Americans Are Horribly Misinformed About Who Has Money
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The premise of such posts is that if people were aware of who was getting a tax cut they would be against it. Put another way: the premise is that everyone is purely motivated by self-interest.
There are two immediate problems with this line of thinking.
The first is tha it ignores how aspirational people are.i remember a survey from the 2000 election when Gore made the mistake of demonizing the top 1% repeatedly. The survey show something like 19% of people thought the were the top 1% and another 20% thought they would be someday.
The second problem is the whole "money for rich people = bad" argument. Some may ascribe to Reagenesque trickle down economics. Others may see that overtaxing the rich is ultimately shortsighted. Yet others may not get hung upon percentages and look at the absolute tax burden (iirc the top 1% pay ~40% of the tax burden).
Personally I just object to the tone of the rhetoric where politicians talk about "affording" or "paying for" a tax cut like they're giving away money. The reality is just that they're taking less money. Bit of a difference.
All of this is just "policy theatre" however. What the US (and most of the West for that matter) is facing a far bigger problem that the current systemis unsustainable and no politician wants to be at the helm when the music stop (to mix metaphors) with declining birth rates and increasing life expectancy.
Can you afford to take a year off from work? It's just taking less money. The fact is that tax cuts aren't free. If they aren't matched by spending cuts, you're just deferring the tax increase until later and incurring deficits in the meantime.
So you have to decide what you're going to cut. Which means weighing, say, decent healthcare for veterans, versus the benefit of the tax cut to people who are probably quite well-off already.
The Republicans in the Bush years were not willing to do that. So they cut taxes. And raised spending. And we could afford neither.
The budget is blowing out for three reasons: Social Security, health care and the military. Of the three only the last is largely discretionary (being the ongoing cost for campaigns in Iraq and Afghanistan).
When FDR introduced Social Security there was something like 50 working people for every retired person and the average life expectancy was probably only 60 or so. It's a straight money goes in money goes out system with no saving or planning for future spending. Everyone knows this is unsustainable. It's merely a question of when something will change and what. The smart money is on raising the retirement age.
Health care costs are spiraling. This is a much more complicated and multi-faceted problem. Personally I think part of the problem is the blank chewue mentality we have to health care. Basically it doesn't matter how much it costs to research and develop pharmaceuticals and medicine, we expect to be provided it. So companies largely ignore the costs.
It's a bit like saying to a subcontractor: you can choose to spend as much as you like and I'll pay you a 20% margin on top of that. What is the motivation of that subcontractor and the inevitable outcome?
Also I think you need to look at the structure of the health care system. I suspect the US has the most expensive health care in the developed world. I think systemic inefficiencies and overprotective IP laws play a bigpart in this.
> Growth in Budgets for Military Health Care
> The DoD's health care costs rose from about $20 billion in 1998 to $47 billion in 2010 (FY 2010 dollars)—an annual growth rate of 7.4 percent above inflation. Absent changes in policy, CBO projects they will at least double between now and 2028.
It's no sale because it's ~2% of the budget masked in emotion, which is at best an irrelevant distraction and at worst a deliberate attempt to demonize opposing views.
Limit the focus to just the (increasingly ill-named) "defense" budget and even then it's only around 10% and is dwarfed by the cost of discretionary operations within that budget/department.
> with declining birth rates and increasing life expectancy.
This problem is much worse in China.
Unless they then make it hard. After all, the state paid for your (compulsory) education, so to some you owe them all future success. And so you can't leave to escape a regime which is broke and desperate.
The end game of this process is East Germany or North Korea, where the state taxes 100% and literally shoots you if you try to leave. In the US, of course, we don't shoot you if you emigrate...but in 2008 the US did, for the first time, implement a massive ~50% exit tax for those over 200k in net worth who renounce citizenship. It was remarked upon as a radical shift, as a desirable/wealthy place makes it hard to immigrate while an undesirable/destitute country usually makes it hard to emigrate. A harbinger of things to come?
Maybe the 2th would be happy to leave though.
Our current situation has people like Warren Buffet paying a far lower percentage of their income in taxes than you and I, yet the rich use government services to a far greater extent than the rest of us. The US military isn't protecting oil fields I own in nigeria because I don't own any oil fields. The fire dept. isn't protecting the factories I own throughout the US because I don't own any.
I think it only makes sense that those who benefit the most from our government, and who can afford it, invest in it accordingly. For starters they shouldn't have a significantly lower percentage of income taxed than the rest of us.
The survey show something like 19% of people thought the were the top 1% and another 20% thought they would be someday.
If you're claiming that perpetuating this delusion would cancel out the effects of undermining the other delusion, you might be right. On the other hand, maybe curing this delusion too would compound the effect of curing the other delusion. Or hey, they might even be related.
Personally I just object to the tone of the rhetoric where politicians talk about "affording" or "paying for" a tax cut like they're giving away money. The reality is just that they're taking less money. Bit of a difference.
Personally, I think it's great when politicians use language that reminds people that it's our own government and our budget. Can I as a taxpayer, or we as taxpayers collectively, afford to move money from the "public expenditure" bucket to the "private expenditure" bucket? It's a reasonable question. What bothers me is politicians who suggest that spending cuts will just magically materialize and save the day if we don't pay enough taxes. Sorry, no, that doesn't just magically happen.
The alternative to reminding Americans of their responsibilities is to alienate them from the government, i.e., stop them from thinking like citizens of a democracy. Let them think the government can go completely to hell, ruin its credit and go bust, and the people will bear no responsibility. Let them think that government spending doesn't reflect the will of the people, so the people have no responsibility to pay for it. Or let them think that maybe government spending does reflect the will of the people, but that because they personally disagree with part of the spending, they aren't responsible for paying for the whole thing.
