Is Increasing Inequality Acceptable If Everyone Benefits?

[Vanadium 50]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

 

[jz92wjaz]

If you double the spending money of any significantly large group of people overnight it seems to me that you risk destabilizing the economy with their new investments/purchases. Instability tends to disproportionately hurt the poor.

 

[billy_joule]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

No.
But I'm sceptical that that situation could exist, and for reasons like the following it's becoming less likely to be possible:

The view that income inequality harms growth—or that improved equality can help sustain growth—has become more widely held in recent years (see “Equality and Efficiency” in this issue of F&D). Historically, the reverse position—that inequality is good for growth—held sway among economists.

The main reason for this shift is the increasing importance of human capital in development. When physical capital mattered most, savings and investments were key. Then it was important to have a large contingent of rich people who could save a greater proportion of their income than the poor and invest it in physical capital. But now that human capital is scarcer than machines, widespread education has become the secret to growth

http://www.imf.org/external/pubs/ft/fandd/2011/09/milanovic.htm

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way. The rich do not exist in a vacuum, they cannot create wealth independently* of the wealth of the poor as the poor either produce the goods & services or consume them. Either the poor are producing more goods and their wealth is not increasing proportionally or the poor are paying more for goods with the same wealth, both result in a decline in wealth of the poor.

As an anecdote; On a professional engineers wage I won't be able to provide my future children with the same quality of life my grandfather provided his seven children and wife. He was a day labourer. Most young people of my generation will be poorer than their parents. This isn't solely due to inequality but it is partly.

 

[Pythagorean]

Billy Joule, suppose we had a society where one day the rich doubled their wealth, and the poor did not - it stayed constant. Inequality has clearly gone up. Do you believe the problems like "poorer health, higher crime & incarceration rates, lower productivity etc etc" will suddenly become much worse?

My understanding is that it's not a "sudden" thing, but that it will result in physical segregation due to home price differences, which will result in neighborhoods with a homogenous population of peoples with low socioeconomic status. And that these neighborhoods, fueled by the crime-education-poverty triangle, will make the neighborhood a smaller priority for budgeting and administrative attention. We will call them ghettos.

 

[russ_watters]

Poverty and inequality most often go hand in hand.

No they don't. Inequality and prosperity most often go hand in hand. That's what this thread is about!

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way.

But that's the way it has worked for many decades.

As an anecdote; On a professional engineers wage I won't be able to provide my future children with the same quality of life my grandfather provided his seven children and wife. He was a day labourer.

That's shocking. The median PE salary in the US is $100,000. He must have been quite a day laborer!

Most young people of my generation will be poorer than their parents.

That's false. Incomes are rising over time. Most young people are/will be richer than their parents. I provided the data that proves this.

 

[jz92wjaz]

I've seen multiple reports that suggest that Millenials are less financially secure than their parents. The reports show that they have higher student debt, lower employment, and lower inflation adjusted wages. It may be partially because we spend more time in college, but a college degree has become more necessary, so jumping into the workforce out of high school is much less of an option than it was for the previous generation. People are reluctant to hire new graduates due to limited resources and their inexperience. It's not impossible, but I do believe this job market is tougher for us than it was for our parents, and we have to work harder and smarter because of the world we live in.

http://www.washingtonpost.com/busin...659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html

 

[billy_joule]

No they don't. Inequality and prosperity most often go hand in hand. That's what this thread is about!

Which of these lists has more prosperous nations?

The ten most unequal nations:
Namibia
Zimbabwe
Denmark
Switzerland
United States
Gabon
Brazil
Central African Republic
Swaziland
Guatemala

The ten most equal nations:
Japan
China
Spain
South Korea
Macau
Ireland
Italy
Yemen
Finland
Australia

http://www.nber.org/papers/w15508

All tabulated here: http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

That's shocking. The median PE salary in the US is $100,000. He must have been quite a day laborer!

He had a 6 bedroom house in a nice neighbourhood. A comparable house would cost me over 1mil, let alone supporting 7 kids on one income! The cost of living and housing prices has outstripped incomes year on year where I live.

That's false. Incomes are rising over time. Most young people are/will be richer than their parents. I provided the data that proves this.

Yes, incomes are rising but by poorer I mean less wealth.
http://money.cnn.com/2014/09/22/news/economy/gen-x-poorer-than-parents-pew-study/

 

[Vanadium 50]

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

Switzerland? Denmark?

Let's look at historical data. In 1982, China had a Gini coefficient of 0.29 and India one of 0.32. Today Japan has the lowest in the world at 0.574. By your argument, in 1982 these should have been the most prosperous countries in the world. Instead, they had poverty rates of 96% and 86% respectively. Today their poverty rates are lower - much lower in the case of China - and their inequality rates are much higher: their Gini coefficients are twice what they used to be. If you look at the global trends over the last 30 years or so, there has been a trend towards decreasing poverty and increasing inequality.

The argument that reducing inequality will reduce poverty is simply not supported by the data. The argument could be made (and has been made) that reducing inequality is a good in and of itself, but again, the evidence is that this will increase poverty. How much worse are we willing to make the lives of the poor, in order to punish the rich?

A very interesting word was used earlier - "disruption". Henry Ford disrupted the world, and by the way, made a fortune doing it. This was not good for buggy-whip makers.

 

[russ_watters]

I've seen multiple reports that suggest that Millenials are less financially secure than their parents. The reports show that they have higher student debt, lower employment, and lower inflation adjusted wages. It may be partially because we spend more time in college, but a college degree has become more necessary, so jumping into the workforce out of high school is much less of an option than it was for the previous generation. People are reluctant to hire new graduates due to limited resources and their inexperience. It's not impossible, but I do believe this job market is tougher for us than it was for our parents, and we have to work harder and smarter because of the world we live in.

http://www.washingtonpost.com/busin...659b1e-aa17-11e3-9e82-8064fcd31b5b_story.html

Second sentence in the article:

They may be the first cohort to end up worse off than their parents.

