Never mind the 1 percent: Let's talk about the 0.01 percent (2017)
review.chicagobooth.edu
review.chicagobooth.edu
WaPo review https://www.washingtonpost.com/outlook/trump-among-the-klept... The Economist review https://www.economist.com/books-and-arts/2020/10/08/two-book... (might require login)
Small quote from The Economist that does a wonderful job summarizing why this book is very good:
“Kleptopia” is wonderfully if grimly entertaining, replete with tales of Zimbabwean thugs, late Soviet gangsters and kgb officers-turned-entrepreneurs, as well as a Romeo-and-Juliet romance between the children of rival oligarchs. Mr Burgis’s depiction of the interlocking worlds of post-Soviet business and politics captures the way corruption binds together economic and political power. He meticulously demonstrates how, once overseas money enters Britain (attracted by the protections of its legal system), the associated power struggles and skulduggery follow.
Except it is not just Britain, but also us here in USA - countries that he touches include USA, Canada, France, Italy, Spain, Colombia, Congo, Zimbabwe, South Africa, Ukraine, Russia, Kazakhstan, China and both Koreas.
It was a fast and furious read that made me REALLY angry at times. It does not have a happy ending:
America and Britain, he thinks, are ever-more like Ukraine, Russia and Kazakhstan: “Like a parasite altering a cell it invades, so kleptocratic power transforms its host.”
Highly recommend as a serious, if depressing read.
Sure, Koch is a corrupt foreign billionaire, but it's a rare example.
It is the belief that they themselves will get rich someday, that makes voters support (at least not oppose) all kinds of laws that benefit only the rich, often at the expense of everyone else.
I don’t know if this delusion is everywhere, but it certainly is in the U.S
There is a belief that you can get rich with hard work in the US. Rich being a few million and enough cash to buy a ridiculous house or exotic car or a boat.
But “uber rich”? Like $1B+, I don’t know anyone who thinks you can do that through hard work alone.
It’s more than enough to retire independently in LCOL areas of the US.
> Rich being a few million and enough cash to buy a ridiculous house or exotic car or a boat.
There’s no difference in regulations in or outside the city
> their institutions that isn’t there with some bank in a random backwater
It’s the exact same banks. Here’s a list for Jersey although the same is true for most Crown-controlled tax havens: https://en.m.wikipedia.org/wiki/List_of_banks_in_Jersey
I think the path dependency is what made the City of London the hub, and their trust system is how non citizens were able to access their financial system and those in their territories as well. I'm sure now there are ways to access services in these places directly now, but historically, the majority of the infrastructure dedicated to this stuff in these places was built out from England.
Gates, Zuckerburg, Musk and Thiel are not Kleptocrats.
Frankly, neither are the Walmart children.
There are soft parrallels and kleptocracy does exist.
But this issue is about power asymmetry and markets etc.
It's a systematic problem.
The 'big problem' is that a lot of small fish in the market might be in the top 20% are making 'some money' from stocks, and will push back against rectifications, all the while not realizing that though they are 'getting a better deal than the bottom 80%' ... those above them, i.e. the 5%, 1% and 0.1% are getting gigantically better deals.
The 0.1% is screwing over the 1% as bad as the 1% is screwing over the 10% as bad as the 10% is screwing over the middle class as bad as the middle class is screwing over the working class.
I feel that this is true, and the 'natural result' of a system in which everyone believes they are 'doing much better than those below them' - but have no insight or information into the layers above to grasp how bad they are being screwed.
Middle class don't quite understand Doctor/Dentist pay, who don't understand Executive/Banker pay, who don't quite understand mega wealth income.
In Monaco, you can tell what 'class' people were by looking at them, and even if you wore a $2K suit, and were a high paid banker, you 'had a job' meaning you were still 'working class' to the 'true elite' there.
And by the way, the other greatest source of inequality is housing.
Everything I just said about housing is even more true: the first time owners think they are making bank, without realize the middle class is making more, and those with $3M homes even more.
When everyone is making more from their property investments, which are not productive, then the people paying the price are those with the least leverage, i.e. working class.
But politics is what it is, and you can basically never attack the middle class - while they are sympathetic to the 'working class', they're not going to actually really want to give up massive benefits - and - working class people are less likely to vote. This is a huge systematic problem in Canada right now, with the government pandering hard to 'middle class' who are effectively leveraging themselves over working people with money-printing that is being plowed into homes. It's not productive, it's just rearranging deck-chairs, with 1 more chair going up the stack every time they are rearranged.
This is true for everyone retired. It's true for a lot of people >55. And it's true for almost everyone in the top 1% by wealth (by definition you have >$10.5M - which even with average returns would net you $787,500 in capital gains per year - which is greater than the cut off for the top 1% in earned income).
Outside of that dynamic, I don't think there's as big of a difference between the top 20%, 10%, and 5%.
It's all relative to wealth - and the curve doesn't get ridiculously steep until you get into the >2% (of wealth).
A top 5% can have access to some special opportunities, be an insider at a company or have stock options.
A top 0.5% will be CEOs, Bankers, and connected individuals (through family/school networks).
Top 0.1% gets access to giant deals via government, international industrial or political relationships, access to major financing (i.e. SPACs).
As you can see in the charts from the article the 'jump' from each of the tranches is oddly about the same.
> The 0.1% is screwing over the 1% as bad as the 1% is screwing over the 10% as bad as the 10% is screwing over the middle class as bad as the middle class is screwing over the working class.
I don't want to sound flippant when I say, I think that GME and a lot of the Reddit hype has helped to alleviate this among that successful 20%.