The truth is that it's in our interest to keep the government financially healthy and creditworthy. It makes a big difference to us whether the government pays its bills over the long term. It's also true that in a democracy we're responsible for the well-being of a government that doesn't follow our individual whims. When we ponder how to pay for government spending, we can't just think about how to pay for the spending we approve of. We're responsible for the whole thing, conservative or liberal, big spender or "fiscal conservative," whether we like it or not. I can't refuse to pay for the Iraq War just because I opposed it. Yet that's what pundits constantly implicitly ask us to do. They target conservatives especially: we should not pay enough taxes to support entitlements because entitlements are bad policy. Such-and-such is unsustainable; therefore, don't worry about paying for it.
Unfortunately, cutting taxes doesn't cause spending cuts. In a cash economy it might work, but in age of credit, when credit is necessary to get any business done, "starve the beast" is the practical equivalent of, "I'm going to eat so much that I'll be forced to exercise!" The one thing is only connected to the other by discipline (keeping revenue and spending in line) or catastrophe (failing to maintain our creditworthiness.) Pretending they're perforce connected under normal conditions, and hence the country should only collect enough revenue to pay for the spending we personally support, is a free pass to self-indulgence, because nobody in the country supports the entire budget. Since everybody opposes a significant chunk of federal spending, we would all agree on funding just a fraction of it. Then we could all blame the shortfall on the people who supported whatever fraction of spending we opposed. It would be -- no, it is -- a perfect scenario: nobody thinks the shortfall is our fault, even though we all support it!
That's absurd, of course. We're all responsible for the whole budget, even if we personally didn't support every piece of it. I'm responsible for finding some way of paying for the Iraq War. Conservatives are responsible for finding some way to pay for welfare benefits. It's our government; we're responsible. If we don't want to pay for something, we have to persuade our fellow citizens to oppose the spending, and if that isn't enough, we may need to reform our political processes. What we can't do, in an age when credit is a necessity for getting anything done, is agree as a nation not to pay for spending that we as a nation agree to indulge in. That's why it makes sense to ask if we can afford a tax cut.
I find it particularly disturbing that these thoughts even find an outlet on HN which is the antithesis of the zero sum world. You, yes you coder, entrepreneur are part of building wealth out of nothing. How can you possibly think that by doing so you are stealing food out of the mouthes of poor children in the inner city. You are helping them in the long run by growing the economy.
To a poor person objectively speaking it doesn't matter on anything but an envy level if someone else is rich. What matters is their own life. And this is what Gini coefficients and graphs like this one doesn't show. Yes it's interesting that people have different views of this, but it is not important.
Imagine we can put a number on quality of life. If the poor person starts out at say 1 and is at 10 after 10 years (as has happened in many developing countries). Does it matter that the rich person also is 10 times better off or even 100 times better off? I don't think so. That poor person now is healthier, has better opportunities etc than before.
The children of this poor person will likely have a much better life while inequality might not have budged much in his country.
See Hans Rosling who illustrates this very well:
http://www.ted.com/talks/hans_rosling_reveals_new_insights_o...
America is a very unequal country that is true. Just not unequal in opportunities. The richest people in the US (the ones with 80% of the wealth) have probably in most cases earned it.
Many of them have come from other parts of the world and created lots of jobs both here and abroad. Due to the fact that there are so many opportunities wealth distribution of course is skewed towards the rich.
Another fact that simple populist statistics don't show is that many of the poor are new immigrants arriving here because of those same opportunities. Their kids will be considerably well off.
Just by virtue of the HN community being who we are, we should keep doing our bit to increase the overall wealth of our world and countries, even if we may end up with more than our "fair" share.
The question on the table, though, is whether it's worth knocking the rich person (or maybe all rich people) down from (on some "quality of life" scale) a 100 to a 99.9 in order to lift the poor people from a 10 to a 20.
If you just look at that wealth distribution, you'll realize how little the rich have to suffer in order to help the poor a huge amount. And that's even before taking into account logarithmic utility functions...for all the arguments about how taxation reduces the incentive to make money, it's oh so rare for libertarians to explain why the rich still keep trying to make money even though they derive far less utility from it due to logarithmic utility functions than they could ever lose from a modest taxation rate.
In any case, here's where most of the disagreements stem from: most people that are against redistribution are concerned with optimizing the long term dollar value of the entire economy, so they want to keep wealth in the hands of those that are good at turning it into more wealth, even if the wealth that's created doesn't benefit those people directly at all (give $1 million to Bill Gates and he won't even notice; give it to someone on welfare, and it would change their life).
People that are for redistribution are concerned with optimizing the short term utility value of the entire economy, so they'd rather put wealth in the hands of the people that would benefit from it the most rather than in the hands of the people that would create more of it.
Taken to the extreme, each of these positions is absolutely indefensible and leads to a ridiculously inefficient and/or cruel economy. So we should always summarily discard any argument that does not promote some balance between the two sides.
Sadly, it's been a long time since I've heard someone present an argument that actually supports a stable balancing point, most people just argue blindly to push in one direction or the other.
When it comes to wealth distribution, I can not see any better way of doing it than letting the markets manage it. Where the governments and charity's come in should be in efficient exception handling dealing with the various emergencies the real world raises. Don't misunderstand me though. "Rich" people are not necessarily nice people and often are not believers in free markets. They are often directly in cahoots with government and make lots of money being invested in the status quo.
The problem with just about every single attempt at taxing this little tiny group of extremely rich people is that in the end it hardly affects them, but almost always harm the entrepreneurs who aren't yet at the Billionaire level.
(Excuse my CS metaphors) My own country Denmark got rich by having an open economy with little redistribution but plenty of exception handling. Since the late 60s the focus shifted from exception handling to having a heavy handed kernel process maintaining resource sharing in realtime which now counts for over half the economy. This has stagnated the economy, which currently only looks better than Greece because of our oil resources. We are an extremely equal country, with only a small handful of outliers. End result to maintain our equality many of the smart coders/entrepreneurs now live abroad (eg. DHH, Rasmus Lerdorf) while more and more resources are being spent beating immigrants into being as equals as the rest of us to which we are now being rightly condemned throughout the world.
