Warren Buffet nails it on inequality

[Loren Pechtel]

He doesn't favor the EITC over increases in the wages of the poor because he has calculated that it will mean more profits for himself. He believes that it is the best way to proceed to improve the lot of the poor because he doesn't understand the economics involved, including the role of the investors like himself.

He would probably agree with Loren and most of the free market enthusiasts here. That the labor market is a fair market where wages are set to the marginal productivity of the labor. That to increase the wages by an artificial means like increasing the minimum wage will distort the labor market, resulting in unemployment.

He is approaching the problem with a faulty set of economic tools. It is worth pointing out for example, that his toolset doesn't have an equivalent concern for profits exceeding the marginal productivity of capital, causing economic distortions in the capital markets. It is reasonable to assume that if marginal productivity plays such a key role in one market it must play an important part in the other.

It actually doesn't play a part in either, the labor market is exactly what it appears to be, one that is not a fair market unless the economy is at full employment and full utilization. Even then the employer has considerable leverage in dealing with his employees.

Disclosure, I own Berkshire stock and have the highest regard for Buffett's abilities as a value investor. I have less regard for his abilities as an economist.

Given how well he does at economics I find a simple assertion that he's wrong without providing any reason to be highly suspect.

And he doesn't have a concern for excess profits because that is self-correcting in time. Trying to fix it is worse than not trying to fix it.

 

[Loren Pechtel]

It is more than a little ironic that those who present themselves as the strongest defenders of capitalism seem to feel that it is such a fragile system that in the world's biggest, richest capitalistic economy that it can't accomplish the elimination of poverty, a task that many capitalistic economies with far fewer resources and advantages have accomplished.

Capitalism is inherently incapable of eliminating poverty because it's incapable of making the worst of workers worth hiring, especially at the wages needed to eliminate poverty.

What Buffet is saying (and which I agree with) is that we should let capitalism run the economy and use the government to step in and help those that need it. The EITC is very good in this regard because it rewards work rather than rewarding non-work.

The problem with the left is that they are trying to take a government function--welfare--and foist it off onto the business world. It's off the books, they don't see that it costs far more (in higher prices/lower wages) this way than if it were directly tax-funded.

 

[Loren Pechtel]

Without you they would build something else. You are relying on the scarcity of capital to make yourself important. Do you really think other people live to listen to you daydream and watch you eat bon bons? The person who gave you the loan made it all possible. Did he contribute anything but a paper assertion that you must be listened to while eating your bon bons? You guys are playing a Kabuki game.

Capital is always scarce, no matter what your fantasy. Infinite capital means infinite labor. Since we have both finite time and finite people that's impossible.

 

[RavenSky]

And you confuse the point of my original hypothetical. If I want a custom house built, no "they" really cannot do it without me. To build it, I am the most important component because I am the one providing the money to build it.

Moreover, you confuse the point of my developer example as well. Without at least one person/company involved in the development having the ability to secure financing for the project, the project will not get built. Even if the person with the ability to secure/provide the financing to get the project built does absolutely nothing else, they are still a necessary component to the development - not "deadwood"

You have failed to actually demonstrate this "deadwood" you keep insisting exists.

Of course they can build a custom house without you.

They can also build a custom house to your desires.

But they don't need you to build it.

You can stay home.

If I am not buying the custom house (you do understand what "custom" means, don't you?) then it would be massively stupid for the brick-layer's coop to expend their money and energy building it, don't you think?

Hang it up unter. Your extremely cartoonish world-view is not worth discussing any further. You will not add anything new - you will only repeat your hyperbolic buzz words over and over and over. Perhaps YOU should stay home, and study your hobbyhorse subject so that you could actually argue it intelligently.

Buh bye.

 

[RavenSky]

And you confuse the point of my original hypothetical. If I want a custom house built, no "they" really cannot do it without me. To build it, I am the most important component because I am the one providing the money to build it.

Moreover, you confuse the point of my developer example as well. Without at least one person/company involved in the development having the ability to secure financing for the project, the project will not get built. Even if the person with the ability to secure/provide the financing to get the project built does absolutely nothing else, they are still a necessary component to the development - not "deadwood"

You have failed to actually demonstrate this "deadwood" you keep insisting exists.

I have never seen "money" build anything. I have never seen "financing" build anything. Money is a societal chit one uses to procure THINGS, hence claim ownership. It is issued by people who intend for it to eventually represent the results of labor and not labor itself. The money manipulators in our society could be replaced most easily because they have no particular skill except holding their faces straight when they claim to own the human environment.

