you expect people to abide by law they cannot understand? Worse, how can you communicate to people that they're incapable of understanding without being (or even just 'coming across as') condescending? I don't know, I don't have an answer. But when people like this: http://www.nytimes.com/2009/05/03/magazine/03european-t.html... show being absolutely oblivious to the mechanism (people who are for the rest presumably quite intelligent, and who - professionally - spend quite a bit of time on a piece like this), how can we expect the average citizen to really understand?
I guess it's a recent problem too - just 50 years ago people just listened to their banker about financial things and their doctor on medical things, and believed whatever they said, but we've long passed that point.
Yes, once I thought about it I had a greater appreciation for the "This isn't class warfare, it's math" Obama quote that's being tossed around.
[deleted]
It really blows my mind how many people don't understand our progressive tax system. Especially someone making 250k+...
Income distribution is relatively uniform - there are no "spikes" - but it is uniform according to a power law distribution[1][2]. Due to the uniformity practically every division could be called "arbitrary."
[1]http://en.wikipedia.org/wiki/Pareto_distribution [2]Unless you look at the bottom end where you may find welfare trap effects http://en.wikipedia.org/wiki/Welfare_trap
[1]http://en.wikipedia.org/wiki/Pareto_distribution [2]Unless you look at the bottom end where you may find welfare trap effects http://en.wikipedia.org/wiki/Welfare_trap
Although income (and wealth) distributions are pretty smooth in dollar terms, there's an extreme social stratification somewhere in the the top 1%. The lower half of the top 1% consists of doctors, lawyers, managers, and successful small business owners. The upper half (or upper .1%, or upper .01%) form a very different group.
http://news.ycombinator.com/item?id=2844059
http://news.ycombinator.com/item?id=2844059
If you barely make the cut you would only be paying taxes on a very small portion of your entire income.
top 5% you are earning more than 95% of society... you are rich (relative to the rest of society). Stop complaining, and pay more taxes.
I initially dismissed your comment, but I think I'll counter it instead and see if you have any actual reasoning behind it.
I don't disagree with your first 2 statements. Here's my beef with "pay more taxes":
- The top 5% of earners already pay 53% of the nation's income tax revenue. The top 1% pay 33% of it. Exactly how much would you like it to be?
- Those in the top 5% are in a higher tax bracket already (usually 33 or 35%).
- 40-50% of americans pay no federal income tax (only payroll tax) and 10% receive more cash from the IRS than they contribute in federal income taxes and payroll taxes.
So, please, tell me what those in the top 1%/5% should be paying?
I don't disagree with your first 2 statements. Here's my beef with "pay more taxes":
- The top 5% of earners already pay 53% of the nation's income tax revenue. The top 1% pay 33% of it. Exactly how much would you like it to be?
- Those in the top 5% are in a higher tax bracket already (usually 33 or 35%).
- 40-50% of americans pay no federal income tax (only payroll tax) and 10% receive more cash from the IRS than they contribute in federal income taxes and payroll taxes.
So, please, tell me what those in the top 1%/5% should be paying?
What you miss is that income taxes are a small fraction of the total for the non-rich, and almost everything for the rich. Total taxes as a fraction of income are fairly flat by quintile, dropping for the very rich (multi-millionaires and billionaires, who pay lawyers and acocunts to have income transmuted into capital gains, taxed at 15%). http://www.ctj.org/pdf/taxday2010.pdf
You miss this point because the mendacity is useful to the very rich, who pay their henchmen in Congress and the Murdoch media companies to repeat it endlessly.
You miss this point because the mendacity is useful to the very rich, who pay their henchmen in Congress and the Murdoch media companies to repeat it endlessly.
The top earners pay the majority because they're earning the vast vast majority of money and are increasing that majority share at a rapidly increasing rate. It's common sense that pretty much how ever you tax it, whoever controls 80% or more of the wealth will end up bearing the brunt of taxes as well.
Add the fact that most of the whales out there pay a much lower marginal rate than you or I makes it all the more impressive that they carry so much of the load. It's a stark sign of the disparity.
Add the fact that most of the whales out there pay a much lower marginal rate than you or I makes it all the more impressive that they carry so much of the load. It's a stark sign of the disparity.
I'll take the slightly more extreme point of view (that will probably be shot down as "pinko-commie bullshit")
You should pay as much tax as is required to lift the rest of society to (or close to) your level (of lifestyle/income etc). (obviously "your level" will decrease as you pay more tax).
That's the IDEAL it is of course highly impractical. Most ideals are. :(
Just because you got given awesome opportunities (good school, good family, good race, good society, whatever) and even if you worked really hard, doesn't mean you deserve to hold disproportionate amounts of wealth compared to those that didn't get those things.
You should pay as much tax as is required to lift the rest of society to (or close to) your level (of lifestyle/income etc). (obviously "your level" will decrease as you pay more tax).
That's the IDEAL it is of course highly impractical. Most ideals are. :(
Just because you got given awesome opportunities (good school, good family, good race, good society, whatever) and even if you worked really hard, doesn't mean you deserve to hold disproportionate amounts of wealth compared to those that didn't get those things.
I'm actually with you more than you'd think ... but here's where I get hung up ...
I have a friend who is roughly the same age as me, same race (white), parents were the same class, and we grew up < 3 miles from each other. Yet he is the laziest eff'ing slob I know. His wife works part-time, he collects unemployment and makes no attempt to train or find a job. They live in subsidized housing and make ends meet via welfare and taking advantage of others' charity.
I'm curious how you argue that all of society (including people like this) should have their lifestyle increase in perpetuity.
I have a friend who is roughly the same age as me, same race (white), parents were the same class, and we grew up < 3 miles from each other. Yet he is the laziest eff'ing slob I know. His wife works part-time, he collects unemployment and makes no attempt to train or find a job. They live in subsidized housing and make ends meet via welfare and taking advantage of others' charity.
I'm curious how you argue that all of society (including people like this) should have their lifestyle increase in perpetuity.
I (being optimistic) would like to believe most people want to be productive. So as long as you make it 'easy' to be productive, then the problem should be minimal.
You can always find fringe cases where people are undeserving and insulting to a particular system. But the system shouldn't be defined by the few.
For every one person you find, who is a lazy slob, I bet I can find three people who want to work, want to make something of it but just don't have the means to get out of the rut they are in. (presumptuous I know, and I can't really back this up, but I'd like to believe it is true).
You can always find fringe cases where people are undeserving and insulting to a particular system. But the system shouldn't be defined by the few.
For every one person you find, who is a lazy slob, I bet I can find three people who want to work, want to make something of it but just don't have the means to get out of the rut they are in. (presumptuous I know, and I can't really back this up, but I'd like to believe it is true).
So basically you are basing your proposition of robbing the people who have made wealth for themselves on your really wanting to believe that most people would want to be productive? Isn't that, how shall I say it, rather strange? Because for your assertion that those who want to be productive outnumber slobs 3:1, I'll posit the exact opposite.
> ...robbing the people who have made the wealth wealth for themselves...
How about I flip that then, the wealthy robbed the people to generate their wealth, and then complain when they have to give (some of) it back.
It is very rare to find a company that isn't exploiting someone along the chain in order to generate that wealth. Of course capitalism renames it to "surplus value", but it is in fact exploitation (people being paid less than the value they add).
Do you really think an individual is responsible for all wealth they generate? So, if Steve Jobs was born in china, and lived through the cultural revolution, he would have still built Apple (or equivalent) and been the success he is today. Because society and the services around him had nothing to do with his success?
People don't generate wealth for themselves, they capitalise on opportunities provided to them. The U.S provided a lot of opportunities to a minority of people, who then capitalised on it. But their wealth wouldn't exist without the opportunities being available and thus they should pay tax (proportional to the amount of wealth they have generated) so that the U.S (government) can provide more opportunities to more people.