A little thought experiment to which I do not know the answer:
What part of Bill Gates deeds will over history have done more to multiply peoples quality of life in the developing world? The Bill and Melinda Gates foundations good work throughout the world or the millions of pirated Windows copies used throughout the developing world in everything from small businesses to internet cafe's to schools.
Splitting the world into two sides based on some simple criterion, and assuming that one side will always have one opinion and the other side the opposite opinion, is a gross oversimplification and disrespectful of everyone involved.
To run with the taxation example, taxing the rich is not simply a matter of "less" or "more," "good" or "bad." That kind of thinking simply drives the rate to 0% or 100%. Of course there is some optimal level, and deciding whether that level is higher or lower than the current rate requires some examination of the current state of affairs, not just a cartoon narrative that always says "less" or "more" no matter what the current situation is.
Policy decisions have to be based in facts and reality. I find it flabbergasting to see on HN -- where we are supposed to be hackers, people adept at working with concrete technology that is not amenable to rhetoric (could you please persuade my code it should run faster?) -- I am flabbergasted to see someone suggest that a gross misconception about reality is harmless, and that drawing attention to such a misconception should be stigmatized as "scaremongering." The author doesn't hide his political leaning, but he limits his editorializing to a few stray comments, and he makes an excellent point about the importance of facts: "It's fine if reasonable people have different ideas about whether we should extend the Bush tax cuts for people making more than $250,000. Or think estate taxes are unfair. But when we have those debates, it's critical that everyone has a clear understanding of how things really are."
If anything should be accepted as fair in political argument, it's the presentation of facts, unless you wish to challenge their accuracy.
Finally, as a point of rhetoric: By disagreeing with the above, by stigmatizing facts as "scaremongering" without challenging their accuracy, and by assuming that the presentation of these facts has an inherently redistributionist implication, you appear to be endorsing the slogan, "Reality has a well-known liberal bias." You may want to consider making your point in a different way to avoid this perception.
Policy decisions should absolutely be based in fact and reality. Yet they rarely are and the unintended consequences of almost every single law in every single country in the world proves it. This is why it's best to avoid policy decisions in the first place or at least minimize them and their impact.
Thirdly, yes it's terrible that people believe wrong things. But here is a surprise. They always have and they always will. Who knows maybe you and I both believe wrong things. As long as these wrong facts can't harm other people it doesn't do a lot of harm.
Should we try to teach them about the truth. Of course we should try. Should we punish them if they don't accept our version of the truth? No.
I for example am frustrated when intelligent people still insist on seeing the world as zero sum. It is a cultural issue more than anything. As that is what we have been brought up with from countless hollywood movies with evil rich guys taking land away from the common folks and what have you. I try whenever I can to teach about this, but I know it is an uphill battle.
Facts are important. But understanding the effects and importance of facts is even more important and is unfortunately not an objective task.
If you're interested Russ Roberts of EconTalk had a very interesting discussion of bias within Economics, where he attempted to look critically at his own and other economists biases in analyzing empirical evidence, which is essentially what our discussion is about:
http://www.econtalk.org/archives/2009/01/roberts_and_han.htm...
Can you provide evidence for either of these claims?
That America is not unequal in opportunities? Just look at the membership of HN and YC. People from all over the world come here to follow opportunities they did not have at home.
I may very well have overstated the issue about 80% of the wealth have earned it, but if they inherited at some point in their family history someone earned it. It is far from the old communist image though of fat laughing capitalists in top hats stomping over the poor proletariat, which while extreme is essentially the subtext to "The rich are not paying their fair share". "Ooh the rich own 80% of the US" etc. etc. ad nauseum.
If PG's terms were that he collect 100% of the profits of successful companies, while paying people a flat rate, then yes he would be 'sucking blood from the productive masses'. Yet, this is essentially what happens in most other spheres. Those who own the means of production let those on the bottom use their "property" while keeping the ever-increasing profits to themselves.
Yes, everyones quality of life increases, but at a radically disproportionate rate. At this point the income is passive and there should be a line where you're not entitled to any more of it.
That is a lie. Only a negligible fraction of actual capital accumulation can be tie to life cycle savings. Therefore, we must conclude that intergenerational transfers account (inherit capital) for the VAST MAJORITY of aggregate capital accumulation in the USA.
See an MIT/Yale study on the subject. http://bit.ly/fjmyIw
I am not advocating a cero sum game or that everybody should be equal, but when you have the VAST majority of capital in the USA being inherit, the merit of earning that capital fades away pretty quickly.
Matt Yglesias is claiming that Americans underestimate the wealth of the poor and overestimate the wealth of the poor. He concludes means they underestimate the needs of the poor.
I think you are making the assumption that what is being promoted is anti-wealthy as opposed to pro-poor. I think it's probably safe to assume the authors consider themselves in the latter.
The premise of such posts is that if people were aware of
who was getting a tax cut they would be against it.
Put another way: the premise is that everyone is purely
motivated by self-interest.
And the problem with this counterargument is that trickle-down does not work.
I have a strong quantitative background, and I have to do some calculations to interpret these numbers. And these guys are interviewing average Americans and inviting them to pull numbers out of their ass. Cognitive biases are going to skew these numbers horribly: people will sooner say 80% because it "sounds" like a much more "reasonable" answer than 99.8%, even if a little math would show that it wasn't.
For example, I'd like to see the study done again with people asked the mathematically almost-equivalent question: what do you think is the average wealth of the top (resp. second, etc.) quintile. (Almost-equivalent, because you have to tell the respondents the total amount of U.S. wealth for them to be able to convert one answer to the other.) Without that control I think the results are worthless.
I guess I thought the point of the article was to demonstrate exactly this skew.
Where does a person's emotional reaction to tax cuts or welfare come from? If people casually think that poor people aren't as poor as they really are and that wealthy people aren't as wealthy as they really are, they're going to act accordingly when it comes up in their daily life. How they actually think when forced to confront real numbers seems less relevant in that case - how many people actually sit down and do the math before deciding who to vote for?