This is getting really really childish Yes, arkirk, "Money is a societal chit one uses to procure THINGS" and labor. I never once claimed that individual dollar bills went out and picked up hammers to build a house.

But money IS necessary to purchase the labor and materials to build my custom house. MY money, money that I earned selling my labor elsewhere. That does not make me "deadwood" in the effort to get the house built no matter what unter continues to nonsensically insist.

Now, if you or unter know of a brick-layer's coop who would like to build me my custom house without using any of my money, please... by all means send me their phone number.

 

[untermensche]

Of course they can build a custom house without you.

They can also build a custom house to your desires.

But they don't need you to build it.

You can stay home.

If I am not buying the custom house (you do understand what "custom" means, don't you?) then it would be massively stupid for the brick-layer's coop to expend their money and energy building it, don't you think?

Hang it up unter. Your extremely cartoonish world-view is not worth discussing any further. You will not add anything new - you will only repeat your hyperbolic buzz words over and over and over. Perhaps YOU should stay home, and study your hobbyhorse subject so that you could actually argue it intelligently.

Buh bye.

So you decided to wave your hands around before you run away?

If you don't want the house somebody will.

You are not necessary.

 

[RavenSky]

Yes.

To go back to my hypothetical, I (as the person commissioning the home to be built) am the MOST important component. Without me sitting on my ass eating Bon-bons while waving my fingers at the architects and contractors and brick-layers (as you seem to envision the "deadwood" doing), the house would never be built and none of those people would make any money from the building of it. It was my ability to get the loan and my desire to have a house built that made it all possible even if I never once picked up a hammer.

Without you they would build something else. You are relying on the scarcity of capital to make yourself important. Do you really think other people live to listen to you daydream and watch you eat bon bons? The person who gave you the loan made it all possible. Did he contribute anything but a paper assertion that you must be listened to while eating your bon bons? You guys are playing a Kabuki game.

Sure, they could go build something else for someone else, but the same exact rules will apply because THEY WILL HAVE TO GET PAID FOR THEIR LABOR FROM SOMEONE EVEN IF THAT PERSON DOES NOT CONTRIBUTE ANYTHING WHATSOEVER EXCEPT THE MONEY TO THE BUILDING OF THAT HOUSE

You can pretend otherwise, and you can go out of your way to be insulting, and you can repeat yourself ad nauseum, but you will still be making a nonsensical argument. The only way for your idea of utopia to work is that every single person who wants to own a house will have to build it themselves, and if they want a car they will have to build it themselves, and if they want food they will have to grow it themselves, and if they want a computer they will have to engineer it themselves. And I don't know what they fuck people in your weird utopia will do about obtaining stuff like internet services.

 

[RavenSky]

Given how well he does at economics I find a simple assertion that he's wrong without providing any reason to be highly suspect.

I don't think he is wrong, per se. I think he failed to address where the funding for such a program is going to come from, and how he can guarantee said program won't be gutted as soon as possible by Republican controlled anything.

At least with minimum wage, it isn't going to be taken away on the whim of a different politician.

And he doesn't have a concern for excess profits because that is self-correcting in time. Trying to fix it is worse than not trying to fix it.

I have seen no evidence of that, at all.

I have no problem with a greatly expanded EITC as long as the funding from it comes from taxing corporate profits and the top 1% (including passive income), and it is made a permanent program that cannot be rescinded and it automatically increases along with inflation or some other measure. That solves the problems of poverty and of excessive profits, slightly balancing income inequality - and would prevent the next Sam Brownback from screwing everyone over like he has done to the citizens in Kansas.

 

[Togo]

He doesn't favor the EITC over increases in the wages of the poor because he has calculated that it will mean more profits for himself. He believes that it is the best way to proceed to improve the lot of the poor because he doesn't understand the economics involved, including the role of the investors like himself.

He would probably agree with Loren and most of the free market enthusiasts here. That the labor market is a fair market where wages are set to the marginal productivity of the labor. That to increase the wages by an artificial means like increasing the minimum wage will distort the labor market, resulting in unemployment.

He is approaching the problem with a faulty set of economic tools. It is worth pointing out for example, that his toolset doesn't have an equivalent concern for profits exceeding the marginal productivity of capital, causing economic distortions in the capital markets. It is reasonable to assume that if marginal productivity plays such a key role in one market it must play an important part in the other.

