Why inequality persists in America | Hacker News Reader

Why inequality persists in America

newyorker.com

Sorry, I know I have some remedial reading to do on this subject -- I'm trying to fill in the gaps. One thing I never see in these articles is why the movement people are seeing in this indicator necessarily means that something bad is happening.

Suppose I rake leaves for a living and only barely make enough to feed myself. Suppose technology allows someone else to succeed in ways that have not previously been possible, and they become billionaires. Didn't the range between poorest (me) and richest (them) become wider? Suppose they succeed even more and become trillionaires. Didn't the range just get wider again? Why is this bad?

Having exceptionally wealthy people in a market puts an upward pricing pressure on goods that have a limited supply. For example, if two very rich people want the same house they can bid for it and one will win. That person who sold the house now has more to spend on their next house, so they pay more in turn, and so on down through the market. In theory that means everyone wins - with the notable exception of a person who is buying their first house. They face higher prices with no external wage stimulus to give them the additional purchasing power to buy. Consequently they're shut out of the market.

Now extrapolate that to all goods. Poor people just can't buy things if there are people at the top end of the market with vastly more wealth than them. If that happens then people start to starve, get sick, or resort to crime more. Society is worse for it. There's little point in being hugely wealthy if you can't leave your lovely secure house without feeling the city you live in is a horrible place.

The concept is called 'private wealth versus common wealth'.

But most people are not exceptionally wealthy.

Income inequity is generally a runaway process -- the rich get richer, so to speak. When you have resources and capital, making money isn't that difficult. The problem is that as the gap between classes widens, so do the cultural and societal differences.

The rich have SO much money that they can't even imagine what it's like to be poor. They see the disadvantaged as lazy and deserving of their state. The poor see the wealthy as out of touch at best, and arrogant assholes at worst. When the wealthy are so far removed from the poor, it's more difficult to affect change in governmental policies that benefit the lower class. Those in power and those with money pass laws that benefit the upper class or, more likely, simply don't benefit the poor enough. The cycle continues until a large portion of the country is quite poor, and a tiny fraction is incredibly rich.

In other words, positive liberty, a concept I think many Americans have yet to wrap their heads around.

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

> Why is this bad?

That is an excellent question. Part of it comes down to the fundamentals of ethics. If I believe, for instance, that the bedrock of ethics is "do whatever is best for me" and I happen to be one of the rich folks, then this may not seem so bad. If I take as one of my basic ethical principles "From each according to his ability, to each according to his needs." then a high Gini index is patently unfair.

If the answer depends on what basic principles of ethics you accept then in a certain mathematical sense there is nothing to say here. Once a proposition has been proven to be true or false depending on what axioms you use, there is no sense in proving things anymore, we can just argue about which axioms we like best, or perhaps just stop discussing it. Philosophers have spent (literally) centuries arguing over what fundamental principles to base ethics on, and nothing has been permanently settled.

But I will make this observation. Human beings seem to have a basic, built-in sense of "fairness". Researchers have conducted experiments where two participants are given something (like cash) and one picks how much to take, then the other decides whether both get their amounts or get nothing. Many (perhaps most) participants will split it 50-50. More interestingly, if the first player splits it 95-5, the second player will usually get indignant and decide that both will walk away with nothing. Most humans would rather give up a free $5 in order to prevent someone else from getting "more than their share".

Now, I can't say whether you are one of the people who would act that way -- as mentioned before, different people have different takes on the fundamentals of ethics and I don't know what moves you. But this example may help you to understand why many people have a visceral distaste for high Gini indexes.

I just want to point out that when researchers repeated the experiment in other countries, the results varied a lot, with some countries having a rejection rate of 0%. See Cultural Differences in Ultimatum Game Experiments: http://www.econ.nagoya-cu.ac.jp/~yhamagu/ultimatum.pdf

Don't worry about the guy who makes a lot of money today. Worry about his children, and the unearned influence they will have over business and politics.

It subverts meritocracy when a large segment of the population inherits enough wealth that they do not have to work, or can get any job they want through family connections without competing. This class of people will tend to favor legislation that reduces social mobility, in order to protect their interests. The trend toward inequality then reinforces itself.

My same exact thought process. I think the real issue is poverty. Globally, poverty still exists on a mass scale. That is the sad part, not the fact that .01% buy private planes and the bottom 50% in the US buys used Toyotas.

My other question with GDP / income stats that I never see answered is, why is lower income worse? While 50 years ago it seems maximizing personal income was the main career goal, that is definitely not true for a large % of the population today. People are looking for fulfillment, working for non profits, taking time off to travel and choosing lower income jobs that they enjoy more. It is represented as a negative thing that those people are making less money even if they end up happier.

"that is definitely not true for a large % of the population today"

What you're seeing is rationalization as a defense mechanism. Also bragging about low level jobs is a peculiar form of conspicuous display of wealth for trust fund babies, who are pretty rare outside the largest cities so their behavior is fairly irrelevant on a very large scale (like country wide scale)

Another issue is we have various untrue slogans about everyone having a political voice or everyone being equal under the law, in practice that is strictly financial wealth based, and when wealth is relatively equal the cognitive dissonance is very low and doesn't usually matter very much, but consider the social effects when wealth is very unequal and the sloganeering doesn't pacify the masses anymore.

I look at the situation as, "If someone can work full time and 'barely make enough to feed' themselves then that system is bad". It might not be 100% bad but it certainly doesn't fit into the good category.