"May". It hasn't happened yet. Most of the issue for millenials is that many came of age at the start of the Great Recession. So they are off to a bad start. Only time will tell if their situation is to remain bad, but lately the economy has been growing quickly and job numbers improving.

And, as the quote says: if it does happen, it would be the first time ever. So my point is not impacted but you would have to make an argument for what/why the change. Student debt is a potentially viable answer and I do think it is a problem that needs to be fixed, but a large part of that problem is due to the slow start millenials got due to the recession.

 

[russ_watters]

Which of these lists has more prosperous nations?

I've never heard the word 'prosperous' used to describe many of the nations in the first list. I wouldn't conclude inequality and prosperity go hand in hand.

That's an invalid way to do the analysis. Different nations with vastly different structures may have vastly different inequalities regardless of if they are rich or poor. What we're talking about is an all else being equal situation: tracking one country (usually, the US) through time. So again, the way it has worked is that when the economy rises, inequality rises and when the economy falls inequality falls.

"Inequality" has been an issue over the last year or two in the US because it is rising in the US. That's why we're having this discussion. It is rising because the economy is growing. Prior to that, during the Great Recession, few people talked about inequality because it dropped when the economy dropped.

He had a 6 bedroom house in a nice neighbourhood. A comparable house would cost me over 1mil, let alone supporting 7 kids on one income!

Well again, good for him -- but that situation was not typical.

The cost of living and housing prices has outstripped incomes year on year where I live.

That situation is not typical for the US. The statistics I provided are adjusted for inflation -- cost of living. Housing prices had a wild bubble 10 years ago, but that bubble burst and housing prices are no longer out of whack with their historical trend.
http://www.jparsons.net/housingbubble/

Also, 7 kids? That's not typical either. Family sizes have decreased over time. So given that you should be making a ton more money and have a smaller family than your father, I see no reason why you shouldn't have a substantially better standard of living. Again, individuals can vary, but that is the norm in the US.

Yes, incomes are rising but by poorer I mean less wealth.
http://money.cnn.com/2014/09/22/news/economy/gen-x-poorer-than-parents-pew-study/

No you don't. We've been talking about incomes throughout this entire conversation. You were correct to be talking about gini coefficient (though you didn't do it right) -- which is a measure of income equality. Standard of living is not well tied to wealth because wealth isn't what you use to make your house and car payments and buy groceries -- income is.

 

[russ_watters]

The argument that reducing inequality will reduce poverty is simply not supported by the data. The argument could be made (and has been made) that reducing inequality is a good in and of itself, but again, the evidence is that this will increase poverty. How much worse are we willing to make the lives of the poor, in order to punish the rich?

Well, there is another school of thought and it may explain some of the differences between Western countries. The thought goes like this:

The US has become a very rich country and our prosperity continues to increase. But there are some people who remain poor/left behind. What if we chose to reduce the overall prosperity of the country by taking some of the money from the upper half and giving it to those who are still in poverty? That's part of the thought process behind Greg's "guaranteed national income" thread. The questions are whether that is an acceptable trade-off and whether there will be any unintended consequences.

But other western countries are already doing this in part: socialized medicine has the same effect as a guaranteed national income. Let's say the value of the government provided insurance is $500 a month. That's $500 a month given to every citizen and paid for via the taxes of those in the upper level. It works exactly the same, it is just smaller.

 

[Czcibor]

Put simply, I don't think the rich could double their wealth without those that provide the human capital losing out in some way. The rich do not exist in a vacuum, they cannot create wealth independently* of the wealth of the poor as the poor either produce the goods & services or consume them. Either the poor are producing more goods and their wealth is not increasing proportionally or the poor are paying more for goods with the same wealth, both result in a decline in wealth of the poor.

I think that what you just describe is called in economics d zero sum fallacy:
http://books.google.pl/books?id=c0m...ir_esc=y#v=onepage&q=zero sum fallacy&f=false

I mean economics is not a zero sum game.

 

[enorbet]

Unless I'm mistaken I have not seen Income figures adjusted here vs/ cost of living. Also little attention has been paid to the fact that nowhere does Laissez Faire Capitalism exist. Studies from Princeton and Northwestern have declared the US officially an Oligarchy and with good reason. Example - The Koch family has huge influence to create laws that benefit their bottom line which is rather understandable. All of us would likely do the same. However they also create laws that reduce the wealth and power of anyone under them and stop others that would be advantageous to lower classes, even if that short term gain may create a less good future for everyone, including themselves, in the long run. That is the nature of unbridled greed. It is not logical. It is whimsical.

Regarding cost of living and "the American Dream" - One of the most profound bits of information to which I have ever been exposed was contained in a Historical News Documentary Series in which documented history was accompanied by interviews with people who had first hand accounts as they were involved in the events. I thought the show's name was "The 20th Century" but I'm not certain that is accurate. It was a few years ago that I saw the episode which I will quote and which I remember exceedingly clearly because it impacted me so strongly.

The particular episode to which I refer was about the Market Crash of 1929. One lady they interviewed was introduced and her story was told by the commentator and by direct interview. She was born in a rural community in Upstate New York and attended a one room schoolhouse (all grades taught simultaneously) from which she did not graduate. Recruiters from Bell offered many jobs for telephone operators and she and a friend responded. They both subsequently moved to New York City and became operators at the switchboard, and for a woman aged 18 years in the late 1920s without a high school diploma they were paid on a scale commensurate with the economy as it was.