It actually doesn't play a part in either, the labor market is exactly what it appears to be, one that is not a fair market unless the economy is at full employment and full utilization. Even then the employer has considerable leverage in dealing with his employees.

Disclosure, I own Berkshire stock and have the highest regard for Buffett's abilities as a value investor. I have less regard for his abilities as an economist.

Given how well he does at economics I find a simple assertion that he's wrong without providing any reason to be highly suspect.

Is he any good at economics? I mean, he clearly knows a lot about the capital markets, but then so do I - I wouldn't describe myself as a successful economist. It's an entirely different skill set. A bit like how being a psychologist doesn't make you good with people, or being a doctor doesn't make you a caring and nurturing person.

 

[untermensche]

Is he any good at economics? I mean, he clearly knows a lot about the capital markets, but then so do I - I wouldn't describe myself as a successful economist. It's an entirely different skill set. A bit like how being a psychologist doesn't make you good with people, or being a doctor doesn't make you a caring and nurturing person.

He's a master gambler.

And his ilk have turned the economy into a casino.

 

[Loren Pechtel]

As always you don't recognize the value of direction. How far will your car get without you in the driver's seat?

As always you look at people trapped in a system of limited capital flow as needing direction.

Direction is not what they are lacking.

I've seen what happens when management fails at providing adequate direction. The workers move towards approaches that make their job easier but that's not the same thing as making the whole operation work better. For example, doing the work that's in front of them rather than tracking down the work that should be done first. The result is anything that's not clearly in view basically vanishes from production. The stuff that went missing that way was usually urgent orders for replacement parts.

- - - Updated - - -

Hang it up unter. Your extremely cartoonish world-view is not worth discussing any further. You will not add anything new - you will only repeat your hyperbolic buzz words over and over and over. Perhaps YOU should stay home, and study your hobbyhorse subject so that you could actually argue it intelligently.

Buh bye.

The problem is that he only studies what like-minded individuals say.

- - - Updated - - -

If I am not buying the custom house (you do understand what "custom" means, don't you?) then it would be massively stupid for the brick-layer's coop to expend their money and energy building it, don't you think?

Hang it up unter. Your extremely cartoonish world-view is not worth discussing any further. You will not add anything new - you will only repeat your hyperbolic buzz words over and over and over. Perhaps YOU should stay home, and study your hobbyhorse subject so that you could actually argue it intelligently.

Buh bye.

So you decided to wave your hands around before you run away?

If you don't want the house somebody will.

You are not necessary.

Apparently she's right, you don't know what "custom" means in this context.

- - - Updated - - -

I don't think he is wrong, per se. I think he failed to address where the funding for such a program is going to come from, and how he can guarantee said program won't be gutted as soon as possible by Republican controlled anything.

At least with minimum wage, it isn't going to be taken away on the whim of a different politician.

And he doesn't have a concern for excess profits because that is self-correcting in time. Trying to fix it is worse than not trying to fix it.

I have seen no evidence of that, at all.

I have no problem with a greatly expanded EITC as long as the funding from it comes from taxing corporate profits and the top 1% (including passive income), and it is made a permanent program that cannot be rescinded and it automatically increases along with inflation or some other measure. That solves the problems of poverty and of excessive profits, slightly balancing income inequality - and would prevent the next Sam Brownback from screwing everyone over like he has done to the citizens in Kansas.

I would certainly index it to inflation.

I strongly disapprove of your eat-the-rich attitude, though. Revenue collection should not be used as a means of implementing social policy--that always results in bad rules.

- - - Updated - - -

Is he any good at economics? I mean, he clearly knows a lot about the capital markets, but then so do I - I wouldn't describe myself as a successful economist. It's an entirely different skill set. A bit like how being a psychologist doesn't make you good with people, or being a doctor doesn't make you a caring and nurturing person.

He's a master gambler.

And his ilk have turned the economy into a casino.

He's most certainly not a gambler. He objects to the gambling attitude that's common in Wall Street.

 

[Axulus]

He's most certainly not a gambler. He objects to the gambling attitude that's common in Wall Street.

His definition of gambling seems to be any action where one puts money at risk to make more money without a 100% guaranteed payoff.

So anyone who invests in anything other than T-bills is a gambler in his mind.

He would also have to consider someone quitting their job and going back to school in the hopes of finding a better job to also be a gambler under this absurd definition.

 

[untermensche]

He's a master gambler.

And his ilk have turned the economy into a casino.

He's most certainly not a gambler. He objects to the gambling attitude that's common in Wall Street.