I have no disagreement there, I'm just saying that it's still interesting to know what that incorrect "sounds good" answer is in this case, because it reflects how people casually regard an issue. My unsubstantiated hypothesis is that this casual regard may actually be more important anyways, because many people aren't thoughtful in their regular daily lives, either.
In other words: if a cognitive bias can affect how someone responds to a survey, why can't it affect how that same someone acts in their daily lives?
I remember when studying some social network stuff the other year I found that pretty much everything in every social network I looked at followed this type of trend regardless of what the 'wealth' was (twitter followers, youtube subscribers, flickr views, etc)
I bet this is due in large part to the availability of credit over the last few decades. Credit has allowed lower-income people to "play the part" of the wealthy, giving rise to the distortion. In particular, interest-only, 0% down mortgages, low or no-interest credit cards, and car leases let someone making $50,000 a year drive a Mercedes, live in a million-dollar house, and buy fancy toys like flat-screen TVs and Jet Skis. I think the vast majority of the public would base their perception of wealth on material possessions such as cars, houses, and boats rather than the amount of money in savings or investments. This could explain the discrepancy.
Of late in Atlanta, one news story about someone unable to pay to heat more than one room had a dramatic photo of her showing her heating bill in her living room - with a 55" HDTV and Xbox360 in the same room.
Problem with that chart is scale: while 20% may have most of the money, the poorest still have enough to live in world-relative luxury.
There's a difference between the ability to purchase one-off consumer goods and the kind of situation this person is in. Consider that those consumer goods may have been purchased before an economically catastrophic event such as an illness or a layoff, or they may have been a gift from someone who is willing to purchase consumer items, but not willing to provide the household stability that they require.
Also consider that, second-hand, these items are not particularly expensive, and even if they were sold, they may only provide a heating bill for a month or two. Especially in places like Atlanta, which are particularly badly insulated, and ill-equipped for severe cold.
So what we have is a situation of economic precarity, an instability in which the existence of consumer good purchases does little to remedy a unstable situation.
I have a lot of gadgets and toys, but the overall value of them depreciates daily, and if I lost my employment or well-being tomorrow, they would do little to stabilize my financial situation, even if I fully liquidated all of them at a good market rate.
My inner liberal fires back with the complete, utter and deplorable lack of financial education and hence literacy in this country which is at the very least a partial cause of the most recent subprime financial kablooie.
My inner conspiracy theorist mutters something about that being awfully profitable for those able and willing to profit from said illiteracy.
It took him over 18 months to find a job.
Sure, there was a 42" HDTV in their house too. They still weren't spending money on ANYTHING. And he was working 50+ hours a week trying to find a job. Their expenses went up a little because he was traveling for interviews and networking at executive events. (Oh sorry, forgot to mention he was CEO of a 500 person company that was beating its targets even during 2008 when the stock market dropped like a stone).
So yea, if it can happen to him, it can happen to you. Tell your inner libertarian 6 months is nothing, and maybe he should find out what this current economy is really like.
Meaning she probably was using an inefficient electric heater, in a poorly-insulated home in a normally-warm region, in an unseasonably cold period. I could see that raising the electric bill significantly. I once went away for Thanksgiving weekend and accidentally left my refrigerator or freezer door open a crack. That month's electricity usage was several times higher than any other month since I've lived there.
Was the HDTV a projection set? Those are cheap, especially second-hand. Might only be a 720p. EBay has larger TVs listed for $200. Hell, nobody wants those fuzzy room-hogging monsters anymore. Could have been a freebie from a better-off friend or neighbor who upgraded to a flat panel.
XBox 360s aren't particularly new, rare, or precious, so might have been acquired used, possibly as a trade. And might have been bought by a child, or received as a gift. Maybe her kid bought it then went into the military and left it behind.
A meaningless stat; cost of living here is far more than the world median as well.
Perhaps the ever "improving" social safety net reduces the risks associated with having no wealth (savings)? Another commenter noted the woman who, with her 55" TV in the background, complained that she could not afford to pay to heat her home. I'm sure there's some governmental program (or some government-mandated assistance from the utility companies) waiting to help her out.
This is the very tail end of Fortune's richest people list.
http://www.forbes.com/lists/2010/10/billionaires-2010_The-Wo...
Any one of those people is worth 1 billion dollars, along with all the Gates's and Buffett's of the world. If I were pretty well off and worth, say, $1,000,000, it would take a thousand of me to equal one of him. And if I were a student with just a thousand dollars, it would take one million of me to get to one of him.
Based on that, the top quintile is not rich because of doctors, executives, basketball players or lawyers - it's billionaire company founders, investors, and the like. To test that hypothesis, I tried to find results marked by percentile, instead of quintile:
http://www.lcurve.org/WealthDistribution-1998.htm
The top 0.5% have 25.6% of the wealth and the next 0.5% have 8.4%.
---
(Side note, if you're thinking about income taxes: I'll bet there are more than a few people up at the top who get paid a dollar a year in salary.)
Most people like to spend money now instead of later though, and the charts reflect that. It's as simple as time preference.
{shakes head sadly}
There's plenty of examples of people that win the lottery, only to spend it all within a few years and be back to where they started.
Put it this way: you have a car. Sooner or later it will break. Are you preparing for that? Are you setting aside money to repair and replace it - money that earns you interest while it builds up? Or are you borrowing money and spending all your money on payments, risking that you won't be able to pay rent if your transmission breaks?
OK, if you make minimum wage, this is hard to get out of. But it's possible. Can you live with your mom? Can you drive a worse car? If you can get that thing paid off and get ahead of the debt, get some savings going, you'll be on a moving sidewalk to better finances, less stress and unhappiness, etc. If you're spending everything on a payment, you're on a treadmill pushing you toward bankruptcy.
Yes, it's hard to make do with a small income. But saving is something that really, almost anybody can and should do. Liking to spend money NOW should not overrule our desire not to be thrown out in the cold next month, or our desire to sleep peacefully. There must be a balance, and all but the most destitute can do this. By which I mean "half a cup of rice a day."
Wealth inequality is much more pronounced than income inequality, especially in the bottom quintiles.