How about I flip that then, the wealthy robbed the people to generate their wealth, and then complain when they have to give (some of) it back.
It is very rare to find a company that isn't exploiting someone along the chain in order to generate that wealth. Of course capitalism renames it to "surplus value", but it is in fact exploitation (people being paid less than the value they add).
Do you really think an individual is responsible for all wealth they generate? So, if Steve Jobs was born in china, and lived through the cultural revolution, he would have still built Apple (or equivalent) and been the success he is today. Because society and the services around him had nothing to do with his success?
People don't generate wealth for themselves, they capitalise on opportunities provided to them. The U.S provided a lot of opportunities to a minority of people, who then capitalised on it. But their wealth wouldn't exist without the opportunities being available and thus they should pay tax (proportional to the amount of wealth they have generated) so that the U.S (government) can provide more opportunities to more people.
It's not a perfect system, but I'd rather subsidize a few bums like your friend and also subsidize people who really do need welfare / disability / unemployment.
The good news for is that a standout non-lazy person will raise much more revenue than a stand-out leach will be able to take.
The good news for is that a standout non-lazy person will raise much more revenue than a stand-out leach will be able to take.
I am going to argue for as a straw man...
If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally. I would argue equally means normalizing their income against their position on the income scale so the taxes "hurt" them the same as it they "hurt" everyone else.
It is well known that 10% of the income of someone below the poverty line is a serious hardship, but 10% in the top 1% of earners is not (although it still hurts). If you normalize the taxes based on the income distribution you can cause the amount of economic "hurt" to be equalized across society. This means that the top %1 will pay much more in taxes than perhaps the bottom 90% or even 95%. However, the "hurt" they endure will be equal.
If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally. I would argue equally means normalizing their income against their position on the income scale so the taxes "hurt" them the same as it they "hurt" everyone else.
It is well known that 10% of the income of someone below the poverty line is a serious hardship, but 10% in the top 1% of earners is not (although it still hurts). If you normalize the taxes based on the income distribution you can cause the amount of economic "hurt" to be equalized across society. This means that the top %1 will pay much more in taxes than perhaps the bottom 90% or even 95%. However, the "hurt" they endure will be equal.
No, you misunderstand the 'created equally' argument. It doesn't mean everybody should get the same, it means that no legislation should discriminate between people. More technically, the 'created equally' refers to negative liberties and negative rights, not to somebody else's obligation to do something to create an artificial equality.
(note that this is not a matter of argument - this is quite clearly settled. Of course you could question if it should be like this, and if we shouldn't change the meaning of 'equal' into more positive rights ('affirmative action' etc); I'm not so much interested in debating that. I'm just pointing out that for broadly-accepted definitions of the terms you use, your argument is flawed).
(note that this is not a matter of argument - this is quite clearly settled. Of course you could question if it should be like this, and if we shouldn't change the meaning of 'equal' into more positive rights ('affirmative action' etc); I'm not so much interested in debating that. I'm just pointing out that for broadly-accepted definitions of the terms you use, your argument is flawed).
First, I'm doubtful that a family at the poverty line ($22K for a family of 4) pays 10% in income tax. I could be wrong, however.
>> If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally.
On this, I'm not sure how you can come to that conclusion. I'm assuming (possibly wrongly) that you're referring to the DOI, which states:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
This seems to refer to equal starting points, equal liberties, and equal opportunities–not equal amounts of wealth or income throughout life. I think "pursuit" is a key word here. We should all be free to pursue what makes us happy, but there are no rights or guarantees that we will get it.
>> If you believe theologically, ideologically, or otherwise that "all men (and women!) are created equal" then it follows they should pay equally.
On this, I'm not sure how you can come to that conclusion. I'm assuming (possibly wrongly) that you're referring to the DOI, which states:
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
This seems to refer to equal starting points, equal liberties, and equal opportunities–not equal amounts of wealth or income throughout life. I think "pursuit" is a key word here. We should all be free to pursue what makes us happy, but there are no rights or guarantees that we will get it.
> This seems to refer to equal starting points, equal liberties, and equal opportunities
So you are saying all americans have equal starting points/liberties/opportunities?
So you are saying all americans have equal starting points/liberties/opportunities?
No, I'm saying that's the spirit of that sentence as I interpret it. Based on that I don't think you can conclude everyone deserves equal wealth.
[deleted]
Upvoted. I disagree with your perspective, but your comments are entirely relevant and appropriate.
Has anyone ever stopped to try to get an estimate of how much of these gains this 5% have created?
I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?
Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.
I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?
Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.
Milton Friedman said that most fallacies in economic thinking were derived from the "fixed pie" assumption: that one party can gain only at the expense of another. In an ideal world, the pie would always be growing, and those marginal increases in utility would spill over and everybody would increase well-being gradually over time.
But that's not what happens.
The top 5 percent may create some gains for the other 95, but their gains that "trickle down" do so very, very selectively, and only go so far. Probably the most obvious evidence that trickle-down economics doesn't work is this:
The share of wealth held by the bottom 60% dropped 7.5%.
When over half of the people are on the shrinking pie side of the table, it's pretty tough to spell "Net win"
But that's not what happens.
The top 5 percent may create some gains for the other 95, but their gains that "trickle down" do so very, very selectively, and only go so far. Probably the most obvious evidence that trickle-down economics doesn't work is this:
The share of wealth held by the bottom 60% dropped 7.5%.
When over half of the people are on the shrinking pie side of the table, it's pretty tough to spell "Net win"
So the pie hasn't grown? I'm serious asking-- I don't know.
It it has, then it COULD be a net win. Example: Pie consists of $100. I (rich guy) have $50, the rest of the folks (5 people) split the other $50, and have $10 apiece. I cleverly invest abroad and double my money. I now have $100. The rest of the folks invest less cleverly, and turn their $10 into $12. Their share of the wealth declines, no?
It it has, then it COULD be a net win. Example: Pie consists of $100. I (rich guy) have $50, the rest of the folks (5 people) split the other $50, and have $10 apiece. I cleverly invest abroad and double my money. I now have $100. The rest of the folks invest less cleverly, and turn their $10 into $12. Their share of the wealth declines, no?
In absolute sense (number of dollars) the pie grows and so does everybody's share in the pie. But you have to take in to account buying power as well and once you do that for lots of people their actual take drops.
But also remember that there are things they can buy now with those dollars (even if they have less of them) that before they just couldn't.
They might be making less inflation adjusted dollars than their parents did in the 70's working at the Ford plant, but how many 1970's dollars did it take to buy an iPad, or laser vision correction, flat screen HD tv, cable with 500 channels etc etc? (1)
Steve Jobs is a billionaire. I make less programming than my dad did at my age as a lowly salesman. But I have so much more. I'm OK with that.
(1) I don't mean what would the inflation adjusted price of the iPad be in 1975 or whatever. I mean all the money in the world in 1975 couldn't have bought even one seeing as how they didn't exist and all. "The Pie" is more than dollars.
They might be making less inflation adjusted dollars than their parents did in the 70's working at the Ford plant, but how many 1970's dollars did it take to buy an iPad, or laser vision correction, flat screen HD tv, cable with 500 channels etc etc? (1)
Steve Jobs is a billionaire. I make less programming than my dad did at my age as a lowly salesman. But I have so much more. I'm OK with that.
(1) I don't mean what would the inflation adjusted price of the iPad be in 1975 or whatever. I mean all the money in the world in 1975 couldn't have bought even one seeing as how they didn't exist and all. "The Pie" is more than dollars.
The key word here is share.