The reason such a low level job holder was interviewed is that she did have sufficient discretionary income to buy stock on margin, one of the major factors cited for causing the crash. The level of her discretionary income (and remember her social/educational status) should blow your mind. By the middle of the 4th day of the 1st week of each month, ALL her monthly bills were paid ! 0_0

Calculate your own discretionary proportion in whichever way you prefer - how much you would have to be making for all your bills to be paid leaving you with over 80% discretionary dollars, or how low your bills would have to be for them all to be paid each month by the middle of the 4th day, roughly 100 years later.

Frankly I care little what numbers and graphs are shown here if such a loss in personal power is not addressed. The way I see this is that in the most elementary and meaningful ways this supports that the rich indeed do get richer and the poor get poorer. Never mind that it is also true that the poor don't have potential access to the political power that so affects their lives, income and personal power. This is an actual documented event even sometimes quoted by those in favor of inequality "because the poor don't know how to manage wealth".

FWIW I am decidedly not a bleeding heart liberal and I don't mistake "equal under the law" for "equal in all things". I do think society as a whole is diminished in uncountable ways by forces that create and maintain a horizontal society. I further maintain that we are coasting on the vertical society that originally made this country great, and drifting way off course.

 

[jz92wjaz]

I consider myself to be fairly fiscally conservative. High and rising income inequality is a change in our economy that I find concerning, and at very least worth looking at critically to be sure that it's not negatively affecting our country.

 

[russ_watters]

Unless I'm mistaken I have not seen Income figures adjusted here vs/ cost of living.

You are quite mistaken. We are only dealing in cost of living adjusted income. That question has been asked and answered many times in this thread, which makes it curious that you could be wrong about it.

Also little attention has been paid to the fact that nowhere does Laissez Faire Capitalism exist.

No one has claimed it has, so I don't know why we would be discussing that.

Example - The Koch family has huge influence...

Regardless of how true or not that statement is, it isn't relevant: the increases in bottem-end incomes that we are discussing are happening despite that supposed influence.

She was born in a rural community in Upstate New York and attended a one room schoolhouse (all grades taught simultaneously) from which she did not graduate... The level of her discretionary income (and remember her social/educational status) should blow your mind. By the middle of the 4th day of the 1st week of each month, ALL her monthly bills were paid !

Having no idea what her expenses were, I have no idea if that should blow my mind. At age 18, I was still living with my parents and all my bills were "paid" on the first day of the month, leaving the rest of the money I earned as "discretionary" income!

The way I see this is that in the most elementary and meaningful ways this supports that the rich indeed do get richer and the poor get poorer.

Unless they told you exactly how she was living, all you are doing here is guessing. That's completely meaningless.

 

[russ_watters]

I consider myself to be fairly fiscally conservative. High and rising income inequality is a change in our economy that I find concerning, and at very least worth looking at critically to be sure that it's not negatively affecting our country.

When has income inequality done anything but rise?
[that's a loaded question because it has, at times, fallen...]

 

[jz92wjaz]

When I was still single, I never footed the full monthly rent or utility bill because I lived at home or with roommates. Over half of my income went to savings, and the rest went to necessities and fun.

When has income inequality done anything but rise?
[that's a loaded question because it has, at times, fallen...]

Not sure what you're getting at. In my lifetime it's been a fairly constant upward trend. There was a downward trend after the great depression. It moved out of the high region in the early 1940s and remained low through the 1970s, when it started going up again. It was in the mid-range in the 90s, and now it's back to being high.

 

[russ_watters]

Not sure what you're getting at. In my lifetime it's been a fairly constant upward trend.

That was my point: it has been fairly consistently rising as the economy grows, so the rise in and of itself is not necessarily a bad thing.

 

[jz92wjaz]

The economy has also grown when it's gone down, so rising inequality isn't necessarily a good thing either. As the US recovered from the great depression, income inequality went down.

 

[russ_watters]

The economy has also grown when it's gone down...

That is not typically true. It went down during the Great Recession, for example.

As the US recovered from the great depression, income inequality went down.

Typically, the Great Depression is defined as the years 1929 - 1939, though it could also be defined with a couple of years of Depression in the beginningn followed by a couple of years of recession in 1938. Most of the drop in the Gini happened during the downturn years (most actually during the 1938-1939 period):

In any case, following the stock market crash and depression, a lot of laws got changed to try to prevent the bubble and crash from happening again. Major changes in laws can change the structure of an economy and the level of inequality independent of short term GDP. And that is also part of why different countries have different ginis, independent of growth.

The point of all of this, still, is that by and large, rising inequality goes hand-in-hand with rising incomes across the board.

 

[enorbet]

You are quite mistaken. We are only dealing in cost of living adjusted income. That question has been asked and answered many times in this thread, which makes it curious that you could be wrong about it.

It is my understanding that a much higher percentage of Americans first entering the marketplace these days will never afford to own their own home in contrast to early 20th century. Perhaps these adjustments don't include such concerns.

No one has claimed it has, so I don't know why we would be discussing that.

I brought it up because it speaks to the issue of government control of business and the resulting special interests that end up controlling government by that mechanism, or as Robert Zimmerman put it, "The pump don't work 'cause the vandals took the handles".

Regardless of how true or not that statement is, it isn't relevant: the increases in bottem-end incomes that we are discussing are happening despite that supposed influence.

...and I contend this is likely skewed statistics since there is evidence that people on "the bottom-end" had considerably more buying power/discretionary dollars in the first half of the 20th century and it has been diminishing ever since due largely to the Lobby system and Supreme Court decisions on political donations.

Having no idea what her expenses were, I have no idea if that should blow my mind. At age 18, I was still living with my parents and all my bills were "paid" on the first day of the month, leaving the rest of the money I earned as "discretionary" income!

Unless they told you exactly how she was living, all you are doing here is guessing. That's completely meaningless.

