A Simple Fix for Our Massive Inequality Problem
nytimes.com
nytimes.com
IIRC, prior to Smith's famous book, the wealth of nations was viewed in terms of gold kept in the coffers of the kings. This was increasingly a source of puzzlement because it was failing to explain why some nations were thriving and others were not. This seminal work has been credited with being single-handedly responsible for transforming our understanding of wealth as "gold in the king's coffer" to what we now refer to as GDP. Wealth of a nation is measured by its productivity, not the money in the bank.
While I agree we need to do something about the current trend towards concentrating money in the hands of the few, clearly at the expense of the many, this is not the way to do it. This in no way protects the productivity that gives rise to these riches. In fact, it is likely to undermine said productivity.
There is no limit to how much people can spend. If you just cut everyone a check, whether you call it Basic Income or American Equity, the money will get pissed away. It will not get invested in a better future.
We have to find ways to address the underlying structural problems that are causing the 1 percent to effectively bleed the masses for more. We also must do so without creating perverse incentives. This is a case of "the cure they are recommending is worse than the disease."
It's offensive to suggest more of that money will get spent on entertainment (etc) than food, clothing, shelter, education, medical expenses (etc)
The military is also a source of medical training, new medical knowledge, various forms of stability, and research that helps create new products.
I am advocating for people not being bled by the 1 percent to begin with. Charity never provides anyone a secure, comfortable life. It makes you their bitch and thus de facto undermines quality of life.
I want people to have the money they deserve, but not by saying it is okay for the rich to first bleed us and then we will ask for some piddling check afterwards and kiss their butts and say "Thank you, massah."
They outlawed slavery in the US. I would like it to really die and not come back from the grave with a new name.
2) Yes, there are good economic side effects that come from spending 600B on just about anything. Lifting people out of poverty a few inches couldn't possibly be less economic waste than grossly disproportionate military spending.
3) You've got a pretty novel definition of slavery.
Perhaps. FWIW, my definition of slavery is that the value of your productivity is owned and controlled by someone else, not you. I see the movement towards basic income as the promotion of a world of poor people in chains.
Money grows out of power, not the other way around. If money alone created power, lottery winners would all promptly take their place in the halls of power. They don't. Most wind up bankrupt within 5 years.
I see, so you too consider capitalism a form of slavery.
Of course, when workers and stockholders are entirely separate classes of people, then, basically, yes. But that is not an inevitable outcome, even though it seems to generally be the state of things currently.
This is a common misconception about money. It never gets 'pissed away', it just changes hands. How fast it changes hands, and the degree to which it leaves productive assets in its wake, are the determining factors for economic health. The question is whether money spent by individuals on daily necessities would ultimately be better for the economy than money spent by high speed traders exchanging commercial paper or by a surgeon buying a second yacht. I don't know the answer to that question, but in no case is the money 'pissed away'. To paraphrase Al Gore, there is no 'away' to piss it into.
I know someone who got fired, got six weeks severance pay, drove to a vacation spot with a friend and blew six weeks pay in one three day weekend on sex workers and cocaine. They then moved back home because they couldn't afford their apartment anymore. Six weeks severance pay plus unemployment benefits could have bought them their ongoing independence.
I would call that pissing money away.
Edit: Changed hookers to sex workers. They were called hookers back in the day.
Also, your anecdote had a safety net - parents willing to take them in. What impact would the absence of that safety net have had?
You cannot change one element of an equation without impacting all parts. Thinking you can is a common logical error.
You don't care that he flushed his own life down the toilet, just as long as sex workers and cocaine dealers invested it well after they cleaned him out. And then you criticize me for "moralizing."
I don't want to give a lot more details about this person's life. It is a real person and giving too many details amounts to gossiping about them. But I think you are in error. The impact it had on this person's life has other impacts.
I don't know why you think this is some appeal to emotion. It isn't. A person who cannot get their life together because of one youthful indiscretion has long term consequences that impact the wider economy.
This is likely part of why such stories are emotionally compelling: Because it actually matters.
I am not generally not talk about morality in the sense that other people do. I am not too happy to have the concept of morality injected into the discussion in such a way that it slings mud all over me at every step of the way. I am not talking about morality. I am talking about what makes for a healthy system that serves both the commoner and the rich person well. Our current approach doesn't do that.
One of the reasons it does not do that is because I have seen a number of statements by wealthy people to the effect that they live with a lot of fear due to their wealth plus the state of the world. I thin this fear is legitimate and I think it tells us that a system that makes the ultra rich richer by bleeding the common person is a fundamentally unhealthy system that serves no one well, not even the rich people soaking up the extra money and wondering if they will need to abscond to Australia in their jet should the crap hit the fan.
I think this fear is part of why so many tech giants talk so much about things like creating basic income. They want to be able to stop living in fear that someone is going to want them dead because the world is going to hell for so very many people and this makes them a potential target.