I.e., if I become 10% richer, but some other guy becomes 20% richer, my share of the wealth is lower but I'm still wealthier.
I.e., if I become 10% richer, but some other guy becomes 20% richer, my share of the wealth is lower but I'm still wealthier.
This depends on what I'm trying to buy; if I'm having to spend a lot of money on buying positional goods, I'm not wealthier.
Before anyone assumes that 'positional goods' means "biggest house on the block" or "huge speedboat", I might point out that "a house to rent/buy in a high school district that doesn't completely suck" and "time with a competent doctor" are a couple examples of de facto positional goods.
I'm aware that we could see a big increase in the supply of that latter in theory, of course... but I'd be willing to bet that it'll be quite likely to see big-screen TV halve in price in the next 5 years, or a mid-market car add most of the features of a 2011 luxury car by 2016, etc. I'd also bet that the relative pricing of good educating, lawyering or doctoring goes up in the same time frame, even taking into account innovations in these spaces (Khan academy, do-it-yourself legal stuff, ...)
Before anyone assumes that 'positional goods' means "biggest house on the block" or "huge speedboat", I might point out that "a house to rent/buy in a high school district that doesn't completely suck" and "time with a competent doctor" are a couple examples of de facto positional goods.
I'm aware that we could see a big increase in the supply of that latter in theory, of course... but I'd be willing to bet that it'll be quite likely to see big-screen TV halve in price in the next 5 years, or a mid-market car add most of the features of a 2011 luxury car by 2016, etc. I'd also bet that the relative pricing of good educating, lawyering or doctoring goes up in the same time frame, even taking into account innovations in these spaces (Khan academy, do-it-yourself legal stuff, ...)
For positional goods, it doesn't matter much what happens to the share of the wealth held by the bottom 10%.
Distribution of positional goods is determined primarily by position - the bottom 10% are always stuck in last place for positional goods. There is nothing you can do about that short of making everyone's wealth identically equal.
Distribution of positional goods is determined primarily by position - the bottom 10% are always stuck in last place for positional goods. There is nothing you can do about that short of making everyone's wealth identically equal.
> Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.
IANAE, but I don't think wealth creation works like that (the Randian hero as the engine of humanity). I'm inclined to think that parents are the greatest wealth creators, followed by teachers
http://economix.blogs.nytimes.com/2010/05/21/who-creates-the...
IANAE, but I don't think wealth creation works like that (the Randian hero as the engine of humanity). I'm inclined to think that parents are the greatest wealth creators, followed by teachers
http://economix.blogs.nytimes.com/2010/05/21/who-creates-the...
Yes. The Fed has spend 30 years ensuring that labor never has the upper hand: http://thinkprogress.org/yglesias/2011/09/14/319359/how-asym...
http://rortybomb.wordpress.com/2011/03/18/the-federal-reserv...
WRT manufacturing: http://rortybomb.wordpress.com/2011/01/21/immelt-ge-capital-...
http://rortybomb.wordpress.com/2011/03/18/the-federal-reserv...
WRT manufacturing: http://rortybomb.wordpress.com/2011/01/21/immelt-ge-capital-...
I usually defend capitalism, and I read and mostly agreed with PGs wealth essay. But having seen pictures of how the poor live in the US (I am not from the US), this just feels wrong. How much wealth do you really need? It is one thing if everybody lives a happy live, and some people live in slightly bigger houses by the seaside. It is another if lots of people live in squalor at the same time.
I think some things should be rewarded. If you find a cure for cancer, you deserve to be rich. But even then, maybe a couple of million $ would be enough, even if what you gave to society is worth trillions. Perhaps related: Joel Spolsky's article on how to compensate an intern who created a lot of value for the company. Can't find the article atm, but I think he ended up giving hardly anything. Cancer researchers are just interns of society, when seen from space.
I think some things should be rewarded. If you find a cure for cancer, you deserve to be rich. But even then, maybe a couple of million $ would be enough, even if what you gave to society is worth trillions. Perhaps related: Joel Spolsky's article on how to compensate an intern who created a lot of value for the company. Can't find the article atm, but I think he ended up giving hardly anything. Cancer researchers are just interns of society, when seen from space.
I agree with your sentiment but ask how questions such as "how much is enough" can be answered? I could imagine an arrangement analogous to "floating currency rates" where you define a band within which the market price can fluctuate. Progressive taxation coupled with social safety net can have this effect if taken to its combined extreme. But how realistic is that sort of thing in today's monetized society?
On a tangent, I find it curious how we all seem to have been brainwashed somehow into taking certain assumptions _automatically_ for valid that then frame the entire discussion.
I mean, where does the connection between "what you gave to society" and your financial profit come from? It's not at all clear to me, on second thought, that they are connected so closely. Also, what exactly does it mean to "give to society" when your (more neutrally formulated) net effect on your environment is determined not just by "effort" but also by randomness and by the very environment you interact with? Finally, it's not clear to me that everything can be quantified (in the special sense of putting a competitive market value on it). The concept of value is, I suspect, a strict superset of "monetary value", and it's important we understand (as a society) better what are the special conditions under which a mapping to "money space" makes sense.
Big, hairy questions, sure, but to give a concrete example for the last one: Since when does it make sense that the "performance" of museums or orchestras is measured in how much tickets they sell? (Incidentally, see how far today's terminology is off?) Yes, I can't pull a better answer out of my hat right now but I _am_ quite sure this question itself is framed in the wrong way because we already presuppose the applicability of concepts like "competitive exchange" and "valuation".
Don't get me wrong, I'm a big believer in competitive markets, private property and responsibility, and entrepreneurship. The thing is, I feel more and more that this type of thinking can only be applied to a subset of political issues, it is not a universal acid. And I just got reminded of how deep these issues are because even in your post, which goes generally in the same direction I am currently thinking, I can see certain ideas "embedded" already.
On a tangent, I find it curious how we all seem to have been brainwashed somehow into taking certain assumptions _automatically_ for valid that then frame the entire discussion.
I mean, where does the connection between "what you gave to society" and your financial profit come from? It's not at all clear to me, on second thought, that they are connected so closely. Also, what exactly does it mean to "give to society" when your (more neutrally formulated) net effect on your environment is determined not just by "effort" but also by randomness and by the very environment you interact with? Finally, it's not clear to me that everything can be quantified (in the special sense of putting a competitive market value on it). The concept of value is, I suspect, a strict superset of "monetary value", and it's important we understand (as a society) better what are the special conditions under which a mapping to "money space" makes sense.
Big, hairy questions, sure, but to give a concrete example for the last one: Since when does it make sense that the "performance" of museums or orchestras is measured in how much tickets they sell? (Incidentally, see how far today's terminology is off?) Yes, I can't pull a better answer out of my hat right now but I _am_ quite sure this question itself is framed in the wrong way because we already presuppose the applicability of concepts like "competitive exchange" and "valuation".
Don't get me wrong, I'm a big believer in competitive markets, private property and responsibility, and entrepreneurship. The thing is, I feel more and more that this type of thinking can only be applied to a subset of political issues, it is not a universal acid. And I just got reminded of how deep these issues are because even in your post, which goes generally in the same direction I am currently thinking, I can see certain ideas "embedded" already.
I'd be interested to know where you saw these "pictures".
There's a group of people who like to paint the picture that the US is devolving in to a Dickensian nightmare. There is always room for improvement, but as someone who lives here and has traveled extensively I don't think you can say that "lots of people live in squalor".
Sure, we have 300+ million people, so you can find people who are homeless and living on the street, but that would still be the case even if the government offered unlimited free housing.
There's a group of people who like to paint the picture that the US is devolving in to a Dickensian nightmare. There is always room for improvement, but as someone who lives here and has traveled extensively I don't think you can say that "lots of people live in squalor".