This is all true of course: except that the worry about an ultra-wealthy minority is not that their quality of life is too high compared to your's (it's not) but rather that their POWER is too extreme, since money is power and speech, and that since power corrupts, they MIGHT ultimately work to reduce further the strength of the lower classes to the point that poverty really does become extreme. - Since as Marx shows this is not really in the interest of the upper classes (that is: tyranny and extreme poverty are precisely what leads to a violent reaction by the down-trodden) it may be that, through the miracle of technology's abundance, we will continue on a track where we all have a high quality of life, but only a smaller and smaller pool of people "own" the production engines.
How a world where a few own all the profits, but the masses have what they need to survive looks, we will soon see: but it certainly feels very Brave New World and is, perhaps, inevitable.
Political inertia, the passions of the mob, and the maladaptive incentives facing legislators and bureaucrats are much more potent forces shaping our society than concentrated wealth.
I don't fear this as much as some because I know that elites have always held undue influence, and that has been generally a good thing, with some bad apples throughout. Small numbers of people have always had extraordinary sway in societies. It's just that today, with media and technology, the ratios are larger than ever before.
An interesting article on the subject: http://www.nytimes.com/2010/12/26/business/26excerpt.html?_r...
It would be illegal, unfortunately. The amount of money you can spend on your own campaign is unlimited, the amount you can spend on others is capped.
>"It's just that today, with media and technology, the ratios are larger than ever before."
If you mean that more people can exert political influence, then I agree with you. Something like the Tea Party would have been impossible a few decades ago. The internet allows citizens to organize and exert pressure on politicians like never before.
That said, 99.9% of the bureaucracy is unelected. Changing the thin film of politicians layered on top doesn't have as large of an effect on actual policy as we think.
Seeking office is probably the least effective way for wealth to exercise its power. They do a lot better from behind the scenes, giving smaller sums to many politicians (or threatening to withhold it) to buy influence.
Jamie Dimon of JP Morgan is more powerful than either Romney or Whitman, and he hasn't quit his day job or squandered a bunch of his personal fortune.
People want to believe that there is some conspiracy of rich people screwing things up and if there weren't then everyone would have roses and unicorns. But I don't think that's quite right. Sure, entities that have a lobbying budget have a bigger say in policy than people without. But they get to influence a couple paragraphs in a 2,000 page bill. You add it all together and you get a bad bill that squanders public resources on private interests. The bill making process is broken, but that doesn't mean there is a cadre of rich people acting as puppet master.
The United States government is more like a boat where the captain is drunk and passed out than one highjacked by some nefarious pirate.
I think the first part of what you said is right: we will continue on a track where we all have a high quality of life, absent a paradigm shift in which the economy crashes like in Weimar Germany.
The second part of what you said -- about ownership of the "engines of production" -- is straight out of Marxism, which is, by the way, broken. More and more we live in an information economy; it's not about what you own, but what you know and what you can make.
That minor nit aside--who cares who owns what, as long as it isn't stolen from others and as long as quality of life continues to rise for everybody who puts in their share of effort?
What I mean to say is that the most important thing is that the system be fair, and let's be honest, fair does not mean an "equal distribution of wealth."
In fact, it seems pretty clear (especially when "nobody's starving") that what is fair is letting people earn based on their productive capability and effort, whether they're Steve Jobs, an average software developer, or someone with only a high school diploma.
Just kidding, I'd forgotten that fact. Wish I could say I'd worded things as I did on purpose, remembering that.
I don't agree: while it's important to know a lot to be valuable today, the people who are in this extreme high echelon of wealth are accumulating wealth through corporate ownership and they seem to be owning a larger and larger percent of those corporations.
Perhaps what you mean is that corporations, while dominant when it comes to dollars, are not necessarily continuing to be dominant wrt. the human experience. And this I agree with: the internet has opened the wealth of human knowledge to all of us. This freedom and the fact that so many of us spend our days doing what are effectively leisure of artistic pursuits means, even if we're not making money, we're contributing to man kind. And this is true: and not reflected in the wealth distribution, I agree.
The large majority of jobs, while they do require a level of intellect, which may be at times large, are nowadays less dependent on individual thought and more about being able to follow processes and procedures, to the point where the skills themselves are mere commodities and original thought is not needed unless we're talking about the higher echelons of a company.
I can't find the NYT article on the matter, but I can describe my experience as a systems administrator: While in theory Unix sysadmins are highly qualified people who should be thinking independently, I left the line of work largely because of the extreme tediousness and lack of independence.
- 90% of the tasks that had to be done were extremely trivial but their automation had already been maximized (adding users in heterogenous systems, altering filesystems, touching files and installing software)
- Most nontrivial errors were deferred to support lines. Decisions on how to proceed with most "important" issues were left up to project executives and people with no technical qualifications.
- Most change issues were managed through tickets which had a list of steps to follow to the implementer. Most of the work there consisted of chasing the proper approvers so that I could do the work for them on time.
What was left was a highly predictable, boring system where all the originality and intelligence was made at the procedure level, and we were expected to follow procedure at all times, even when it was not necessarily the best choice.
Corporations do not generally want an inspired rank-and-file. Intelligent individuals want to question and are willing to make mistakes, and this clashes with organizations that want to automate what cannot be automated at a fundamental level. My skill set was reduced to just knowing the commands and locations to do stuff; creative problem determination was discarding as being dangerous and disrupting, and even though there were a hundred different ways to improve processes, the bureaucracy to do that made it an incovenience that I was not willing to put up with.
Thankfully I left that position for places that did require much deeper through and rewarded creativity, but the reality is that a large chunk of work simply doesn't require that; some jobs have a ceiling as to how productive one can be, and IMO, the current trend of making everything dependent on processes doesn't help in bringing the best out of people.
Think about this on retail jobs and food services: interaction with the customers is scripted at incredibly deep levels with little margin for the person to make his or her best judgement. The problem is that not everyone is in a condition to leave and operate their own establishment or find better positions, so we have a large mass of people whose skills are being purposely underutilized.
