Comment by DoreenMichele | Hacker News Reader

Comment by DoreenMichele | Hacker News Reader

Have they not heard of Adam Smith's The Wealth of Nations? *

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."

* https://en.m.wikipedia.org/wiki/The_Wealth_of_Nations

"...the money will get pissed away."

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.

"Easy come, easy go" is a well known phenomenon. How you get your money influences how and what you spend it on. Most lottery winners are bankrupt within 5 years (about 2/3s of them).

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.

anecdote != data

You only need one example to the contrary to rebut an assertion of never.

However you need much more than one to avoid delineating the exceptions which prove the rule.

Also, your anecdote had a safety net - parents willing to take them in. What impact would the absence of that safety net have had?

The judgement of the parents may have been part of why he felt compelled to leave town and get thoroughly wasted. Perhaps had they not been there, he would have been facing a very different mental and emotional landscape entirely and made other choices.

You cannot change one element of an equation without impacting all parts. Thinking you can is a common logical error.

It doesn't matter as much what he got for his money, as where it goes from there. The question is whether the money has a faster path to productivity via the sex worker or drug dealer than it would via a hedge fund manager. And that is not an easy economic question to answer, all moralizing aside.

I think that completely discounts the negative long term impact on his life, which seems particularly egregious in a discussion where I am being criticized as if my remarks are an act of callous disregard for the welfare of the common person.

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."

You're correct, it does discount the impact on his life because that impact, however emotionally compelling, is irrelevant to the point of the subthread. Which is that, short of literally destroying it, money is never 'pissed away'---it simply moves on to someone else. People often confuse the benefits (and moral implications) for the spender (which are often pretty clear, as in this case) with the broader economic benefit of the transaction to the economy (which is much less clear). Ie, "someone made a bad moral choice in spending their money, so that must be bad for the economy." Not necessarily.

So, his inability to buy a house for himself and the fact that he continued to live with parents for many years has no bearing on our discussion of the economy and the creation of wealth?

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.

"So, his inability to buy a house for himself and the fact that he continued to live with parents for many years has no bearing on our discussion of the economy and the creation of wealth?"

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.

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

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.

I meant no offense. I understand that the guy's story is a sad one, and that he could've spent the money more productively. He could've been a better person. None of that has anything to do with what happened to the money after he spent it, which was the point of my original comment. If the focus is on the guy and his behavior, and the money that comes in and out of his life, it says very little about how much that money is contributing to the economy. Like a lot of things, it's the economic network that matters, and his position in it, and not so much his direct marginal contribution to it (or lack thereof).

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.

I meant no offense

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.

Don't give up, you're actually pretty close. Yes, it can be spent in a way that reduces value. And it can literally be destroyed (as I noted several times above). In the latter case, we agree it's been lost. But in the case where it's used to destroy value, the money itself still remains in the system, and might very well be used to create greater value than what was destroyed. For instance, a kid might buy a cherry bomb from another friend and destroy a mailbox. But the kid he gave the money to uses that money to start a business. The net value of the money's path through the cherry bomb to the business could be greater than if the first kid had donated it to a charity instead. My point is that while we can make a value judgment on the kid's spending, we can't say with certainty what the broader economic effect is. Even if he's spending all his money on sex workers, cocaine, and cherry bombs.

My point is that while we can make a value judgment on the kid's spending, we can't say with certainty what the broader economic effect is.

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 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 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.

> 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'

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.

There are certainly ways of spending money that are more clearly productive than others. But no, the money isn't pissed away just because what is purchased gets consumed. That just means that the path it's on may not be very efficient. It's that path efficiency that ultimately matters, not the value of any one stop. It's a harder thing to measure, because a short, fast path with a few low-productivity stops may be better than a longer, slower path with higher productivity stops, simply because the money gets somewhere else (with a much higher productivity use) faster.

It absolutely is pissed away. Going back to the beer metaphor, at one time, the economy contained the (let's say) $8 used to create the beer and the $10 to buy the beer. After the beer is consumed, only the $10 remains, so the economy is $8 smaller. $8 was pissed away. My whole point is that economics isn't zero-sum, which appears to contradict your point, although I'm confused by your path efficiency remarks.

No. The $8 that was 'used' to create the beer passes through the hands of the brewer's suppliers and their suppliers, back into the wider economy. It is a medium of exchange, not a consumable. It does not leave the system, short of someone literally destroying it. Economically, the only question is how fast it moves and how many productive assets it leaves behind as it travels its path through the economic network.

yes..and the economy is much more complex than that. even if I just take the eight bucks and burn it, the exchange value of the rest of the money in society increases.

..because both wealth and money only really exist in relation to the people that use it.

How is the 600 billion spent annually on the military anything of productive value that is in any way significantly different than it getting "pissed away"?

It's offensive to suggest more of that money will get spent on entertainment (etc) than food, clothing, shelter, education, medical expenses (etc)

If we do away with the US military, we will promptly be invaded and taken over by someone else. The military allows the country to exist at all. The world is not full of live-and-let-live hippies who all love the US and its people.

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.

1) Yeah, the 300 million firearms in the US wouldn't be any impediment at all to an invasion C'mon. There are no barbarians at the gate.

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.

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.

FWIW, my definition of slavery is that the value of your productivity is owned and controlled by someone else, not you.

I see, so you too consider capitalism a form of slavery.

When things are done right, capitalism does not have to mean that. Employees can, for example, own stock in the company where they work. Some companies basically insist that employees do so and intentionally develop an employee-owned company culture.

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.

(thread fail sorry) Your definition of slavery pretty neatly matches capitalism, I hope you notice ...

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