We're only talking about the marginal impact of the money itself---in this case, his six weeks of severance. That he didn't invest it more productively certainly has some small impact, but the point is that he didn't actually destroy its value, he simply transferred it to someone else. Had he gone off to live happily alone in the mountains as a Buddhist monk, he would've been similarly unproductive. I assume you would've found that more admirable, but the economy doesn't care what we find admirable. It only cares about how fast money moves, and whether or not it leaves productive assets in its wake. He obviously didn't use his severance directly on productive assets, but a lot of people don't. It doesn't mean that they can't be a vector for efficiently getting it to people who do. That's the harder question to analyze. Given the choice between a spendthrift living a dissolute life of debauchery, and a monk who ceremoniously burns all his worldly possessions and lives in solitude, I suspect the economy prefers the spendthrift.
Yeah, I am done with this. In spite of me stating that this is not about moralizing, you keep projecting moral nonsense onto me.
The only thing I am talking about is this guy blew through a lot of money in a single weekend and this had long term negative repercussions for his entire life. He went back home to his parents and then never really cut the umbilical cord again. It interfered with his ability to live as he saw fit for many years afterwards and to this day. He threw away his one shot at ever getting to be an adult and live on his own terms.
To be perfectly clear, if he had blown through all that money for cocaine and sex workers, come back revitalized, stood up to his parents and said "Yeah, I don't care about your opinions about my life" and sold his second car to make it possible to keep his independence, I might well feel that was money well spent. But that isn't how it went down. Instead, he tucked tail, moved back home and then never lived down what an untrustworthy "loser" he was in the eyes of a lot of people whose opinions mattered to him.
Edit: Trying to stop using the F word like a substitute for very.
If he had been terminated without any severance, he might've still moved back home and never lived it down. And the money would've taken some other path through the economy, maybe a more productive one, maybe a less productive one. Either way, it wouldn't be pissed anywhere, it would just travel a different path through the network.
Thank you.
Money can be spent in a manner that is harmful, that actually reduces value in the world. It can also be genuinely lost or destroyed.
But I don't imagine you and I will ever bridge whatever communication gap is happening here. So, I don't plan to "throw more good money after bad" in terms of investing more of my time in what feels like an inane discussion.
There is about a metric fuckton (TM) of data that shows that when people are handed a big check that they didn't work for, it typically gets spent differently than it would have been had it required blood, sweat and tears to get the exact same amount of money. And the way in which it gets spent differently is typically consumptive, usually with little or no long term value and potentially a lot of long term harm.
This is a thing we can know with a fair degree of certainty. It is part of why the NFL tries to provide some kind of financial literacy for its players. Most of them will have a very short career in professional football. Probably most of the ones who aren't there very long will never make that kind of money again. They are trying to make sure that if some guy only make a quarter of a million dollars one year of his life, it pays for something of long term benefit, like a house or some retirement savings.
Don't give up, you're actually pretty close.
This suggests you are the smart, knowledgeable person here to educate my less smart, less knowledgeable self.
I was describing a communication gap due to differing mental frameworks for the issue. I was not suggesting one of us was "dumber" than the other.
I moderated a smarty pants email list at one time. I am all too familiar with the tendency for smart people to think they are smarter than the person they are talking to. That attitude is not constructive and it is not something I care to keep engaging with.
I should probably have said "we're pretty close". It is the mental framework that's the issue, or more accurately the frame of reference. Most of your discussion is focused statically, on what a particular individual gets for their money. And whether you want to admit it or not, there is a consistent thread of moral judgment in your arguments. You talk about people spending money on vices, and other people who receive money without earning it.
My frame of reference is global, looking at the two factors that actually mathematically matter for economic growth: the velocity of money, and the productive assets left behind. There is no moral component. In that frame, it's entirely possible that spending that appears wasteful could actually be part of a productive system. The net effect of an air conditioner is to produce more heat, despite the fact that it blows cold air into your home. Your original argument was that a basic income would be "pissed away" and be economically inefficient. My response is that you're only looking at one side of the system, like someone concluding that too many air conditioners might cause an Ice Age. That basic income would pass back into the economy by way of grocers, landlords, auto dealers, and yes, probably some liquor stores and cigarette companies. It could nonetheless be a more effective way of stimulating the economy than giving tax cuts to the wealthy.
That isn't the only question, and it also presumes that lower-income people only spend their money on "daily necessities" and not cable, cigarettes, alcohol, etc. It also presumes that wealthy people only spend frivolously, and that they don't invest. Both of these presumptions are likely very wrong.
