Basically if you're a supply and demand free-market capitalist and you can't see the drawbacks of extreme income disparity then you haven't followed your own ideals out to the logical conclusion.
Short version - great income disparity harms the free market.
"Great income disparity harms the free market" is a nonsense statement, because by the coase theorem, a truly free market will always efficiently allocate resources regardless of the initial distribution of wealth disparity.
Thus one of the following must be true:
1. Great income disparity implies the absence of a free market.
OR
2. Great income disparity implies that an unequal distribution is an efficient distribution.
(The correct answer in the real world is option 1, by the way)
I don't think "guilty" is a good word choice when you're talking about a desire for a better life.
Kudos for getting my engine rev'd with an appeal to emotion. If a person is not able to substain that better life on their own, its artifical.
I myself am not taking a stand for or against "bailouts". The simple truth of the matter is that people need to be able to get to work. The availability of transportation is a major issue. If the price of cars is beyond the reach of the average consumer (headed that way) then that's a big problem for everyone.
Yep, a market correction will then occur. Obviously you are because you think something needs to be done. The little people need bailed out so they can keep a standard of living that can no longer substain themselves.
There's a bunch of different ways to attack that problem - that's a debate for some other thread.
Is it a problem? Economic activity operates in cycles.
As for us - the common man can remember when a summer's worth of work was enough to buy a new car. The value of labor has been cut down for everyone except for a small class of people who have excellent salaries.
You seem to think we should always be able to afford a car after a summer of work, well that maybe possible during some periods but not others. The value of labor for specfic jobs have been cut down. This means society has to adapt and find new jobs. There are several jobs that pay well. I have listed a few in other threads and people like you complain how not everyone can do those or how difficult it is.
That seems reasonable up to a certain point, but there is no natural mechanism for slowing this increase in disparity. It will grow.
Rich people can not be rich with out being able to sell things. How did the Facebook CEO become a billionaire? How about Mark Cuban? The problem with the argument you make is you think we are entited to finacial progress with out doing any actually work, innovation or education and this progess needs to be active at all times.
You should be asking yourself - why is it that a years' worth of minimum wage work isn't even enough to buy the crappiest car on the market, when 50 years ago it would've bought one of the nicer cars available at the time? What is it about the passage of 50 years that has made us have to work so much harder to get so much less?
Our country was more prosperus back then? Who says 50 years ago should be the norm or standard? Cherry picking eras where evertyhing seemed to be honky dorry is bull*****. The economy works in cycles. Its not always going to honky dorry. Stop pretending it can be. Sometimes your not going to be able to afford a car.
I don't disagree with the general idea behind bitterroot's post, and I agree with his conclusion that the markets aren't actually free.
I'd go farther with it and say that the free markets in general are essentially a myth. It's a nice idea, but in practical terms there is no free market. There never will be and never can be.
There are a few industries that are healthier than others. The craft beer industry has exploded recently. The root cause of that growth is the repeal of a law that had put very strict restrictions on the volume of beer that a craft brewer could produce and sell in a year. That law had stifled innovative practices and prior to repeal it had resulted in bud, miller and coors dominating the beer market with a slate of piss-water beers.
It is tempting to think that you could find similar competition-enabling levers and open up other markets, but this was an exception that occurred only because the relevant corporations failed to anticipate the disruptive potential of craft beer. If they had known that they would lose so much market share in the past decade and a half they would certainly have done what all of the big corporations are doing. They would've paid to make sure it didn't get repealed.
That is happening everywhere. It is rampant and the politicians are complicit. Many of your senators are on the payroll of companies who Have so much financial muscle that they can afford to buy laws that mandate that you do business with them. Universities use their financial muscle to make certain that you have to go through one of them if you'd like to have a decent lifestyle. The joke's on you in the end, because a lot of us college graduates end up working in the service industry anyways.
People like billy are trained to defend principles that sound good but don't really work. It's still possible to convince yourself that you can be upwardly mobile as long as you train yourself to excel in one of a dwindling number of appropriate careers. Are you interested in investment banking? Great for you! If you're competent at your job there's going to be 6 figures in your future. Nursing? We always need nurses. Are you clever enough to be an engineer or a top designer? Are you good at marketing? It's all good. Professional-caliber entertainer? Fine. Surgeon? Sure.
And sometimes if your Daddy is rich enough he can create a brand for you - isn't that nice?
Everybody else is worthless.
You should've known better than to get a liberal arts degree. Nobody gives a crap if that's what you're most interested in. Nobody cares that art is your best chance of contributing something meaningful to the world. "They" don't need another guitar player. What they need is a latte. Now you're a barista at the starbucks. If you can't be bothered to earn a "relevant" degree in the "free time" between minimum wage work shifts then you're a lazy piece of crap. You should've learned about supply and demand instead you lazy piece of crap.
People like billy are trained to defend principles that sound good but don't really work. It's still possible to convince yourself that you can be upwardly mobile as long as you train yourself to excel in one of a dwindling number of appropriate careers. Are you interested in investment banking? Great for you! If you're competent at your job there's going to be 6 figures in your future. Nursing? We always need nurses. Are you clever enough to be an engineer or a top designer? Are you good at marketing? It's all good. Professional-caliber entertainer? Fine. Surgeon? Sure.
And sometimes if your Daddy is rich enough he can create a brand for you - isn't that nice?
You have no clue what principal I'm defending. I'm in fact attacking your principal that something needs to be done because the rich are rich and the poor are poor. I'm attacking your claims we need to do something to artifically keep a artifcial standard of living above what can be substained within the current economic climate. I'm attacking the notion that things can be the same as they were before mass globaliztion. I'm not defending *****. You want to cherry pick an era and compare the current conditions to it and make a cliam we should be like that....it dont work that way.