I think many of that group are seeing that, while the structure of the system does allow them to succeed more than the other 80%, the system isn't built with them in mind. So, when the system is threatened, it will hurt them happily. Furthermore, I think they have started to not just know, but genuinely understand, that the top of the top is further away from them than they realise and far, far more advantaged than they realised too.
That, of course, is just one recent and notable example of these realisations.
But of course even amongst the 0.1% for which employment is genuinely counterproductive financially, there is the stratification stated above.
This is where the actual issue is I think. The usual solutions proposed are to increase taxes on the 10%, and increase spending much more than that, and inflate the money supply. A lot of people see all of this as the exact mechanism which transfers wealth to the 0.01% at the expense of everybody else.
Has there ever been a centrally-planned economic policy implementation that actually reversed concentration of wealth and power?
This is nonsense.
The more obvious point is that the forces that result in inequality don't originate in crypto, and any serious attempt to oppose these forces should target the origins.
Of course. But, this is either a ridiculous argument, or so obvious it's not worth stating. Inequality has been a thing for thousands of years.
a net worth of $300+ million dollars is more than skills. I think skill is a necessary but insufficient condition.
I predicted Bitcoin could hit $50k back before it was worth ten bucks. But I was off a failed startup at the time, so I only acquired 120 bitcoins, partially from some mild day trading to bring my dollar cost average to four bucks. I could have gone deep into debt. Risking the family money, but you know what? I didn't. Why? Because I didn't want my parents to lose $100k if I was wrong, and even though I thought it could 5000x, I was only about 20% sure. I'm fully out of crypto now, and I made a good return, but you know what? $300m? I could have been a billionaire, which I don't think would have been good for my soul, but still.
The system that allocates capital selects people that don't make the same decision. Because so many of the gains of modern technology are exponential, the system rewards people that take risk even if there are downside consequences to other people and even if the likelihood of any one person taking such risks succeeding is low.
Put aside all of the adverse incentives that go along with accumulating so much power and control over people, politics, capital, etc.
It's random. The rewards (infinite cosmic power, more or less) are disproportionate with the risk. Some/many people take greater risks with no hope of even a fraction of equivalent reward.
Nobody denies that the billionaires of this world worked and work hard for their billions. Some might have even taken great risks. But there is little sense of justice in it.
"Why should they get billions while I work just as hard as them? Because they happened to have that one good idea?"
This is where the Marxists sweep in and wow everyone with their promise of a different way. I'm not convinced, but I definitely see the appeal.
I'll say this: Billionaires do not have infinite cosmic power. If they, and they alone, achieved indefinite longevity then we could start to talk about this, but they're no demiurges or immortals. Even with some extra tech, the heat death of the universe awaits them eventually. Plus I have yet to see a convincing proof for the non-existence of God, so there's that too, but HN isn't the place for religious discussion.
That said, I can't believe what we're letting them get away with. This is ridiculous. They don't pay taxes until they sell their shares, so they just make their interests into business divisions. Interested in space exploration? Make a rocket division of the company! Hire people around the world without ever paying into their education systems or infrastructure!
If there weren't so many arms races in the economy then it wouldn't really matter how much wealth the individuals at the top accrue, but there are and the productivity gains from all the technology advancement over the past 70 years are consolidating in the hands of the very few and the same very few are using wealth to shape media narratives and political policy via lobbying.
I'm not against inequality, I'm against the ever-more-expensive homes, healthcare, and tuition. Some billionaires fund important, life saving work, but so many don't and we don't have accept the system as it is. For example, we could force them to pay taxes on their capital gains before they sell if the current market value is more than 10x what they acquired them at. We could ensure that capital gains taxes were similar to income taxes for founders to stop the problem of a founder's income being mostly capital appreciation.
It’s worth noting that this is intentional, at least in the U.S. The corporate tax system is specifically designed so that companies have a financial incentive to create jobs and hire people. That’s why companies pay taxes on income and not revenue.
The idea is that it is better for society to run corporate revenue through employee income and then into tax revenue, than directly into tax revenue from the corporate coffers. When people have jobs and income, they are invested in a stable society. When they pay taxes, they are invested in participatory democracy.
A society in which companies directly pay most tax revenue is a world in which it is even easier (than it is now) for a few corporate and political leaders to team up in paternalistic abuse of the populace. And when people own little, they have little to lose, and have no reason to prefer a stable society. History is clear on this matter.
The fundamental issue today is share of income. Raising taxes does not fix that because increased taxes do not become increased income for employees. Other policy solutions need to be found that change the balance of income between owners and employees.
The article cites the high income of athletes like Lebron James and Clayton Kershaw. The reason individual professional athletes make so much income is that they are part of collective bargaining agreements that reserve a certain percentage of business revenue for their salary. We’re taught to think of lazy Teamsters when we hear the word “union,” not Lebron James and Clayton Kershaw.
It’s one possible solution; there may be others, like pay ratio limits, mandatory salary disclosure, or greater incentives for employee training programs.
If you consider that billionaires only personally consume a sliver of their net worth, what are they actually getting away with?
For example, say a billionaire consumes $100K worth of food, $20K worth of gasoline and jet fuel, and $1m of clothing, entertainment, baubles, prostitution and medical services per year. What happens to the rest of her wealth?
It's tied up in investments:
$500m in shares of company X
$100m in shares of company Y
$100m in a mutual funds
$100m in real estate (houses and land for personal use)
$100m in a philanthropic fund
$ 98m in artwork
What do you find so objectionable about this?
