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Comment by kiliantics | Hacker News Reader

Piketty showed in Capital that most modern work about the trends in economic inequality was flawed. We usually think of the industrial revolution and modern era as periods where power and wealth became much more fairly distributed. However, if you go far back enough into the records, as he did, you can see a clear trend of concentration of wealth even now in the current system. The trend was briefly disrupted by the two world wars which were so destructive to our economies. The necessary reconstruction led to massive wealth redistribution and evened the playing field somewhat.

It seems that the graphs in this tweet are another confirmation of Piketty's observation.

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Didn't Rognlie @ MIT show that almost all of the out-performance of wealth was due to real estate prices? Couldn't the solution to wealth inequality therefore be a radically different approach to building codes and land value taxes? And doesn't it follow that wealthy landlords in California massively benefiting from proposition 13 and decrying wealth inequality at the same time sit at the pinnacle of political and economic hypocrisy?

> In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well-known, and a fall of comparable magnitude that continued until the 1970s, which is less well-known. Overall, the net capital share has increased since 1948, but when disaggregated this increase comes entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. [0]

That doesn't mean that the gains for capital since the 70s are from housing. Only that the gains from the 40s are. It also doesn't address the industrial revolution's affect.

[0] - http://mattrognlie.com/brookings_capitalshare.pdf

It’s clearly the case for since the 70s as well.

In an interview, Nobel prize-winning economist Joseph Stiglitz (who served under Bill Clinton) criticized Piketty [0] of overemphasizing the increase in concentration of wealth, and this was on the basis that the current increase in wealth stems from an increase in land value.

[0] https://www.salon.com/2015/01/02/joseph_stiglitz_thomas_pike...

> It seems that the graphs in this tweet are another confirmation of Piketty's observation.

As far as I can tell, the graph is based on an earlier graph from Pikettys paper:

http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015....

Compare to Figure 5

There are two extreme ways to remove the inheritance problem. One would be to forfeit personal property: you can't give what you don't own. The other would be to remove the concept of family: when born you are placed in a communal system to be raised by professionals. People start with the same chances, the same level of social knowledge, network and vocabulary, you almost get to a pure meritocratic society (there are still those pesky genes).

Let's not imagine the unwanted effects and just bask in the idea of those kind of perfect societies.

We already have inheritance tax laws, they are just not very good. They need to target trusts and other ways that rich families get around it.

> you almost get to a pure meritocratic society (there are still those pesky genes).

That's OK, we can use CRISPR tech to solve that problem.

Brave New World in 3.. 2.. 1..

There is a third (equally extreme) but much simpler way.

Keep everything as is, but don't allow inheritance, or cap it at some number.

You still benefit from your parent's network, you learn a lot more at a young age at home, you profit from their money while being raised. That's a huge difference between people from poor areas and those from even middle-class families.

And that's something advantaged people don't like to think about when they use the meritocratic word: most of them benefited from huge advantages by being born in the right family. Or even just by being born in the right country.

Nowadays you benefit from your inheritance when you are established and don't really need it anymore. What really helped you was the 100k-1 million 0% interest loan with no problem if you don't pay it back you got during your 20s from your parents. Or just knowing you could be attending a good college and knowing the most important you have to get out of there is the right network of people.

https://news.stanford.edu/news/2013/september/toddler-langua... for an example of what having the right parents can help a long time before inheriting their property.

Why shouldn't we concentrate most of our effort on those whos' parents succeeded? If the parents had the right mindset and the right genes to succeed, they would in all likelihood pass those onto their children. This mirrors the natural world to a great degree, and to me would seem to allow for a lot more beneficial outcomes then some arbitrary guideline of fairness.

What is better, to give $100K in wealth to everyone, from idiots to geniuses, or concentrate our efforts on those that have more chance to succeed?

Social Darwinism was bullshit 100 years ago and it’s bullshit today.

I looked up this term in wikipedia, and I don't know what you are trying to label me as. It seems to be just a buzz word.

As quoted from "The Concise Oxford Dictionary of Politics":

Part of the difficulty in establishing sensible and consistent usage is that commitment to the biology of natural selection and to 'survival of the fittest' entailed nothing uniform either for sociological method or for political doctrine. A 'social Darwinist' could just as well be a defender of laissez-faire as a defender of state socialism, just as much an imperialist as a domestic eugenist.

Can you explain further?

