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Comment by missedthecue | Hacker News Reader

Wealth isn't zero sum.

That's not a given. There are multiple historical periods where wealth was effectively zero-sum. These periods often aligned with strong income inequality and an inability for individuals to purchase productive assets e.g. Feudal Europe, and Tzarist Russia.

On an individual basis there are multiple portions of the economy for which wealth could be modeled or interpreted as a zero-sum game. Examples include landlord/renter relationships in high rent burden environments, or other segments where an individual is unlikely to ever be able to afford a "share of future economic growth" in order to fund retirement etc.

If a market isn't growing, it's zero sum.

Lots of markets (most markets?) aren't growing at any particular moment. We should really figure out how to fix our system in the low-growth zero-sum regime because it's common and important.

Likewise, "a rising tide floats all boats" is a lot more convincing when the tide is rising and the boats are floating.

We’re living in an unprecedented area of the rising tide lifting all boats! Annual consumer expenditures in the US have doubled since 1990: https://www.statista.com/graphic/1/247455/annual-us-consumer.... In my home country of Bangladesh it has tripled since 2000: https://www.ceicdata.com/datapage/charts/ipc_bangladesh_annu....

Asia is a growing economy. I have no trouble believing that the tide is rising and the boats are floating in Asia.

In the United States, it's a different story. The tide is rising, but most boats have not been rising with the tides for about 40 years, and that's troubling.

https://www.epi.org/publication/swa-wages-2019/

The figure you linked does not indicate adjustment for inflation and does not segment expenditures by wealth, which is important, because the US economy as a whole is growing, but more than 100% of the growth is flowing to the top. The rich get richer, the poor (and middle class) get poorer. You have to segment by income to see this trend.

Wages are a bad metric because they exclude various non-wage compensation, tax transfers, etc. Consumption is a more direct measurement of whether things are getting better. It’s also better because it naturally excludes the super wealthy that making a bunch of paper income from the growth of equity value, but it actually consuming proportionally to that increased wealth. The idea being that I don’t really care about how much Bezos’s stock is worth except insofar as it impairs my own ability to buy stuff.

Inflation adjustments are tricky because it’s not really obvious how to measure inflation. But even adjusted for CPI inflation personal consumption expenditures have been steadily increasing in the 20th century: https://alfred.stlouisfed.org/series?seid=A794RX0Q048SBEA

Yeah, if you average the rich and poor together, they're getting richer! But the poor are still getting poorer. Averages hide disparities. We've been over this!

Tangent 1: Placeholder: I don't agree that consumption metrics are better.

Tangent 2: Rich people do consume (colloquially speaking) proportionally to their increased wealth, but after sating their material desires they turn to financial assets: dibs on passive income and future growth. More for them does mean less for everyone else. Both in the first-order sense of owning more shares and in the second-order sense of being on the winning side of prevailing trends in globalization, automation, tax law, and corruption.

No it isn’t. It hurts the economy when too much wealth is concentrated in too few hands while too many people don’t have enough to spend.

Wealth isn't money. Wealth isn't something you spend. It is the value of the things you own.

Jeff Bezos owning 10% of amazon does not place prohibitions on the amount of dollars you can spend.

If Jeff pays his workers more money, his wealth accumulation will be slower and after a while he will have less wealth than he would have had if he had paid his workers more.

Also, if Jeff's workers have more wealth, they don't have to spend a lot of their disposable income on paying student loans or mortgages, and they will have more money to buy more stuff.

Is this true? Amazon shares have had a sharp rise in the time since he raised many of their wages by 50% to $15 an hour.

There seems to be little correlation, much less causation, between the amount he pays his employees and the value of the firm in which he holds interest.

You seemed to not understand the relationship between income, spending, and wealth, so I gave a simple explanation. Of course the world is more complicated, and for example Henry Ford realised (at least according to the myth) that he had to pay his workers enough so they could buy his products, otherwise he wouldn't have enough market. But that doesn't change the fundamental relationships between income an wealth.

Popular myth. Ford paid his workers that amount to outcompete competitors, not because he was in the game of charity. It's the same with Bezos, hence why Amazon lobbies for a federal $15 minimum. Many businesses will be outcompeted by Amazon with a law like that.

https://www.nytimes.com/2006/04/05/business/the-economics-of...

I had a feeling that it was apocryphal. That is why I wrote “according to the myth”.

Jeff Bezos wealth hasn't been realized yet though, it is a lottery ticket people would pay a lot of money for that might create that amount of wealth in the future. It is unclear how that value would change if you changed worker pay today since it isn't really related to how much profit Amazon can extract right now. If Jeff Bezos were to sell his shares of Amazon the money wouldn't come from the pockets of his workers but from the pockets of investors. Amazon hasn't generated over a trillion in profits.