Most people I think are fine with their existence and good for them for doing good at the business game but theyre only one facet of of the economy, and while they’re doing great everyone else arguably isn’t getting better
1. If I were to lend you the deluxe magic wand, what changes would you decree that would cause everyone else to get better?
Now let's quantify the effect of those changes.
2. If instead of the billionaires getting richer next year, rather, because of your changes, the delta of their projected wealth increase goes to everybody else, how much better off would that make the average person?
You tell me. You've got the deluxe magic wand and you can do whatever you like. What would you do in order to change society for the better to achieve the outcome you've described?
The first objection is that the system allows them to marshal massive amounts of resources to achieve their objectives without support the very infrastructure that they rely on to acquire ever increasing control of resources.
The second objection is that they've lobbied for a system that benefits them. Do we really think of adding years to copyright is something that actually benefits everyday people? No. Of course not. But the wealthy pressure the politicians and the politicians cave and most of the public is too busy to understand or fight it.
The third objection is that they drive up costs for others for areas of the economy that are naturally limited. The larger their house and plot, the fewer people can live there, the more they drive up prices for land. They buy multiple homes. The best lakes and groups of normal people can't compete. In basically any market where there is an arms race the ever increasing economic disparity is making the day-to-day reality of the poor worse. Automation has helped bring the cost of things down, but in so many areas it's a hollower copy of what it used to be. People used to bake bread at home all across Canada. Now, it's wonderbread for the poor. To an economists spreadsheet things look great, but there's a humanness that is getting pushed out of interactions.
Imagine this continuing on and on, as technology continues to ever centralize returns. We're going to start having trillionaires soon. Right now the word is marked as incorrect by my spellchecker, but once it hits the news there's going to be the new bar people hit. A new top class.
There should be wealth limit. Or very high wealth taxes after, say, $100m. It doesn't make sense for such a small percent of people to own such a large percent of our society.
No worries. It's interesting that some people have, because I haven't expressed an opinion in favour or against billionaires. I've just asked for opinions and thoughts.
Disclosure: I am not a billionaire.
Or crushed other people's ideas using unfair competition.
When your financial decisions though involve publicly traded assets, it is painfully easy to go back and with precision determine the exact amount you missed out on because of your risk aversion.
The argument is not that these people are so uniquely skilled. The argument (as I understand it) is that they are capturing the returns from automation, because they control the capital and market-ish economies generally funnel gains to owners of capital.
The "pie" grows in size, but capital owners also take an increasingly large slice.
That said, ultra-billionaires who didn't inherit their money are uniquely skilled, if not also uniquely well-positioned to take advantage of those skills. But that's not really what economists mean by "skills-biased technological change" except in an overly literal sense.
I believe Government Tax policy has only helped to serve this end.
In the 1950s, roughly: 50% of federal revenue was from personal income taxes, 25% was from corporate taxes, and 25% from excise taxes.
Today, roughly: 85% of federal revenue is from personal income taxes, 7% is from corporate taxes, and 8% from excise taxes.
And are social security and Medicare included in these taxes? If so, social security was massively expanded and Medicare came into being. These were a big increase in income taxes but individuals are also the major beneficiaries.
When discussing the super-rich, many bring up family dynasties such as the Waltons of Wal-Mart, or the Rockefellers and Koch brothers of energy fortunes...But who is actually in the 0.01 percent?... Smith, Yagan, Zidar, and Zwick find that the 1 percent’s income is being driven by owner-managers, mostly of small and medium-sized companies..."
You may think the rich are traditional capitalists - ie, wealthy business owners. But after a lot of guff, we'll say they are exactly that.
And a lot of rhetoric of the article involves the kind of balancing act found in policy papers aimed at the wealth - use euphemisms that are technically truthful but make wealthy sound much more creativity, benevolent, dynamic, etc than they are.
I always find it odd that these articles pretend that you can educate everyone well enough to earn a middle-class job. I believe it's more like a Red Queen race, meaning that as soon as you increase the average education of potential employees, companies will equally raise their requirements.
- 50% of inner city school kids will not graduate high school.
- 2/3 of the prison population is functionally illiterate.
- 75% of the prison population did not finish high school.
- 19% of the US population cannot read a newspaper. Nearly all of them earn incomes at or below the poverty level.
The situation is the same in European countries as well. Italy has an extremely high rate of functional illiteracy. (Some estimates peg it at 47%) How can people be expected to live healthy productive lives when they cannot effectively communicate in written language?
None of the statistical numbers above are surprising and, call me cynical but, I don't think there will be much change coming. I'd love to be proven wrong.
Even the government would disagree with you: https://nces.ed.gov/fastfacts/display.asp?id=69
Actually, like the OP said it depends on how you define literacy. Using the definition of <3 on NCES it would be around 50% but if they were using a more liberal definition like CIA world factbook it would be almost 100%.
So, in short, I think literacy level is reasonably quantifiable, and by 'just barely literate' I meant 'sufficient to be called literate but no higher', right on that boundary.
I don't know and wasn't suggesting anything about the current actual make up of literacy in the US; I was just replying to '50% are below average' which is of course always going to be true in a relative sense, but you can shift the absolute values up; it doesn't mean 50% must be illiterate or anywhere close, or any at all even. (Unless you define it as less lettered than average I suppose!)
- They use it in political activities to maintain their status also by fighting against social liquidity, or against laws that let the externalities of their businesses emerge as costs.
- Even when they have goodwill, they don't know what is good for us and how to achieve it, simply because success in business does not prove they are good at this.