The problem with this is that as long as there are so many confounding factors, there is no reason to assume that the success of someones parents was "their own" as opposed to a result of one or more of the confounding factors such as a better network, and access to better education.

If you are going to go that route a better measure would be how much upwards mobility someones parents have demonstrated proportional to their starting point.

Of course that still suffers from a number of confounding factors (e.g. we don't know how much is down to luck)

That would be true if we were trying to find the exact reasons for success.

If you are just trying to promote success, then it stands to reason to reward success of the parents, incase some of those confounding factors are hiding actual fitness. After all, if the null hypothesis is true, you aren't losing anything by promoting some people over others, if they are all equality capable, anyway.

If you're letting 1% of the population hoard 99% of the opportunity, you're losing metric tons of potential.

It isn't. It's much more graduated than that.

If we don't vary the amount of support people get, then we won't be able to take advantage of situations where more support (or less) would result in greater success.

And given that everything is constantly changing, there is no way to find a perfect level of opportunity to give to people.

So, a system that provides a varying level of support spread out against the population will do better nearly all of the time than one that provides an equal amount to everyone.

I wasn't advocating for perfect exactly measured equality, I was arguing for a distribution that wasn't over the top insanely unfair to 99+% of everyone.

Does it? We don't know that without actually testing. It's very much possible that providing less assistance but to more people will have a much wider impact. If the parents truly are responsible for their own success, there is for example good reason to hypothesize that they may be able to compensate for reduced support with their abilities.

The problem is that measurable success is going to change the experiment.

If you consider that there is no constant landscape, it's always changing and always an unknown, the best option is to try a plethora of different ideas, hoping some will succeed.

It's more like fighting a war in an unknown battlefield. If you play it just one way, you are more likely to lose than if you try many different strategies at once.

The ones that succeed will be self-sustaining, for as long as they are successful, anyway, and gain you enough ground to compensate for the strategies that didn't work.

If this wasn't true, nature would only have produced one single organism rather than a billion or more.

Or as Piketty proposed tax wealth as well as income.

Right now some country implement some inheritance tax, but that's the only time when wealth is actually measured and taxed and there are so many loopholes (trust funds, donations, …) to make this incredibly ineffective especially on the richest.

All these proposals about taxing more make me feel uneasy. The real issue i have with tax isn't how much i pay but how it is used. Before i need to pay even more tax i would like to see a concerted effort to automate civil service jobs out of existence (needing to queue at 5am in the morning to get anything done in Berlin is an inexcusable joke in 21st century) and two we need to destroy the unemployment welfare system and implement a basic income. If those two things don't happen as a minimum then i don't think anyone should pay another cent because Europeans are already getting shit value for money as it is.

The main problem is that right now we have absolutely no idea of where the wealth is. One of the most important consequences of the universal income tax was the production of a huge amount of data. There is no equivalent for wealth, even things like Forbes lists are mostly guesswork and handwaving.

>More than half of all private wealth has been inherited in most of Europe

The only time that wasn't true in the USA was before income started being taxed.

If you do the math, the only tax which is not destructive to working people is taxing commerce.

That's the way the US federal government was funded when free enterprise was more available to a greaater percentage of citizens. Switching over to income taxes shifted the burden dramatically from the powerful to the relatively powerless. What more effectie way was there at the time to keep down the first freeborn decendandts of slaves after bondage ended?

The most prominent feature of taxing income is its huge damping effect on upward mobility.

That's OK, the ones who instituted income tax to begin with did so because as far as they were concerned enough citizens had moved up already, especially from the very bottom.

That's the most important consequence.

This is by design.

It's probably best to try and look beyond conventional wisdom when invoking caca del toro.

The real issue i have with tax isn't how much i pay but how it is used.

Pardon my french, but that's such bullshit. Everyone who doesn't like to pay taxes has a noble excuse like yours. Sometimes they oppose to taxes being used to fund the arts, even though it's such a minuscule slice of the total pie as to be barely visible. Other times it's something else that they feel is frivolous or opposed to by some principle or other. The thing is however, that the nature of public spending is such that there is always something which we as private citizens would prefer not to pay for, if given the choice.

People with a libertarian bend tend to think of tax money being spent inefficiently as simply being wasted. But money spent by the government doesn't just disappear after it has been spent. It ends back in the pockets of the citizens! In the worst case scenario, it is thus simply being redistributed. In the best case scenario, it buys society something valuable (universal healthcare, say, or public education) along the way.