Isn't it really? Given that wealth is the amount of resources you can command, and resources are finite, doesn't increasing your wealth decrease everyone else's? It's why printing money reduces the value of everyone else's money and gives it to you.

We are able to use existing resources more and more efficiently. This is why the global wealth per person is higher than it was in say Roman times, despite the global population being orders of magnitudes higher

That only means that you can add wealth up to the new delta. Anything more is zero-sum.

But we don't value things solely based on their natural resource composition; we pay far more for "labor" and other intangibles.

As a result of the above, the value of a natural resource changes over time. For example, natural resources used in electronics and batteries are relatively more expensive now than they were 100 years ago.

So, you can be technically correct by saying that wealth is zero-sum, but that's pretty much the same thing as saying "the world's 'wealth' traded for natural resources sums up to 100% of all natural resources"

and we are also much better at exploiting resources. Which ultimately run out. Oh, wait...

You can make stuff. Writing a book say, doesn't cause the other books to cease to exist.

yet the book doesn't feed or cloth anyone. This is generally done by the sun (and stored energy from it in the form of many fossil fuels). Also, for a finite population, all the other books can not be consumed anymore. So yes, it is a zero-sum game.

The amount of resources aren’t constant, and how much that is created depends on the wealth distribution. Too little wealth concentration and there won’t be built any factories. Too much wealth concentration and too few can buy what the factories produce.

the amount of resources is very much constant, I don't see the earth adding mass anytime soon...

You might think about certain natural resources, such as minerals and oil as the only resources. But some resources grows, like trees for building material, and those depend on how many trees that we decide to plant. And other resources, like available teachers or programmers depend on how many we have taught and how much money we are willing to pay them.

[0] https://en.wikipedia.org/wiki/Resource

There's still only so many trees that we can have on earth at once, as past a certain point, some trees would have to die in order to either have physical space or nutrients to grow new ones. Which would be zero sum...

It's the same with everything. When you're not at your limits of your ecosystem - things aren't zero sum. However once you do hit your limits, things become zero sum.

You even see this with businesses. Industries go through a growth phase. In the startup-growth-adoption phase, all businesses in that industry can grow. However, once market matures and reaches saturation, businesses struggle to grow or change. The only significant way mature businesses can grow larger at that point, is via mergers and acquisitions of other businesses.

Increased productivity means that we can produce more with less (usually labour, but also energy or natural resources). That a market reaches saturation usually means that the demand is met. It is rare that it means that not more can be produced.

>That a market reaches saturation usually means that the demand is met

A limit is a limit, doesn't matter if that's a demand limit, or a production limit, or a resource limit. The effect is still the same. Being under limits, makes things zero sum. If those limits were suddenly removed or increased temporarily, things would return to not being zero sum - at least until you hit another limit.

>It is rare that it means that not more can be produced.

In practicality sure. I'm sure we could make more basketballs than we do now. But physically speaking, you'd eventually hit limits. The earth is not infinite... we certainly could not make more basketballs than there is mass of earth itself. At which point we would either have to make new basketballs out of old basketballs, (zero sum), or raise our limits (mine matter out of other celestial bodies).

> Being under limits, makes things zero sum. If those limits were suddenly removed or increased temporarily, things would return to not being zero sum

Why do you think so?

> In practicality sure.

And that is what matters? Why is it interesting that there is a theoretical limit on how many basketballs that is possible to produce with the resources available on Earth when no conceivable situation exists when that limit ever becomes relevant?

I'm not sure under which rock you are living, but we are hitting limits fast. Soil degradation, climate change, acidification of the seas or phosphate ressources. Probably you'll die before these limits hit us hard(est). But eventually they will hit us and these are very conceivable situations...

Wealth is not zero sum, but whether the wealth a worker creates is kept by him or sent to an heir in a dividend check is zero sum.

The labour theory of value has been proved irrelevant for 200 years now. Quackery of that nature should not be promoted in this day and age.

You mean the quackery of Benjamin Franklin, Adam Smith, Ricardo and so on?

Someone should tell the record companies who say when you pirate a song, you're stealing from the artist who will not be properly compensated for the time they labored to write and record that song. I see corporate spokesmen expounding the labor theory of value all the time.

Yes, I meant the quackery of those you listed. Isaac Newton had a very distinguished mind, but was a proponent of young earth creationism; being right about one thing does not make you right about all things, and so it goes with Franklin, Smith, Ricardo et al.