I think it would be better to invest in solid infrastructure, education, healthcare, affordable housing, rehab, crime reduction, etc. so that everyone has a legit chance of improving their standard of living. There are some really hard, poverty skewed cultural problems that need to be solved and simply giving people money isn't going to do that.
The benefit of investing in all of those infrastructure related things is that it creates jobs for people that want them. Hopefully enough people fight their way out of poverty that the next generation will have people with the knowledge base and skillset to improve things even more. I honestly don't think we're going to get a solution to poverty, petty crime, etc. until we're able to engage a lot more people that have lived in that world. Our supposed "leaders" just don't understand it well enough to come up with viable solutions.
The biggest hurdle is filling the government with people that actually care and want to improve the world as a whole. I don't know if that'll every happen :-(
Give cash to a rich person and they make a bet on what they think people will buy. Consolidate the wealth and we're back to central planning / command economy.
Paying taxes + low income housing + free drugs + drug addiction clinics > me or my children getting stabbed by a desperate addict.
Why? It was working people who created that wealth.
Being super rich and using that advantage to usurp all the productivity gains of the whole world doesn't make them working people. The working people are the ones that actual do the work, not the ones that control the capital.
Things like Jeff Bezos getting a $500 million yacht make me sick. What kind of resources does that take? How many lifetimes of work go into it? How many schools could you build instead? Hospitals? Houses? How about spending $500 million dollars building water filtration systems for developing countries?
No one should be allowed to squander resources and labor like that until every person on the planet has food to eat, clean water to drink, and a safe place to sleep.
No, the simplest way is for the 0.01 percent to pay them to do things, not give them money.
Give 10,000,000 to a rich person and they but some property or “invest” it in some hedge fun that makes the world worse. Give 10,000 to 1000 people they spend it. All of it. At local businesses which pay tax. For homes they need. And it eventually ends up in the hands of the rich again anyone because they are so good at extracting wealth at every opportunity
Also, since you admit that it all eventually ends up in the hands of the rich again, the alternative of "give the money to the non-rich" doesn't solve the problem anyway.
That's not what UBI does. UBI gives money to everybody whether they need it or not. Sure, for some of them it will be "life changing", but for many it won't. So UBI is very inefficient at getting money to people who need it.
Rich people, in addition to paying people directly for goods and services, which those people would not produce in the first place if they didn't need the money they can sell them for (so paying them is directly giving them money they need), can (and many do) donate to charities that do a much better job than the government does of figuring out who actually needs the things they provide.
If the market will figure that out so fast, then the way for poor people to become not poor is to become part of the market. Produce things that other people want, and sell them.
Giving people money as a one-time gift to help them bootstrap their way to doing that is a great idea. Rich people do that all the time; they're called "angel investors". The government can't do that; certainly that's not what UBI is.
The key point you are missing is that if you just give people money, and they spend it, and don't produce anything, you haven't helped the situation at all. You've made it worse. It's not enough for the market to figure out what people want; someone has to produce those things. Money flowing back and forth between people depends on everyone producing something. If money starts flowing to people who aren't producing anything, the incentive to produce goes away, and the market will stop being able to provide the things people want, because nobody has any incentive to produce them.
In fact, the arguments being made in this discussion about rich people being inefficient at spending money are based on precisely this observation: the rich people aren't producing anything to match up with all the money they have. And the argument for redistributing that money to others who will make better use of it is that those others will produce more with it than the rich people do. The fact that the others will also consume more is just looking at it from the other side. Nothing can be consumed until it is produced. So you can't just give people money for them to consume it; that's just as bad as the rich people having it. You have to figure out how to use that money to produce more. And that's something governments simply suck at doing.
Also, people pay other people for goods & services that the people with the money want to pay for. The nature of my life should not be determined by the preferences of the people who've managed (frequently via heredity) to hoover up outsize chunks of wealth and power within the economy. As a human being, I do not exist to satisfy the wants of the rich (though I might choose to pursue doing so as means of making a living). The options available as a way to make a living should not be controlled by those who have already been successful.
I don't assume that. I was merely contrasting your complaints about the bureaucracy required for the government to distribute money to people with the reality that any system for distributing money to people is going to be ... bureaucratic.
I also don't agree with your assessment of things as they are. You claim that the bureaucracies are bloated, but have no evidence that the things they do can be achieved with less bureaucracy. Most regulations exist to check the power of the rich (or some subset of them), not to enable them (or some subset of them). Creating wealth does not involve navigating a complex maze any more than simply being alive does.
Nope. Private charities like churches are not bureaucratic. They distribute money to people based on personal knowledge of those people and a personal judgment on the part of the church community that those people deserve charity.
> You claim that the bureaucracies are bloated, but have no evidence that the things they do can be achieved with less bureaucracy.
Many of the things that bloated government bureaucracies do should not be done at all. So it's pointless to ask for evidence that they could be done with less bureaucracy.
> Most regulations exist to check the power of the rich
That's what we are led to believe. I just don't think it's actually true. A whole new mess of regulations got put in place after the crash of 2008. Yet the rich are even richer now than they were then.
Just delete "government" and I might agree with you. On the other hand, even though I largely agree with the content of Graeber's "Bullshit Jobs", I think that actually the onus is on those who claim "it doesn't need to be done" to explain one or both of (a) how we ended up with "the doing" in the first place (b) what happens when we get rid of "the doing"
When I said "Most regulations exist to check the power of the rich", I did not mean to imply that they were always effective. However, I also did not mean to imply that they exited to limit the wealth of the rich, merely their power. Particularly in the USA, the concept of seeking to limit wealth accumulation seems to be an anathema to a sizable chunk of the population. Seeking to limit power does not, as naive as this might be.