Sorry it's not bullshit. Governments in Europe are especially renowned for the any work is better than none approach and therefore even make up fake jobs to keep their unemployed subjects busy. Protestant work ethic withdrawal is evident and drawn out. Having experienced living in numerous countries i can safely say that taxes are often (not always) poorly spent in Europe. The bureaucracy is over bearing and many jobs exist purely for the sake of existing when they could and are done much better by computers in other countries. Im actually quite left leaning which is why when i care when i see public sector inefficiencies on the scale that they exist in Europe. My ideals start to become threatened when the execution is so purposefully ham fisted. We could be using that money and more importantly time to do amazing things that brings all of humanity forward rather than forcing people to do pointless jobs that they hate in any case.

Not that I necessarily disagree, but what countries outside of Europe are doing a better job with regards to spending money?

In the bureaucratic civil service area Singapore is run like a slick SV startup. It's really a pleasure dealing with the government here. *For the benefit of avoiding unnecessary heated discussion I'm aware and don't want to get into how cheap foreign labour is subsidising the public sector.

Regarding social welfare I don't know anywhere that's doing it well enough to be considered a success. We should be able to provide housing and food for 100% of the people 100% of the time. For the edge cases that fall through mental health care should be provided for as long as necessary.

Not to want to seem like a downer on Europe the things I think they do exceptionally well includes investing in education, while they are also OK on the healthcare front (personally I'm a huge fan of the NHS model and would prefer if it was more widely adopted).

Housing is badly managed as is support for cash strapped entrepreneurs. The taxes nearly broke us when we started the last business in Berlin. In Ireland there is (the last time I checked) a possibility of a 2 year tax hiatus for new businesses in certain circumstances. In general these kind of incentives could do wonders for entrepreneurialism and the potential knock-on upward mobility it can bring.

Governments in Europe are especially renowned for the any work is better than none approach

Are they now? It used to be true in the east bloc countries when they were all communist, but it's not remotely true in today's Germany where OP lives.

Having experienced living in numerous countries i can safely say that taxes are often (not always) poorly spent in Europe

People say that, and I hear: Taxes are not spent the way I would spend them, if I were in power.

when i see public sector inefficiencies on the scale that they exist in Europe

Please be specific about which inefficiencies your are referring to.

European countries are doing very well on the list of riches countries in the world as measured in GDP per capita. That would be quite surprising if their large public sector really were so horribly inefficient.

If you hear want you want to hear and not what I'm actually saying there is very little point in continuing our discussion.

> European countries are doing very well on the list of riches countries in the world as measured in GDP per capita. That would be quite surprising if their large public sector really were so horribly inefficient.

What do GDP and government efficiency have to do with each other?

> But money spent by the government doesn't just disappear after it has been spent. It ends back in the pockets of the citizens!

Money doesn't disappear, but resources (labor, natural resources) do. Money is just a proxy for resources, so it is valid to say that money can be "wasted", even if it flows into the pockets of workers – for every unit of money spent, there is an opportunity cost.

> In the worst case scenario, it is thus simply being redistributed.

That is not the worst case scenario. The worst case scenario is that resources are used up with little or nothing constructive to show for it. I disagree with many libertarian opinions, but it is not unreasonable to worry about wasteful government spending.

I would usually agree with you but I live in one of the most corrupted countries in Europe where public money is spent with complete disregard and some public services are crumbling as a result.

Over here we pay a lot and don't get nearly enough in return. The effect of this is a growing libertarian political scene.

a "noble excuse" like "I don't want the goverment to spend over a third of what it gets in taxes on a massive ponzi scheme"?

I'm going to assume you are french, and invite you to come to Spain, where we have a flamboyant highspeed railroad service in which there's not a single line that covers costs (not even Madrid-Barcelona). And guess what, we keep throwing money to that thing.

As for "money not disappearing", you are falling for the "parable of the broken window". Wikipedia has a much better explanation for it.

Once you're done with that, I suggest you to look at how 10 years ago Spain redid all it's public walkways (that were mostly ok) to "improve the economy". It was a massive waste of resources.

[I] invite you to come to Spain, where we have a flamboyant highspeed railroad service in which there's not a single line that covers costs (not even Madrid-Barcelona). And guess what, we keep throwing money to that thing.