Secondly, despite the information economy, it is still very much about what you own. If you are capable of making something amazing, you still need savings or investors who will feed and house you while you make those things and pay the still significant costs of infrastructure that many products require.
Concentration of wealth matters. That doesn't necessarily mean that government intervention is a good idea.
Most jobs that truly are "trivially automatable" have already been automatized. I think it's extremely unlikely that most or nearly most of Americans' jobs can be replaced by computers in our lifetimes, barring something like the Singularity happening (which I'm not holding my breath for).
Wealthy people will actually own the means of production in a very meaningful way
Like I said, this is a Marxist bromide. Fundamentally, the means of production is mens' minds. Marx mistakenly believed that production amounted to physical human labor + expensive heavy-industry capital (like factories), which leaves work requiring intelligence and skill (MOST work) out of the picture, and is inaccurate - and is becoming more and more innacurate.
those that aren't equipped by their genes, upbringing, or education to participate in the information economy will be unable to earn an income.
Everyone is equipped to participate, barring exceptionally low IQ. Human beings are not automatons; they are not determined by the environment or their parents or their genes; they exercise choice.
Secondly, despite the information economy, it is still very much about what you own. If you are capable of making something amazing, you still need savings or investors who will feed and house you while you make those things and pay the still significant costs of infrastructure that many products require.
Big projects typically require capital investment, but so what? That can be gotten if you have a good idea. Also, lots of people that work in service jobs and don't need heavy capital investment do important, creative work. My point here is that, no, it's not "very much about what you own." Most people in America are doing just fine, especially those with an education, and most people in America did not inherit a trust fund or something.
Concentration of wealth matters. That doesn't necessarily mean that government intervention is a good idea.
If it has no implications, then by definition, it doesn't matter. So if you claim that it matters, you should give an implication.
Food service. Retail. Automobile repair. Lower-end healthcare jobs. Any job that doesn't require creativity can be automated.
Do you doubt that a McDonalds with zero human employees will exist in our lifetimes? When farming and transportation are automated as well and Big Macs are produced with zero human involvement, will you agree that "owning the means of production" is quite possible?
> "...which leaves work requiring intelligence and skill (MOST work) out of the picture..."
You are very, very wrong. Here are the 15 most common jobs according to the Bureau of Labor Statistics: http://www.huffingtonpost.com/2010/10/06/the-most-popular-jo...
3.2% of Americans work in retail sales alone. Those jobs are going away. I count two jobs in that list, elementary teachers and general managers, that will be difficult to automate. What careers do you see this huge group of people switching to?
Please stop bringing Marx into this. It's basically an ad hominem argument. You're arguing against him instead of me.
> "Everyone is equipped to participate, barring exceptionally low IQ."
This is extremely wishful thinking with no evidence to back it up. The incentives for training oneself for a job in the information economy is huge today, yet only half of Americans have completed any college coursework.[1] If all of the people doing menial tasks today are capable of doing more intellectual work, why are they ignoring the incentives that exist today to get them to do so?
> "Big projects typically require capital investment, but so what? That can be gotten if you have a good idea."
Your arguments are skewed by your familiarity with the software industry. The businesses normal people start don't get venture capital. They get small business loans on their personal credit. If you have no credit or bad credit because you're poor, you'll never start a business. Concentration of wealth creates more people who are relatively poor.
> "Most people in America are doing just fine, especially those with an education, and most people in America did not inherit a trust fund or something."
I agree. I've been talking about the future, not now.
> "If it has no implications, then by definition, it doesn't matter. So if you claim that it matters, you should give an implication."
Implications:
1) An almost-permanent upper class.
2) An almost-permanent lower class.
3) (1) and (2) lead to civil unrest.
[1] http://en.wikipedia.org/wiki/Educational_attainment_in_the_U...
I've explained it in detail before when someone made your point, but suffice to say that nobody is going to automate a McDonalds anytime soon.
A robot equal to a human costs $50,000 at least. If you have someone working for $10 an hour, that is 5,000 hours or 2.5 years payback on the robot. And the robot is far less flexible (and $50k is a super low number). When you have 3-10 year pay off on a robot, why would you do it?
Robots really aren't built for menial tasks. Where do you see robots in the auto industry? Painting and welding. Painting is a skill job. Welding is a skill job. A good painter or welder is not making far off of what an entry level coder is making (if you don't believe me, find out how much it costs to weld oil pipeline or ship structure). They didn't take over Detroit to displace cheap labor, they did it to increase quality. The reasons for automation are usually increasing quality or doing something humans physically can't (speed, precision, strength etc). Rarely do you see it worthwhile to replace a human with a robot for a menial hand task.
So no, McDonalds will not be taken over by robots. The economics of it just don't make sense.
Also, McDonalds is open far more than 40 hours a week. It's more like 6am to 1am, seven days a week. That gets paid off in 8.5 months. The real number would be a little higher than that due to fluctuations in demand throughout the day that would require extra robots that aren't fully utilized. Even if you triple the cost of the robot, that still isn't an unreasonable cost/benefit ratio. Within the next 50 years, it will be a no-brainer.
If you think capital itself is a virtue that is entitled to the profits of all labor, then I suppose you are in turn entitled to hold that opinion. So long as the lives of those who are in thrall to capital have a "reasonable quality of life", yes? I won't even go down the road of opportunity inequality here, but I will just say I disagree with how readily you discount environmental factors in the development of people, and how readily you discount the influence of privilege.
Fast food joints could be mechanized. I have a scheme for a nearly fully automated department (grocery/walmart/etc) chain. It would take capital and engineering, but it's a solved problem.
"We engineers" are barely in that top 20% if at all. It's occupied by corporate CEOs, Wall Street bankers, and lawyers: the people who either write or lobby/bribe the people who write the laws (at least in the plutonomy/plutocracy that we call the United States).
"We engineers" don't control the information. We write the tools that do. The people with the money (see above) use the tools.
Statistically speaking, I imagine that the majority of engineers who participate in a successful startup exit (how else is an engineer going to get into the top 10 or 20%?) are still less well off than a great deal of the above "fat cats".