You should've known better than to get a liberal arts degree. Nobody gives a crap if that's what you're most interested in. Nobody cares that art is your best chance of contributing something meaningful to the world. "They" don't need another guitar player. What they need is a latte. Now you're a barista at the starbucks. If you can't be bothered to earn a "relevant" degree in the "free time" between minimum wage work shifts then you're a lazy piece of crap. You should've learned about supply and demand instead you lazy piece of crap.
Exactly. You think people are entitled to something and if they dont get that, we are screwing them. I'm sorry, I have no interest in paying a guitar player more than they are worth and many people agree with me. If the guitar player is unhappy about this, do something else. Its not my or anyone else to provide the guitar player a living because he wants to play the guitar. No on is calling the guitar player lazy. Thats another ignorant straw man you've presented. Liberals cant help appeal to emotion when their logic is shown to be bull*****. Seriously, get real.
Basically if you're a supply and demand free-market capitalist and you can't see the drawbacks of extreme income disparity then you haven't followed your own ideals out to the logical conclusion.
Short version - great income disparity harms the free market.
"Great income disparity harms the free market" is a nonsense statement, because by the coase theorem, a truly free market will always efficiently allocate resources regardless of the initial distribution of wealth disparity.
Thus one of the following must be true:
1. Great income disparity implies the absence of a free market.
OR
2. Great income disparity implies that an unequal distribution is an efficient distribution.
(The correct answer in the real world is option 1, by the way)
I think the answer in the real world is more that people who advocate for a "free" market are advocating for less restrictions on what they can do as a business, even if that doesn't actually make the market free-er, and will say that they are for free market economics.
That and that the invisible hand of the market is not necessarily going to work fast enough to avoid severe social consequences.
People like billy are trained to defend principles that sound good but don't really work. It's still possible to convince yourself that you can be upwardly mobile as long as you train yourself to excel in one of a dwindling number of appropriate careers. Are you interested in investment banking? Great for you! If you're competent at your job there's going to be 6 figures in your future. Nursing? We always need nurses. Are you clever enough to be an engineer or a top designer? Are you good at marketing? It's all good. Professional-caliber entertainer? Fine. Surgeon? Sure.
And sometimes if your Daddy is rich enough he can create a brand for you - isn't that nice?
You have no clue what principal I'm defending. I'm in fact attacking your principal that something needs to be done because the rich are rich and the poor are poor. I'm attacking your claims we need to do something to artifically keep a artifcial standard of living above what can be substained within the current economic climate. I'm attacking the notion that things can be the same as they were before mass globaliztion. I'm not defending *****. You want to cherry pick an era and compare the current conditions to it and make a cliam we should be like that....it dont work that way.
You should've known better than to get a liberal arts degree. Nobody gives a crap if that's what you're most interested in. Nobody cares that art is your best chance of contributing something meaningful to the world. "They" don't need another guitar player. What they need is a latte. Now you're a barista at the starbucks. If you can't be bothered to earn a "relevant" degree in the "free time" between minimum wage work shifts then you're a lazy piece of crap. You should've learned about supply and demand instead you lazy piece of crap.
Exactly. You think people are entitled to something and if they dont get that, we are screwing them. I'm sorry, I have no interest in paying a guitar player more than they are worth and many people agree with me. If the guitar player is unhappy about this, do something else. Its not my or anyone else to provide the guitar player a living because he wants to play the guitar. No on is calling the guitar player lazy. Thats another ignorant straw man you've presented. Liberals cant help appeal to emotion when their logic is shown to be bull*****. Seriously, get real.
I am not talking about entitling any particular individual. Rather it is you who are arguing entitlements. You think that there are some people who are entitled. You think that certain types of people deserve to be filthy rich.
I'll get back to that, but let's talk guitar players again for a moment.
If said guitarist is eddie van halen then all of a sudden the value of a guitarists' labor is very high. So which is is? Is a guitar player entitled to a multi-million dollar income or not?
That was a rhetorical question: we all know the "answer" to that. Since the "free market" deemed him to be an excellent guitar player then he is worth millions, and all other guitar players that don't make millions, ipso facto - since they don't sell as many records as eddie van halen then it's safe to assume that their labor is worth less.
What a perfect answer! It confirms every bias.
Your so called "logic" is actually not good at all. It is circular and it derives from a false premise.
So let's return to entitlements. If I suggest that every person has a right to bear arms, is that an entitlement? What about freedom of speech? No... - these are called rights. A right is something that you extend to every person. Like the right to a 40 hour work-week that pays enough to cover your bills.
On the other hand the fiscal policy that rewards investment bankers above many other careers is a form of entitlement. It only rewards certain people doesn't it? Yep - that's an entitlement.
So don't talk to me about entitlements. You don't know what an entitlement is.
>Implying "being rich because your family is rich" = "inherit all wealth in the form of wealth and never do anything for yourself"
More seriously, I really wish you'd posted a link to something more robust than an opinion piece based mainly on historical surveys of rich people's opinions.
The implication that memory-based surveys aren't biased was amusing.
A quick skim through Google Scholar also finds that inheritance of inequality seems pretty common, though it's often racial and/or national.
The USA and the UK seem to have the greatest tendency for inequality inheritance, with ~50% of parental advantage or disadvantage being passed on (Miles, 2013). Mainly that's because rich people can afford to spend more on their kids, so their kids get a better start.
The fomatting on this is super dodgy so I can't just paste it in, but have a look at Bowles and Gintis (2002) "The Inheritance of Inequality". Basically, it says that family income tends to be very similar, which suggests that even if explicit inheritance isn't a thing, people who have a good starting point do better than people who have a bad one.
>Implying "being rich because your family is rich" = "inherit all wealth in the form of wealth and never do anything for yourself"
More seriously, I really wish you'd posted a link to something more robust than an opinion piece based mainly on historical surveys of rich people's opinions.
