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> So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?

You mean would I want capitalism to be different, or would I want a system that wasn't driven to inequality because it relied on capital returns to drive both the economic system and (due to fungibility of power) and the political system?

The first is a pointless question, the second, well, yeah. It's the fundamental problem with capitalism that led both socialist critics to identify and seek to overthrow it, and more moderate social democrats to seek to reform and moderate it.

> There certainly is wealth inequality in the world, but it isn't actionable to blame it on r > g.

Sure it's actionable, and if it's the true cause, no micro action is meaningful.

You may not like the actions that are implied by understanding the root cause, but that doesn't make it not actionable.

The idea that outperformance should be rewarded with wealth is fundamental to the idea of capitalism. It is well represented by the idea of r > g. Also, just because r > g, doesn't mean that the economy relies on capital returns. It means it relies on capital returns being able to outstrip increases in output.

If you want a system where r = g, you are requiring some sort of top down wealth allocation system to cap r, (a morally and legally supreme government...socialism?). I'll avoid that system.

If you think it's actionable perhaps you could suggest an action?

If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed? That's a pretty lame excuse, I'd feel bad saying that.

> The idea that outperformance should be rewarded with wealth is fundamental to the idea of capitalism. It is well represented by the idea of r > g.

No, the idea that aggregate performance should redound principally to the benefit of capital holders is fundamental to the idea of capitalism, and, yes, that pretty much implied that r > g leads to greater inequality under capitalism.

> If you think it's actionable perhaps you could suggest an action?

If the problem is fundamental to capitalism, the action to correct it is to move away from capitalism.

> If you think no micro action is meaningful, does this mean you would be comfortable walking up to a homeless person and saying that you're not going to bother helping them with their problems because no matter what they do, r > g and they're screwed?

No, it means when I do something to momentarily alleviate the immediate problems of a homeless person, I know that unless I am also working to reform the fundamental politico-economic system to deal with the structural problem, I'm doing nothing more than putting a band-aid on a sucking chest wound.

r > g is not the problem, r > g is aggregate prosperity. Capitalism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.

>No, the idea that aggregate performance...

You're saying no, but our statements mean essentially the same thing. Aggregate performance rebounds to the benefit of capital holders because they are outperforming. For example, it is better to save and lend than it is to borrow, which is why interest rates exist.

I'm not disagreeing that r > g can lead to greater inequality under capitalism. The reason you can have inequality under capitalism is because you have the opportunity for outperformance. I don't want to live somewhere that opportunity doesn't exist. You can if you'd like.

How can you say that it's a problem fundamental to capitalism when I can look through history and say these things without a doubt:

Socialism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.

Autocracy is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.

Communism is the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.

Dictatorships are the problem that turns aggregate prosperity into greater relative deprivation and narrow concentration of wealth.

It's not a fundamental problem of capitalism, it's a fundamental problem of society.

By doing something to alleviate their immediate problems do you mean help them get clothes for a job interview? Point out a way for them to learn a skill to get a job? Locate a homeless shelter for them to spend the night? The longer you take to reform the system, the guiltier you should feel for not simply helping the person with a comparatively more immediate solution: micro actions. All of a sudden micro actions are meaningful.

Your suggestion for an action on how to deal with the inequality of capitalism is to adopt... not capitalism? I think you're lacking important details on how to turn that into an action.

Let's agree that you can't have it another way. But there are still huge questions attendant to that arrangement.

For example, should opportunity be unlimited, or is the prospect of earning enough for a very comfortable life sufficient motivation?

Or, how much are we willing to let families build dynastic wealth? Shouldn't wealthy people's children be expected to compete without a huge head start over the children of poor families?

Shrugging suggests to me that the conversation is over, but I think it's just beginning once we recognize that this is a fundamental economic force. How do we harness it as a society and pursue a just world?

For example, should opportunity be unlimited, or is the prospect of earning enough for a very comfortable life sufficient motivation?

One problem with this idea is that the factors that determine what's meant by a "very comfortable life" will necessarily have to be decided by politicians and bureaucrats and imposed by force. By distorting (if not entirely removing) the effects of economic competition, a system of that nature turns the problem of achieving material success into an almost-purely political one.

When people who don't actually create value are given excessive power over people who do, economic progress stops. We've seen the outcome in enough places, from the Soviet Union to modern-day Venezuela, that it almost seems inevitable: the rich still get richer, but the rising tide that's supposed to lift all the boats never seems to come in.

But what's being done in the West isn't working either? The rich (especially the 0.1%) have seen ludicrous spikes in growth whilst the middle class collapses.

The fact that we don't have riots in the streets means that the collapse of the middle class has been greatly exaggerated. Most people are better off in most material ways than they were in decades past, like it or not. Even if the numbers in their bank accounts aren't as large.

Meanwhile, in Venezuela...

Are you claiming with your statement that riots in the street are the only mechanism for supplying meaningful evidence of a significant inequality between middle and upper classes?

No, I'm claiming that market economies are not zero-sum games, and that a number in somebody else's bank account isn't the best thing to focus on as you go through life.

That "number in somebody else's bank account" is meaningful. It represents a claim on a share of the world's resources. Those resources are essentially finite.

> Most people are better off in most material ways than they were in decades past

I see this sentiment a lot and I find it utterly meaningless.

The issue is not that people have higher or lower living standards than they have in the past, but that their share in economic prosperity is declining while the shares of a small few are skyrocketing.

That is a serious problem that will lead to a sort of modern feudal rentier society.

Hardly. It could be as simple as setting a high tax rate at some threshold of income. Not sure why you're jumping straight to central control of the economy as though it's the only option - it's the most extreme option among many.

How is "setting a (presumably very) high tax rate at some threshold of income" not a strategy for implementing "central control of the economy"?