Perhaps you assumed her parents moved from Upstate New York with her to New York City? It was stated by the documentary that she and her girlfriend from school shared a 2 bedroom apartment and she confirmed this and described their lives. I did say she was interviewed in person and I find it dismissive and disingenuous that you would bring up living with your parents and having your bills paid for you by others. It is further an affront to refer to your argument as "we" in order to somehow minimize any dissent so that yours appears to have the preponderance of authority. The entire point was that her job provided that level of wealth. Why would I have even recounted it if someone else paid any of her bills? I will do my best to see if the documentary is available so you can see it for yourself.

In the meantime, do you suppose you could try to refrain from scurrilous remarks just because you disagree with this concept? If your argument and evidence "hold water" there is just no need for under-handed psychological trickery or twisted assumptions. If it turns out I am mistaken in any way, I will gladly report it, and apologize for my error. Until that time, let's try mutual respect.

 

[Vanadium 50]

..and I contend this is likely skewed statistics since there is evidence that people on "the bottom-end" had considerably more buying power/discretionary dollars in the first half of the 20th century and it has been diminishing ever since due largely to the Lobby system and Supreme Court decisions on political donations.

In 1950, the lowest 20% had an income (upper limit, not average) of $14,030 2013-dollars. In 2000, the lowest 20% had an income of $32,465, again in 2013-dollars. Source: https://www.census.gov/hhes/www/income/data/historical/families/

 

[russ_watters]

It is my understanding that a much higher percentage of Americans first entering the marketplace these days will never afford to own their own home in contrast to early 20th century. Perhaps these adjustments don't include such concerns.

That's an inherrently unsupportable guess, so sure, the statistics don't cover it.

I brought it up because...

Well again, regardless of that, the statistics show that all income groups have gained, so even if that is true it doesn't change the reality that the poor get richer over time.

...and I contend this is likely skewed statistics since there is evidence that people on "the bottom-end" had considerably more buying power/discretionary dollars in the first half of the 20th century and it has been diminishing ever since...

You need to provide real evidence of your claim. You can't just guess/make it up because you feel like it should be true.

Perhaps you assumed her parents moved from Upstate New York with her to New York City? It was stated by the documentary that she and her girlfriend from school shared a 2 bedroom apartment and she confirmed this and described their lives...
The entire point was that her job provided that level of wealth.

Mine was just an example. You said she moved, but didn't provide any details at all about her living situation, income, expenses, etc. We have nothing on which to base any judgement about how well she was doing or why.

Why would I have even recounted it if someone else paid any of her bills?

Based on your previous statements, my best guess would be that your imagination is filling-in the blanks in your knowledge of the facts.

I will do my best to see if the documentary is available so you can see it for yourself.

I would appreciate it.

In the meantime, do you suppose you could try to refrain from scurrilous remarks just because you disagree with this concept?

No. You have not provided any facts to back-up your assertions. You are not entitled to just say anything and require us to accept it, particularly when the things you say that have already been discussed have been flat-out wrong.

If your argument and evidence "hold water" there is just no need for under-handed psychological trickery or twisted assumptions. If it turns out I am mistaken in any way, I will gladly report it, and apologize for my error. Until that time, let's try mutual respect.

There was nothing underhanded and no trickery in what I've argued. I take exception to your method, which so far has been to speak off-the-cuff with no citation of evidence.

Moreover, given that the very first thing you said in the pervious post was quite clearly wrong, you should start showing that honor you are referring to by admitting your error instead of trying to argue your way out of it by saying you don't accept the statistics that you don't like!

 

[Czcibor]

It is my understanding that a much higher percentage of Americans first entering the marketplace these days will never afford to own their own home in contrast to early 20th century. Perhaps these adjustments don't include such concerns.

The data series seem to start in egalitarian '60s: (I failed to find anything older)

http://upload.wikimedia.org/wikipedia/commons/d/de/Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg
the picture:
http://upload.wikimedia.org/wikipedia/commons/d/de/Historic_U.S._Homeownership_Rate,_as_of_2014.svg

Mythical good old days?

Anyway, I also insist that you should use here more economic data and less gut feelings/anecdotal evidence. Damn, its supposed to be a scientific forum here.

 

[enorbet]

For the record I am not guessing nor imagining things and more importantly I have no reason to do so since it is not my desire nor agenda to prove anything but rather simply to try to get at some truth and understand these processes better. In fact I would be delighted to discover that "the poor get poorer" is a myth or outright lie. That would seemingly lead to some fascinating perspectives.

I have freely reported any areas where my memory is sketchy such as the exact name of the documentary. I also cannot recall if it was Mike Wallace who was the interviewer but I do recall for certain that it was a nationally renowned, highly experienced and respected commentator. I remember best, naturally, that which shocked me the most. Additionally I have repeated her story many times over the years exactly because it was so shocking and not once have I embellished anything nor left out any contradictory data. There simply was no need to "gild the lily".

Conversely some here seem so convinced of the certainty of "the poor do not get poorer" it seems their position is beyond question, if not beyond reproach. The only "citations" I've seen here are statistics which are easily skewed, especially when it is desired to sell something. "Three out of four doctors choose Anacin", "Our speakers are flat from 20Hz to 20Khz", "Our amplifiers produce a whopping 400 Watts", etc. In the first case we are not told the sample only includes four hired "doctors" but in the last two types the specifications merely leave out any qualifying data. I sincerely doubt that in a forum such as this with people learned in so many fields that I need to go into just how important the qualifying data is and how misleading the specifications are. The same is true of any statistics as you also must know. Graphs are notorious in this since it is so easy to adjust x vs/ y scaling to that peaks and dips appear either smaller or larger as the author requires. Also start and end points can be chosen that reflect an agenda, not clear fact.

One example of this is the Home Ownership graph shown in a previous post which only goes back to 1960 and stops at 2000, before the Real Estate Bubble during which an actual crisis of foreclosures put many hundreds of thousands out of their homes and back in the hands of bankers. It was an entirely engineered crisis bearing many similarities to the methods Stock Pools used to inflate stock prices sold on margin during the 1920s, leading to the Market Crash of '29 and The Great Depression, which while actually devastating lower income brackets, had less effect on higher income families and made some even more wealthy, more powerful.