What separates "we engineers", at least those that read and participate in Hacker News, is that, perhaps, we have just a little more potential for social mobility than the rest.
Bring on them downvotes!
But there are conflicting opinions about how predatory the current economic system is. How much wealth is stolen? It's not easy to answer unless you are an ideological zealot.
The only economic system that is not predatory is a free market, which is based on voluntary trade for mutual benefit; any other economic system involves coersion, which is required for something to be predatory. In the current economic system of the civilized world, government holds a monopoly on coercive power, so only the government and those influencing it can be/are predatory.
Among the people who have the most wealth (at least in the US), most of them are prey, not predators, if you agree with my claim about the nature of predation.
If you're going to make accusations, don't hint at them, make them.
You're kidding right? Ever have someone in your family get an unexpected major medical problem while their young and either have no insurance or have the insurance refuse to cover care? That is a quality of life killer!
Or the simple fact that wages for the average person are stagnant or slightly down in the past few decades while healthcare costs are rising as well as the cost of an education. People are realizing that their children are likely to be worse off than they were and that is a quality of life killer!
Have you had a house foreclosed on? Again, quality of life killer!
I can go on, but you get the idea. What exactly do you mean by "quality of life"?
Sure, some people would choose 100 years ago, but a large majority of people, when asked, would rather live a middle-class life today than as millionaires 100 years ago.
Clean water, sewer systems, restaurants, the Internet, television, microwaves, dishwashers, transportation, etc all make a middle-class lifestyle today far better than it was 100 years ago.
1) Loss aversion. I know that I like modern conveniences and would hate to lose them. Psychologically, we place greater weight on losing something than getting something. Maybe I'd be dumb not to give up my microwave burritos for fresh roasted grouse, but the burritos are comfortingly familiar.
2) I'm just guessing about fresh roasted grouse. What ARE the nice features of being a millionaire 100 years ago? I'm probably ignorant about most of them. Maybe people back then would pity me for not experiencing what they did.
3) I'm a bad estimator of what will make me happy. Sure, I like the internet. Does it make me happier, or does it just scratch weird psychological itches? People WANT to play Farmville, but does it make them happy? Maybe I'd be happier having 10 close friends in my neighborhood and no telephone than having 200 friends on Facebook.
The one thing that's hard to dispute is that illness was more likely and more painful in the past. Other than that, whether then or now is better is something I'm unable to judge well. And I suspect the same is true for most people.
You're moving the goal posts a bit aren't you? For starters, those antibiotics will be followed by bankruptcy for the poor person in most cases. And most importantly, that alone isn't convincing me that quality of life for the poor is better than ever. I also didn't mention in my last comment that who is really seeing their quality of life decrease is the blue collar middle class, not the poor.
So? Bankruptcy eliminates debt, which is a good thing for poor folks.
And yes, I've read the studies about "health care bankruptcies" - have you? They counted anyone who had health care expenses, and they included gambling and drug abuse as health care problems.
Right now my girlfriend and I are having a hell of a time with medical bills. She recently started her job, but they won't give her health insurance for the first 5 months. To cover the gap we bought our own individual plan.
So far she has gone to the hospital for an allergic reaction to food she has never been allergic to before, and also needed to see 2 doctors along the way. Total cost is around $1,000 in 2 months, and her individual plan doesnt cover any of it because it was extremely limited. I also needed surgery recently and I've racked up a total of about $1,000 in the same 2 months (thats after my insurance paid quite a bit).
We just graduated college, so we have a sum total of about $2,000 in the bank. We have around $2,000 in expenses a month to live in our apartment, buy food, pay for our cars, etc. Our income is pretty good for two fresh college grads, but we just started so there were the expenses of moving out along with waiting for the pay to catch up.
It wasn't pretty, but we made it through with a $4k loan from my parents (which we have since paid back). Without that, we would be bankrupt or riddled with credit card debt.
Considering we have no kids, our expenses are <$2k a month, and we make decent money, I don't consider us poor. Yet it was just one thing after another that was unusual and unplanned for. If one or the other of us had health issues, it would have been no big deal. If her insurance had kicked in earlier, it would have been no big deal. If she had been able to start sooner, it would have been no big deal. But with all of that screwing us, we got in a bad position despite being extremely frugal and planning really well (how many 22 year olds know to get an individual health care plan to cover the gap between when they are dropped off their parents and their employer one starts. Our only mistake as putting the deductible at $1,000 instead of $500.)
So this isn't an academic exercise. It's not just "poor folks" that you so readily dismiss. Our healthcare system is a freaking mess and anyone denying it hasn't lived through the rough edges. Right now we'd love to have real health insurance for my girlfriend. I would love to put her on my insurance but I can't. Her parents would love to put her on their insurance but they can't. She would love to buy an individual plan that covered more than just catastrophic hospital visits, but she can't.
So maybe you should stop reading the academic studies and start talking to people living in the real world.
I am not that familiar with the US healthcare system. Why can't she buy a different plan for herself? Is it too expensive? Or would it also kick in too late?
They can only deny coverage for pre-existing conditions if she let her coverage lapse.
Are you claiming that your experience is in any way typical?
Are you claiming that the only way to deal with your problem is to change health care for the rest of us?
I realize that $4k is a big deal to you, but the gap between "make decent money" and "our expenses are <$2k month" isn't many months.
It's not just about violent reactions; simply because extreme poverty does not benefit the very rich in economic terms... in fact, it harms them. And some (maybe a few, maybe most, who knows?) of the very rich understand this; look at what Larry Page and Sergey Brin did in establishing Google's charitable foundation. They understood that - in the end - their ability to grow their business requires a population of healthy, productive, engaged people to do Google searches.
it may be that, through the miracle of technology's abundance, we will continue on a track where we all have a high quality of life, but only a smaller and smaller pool of people "own" the production engines.