At some level of income confiscation, you're basically describing slavery.

All those poor slaves who were earning over $300,000 a year in the 1960s United States, and had to pay a 91% marginal tax rate on the extra.

It's entirely reasonable to debate the appropriateness of such rates, but claiming that "slavery" is even close to a legitimate comparison demonstrates a shocking disregard for the plight of actual slaves, both past and present.

(Shrug) A gun at your head is still a gun at your head, regardless of the number in your bank account.

Unless you're paid for getting the gun held to your head, right? /s

Generally without such taxation such "personal money" gets frozen out of economy and competition as well gets distorted.

The rich have many more options to avoid the taxes as well.

No, not really. The abstract threat of force for acting as though you could possibly have or accomplish everything without having had the support of society is nothing like the very immediate threat of torture, rape, or death. They do happen to be on the same spectrum, which gives you only the barest excuse for such a callous view.

> The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.

Is that true? If I have capital wouldn't I want to allocate it for the best risk/return/effort. That my percentage of the pie is shrinking doesn't mean I would allocate my capital inefficently to accelerate that shrinkage.

For example, imagine today you had 1 million dollars. If interest rates were 0.1% would you say no to that risk free $1000 a year? I wouldn't. I would click that button. Perhaps it would encourage me to spend more but I wouldn't sit on cash.

I agree that it makes sense to allocate your capital efficiently.

A risk free 0.1% doesn't look like you're being an employer though.

It sounds like the rate that comes from your deposits at a bank (which lends your deposits to make money, which in some way most likely depends on them getting a higher rate of return on capital than growth in output)

> If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?

You can still spend the principal you made without having to be employed. If I understand correctly, r>g is about how much of new wealth is coming to labor vs rent on existing capital.

> If r (the rate of return on capital) is less than g (the growth in output) that means that people have no incentive to build wealth or become more intelligent to deploy that capital more profitably. If I'm never going to make more than the growth in output, why bother with capital?

The idea is that you consider yourself a smart and educated investor. Therefore, you are confident that even with r = g, your particular investment is wise and will yield a huge profit.

> So yeah, capitalism may be inherently inclined to wealth inequality because some people outperform. But do you really want it another way?

You can get a rate of return that will consistently be higher than the growth of the economy by dumping your money into an index fund. I would consider that more like taking advantage of other people's work than "outperforming" anything.

How can it be a huge profit if r = g? You'd need to invest more in g to increase r by an equal amount.

The fact that you can consistently get higher growth in an index fund than GDP is just a symptom of r > g. It incentivizes you to save. But this simple example also ignores volatility in stocks, GDP can drop by 3% and index funds can drop by far more. Also is it really taking advantage of other peoples work if they go through a public offering and offer to sell you the stock of their own free will?

As I said, because you are such a brilliant investor!

Think of the economy as a casino and the investor as a gambler. The casino flips coins. You can bet $1 for heads or tails and if you guess right, you win $2.00.01. This is r > g. Clearly, it is nice to have dollars spare so you can bet in this casino. For the casino, it is not so nice.

In another casino you can also bet on coin flips, but you only get $2 for winning bets. On average, gamblers are neither winning nor losing money. This is r = g. Gamblers still continue to play because they think they have figured out how to get an edge.

In real world casinos, r < g but people still happily play.

And perhaps the game isn't coin flipping but something skill-based like chess played against other gamblers? I hope you see how r = g wouldn't stop investment money from flowing in the economy.

The gamblers that think they have an edge with r = g in your example are suckers wasting their time. Would you agree?

On average they are. However, if the game was skill based, like playing chess for money instead of coin flipping, then it would be easy for gamblers to get an edge by being skilled enough. If we consider investing more like playing chess than coin flipping, then in the r = g scenario, the economy would reward smart investors with huge profits. Dumb investors would lose all their money. As it should be.

So your analogy is smart chess players playing against stupid ones, but both players can only bet a dollar and win 2?

That scenario only "works" if you have a limitless supply of suckers.

Sooner instead of later the worse players will realize they need to be able to win more than a dollar to compensate for their risk. The result is an unvirtuous cycle where the bottom players keep dropping out because their odds are getting worse and worse.

Given that people happily play on in casinos where the odds are significantly worse than even, I think it is safe to rely on the universe providing us with an infinite supply of suckers.

Anyway, a fairer stock market wouldn't have to be a completely zero-sum game. It would just not have to be as heavily tilted in favor of the gambler/investor as it is today.

The smart people that go into a casino aren't expecting to come out ahead, they walk in knowing they're probably going to burn a couple hundred bucks. They also get to leave, which is why they're willing to play at worse odds for a short time. Given that, I don't think its safe for you to rely on an infinite supply of suckers.

What if they want to go to a different casino that gives them better odds, will you force them to stay? If they can't leave they'll figure out who they shouldn't play against because they'll lose. So now are you forcing them to play? Now you're either micromanaging which ones should play against each other to make sure nobody ends up broke, or you're actively forcing them into poverty.

Is this a casino you'd like to visit?

> The logical conclusion to that would be that everyone wants to be an employee and nobody wants to be an employer.

This is interesting. Let's say there is a a r=g, to r is slightly less than g world. Then people would try to maximize employment & investing that income. Sortof double dipping. Am I thinking about that correctly?

Also, r<g doesn't mean that you're 'never' going to make more than the growth in output, right? Theoretically good stewards would outpace the market.

> that means that people have no incentive to build wealth

Less incentive. The epeen comparison factor is underrated by anyone who ignores game theory.

Translated into normal language: status, political power and signalling are vastly undervalued by this theory.

Off course since it is not a complete theory, it does not consider the above as major factors in wealth accumulation leading to inequality.

That said, each feeds into another.