That said, it appears there is at least some credence to the concept that News agencies have reported falsely dire impressions as actual news.

A far more accurate data set comes from the US Census Bureau

http://eadiv.state.wy.us/housing/Owner_0000.html

Unfortunately, although it does go back to 1900, it too stops short of the Real Estate Bubble which peaked around 2010 but excepting any qualifying data of which I am unaware it does seem to display that ownership in general and by percentage of the population has increased with just a few hiccups. My apologies for my erroneously falling prey to false or ill-advised news reporting. I should have known better since I am aware News has become largely Entertainment instead of entirely solid Journalism.

Some thoroughly documented facts -

From 1920-1930 the top 4 earners were John D. Rockefeller, Henry Ford, Andrew Mellon, and William C. Durant who paid taxes on $900 Million, $500 Million, and $300-$400 Million respectively. Durant's family claims he had $1 Billion dollars at one point before he lost it all, but I can find no information on what he actually reported. These men did not exist in a vacuum but rather in a community of wealthy and powerful friends and associates. Some of the above worked together in Stock Pools along with dozens of others.

By contrast the present reported net worth of the Koch Brothers is over 100 times as large as the Rockefeller family in 1930 at over $100 Billion. The difference in tax rate makes this even greater by a rather large margin.It is also a documented fact that Koch and many others in the Oil Business (including those corporations dependent on oil) have thrown many millions of dollars in various interest groups that have, among other things, reinforced the denial of human affected climate change, heavily influenced elections and appointments, and stopped bills that would continue, let alone increase, funding of some Health, Educational, and Science programs that could benefit all. They can afford to indulge their whims and apparently do so, as might be expected, to stay "at the head of the pack" but also sabotage competitors, even if it is detrimental to the Nation, or a large segment of it.

So it can certainly be seen that the rich have gotten richer, to put it lightly. I cannot find any statistics that show that the lower income classes have increased wealth, standard of living or any other important index by even just an order of magnitude lower than commensurate with the gain in wealth and power of the very rich. As has already been noted, if you're not keeping up it is the same as falling behind and that doesn't even include predatory practices that strip ones options in a skewed "playing field".

In the wake of the mortgage industry meltdown, Senator Chris Dodd, Chairman of the Banking Committee held hearings in March 2007 in which he asked executives from the top five subprime mortgage companies to testify and explain their lending practices. Dodd said that "predatory lending practices" were endangering home ownership for millions of people.[19] In addition, Democratic senators such as Senator Charles Schumer of New York were already proposing a federal government bailout of subprime borrowers like the bailout made in the Savings and Loan crisis, in order to save homeowners from losing their residences. Opponents of such a proposal asserted that a government bailout of subprime borrowers is not in the best interests of the U.S. economy because it would simply set a bad precedent, create a moral hazard, and worsen the speculation problem in the housing market.

...but a Wall Street bailout apparently has no such effect <sarc>..Also Dodd said "millions" and I said "hundreds of thousands" but what's an order of magnitude among friends?

Maybe this is all just Middle Class Mythology but then there is the sticky problem of the above documented data and similar studies such as caused Princeton and Northwestern to conclude America has officially evolved into an Oligarchy. Maybe there is no global climate change, Greece and Italy are just pretending to be bankrupt since there is no global economic crisis similar to The Great Depression (and for similar predatory reasons) and we can all gather 'round the campfire on the beach and sing "Blue Skies". Oh yeah, and above all, Oligarchies historically take really good care of middle and lower classes making certain they "keep up".

OK that last bit is perhaps overly sarcastic but come on, these people manipulate data for a living to sway public opinion in their economic and political favor. Have you not read Mein Kampf, or Machiavelli, or Sun Tzu or Goebbel's Principles of Propaganda or so-called Social Darwinism? Are you unaware or blind to the efforts to vilify Science and universal education? just in the area of human caused Global Climate Change alone this can be seen to be real and ugly and with huge economic agenda and impact. When global temperature averages hit +2C who do you think will find it most unpleasant? Apparently those in league with Oil interests either are in a state of complete denial or they believe with their wealth and power they can weather any storm and as for the rest, "Qu'ils mangent de la brioche".

You don't need a weatherman to see which way the wind blows

 

[russ_watters]

For the record I am not guessing nor imagining things...

I also cannot recall...

Regardless of what you want to call it, a vague and unsourced claim based on an old memory is useless here.

Conversely some here seem so convinced of the certainty of "the poor do not get poorer" it seems their position is beyond question, if not beyond reproach. The only "citations" I've seen here are statistics which are easily skewed...

I don't know what to say here. You started by saying something wrong about the statistics, then said you would admit you were wrong if you had been -- but didn't -- and now say you just refuse to believe the statistics. You need something on which to base your accepted position that is better than decades-old memories and refusal to accept simple data when it disagrees with your opinion.

The issues of rich vs poor and inequality are simple statistical issues. They cannot be easily biased in the reporting.

Some thoroughly documented facts -

From 1920-1930 the top 4 earners were John D. Rockefeller, Henry Ford, Andrew Mellon, and William C. Durant who paid taxes on $900 Million, $500 Million, and $300-$400 Million respectively. Durant's family claims he had $1 Billion dollars at one point before he lost it all, but I can find no information on what he actually reported. These men did not exist in a vacuum but rather in a community of wealthy and powerful friends and associates. Some of the above worked together in Stock Pools along with dozens of others.

By contrast the present reported net worth of the Koch Brothers is over 100 times as large as the Rockefeller family in 1930 at over $100 Billion.

