If I stick a million dollars in an index fund and passively get richer, am I stealing from the poor? Wealth is not zero sum, yet we seem to treat it like it is (in order for poor people to become wealthy we need to take from the wealthy)
This is obviously not the entire story, because the economy certainly has grown historically and continues to grow, and that growth comes from somewhere. But it is plausible that some amount of wealth accumulation does come at the detriment of the poor.
If the market rate is artificially inflated (minimum hourly wage) then companies will find a way to automate those jobs away. I am sure people will say that this would have happened anyway with certain unskilled labour jobs but you could argue that this only further incentivises them.
I would argue that the UK fast food chains and supermarkets are a good case study to illustrate this. In the UK most of the cashier staff are slowly being removed. Now they normally have 6 - 10 checkouts that are automated and have the customer scan their own items. Tesco (that where I normally go) instead of having 10 checkout staff you can buy 10 machines that are managed by one or two people at most. All the machines in the major supermarkets are using the same vendor for their machines and the software appears to the same for each supermarket but skinned, with the only exception being the german supermarkets.
Similarly at the other end of the scale in the UK. A C# .NET + MVC + JS with some SQL Server experience contract rate is about £350-400 a day. In London because developers expect higher rates (and the higher cost of living pushed the rate up by about £100-200 a day.
First, are all markets just markets?
Second, what if the market rate is artificially depressed - what if it is systemically artificially depressed?
Do market expectations align with an appropriate distribution of wealth to labour under conditions where the first is false or the second is true?
I am not sure what you mean by this.
> Second, what if the market rate is artificially depressed - what if it is systemically artificially depressed?
Regarding artificial depression. Well this is where we get into some somewhat controversial territory.
Some will argue that immigration artificially depresses wages as you can artificially increase the supply of labour and thus drive down the prices. Those that are conspiratorially minded would claim that large companies would make efforts to lobby Political parties to have a more open doors policy on immigration.
Now there is some evidence of the market rate being depressed due to immigration e.g. construction wages have increased in the UK after the "Leave Vote".
https://www.theguardian.com/business/2019/jun/24/constructio...
But I remember reading about a Bank of England report which is somewhat recent and this is the published paper:
https://www.bankofengland.co.uk/working-paper/2015/the-impac...
However the stats themselves go over my head. I have google'd around for a simplified explanation (because I don't trust any of the newspapers to be honest as they will each push their own agenda). It appears that the effect on a native workers on minimum wage would have only lost less than a penny per hour due to immigration. A penny per hour is a rounding error for most people.
However that seems to be at Odds at what we have seen recently with construction.
So I don't know what to think tbh and I won't claim to be any definitive authority on the matter.
> Do market expectations align with an appropriate distribution of wealth to labour under conditions where the first is false or the second is true?
Sorry it isn't clear what you are asking me to compare.
Contrast that with the plethora of wealth-increasing opportunities that are not available without a large initial investment or the connections or power that comes with existing wealth.
The point being: a large fraction of the population in the US is living paycheck to paycheck and has no money to spare for investing in an index fund.
being poor impairs your cognition[1], so it's not surprising that they are wasting money on stuff like that.
[1] random google result: https://www.scientificamerican.com/article/how-poverty-affec...
And if you were to find evidence of poorer people having impaired decision-making skills in the US (and there might be evidence of that), the question becomes, are they as poor as they are because of that poor decision making?
If they're forced to take their money out of the fund due to their circumstances, then they could actually lose a lot of it (an economic downturn makes both situations more likely to occur at the same time). Whereas someone who is well off only loses money on paper and can afford to hold on to their investment until the economy improves.
In short, index funds are a bad investment unless you're well off enough that you won't need the money invested. At least not for a long time.
If the rich got richer, does that mean they took from the poor? No. But it also doesn’t mean they didn’t. As usual, you have to look at the specifics.
The world does have limited resources and capacity for economic growth. In your index fund example, a substantial chunk of those are being allocated to someone who already has plenty, and it would be a lot more useful if it went to someone who had less. That’s not exactly taking from the poor, but it’s not exactly not.