As far as LTV is concerned, we know it to be a flawed theory today because we understand the time value of money. LTV will hold in the long run with constant returns to scale. Without constant returns to scale, only the marginal consumer matters. In simpler terms, demand will affect price, not just supply. Now, if we make the errant assumption that the supply curve is completely flat in the long run, then LTV does in fact hold. That is, the LTV is not a terrible description of economic reality, as long as you note that a) an isomorphic argument can be made for “the land theory of value” or “capital theory of value”, so labor is in no way special, and b) LTV can only apply for goods with flat long-run supply curves. In any case, there’s a reason the early great economists used it! Smith, Ricardo, and others were not all idiots. However, today, we know better and it flies in the face of modern science and understanding to promote its use.

But the money is. And money is the way how we decide who has the right to what share of wealth.

Actually I suspect there may be a connection between the currency the economy uses to divvy up scarce resources and whether wealth is zero sum. If wealth were tied explicitly to the amount of gold humanity had extracted from the earth then the sum total of both are assumed equal. In that case, wealth definitely appears to be zero sum. It could even become negative sum if some quantity of gold is being made useless or unavailable. If currency is not tied directly to some hard-finite asset like how ever much gold has been pulled out of the ground then maybe wealth can be positive sum.

Wealth doesn't depend solely on currency; the value of people's other assets is very important. Reliable cars, comfortable houses, and amazing electronics all contribute to our material wealth.

Wealth leads to power. Power is zero sum.

Not necessarily. Power over nature / viruses for example.

I'm not sure you know what zero sum means. Or I'm just super confused by your statement.

I think he means that even if you believe that power is zero sum (debatable) the system in which that power extends is not. E.g. technological advancement can shift power away from violent storms, earthquakes, viruses, etc and into humanities hands. Thus I think it's pretty clear that 'power among humanity' would not be zero sum

I kind of do. I guess zero sum is ill defined when it comes to power as it doesn't really have numbers attached you can add up.

Then perhaps we should split up money from power.

People often like to say that economy is not a zero sum game. But reality is that economy is not a game and, arguably, can be better modeled as a set of games, some of which are zero sum.

i tend to flag and move on, but i'm making an exception to note that simplistic, identity-based tropes like this are so damaging to real discussion and should be flagged and ignored because the post was not made in good faith (in short, it's a troll).

gdp (national wealth) is a made-up metric, it's aggregate, it's dynamic, incomplete relative to its stated rationale for existence, inapplicable to the discussion, and a whole host of other irrelevances to a real understanding of wealth and its distortions.

Academically, this might be true, but in the real world, wealth (like most scarce things: high-quality partners, precious metals, Michelin stars) tends to be zero sum.

I strongly disagree. In the real world, wealth is very much not zero sum.

Look around where you live, at the things that you value. How many of them were created with human effort, versus just existed in nature? Look at everything from computer you're typing on to the chair that you're sitting in to the roof over your head. EVERYTHING that was created with human effort is an example of wealth creation.

> EVERYTHING that was created with human effort is an example of wealth creation.

Without dismissing your point, I would strongly push back against effort being synonymous with wealth creation. Having grown up in post-Communist Eastern Europe, there was no virtually correlation between the two.

Excellent point. The wealth created is not strongly correlated with the effort put out. And we've all gotten wealthier as we've moved from high effort low return activities (eg sowing fields by hand) to low effort high return activities (eg computer programming).

Wealth isn't, but political influence seems to be. I'm all for the existence of billionaire, so long as they don't muddle up the lives of the little people. Unfortunately they've shown little restraint on that front.

That is mostly an American problem. The top 1% has much less influence in Europe. You should probably work at fixing your democracy first since it is the real issue here.

Brexit and the yellow-vest riots are proof that what you're saying is incredibly poorly thought out and probably comes from a nationalistic bias.

The title "président des très riches" wasn't born out of nowhere, was it?

no, but income and wealth have diminishing marginal utility, so those with excess should have it redistributed.

Yeah I think that's the point.

Therefore, it's not a real problem that Jeff Bezos owns 10% of Amazon. You wouldn't be any better off if he owned 9% or worse off if he owned 11% instead. It's a wedge issue.

If half of Jeff's shares were transferred to a non-profit organization that assists homeless people, would that make a physical difference in the world, or would it have no effect?

That in no way follows.

Well....

If he owned 9% instead of 10% and I owned the difference of 1%, then I would be better off.

And if my grandmother had wheels she'd be a bicycle.

Right. It's much more of a problem that his employees are getting less value than they create for the company, and he is taking a lot of the difference. Since all billionaires have made their fortunes this way (or inheriting from someone who did), billionaires should not exist.

P.S. He owns 11.1% and had more before his divorce.

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