What produces great economic inequality?

[DBT]

There are plenty of facts. The power and privalige of those in the highest strata of society is on display for all to see.

 

[Loren Pechtel]

Very true. This happens all the time. People make bad decisions. In the banking world, it's called rags to riches to rages again. 60% of all second generation companies fail, 90% of third generation fail.

You mean they go mad at losing their money?

 

[Loren Pechtel]

What's missing here is that a big factor is how much one puts towards the future rather than for current use. ...

That's a common presumption among right-wingers, that everybody has an upper-middle-class income or more.

It doesn't take an upper class income.

One of the big things is applying oneself in school.

 

[Loren Pechtel]

Yet new wealth is comparatively rare. Old wealth - generational wealth that stays with a single family for centuries - is commonplace amongst the wealthy. No family is lucky, generation after generation. No family has only heirs who are extraordinary, or even only heirs who are above average in intelligence. The Duke of Westminster has done bugger all to get rich; And at his level of wealth, it would require the most unimaginably moronic dolt to lose enough to become merely very wealthy indeed.

[Citation Needed]

I have repeated brought up The Millionaire Next Door on here, it looks like nobody on the left has read it. Hint: The large majority of millionaires inherited nothing beyond attitudes and perhaps college--and even amongst those who got a substantial windfall most had already also become millionaires on their own. The thing is most people inherit late enough in life that it doesn't substantially change things.

But discussions about wealth always founder on the definition of 'wealth'. Sure, if I had $10million I would feel rich; And sure, I could ensure poverty for my children by making bad business decisions, or by simply diluting the inheritance amongast a large family. But that's far less likely if I have $10billion. By conflating millionaires with billionaires, it's possible to confuse the issue to the point where nobody can discuss ludicrous wealth, and mere wealth can be dismissed as justly deserved.

1) And how many billionaires are there?? While they have a lot individually it's a darn small piece of the overall pie.

2) Look at the Forbes list--most people on it are either pretty much self-made, or the first-generation inheritance from those that were. That generational wealth gets split amongst the kids, it doesn't take very many generations for it to sink away unless the next generation is adept at maintaining it.

 

[bilby]

Very true. This happens all the time. People make bad decisions. In the banking world, it's called rags to riches to rages again. 60% of all second generation companies fail, 90% of third generation fail.

Yet new wealth is comparatively rare. Old wealth - generational wealth that stays with a single family for centuries - is commonplace amongst the wealthy. No family is lucky, generation after generation. No family has only heirs who are extraordinary, or even only heirs who are above average in intelligence. The Duke of Westminster has done bugger all to get rich; And at his level of wealth, it would require the most unimaginably moronic dolt to lose enough to become merely very wealthy indeed.

But discussions about wealth always founder on the definition of 'wealth'. Sure, if I had $10million I would feel rich; And sure, I could ensure poverty for my children by making bad business decisions, or by simply diluting the inheritance amongast a large family. But that's far less likely if I have $10billion. By conflating millionaires with billionaires, it's possible to confuse the issue to the point where nobody can discuss ludicrous wealth, and mere wealth can be dismissed as justly deserved.

Do you have a source that demonstrates that most new wealth is rare?

I didn't say it was.

I said that new wealth is rare, not most new wealth.

Amongst the hyperwealthy, the majority are people who inherited at least a large fraction of their wealth, and their ancestors going back more than one or two generations were also wealthy by the standards of their time.

This is most obvious amongst european aristocrats; But it's certainly true enough in the US for old money to be a cliché, particularly in New England.

 

[Loren Pechtel]

One criticism I often see is the over financialization of the economy. I don't remember the exact numbers, but it's something like 15% of GDP in the '50s compared to over 40% now.

I have heard this as well. And I agree with it too. Especially when you consider it matches perfectly with the trajectory of the last extreme wealth inequity which took place in the mid to late 1920's. Back during that time, it was legal to borrow money to purchase stock on the market. This time around, we haven't yet allowed that practice again. But we are allowing the banks to speculate with deposits and we are allowing the fed to engineer interest into negative territory. All of this helps to foster higher incomes for the money changers and lower incomes for the producers of labor. Wealth inequality.

There are a lot of people (this forum included) who blame capitalism for wealth inequality but nothing is further from the truth. This is a political problem (created by corruption and the lobbys of government) which has altered the true functioning of capitalism.

Once again you show you don't know what you're talking about.

It's quite legal to borrow money to purchase stocks. In fact, anyone doing their own stock picking should enable it on their brokerage account because it means you can be 100% invested without having to restrict yourself to limit orders. (If your market order goes through ever so slightly higher than you expected and you were investing the last dollar in your account into the stock you have a problem. If your account is enabled for margin trading you simply pay a sliver of interest until the next dividend ends up in your account.)