Sure, we have 300+ million people, so you can find people who are homeless and living on the street, but that would still be the case even if the government offered unlimited free housing.
I saw them on German TV, and OK, maybe also in Michael Moore's movie (not sure, I watched it recently but I am foggy about the details). For example there are pictures of the tent cities that emerge.
To be honest lots of stories from the USA sound disturbing, but then again I can not claim to know every corner of Germany. Perhaps there are lots of people living in squalor here, too.
To be honest lots of stories from the USA sound disturbing, but then again I can not claim to know every corner of Germany. Perhaps there are lots of people living in squalor here, too.
I have traveled very extensively through the US (still, there are plenty of places I haven't been). From my experience, you'd have to look very hard to find what I'd classify as a tent city.
That being said I know where one is and I've been there working with a local church organization. It's in the woods behind a local shopping center, and at any given time there are about 15-20 people living there.
The church helps out the best they can, but the vast majority of the men living there wouldn't leave if they were offered free housing. Most of them have mental issues, and the only way to really get them out would be involuntary commitment.
In short, it's ridiculous to find a tent city somewhere, film it, and use it to claim that America is devolving into Calcutta.
That being said I know where one is and I've been there working with a local church organization. It's in the woods behind a local shopping center, and at any given time there are about 15-20 people living there.
The church helps out the best they can, but the vast majority of the men living there wouldn't leave if they were offered free housing. Most of them have mental issues, and the only way to really get them out would be involuntary commitment.
In short, it's ridiculous to find a tent city somewhere, film it, and use it to claim that America is devolving into Calcutta.
It's not devolving into Calcutta for sure, but certainly a nation with the wealth that we have can (and I'd argue should) provide a much higher standard of living for the members of society on the lowest rung of the ladder. If not by direct assistance then by structuring society so that the people at the bottom don't bare an unreasonable amount of the burden. (I'm thinking restructuring payroll taxes, tax vouchers for necessities, etc.)
I am not sure if I trust your research. How have you traveled - did you seek out poor places? I don't think tent cities emerge at the typical tourist locations.
Are you saying that there is no problem in the USA, no financial crisis etc? Because I have been hearing other things - but I know the media likes to hype, too...
Are you saying that there is no problem in the USA, no financial crisis etc? Because I have been hearing other things - but I know the media likes to hype, too...
Yes, plenty of the places I've gone have been by plane, to tourist locations. However, I've travelled extensively by car throughout the middle to lower sections of Georgia and Alabama (fairly poor areas).
I'm fascinated with how technology has changed rural life, so I like to visit small towns just to observe. For instance 10 years ago I noticed fairly substantial differences in the way teenagers from rural areas dressed compared to suburban teenagers (i was a suburban teenager at the time). Now the differences, in apparel are closing rapidly. Also, when I was a kid and the Nintendo 64 came out but everyone was out of stock. All you had to do was drive to some small town (Hazlehurst, GA) Walmart to find one. Now because everyone is so connected, that same Walmart had a line out the door on the day the PS3 was released.
I'm also the type of person who likes to go to a city with no plan in mind and just wing it. A few friends and I, went to New Orleans about 2 years after Katrina, we got a hotel near Bourbon Street, but we spent most of our time just walking. We walked for miles, covered a huge part of the city, and definitely ended up in some places where we probably shouldn't have gone.
In summary, yes I've definitely been in places where one would expect to find tent cities.
I'm not saying they don't exist, but if you do find one, it's likely to be just a handfull of people living in the woods, not what I'd really call a "tent city."
Also there is a problem in the US, there is a financial crisis, but the average person gets up everyday and goes to work. They may be worried about the economy, but no more than the other stuff the 24 hour news warns them about (you know--child murderers, plagues, terrorists etc...)
I'm fascinated with how technology has changed rural life, so I like to visit small towns just to observe. For instance 10 years ago I noticed fairly substantial differences in the way teenagers from rural areas dressed compared to suburban teenagers (i was a suburban teenager at the time). Now the differences, in apparel are closing rapidly. Also, when I was a kid and the Nintendo 64 came out but everyone was out of stock. All you had to do was drive to some small town (Hazlehurst, GA) Walmart to find one. Now because everyone is so connected, that same Walmart had a line out the door on the day the PS3 was released.
I'm also the type of person who likes to go to a city with no plan in mind and just wing it. A few friends and I, went to New Orleans about 2 years after Katrina, we got a hotel near Bourbon Street, but we spent most of our time just walking. We walked for miles, covered a huge part of the city, and definitely ended up in some places where we probably shouldn't have gone.
In summary, yes I've definitely been in places where one would expect to find tent cities.
I'm not saying they don't exist, but if you do find one, it's likely to be just a handfull of people living in the woods, not what I'd really call a "tent city."
Also there is a problem in the US, there is a financial crisis, but the average person gets up everyday and goes to work. They may be worried about the economy, but no more than the other stuff the 24 hour news warns them about (you know--child murderers, plagues, terrorists etc...)
Most of the US wealth is ephemeral and is tied up to the real estate market. The poorer one is, the greater proportion of personal wealth is tied up to the value of their real estate.
If you started off wealthy before the real estate crisis, and just stayed in cash, your wealth in absolute terms would decline slightly as your house lost value and your super-conservative cash holdings earned you 0%.
In relative terms the guy who bought with no money down, easy mortgage guaranteed is now seeing his total wealth delta in severe red, so yeah, the wealthy ones are seeing their proportion rise by staying stable.
If you started off wealthy before the real estate crisis, and just stayed in cash, your wealth in absolute terms would decline slightly as your house lost value and your super-conservative cash holdings earned you 0%.
In relative terms the guy who bought with no money down, easy mortgage guaranteed is now seeing his total wealth delta in severe red, so yeah, the wealthy ones are seeing their proportion rise by staying stable.
Before jumping all over the rich, consider whether you are one. For example, if you earn $100k or more per year, you are IN the top 5% of income earners. And if you have a total net worth of ~$200k or more, you are IN the wealthiest top 5%. Easy to imagine that many HN readers are in these boats.
Not even close. A $100,000 income puts you at about the 75th percentile, not the 95th.
http://en.wikipedia.org/wiki/File:United_States_Income_Distr...
http://en.wikipedia.org/wiki/File:United_States_Income_Distr...
That's household income, not individual.
$100,000 or more; percent in group: 6.24%
http://en.wikipedia.org/wiki/Personal_income_in_the_United_S...
$100,000 or more; percent in group: 6.24%
http://en.wikipedia.org/wiki/Personal_income_in_the_United_S...
As the legend states, the graph shows family income not individual income. If you and your spouse both earn $100k, you'd be above the 95th percentile.
Ahh, if only i didn't have an english major for a live in girlfriend.You bet we are. But it doesn't necessarily follow that we think that the disproportion is a good thing.
Not picking on this article in particular but whenever I read these types of stories I get the feeling that people don't make a clear separation of these two very different issues:
1. The bottom is worse off relative to the top in terms of wealth than they were before.
2. The bottom is worse off in terms of wealth (quality of life) than they were before.
People seem to imply 2 when they talk about 1. but they are very different things.
1. The bottom is worse off relative to the top in terms of wealth than they were before.
2. The bottom is worse off in terms of wealth (quality of life) than they were before.
People seem to imply 2 when they talk about 1. but they are very different things.
"A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president"
http://www.newyorker.com/online/blogs/johncassidy/2011/09/po...
(More to the discussion in the article, ) As long as we continue to structure tax cuts as we do, and as long as an attempt to get the wealthiest top percentages to pay at least as much as the middle class in taxes (on a percentage basis, mind you) is called "class warfare" by the GOP, it's not likely to change (the response to the "Buffet clause" in the last two days or so). It's not hard to understand how our politician's priorities influence the outcome embodied by the title of this post...
http://www.newyorker.com/online/blogs/johncassidy/2011/09/po...