What if you let go of the notion that public transportation must be profitable? I don't know anything about the railroad service of which you speak, but I find it incredible if the cost of running it is more than the value it creates (although I concede that it's possible in principle). Do you know what else most societies keep throwing taxpayer money at? Roads. Yet you don't find very many people having a hard time accepting that the cost of building roads exceeds the value created by doing so.

As for "money not disappearing", you are falling for the "parable of the broken window".

I don't know what you mean by this.

Wikipedia has a much better explanation for it.

I'm sure they do.

Once you're done with that

I have this principle which is that if you can't or won't make the argument, I'm not going to go elsewhere and read someone else make it for you.

This might be a chicken and egg problem: we need takes to fund the work of automating away these things. Just saying "public service is not good enough, so i don't want to pay more money to make it better" seems like a dead end.

I disagree. There should always be an effort to do more with less. This should be ingrained into our dna in business and in government.

What about taxing more the inheritances and capital income and taxing less the work income?

Not living with your family in you first ~7 years of life has disastrous effects on brain development and emotional health for the rest of your life.

I don't think that the parent comment was actually suggesting implementing these things, quite the opposite.

I believe Israeli kibbutz had communal child rearing.

> There are two extreme ways to remove the inheritance problem. One would be to forfeit personal property: you can't give what you don't own.

You are talking about private property. Personal property is distinct from private property.

I think you're kidding, but just in case not: Communism never did any little guy any favors. I can't even imagine the amount of suffering that would go on for children "raised by professionals" given the amount of documented abuse that takes places in institutions like boarding schools, foster homes, and so forth. Nobody loves a kid like his/her own parents do. Not to say that many families don't abuse their kids, but the idea that society would care better for a child is a concept that has been thoroughly and completely debunked time and time again.

As far as removal of private property, I don't think I like the living conditions in Venezuela, Cuba, or China very much, thanks. Again, nobody cares about property better than its owner, someone with a vested interest in maintaining it.

How then is it possible that some four in five American millionaires inherited no more than ten thousand dollars, according to The Millionaire Next Door by Thomas Stanley?

A millionaire is hardly wealthy these days. Upper middle class rich, sure. But not "an estate to leave to my heirs" rich.

Someone who got a good middle class start, went into the right career, and had everything work out pretty well (no major financial misfortune or an injury or sick family member) while saving responsibly, can become a millionaire in a few decades today. They can probably afford a nice house, which their kids can carve up to have their own nice middle class start.

This group of people is still insanely privileged but it is nothing on the obnoxious levels of real inherited wealth in the upper crust.

Speaking as one, I can tell you that having a couple million takes the edge off of everything in life. You don't sweat buying a house or pretty much any new car anytime you want it. The monthly bills are in the noise as far as concerns in life. I still go to work every day but I won't be working until age 65, that's for certain; not full time, anyways. My kids will be able to be entrepreneurs if they wish, they have a comfortable fallback that I never had. Less stress in life is a good thing.

What's different today is that inflation and high taxes have wrecked the middle class. The truly rich are the $100M and billionaire types whose wealth has run away from the rest of the people. Almost none of the truly wealthy are that way because they were smart (merit) only a few are. The rest . got rich either because they were lucky or because of some angle they could exploit such as favorable connections or regulatory capture. Above them, Old Money rules the world by at least one order of magnitude.

Isn’t this article about Europe though?

It's called "Thatcherism" for a reason.

A median-income household owning a median-priced house and making the standard 15% 401k contribution will clear "millionaire" by retirement age, easily.

And yet “Fifty-seven percent of Americans don't have enough cash to cover a $500 unexpected expense”. We suck at saving as a country.

Most of the value contributing to millionaire net worth is going to be in 401ks and home equity, neither of which you could reasonably access to pay a $500 expense.

It would be pretty weird to have <$500 in checking at the same time as 5-6 figures in retirement + home equity, but possible. It helps that 401k is a payroll deduction and there's really no bargaining with yourself on whether to pay the mortgage this month (whereas it's easy to splurge instead of saving extra cash).

You can access 401k under "financial hardship", after paying taxes and 10% penalty. Of course, it's rarely worth it for $500 - it'd be better to find a credit card with 0% APR or other credit option, if you have access to those. I imagine most people with 401k's do have access to credit. Am I wrong?

You can also loan against 401k (though there are limits, but if you have it for a while loaning $500 would not be a problem, though again fees could make it a bad deal). Advantage is that while you lose the growth for the time of the loan, you are paying interest to yourself, not somebody else.