The implication that memory-based surveys aren't biased was amusing.
A quick skim through Google Scholar also finds that inheritance of inequality seems pretty common, though it's often racial and/or national.
The USA and the UK seem to have the greatest tendency for inequality inheritance, with ~50% of parental advantage or disadvantage being passed on (Miles, 2013). Mainly that's because rich people can afford to spend more on their kids, so their kids get a better start.
The fomatting on this is super dodgy so I can't just paste it in, but have a look at Bowles and Gintis (2002) "The Inheritance of Inequality". Basically, it says that family income tends to be very similar, which suggests that even if explicit inheritance isn't a thing, people who have a good starting point do better than people who have a bad one.
Don't accuse me of trolling without due cause.
First of all, the opinion piece in question linked a respected economist. Second, read ALL of this:
Here is a tidbit from that study by a known and repsected economist:
We find that wealth transfers actually act as a factor that decreases wealth inequality rather than increasing it. Though we do not have hard empirical evidence on whether inheritances inhibit or spur intergenerational wealth mobility, we infer that wealth transfers are likely to raise the degree of wealth mobility
across the generations.
I don't think you will read the article...never mind addressing who ******* cares if they inherit *****? Are you jealous?
your entire objection is concerning how unfair things are. Little hint for you kiddo, the world aint fair, never will be, so stop chasing waterfalls. Income equality is unfair to the productive people in society. No matter how you slice it, someone will get screwed. I'm not sorry its the least productive people who get screwed the most in society. It makes more sense than screwing the most productive. I'm not sorry some guitar player who cant play a lick of guitar cant make a living playing guitar. You keep crying your eyes for that person. Most of the billionaires in our country went out and got it....it was not given to them. Bill Gates, Larry Ellison, Mark Cuban, Warren Buffet, Zuckerberg, Page, Brin, pretty much most of the forbes list not name Walton, with a few exceptions, all went out and earned their money. You want it, go ******* get it.
In fact, the majority of our Forbes 400 members–273 of them–scrapped their way onto our list through their own efforts.
Another surprising result is that while both the percentage of households receiving a wealth transfer and the value of those transfers rise almost monotonically with income and wealth class, wealth transfers as a share of household net worth tends to decline with both income and wealth. In 1998, the present value of wealth transfers amounted to 45 percent of the net worth of the lowest income class and only 17 percent
for the highest income class. Likewise, the present value of these transfers accounted for 46 percent of the wealth of the second lowest wealth class ($25,000-$49,999), compared to 17 percent for both the top wealth class of $1,000,000 or more and the top one percent.
The rationale is that while the dollar value of wealth transfers is greater for wealthier groups, small gifts and bequests mean more to poorer families. This relation will produce some rather counter-intuitive results regarding the effects of inheritances on wealth inequality –
namely that inheritances will be seen as an equalizing factor on wealth inequality -- as will be seen below.
So that's hilarious.
EDIT: In summary, gifts and inheritance seems to increase equality because poor people gain a greater subjective % of current wealth per gift because they have objectively less money, while the rich can throw around thousands of dollars and not have it register vs current wealth.
127 out of 400 is still a pretty reasonable number - just shy of 33% or 1 in 3.
It's not a shoe-in, but it's a definite leg up. Not to mention "through their own efforts" doesn't mean they didn't have help necessarily - I bet over 75% of them had a parent that made a good living for their time. (Even Bill Gates who's often listed as a "through their own effort" type was assisted by his father's money to a slight degree - money that he likely wouldn't have had if he wasn't a lawyer)
In fact the irony in "through their own efforts" as a concept entirely is that either they had to have previous wealth, or they didn't go alone because every wealthy person needed an investor at some point either for start-up or later expansion - either private, public, or family. Barring the rare oddity that found a sunken Spanish galleon on their own at least.
In fact the irony in "through their own efforts" as a concept entirely is that either they had to have previous wealth, or they didn't go alone because every wealthy person needed an investor at some point either for start-up or later expansion - either private, public, or family. Barring the rare oddity that found a sunken Spanish galleon on their own at least.
I think you miss the bigger irony of rich people helping poor people get rich. Tell me how this actually helps the argument against rich people? Investment in innovation is the spur of our economy......but I digress, investment bankers are the devil. Interesting you say Bill Gates who is donating most of his net worth to charity.
Another surprising result is that while both the percentage of households receiving a wealth transfer and the value of those transfers rise almost monotonically with income and wealth class, wealth transfers as a share of household net worth tends to decline with both income and wealth. In 1998, the present value of wealth transfers amounted to 45 percent of the net worth of the lowest income class and only 17 percent
for the highest income class. Likewise, the present value of these transfers accounted for 46 percent of the wealth of the second lowest wealth class ($25,000-$49,999), compared to 17 percent for both the top wealth class of $1,000,000 or more and the top one percent.
The rationale is that while the dollar value of wealth transfers is greater for wealthier groups, small gifts and bequests mean more to poorer families. This relation will produce some rather counter-intuitive results regarding the effects of inheritances on wealth inequality –
namely that inheritances will be seen as an equalizing factor on wealth inequality -- as will be seen below.
So that's hilarious.
Of course, we should also be cautious about drawing definitive policy implications from cross-country regression analysis alone. We know from history and first principles that after some point redistribution will be destructive to growth, and that beyond some point extreme equality also cannot be conducive to growth. - Jonathan D Ostry, Andrew Berg, Charalambos Tsangarides (same guys who wrote the study you cited). http://www.voxeu.org/article/redistribution-inequality-and-sustainable-growth
The conclusion that emerges from the historical macroeconomic data used in this paper is that, on average across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes. Quite apart from ethical, political, or broader social considerations, the resulting equality seems to have helped support faster and more durable growth.
