Income inequality today may be higher today than in any other era

1. Interest rates matter, because if they're low, they'll usually invest their money elsewhere / pay the interest / pocket the difference. They'll often do a deal "cash" (meaning, without debt) and refinance later.

2. Using debt to offset taxes matters too.

But if the number of people is small, the amount of housing they can consume is tiny. For example, NYC has 5,600 ultra high net wealth individuals. Assuming a wealthy person rents 10 flats, these rich people only have the same effect on housing supply as NYU (57,000 students).

http://marketurbanism.com/2016/06/27/do-the-rich-cause-high-...

The more inequality you have, the less competition you face from wealthy people. If we replaced 5,600 rich people with 1 mega-rich person, would that mega-rich person suddenly rent 67,000 flats, taking an additional 10,000 off the market?

The mechanisms are somewhat nebulous and likely complex and diffuse.

So no single WHY other than stability (I live in the UK and an unpredictable future is really bad for my business as we just found out).

Think of startups gradually removing stock options from their employees, until they are absolutely eliminated with no salary compensation. Shareholders and management will get all the big gains from the company growth. One could consider this reasonable if the separation of dividends corresponds to the value provided, but I'd argue that there is a difference in the value you create, and the ability to capture that value.

The wisest suggestion I've gotten with regard to this is to not fall prey to instantaneous picture. It may even be impossible to have equality in a single slice of time. Rather than looking for single point inequality, look for how the population is moving through the income inequality over time.

Basically, are the same people always in the bottom, middle, and top? If so, that's probably a problem. What's the time any given person spends in the top? Bottom? Middle?

As long as you have continuous movement throughout and no one is stuck, you can at least know that there is some semblance of equality in opportunity even if not outcomes.

2. Money becomes power. More power in the hands of fewer people is not good for a democracy.

I only speak for myself. I'm curious what the more idealistic among us will say. Keep in mind that income growth is a proxy. What really matters is wealth inequality. We just talk about the one that's easier to measure.

When this reaches a critical mass, it becomes less risky to take up arms and eliminate the oppressors in exchange for the promise of better life.

Ends in revolution and war.

The upper echelons of the revolutionary class become the new upper class, while the lower classes get the same or even worse of a deal dressed up in propaganda.

Adapted from "The Theory and Practice of Oligarchical Collectivism" by Emmanuel Goldstein.

free people aren't equal. equal people aren't free.

A billionaire or a thousand millionaires.

A society where the rich has most of the money can't grow and then in the end everyone gets poorer.

It is a big problem IF the gap becomes too big at the expense of the poorest. I.e. the rich get richer but the poor doesn't get richer relative to the poor.

It is not a big problem if there is some undefined balance between the different income groups as this will keep the economy going.

The problem we have today is mostly that the rich gets much richer, the poor doesn't really get much better and the middle class is dissepearing which erodes the prospect of any society to grow.

The plutocrats of our country do not have the right to drain the wealth of the "under-class" so they can redistribute it to another underclass in another country... which will of course conveniently help their economic interests at the same time.

1 money = power 2 return to 1

if a few people have most of the money, they have nearly all of the power because nobody else's share of power or money is greater than theirs, even collectively

honest question, do you have an ulterior motive in asking your question?

This happens when you reach the limit of a fundamental input to the bubble. When this happens, you have dramatic, rapid changes in the economic structure of society, which have historically always been Bad.

From a software standpoint, it's a bit like writing a non-determinable program with an infinite loop in an unsafe language: it's just a matter of time.

The other thing is that it's a violation of the golden rule: all of the unborn individuals should have a chance at economic success. The wider the split gets, the less and less realistic that opportunity is. It's fine for all of us that won the ovarian lottery, but we can't say with a straight face that we would be successful if we were born in the fields of a third world country (or the alleys of detroit).

While [many people * low income] and [few people * high income] should both be able to produce demand, it's important to remember there is a brick-wall limit at the poor end of the curve. This is similar to the flaw in the martingale[1] betting system; you have to stop playing when your cash runs out.

When you have to spend every dollar you have trying - and often failing[2] - to pay for basic living requirements, you aren't spending money on the rest of the economy. Expect violence to start when the bottom end of the income curve is pushed low enough that some people starts going hungry.

A proper social safety net helps both of these problems. Keeping people in the economy with realistic wages (and/or a basic income or other welfare programs) keeps money flowing through a large part of the economy. It also discourages people from looting your house. Brexit and Trump are warnings; when people are desperate they tend to attack anything they perceive is they problem. Fixing the income problem needs to happen now, so people not only have enough to live, but also have a sense that they have their fair chance to succeed. If the warning signs are ignored... as Mark Blyth said, "The Hamptons is not a defensible position"[3].

