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Comment by hacknat | Hacker News Reader

This is a problem in almost every academic field right now. Peoples’ lack of sophistication with understanding the mathematical/philosophical constraints of their tools is incredibly scary.

For example, people throw around the low labor productivity stat all the time to prove that no automation is happening, not realizing that GDP is the numerator of that stat. Well, GDP is a pretty terrible gauge of who is benefitting from technological innovation, as it is distributed incredibly unevenly, probably more so than income even. The problem with automation isn’t that it’s not happening, it’s that only a very small number of people are capturing the wealth that it is generating. Also, it is generating a small number of professional jobs, but mostly the jobs it is generating suck (Uber driver, AMZN warehouse worker, etc).

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Likewise, looking only at nominal wage increases is a “pretty terrible” way of gauging who benefits from increased wealth. If improvement in productivity (automation) results in lower prices (or better or more goods for the same price), that increases the purchasing power of a worker’s earnings, even if their wage has not risen.

In other words, a worker is richer if they can buy more and better stuff even without any rise in their wage.

The fact that everyone can afford a smartphone, including those with jobs that “suck”, does not reconcile with “only a very small number of people are capturing the wealth that it is generating.“

Sorry, but I see a lot of people, kids especially, with expensive smart phones because of status not because they can afford one.

The fact that smartphones, which didn’t exist decades ago, are now afforded by everyone, contradicts the assertion that productivity gains are captured by a small class/group, and demonstrates why looking at nominal measures of income is an incomplete picture of increasing productivity and wealth disparity.

>contradicts the assertion that productivity gains are captured by a small class/group,

Only that they are fully captured by a small class. It says nothing about the relative amount, and doesn't change anything about the wealth disparity picture, for those smartphones are cheaper for everyone but one group has a lot more to spend AND smartphones are cheaper for them

I think this is a common misconception when it comes to judging Karl Marx perspective on capitalism: he didn’t say that a worker in 2020 is going to be absolutely worse off than a worker in his days if capitalism continues — quite the opposite: he said workers will be better off than they were in his days. What he did predict however is that the rich ones will even better off still.

If you try to look at how much much of societies gains go to which wealth bracket and how much they actually do for it, this gap widened considerably during the last century and has become a real threat to these western values of liberty and democracy, especially because the rules of civilization and democracy exclude those on top.

One doesn’t really have to be a marxist in order to want to go back to a resonable wealth/wage gap. One doesn’t have to be a marxist to demand the rich should pay their taxes and follow the rules. I’d argue that every conservative in the very sense of the word should stand behind this as well.

There’s also a booming market for high interest micro consumer loans though.

Many cannot afford these smart phones and gadgets but will take loans or buy them with plans that on the surface looks cheap.

Loans from pretty much fully automated ”banks” working on-line only. Send an sms and get $500 to buy that phone!

Further increasing the gap in the process...

No.

Because wealth is defined by claims on other people's productivity, not by the ownership of one particular consumer good.

If you'd said "Everyone now gets a significant proportion of their income from investments and uses some of it to buy a smartphone" you might have had a point.

People buy smartphones instead of CDs, movie tickets, and new cars.

It depends on what goods you are looking at. Sure, people can "afford" an iPhone but where I live a modest house costs around 14x median full-time male salary. The wealth inequality is from a small number of people capturing all this wealth.

40% of Australia's population live in either Sydney or Melbourne, and these two cities are among the top 5 least affordable in the world [1].

1 - https://www.afr.com/companies/financial-services/australian-...

Numbers don't match though. It looks like there is physically not enough money to buy everything that is sold. For example:

- There is a ballpark estimate that sum of all physical money in the world is 90.4$ trillion, let's distribute it equally to all 7.53 billion people: we get 12k$ per person. This is not enough to buy an apartment in most parts of the world.

- There is an estimate that 1% has 303.9$ billion, let's distribute it equally to US population of 327.2 million people: we get 928$ per person. Barely enough to buy status smartphone.

So I don't see how wealth distribution can solve anything. Even if we equalize wealth and prices at a same time, free market will quickly spiral down to similar pricing that we have today (things are barely purchasable, or not at all).

Why just physical money?

s/physical/virtually-tangiable/g

I have no idea why or what exactly physical money is, since money mostly isn't physical, but it seems to me that it might not disrupt society too much if we redistributed all of the stock in companies in the S&P 500 equally. We already have widely diversified ownership, with index funds and pension funds, so why not take it all the way?

However, the total value of the S&P 500 (which is probably about half the world stock markets value) is about $26 trillion, so that is about $3400 per person or maybe double or triple for a family. And the dividend of 1.75% means an income of $60/year if you hold on to the stock.

So I think doing this redistribution would result in everybody to whom $3400 is a lot immediately selling (assuming they were allowed to). I'm not sure what the distribution of capital would end up being. Someone would buy, say "Barren Wuffet" who fortunately had all their investments in cash, bonds, and small cap stocks. So ownership would end up being concentrated again, but maybe not as concentrated.

Anyone who has a lot of money saved for retirement in a large-cap fund would be unhappy, but why should you be better off than an average citizen of the world?