To put it simply, we find little evidence of a ‘big tradeoff’ between redistribution and growth. Inaction in the face of high inequality thus seems unlikely to be warranted in many cases.
You're the only person I know who can take a discussion that says "increasing equality is probably a good idea" and claim that the discussion says "increasing equality sucks". See your sig, I guess.
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“Tell me who you walk with, and I'll tell you who you are.” Esmeralda Santiago Art is life itself.
bitterroot, your own link says that the theorem is nearly always inaplicable to reality because of reasons.
The "reasons" are (1) high transaction costs, and (2) imperfect information. Since zero transaction costs and perfect information are part of the economic definition of a free market, it follows from the Coase theorem that pernicious income inequality implies the absence of a free market.
Which is, incidentally, what I said in my post:
1. Great income disparity implies the absence of a free market.
...
(The correct answer in the real world is option 1, by the way)
The "reasons" are (1) high transaction costs, and (2) imperfect information. Since zero transaction costs and perfect information are part of the economic definition of a free market, it follows from the Coase theorem that pernicious income inequality implies the absence of a free market.
Isn't there at least one more requirement. Perfectly rational decision makers. In his thereon he assumed that the radio bandwidth owners would come to a mutual understanding based on each others mutual benefit. This would lead them to agree to keep their signals from interfering.
If my assumption is correct. What good is a thereon that requires a system that does not exist with actors that will not exists?
In fact the irony in "through their own efforts" as a concept entirely is that either they had to have previous wealth, or they didn't go alone because every wealthy person needed an investor at some point either for start-up or later expansion - either private, public, or family. Barring the rare oddity that found a sunken Spanish galleon on their own at least.
I think you miss the bigger irony of rich people helping poor people get rich. Tell me how this actually helps the argument against rich people? Investment in innovation is the spur of our economy......but I digress, investment bankers are the devil. Interesting you say Bill Gates who is donating most of his net worth to charity.
The point is, inherited or not, most people do have assistance to get them to those tiers.
And in fact, credit rating which is required in almost all circumstances to get that assistance from a non-family member (and sometimes even then...) generally follows suit with someone's place in the birth lottery - sure maintaining a great credit rating is reasonable at Upper Middle Class income (although it's still only about 50-60% that manage to maintain a great credit rating even in the $100k+ tiers!), the numbers drop into a deep spiral as you drop down past that.
I'd bet pennies to pesos that if you went over your list there, and looked for "Upper Middle Class" or better parents to those wealthy folks you'd note that almost all of them came from a UMC+ background. That's not really a huge sign of mobility since it's really only jumping from UMC/LUC to UUC and honestly it's in the least worrying levels since it's the comfortable getting MORE comfortable.
Mobility of those in the LLC through ULC are the important ones to look at - which right now are stagnating and growing - in fact recently there's been more people falling out of the LMC than joining it for Christ's sake. The American Dream is to come here, work in the Lower Classes have a kid who makes it to the Middle Class and then they have a kid that breaks into the Upper Class - not stagnate in the Lower Class as is happening today.
That is the danger of that stupid often trumped up "first generation rich" statistic. Because it ignores how stacked the deck is to get there by having parents that are somewhat wealthy, even if they're not super rich themselves. (Case in point - look at your background versus mine - I've been out of work for five years and thanks entirely to my family's money keeping my credit afloat I just qualified for my business loan, home loan and car loan totaling close to a million dollars in loans to prep for my move [although it's getting delayed, wife's surgery recovery time is longer than I expected] - with only MMC/UMC income parents/grandparents [having a MSHRM (which is equivalent to an MBA in most applications probably was an extra + for the business loan as well) - yet I can guarantee if you went in to try to get the same loans with your history and current personal income levels and no family to back you up [at least I'd imagine on the latter since you were homeless - can't imagine if your family is around they back you financially at all if you ended up in those circumstances] that you'd get rejected on most if not all of the loans I got approved for within the spacing of a week of each other)
And I picked Bill Gates as an example I knew was understated in listing him as coming from "non-wealth" not that he was intrinsicly a bad wealthy person. In fact all of the list I'm familiar with is charitable - not that charity is really relevant to the discussion at hand.
The conclusion that emerges from the historical macroeconomic data used in this paper is that, on average across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes. Quite apart from ethical, political, or broader social considerations, the resulting equality seems to have helped support faster and more durable growth.
To put it simply, we find little evidence of a ‘big tradeoff’ between redistribution and growth. Inaction in the face of high inequality thus seems unlikely to be warranted in many cases.
You're the only person I know who can take a discussion that says "increasing equality is probably a good idea" and claim that the discussion says "increasing equality sucks". See your sig, I guess.
Your own ******* economist said it, not me.
Of course, we should also be cautious about drawing definitive policy implications from cross-country regression analysis alone. We know from history and first principles that after some point redistribution will be destructive to growth, and that beyond some point extreme equality also cannot be conducive to growth. - Jonathan D Ostry, Andrew Berg, Charalambos Tsangarides (same guys who wrote the study you cited). http://www.voxeu.org/article/redistribution-inequality-and-sustainable-growth
This is from the economists YOU cited and yes they absolutely contradicted themselves.
In fact the irony in "through their own efforts" as a concept entirely is that either they had to have previous wealth, or they didn't go alone because every wealthy person needed an investor at some point either for start-up or later expansion - either private, public, or family. Barring the rare oddity that found a sunken Spanish galleon on their own at least.
I think you miss the bigger irony of rich people helping poor people get rich. Tell me how this actually helps the argument against rich people? Investment in innovation is the spur of our economy......but I digress, investment bankers are the devil. Interesting you say Bill Gates who is donating most of his net worth to charity.