The difference between now and 1929 is we have limits on how much you can borrow against stock. Back then there were no limits.

 

[ZiprHead]

If you look at the list of wealthiest Americans, most of the top 15 like Jeff Bezos or Warren Buffet made the money themselves.

Buffett, yes. Bezos, however, got $300,000 from his parents to start Amazon. Over a half million in today's dollars.

 

[DBT]

Very few make their fortune without luck or the aid of others. Having a marketable skill or talent helps.

 

[Derec]

Amongst the hyperwealthy, the majority are people who inherited at least a large fraction of their wealth,

What are your definitions of "hyperwealthy" and "a large fraction" and can you back up your assertion?

Amongst the hyperwealthy, the majority are people who inherited at least a large fraction of their wealth, and their ancestors going back more than one or two generations were also wealthy by the standards of their time.
This is most obvious amongst european aristocrats; But it's certainly true enough in the US for old money to be a cliché, particularly in New England.

Just because such families exist does not mean they are they majority of the "hyperwealthy", much less that new wealth is "rare".

As I said, even the wealth of THE proverbial American hyperwealthy family only goes back to the oil business of the late 19th, early 20th century. And even their wealth has been significantly diluted since John D.'s death. I doubt any living ones are even on the Forbes 400 list, but I haven't checked.

 

[Derec]

Buffett, yes. Bezos, however, got $300,000 from his parents to start Amazon. Over a half million in today's dollars.

I did not say he didn't receive any help from his parents. But neither were his parents in the "hyperwealthy" category with him mostly just inheriting family wealth. Going from $300k to $144G is almost a half million-fold increase.

And as I said, even the heirs on the Forbes list tend to be from a generation or two, not going back centuries. Which was the claim.

 

[Bomb#20]

That Luck Matters More Than Talent: A Strong Rationale for UBI • Richard Carrier

t can now be said with certainty that luck matters more than talent and effort. Not that talent and effort don’t matter, but that they are easily overwhelmed by bad luck, and easily replaced by good luck. Consequently, all ideologies that depend on any version of Just World Theory (as, for example, most versions of Libertarianism and Anarchocapitalism do) are false and must be abandoned.

That's projection, pure and simple. Libertarianism and Anarchocapitalism do not in any way "depend on any version of Just World Theory". They depend on the nonaggression principle. Carrier and the countless other anti-libertarians who claim they depend on Just World Theory are blatantly consulting their own personal values, contemplating what they themselves would need to believe in order to regard Libertarianism and/or Anarchocapitalism as moral, and taking it for granted that their own hypothetical belief is what actually grounds the views of real libertarians and anarchocapitalists. Carrier apparently just can't wrap his head around the concept of another person finding nonaggression morally appealing for its own sake.

The wealthy always just skim off the top of everyone else’s transactions. We should therefore skim off the top of what they take, and recycle it back into public goods.

And the Jews eat Christian babies. Deriving your bigoted claims about your outgroup from a widespread folk-theory that claims your outgroup are predators doesn't make you a non-bigot.

 

[Bomb#20]

What produces great economic inequality? It is far out of proportion to amount of work effort or amount of skill or amount of diligence or whatever.

What produces great economic inequality is the innumerable individual decisions of consumers to collectively give vastly more of their wealth to person A than they give to person B -- a decision they make because person A gives the consumers in exchange vastly more wealth than person B gives them. The consumers and person A make this trade because, as a result of the different marginal utilities the traded goods and services have for the different parties to the trade, the trade benefits them both. Consequently, the process of becoming wealthy "far out of proportion to amount of work effort or amount of skill or amount of diligence" is a process that increases the wealth of the consumers. Profit margins typically being thin, it usually increases the wealth of consumers collectively a lot more than it increases the wealth of person A. The thing economic inequality "far out of proportion to amount of work effort or amount of skill or amount of diligence" is not far out of proportion to is the ratio between how much wealth in excess of the purchase price is given to consumers by person A, and is given to them by person B.

 

[ZiprHead]

Buffett, yes. Bezos, however, got $300,000 from his parents to start Amazon. Over a half million in today's dollars.

I did not say he didn't receive any help from his parents. But neither were his parents in the "hyperwealthy" category with him mostly just inheriting family wealth. Going from $300k to $144G is almost a half million-fold increase.

And as I said, even the heirs on the Forbes list tend to be from a generation or two, not going back centuries. Which was the claim.

I wasn't contesting anything else you wrote which is why I didn't quote anything else.

You conveniently cut out the part I was contesting.

most of the top 15 like Jeff Bezos or Warren Buffet made the money themselves.