It seems like a fine experiment to me.

Edit: but just to spell it out, obviously politically impossible given the consequences for first world people who are relatively privileged but don't think of themselves that way. The median IRA balance (note, not the average that is skewed by the rich) is somewhere around $20-30K, so redistribution would affect those people like a 90% market crash.

I'm not sure where your numbers come from, but your off by 2 orders of magnitude (are you talking income?). According to Wikipedia the wealth of the top 1% is 29 trillion (https://en.m.wikipedia.org/wiki/Wealth_inequality_in_the_Uni...).

The wealth of the top 4 richest people is ~300 billion, he's way off.

I've took it from [0]. It does seems like numbers are very approximate everywhere, but even than, let's take 29 trillion and distribute it between 327 million population: we get 88.6k$ per person, still not enough to buy housing in most parts of US.

- [0] https://www.businessinsider.com/the-1-percent-dont-know-what...

Only if you think of single-occupancy homes. A married couple with 2 kids will be around 350k USD, peanuts for California but enough to buy a home for the family in many places in the US.

You don't understand what money is. To a first approximation, money is a intermediary unit for converting and exchanging value; it's not a large proportion of wealth by itself.

The world could make do with very little money if it could move faster. Quantity of money times velocity of money times unit of time gives you the total monetary transactions over a time period; if you increase the velocity, then you can decrease the quantity, and nothing else would change.

https://en.wikipedia.org/wiki/Velocity_of_money

> So I don't see how wealth distribution can solve anything. Even if we equalize wealth and prices at a same time, free market will quickly spiral down to similar pricing that we have today (things are barely purchasable, or not at all).

Could you explain how you got to that conclusion? It does not seem logical to me at all.

Current prices are in part a result of high inequality: It makes economic sense to sell a house for 10x the median income because they are still groups of people so high above the median that they can afford to pay that price - and of course as a business you'd very much like to sell to those people if in any way possible.

In a society with more equal income, the highest price for which you could find a buyer would likely be a lot closer to the median.

This, in a nutshell, is why I (a highly paid software developer in NYC) would personally benefit from aggressive action on income and wealth inequality. There are enough people in this city who make tens or hundreds of times the salary I make that landlords and sellers are happy targeting them, and I'm competing against the prices they can pay. As a thought experiment: cap my salary to $50K/year and cap everyone else's to $50K/year too and market forces will quickly make me a much more competitive buyer.

I wouldn't even be sad about the money I'd no longer be making, because right now a good chunk is going into rent, and an even larger chunk is going into savings so I can buy a home at NYC prices. So it's not like I get to spend it on other things. If I didn't have the money but I also didn't have to spend that money on housing, I'd be equally well off.

(And all of this is leaving aside that other people would be better off, which is net good for society, etc. etc. Even the first-order effects alone are selfishly valuable.)

I live in NYC too and am in the same situation as you and would benefit from aggressive action on income and wealth inequality too. You’re absolutely right in your thinking, income inequality makes the money agressively flow towards the ones who own most of it.

And yet, they can afford to live in two cities that are among the top 5 least affordable in the world. Is that a sign of them being poor or rich?

>In other words, a worker is richer if they can buy more and better stuff even without any rise in their wage.

I don't see everyday life improving several billion times from 1970 even though the number of switches I control in my laptop are several billion times (at least) larger than the number of switches that existed in the world in 1970.

This argument forgets that where people spend most of their money, housing, education, healthcare, costs are rapidly raising in real terms and have not followed Moore's law in usefulness.

Yes technology has made cool gadgets for consumption, but that isn't what wealth is about. From Wikipedia: "Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions."

The average worker hasn't seen a real pay ride in 40 years, and their ability to build wealth through savings has been greatly diminished.

Incorrect about workers not earning more. The problem is that household sizes are shrinking.

https://www.minneapolisfed.org/article/2008/where-has-all-th...

So basically, improvements in productivity are only benefitting people in areas where productivity has improved? That seems more like a tautology to me than something which can be fixed by gnashing teeth about the distribution of wealth

How did you get from

> The average worker hasn't seen a real pay [rise] in 40 years

> So basically, improvements in productivity are only benefitting people in areas where productivity has improved?

Worker productivity has increased enormously in the last decades.

I didn't? Obviously, I got that from the "housing, education, healthcare, costs are rapidly raising in real terms and have not followed Moore's law in usefulness" part...

Improvements in productivity are only benefitting people who own a critical mass of capital and can therefore dictate where the return on productivity gains go.

There is no data that supports the assertion that the average worker hasn't seen a pay increase in 40 years. Increases may not have been as great, but there have been increases. Whether you look at Fed numbers, CBO numbers, or Census numbers, all show an increase in real income.

https://en.wikipedia.org/wiki/Household_income_in_the_United...

Between 1979 and 2011, gross median household income, adjusted for inflation, rose from $59,400 to $75,200, or 26.5%. This compares with the Census' growth of 10%.[19] However, once adjusted for household size and looking at taxes from an after-tax perspective, real median household income grew 46%, representing significant growth.[20]

https://en.wikipedia.org/wiki/Household_income_in_the_United...

