Comment by smanek | Hacker News Reader

Comment by smanek | Hacker News Reader

"It is well known that wealth is shared out unfairly"

We know no such thing. We know that wealth is distributed unequally (see, for example, the Gini coefficient). Whether or not an unequal distribution of wealth is unfair is a decidedly normative question - and beyond the purview of economists.

One of the many problems that I see is they assume that various attributes are independently normally distributed - which many studies have shown not to be the case. An individual's performance in a wide variety of seemingly unrelated disciplines tends to be highly correlated (http://en.wikipedia.org/wiki/General_intelligence_factor). Simply put, a person who is a great at one thing is also more likely to be good at other things.

Furthermore, there is no reason to expect the output elasticity of intellect to be anywhere near 1. Someone who is just the tiniest bit smarter than me may see a shortcut that they I don't that saves them a tremendous quantity of resources.

Study after study has shown that 'overpaid' people (sports stars, actors, etc) get paid a wage that is almost exactly equal to the marginal revenue they bring in - that is they are paid perfectly appropriately.

Well of course "fair" is a normative question, but it is one that there are usually some common themes about.

For example the "equal opportunity" American ideal doesn't match up if the greatest predictor of your economic success is not your intellect, hard work, creativity, etc. but rather the income of the family you were rather arbitrarily born into.

For example: http://www.portfolio.com/views/blogs/market-movers/2009/04/2...

"The truly amazing thing to me is that parental income isn't just crucial in getting to college, and getting through college -- its effects linger on, basically, in perpetuity. One of the most remarkable findings from the Pew Charitable Trusts' Economic Mobility Project is that a child from a family in the top income quintile who does not get a college degree is more likely to wind up in the top income quintile himself than a child from a family in the bottom income quintile who does get a college degree"

A large part of this is due to public policy and there are clear examples of many European countries where changing public policy produces less arbitrary income inequalities. As the developed world transforms into a more knowledge based economy which requires large long-term investments in yourself to really compete, income inequality will only grow between those that can make the investments and those that can't.

I'd also be careful to consider how the market pays people as necessarily being "fair" until you look at after-tax income and the institutions that help determine that price. There are many different ways to setup a distribution of resources in a society and there are many different ways to setup markets (property rights, laws, public services, regulation, taxes etc.). As such we should consider the fairness of our human created rules and institutions; the particular results they create are just indicators. Of course whatever people are paid is "appropriate" as long as it follows the system of rules we have setup.

The "appropriate" results would be very different if we changed how the system was setup.

Your quote claims the effects of the parents' income persist, but in doing so it claims correlation is causation and neglects to consider other familial effects, such as genetics and upbringing.

An alternative explanation is that wealth doesn't beget wealth, but rather those with the characteristics which lead to the acquisition of wealth also beget offspring with the same properties. This isn't necessarily unjust, as Yglesias states, but rather an artifact of the reality of genetics, upbringing and their effects on productivity. If so, to achieve the "equal opportunity" you seek, you must wipe away these differences in both genetics and upbringing, in which case, just call me Harrison Bergeron.

Have you ever heard of 'regression towards the mean'? On average, exceptional parents tend to have slightly less exceptional children.

In any case, there's no need to sit here and think up a priori explanations for this correlation. I'm afraid I don't have time to look them up right now, but I would guess that there have been studies done that examined the performance of adopted children of wealthy families, and I strongly suspect that these studies show that the adopted children perform comparably to biological children of wealthy families.

These hypothetical studies would not contradict an explanation which emphasized upbringing, rather than income or genetics as a determinant of success. Parents bring their time and perspective, as well as their money, to the table.

For such an explanation, I'll note that as the article mentions re. savings plans, much of the behavior which perpetuates poverty tends also to be associated with a short time horizon, or a high discounting of the value of future income. It may be that these practices are largely adopted for lack of educating and training the child of the alternative: that sacrifice and current effort can lead to greater happiness over time. Parents would be well-situated to impart such a lesson.

But my explanation need not be the only factor at play, it only serves to show that the view that income begets income (and thus needs to be equalized) is not the only conclusion supported by the facts.

For some Harrison Bergeron, for others John Rawls Theory of Justice. Sort of dystopian/utopian sides of a similar coin. A strong public education system is suppose to minimize the differences in upbringing (by helping those without a strong upbringing; not by bringing down those who already have a great upbringing Harrison Bergeron style).

You wouldn't have to wipe away the differences, but for some a "just" society should view someone who had poor parents, limited opportunities and an IQ of 70 and someone who had every opportunity, great parents, and an IQ of 130 as equally important and valuable. Such people view a society where the top 2% of the world owns over half the wealth and much of the world lives in absolute poverty as a sign that maybe our institutions are a bit out of wack.

Personally I'm more a fan of smaller "nudge" (nudge.org) like concepts combined with a progressive tax code and a strong commitment to helping minimize "brute luck" (being born to poor parents) while holding people fully accountable for personal decisions or "option luck" (choosing to take a risk, or making a life decision such as being a teacher vs. an i-banker; or going out at bars instead of saving). (Sort of in a Dworkin fashion see: http://en.wikipedia.org/wiki/Ronald_Dworkin#Theory_of_equali... / or http://en.wikipedia.org/wiki/Luck_egalitarianism).

> concepts combined with a progressive tax code

About half of US workers don't pay income tax. They pay for part of their retirement (SS for them is a modest deal, because their ROI is subsidized by folks who pay more).

Our vice president said that paying taxes is patriotic. Shouldn't they be patriotic?

Reply on news.ycombinator.com