The point is, inherited or not, most people do have assistance to get them to those tiers.
And in fact, credit rating which is required in almost all circumstances to get that assistance from a non-family member (and sometimes even then...) generally follows suit with someone's place in the birth lottery - sure maintaining a great credit rating is reasonable at Upper Middle Class income (although it's still only about 50-60% that manage to maintain a great credit rating even in the $100k+ tiers!), the numbers drop into a deep spiral as you drop down past that.
I'd bet pennies to pesos that if you went over your list there, and looked for "Upper Middle Class" or better parents to those wealthy folks you'd note that almost all of them came from a UMC+ background. That's not really a huge sign of mobility since it's really only jumping from UMC/LUC to UUC and honestly it's in the least worrying levels since it's the comfortable getting MORE comfortable.
Mobility of those in the LLC through ULC are the important ones to look at - which right now are stagnating and growing - in fact recently there's been more people falling out of the LMC than joining it for Christ's sake. The American Dream is to come here, work in the Lower Classes have a kid who makes it to the Middle Class and then they have a kid that breaks into the Upper Class - not stagnate in the Lower Class as is happening today.
That is the danger of that stupid often trumped up "first generation rich" statistic. Because it ignores how stacked the deck is to get there by having parents that are somewhat wealthy, even if they're not super rich themselves. (Case in point - look at your background versus mine - I've been out of work for five years and thanks entirely to my family's money keeping my credit afloat I just qualified for my business loan, home loan and car loan totaling close to a million dollars in loans to prep for my move [although it's getting delayed, wife's surgery recovery time is longer than I expected] - with only MMC/UMC income parents/grandparents [having a MSHRM (which is equivalent to an MBA in most applications probably was an extra + for the business loan as well) - yet I can guarantee if you went in to try to get the same loans with your history and current personal income levels and no family to back you up [at least I'd imagine on the latter since you were homeless - can't imagine if your family is around they back you financially at all if you ended up in those circumstances] that you'd get rejected on most if not all of the loans I got approved for within the spacing of a week of each other)
And I picked Bill Gates as an example I knew was understated in listing him as coming from "non-wealth" not that he was intrinsicly a bad wealthy person. In fact all of the list I'm familiar with is charitable - not that charity is really relevant to the discussion at hand.
I did not say they did everything by themselves absolutely however, they did take the steps themselves to get that investment from other people and made use of it. You guys give too much credit to the silver spoon as reason for success. I'm willing to bet more people have blown their inheritance than made use of it.
Isn't there at least one more requirement. Perfectly rational decision makers. In his thereon he assumed that the radio bandwidth owners would come to a mutual understanding based on each others mutual benefit. This would lead them to agree to keep their signals from interfering.
If my assumption is correct. What good is a thereon that requires a system that does not exist with actors that will not exists?
Not necessarily. It is generally assumed that people behave "irrationally" because they have imperfect information. Thus, with perfect information available to everyone and anyone, every action they take will be rational, or at least rational to their interests.
I dunno if people who make such assumptions also assume that people will actually read whatever information is available, or whether they just assume that the information will be inserted into their brains or w.e.
Not necessarily. It is generally assumed that people behave "irrationally" because they have imperfect information. Thus, with perfect information available to everyone and anyone, every action they take will be rational, or at least rational to their interests.
I dunno if people who make such assumptions also assume that people will actually read whatever information is available, or whether they just assume that the information will be inserted into their brains or w.e.
I believe that the rational human is largely a myth. Human decisions are a mix of emotion, bias and reasoning. Rationality is usually a low percent of that mixture.
I believe that the rational human is largely a myth. Human decisions are a mix of emotion, bias and reasoning. Rationality is usually a low percent of that mixture.
Well, people would say that those decisions are all because they ultimately have imperfect information at their disposal. Biases are biases because people believe in different things and in different ways. But suppose everyone suddenly knew everything about the universe, including the pros and cons of every issue in existence.
Take global warming. Suppose the reality is that humans aren't affecting global warming after all, and one day every human realized this through some sort of spark of omniscience and gained all understanding of WHY and HOW humans aren't affecting global warming after all. Then, conceivably, no one can be pro-global warming.
But, yes, you're right- all of the above still ignore the concept of emotions and the way humans perceive information that flat out contradict deeply held beliefs. It's why I don't like any theories that require the assumption of "perfect knowledge". For one, no such thing as possibly exist and so making claims on the basis of such an assumption seems really silly. Second, one cannot necessarily suppose that human beings will be rational even if they gain "perfect knowledge".
The "reasons" are (1) high transaction costs, and (2) imperfect information. Since zero transaction costs and perfect information are part of the economic definition of a free market, it follows from the Coase theorem that pernicious income inequality implies the absence of a free market.
Isn't there at least one more requirement. Perfectly rational decision makers. In his thereon he assumed that the radio bandwidth owners would come to a mutual understanding based on each others mutual benefit. This would lead them to agree to keep their signals from interfering.
If my assumption is correct. What good is a thereon that requires a system that does not exist with actors that will not exists?
There are roughly nine requirements for a free market, depending on how you parse them out: (1) actors are rational, (2) actors are utility maximizers, (3) perfect information for everyone, (4) no transaction costs, (5) no loss from buyer surplus, (6) no externalities, (7) no monopoly power, (8) no monopsony (ie buyer monopoly) power, (9) no taxes.
I was responding to the statement "inequality harms the free market." By definition, inequality cannot harm a free market, because harmful inequality cannot exist in a free market.
I never claimed that a free market can exist in the real world. It certainly cannot. I'm not sure it's possible to satisfy even one of the nine conditions in the real world.