Should we legislate for a better economy even if we are taking money away from the rich? Well in some senses the rich are existing as part of the economy and part of our society. So if they choose to use our money then we can choose to take some of it back as tax.

> Why is this bad?

Because they have more money that they can spend, while you an other human being is almost starving, and maybe can't access to education or healthcare.

It's not only a matter of billionnaires. We can wonder if it is fair that we (most of us are middle-class of developed countries) live a life of opulence when others are struggling. It strikes me whenever I travel in less developed countries.

But is inequality the root issue or is poverty the root issue?

If everyone in the world could afford 1 yacht, but 1% each had 1,000 yachts, that is mass inequality. But would that bother you?

The glorification and normalization of "lack of empathy" as a moral and ethical inherent good, is extremely disturbing to see.

The problem isn't unequal yachts, its when that same mindset is applied everywhere else in society, to political power, judicial protection, civil rights. "Why are you bothered by police gunning down unarmed black teen boys, you're not an unarmed black teen boy and the cops haven't done anything bad to you so far, you're getting enough justice its just that some small fraction get much less justice and thats OK because they're not you"

It depends on how rivalrous the goods are. If everybody had enough money to buy a yacht, that would mean that the world had enough resources to create a yacht for everybody. However, the world could never have enough prime docking space for every yacht, nor would the world have enough people to crew every yacht.

Land, human labour and political influence are three of the most rivalrous goods, goods where the price goes up as fast (or faster) than the supply of money.

In a world with little poverty but vast inequality, everybody could afford TV's and video games; food would be expensive but affordable. Labour intensive services like education and health care would be unaffordable. Owning or renting a nice place would be unaffordable.

(I am not an economist)

That basically is today in America. Many of the poor have flat screen tvs, cellphones etc. I think we as humans will always focus on the inequality part bcuas were social beings.

For a luxury thing like a yacht it wouldn't bother anyone. When it happens to necessities like housing, food and healthcare then it's quite rational to be bothered.

Right, that is exactly my point. The fact that inequality exists doesn't bother most people, it's poverty (the lack of housing, food, healthcare...) that bothers people. Inequality is irrelevant to the core issue, poverty.

Except that in the US inequality is a large factor in the maintenance of poverty since your super rich & rich corps seem so keen on keeping your broken markets in healthcare and removing any social safety net on food whilst they drive up the price of high demand housing.

"The less representative the upper body of a national legislature, the greater the gap between the rich and the poor."

Interestingly enough, one of the failed amendments to the Constitution was have each member of the House of Representatives represent a max of 50,000 citizens. [1] I've wondered whether this would be a good change to our modern system where some representatives have 1m+ constituents.

I mean, how can one person accurately represent the views of so many people?

What a larger house would mean is an increase in the number of political parties as small groups of people could work to have their minority groups represented outside of a major political party.

[1] https://en.wikipedia.org/wiki/Congressional_Apportionment_Am...

EDIT: Here's a site with some information about the idea of increasing the size of the house: http://www.thirty-thousand.org/

If gerrymandering persists, the dysfunction of Congress will also persist, no matter how many members there are. Representatives have no incentives to behave responsibly under the current districting situation.

One of the intended consequences of increasing the number of members is that each one is more easily replaced if they do not accurately represent the views of the constituents.

My back of the envelope math gives the US 6400 member of the house at the current population which also has the effect of reducing each single member's importance.

By drawing district lines around politically homogenous populations, gerrymandering guarantees that representatives accurately represent the views of their constituents and enables hyper-partisan behavior without consequences. Adding representatives does nothing to change that. 6400 gerrymandered districts will give us the same results as 435.

Increasing inequality, and a decline of the wages of the middle class, are worldwide phenomena that are occurring in most first-world countries. The effects of trends are currently the most extreme in the United States, but I'd be willing to bet that the US just got here first, and others will follow.

I won't pretend that anyone really knows why this is happening (although a few causes seem fairly obvious), but it is clearly a worldwide phenomenon, and looking for causes only in the United States is a bit myopic.

As Gini approaches .5 ---> Instability rises As Gini exceeds .5---> chance of 'revolution' increases exponentially

Gini of .333 is 'ideal'

How was that assessed?

Says who?

I searched the article for "Federal Reserve" and saw no reference to it so I didn't read the rest. It just seems obvious to me that if you give easy credit to one segment of the population, the money will chase up the prices of assets and make those without access to credit more impoverished, relatively speaking.

The article mentions the book talking about how we don't care about other peoples kids as being one of the problems. I think that is a symptom of realizing that the world at large doesn't care for us, and if we only have so much time and energy to give we give it to our own.

Also it seems like inequality is multifaceted. Everyone has more now then they have ever had, more stuff, more tech, more access to everything you need to survive. At the same time I see folks having a hard time making it, buying a house, saving for retirement, they are constantly drained.

Unless you have both spouses working, which is another conversation all together. I only see discretionary spending happening from dual income houses, or single youth not yet concerned with retirement.

>Everyone has more now then they have ever had, more stuff, more tech, more access to everything you need to survive.

more debt, more inequality, less security about the future.

Yet another article about income inequality that does not talk about government corruption.

You actually read to the end?

The article concludes with the lack of representation in Congress which is certainly linked.

I thought this was about the continent. What a pretentious title.

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