(More to the discussion in the article, ) As long as we continue to structure tax cuts as we do, and as long as an attempt to get the wealthiest top percentages to pay at least as much as the middle class in taxes (on a percentage basis, mind you) is called "class warfare" by the GOP, it's not likely to change (the response to the "Buffet clause" in the last two days or so). It's not hard to understand how our politician's priorities influence the outcome embodied by the title of this post...
A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president
Which just means that income is an inadequate measurement. How many Americans would prefer to live in 1975 than today?
Which just means that income is an inadequate measurement. How many Americans would prefer to live in 1975 than today?
It is my understanding, citation needed perhaps, that over all cost of living was lower in 75. So perhaps there were no iphones, ssd hard drives, big screen plasma televisions, xboxs, etc. but on a single income (not one of our 100k plus incomes but a regular joe income) you could likely afford a home, a nice car, etc.Probably a few people out there who wouldn't mind having affordable health care.
Affordable health care that doesn't include all of the advances in treatment (procedures, pharmaceuticals, technologies, etc.) that have come about in the past 36 years?
To give an example that affects most people in small ways: in 1975 I would be wearing heavy, uncomfortable glasses all day, and would fully expect to wear dentures after a certain age. Instead, my vision has been corrected to be perfect and I will almost certainly chew my last meal with my own teeth. My Dad had cataract surgery a couple of years ago: the new lenses are so great that he no longer even needs reading glasses. They had cataract surgery in 1975, but not with the kind of results my Dad experienced.
To give an example that affects a smaller number of people in a bigger way: since 1975, survival rates for many types of cancer have increased dramatically. Similar effects for heart disease.
I'm not trying to say that all of the increases in cost of health care are due to increased availability of treatment options, but it's almost certainly a big driver. Would you accept a health care plan that charges 1970s rates (in real dollars) but restricts you to 1970s medicine? If you are young and healthy, it might actually be a good deal, except for the dental plan.
To give an example that affects most people in small ways: in 1975 I would be wearing heavy, uncomfortable glasses all day, and would fully expect to wear dentures after a certain age. Instead, my vision has been corrected to be perfect and I will almost certainly chew my last meal with my own teeth. My Dad had cataract surgery a couple of years ago: the new lenses are so great that he no longer even needs reading glasses. They had cataract surgery in 1975, but not with the kind of results my Dad experienced.
To give an example that affects a smaller number of people in a bigger way: since 1975, survival rates for many types of cancer have increased dramatically. Similar effects for heart disease.
I'm not trying to say that all of the increases in cost of health care are due to increased availability of treatment options, but it's almost certainly a big driver. Would you accept a health care plan that charges 1970s rates (in real dollars) but restricts you to 1970s medicine? If you are young and healthy, it might actually be a good deal, except for the dental plan.
That's not an excuse for radically inflated prices.
I guess I figured in the context of money and wealth that income was a pretty decent measurement. Unless you're talking investments. (But then again, the top 1-5% having huge amounts of their wealth tied in investments is how many manage to pay less taxes than the middle/low class, so I doubt it)
"A typical American male who works full time is earning almost exactly the same as his counterpart was when Nixon was president"
But that's clearly, obviously and without question BULLSHIT (when you look at what you can actually do with that money, rather than just look at inflation-adjusted dollar numbers). A typical American male in that income bracket today has a house that is larger and much more comfortable than back then, has access to a much broader range of food, can communicate with anybody anywhere in the world instantly, carries in his pocket a device to communicate with people he knows in a much more efficient and convenient form than whatever was available 30 years ago, has a higher life expectancy and better access to information (not to mention that the information that is available is vastly more), etc etc.
What would you prefer, being Louis XIV who lived in a castle with no bathrooms (everybody shat where ever they happened to be standing and there were servants to sweep it up) or in the typical house of somebody in the West in the 20th-40th income percentile today (with running, hot water and functioning plumbing, electricity etc?) Or even being an early 20th century rich businessman/socialite in NYC, where the health circumstances even for the very rich were vastly inferior to what is now available to everybody except those at the very bottom of the socio-economic ladder?
But that's clearly, obviously and without question BULLSHIT (when you look at what you can actually do with that money, rather than just look at inflation-adjusted dollar numbers). A typical American male in that income bracket today has a house that is larger and much more comfortable than back then, has access to a much broader range of food, can communicate with anybody anywhere in the world instantly, carries in his pocket a device to communicate with people he knows in a much more efficient and convenient form than whatever was available 30 years ago, has a higher life expectancy and better access to information (not to mention that the information that is available is vastly more), etc etc.
What would you prefer, being Louis XIV who lived in a castle with no bathrooms (everybody shat where ever they happened to be standing and there were servants to sweep it up) or in the typical house of somebody in the West in the 20th-40th income percentile today (with running, hot water and functioning plumbing, electricity etc?) Or even being an early 20th century rich businessman/socialite in NYC, where the health circumstances even for the very rich were vastly inferior to what is now available to everybody except those at the very bottom of the socio-economic ladder?
What is the point of this near-rant? Sure, quality of life, cost of technology and standards of living are different, but that doesn't change the economics of the situation.
Sorry it's such "obvious bullshit" to you.
Sorry it's such "obvious bullshit" to you.
They aren't as different as you think. Even if wages remain the same at the bottom while wealth at the top increases tenfold, the poor are worse off. They are worse off because they will see their political power decrease, especially in a country like America where that is so tied to money, and they are worse off because income disparities decrease quality of life across the board (i.e. for rich and poor alike).
There isn't the clear separation that you are putting forward here.
There isn't the clear separation that you are putting forward here.
I don't disagree with you but I've seen a number of articles that simply present the fact that the top have increased their % and left it at that as proof of something bad happening.
If what you say is true then that is the argument that needs to be made before reaching that conclusion, that's all.
If what you say is true then that is the argument that needs to be made before reaching that conclusion, that's all.
The argument certainly needs to me made, especially coming from the WSJ where a lot of folks that read it may not have heard it.
However I don't think it is so outrageous to point out that the wealthy have increased their wealth considerably while income among the poor has remained stagnant, and then leave it at that. Egalitarian ideals are still alive and well, and you don't have to be particularly leftist to think that huge gaps in wealth allocation are symptoms of a dysfunctional market economy.
This could simply be responsible reporting, with some food for thought but mainly leaving it to the reader to draw his own conclusions.
However I don't think it is so outrageous to point out that the wealthy have increased their wealth considerably while income among the poor has remained stagnant, and then leave it at that. Egalitarian ideals are still alive and well, and you don't have to be particularly leftist to think that huge gaps in wealth allocation are symptoms of a dysfunctional market economy.
This could simply be responsible reporting, with some food for thought but mainly leaving it to the reader to draw his own conclusions.
But it's both, isn't it? Fewer Americans have health coverage, fewer Americans have jobs, fewer Americans can stay in homes. What you hear people saying is that #1 implies #2.
Apart from short term fluctuations during the recession, more Americans own homes and health insurance coverage is roughly the same as it ever was.
http://research.stlouisfed.org/fred2/series/USHOWN
http://en.wikipedia.org/wiki/File:U.S._Uninsured_and_Uninsur...
http://research.stlouisfed.org/fred2/series/USHOWN
http://en.wikipedia.org/wiki/File:U.S._Uninsured_and_Uninsur...
.JPG){kind=link}
What you call "fluctuations" most of us call a downward trend. And the fact that you think that it's "same as it ever was" is somehow a positive thing is somewhat disturbing.