[1] https://en.wikipedia.org/wiki/Martingale_%28betting_system%2...

[2] https://medium.com/@sarahkendzior/the-minimum-wage-worker-st...

[3] https://www.youtube.com/watch?v=Zzl4B3mrKQE

If we define wealth as abstracted resources available, this seems obviously problematic: it reduces the size of the coalition needed to make decisions for society. To pick a crazy example, there are two ways for someone to prohibit serving falafel in their city. They can either get enough voters together to prohibit that (difficult for obvious reasons). Alternatively, they can get enough wealth together to buy or bribe all of the restaurants (or suppliers, or commercial property, etc).

Naturally, we're nowhere close to my crazy example, but there are smaller examples of this effect that we're starting to see. Try going down to the store and buying a Blu-Ray player that doesn't encrypt its HDMI output. You can't, even though the majority of people who care one way or the other would like one.

The other problem is that it's rather detrimental to the narrative that one's income is purely the result of the work one puts in. It's hard to explain rising income inequality if that is true. Are rich people systematically working harder (and poor people systematically working less hard) than they used to? That's implausible on its face, so what's causing the inequality to increase?

There are some plausible explanations for this, which still work within the narrative that income results from work. Occam's Razor would seem to point in other directions, though.

Absolute poverty is a solved problem. People rarely starve to death in the US. It's an El Niño year; out here in not-SF we're having a bit of a drought, but no one is seriously afraid of a famine. Sure, there are things like health care that could be better, but those are second-order effects and fairly minor on the poverty scale.

The actual problem is power. (That may not be a popular statement[1] in this forum, where single young adults are commonly making 2-3x the median household income and yet are fond of complaining about disenfranchisement.) Money is power, the power to do things and the power to tell others what do do.

Now, I admit that the technology industry seems spectacularly bad about translating it's assets into political power, so it may not be apparent to people reading this, but I don't expect that to last forever. (C.f. Thiel and Gawker.)

On the other hand, a lot of money in a small number of hands is not in the hands of the tech industry. Consider the Kochs, or Citigroup/JP Morgan/Goldman Sachs. That money buys politicians, to an extent, but it also buys agendas, access, and, rather amazingly, consensus. (Why do Americans seem to have a weird habit of voting for ideology instead of their presumably enlightened material interests?)

This power held by a few people means that the actions of a country may not necessarily be in accord with the wishes of its citizens. Take a look at the third graph in the article. The peak of the England-Wales line is roughly 1825-1875, roughly the high point of the British Empire and, strangely, including things like the Irish famine.

But, fortunately, for the likes of you and me, there isn't a problem. Yay. (As long as no one sets up guillotines.)

[1] Dare I say it?: not a politically correct statement.

In a way, the direction of where you are going matters more than where you are. Even if everyone had food and shelter, we would feel less anxious but inequality would still get more profound and unavoidably end up in some people owning others.

Please and thanks.

> [1] If you don't count the Native Americans who were persecuted and slaughtered for their land.

Also [2] if you don't count the imported slaves who contributed much of the raw labor.

    Consider 10 separate countries, cities, or other units
    of equal size, with population 1000. Assume the wealth in
    each unit follows a power law distribution, say a ParetoLomax,
    all with the exact same parameters. Assume a
    tail exponent of 1.1. The average Gini index as obtained
    by direct measurement will be ≈ .71 per country. Now
    aggregate them into a single country. The composite
    Gini — as traditionally and currently measured — will
    be ≈ .75, that is 6% higher – for the same sample.
    This inconsistency implies not only that the Gini cannot
    lend itself to comparisons between units of different size
    but that intertemporal assessments are vitiated by the
    population changes.

More educated, less crime, better living conditions, better nutrition.

The only problem I see is jealousy. Poor people are jealous of what rich people have and want to take it.

Given that there are people in both categories, I'm not sure more "hard data" is needed. If you actually dispute the claim, there's a Wikipedia page with many links. That's probably a better source than expecting every article on the topic to explain it again.

The sad thing is that brexit wont do a single thing to diminish austerity. On the contrary its the people who voted out who will be affected the most.

Overly tight money from the ECB and too low inflation is destroying the young and the rural's career prospects (this will go on until the baby boom retires) and is forcing them to fund boomers' retirements even if they were excluded from good careers for so long.

Even though the UK doesn't use the Euro, it is close enough to be impacted by its mismanagement.

More thoughts here: http://bessiambre.tumblr.com/post/146561613022/the-euro-make...