1. Please provide the documentation!

2. It appears to me that after wrongly chiding me for using un-inflation adjusted data, you've done it yourself! A simple google of "Rockefeller net worth" reveals that his net worth when he died in 1937 was $340 billion (not sure in what year's basis), making him the richest man in history:
http://www.forbes.com/sites/carlodo...kefellers-the-legacy-of-historys-richest-man/
This link says $400 billion, so perhaps the $340 billion was based on an ealier year for inflation equivalence:
http://www.therichest.com/rich-list/world/10-of-the-wealthiest-historical-figures-to-ever-live/9/

So the Koch Brothers are nowhere close to as wealthy as Rockefeller was.

3. It appears you are misunderstanding the difference between income and wealth. The link below says Rockefeller's net worth was $800 million in 1918, which is close to your stated value of $900 million for his net worth. But you're taxed on income, not net worth, which for him was $33 million (in 1918 $).
http://www.nytimes.com/learning/general/onthisday/bday/0708.html

So it can certainly be seen that the rich have gotten richer, to put it lightly.

That has never been in dispute, but you've picked a very wrong way to try to show it.

I cannot find any statistics that show that the lower income classes have increased wealth, standard of living or any other important index...

Did you read any of the data presented earlier? I posted graphs in Post #21 of inflation adjusted income. Income is what best translates into standard of living.

...by even just an order of magnitude lower than commensurate with the gain in wealth and power of the very rich.

Again: no one has claimed the poor gained as much as the rich. That's not what is being pointed out. What is being pointed out is simply that the poor do in fact get richer, not poorer, over time.

As has already been noted, if you're not keeping up it is the same as falling behind...

No, it really isn't. Again, that's the inequality = poverty fallacy.

 

[Czcibor]

For the record I am not guessing nor imagining things and more importantly I have no reason to do so since it is not my desire nor agenda to prove anything but rather simply to try to get at some truth and understand these processes better. In fact I would be delighted to discover that "the poor get poorer" is a myth or outright lie. That would seemingly lead to some fascinating perspectives.

I have freely reported any areas where my memory is sketchy such as the exact name of the documentary. I also cannot recall if it was Mike Wallace who was the interviewer but I do recall for certain that it was a nationally renowned, highly experienced and respected commentator. I remember best, naturally, that which shocked me the most. Additionally I have repeated her story many times over the years exactly because it was so shocking and not once have I embellished anything nor left out any contradictory data. There simply was no need to "gild the lily".

Conversely some here seem so convinced of the certainty of "the poor do not get poorer" it seems their position is beyond question, if not beyond reproach. The only "citations" I've seen here are statistics which are easily skewed, especially when it is desired to sell something. "Three out of four doctors choose Anacin", "Our speakers are flat from 20Hz to 20Khz", "Our amplifiers produce a whopping 400 Watts", etc. In the first case we are not told the sample only includes four hired "doctors" but in the last two types the specifications merely leave out any qualifying data. I sincerely doubt that in a forum such as this with people learned in so many fields that I need to go into just how important the qualifying data is and how misleading the specifications are. The same is true of any statistics as you also must know. Graphs are notorious in this since it is so easy to adjust x vs/ y scaling to that peaks and dips appear either smaller or larger as the author requires. Also start and end points can be chosen that reflect an agenda, not clear fact.

One example of this is the Home Ownership graph shown in a previous post which only goes back to 1960 and stops at 2000, before the Real Estate Bubble during which an actual crisis of foreclosures put many hundreds of thousands out of their homes and back in the hands of bankers. It was an entirely engineered crisis bearing many similarities to the methods Stock Pools used to inflate stock prices sold on margin during the 1920s, leading to the Market Crash of '29 and The Great Depression, which while actually devastating lower income brackets, had less effect on higher income families and made some even more wealthy, more powerful.

I don't want to be rude, however actually the graph ends somewhere around 2013 or 2014. May I treat the rest of your accusation (especially less verifiable part) similarly serious?
Define "engineered crisis", because it sounds as far reaching accusation, but as non-native speaker I'm not sure what's it supposed to mean.

That said, it appears there is at least some credence to the concept that News agencies have reported falsely dire impressions as actual news.

It may be a better business to maintain misconception, that make the viewers feel awkward after being confronted with news that contradict their prior believes. ;)

A far more accurate data set comes from the US Census Bureau

http://eadiv.state.wy.us/housing/Owner_0000.html

Your source:
HOMEOWNERSHIP RATES
1900 : 46.5%
1910 : 45.9%
1920 : 45.6%
1930 : 47.8%
1940 : 43.6%
1950 : 55.0%
1960 : 61.9%
1970 : 62.9%
1980 : 64.4%
1990 : 64.2%
2000 : 66.2%

I add fresher data:
http://www.census.gov/housing/hvs/data/q413ind.html
[table 5]
let's select 4th quarter:
2010 : 66,5%
2013 : 65,2%

It is my understanding that a much higher percentage of Americans first entering the marketplace these days will never afford to own their own home in contrast to early 20th century. Perhaps these adjustments don't include such concerns.

Does the data (including those that you brought) is somewhat incompatible with your opinion?

 

[russ_watters]

Czcibor, you really butchered the quotes there...can you fix that?

 

[enorbet]

@Czcibor - Excuse me but I didn't post the links to denigrate your position on home ownership but rather my own and I apologized for my error. Simply put, on that front I stand corrected.

@russ_watters - All of my numbers in the previous post came directly from several wikipedia pages. I apologize for employing misdirection to get you to state how unadjusted figures can be misleading or more importantly how they do not tell the whole story. So, since the Koch family is "nowhere close to as wealthy as Rockefeller" is it now your position that the rich got poorer and the poor got richer? Do you see the point? Nowhere have we documented for example tax rates then and now, especially including the nebulous loopholes that favor the very rich. Simple income is not enough and changes in relative income matters. How can it not?