Ignoring moral judgments about how people spend their money, these two propositions (frivolous spending versus "durable" spending) have very different economic implications--frivolous spending is pissing away the money. The cigarette/alcohol/etc industry works to produce a product that will ultimately be consumed--its value is immediately lost. So at one point in time, Joe had $10 and Budweiser had a case of beer--both existed simultaneously, but after Joe buys and drinks the beer, only the $10 remains (in Budweiser's pocket). The value of the beer is literally pissed away, and the economy is roughly $10 smaller (modulo Budweiser's margins).
If it was a different product--a home, for example, the home would exist and retain value for a very long time into the future even while the money to buy the home is transferred to the contractors, etc and beyond. The money to buy the home and much of the home's value continue to exist simultaneously for a very long time.
..because both wealth and money only really exist in relation to the people that use it.
If we used a conservative 3.5% average return to give $1,000 USD for each American (~325M) you need nearly 10 Trillion dollars in this fund or over half of our yearly GDP.
Now keeping in mind this would need to be generated from a tax on some good/service/capital which obviously has a cost component at it's base. Just getting the initial 10Trillion in a fund would be ridiculously hard. Now add to that the fact that 1k is a pittance and figuring out a true basic income -- this is wayyyy more complex.
I'd like to point out a HUGE fallacy in this "simple" plan -- it only works in low population high natural capital resource areas. Alaska and Norway happen to be relatively remote/cold places with an abundance natural gas/oil. Norway's 1T dollar fund would be comical at US scale.
What makes natural resources different from capital such that these wealth funds work with natural resources but not capital?
Value is value -- for sure
but Value derived from luck of the draw (e.g. Norway's current citizens banking on their ancestors settling in a land rich in oil).
Frame it this way -- would Saudi Arabia be as wealthy as it is today without Oil? Do you think their social and political structure would have produced equivalent wealth as their oil companies?
The NYT article made me think it was a good idea, but this comment inspired me to run the numbers myself. It's impossible to run a UBI with this type of system in the United States without total state ownership. Why would they publish something like this?
It's as if people in the world have agendas that allow them to handwave away things like facts.
In all seriousness, it's an op-ed, so the NYT hasn't subjected it to their standards of journalistic rigour, and it's written by a lawyer/blogger who works for a think tank called Demos. Maybe I'm biased from living in DC/the Beltway for so long, but in my head whenever I read 'works for a think tank,' I substitute 'professional liar'. The author is the very definition of someone pushing an agenda.
I understand people have reasons for writing appealing lies. I understand part of the job of a think tank is to write and publish their ideas.
I do not understand why The New York Times would publish a policy idea that is impossible. A critical thinking person can conclude that the investment fund model cannot be applied to The United States in a meaningful way. The New York Times is one of the most respected news papers in the world. In my mind, publishing this article has the effect of decreasing the paper's reputation among people that critical analyzed this policy proposal. This is damaging the The New York Times' greatest asset, the reputation of their brand.
I do not know a lot about newspapers generally, or The New York Times specifically. What I do know is this discourages me from investing more of my attention into The New York Times.
The amount and the quality of goods and service that is available to even the lower income bracket has never been better; most families can afford access to a car, a washing machine, food from around the world, unlimited entertainment, unlimited knowledge, air travel, telephone, etc. etc.
Put another way, all the money in the world can't buy you a better phone than a 1000$ one, and that phone is only marginally better than a 100$ one, which everybody can afford. And that is how it works for most things nowadays.
The reason people are so pissed about inequality, is that despite people having material and service equality like never before, social status remain extremely unequal. But that is human nature, and no amount of money redistribution can change it.
Maybe that is what you mean by "social status", but an very unequal distribution of power is not a good thing in a society through many's eyes.
One tweak is having a robust estate/death tax. That will create a more level playing field. People will complain about double taxation because their whole lives they are building a fortune for their children, but passing tens of millions of dollars to your grandchildren is not something we need to protect.
Not to discount the importance of the rest of what you've listed, but there are still immensely important things that are not available at lower income, or that are only available at higher income.
The retirement insecurity is a consequence to lifetime expectancy having increased vastly beyond retirement age. The health care bills ? You couldn't even get them before, as all the healthcare one could expect was penicillin, aspirine, bandages and hot soup. Housing ? People would live with their parents until and even after they married. Now people can afford to move out and divorce.
Social behaviour and expectations have changed to fill in the opportunities offered by newfound wealth, driven by the search for longer life and higher social status.
For physical comfort and mass produced entertainment, yes, they have never been cheaper. But definitely not opportunities.
Quality education, the bedrock of opportunity, is more expensive than ever, even for the middle class, and the poor have long been largely priced out.
It doesn't matter if all the knowledge in the world is available online because you still need a quality education to absorb that. When the wealthy decide to pull their kids out of school and give them the internet as a substitute I'll reconsider that.
Safe communities are also something increasingly inaccessible to the poor.
The disparities in opportunity are especially pronounced in urban areas and rural and post industrial areas, but the trend is the same practically everywhere.