As for "what good is a [theorem] that requires a system that does not exist," I would say every scientific theorem we have makes simplifying assumptions about the world. Newton's laws of motion are ridiculously oversimplified and assume a great many things that aren't true in reality. That doesn't mean they're worthless. The mathematical analysis underlying the Coase theorem has been a building block for future discovery since the 1930s.
Not necessarily. It is generally assumed that people behave "irrationally" because they have imperfect information. Thus, with perfect information available to everyone and anyone, every action they take will be rational, or at least rational to their interests.
I dunno if people who make such assumptions also assume that people will actually read whatever information is available, or whether they just assume that the information will be inserted into their brains or w.e.
I believe that the rational human is largely a myth. Human decisions are a mix of emotion, bias and reasoning. Rationality is usually a low percent of that mixture.
The "rational actor" requirement is much, much weaker than most people seem to think. "Rational" here means something like "not arbitrary." So if I want a doughnut but I take my money out of my wallet and light it on fire instead of buying a doughnut, that's irrational. If I want a doughnut and I buy a doughnut, I'm being rational. It doesn't need to be a smart decision. I don't need to have a good reason for that decision. I just need to act in accordance with what I have decided to do.
It is true that people are sometimes irrational though, notably due to mental illness or addiction. If someone really, really doesn't want to do heroin, but they are compelled by a physical addiction to do it anyway, they are (arguably) not acting rationally. Another (arguable) example is superstition, where someone wants a doughnut, but refuses to buy one because it's bad luck to buy doughnuts on Thursdays. (In both these examples, some people would argue they're still being rational within the economic meaning of that term, but I won't go into that right now).
"Great income disparity harms the free market" is a nonsense statement, because by the coase theorem, a truly free market will always efficiently allocate resources regardless of the initial distribution of wealth disparity.
Thus one of the following must be true:
1. Great income disparity implies the absence of a free market.
OR
2. Great income disparity implies that an unequal distribution is an efficient distribution.
(The correct answer in the real world is option 1, by the way)
Kudos for getting my engine rev'd with an appeal to emotion. If a person is not able to substain that better life on their own, its artifical.
Yep, a market correction will then occur. Obviously you are because you think something needs to be done. The little people need bailed out so they can keep a standard of living that can no longer substain themselves.
Is it a problem? Economic activity operates in cycles.
You seem to think we should always be able to afford a car after a summer of work, well that maybe possible during some periods but not others. The value of labor for specfic jobs have been cut down. This means society has to adapt and find new jobs. There are several jobs that pay well. I have listed a few in other threads and people like you complain how not everyone can do those or how difficult it is.
Rich people can not be rich with out being able to sell things. How did the Facebook CEO become a billionaire? How about Mark Cuban? The problem with the argument you make is you think we are entited to finacial progress with out doing any actually work, innovation or education and this progess needs to be active at all times.
Our country was more prosperus back then? Who says 50 years ago should be the norm or standard? Cherry picking eras where evertyhing seemed to be honky dorry is bull*****. The economy works in cycles. Its not always going to honky dorry. Stop pretending it can be. Sometimes your not going to be able to afford a car.
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bitterroot, your own link says that the theorem is nearly always inaplicable to reality because of reasons.
Art is life itself.
I'd go farther with it and say that the free markets in general are essentially a myth. It's a nice idea, but in practical terms there is no free market. There never will be and never can be.
There are a few industries that are healthier than others. The craft beer industry has exploded recently. The root cause of that growth is the repeal of a law that had put very strict restrictions on the volume of beer that a craft brewer could produce and sell in a year. That law had stifled innovative practices and prior to repeal it had resulted in bud, miller and coors dominating the beer market with a slate of piss-water beers.
It is tempting to think that you could find similar competition-enabling levers and open up other markets, but this was an exception that occurred only because the relevant corporations failed to anticipate the disruptive potential of craft beer. If they had known that they would lose so much market share in the past decade and a half they would certainly have done what all of the big corporations are doing. They would've paid to make sure it didn't get repealed.
That is happening everywhere. It is rampant and the politicians are complicit. Many of your senators are on the payroll of companies who Have so much financial muscle that they can afford to buy laws that mandate that you do business with them. Universities use their financial muscle to make certain that you have to go through one of them if you'd like to have a decent lifestyle. The joke's on you in the end, because a lot of us college graduates end up working in the service industry anyways.
People like billy are trained to defend principles that sound good but don't really work. It's still possible to convince yourself that you can be upwardly mobile as long as you train yourself to excel in one of a dwindling number of appropriate careers. Are you interested in investment banking? Great for you! If you're competent at your job there's going to be 6 figures in your future. Nursing? We always need nurses. Are you clever enough to be an engineer or a top designer? Are you good at marketing? It's all good. Professional-caliber entertainer? Fine. Surgeon? Sure.
And sometimes if your Daddy is rich enough he can create a brand for you - isn't that nice?
Everybody else is worthless.
You should've known better than to get a liberal arts degree. Nobody gives a crap if that's what you're most interested in. Nobody cares that art is your best chance of contributing something meaningful to the world. "They" don't need another guitar player. What they need is a latte. Now you're a barista at the starbucks. If you can't be bothered to earn a "relevant" degree in the "free time" between minimum wage work shifts then you're a lazy piece of crap. You should've learned about supply and demand instead you lazy piece of crap.
Myth. If you are going to troll, do a better job.
http://blogs.wsj.com/wealth/2008/01/14/the-decline-of-inherited-money/
Accusing people of trolling is flaming. --Senori
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You have no clue what principal I'm defending. I'm in fact attacking your principal that something needs to be done because the rich are rich and the poor are poor. I'm attacking your claims we need to do something to artifically keep a artifcial standard of living above what can be substained within the current economic climate. I'm attacking the notion that things can be the same as they were before mass globaliztion. I'm not defending *****. You want to cherry pick an era and compare the current conditions to it and make a cliam we should be like that....it dont work that way.