CPI isn’t being measure properly. What if all of these numbers that you cite have been games by a bureaucracy desperate not to advertise its failures? Everytime I dig into a government stat I end up finding out how badly it misses the mark. This whole article is about how we trust our own data too much, and your argument is, “But that’s not what the data says”.

Instead of looking at nominal income (which was a smaller part of peoples’ wages decades ago), look at real wage growth (https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...). If we take in all the benefit cuts, the fact that college has become a necessity, pensions are dead, and healthcare inflation is insane, real housing inflation has been substantial, then you can begin to understand the situation. Income is only part of the equation. Yes, income has gone up, but we traded it for the mother of all benefit cuts.

It's actually simpler than that, median household income != median wage. Here's the chart the parent wants. Simple explanation is that there are more dual income households.

https://aneconomicsense.files.wordpress.com/2015/02/going-fr...

You either use the data, or your are just telling stories to fit your worldview. You carefully avoid stating it, but even the data in your Pew link shows a pay increase, albeit small.

Or the third option, you do the hard work of digging into the data yourself to see what it actually says, rather than reiterating what the bureaucracy tells you it means.

Quality of life is the only thing really worth having. The wealthy have the option to spend their time however they like, great healthcare, a big home etc. All the smartphones and gadgets in the world can't make up for that. Free time and economic security are still things very few people have.

... that increases the purchasing power of a worker’s earnings, even if their wage has not risen.

If your boss said you're not getting a pay rise this year but that's OK because you'll still be able to buy more would you accept that as a fair and reasonable argument?

No?

Don't use it as an argument to keep poor people's wages low then.

Gadgets aren't a large proportion of most people's expenditure.

But people do spend an extremely large portion of their lives on them

It's a bit different:

In the 1990s and early 00s, automation happened mostly in manufacturing. The low productivity growth stats that stupid (mainstream) "economists" like Krugman cite to argue against people like Yang or Musk measure all labor. But manufacturing makes up less than 1/5 of the US economy. If you look at the labor productivity in the manufacturing sector alone, it's congruent with the automation argument [1].

Productivity numbers are lagging because investments in new tech need time to bear fruit. Automation of the service sector has already started and will show in the numbers soon enough. Given that the service sector is four times the size of manufacturing in the US, it will be even better for GDP and even worse for people if again nothing is done and people keep listening to those intellectual frauds who call themselves "economists."

_______________________

[1] https://www.bls.gov/lpc/prodybar.htm

Reminds me of the thought experiment where I can duplicate myself with a robot. Who would benefit? Me, having eterernal vacation and my robot doing my job for me, or my employer who lays me off and uses a robot instead?

Clearly, if the latter would happen, and we are on that path right now, we are bound for a distopian future.

Old economic models don't work anymore, we need radical changes. If we don't plan them, they will come in the form of either revolution, or brutal repression (ala China).

When you extend your thought experiment to the CEO and the management of your company then they should be replaced by robots too?

And what happens then?

In the limit the only beneficiaries are shareholders, who now own all the wealth and capture all of the productivity.

You now have a choice between a neofeudal dystopia where a small percentage of the population lives like emperors while everyone else is relegated to a shanty economy where they fight over scraps, or you stop the nonsense and set up a humane economy where all productivity is redistributed and humans automatically have economic freedom as a birthright without having to work for it or inherit it.

Currently we're on our way to the first option. But the second is the only viable long-term outcome - because in the limit the wealthy will continue to play status games with wealth, and the circles of distribution will become smaller and smaller until eventually literally everything is owned by a small handful of individuals and - perhaps - their immediate families.

>Currently we're on our way to the first option. But the second is the only viable long-term outcome - because in the limit the wealthy will continue to play status games with wealth, and the circles of distribution will become smaller and smaller until eventually literally everything is owned by a small handful of individuals and - perhaps - their immediate families.

That's been the case for most of human history. I don't see why this isn't a viable option again. High technology does not mean a humane society. For the majority of the last 10,000 it was pretty much the reverse. Egalitarianism meant primitive, starvation and deprivation meant wealth.

Of course one only need read what happened to monarchs for most of the period. Being king is good, less so when you become furniture for the next king.

Because, at the same time that this is happening, the capacity for a single actor to wreak catastrophic destruction or violence is increasing. If that "viable option" increases the number of discontented people who increasingly have access to WMDs (or that support actors who can, given enough of that support), you increase the likelihood that someone has the motive to blow everything sky high.

Also, you're wrong. Egalitarianism has meant a lack of luxury relative to what was possible at the time, but a better baseline for the population as a whole.

The majority of people are disarmed and happy to be defenseless because "Won't someone think of the murdered children in schools!".

>Egalitarianism has meant a lack of luxury relative to what was possible at the time, but a better baseline for the population as a whole.

[[citation needed]]

The population of China was larger than any of the time and the majority lived in poverty so great the Europeans who visited were shocked by it.

It's already happening with index funds in the financial space.

Amazon does not employ warehouse workers they are "associates". At Starbucks a waitress function is named "partner". Brilliant piece of doublespeak.

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