"I imagine most people with 401k's do have access to credit. Am I wrong?"

Yes. Low-paying jobs at Wal-mart and Lowes and some gas stations offer a 401k. The contributions are tiny because the checks are tiny but the company usually contributes as well. These folks aren't as likely to have access to credit.

I'll put this as well: If you are looking to take $500 from your 401k outside of those groups, I'm gonna guess things have gone horribly wrong. Getting a new credit card might be a bit tough because your credit is probably already showing the hurt.

Plus the fact that to a person with cash difficulties going to their 401k to get money wouldn’t be easy. Even if you can find someone to help you they’re going to mail you a cheque some time in the future. Hence the success of pay day loan operations that are more than happy to help you out with that immediate $500 emergency.

Hmm I didn't know Walmart offered company-matched 401k. In that case, if they have contributed there at least $100 (which I think should be possible with company match if you work fulltime) for a year, there should be enough money to take a loan of $500 AFAIK.

> If you are looking to take $500 from your 401k outside of those groups, I'm gonna guess things have gone horribly wrong

Yes, probably, but the question was is it possible, when the things go horribly wrong. I still think if you have 401k that should be possible.

They actually have the most generous 401k plan of any company I ever worked for- a dollar for dollar match up to 6% of pay, with no cap. It also vests immediately.

Cash and net worth are not the same thing.

I like to remind myself that being poor and being broke are not the same thing.

15% of those are in poverty. This doesn't let you save up money. One in two americans are low income. [1]. I'd not call these number exact, but close enough. Much of the group you describe only suck at saving because their income sucks. $50-$100 extra a month doesn't make it easy to save up $500 for an emergency. Literally months. Months with nothing happening. Not a flat tire, not a doctor's appointment. Nothing breaking.

This doesn't explain everyone in your category, though, so a portion suck at saving.

[1] https://www.forbes.com/sites/timworstall/2011/12/16/well-of-...

15 percentage points, or 15 percent of the 57%?

The first. The percentage would be higher if taken from the 57%.

There's a great reddit comment that explains this in a relatable way. It's very expensive to be poor:

https://www.reddit.com/r/TrueReddit/comments/1v4t18/it_is_ex...

As the linked article points out, we have defined terms like “poverty” and “low income” relatively, so telling us the percentage of people they cover doesn’t convey any information.

The 57% figure is much more illustrative, in large part because it conveys an absolute capability which people can lose or acquire.

your primary property isn't normaly counted in this case

> A median-income household owning a median-priced house

A median-income household is unlikely to own a median-price house for a reason very similar to the reason they are unlikely to own a median priced jet, because home ownership isn't uniformly distributed across income levels, as low income households are more likely than high income households to be renters, and high income households more likely to be homeowners (and to own multiple homes.)

If a median-income household owns a home, it is likely to be a singificantly-below-median-value home.

I haven't looked at the data, but my guess would be that it's the difference between weighing based on individuals (number of individual millionaires) vs total wealth. The latter is going to be dominated by the richest part of the distribution.

This sounds like a big number, but consider this - if less than 10% of Americans are millionaires then this means that millionaire parents are more than twice as likely to have millionaire children as non-millionaires.

This shouldn't gel well with someone who values meritocracy/social mobility.

Parents have influence on how well their children do. Nature and nurture. Is this not the whole point of parenting?

If millionaire parents are only twice as likely to have millionaire children I would be surprised.

Handling money responsibly is the easiest way to become a millionaire, not inheritance.

Upbringing is important and I think children of millionaires are more likely to develop healthy spending habits.

Clearly those four in five millionaires aren't responsible for much of the total wealth.

From what I remember Piketty was simply against using the Gini Coefficient as a measure of wealth and income inequality, which happened/happens to be primarily used by such contemporary measurements.

> wealth became much more fairly distributed > clear trend of concentration of wealth

These two facts only contradict one another if you have an implicit belief that "fair" is "equal".

Yes, that was the point the comment was making - that going back further shows that the common assumption of a more fair distribution is wrong.

It seems that you're mixing up fair and equal again - which was the point of my comment that you may have missed.

Then you might want to make that comment instead of trying to be glib.

And no, I was not mixing up anything, I was pointing out that you were merely confirming what the comment said. That you disagree with the definitions used does not change that, given that it was clear which definitions were used, as you clearly understood yourself what was meant.

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