If anything, technology seems to be making it easier and easier for people with less capital to produce things. In "our world" (that is, computers, software, web-based consumer sites, etc.) it's already possible to build a software startup with a negligible amount of money. Open Source Software and cheap hosting from Linode, Slicehost, etc. have made this stuff way accessible.
And even in the world of physical goods, every time we turn around we're hearing more about cheap 3d printers that make it possible to spit out real world physical items without a big, expensive factory.
Print-on-demand books make it possible to become an author / publisher for almost no cost. And the "print on demand" concept has been applied to other areas... have artistic talent? You can quickly be in the business of selling your art via the Internet, as clothes, prints, etc.
Now granted, doing something like making jet engines or automobiles still takes a lot of up-front capital, but still... I think the trend is towards more and more forms of production becoming more and more accessible to everyone.
http://www.ers.usda.gov/Publications/ERR66/ERR66.pdf
More intuitively, go live in a poor neighborhood. For the most part, the only skinny people you see are the addicts. Everyone else is fat.
I bet most of the people adding weight are actually doing that because they feel starving (majority of American food being too fat and sugary and not nutritional enough).
Income distribution looks quite different from wealth distribution, and is more equal than the estimates in the original article.
[ Household income data from here: http://www.econlib.org/library/Enc/DistributionofIncome.html]
Don't take this as an attack -- just as a my personal opinion.
"We ensured that all respondents had the same working definition of wealth by requiring them to read the following before beginning the survey: “Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person's net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages."
I also disagree with pg's assessment; I find it hard to imagine peoples minds defaulting to thinking of percentage of income earned (what does that even mean?) over percentages of money and stuff owned.
You're not needier just because your neighbors are richer than you thought they were.
[1] http://en.wikipedia.org/wiki/Household_income_in_the_United_...
This is not an injustice. A top programmer will be many times more productive than an average programmer and large codebases tend to include code from top programmers preferentially. Not only that, the value generated by top programmers (or project leader) is vastly more than that of an average programmer. This is why Google is paying their top people (technical, administrative) millions of dollars.
Compare that to a stone age hunter, who may have been 2-3 times more effective than an average hunter. A strong or a fast man is never much stronger or faster than an average man.
Others think differential returns to people of differential abilities is an injustice (or at least, the existence of differential ability in the first place). The fact that you don't just means your not a leftist. It's an a priori assumption either way.
Paris Hilton. Among other examples. Yes, there are people who get large paydays because they are strikingly effective at what they do. Then there are the people who get large paydays for no particular reason. Or because of their parentage.
Before celebrating the übermensch, please try checking back in with reality.
Frankly that's worth a whole lot more than being able to program better and I hope he got paid accordingly.
That is, people who think that if I have a dollar, then they can't also have that same dollar at the same time.
It's been clearly determined that wages have not kept up with inflation, so I would say that comparing one generation's wealth with their parents is not something that will yield hopeful results.
You can buy many things for $100 today that would have cost $5000 in 1985 (or more likely, that didn't exist at all). Life's necessities, with the important exception of homes and apartments, have gotten cheaper in inflation-adjusted dollars over time.
I'd argue that the truest measure of wealth is the distribution of 'happiness' over a population, but that opens so many cans of worms as to be near-useless. I'm guessing the average happiness has decreased over time, but I wouldn't chalk all that up to a decrease in inflation-adjusted dollars.
At least be right if you're going to try to shoot down a comment with worthless sarcasm.
Regardless, the original comment was fairly reasonable and didn't deserve the response it got.
Given that the "ideal" distributions are more or less the same across all other demographic slices, I doubt it would be substantially different. Which is good, because that argument doesn't stand up to even casual scrutiny.
The macroeconomic pie grows so slowly that it's not particularly meaningful to individuals on scales of less than a lifetime. When you actually look at the numbers [1], it's clear that rich people are getting richer at a much higher rate than poorer people are getting richer. Moreover, the average real household net worth has dropped substantially over the last decade, while the net worth of the richest has grown. No matter how you look at them, the numbers just don't support the "pie growth" hypothesis on anything other than an extremely long time scale.
[1] https://secure.wikimedia.org/wikipedia/en/wiki/Wealth_in_the...
Money is a zero-sum game, wealth is not. So yes, I can't have the same dollar that you have.
It's sitting there on both your and my bank statement. We both have it at the same time.
If one has a monopoly, can others do just as well without detriment to the monopolist?
I don't really know anyone that is confused or surprised when they hear that this is how the country's wealth is distributed.
And the funny thing is, even though many people agree with that, everyone is coming up with excuses. No one is addressing the problem on how to narrow the poor-rich divide instead of further widen it in any meaningful way. They all are caught up in discussions about details such as 'should we increase tax this year' which will probably have zero influence in the big picture.
But the most disgusting thing to me is that they are still trying to push their system of corporate plutocracy on the rest of the world, as if it is the best thing since sliced bread.
Plutocracy seems to be an apt description.
20% seems about right. 20% of the people are entrepreneurs and are smart, gifted, talented people that employ the rest of the country to achieve their dreams.
http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20pre...
Note that the survey was carried out five years ago, before the financial crisis.
Rather than just looking at the raw numbers (which these articles always love to do), I think the more relevant questions is, do or don't the "rich" deserve their wealth? If they deserve 85% of all wealth due to their involved in the economy, job creation etc...well, then they should have it.
I think few here in the HN community would argue against some entrepreneurial fellow HNer making a buzzillion dollars off of some cool and desirable product/service which instantaneously puts then into the 1st 20th percentile of the graph. Why? Because this person created enough value to earn that money....and maybe those other Americans in that top percentile did too.
So if you gave the average person 5 groups of people and told them to ideally distribute the wealth between them, they would probably exhibit this same equality bias on average.
As for the estimated case, I'm sure you'd get similarly wrong responses asking the average person basic questions about U.S. history. Or algebra, chemistry, or pretty much any other academic subject.
EDIT: Dan Ariely and others frequently cite this kind of bias in the books and talks I've seen. I wonder what Dan would have to say about that considering he collaborated on this paper.
(playing Devil's Advocate here btw)