For example, business growth is usually wealth creation. We shouldn't think badly of successful businesses (unless they're taking advantage of externalities or similar). However, pay is wealth allocation. Pay going to executives versus workers versus charity versus taxes is a zero-sum game, but we're OK (for certain values of "we") with executives getting a huge slice of that pie because we're pretty sure it helps drive the wealth creation side of things by providing incentives.
It gets you thinking about what incentives you need, what sort of behavior they drive, what sort of behavior we want to drive, etc.
Far more useful and interesting than the typical story of "wealth is not a zero-sum game, rich people don't take anything away from poor people, The End."
It's not entirely zero sum, some investments increase productivity and thus create actual wealth. Unfortunately investment in stocks and real estate don't increase productivity at all while rent-seeking only directs an ever increasing proportion of available wealth towards rich people.
yes, the money supply and real productivity are disconnected from each other, but it's hard to imagine such a huge change in control of the money supply over a period where real productivity is held constant.
> It's not entirely zero sum, some investments increase productivity and thus create actual wealth. Unfortunately investment in stocks and real estate don't increase productivity at all while rent-seeking only directs an ever increasing proportion of available wealth towards rich people.
if there are some investments that increase productivity, but they aren't stocks or real estate, what investments do increase productivity?
Starting/growing a company is the obvious investment that increases productivity (pg isn't wrong). But selling your labor also increases it on a smaller scale, as long as you don't replace someone else. Actually literally anything that creates anything increases productivity. Even creating bitcoins in a sense does (but trading them doesn't)... until they crash.
But real estate and stocks only move ownership from one person to another. They don't create anything. Even issuing new stock only moves ownership.
One way to fix the problem, in one way or another, is by some form of resource distribution. If someone has got other recipes that could reasonably be expected to work, then they should put them on the table. So far, the "trickle down to the masses" methods favored by the ultra rich have not proven to be very successful and people cannot be bullshitted forever (or who knows, maybe they can, we'll see in the future).
The rich making a trillion dollars does not translate into the poor losing a trillion dollars (zero sum). But the wealth of the rich increasing by 300% and the wealth of the poor remaining the same indicates the economic policies and conditions are not benefiting the poor as much as they benefit the rich.
Often,the argument is that policies are not fairly applied to allow the poor to maintain an increasingly better economic living conditions.
But anyways, that's not how people build their model of fairness.
They look at their boss, making much money,often of their good work, while giving them the bare minimum he could get away with.
They look at bezos treating employees like cattle, and not paying taxes.
They look at their landlord, "killing them" with rent. And let's not talk about buying a house.
They look at rich guys, getting many women easily. While they struggle.
Should they really feel the rich don't play a zero sum game?
But what relative wealth buys - a safer, more comfortable position in society - definitely is.
There is a tautological zero-sum ordering in relative wealth, but it's not clear that correlates to anything meaningful to vast majority of people.
I’m not saying it’s not important, I’m saying it’s not obviously zero sum. If it was, any marginal change for one person would have impact for another. With an uneven enough distribution I could lose relative in an amount that actually has no impact for me, but could have utility going to you, say. Bear in mind the criteria was “safe and comfortable”, not “able to outbid you on a property”
When you shove apes deeper into the pits of the dominance hierarchies and feed them garbage, you're going to have resentment.
Along those lines, capital has been concentrating ever more into a smaller slice of the population while cutting the value of the humble pile of capital the average US citizen has. I don't believe in wealth as a zero sum game but I do believe in hyper-predator agents steering the system for more ill-begotten gains. Which becomes a zero sum game...
I would say it's a combination of zero sum and non-zero sum. If we can allocate resources better, both the poor and the rich can get richer by producing more. But at the same time how profits are distributed is a zero sum game.
Point is it does not matter if rich got richer. What matters is the tax-system that (at least under Trump) favors the rich and produces growing inequality.
What is not zero sum are the actual goods bought with the money, in cases where cooperation could result in better productivity and more actual goods produced.
A surprising number of people retain from childhood the idea that there is a fixed amount of wealth in the world.