Regarding churches, I and millions of other people categorically reject systems of aid and redistribution that are based on the personal moral judgement of a handful of people. The bureaucracies we've tried to replace that with do not always do quite what we intended (by a number of different metrics), but they do at least attempt to be (more) value neutral than private charity.
It's easy to create a dewy-eyed view of small, personally-connected communities where things are done "based on personal knowledge of those people". Big cities are full of people who fled that kind of society - the judgement, xenophobia, myopia, and expectations.
In theory, sure. But as the saying goes, in theory, theory and practice are the same, but in practice, they aren't. No such "simple" system of taxing and redistributing has ever actually existed. The incentives to complicate and manipulate it are too strong.
The fact that you, for example, don't have any goods or services that, say, Bill Gates or Jeff Bezos wants does not mean Bill Gates and Jeff Bezos have all the wealth and you have none.
Wealth is not a fixed thing. Wealth can be created. Bill Gates and Jeff Bezos are rich because they founded companies that created enormous amounts of wealth. Say what you like about Windows and Amazon, but Windows made personal computing available to everyone, not just the affluent who could afford a Mac, and Amazon has made cheap products and easy, fast shipping available to everyone, not just the rich who could afford to hire personal shopping and delivery services. And the wealth those companies created had to be spread among everyone, by the very nature of what they did. Windows would have been useless if it were just Bill Gates' personal OS, and Amazon would have been useless if it were just Jeff Bezos' personal shopping service. The whole point was to make those things available to everyone.
Similar remarks apply to everyone who creates wealth. The people who grow the food you eat grow more than they need just for themselves. Then they trade the excess for other things they need or want. The same applies to you. Want some food? Create some wealth that you can trade for it.
The real complaint that can be made about the "1 percent" or "0.01 percent" or "elite" or whatever term you want to use, is that they have created a system that makes it harder for everyone else to create wealth, by putting all kinds of regulations and complications in place that only they know how to navigate. But you don't fix that problem with more regulations and complications. Nor do you fix it by just confiscating what the rich have now and redistributing it; that only works once. You fix it by scaling back all those regulations and complications so more and more people can create wealth themselves instead of having to wait for a few "elites" to do it.
Taxation ensures that all of society benefits as the collective wealth increases. It pays for shared resources, and provides for a shared safety net. Taxation isn’t confiscation, it’s the cost of doing business and thriving in a complex society. Trickle down and deregulation are awful policies that only destabilize.
1. https://www.nytimes.com/1981/02/15/business/us-vsibm.html
Your reference takes a viewpoint that is, to say the least, questionable. IBM didn't even comprehend the PC market. If they had, they would never have given the license for MS-DOS to Microsoft. Nor did they comprehend the market for graphical user interfaces when they told everyone in the late 1980s that yes, OS/2 would be wonderful when it came along but there was no rush, they were much more concerned about coming out with new mainframe hardware and software. Bill Gates didn't want to wait that long, and the result was Windows. IBM had no clue what he was even doing until it was too late.
If you want to look at what antitrust law really accomplished, look up what happened to Alcoa Aluminum. Their "violation" was providing aluminum more cheaply and in greater quantity to their customers than any competitors could. Their breakup in an antitrust lawsuit made aluminum more expensive and scarcer, causing huge costs to industry and ultimately to consumers. Your rosy view of the benefits of regulation is a myth.
> Taxation ensures that all of society benefits as the collective wealth increases. It pays for shared resources, and provides for a shared safety net.
If that was all our tax money was used for, I wouldn't complain. But it isn't.
Not to mention that much of the money the government spends doesn't even come from explicit taxation; it comes from printing money, which has the same economic effect as taxation--us ordinary citizens have our buying power reduced--but is more politically palatable because most people don't understand what is being done to them.
Money is a completely unnatural invention - nothing about it is “natural”, so I don’t see this as a strong argument.
Not unless human society itself is "unnatural". The reasons why money gets invented are common to all human societies that get beyond the tribal stage; money is as natural as the human societies that invent it are.
Society is created by humans. Therefore it is man made, not made by nature. You don't have to change nature to change society, you can change society by changing humans, which is a very specific subset of nature and not very representative of nature as a whole.
The problems that can easily be solved by money may be natural but we still get to decide how we implement money and the way we do it can create human made problems.
Okay, then that just means "unnatural" is not a bad thing, unless you think society is a bad thing. But if you think society is a bad thing, why are you taking advantage of the benefits it provides? I assume you are, because if you weren't, you wouldn't be able to post here.
> you can change society by changing humans
Really? And how do you propose to do that? Particularly without grossly violating the rights of the humans you want to change?
Second, giving people money does not improve their lives. It can have the negative effect of making them dependent on receiving money, like a big part of Africa is now after decades of outside help. "Teach people to fish, not give them a fish", but this should not be perverted "give them the money to go to college and learn something with no market value".
And not the last, take money from the rich to give to the poor sounds sometime like a justification for rape: give people what they need, even without the consent of the people you take from. Sounds really cool when you tell about Robin Hood, not so cool when you give an analogy.
Competition is always the way these things get tied to absolute metrics and not relative ones. If people can be made more productive by giving them skills, they would be worth paying more. If you underpay employees and pocket too much of the value they produce, then a competitor can come along underpay a bit less but still make a profit, and hire away your employees.
Where do you get better educated people mean everything else stays the same?