I made no claim that anything is positive or negative, I merely pointed out that you are factually wrong on two of your points.
At a most basic level over the period relative wages for the poor haven't moved a lot but the absolute basics such as food and clothing prices have come down a heap.
What proportion of a person's wage does he spend on e.g. entertainment vs. food and clothing now compared to 40 years ago?
Food 2009: 13% of total expenditure, compared to 15% in 1984
http://www.bls.gov/cex/csxstnd.htm#1984
http://www.bls.gov/cex/csxstnd.htm#1984
Sure, it might if you show the data that proves it.
But showing the data that the top has increased their % share of the wealth does not prove that.
But showing the data that the top has increased their % share of the wealth does not prove that.
It hurts people's innate sense of fairness though. When you see the people who manufactured the crises repleting their losses with money from middle and working class american's it is upsetting and does indicate the system has problems.
Some PG thoughts on distribution of wealth:
http://www.paulgraham.com/gap.html
http://www.paulgraham.com/gap.html
PG asks:
Why? The pattern of variation seems no different than for any other skill. What causes people to react so strongly when the skill is making money?
I'd offer this passage from Robert Wright's The Moral Animal as one answer. This assumes the distribution of wealth serves as a proxy (inexact, even inaccurate, perhaps, but functional) for the distribution of access to sexual resources among males:
Men have long competed for access to the scarcer sexual resource, women. And the costs of losing the contest are so high (genetic oblivion) that natural selection has inclined them to compete with special ferocity.
http://books.google.com/books?id=MuI_DVZ1Xo8C&lpg=PP1...
So the argument goes something like this:
Material resources (wealth) provide access to sexual resources and reproductive success (any organism's raison d'etre). An organism hard-wired to persist its genes will probably also be hardwired to recognize the existential threat presented by unequal access to the resources required to persist its genes and take radical action to avoid it. Since among most animals (including humans), females make a greater biological investment, they enjoy the privilege of selecting among males, preferring those with resources to best provide for their offspring, which puts males in the position of scrabbling to accumulate the resources necessary to win the affections of a mate.
That probably leaves out a few necessary premises, but if you're not familiar with the argument, hopefully you at least get the picture.
Wright makes the point that a society in which there is such radical inequality of wealth that a significant number of men have not the resources to attract a mate, settle down, and marry, also tend to be the most violent and unstable.
If you had a society in which there was radical inequality of wealth, but not radical inequality of access among young males to mates, you would expect less instability. But allowing for the shortcuts in reasoning that evolution might encourage, you'd still expect some. And as various behaviorial economic experiments have demonstrated, humans seem to have a tendency to reason about fairness in relative rather than absolute terms. So in such a society, you'd probably still have a greater threat of instability than one where there was a more equitable distribution of wealth -- and, especially, the perception of it.
Why? The pattern of variation seems no different than for any other skill. What causes people to react so strongly when the skill is making money?
I'd offer this passage from Robert Wright's The Moral Animal as one answer. This assumes the distribution of wealth serves as a proxy (inexact, even inaccurate, perhaps, but functional) for the distribution of access to sexual resources among males:
Men have long competed for access to the scarcer sexual resource, women. And the costs of losing the contest are so high (genetic oblivion) that natural selection has inclined them to compete with special ferocity.
http://books.google.com/books?id=MuI_DVZ1Xo8C&lpg=PP1...
So the argument goes something like this:
Material resources (wealth) provide access to sexual resources and reproductive success (any organism's raison d'etre). An organism hard-wired to persist its genes will probably also be hardwired to recognize the existential threat presented by unequal access to the resources required to persist its genes and take radical action to avoid it. Since among most animals (including humans), females make a greater biological investment, they enjoy the privilege of selecting among males, preferring those with resources to best provide for their offspring, which puts males in the position of scrabbling to accumulate the resources necessary to win the affections of a mate.
That probably leaves out a few necessary premises, but if you're not familiar with the argument, hopefully you at least get the picture.
Wright makes the point that a society in which there is such radical inequality of wealth that a significant number of men have not the resources to attract a mate, settle down, and marry, also tend to be the most violent and unstable.
If you had a society in which there was radical inequality of wealth, but not radical inequality of access among young males to mates, you would expect less instability. But allowing for the shortcuts in reasoning that evolution might encourage, you'd still expect some. And as various behaviorial economic experiments have demonstrated, humans seem to have a tendency to reason about fairness in relative rather than absolute terms. So in such a society, you'd probably still have a greater threat of instability than one where there was a more equitable distribution of wealth -- and, especially, the perception of it.
This is a Beta male view of female sexual selection: "if I can just get rich enough, girls will like me".
The truth is that for the middle class and above, social intelligence, wit, charm, "Game", and other characteristics matter as much, or more, than raw financial net worth. Of course, these are often correlated, but there are plenty of broke bikers, musicians, and womanizers doing quite well too, in comparison to Aspie SW millionaires.
The truth is that for the middle class and above, social intelligence, wit, charm, "Game", and other characteristics matter as much, or more, than raw financial net worth. Of course, these are often correlated, but there are plenty of broke bikers, musicians, and womanizers doing quite well too, in comparison to Aspie SW millionaires.
okay, tax male babies and subsidize female ones. not joking.
I like Paul but this essay is especially simplistic and poorly reasoned.
Wealth != income as pg says in http://www.paulgraham.com/wealth.html.
I think wealth is more equal to total free time left on the planet. So total time minus time spent working to provide things for survival minus time spent surviving (like cooking, sleeping, running from lions). The washing machine is invented, lots of peoples' wealth skyrockets. Food gets cheaper, people's wealth goes up.
Looking at income is a short-sighted definition of wealth.
I think wealth is more equal to total free time left on the planet. So total time minus time spent working to provide things for survival minus time spent surviving (like cooking, sleeping, running from lions). The washing machine is invented, lots of peoples' wealth skyrockets. Food gets cheaper, people's wealth goes up.
Looking at income is a short-sighted definition of wealth.
This is pretty damning when you consider it's being run by the Wall Street Journal.
WSJ, Economist, Forbes, none of these pull punches. You want a stark look at these kind of numbers and the issues around them, they all provide it with no hesitancy or softballing.
Don't be surprised when someone talks about the money they've made. They think they have it rightly, just as many feel slighted. No shame in the game of the wealthy.
Don't be surprised when someone talks about the money they've made. They think they have it rightly, just as many feel slighted. No shame in the game of the wealthy.
Just like it should be. Of all the "mainstream" publications, the financial (and business-oriented) newspapers are the ones I distrust less, because in my experience they tend to understand it is their interest to work with the facts and real numbers.
I supported (absolutely past tense) capitalism on the basis that the right people would end up with the money. Maybe they will. Waiting another 30 years isn't on.
Things shouldn't go to people "according to his need".
But now things are going to people "according INVERSELY to his need".
Endless claim checks on future productivity are being stockpiled by precisely those who have no need of 99% of that productivity. In many cases they also have very little future, because they are old.
Politics is bought and paid for. People will not pay taxes. Inflation must now be used as a regressive wealth tax of last resort. At least it transfers purchasing power from the old to the young.
Poor people should, if they were intelligent, stop spending their disposable income and use it to buy the thing that gives the best return on investment - which is bribing politicians. And no, corporations aren't people, and money isn't speech.
Things shouldn't go to people "according to his need".
But now things are going to people "according INVERSELY to his need".
Endless claim checks on future productivity are being stockpiled by precisely those who have no need of 99% of that productivity. In many cases they also have very little future, because they are old.
Politics is bought and paid for. People will not pay taxes. Inflation must now be used as a regressive wealth tax of last resort. At least it transfers purchasing power from the old to the young.