Recently, Austan Goolsbee, then-chairman of the president’s Council of Economic Advisers, stated that "Americans for Prosperity", essentially The Koch Brothers, paid zero income tax. This has not been refuted. Instead Koch Brothers filed suit as to how anyone accessed their confidential tax data, and the administration is back-pedaling to avoid litigation, but the larger picture still exists. Apparently we, at least the public, have no legal means of discovering the actual rate at which corporations contribute. Citation - This is all over various news outlets with slightly different spin but here is one - http://www.weeklystandard.com/blogs...e-house-how-did-you-get-our-tax-information-1

These statistics do not say anything about access to power to change one's conditions, whether political, educational, whatever. Certainly Rockefeller bought politicians but those politicians were hampered in doing Rockefeller's bidding because the laws giving them power in the economy simply did not exist yet. I contend that American society is more horizontal now than it was in the early 1900's and I will seek documentation to demonstrate that, even though it seems that laws making a corporation essentially a citizen and opening up floodgates for campaign contributions all by itself should be sufficient. This reminds me of courtrooms in which both the DA and the Defense have their own "dueling experts". They can't both be exactly right, so how do we decide which is closest to the truth and pertinent to the case?

Most important to me is the progression which I think speaks to the full concept of inequality=poverty equation. Rockefeller worked in a political-economic environment in which government had a great deal less control and inclination to exert it over business. This was instrumental in his being able to manipulate markets to become unimaginably wealthy. He did not, however, have the means to exert anywhere near the political clout that the Koch family has. That has evolved over time as such wealth-fueled interest groups efforts have stacked up. Even William Randolph Hearst could only dream of the monopolization of media that exists today.(Do I really need a citation for this?)

The bottom line for me is this - Is it still possible for any American to become President? Is it still possible for many born poor to become a CEO? Is Mr. Smith going to Washington more true today or more a laughable fairy tale? What are the odds that a person born to a given class is upwardly mobile in 1920 vs/ 2020? Has it gone up or down?

 

[mheslep]

...Recently, Austan Goolsbee, then-chairman of the president’s Council of Economic Advisers, stated that "Americans for Prosperity", essentially The Koch Brothers, paid zero income tax. This has not been refuted...

Goolsbee made the no taxes statement about [I]Koch Industries[/I], and yes it has been refuted, [URL='http://www.nytimes.com/2014/06/28/upshot/sorry-harry-reid-koch-industries-probably-pays-a-lot-of-corporate-tax.html?_r=0&abt=0002&abg=1']by Goolsb[/URL]ee, who apologized, and by the [URL='http://www.weeklystandard.com/blogs/gibbs-questioned-goolsbees-koch-comments_501102.html']White House press sec[/URL].

AFP is a non-profit political advocacy group with a budget of around in the tens of millions that apparently is funded largely by the Kochs. It is not "essentially The Koch Brothers". AFP is a 501 C nonprofit organization that is tax exempt, [URL='http://en.wikipedia.org/wiki/Category:501(c)(4)_nonprofit_organizations']like many others[/URL].

 

[billy_joule]

Saw this on the 6 o'clock news tonight, a new report by the OECD concluded that:

“income inequality has a sizeable and statistically negative impact on growth, and that redistributive policies achieving greater equality in disposable income has no adverse growth consequences.

“Moreover, it [the data collected from the thinktank’s 34 rich country members] suggests it is inequality at the bottom of the distribution that hampers growth.”

Key findings:

 The gap between rich and poor is now at its highest level in 30 years in most OECD
countries.
 This long-term trend increase in income inequality has curbed economic growth
significantly.
 While the overall increase in income inequality is also driven by the very rich 1%
pulling away, what matters most for growth are families with lower incomes slipping
behind.
 This negative effect of inequality on growth is determined not just by the poorest
income decile but actually by the bottom 40% of income earners.
 This is because inter alia people from disadvantaged social backgrounds underinvest
in their education.
 Tackling inequality through tax and transfer policies does not harm growth,
provided these policies are well designed and implemented.
 In particular, redistribution efforts should focus on families with children and youth,
as this is where key decisions on human capital investment are made and should
promote skills development and learning across people’s lives.

http://www.oecd.org/social/Focus-Inequality-and-Growth-2014.pdf (4 page overview, The full report and source data are linked on 4th page)

 

[Czcibor]

I tried to follow their logic behind this report. The source of harm to the economy is lower chance of people with lower parental background to get proper education.

Sounds possible. However, also raises the question whether the problem are inequalities in general or construction of education system. (yes, I think about famous study concerning outcome of proper kindergarten for kids from pathological families)

 

[enorbet]

@Czcibor - Please forgive me for not answering your direct question directly. Now that we are clear that I was not accusing you of anything I can focus on that - the definition of "engineered crisis". Stock Fraud goes back at least to the 1700s and includes many types of schemes such as Pyramid and Ponzi schemes, and Stock Pools but almost always has some form of credit involved.

The most glaring example to which I referred were Stock Pools wherein men like Rockefeller, Durant, Vanderbilt, Mellon and associates would pool their money and buy stock as a block. By buying up much or most of, say, a $5 stock that activity would cause an increase in demand which drove the price up to $10, then $20, then $50. Sometimes "watering" was employed because it was a simple matter to just print up more shares as there were few regulations, and with stock splits the holdings of the Pools became vast. Any new shares could be bought up rapidly because buying stock on margin meant getting $10 worth of stock dividends for a $1 investment... assuming there would be any dividends. Also sham corporations were formed existing only on paper and whose only "product" was stock certificates. So in the above example, they bought at $5 falsely inflated the value and sold at $50. Nice scam, huh?