If anything I’m somewhat pleased to see the Chicago School has passed the denial stage and moved on to bargaining vis-à-vis inequality.
You can keep going and the 0.00001% will be clobbering the rest of the 0.001%. It's a structural thing we're seeing.
That means it'a a fair question, to ask 'is that useful in any sense?'. It's not 'points' we are awarding or measuring, this is the means by which humans interact and survive. It is more of a zero sum game when it's captured by individuals as a way of keeping score. That's non-optimal.
> Let's be precise. The actual 1% are not the ultra-wealthy, they're doctors, senior SV engineers, and regional Vice Presidents. That's not who people are protesting wall street about.
Also, why are you talking about 1.4 million? The article claims “The threshold for membership in the 1 percent in 2014 was an annual household income of $386,000, excluding any capital gains,”
$386k total comp is definitely Google-engineer range.
If you were part of the mega-rich elite, isn't that a convenient narrative you'd want to push? "Watch out regular wealthy folks, they're coming for your cash!" Just like how rich people are always very concerned about how tax rises will affect the working population.
Income is not the rate of change of wealth. Wealth can appreciate significantly without being reflected in taxable income.
Right at the top the terminology clearly delineates the two:
> These economists have been seeking to measure income inequality and wealth inequality, and to understand the nature of the 1 percent’s income and assets.
I read it before I posted, and I think that by presenting wealth and income together, they are conflating them. The terminology is nice, but it is not backed up by the content.
For example how much of the wealth comes from income? I imagine a significant portion has not been recognized. Someone could be self-made and have billions in wealth but only a fraction of that has been recognized as income.
Change in overall net worth - consumption
1. I could make and spend $1m/year and have a net worth of $0.
2. I could earn $1m/year and consume $20k
2.1 I could donate the difference and have a net worth change of $0
2.2 I could save/invest the difference and grow my wealth
3. I could make $1m and have my $1m investments go to $0, leaving no change in my net worth (aside from that year's consumption)
4. I could make $0 and have my investments grow by $1m
5. I could have a net worth of $0 but earn $1m/year
6. I could make $10m/year but have my $100m investments go down to $50m, leaving me $40m poorer, but still be both a high earner and high net worth individual.
Also, debt factors in to these.
All of these variables move, and the definition of "rich" seems to be an ill-defined function of: - Income (from all sources) - Net worth - net worth change - Consumption/lifestyle - Debt - Other (connections, access to capital, creditworthiness)
I wonder how much overlap there even is between the top .01% Wealth households and .01% income without capital gains.
The “income” 0.01% are going to be people like lottery winners and are wholely unrepresentative.
It would be great if consumption and not income could be taxed though (not easy).
Calculating wealth is hard, but they already do that. If you have numbers for wealth over time, take the rate of change.
They calculated "Wealth" for this article.
There are many many valuation methods for assets, including art, and each has its trade offs (yes they can be gamed). Unless you want to take this to its philosophical conclusion of no observation being able to be an objective truth.
Plus as much as I want it I just don't see how would you ever implement anything practical. Pure sophistication and obfuscation helps hide the wealth. Somebody rick can easily spend 10% of their wealth doing that (we're talking millions here) and tracing back these paths can turn out to be more expensive. Gov is at huge disadvantage here despite laws already helping it in a very questionable ways - like your need to prove where did you get some money from instead of gov proving that you got it illegally.
An exception could perhaps be made for sale on the death of the registered owner, and sale to public galleries.
Not taxable income, but still income, isn’t it?
"Zuckerberg comments that people do not really need privacy anymore while buying himself a Fortress of Solitude" :-)
It’s all very nice of course. But here are the richest people on the planet, by grotesque margins, and all that gets is more square feet and a nice site?
Take a look at this: https://landreport.com/2021/01/bill-gates-americas-top-farml...
These people are basically our modern day version of the feudal lords of the past. Definitely not like normal people, despite the houses looking like that. They have a lot of power.
Who lives here? [1]
[1] https://earth.google.com/web/@37.45398166,-122.30164715,204....
Currently, the consolidation is occurring in financial vehicles and global corporations. ( a new kind of colonialism )
It is a bit of a questionable correlation I would agree.
Global corporations enter countries and begin to hold sway and control over the local governments. Though there is no settlements there is a strong financial force entering the countries. I know this isn't new but technology has compounded the effect.
Think the Arab Spring ( a lot would agree this was a good thing, its just an example ). This effort was mobilized/made possible by technology firms that entered those countries allowing them to place large pressures on the systems and change them. Good or bad is not the argument the question is if the external corporations were able to sway the direction of the countries.
In addition, I once heard a very famous investor from Omaha state they are able to sway the economic futures of countries. ( Hopefully they are benevolent in this )
https://www.bloomberg.com/news/features/2021-05-07/jeff-bezo...
In my opinion all billionaires are sociopaths. I think it’s necessary to be one in order to become one, and most definitely to stay one. If you think “yeah I am the best person to manage this wealth”, then you’re already putting yourself over society. That they can look at the state of the world, and double down on personal wealth, makes it even clearer.
Previous discussion:
The bigger problem to me seems like the growing income disparities between the upper middle class and everyone else. When my family in Oregon complains about housing prices shooting up, I don’t think it’s Jeff Bezos that’s to blame, except insofar as he’s paying tons of money to knowledge workers who buy up housing in places like Bend. The stuff middle class people care about—skyrocketing costs of education, housing, health care, etc., seem mostly to be supply and demand problems where the upper middle class is both helping limit supply and inflating prices through demand.