That's a pretty big exception to what you're talking about.
Daycare is another.
Talk to the working class (uber drivers, janitors, &c) about their lives. They work very long hours to just barely scrape by. Housing and medical care are very expensive compared to wages.
Take a walk outside. Unbelievable numbers of people living in misery on the streets. There are entire tent cities sprouting up like mushrooms.
It's bad, in absolute terms.
I dont need a Car, nor a Smartphone nor any of the example they gave. I need Food, Water, and Clothes. Three most important things. Then I need Shelter. First three is solved, the latter happens to be the root of all evil.
I think that is a profoundly naïve narrative.
This has never been done successfully in an economy not based on resource extraction without destroying the engine that produces that "enormous wealth".
The whole thing is both well intentioned and incredibly naive.
So it's a good idea as long as we constrain it to our natural resources?
Norway's sovereign wealth fund is significant because there just aren't that many Norwegians.
The best thing any individual can do to reduce inequality is to only contribute to institutions that do not exacerbate inequality.
Is the median wage at your company less than the wage required to buy the cheapest home within a 2 hour commute of your office? You're likely exacerbating inequality every single day.
Are one or more people at the top of your company working on buying their next Ferrari or second/third home? You'renliklwy exacerbating inequality every day.
If poor people were more willing to die than to contribute to the same companies and people that fuck them over and the middle class was more willing to work for themselves instead of contributing to greedy corporations all for a mediocre home, then we would have much more equal power structures in this country.
Every single person in this country is responsible for the way it is. Being at the bottom isn't an excuse to fall in line and do exactly what your masters tell you everyday.
It seems to me that the real problems here are this: An increasing share of GDP is going to corporate profits, and away from wages, due to deunionization, globalization, immigration, and automation. Government policies are mostly responsible for the first three. This stagnation of wages has combined with the post war relentlessness of Madison ave, which programs us to increase our consumption, even though there is no new income to support it. The result is decreased savings and increased debt among the bottom 90%.
Social credit is slightly different than minimum income in that social credit is tied to the wealth of the country rather than the cost of subsistence.
The income is drawn from a dividend on a kind of sovereign wealth fund which would be gradually capitalized with government assets, increased wealth and capital gains taxes, and possibly directly via the Fed (rather than the Fed capitalizing private banks).
This is in contrast to other schemes that directly pay the UBI based on more progressive taxation.
In the end it is still redistributive, but it redistributes capital downwards and not just income.
Posted on HN here: https://news.ycombinator.com/item?id=15789108
On that note, I wonder how feasible it would be to have a company who uses profit to fund an endowment and then later vows to only pay employees a percentage of the gains from said principal. That'd be neat (assuming you could find employees to agree to said payment method).
Assuming the company has no shareholders, wouldn't it exist in perpetuity? If this works, perhaps a similar scheme could work to fix real life inequality -- force rich people to invest their money and give the gains to the poor. Rich people don't lose any money (other than the opportunity) and poor people thrive. Win win?
Alaska has been facing a multi billion dollar budget deficit as they recklessly spent during times of high oil prices -- ironically not dissimilar to the events that led to the initial creation of the fund. So what was their solution? The governor unilaterally slashed payments from the fund - a decision that was challenged and then upheld in the state courts. We can write all the sort of legalese we want to try to prevent this from happening, but I think the current state of society illustrates quite clearly that laws are subject to the views of those in power. For instance are the actions of the NSA and CIA the sort of government programs the founding fathers intended to allow when passing the 4th amendments? I doubt many would say yes, yet here we are.
And I'm not even considering the inevitable graft involved in the management of such a monumental fund. Ultimately, I just do not think this sort of idea is possible in the US on a national level. State level initiatives are a very interesting idea, however.
Fist currency in principal allows monetizing budgets (either in general or debt specifically), but this is avoided in practice (and one reason for independent central banks is to provide confidence that political actors will not engage in monetization.)
Note well: "If they were aware, they would fix it" is not a valid response. Fixing inequality is not a part of the Fed's mandate.
So wealth redistribution was the punchline after all.
"It wasn't true communism"
My issue with this article is that it claims a fund mechanism makes the inequality problem simpler, but it is still subject to all of the same problems that plague the existing redistribution schemes.
None of the ideas in the article truly boil down to this, except maybe some specific implementations of taxation.
> redistribution is not the only kind of distribution.
I’m trying to understand this, but I can’t.
Perhaps this national wealth fund could pay out this citizens dividend or ubi as a cryptocurrency?
That wouldn't work in the good ol USA because the rich would use racisim and sexual panic to turn people against the welfare state and divert the money for more tax cuts for the rich. In this country the only bennefits that stick around are direct benefits that are mostly targeted at the upper middle class, such as the mortgage interest deduction or 529 college saving fund.