Exactly. You think people are entitled to something and if they dont get that, we are screwing them. I'm sorry, I have no interest in paying a guitar player more than they are worth and many people agree with me. If the guitar player is unhappy about this, do something else. Its not my or anyone else to provide the guitar player a living because he wants to play the guitar. No on is calling the guitar player lazy. Thats another ignorant straw man you've presented. Liberals cant help appeal to emotion when their logic is shown to be bull*****. Seriously, get real.
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I think the answer in the real world is more that people who advocate for a "free" market are advocating for less restrictions on what they can do as a business, even if that doesn't actually make the market free-er, and will say that they are for free market economics.
That and that the invisible hand of the market is not necessarily going to work fast enough to avoid severe social consequences.
I am not talking about entitling any particular individual. Rather it is you who are arguing entitlements. You think that there are some people who are entitled. You think that certain types of people deserve to be filthy rich.
I'll get back to that, but let's talk guitar players again for a moment.
If said guitarist is eddie van halen then all of a sudden the value of a guitarists' labor is very high. So which is is? Is a guitar player entitled to a multi-million dollar income or not?
That was a rhetorical question: we all know the "answer" to that. Since the "free market" deemed him to be an excellent guitar player then he is worth millions, and all other guitar players that don't make millions, ipso facto - since they don't sell as many records as eddie van halen then it's safe to assume that their labor is worth less.
What a perfect answer! It confirms every bias.
Your so called "logic" is actually not good at all. It is circular and it derives from a false premise.
So let's return to entitlements. If I suggest that every person has a right to bear arms, is that an entitlement? What about freedom of speech? No... - these are called rights. A right is something that you extend to every person. Like the right to a 40 hour work-week that pays enough to cover your bills.
On the other hand the fiscal policy that rewards investment bankers above many other careers is a form of entitlement. It only rewards certain people doesn't it? Yep - that's an entitlement.
So don't talk to me about entitlements. You don't know what an entitlement is.
More seriously, I really wish you'd posted a link to something more robust than an opinion piece based mainly on historical surveys of rich people's opinions.
The implication that memory-based surveys aren't biased was amusing.
A quick skim through Google Scholar also finds that inheritance of inequality seems pretty common, though it's often racial and/or national.
The USA and the UK seem to have the greatest tendency for inequality inheritance, with ~50% of parental advantage or disadvantage being passed on (Miles, 2013). Mainly that's because rich people can afford to spend more on their kids, so their kids get a better start.
The fomatting on this is super dodgy so I can't just paste it in, but have a look at Bowles and Gintis (2002) "The Inheritance of Inequality". Basically, it says that family income tends to be very similar, which suggests that even if explicit inheritance isn't a thing, people who have a good starting point do better than people who have a bad one.
Don't accuse me of trolling without due cause.
Art is life itself.
First of all, the opinion piece in question linked a respected economist. Second, read ALL of this:
http://www.bls.gov/ore/pdf/ec110030.pdf
Are you done with your propaganda yet?
Here is a tidbit from that study by a known and repsected economist:
I don't think you will read the article...never mind addressing who ******* cares if they inherit *****? Are you jealous?
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your entire objection is concerning how unfair things are. Little hint for you kiddo, the world aint fair, never will be, so stop chasing waterfalls. Income equality is unfair to the productive people in society. No matter how you slice it, someone will get screwed. I'm not sorry its the least productive people who get screwed the most in society. It makes more sense than screwing the most productive. I'm not sorry some guitar player who cant play a lick of guitar cant make a living playing guitar. You keep crying your eyes for that person. Most of the billionaires in our country went out and got it....it was not given to them. Bill Gates, Larry Ellison, Mark Cuban, Warren Buffet, Zuckerberg, Page, Brin, pretty much most of the forbes list not name Walton, with a few exceptions, all went out and earned their money. You want it, go ******* get it.
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For the record, I worry about inequality because the productivity and stability of nations is tied to low inequality while high inequality is correlated with greater morbidity for the poor (also Pickett and Wilkinson, The Spirit Level, 2011). It can also damage the functioning of democracy.
Also:
So that's hilarious.
EDIT: In summary, gifts and inheritance seems to increase equality because poor people gain a greater subjective % of current wealth per gift because they have objectively less money, while the rich can throw around thousands of dollars and not have it register vs current wealth.
Art is life itself.
It's not a shoe-in, but it's a definite leg up. Not to mention "through their own efforts" doesn't mean they didn't have help necessarily - I bet over 75% of them had a parent that made a good living for their time. (Even Bill Gates who's often listed as a "through their own effort" type was assisted by his father's money to a slight degree - money that he likely wouldn't have had if he wasn't a lawyer)
In fact the irony in "through their own efforts" as a concept entirely is that either they had to have previous wealth, or they didn't go alone because every wealthy person needed an investor at some point either for start-up or later expansion - either private, public, or family. Barring the rare oddity that found a sunken Spanish galleon on their own at least.
I think you miss the bigger irony of rich people helping poor people get rich. Tell me how this actually helps the argument against rich people? Investment in innovation is the spur of our economy......but I digress, investment bankers are the devil. Interesting you say Bill Gates who is donating most of his net worth to charity.
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See my sig.
calling liberals loons=not okay
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Art is life itself.
The "reasons" are (1) high transaction costs, and (2) imperfect information. Since zero transaction costs and perfect information are part of the economic definition of a free market, it follows from the Coase theorem that pernicious income inequality implies the absence of a free market.
Which is, incidentally, what I said in my post:
Isn't there at least one more requirement. Perfectly rational decision makers. In his thereon he assumed that the radio bandwidth owners would come to a mutual understanding based on each others mutual benefit. This would lead them to agree to keep their signals from interfering.
