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Comment by samiv | Hacker News Reader

There's no paradox here. Distribution of wealth matters. Rich got richer and everyone else didn't. Simple as that.

As Ray Dalio has mentioned, you should measure results on how it impacts the bottom 51% of the people (the majority) it's a lot more illustrative than looking at the average.

Yep. I'm not an economist but my social democratic common sense would tell me to look at the bottom 10% income bracket and see how they're doing.

Incidentally these people are the best economic citizens because if you give them money they'll spend every cent of it because they need to buy food and energy, use health care and pay rent.

In other words if a rich person gets a million they (if they're sane) spend a fraction of it and put the rest in assets, stock market, property, etc. If you give 1000 poor people each 1000e every cent will go into local economy immediately.

Bottom 10% are outliers though. Bottom 50% is much more reasonable.

Treatment of bottom 10% and treatment of bottom 50% are both interesting metrics, but for very different reasons, and they are often contradictory.

The "bottom 50%" is a measure of how well you make it possible for everybody to succeed without extraordinary help.

The "bottom 10%" is a measure of extraordinary help.

The capitalist response to that would be that the investment in companies is better because it makes everyone richer in the long term by increasing overall wealth.

I'm not sure I buy it but it's an effect to consider.

That does sometimes happen - investment does cause development. The mistake is to assume that's always what happens, and that everybody can benefit from the development.

Oh I agree with you. I suspect it happens less than is the conventional wisdom, but I might be wrong.

The benefit is uncertain whenever anybody spends money on anything beyond survival. If you go around asking investors "are you using that money properly and beneficially", for consistency you also have to nag the poor with the same question. Should you put a bet on a horse? Is it really necessary that you visit anybody far away? What's the benefit in dyeing your hair? In both cases, you'd be enforcing arbitrary wisdom instead of acknowledging your fallibility.

Not quite. In some cases we’re certain there’s no benefit.

Capitalism has spent the last 10 years burning billions on the metaverse and crypto with apparently no repercussions for those involved so I think their credibility as custodians of wealth is questionable.

Capitalism also spent the last 10 years burning billions to create affordable electric cars, reliable regular spaceflight, efficient delivery of everything everywhere, and the (well, probably) greatest technological invention in human history. This is not a complete list.

But yeah. Ugh, capitalism.

You mean the EVs and spaceflights that were funded by government subsidies?

This sounds a lot like trickle down economy. It did not really help anyone other than capital owners.

Should we perhaps look at the top 51% instead? Why pick one perspective over the other?

I’m not familiar with Dalio outside some weird pseudo-academic paper he wrote where he attempts to provide a new grand theory of economics based on “transactions”, but I would be interested to hear this perspective supported.

Edit: samiv above answered my question

Well, if you're looking at the bottom X%, then you can be confident that the rest of the population are in a better position.

Technically yes but its not that straightforward.

Take a country like Sweden for example everyone is reasonably well off (if not exactly thriving) since income inequality is quite low. At the same time wealth inequality is extremely high since the rich pulled the ladder after them and there are hardly any options for the middle class to accumulate much wealth. In turn that probably doesn’t help productivity and innovation that much. Why work harder if you won’t get anything in return? Which is a general vibe vibe in Scandinavian work culture.

Then again they (well Denmark at least since a petrostate like Norway doesn’t count and Sweden hasn’t been stellar and the Danish government is hellbent on turning the EU into a fascist dystopia so maybe its not a price worth paying..) are doing quite well economically compared to most other European countries.

Ray Dalio created one of the most successful hedge funds ever and as he calls himself "a professional capitalist." The guy even helped with launching the Chickent McNugget (advising McDonald's with Poultry futures)

If you look at the top 51% things are going extremely well, but as this article shows it can hide a lot. I loved his explanation of how the economic machine works: https://www.youtube.com/watch?v=PHe0bXAIuk0 his book Principles is pretty good too.

The median is usually used for this; it throws away outliers on both sides.

This is not quite the same as the median: it is possible for the bottom 50% to improve but for the median to stay the same (i.e. imagine if everyone in the bottom 50% suddenly equaled the best of them). But the median is a lot better than the mean for not being distorted by large changes in the top and bottom percentiles.

You can use other quantiles if you want.

This seems to tacitly assume that the outliers on either side have equivalent weight with respect to whatever is being investigated, while the explicit premise behind this proposal is that in this case they do not.

Considering how skewed tax participation is, this would be a very one sided view. Just tax the top 49% more, no matter what's their current level of taxation, and redistribute to the lower 51%. It'll always make this criteria look like a success.

Problem is, this creates systemic effects. If you look longer term, a society that does this will end up a lot poorer than one that doesn't. Even for the bottom 51% you were optimizing. Because there are two variables to control: the redistribution, and the actual productivity. If you just focus on splitting wealth, you stop growing wealth.

Growing wealth on the other hand will make everybody richer, including the botton 51%. Simply participating in a richer economy has advantages. Plus the smaller redistribution percentage will actually end up bigger in absolute terms.

> If you look longer term, a society that does this will end up a lot poorer than one that doesn't.

Got data to back that up?

(On the serious level, I'm really curious; But on the polemic level I'll call BS - I highly doubt there ever was such a period in any capitalist country ever)

Sometimes I think economists don't know what a median is.

or mathematically speaking ... use the median instead of the arithmetic mean.

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