 

[lpetrich]

Cognitive inequality plus assortive mating. But you’re not supposed to notice that.

Trausti, there is zero evidence for your master-race theory.

Oh, my mistake. So parents do not pass on traits to their children. My bad. All hail the blank slate! In Lysenko we trust!

What one finds is a weak correlation with a LOT of scatter, not a strong correlation with no scatter, what Trausti seems to be advocating.

 

[lpetrich]

"The Millionaire Next Door" advocates what is essentially a miser strategy, living a life of self-imposed poverty. But if everybody tried to be misers, then the economy would collapse from lack of consumer demand. Contrary to what many right-wingers seem to think, consumers don't get their money off of money trees.

If everybody decided to save money by living in tents, the housing industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by not traveling, the travel industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by using cast-off junk as furniture, then the furniture industry would collapse and everybody employed in it would be out of work. Etc.

The result: mass unemployment and an inability to pursue that strategy.

 

[SimpleDon]

That's projection, pure and simple. Libertarianism and Anarchocapitalism do not in any way "depend on any version of Just World Theory". They depend on the nonaggression principle. Carrier and the countless other anti-libertarians who claim they depend on Just World Theory are blatantly consulting their own personal values, contemplating what they themselves would need to believe in order to regard Libertarianism and/or Anarchocapitalism as moral, and taking it for granted that their own hypothetical belief is what actually grounds the views of real libertarians and anarchocapitalists. Carrier apparently just can't wrap his head around the concept of another person finding nonaggression morally appealing for its own sake.

The wealthy always just skim off the top of everyone else’s transactions. We should therefore skim off the top of what they take, and recycle it back into public goods.

And the Jews eat Christian babies. Deriving your bigoted claims about your outgroup from a widespread folk-theory that claims your outgroup are predators doesn't make you a non-bigot.

I wouldn't presume to know all of the elements that go into the diagnosis of the "Just Society Fallacy or Delusion." I had never heard of it before today and psychology is much too indeterminate for me to have much interest in as a tool. I prefer reality and facts to judge things, what happens, and to leave why people believe in the fantasies to others.

Pretty much the entire history of man and of man's interactions with each other puts nonaggression into the area of wishful thinking. You are saying that if we could all just get along we wouldn't need all of these nasty laws and regulations like the ones against thief and murder. You are right, but we do need them to try to force people to behave in society, just as we need rules and regulations in our economy to force people to behave in that sphere.

I have to go. More later.

 

[DBT]

"The Millionaire Next Door" advocates what is essentially a miser strategy, living a life of self-imposed poverty. But if everybody tried to be misers, then the economy would collapse from lack of consumer demand. Contrary to what many right-wingers seem to think, consumers don't get their money off of money trees.

If everybody decided to save money by living in tents, the housing industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by not traveling, the travel industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by using cast-off junk as furniture, then the furniture industry would collapse and everybody employed in it would be out of work. Etc.

The result: mass unemployment and an inability to pursue that strategy.

Not to mention how you spend your one and only life by living miserly life, missing out on experiences that could enrich your experience of life and broaden your mind.

Being a Miser may become a state of mind, consequently, even if you become rich you still cannot bear to spend on little luxuries, cafes, travel, a nice house, a better vehicle, etc, and your life remains miserly and poor regardless of your monetary wealth.

 

[Loren Pechtel]

"The Millionaire Next Door" advocates what is essentially a miser strategy, living a life of self-imposed poverty. But if everybody tried to be misers, then the economy would collapse from lack of consumer demand. Contrary to what many right-wingers seem to think, consumers don't get their money off of money trees.

If everybody decided to save money by living in tents, the housing industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by not traveling, the travel industry would collapse and everybody employed in it would be out of work. If everybody decided to save money by using cast-off junk as furniture, then the furniture industry would collapse and everybody employed in it would be out of work. Etc.

The result: mass unemployment and an inability to pursue that strategy.

No, it's not about living in poverty. It's about living adequately but not trying to keep up with the Joneses.

 

[Bomb#20]

You are saying that if we could all just get along we wouldn't need all of these nasty laws and regulations like the ones against thief and murder.

I am? Funny, I don't remember saying anything like that. If somebody called Jews Christ-killers and I told him he was wrong you'd assume I'm Jewish, would you?

 

[Derec]

"The Millionaire Next Door" advocates what is essentially a miser strategy, living a life of self-imposed poverty. But if everybody tried to be misers, then the economy would collapse from lack of consumer demand.

I have not read the book, so I cannot opine on the cases it features per se, but it certainly is the case that there are some people living very miserly in order to accumulate wealth. I consider that the opposite extreme of spending on wants you can't afford. Like buying a Merc when you barely have rent money.
I think both are wrong approaches.