If my assumption is correct. What good is a thereon that requires a system that does not exist with actors that will not exists?
The point is, inherited or not, most people do have assistance to get them to those tiers.
And in fact, credit rating which is required in almost all circumstances to get that assistance from a non-family member (and sometimes even then...) generally follows suit with someone's place in the birth lottery - sure maintaining a great credit rating is reasonable at Upper Middle Class income (although it's still only about 50-60% that manage to maintain a great credit rating even in the $100k+ tiers!), the numbers drop into a deep spiral as you drop down past that.
I'd bet pennies to pesos that if you went over your list there, and looked for "Upper Middle Class" or better parents to those wealthy folks you'd note that almost all of them came from a UMC+ background. That's not really a huge sign of mobility since it's really only jumping from UMC/LUC to UUC and honestly it's in the least worrying levels since it's the comfortable getting MORE comfortable.
Mobility of those in the LLC through ULC are the important ones to look at - which right now are stagnating and growing - in fact recently there's been more people falling out of the LMC than joining it for Christ's sake. The American Dream is to come here, work in the Lower Classes have a kid who makes it to the Middle Class and then they have a kid that breaks into the Upper Class - not stagnate in the Lower Class as is happening today.
That is the danger of that stupid often trumped up "first generation rich" statistic. Because it ignores how stacked the deck is to get there by having parents that are somewhat wealthy, even if they're not super rich themselves. (Case in point - look at your background versus mine - I've been out of work for five years and thanks entirely to my family's money keeping my credit afloat I just qualified for my business loan, home loan and car loan totaling close to a million dollars in loans to prep for my move [although it's getting delayed, wife's surgery recovery time is longer than I expected] - with only MMC/UMC income parents/grandparents [having a MSHRM (which is equivalent to an MBA in most applications probably was an extra + for the business loan as well) - yet I can guarantee if you went in to try to get the same loans with your history and current personal income levels and no family to back you up [at least I'd imagine on the latter since you were homeless - can't imagine if your family is around they back you financially at all if you ended up in those circumstances] that you'd get rejected on most if not all of the loans I got approved for within the spacing of a week of each other)
And I picked Bill Gates as an example I knew was understated in listing him as coming from "non-wealth" not that he was intrinsicly a bad wealthy person. In fact all of the list I'm familiar with is charitable - not that charity is really relevant to the discussion at hand.
Your own ******* economist said it, not me.
This is from the economists YOU cited and yes they absolutely contradicted themselves.
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I did not say they did everything by themselves absolutely however, they did take the steps themselves to get that investment from other people and made use of it. You guys give too much credit to the silver spoon as reason for success. I'm willing to bet more people have blown their inheritance than made use of it.
EDIT: Turns out I'd win the bet:
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Not necessarily. It is generally assumed that people behave "irrationally" because they have imperfect information. Thus, with perfect information available to everyone and anyone, every action they take will be rational, or at least rational to their interests.
I dunno if people who make such assumptions also assume that people will actually read whatever information is available, or whether they just assume that the information will be inserted into their brains or w.e.
I believe that the rational human is largely a myth. Human decisions are a mix of emotion, bias and reasoning. Rationality is usually a low percent of that mixture.
Well, people would say that those decisions are all because they ultimately have imperfect information at their disposal. Biases are biases because people believe in different things and in different ways. But suppose everyone suddenly knew everything about the universe, including the pros and cons of every issue in existence.
Take global warming. Suppose the reality is that humans aren't affecting global warming after all, and one day every human realized this through some sort of spark of omniscience and gained all understanding of WHY and HOW humans aren't affecting global warming after all. Then, conceivably, no one can be pro-global warming.
But, yes, you're right- all of the above still ignore the concept of emotions and the way humans perceive information that flat out contradict deeply held beliefs. It's why I don't like any theories that require the assumption of "perfect knowledge". For one, no such thing as possibly exist and so making claims on the basis of such an assumption seems really silly. Second, one cannot necessarily suppose that human beings will be rational even if they gain "perfect knowledge".
There are roughly nine requirements for a free market, depending on how you parse them out: (1) actors are rational, (2) actors are utility maximizers, (3) perfect information for everyone, (4) no transaction costs, (5) no loss from buyer surplus, (6) no externalities, (7) no monopoly power, (8) no monopsony (ie buyer monopoly) power, (9) no taxes.
I was responding to the statement "inequality harms the free market." By definition, inequality cannot harm a free market, because harmful inequality cannot exist in a free market.
I never claimed that a free market can exist in the real world. It certainly cannot. I'm not sure it's possible to satisfy even one of the nine conditions in the real world.
As for "what good is a [theorem] that requires a system that does not exist," I would say every scientific theorem we have makes simplifying assumptions about the world. Newton's laws of motion are ridiculously oversimplified and assume a great many things that aren't true in reality. That doesn't mean they're worthless. The mathematical analysis underlying the Coase theorem has been a building block for future discovery since the 1930s.
The "rational actor" requirement is much, much weaker than most people seem to think. "Rational" here means something like "not arbitrary." So if I want a doughnut but I take my money out of my wallet and light it on fire instead of buying a doughnut, that's irrational. If I want a doughnut and I buy a doughnut, I'm being rational. It doesn't need to be a smart decision. I don't need to have a good reason for that decision. I just need to act in accordance with what I have decided to do.
It is true that people are sometimes irrational though, notably due to mental illness or addiction. If someone really, really doesn't want to do heroin, but they are compelled by a physical addiction to do it anyway, they are (arguably) not acting rationally. Another (arguable) example is superstition, where someone wants a doughnut, but refuses to buy one because it's bad luck to buy doughnuts on Thursdays. (In both these examples, some people would argue they're still being rational within the economic meaning of that term, but I won't go into that right now).