Of course he's a gambler.

He understands and plays the game better than most.

And the game is a game of chance. There are no sure bets, only potential good bets.

He's been good, with his methods of gambling, in making bets.

 

[jonatha]

I would certainly index it to inflation.

It already is.

 

[Jayjay]

Builders can get funding in many ways. From worker owned and run banks that lend to workers for example.

Which workers? Do the builders own banks, essentially enslaving bank-workers (financial advisors, clerks, etc), or do the bank workers own the banks? If the latter, why would they be any more likely to lend money to the builders than any privately-owned normal bank?

 

[Jayjay]

I never said that the architect, contractor and brick-layer weren't necessary for my house to be built. And I have already said that you won't have much argument from me if you want to discuss income inequality or the merits of worker cooperatives.

But I will continue to refute your declaration that I am not also a necessary component to that house being built. If I am not available to commission, finance and/or buy the house, it won't be built. Period.

You confuse what is necessary to build something with what is necessary to buy it.

Yes, to keep the whole thing going again you must buy it.

But to build it, you are not needed. They can do it without you.

And if they are good, after a few homes they shouldn't need a bank either.

The only measure of being "good" at house building is to have people want to live in those houses, so much that they are willing to buy them. Building a house that nobody wants is not a sign of success, it's a sign of failure.

 

[Jayjay]

I don't think that logically follows. If you raise minimum wage, you'd expect the number of people making minimum wage to increase simply because the bar is raised: folks who were making just above the minimum would statistically become minimum-wage earners whenever the minimum is raised, even if overall unemployment increases. The number of minimum wage workers would decrease only if the number of employees in the bracket between the old and new minimum wage is less than the number of people becoming unemployed due to the minimum wage increase.

I wasn't submitting this as being logical. I was asking the question that if you say that increasing the minimum wage results in disemployment, to use the economics term for the combination of today's unemployment and tomorrow's reduced job growth, shouldn't decreasing the minimum wage, which we have effectively been doing for a long time now, result in more minimum wage workers, not fewer as has happened?

I get your point, and it's interesting that you presented a clearly testable hypothesis (which the chart you posted shows is indeed falsified). However, that hypothesis is slightly wrong for reasons I stated. Lowering the minimum wage should not result in more minimum wage workers at current minimum wage, but in more workers who are making the equivalent of 1965 minimum wage or less.

 

[Jayjay]

He's most certainly not a gambler. He objects to the gambling attitude that's common in Wall Street.

Of course he's a gambler.

He understands and plays the game better than most.

And the game is a game of chance. There are no sure bets, only potential good bets.

He's been good, with his methods of gambling, in making bets.

So, a bit like your imaginary house builders who build houses without having a potential buyer lined up? Or like your worker-owned banks that give loans to said builders?

 

[RavenSky]

I don't think he is wrong, per se. I think he failed to address where the funding for such a program is going to come from, and how he can guarantee said program won't be gutted as soon as possible by Republican controlled anything.

At least with minimum wage, it isn't going to be taken away on the whim of a different politician.

And he doesn't have a concern for excess profits because that is self-correcting in time. Trying to fix it is worse than not trying to fix it.

I have seen no evidence of that, at all.

I have no problem with a greatly expanded EITC as long as the funding from it comes from taxing corporate profits and the top 1% (including passive income), and it is made a permanent program that cannot be rescinded and it automatically increases along with inflation or some other measure. That solves the problems of poverty and of excessive profits, slightly balancing income inequality - and would prevent the next Sam Brownback from screwing everyone over like he has done to the citizens in Kansas.

I would certainly index it to inflation.

I strongly disapprove of your eat-the-rich attitude, though. Revenue collection should not be used as a means of implementing social policy--that always results in bad rules..

The revenue has to come from somewhere to fund an expanded EITC. So who would you suggest taxing? The middle class?

It has nothing to do with any sort of attitude against the rich. I've been in the 1% and I've been at the other extreme, so I believe in taxing those that can best afford it. And in this case, I particularly prefer that those who would actually benefit the most from continued low minimum wages (large corporations) should have to pay for the expanded EITC via higher taxes.

 

[Axulus]

And in this case, I particularly prefer that those who would actually benefit the most from continued low minimum wages (large corporations) should have to pay for the expanded EITC via higher taxes.

Which is essentially the idea behind progressive taxes - those who make the most money are those who pay a progressively higher amount of taxes.

Also, what does size have to do with it? Large companies can lose money too.