The really bizarre thing is that the top 10% doesn’t realize that it’s interests are highly aligned with the top 1% or top 0.01%. Globalism, intense focus on education, etc., make the top 0.01% richer but also accelerates the divergence between the top 10% and the bottom 90%.
Why would you reflexively assume “the upper upper class” is involved? Billionaires tend to make things cheaper for consumers while gutting the upper class below them. Amazon wipes out owners of regional or local retail chains, but makes things cheaper for consumers. (That’s a big part of why the 0.01% is pulling away from the 1%. It’a billionaires eating the lunch of millionaires.)
Contrast areas like education, where there are no “upper upper class” making profits. Tuitions continue to skyrocket due to growing expenses—in salaries, physical plant, etc. It’s a racket, but it’s a racket run by the upper middle class.
Of course. And Star Wars made a loss: https://www.techdirt.com/articles/20110912/13500315912/holly...
>Why would you reflexively assume “the upper upper class” is involved?
Because at the same time that their wealth is climbing stratospherically, healthcare costs are also rising stratospherically and there has been significant market consolidation. Somebody's making bank.
>In crude terms, the health-care labyrinth comprises six layers, each involving the state, mutual organisations and private firms. People and employers pay insurance companies, which pay opaque aggregators known as pharmacy-benefit managers and preferred provider organisers. They in turn pay doctors, hospitals and pharmacies, which in turn pay wholesalers, who pay the manufacturers of equipment and drugs. Some conglomerates span several layers. For example on March 8th Cigna, an insurance firm, bid $67bn for Express Scripts, a benefit manager. A system of rebates means money flows in both directions so that the real price of products and services (net of rebates) is obscured.
https://archive.is/Qh8ev#selection-745.0-745.683
Did you think the hospital is the only party that could make a profit out of your suffering?
How much of that rent is profit? How much of the drugs being used goes to profit, and how much of the equipment and material of that drug goes to profit, and so on.
If you want to cite a meaningful margin number, use the entire vertical. You can't limit yourself to a single level in the value chain and say that the overall margins are low.
There are definitely upper upper classes making profits in education. "Physical plant" means money going to RE conglomerates. Beyond that the slew of education industry providers seems to make an EBITDA margin on average of more than 10% : https://csimarket.com/Industry/industry_Profitability_Ratios...
It's not good that "hospital aspirin" has a price disconnected with the economics of aspirin. But it's a sideshow issue. You can't make health care cost effective for consumers by fixing the aspirin problems.
Want to know what affects housing prices a whole lot more than one person buying one house? An investor with dollar signs in his eyes buying up 20 of them.
While the top 10% talk about the 0.001%, you’ve got 50% Americans whose ticket to a middle class lifestyle (good paying blue collar jobs) have disappeared, pulling up the ladder.
The top 10% argue about not being able to afford $1M houses or get their kids into Stanford, while the 50% worry about having a future at all.
And that’s one big reason why Trump was elected president. He at least acknowledged it.
He won because he's a billionaire who duped many Americans into thinking their doctor neighbor is the enemy rather than his own billionaire friends.
Sadly it seems like Biden is doing the same with his recent tax plan.
Its a popular explanation (because it is politically useful for bith Trump supporters and progrrssive Democrats, for different reasons) that isn’t, however, born out by the political demographic data.
There was a major shift in lower income support for Trump, even among non-whites. Sure, college educated males voted heavily for him, but they’ve always voted Republican.
I would like to see a flat tax rate with a negative income tax for people below a certain threshold to replace welfare. Flat tax to treat everyone equally and negative income tax to shorten the tail on the left of the curve.
But, that is me. I don't have a problem with some people having vastly more wealth than me. They are still citizens that should be treated as equals under the law.
I would really like to see the 16th Amendment repealed and government return to being funded by import/export tariffs. A flat tax with a negative tax on the low end is a compromise in my mind. I don't see the 16th Amendment ever being repealed but I do want to see tax code simplified, people keeping their income and less redistribution through welfare. That is not something that government should be doing. Sending more money to government is a bad investment.
# Negative + flat
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#progressive
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* There is no free meal (even though food is abundant)
* Merit matters (while we know merit is a myth)
* If people don't work the world collapses (not all work is necessary and has value)
* Generally the idea stands that hierarchy matters, that the strong should dominate the weak, and that social darwinism is a worthy ideology. Since the end of the cold war, the world doesn't believe in equality. People still believe in alphas while its author retracted the paper.
There are a lot of stereotypes that humans integrate, which allows them to rationalize a flawed system
Interestingly, printing money exacerbates wealth inequality. The people closest to the printer get to enjoy the fresh money before inflation hits the broader economy.
Evidence?
>printing money exacerbates wealth inequality
No, the method of distribution exacerbates inequality
Important distinction.
https://www.lancaster.ac.uk/staff/ecajt/inflation%20lags%20m...
Yes, distribution matters. Us common folk got a taste, with stimulus checks, of what has been happening for nearly a century at the top.
Wouldn't introducing automatic stabilizers, like stimulus checks cut recognition and decision lag.
The problem with this is that the government simply can't do it effectively. We had marginal tax rates that high in the past and the revenue didn't get redistributed to the people who really needed it. It got squandered in pork just like it always does.
Charity and helping those who need it is a fine thing, but it has to be done by people who will actually do it right. Whoever that is, it isn't the government.
The evidence is that, compared to the status quo, it can. Perhaps it can’t meet some abstract ideal, but that’s making the perfect the enemy of the at-least-better-than-horrifically-bad.
> We had marginal tax rates that high in the past and the revenue didn't get redistributed to the people who really needed it.