Poor people should, if they were intelligent, stop spending their disposable income and use it to buy the thing that gives the best return on investment - which is bribing politicians. And no, corporations aren't people, and money isn't speech.
It drives me crazy when I see encoding issues in popular articles. Come on, it�s embarrassing.
Looks like it was composed in Word and copied into a rich text editor (without using the paste from Word feature). It converts the double spaces to space, , and doesn't convert the smart quotes.
I am quite tired reading the top x%.
Many people living in the SF bay area for example technically belong to the richest 3-5%... But cannot even afford a nice house here.
And with "nice" I do not mean a pool, 10 rooms. movie room, etc, but just enough rooms for the kids and in a neighborhood with good schools.
Now I have a very liberal viewpoint, and above categorization mostly fits me. Still I personally do not mind to be taxed a bit higher.
But all that talk about the richest 5% living the life of riches is just not accurate.
Many people living in the SF bay area for example technically belong to the richest 3-5%... But cannot even afford a nice house here.
And with "nice" I do not mean a pool, 10 rooms. movie room, etc, but just enough rooms for the kids and in a neighborhood with good schools.
Now I have a very liberal viewpoint, and above categorization mostly fits me. Still I personally do not mind to be taxed a bit higher.
But all that talk about the richest 5% living the life of riches is just not accurate.
> But all that talk about the richest 5% living the life of riches is just not accurate.
It's relative. You seem to define rich as basically being able to spend whatever you want and not have to worry about money. As another commentor has stated, being able to own a home in an area like the SF bay area is rich. It is a very desirable area, with good climate, and jobs.
It's relative. You seem to define rich as basically being able to spend whatever you want and not have to worry about money. As another commentor has stated, being able to own a home in an area like the SF bay area is rich. It is a very desirable area, with good climate, and jobs.
The cute thing with this argument is the idea that your hardships are similar to the bottom 5% somehow. If you're not happy with your income, what should the people making less than you be?
"neighborhood with good schools"
examine this condition more closely. you will be surprised and disgusted.
examine this condition more closely. you will be surprised and disgusted.
Once again, this is a statistical aggregate. As difficult as it might be, please do not picture a filthy rich old white Scrooge character stealing cookies from poor orphans on the street when you read numbers like this. As the author clearly indicates, these numbers are in relation to averages, not real people. Movement between income groups is an area of current study, but I've seen numbers as high as 40% moving from one statistical group to another inside of a year. The rich may indeed be getting richer, but it may only be a small percentage of them who stay in that group over a period of decades. There might be many new arrivals and many people leaving each decade.
Of course, it's perfectly fair to say that the disparity is important whether or not the same people are involved year-to-year or not. I'm not trying to get into that part of the discussion. I'm simply trying to point out the difference between stereotypes and averages and real, live people. There are lies, damned lies, and statistics. (old joke)
Of course, it's perfectly fair to say that the disparity is important whether or not the same people are involved year-to-year or not. I'm not trying to get into that part of the discussion. I'm simply trying to point out the difference between stereotypes and averages and real, live people. There are lies, damned lies, and statistics. (old joke)
I actually think you're wrong with regard to the rich getting richer not being the same people from year to year, at least for the majority of rich Americans. Yes, movement is possible, but most of this happens between the upper and lower middle class. At extreme ends of the economic spectrum this mobility is severely diminished. Even across generations. This study is focused across generations, and shows that adult children of parents in the top 20% are 39% likely to be in the top 20%. Likewise adult children of people in the bottom 20% are 42% likely to be in the bottom 20% [1].
It stands to reason, then, that if the children of top earners are likely to stay in that income bracket, that people in the top income bracket are also likely to stay there.
Notice that the top 4% mentioned in this article fit quite comfortably in the top 20% of income earners. And through extrapolation, I imagine that the movement among the top 4% is even more severely diminished. It would be truly exceptional for even the child of someone in the top 4% to find themselves in poverty or for that matter the middle class.
[1] http://www.economicmobility.org/assets/pdfs/EMP_Across_Gener... (PDF! page 5)
It stands to reason, then, that if the children of top earners are likely to stay in that income bracket, that people in the top income bracket are also likely to stay there.
Notice that the top 4% mentioned in this article fit quite comfortably in the top 20% of income earners. And through extrapolation, I imagine that the movement among the top 4% is even more severely diminished. It would be truly exceptional for even the child of someone in the top 4% to find themselves in poverty or for that matter the middle class.
[1] http://www.economicmobility.org/assets/pdfs/EMP_Across_Gener... (PDF! page 5)
So to put it another way the study says that 61% of children born to parents in the top 20% fall out of it, and 58% of children born into poverty rise out of it. Sounds like pretty good numbers to me.
For people unable to look at the source, here is a direct copy of the chart in question:
http://i.imgur.com/DV5JZ.png
As you should see, it's not really that simple to say "39% stay and 61% fall out." While technically correct, falling isn't equally distributed over the other quintiles. The children of the top quintile are only 9% likely to fall in the bottom quintile and the children of the bottom quintile are only 6% likely to rise to the top quintile.
And really, the top comment was trying to claim the parents migrated income brackets. The numbers here are about children inheriting the incomes of their parents. This data strongly suggests the wealth gains over the past decade are in fact concentrated in the already wealthy. Not only that, but it shows the concentration of wealth has momentum that lasts for generations.
The United States today still has tremendous opportunity for income mobility compared to many other parts of the world and other parts of history. But these articles are showing a disturbing trend that this may not be sustainable.
http://i.imgur.com/DV5JZ.png
As you should see, it's not really that simple to say "39% stay and 61% fall out." While technically correct, falling isn't equally distributed over the other quintiles. The children of the top quintile are only 9% likely to fall in the bottom quintile and the children of the bottom quintile are only 6% likely to rise to the top quintile.
And really, the top comment was trying to claim the parents migrated income brackets. The numbers here are about children inheriting the incomes of their parents. This data strongly suggests the wealth gains over the past decade are in fact concentrated in the already wealthy. Not only that, but it shows the concentration of wealth has momentum that lasts for generations.
The United States today still has tremendous opportunity for income mobility compared to many other parts of the world and other parts of history. But these articles are showing a disturbing trend that this may not be sustainable.
Children learn most of their behavior from their parents, 58% of poor children performing better than their parents sounds like a good number when you look at it that way.
I only said there was a 58% chance they'd rise out of poverty, by which I meant they'd rise out of the bottom quintile. I think that being born dirt poor, and moving into not dirt poor is a very good goal for the majority of people.
Also 6% of people born into poverty eventually make it to the top quintile, that's higher than I would have expected.
We shouldn't pretend that wealth doesn't give huge natural advantages, but we also shouldn't pretend that we are going to be able to eliminate those advantages without eliminating wealth.
I only said there was a 58% chance they'd rise out of poverty, by which I meant they'd rise out of the bottom quintile. I think that being born dirt poor, and moving into not dirt poor is a very good goal for the majority of people.
Also 6% of people born into poverty eventually make it to the top quintile, that's higher than I would have expected.
We shouldn't pretend that wealth doesn't give huge natural advantages, but we also shouldn't pretend that we are going to be able to eliminate those advantages without eliminating wealth.
In this case it's especially relevant: how many of those top 5% are in the top 5% because they were able to grab a disproportionate portion of the economy's gains? In other words, a lot of people will look at this and think, "Rich people used their power and influence to fleece the economy," when in many cases it might be, "People who won when others lost are now rich." Most likely it was some of each.
Good point about statistics not being people, but you should really cite your own statistics if you want to suggest that movement between income groups would paint a significantly different picture than the one presented here.
