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Comment by awrence | Hacker News Reader

Nope, you're exactly right, and it's one of the main engines behind wealth inequality. Once you reach what I personally call material escape velocity, the point at which your lifestyle + inflation < yield on your capital, your wealth accrues up relentlessly. It's like escaping a financial gravity well. Eventually you get to a level where you can weather just about any market shock and then there's basically no way to get sucked back down barring things like death, taxes, divorce etc. The people that have reached this point casually boost on higher while everyone else who hasn't and can't save vs lifestyle needs gets left behind.

You're also right people are thinking beating the market, but that's also a bit silly, you can just buy the market and match it, who needs to beat anything if they've reached this point...

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> The people that have reached this point casually boost on higher while everyone else who hasn't and can't save vs lifestyle needs gets left behind.

The mistake in this line of thinking is that a small pool of billionaires getting richer doesn’t leave everyone else behind. Their money is effectively irrelevant in how rich the rest of us are. A 100% wealth tax on all billionaires isn’t enough to fund UBI for one year.

The only upside to “solving wealth inequality” is just to reduce rich people’s ability to big influence in politics. There is no economic or financial reason to do so.

I agree mathematically but wealth is very much a relative phenomenon, hence the term "inequality". Yes if an alien dropped a bunch of real wealth on the planet and gave it to a lucky individual, the others would be no poorer, but they would sure feel it (all else equal).

This is obviously a highly complex and lengthy topic that spurs tons of thought experiments but I generally agree with your latter point.

I think Bay Area real estate is a good analogy. Almost everyone is making more money than they were 10 years ago thanks to the tech industry, increases in minimum wages, etc... So technically everyone is wealthier, even after accounting for inflation. But thanks to increases in wealth inequality, the real estate market has gone bananas, resulting in the average resident feeling worse off.

> A 100% wealth tax on all billionaires isn’t enough to fund UBI for one year.

This doesn't sound right to me, though of course it depends a lot on what level you set the UBI at. In a US context we typically give numbers around 1/3 of median per-capita income (~$10k, out of $32k), and globally that would be ~$1k (out of $3k median per-capita income).

To give $1k to everyone in the world you'd need $7.7T, and billionaires have ~$9T, so it looks like this would work out.

(I don't think a 100% wealth tax on billionaires is a good idea, just surprised by your claim and looking into it)

I’m talking about the US.

Billionaires in the US hold about 3T. https://www.stockingblue.com/article/311/net-worth-of-billio...

There are 250 million adults in the US. https://en.wikipedia.org/wiki/Demography_of_the_United_State...

That’s $12,000 per adult for a single year. That’s not enough to reach even a minimum wage full time income, let alone a livable wage. UBI is supposed to be something you can live off of. The $10k number you are citing is a joke compromise defeating most of the point of UBI.

> The $10k number you are citing is a joke compromise defeating most of the point of UBI.

$10k is about what I've seen for most UBI proposals. For example, Yang is proposing $1000/month: https://www.yang2020.com/what-is-freedom-dividend-faq/

When you think of a reasonable UBI amount, what are you thinking? Do you have examples of proposals that use figures in that range?

UBI is supposed to supplant the need for a job. The $1000/mo proposed by Yang is poverty and it’s still in excess the of $10k cap. Are you starting to see why the numbers are so vastly off?

It is very relevant in that it empties out the middle class, and middle-class consumption has always been the engine driving the modern American economy.

Middle-class people buy stuff. Poor people don't, because they don't have any money. Rich people don't, because once you've got five houses it's more appealing to stick your extra money in a bank or in investments than it is to buy a sixth one.

So when you've got an economy geared around selling consumer products and services, you need a middle class to make that economy go. If you make 5% of that middle class rich and the rest poor, suddenly there's nobody around to buy those products and services anymore. Which in turn means the jobs of the poor people disappear and the investments of the rich people take a nosedive.

No, it doesn’t empty out the middle class. That assertion is unfounded. The middle class in the US is so large that the wealth of the billionaires spread out amongst it is effectively a drop in the bucket.

> If you make 5% of that middle class rich

If you’re talking about the top 5%, you’re not just attacking billionaires, you’re hitting all successful small business owners, doctors, lawyers, engineers, etc. That’s an entirely different argument.

The middle class has not been emptying at all. It just hasn’t progressed in wealth like the upper. https://www.pewresearch.org/fact-tank/2018/09/06/the-america...

The top 5% is not wealthy enough to be affected by the proposed wealth taxes that people are currently fearing. Even the top 1% is not totally affected.

Yes, some of us are in the top 10%, even in the top 5%. No, we are not going to be up against the wall just for having a modicum of success.

Money provides a claim on future labor. Having more of it in fewer hands leads to worse decisions for the human race. If I acquire all of the dollars in a rural economy and use them to cause a giant statue of myself made of butter to be erected, after the statue melts I have no money and no statue. The community has the dollars again, but they do not have the butter that was wasted (or the labor time which was wasted).

While it seems like this could be true under some circumstances, I don't see how or why this would be inherently true. (Also, picking "billionaires" as the standard here is a strawman; GP didn't say anything about billionaires.)

1. Each billionaire wasn't created by a small EFT from every adult, so there's no reason to expect that reversing the transaction would somehow fix the issue.

If we focus on where the money came from (we don't try to solve for individual billionaire-creating events like inheritance), I would imagine most of it can be described as accrued by extracting small slices from a great many individual transactions (including labor arrangements, government contracts, B2B, retail purchases; directly and transitively through investments, incentives, etc). Little slices of the value that transaction may go to a very large number of individuals, institutions, and corporations.

A great many things seem plausible. Billionaires (or anyone that, as GP said, reaches material escape velocity) could be getting richer by obtaining ever-shrinking slices while facilitating an always-growing number of transactions. Or Billionaires might be growing richer by "winning" (concentrating) slices that used to go to a larger number of people near the top of the wealth scale (via competition or consolidation). Or they could be obtaining slices that used to go to everyone else.

2. While I think I agree that the big benefit of solving wealth inequality is clamping the range of influence, I'm not sure what magical firewall limits the influence of the rich to politics (unless you have a very expansive view of the political).

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