They coincided with a long period of much more effective broad-based growth and less concentration of wealth at the top than we’ve had since they ended, so while the first-order nature of the individual policies may not seem like idealized redistribution, the evidence is that on balance the set of policies that included them was at least less bad at that then status quo set of policies that include lower top-tier taxes.
But even if we hadn't done better before that wouldn't in and of itself be more than very weak evidence that we couldn't do better through government.
And the latter was a side effect of the former; the attempts of the rich to concentrate wealth couldn't keep up with the broad-based growth. But it wasn't high marginal tax rates that allowed everyone else to reap the benefits of that broad-based growth; it was the fact that the growth was outstripping the concentration of wealth. Most of the revenue that went to the government from those high taxes didn't get redistributed to the people at the bottom; it got spent on things like the Korean and Vietnam War (and more generally the Cold War military-industrial complex), subsidies to large corporations, etc. Even Social Security and Medicare, the two poster child programs for the government redistributing wealth from the rich, don't actually do that, because your benefits are based on how much you pay into the system. (Not to mention that the government has raided the trust fund that was supposed to fund those programs for decades, so the fund now has government IOUs in it instead of cash, and those IOUs have to be paid when they come due from current revenues, not from earnings from prior payments in. It isn't the rich that are going to have to pay those IOUs.)
> that wouldn't in and of itself be more than very weak evidence that we couldn't do better through government.
Governments have existed for millennia. There is a lot more evidence about how badly governments do things than just the US in the few decades following WW II.
No, "we" can't. "We" can only do this through the government.
> This is one benefit of UBI.
If you think UBI will eliminate pork and all other forms of government waste, including the pork waste involved with redistributing wealth, I have some oceanfront property in Nebraska I'd like to sell you.
Not being currently politically feasible doesn't mean it's against the laws of nature.
No, it's an inference from a mountain of evidence of what governments are doing now and have done in the past.
I'm familiar with the issues in the article and understand the desire hook reader's attention by pointing out income disparities as dramatically as possible. Still, once a reader is engaged then a more technical presentation allows them to get more value from the article and better equips them to discuss or debate the issue.
I've recently started diving into the "what if" of a hypothetical society that used some kind of "financial lynchmob ritual" as an institutionalised check to infinite wealth concentration: it would be limited in rate, e.g. one property nullification per year per 100 million inhabitants. It would be open nomination, secret vote, "winner" would get stripped of every property and contract, perhaps with some generous lifetime pension in return. It would basically be like an inverse bankruptcy, just concentrated on one creditor instead of one debtor. The rate-limit would make sure that it wouldn't devolve into an ever accelerating tall poppy hunt, but it would be enough to force a requirement to be not disliked too much on the 0.0001% rich. This could have massive benefits, way beyond the direct spoils of occasionally nationalizing some Oracle or Facebook or Aliex. What would be its unavoidable failure modes? Lots of mud-slinging between the super wealthy, that wouldn't be pretty. Lots of defecting into other countries, for sure, but let's assume some total hegemony for the sake of the mind experiment. Seclusion, most rich and powerful would be more invisible than they already are. Chances are you'd eventually have a caste of super rich that keep an extremely low profile. Perhaps even secretly pulling strings for some exceptionally visible and unlikeable dickheads to somehow stumble into wealth, as a caste of sacrificial decoy rich. And the success of those, until eventually stripped, would make others try to emulate them. Perhaps that would be the failure mode?
The bulk of the 1% 10 years ago by number of members was probably mostly made up of doctors and lawyers although the wealth is disporportionately held by the top percentages of that range. Same is true today except add a major component of people in tech.
But the 1% rhetoric never made any sense.
Its a strong argument that the 1% rhetoric makes great sense, even if they underestimate the scale of just how badly wealth is concentrated
Problem is there people take it too literally and then confusingly apply the rhetoric to the actual 1%, with the support of the 0.01% that hide in the shadows. This is most apparent in the US where "tax the rich" was implemented as a tax on people earning $250K+/yr, not $10M+/yr
The basic message of the article is to give the impression that there are somehow two "equally weighted" positions:
In short, there’s a split among economists. Some argue that income needs to be distributed more equitably, while others say governments should focus less on taking actions that could inhibit top earners and more on addressing the reasons others aren’t as successful. Do we slow the 0.01 percent or lift the 99.99 percent, which could be a heavier and more complex assignment? As the debate continues, members of the 0.01 percent continue on their course.
A controversy on which policies should be implemented regarding income inequality. Having read the voluminous Piketty and now searching for the "underdog" Greg Kaplan (Co-Director of the Gary Becker Milton Friedman Institute for Research in Economics: basically the Chicago School of Economics in a new better empiricist's clothes), there is basically - in my quick search - nothing substantial about his arguments other than the good ol' tale: Do not "destroy" the wealth creating machine of the 0.01% instead let the other 99.99% adopt it. Like a cynic saying: Everyone can win the lottery.
For anyone interested about the "real" consequences of the old Chicago School of Economics, there is a great documentary called "Chicago Boys" about the case study of Chile from '73 onwards.
Anyone even bothering to look deeper into the history of inequality between "Stalinism" (Socialism) and "Thatcher-Reaganism" (Neoliberalism) there is for example FDR's "New Deal" which somehow is rarely brought up these days, the parallels (translating into our times) are striking. And many other examples of truly rich datasets to look into.
Of course the datasets about the obscenely rich is very poor even nowadays in the "information age". One has to wonder is this "information distribution" not how real wealth can be defined, too?