One thing that has always bothered me about these reports is that they are not longitudinal, as you point out. We say "the poor are getting poorer" but is it the same poor person that got poorer, or did that poor person discover his inner tycoon and move up while some terrible, lazy deadbeat took his place in the income ladder? If it's the latter, would that not be considered a success despite the fact that "the poor have gotten poorer"?
In particular, "[immigration] disproportionately brings low-skill workers into the U.S. instead of moving jobs abroad. As immigration increases the relative supply of low-skill workers, the income of individuals at the 20th percentile declines."
http://www.frbsf.org/publications/economics/letter/2007/el20...
http://www.frbsf.org/publications/economics/letter/2007/el20...
Why do I get the feeling that you already have answered the question for yourself? Yes of course only the terrible, lazy deadbeats fall on hard times. At least it is very convenient to think so...
Of course they did. As more gains are realized in capital rather than wages, the rich will literally get richer. At the same time, it's becoming ever less clear that many of them serve a useful purpose. Justifying executive pay is losing ground in economic literature and, frankly, has always required recourse to casuistry.
I would say that the problem is systemic - you have two political parties which are basically at eachothers throats the whole time, and a historical belief in a very pure form of capitalism - money is the bottom line, and the markets should govern themselves - the result? - all of the manufacturing has moved abroad, effectively killing the working classes ...
Any attempts to change this system gets vigourously branded 'socialism' both by the media (fox news) and by republican opposition which also has historical connotations harking back to McCarthyism and the Cold War ...
I don't think this is going to change anytime soon unless we see some sort of systemic collapse ... I would argue that this is possible ...
Any attempts to change this system gets vigourously branded 'socialism' both by the media (fox news) and by republican opposition which also has historical connotations harking back to McCarthyism and the Cold War ...
I don't think this is going to change anytime soon unless we see some sort of systemic collapse ... I would argue that this is possible ...
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divide (rather arbitrarily) the population into a few groups.
the very wealthy seem to fall into one of two groups: successful business owners and venture capitalists on the one side, and bankers, traders, and some classes of lawyers on the other.
the wealthy and middle classes all seem to consist of professionals and small business owners, who have met with varying degrees of success.
the poor consist largely of immigrants, people living in impoverished urban and rural areas, as well as people without a trained skill.
here's what i think is happening: a group of the very wealthy, mainly those on the banker-trader-lawyer side of the divide, have this country by the balls. they have accomplished this by having their politician friends (how many politicians are former lawyers? and how many came from wall street? ok, now how many are former business owners or venture capitalists?) convince the poor that the "rich" are responsible for their plight. to fix this problem, they propose raising taxes on the "rich."
this proposal invariably means raising income taxes, which the very wealthy rarely pay because their income is mostly in the form of capital gains. the democrats propose a tax raise, the poor vote them into power, and income taxes go up. the wealthy and the middle class both feel like they're getting fucked, probably because they are. so they fight back, saying they want to lower taxes, reduce government spending, and cut social programs. the republican party says they support these ideals, so they get this type of vote. once in power, the republicans pass a tax cut on both income and capital gains taxes. they also increase government spending, because, hey, why not, fuck you buddy. the poor see this response and it confirms to them what the very wealthy have been saying through their proxy politicians, so the fight goes on.
if this process is going to stop, we need a new word to describe the members of the very wealthy who are contributing nothing but misery to the economy, whether by gambling with other people's wealth and getting bailouts when they lose, or simply by using the broken legal system as a weapon to extract wealth from the venture capitalist / successful business owner side of the divide. if we had a single word to embody this concept, i think more people would become aware of the distinction between the 'productive rich' and the 'destructive rich' and we could fix the problem. since 'destructive rich' isn't exactly catchy, i propose we call those people 'dicks.'
very wealthy: anyone with net worth exceeding $10M.
wealthy: anyone with net worth between $1M - $10M
upper middle class: anyone with net worth between $100k - $1M
middle class: anyone with net worth between $10 and $100k
poor: anyone with net worth < $10k
the very wealthy seem to fall into one of two groups: successful business owners and venture capitalists on the one side, and bankers, traders, and some classes of lawyers on the other.
the wealthy and middle classes all seem to consist of professionals and small business owners, who have met with varying degrees of success.
the poor consist largely of immigrants, people living in impoverished urban and rural areas, as well as people without a trained skill.
here's what i think is happening: a group of the very wealthy, mainly those on the banker-trader-lawyer side of the divide, have this country by the balls. they have accomplished this by having their politician friends (how many politicians are former lawyers? and how many came from wall street? ok, now how many are former business owners or venture capitalists?) convince the poor that the "rich" are responsible for their plight. to fix this problem, they propose raising taxes on the "rich."
this proposal invariably means raising income taxes, which the very wealthy rarely pay because their income is mostly in the form of capital gains. the democrats propose a tax raise, the poor vote them into power, and income taxes go up. the wealthy and the middle class both feel like they're getting fucked, probably because they are. so they fight back, saying they want to lower taxes, reduce government spending, and cut social programs. the republican party says they support these ideals, so they get this type of vote. once in power, the republicans pass a tax cut on both income and capital gains taxes. they also increase government spending, because, hey, why not, fuck you buddy. the poor see this response and it confirms to them what the very wealthy have been saying through their proxy politicians, so the fight goes on.
if this process is going to stop, we need a new word to describe the members of the very wealthy who are contributing nothing but misery to the economy, whether by gambling with other people's wealth and getting bailouts when they lose, or simply by using the broken legal system as a weapon to extract wealth from the venture capitalist / successful business owner side of the divide. if we had a single word to embody this concept, i think more people would become aware of the distinction between the 'productive rich' and the 'destructive rich' and we could fix the problem. since 'destructive rich' isn't exactly catchy, i propose we call those people 'dicks.'
There's a a real word for this. 'Plutocrat.' A member of the 'plutocracy': a government controlled by the wealthy.
If we had a flat tax (say, 20% on both capital gains -- short and long term -- and income tax), we wouldn't have any of this nonsense. But then, we'd have a lot of out-of-work lobbyists (read: politicians in 'retirement') and people who work for non-profits and charities...
If we had a flat tax (say, 20% on both capital gains -- short and long term -- and income tax), we wouldn't have any of this nonsense. But then, we'd have a lot of out-of-work lobbyists (read: politicians in 'retirement') and people who work for non-profits and charities...
i would argue plutocrat doesn't have a ring to it, and makes the user sound like onna them lib'ral elitists
There are a lot of stats everywhere. Here is one I like. The top 1% pays for 38% of all taxes. The top 10% pays 70%. If I showed you this stat, you would lean on taxing the poor more, but that isn't right either. Everyone should look at the problem in aggregate and decide for themselves what is fair for our system as opposed to analyzing individual stats and extrapolated analysis from that alone.
http://ntu.org/tax-basics/who-pays-income-taxes.html
http://ntu.org/tax-basics/who-pays-income-taxes.html
>If I showed you this stat, you would lean on taxing the poor more
No I wouldn't. The ones who are getting most of the benefit should be paying the most for the service.
No I wouldn't. The ones who are getting most of the benefit should be paying the most for the service.
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The sad fact is that America is no longer a country that makes things, and as a result we no longer find ourselves in a position to employ people in positions that are actually worth a damn. Or that pay a salary worth a damn.
We still make some things. Software. Circuit designs. Entertainment. Product design (to sell things to ourselves). Pharma. People who work in these areas are paid well.
Oh, and the financial industry. Which, despite demonstrating a wonderful ability to make itself mountains of cash, has failed to demonstrate how it benefits the rest of the country. (obviously, its ability to provide lines of credit is valuable, but we had that long before investment banking came to dominate the entire financial industry)
I remember reading Snow Crash for the first time and coming across this line:
and thinking "what an alien dystopia that future must be".