At that agreed upon point, when the pool decided it could grow no more, the pool would sell all it's stock, a large enough block that prices would begin to fall... hard. So others wishing to cut their losses would sell and often a panic ensues. It is unlikely that Stock Pools of the 1920s wanted the bubble to burst so explosively that The Great Depression became inevitable, they likely just wanted to make a quick buck and devil take the hindmost. It did not go unnoticed, though, that for some, The Great Depression was a nationwide fire sale as lower classes needed to liquidate assets fast to survive. Some rich got richer even during The Depression.

Similarly the recent Real Estate Bubble was created by the same combination of inflated prices and easy credit. There is little doubt that the banks lending these funds, at some point knew the borrowers could not pay off the loan principle because prices can't keep going up forever. Since the first several years of payments are almost entirely interest and almost nothing goes to principle, the bubble bursting becomes inevitable. Results - people lost their life savings, credit rating and their homes. Banks got to keep all the payments on inflated prices and then repossess the homes. Those that had the loans long enough to have made a dent in principle were bought off at the new, more realistic, uninflated, vastly lower values. Win, win... if you were a banker.

This sort of "white collar larceny" and con game is what I meant by engineered crisis. The "fire sale" outcome of "conning the rubes" was planned all along and is as old as commerce itself.

 

[Czcibor]

@Czcibor - Please forgive me for not answering your direct question directly. Now that we are clear that I was not accusing you of anything I can focus on that - the definition of "engineered crisis". Stock Fraud goes back at least to the 1700s and includes many types of schemes such as Pyramid and Ponzi schemes, and Stock Pools but almost always has some form of credit involved.

[unrelated stuff]

Similarly the recent Real Estate Bubble was created by the same combination of inflated prices and easy credit. There is little doubt that the banks lending these funds, at some point knew the borrowers could not pay off the loan principle because prices can't keep going up forever. Since the first several years of payments are almost entirely interest and almost nothing goes to principle, the bubble bursting becomes inevitable. Results - people lost their life savings, credit rating and their homes. Banks got to keep all the payments on inflated prices and then repossess the homes. Those that had the loans long enough to have made a dent in principle were bought off at the new, more realistic, uninflated, vastly lower values. Win, win... if you were a banker.

This sort of "white collar larceny" and con game is what I meant by engineered crisis. The "fire sale" outcome of "conning the rubes" was planned all along and is as old as commerce itself.

You know, I've got a feeling that we had a few reckless drivers that crashed together and now you selected the one that you dislike and claim that he "engineered" all car accident.Let me think who we have:

1) You mentioned banks. Yes, making bet and just in case too big to fail. Yes, brilliant securitization which spreads risk so well, that no-one knows which risk he holds.

But let's talk about those who you forgot to mention:

2) People who actually take a loan which they can not afford. Yes, they also make a bet on price increase, and just in case non-recursive loan or controlled bankruptcy. Have they "engineered the crisis"?

3) US Central gov and its offshoots:
a) FED that flooded market with interest rates below inflation
b) tax system which allows mortgage interest rate deduction for private people, to make loan much better idea than renting
c) Fannie Mae and Freddie Mac - they were created to encourage private companies to lend to bottom layer people
The intent was increase of home ownership, and this target seemed to work...

4) US Local gov's - zoning laws which created artificial scarcity of construction land and let the housing bubble to grow.

5) Consumer organizations - fight heroically with redlining (I'm curious why they don't celebrate whole subprime loan crisis as their mass success in convincing banks to finally lend money to the usually destitute and discriminated part of the US society ;) )

it. There is little doubt that the banks lending these funds, at some point knew the borrowers could not pay off the loan principle because prices can't keep going up forever.

Yes, financial institutions started to realize what they invested and tried to either dump those papers or at least stop pumping more money that triggered the crisis... ;)

 

[mheslep]

@Czcibor ...

... The Great Depression became inevitable, they likely just wanted to make a quick buck and devil take the hindmost. ... Some rich got richer even during The Depression... recent Real Estate Bubble was created by the same combination of inflated prices and easy credit. There is little doubt that the banks ... Since the first several years of payments are almost entirely interest and almost nothing goes to principle, the bubble bursting becomes inevitable... ... Banks got to keep all the payments on inflated prices and then repossess the homes. Those that had the loans long enough to have made a dent in principle were bought off at the new, more realistic, uninflated, vastly lower values. Win, win... if you were a banker...The "fire sale" outcome of "conning the rubes" was planned all along and is as old as commerce itself.

enorbet - You've had repeated responses pointing out the need for references for the various assertions making up your narrative (many of which are misleading or completely wrong). Why do you continue to ignore these requirements?

 

[enorbet]

@mheslep - This is the Social Science section and if I'm not mistaken it has one major difference from hard Science in that inanimate objects have rather hard rules about their behavior and are incapable of planned deception or theft, unlike human beings. Additionally, and for the same reason - humanity, how one interprets political and socio-economic data depends a great deal on ones position. One could add that inanimate objects also are not in any perceived competition for survival. The Robin's song does not say "Cheeerrup!" to the worm. Everyone knows history is written by the victor and propaganda, whether subconscious bias or ruthlessly planned, has been a fact of life probably since there were human communities.

In short, hard science is objective and social science is largely subjective or we wouldn't have both The Holocaust Museum and Holocaust Deniers, who also have their "citations". FTR I have not ignored these requirements and have posted links to documentation where I thought they might be needed. Since much of this is from News, either present or historical, it is readily available without difficult, arcane searching. It seems fruitless to footnote each and every point in an area so strongly affected by position and opinion.

Furthermore, and as further evidence, I have received a number of "Likes" as well as complaints. Isn't this exactly the point? How one views my posts has much to do with our own preconceived notions in the social arena, all of us. I have recanted and apologized where I saw that I misunderstood hard data and will continue to do so, but just because you think I have been "misleading or completely wrong" doesn't make it so. Where are your references? Are you implying by what you quoted that Stock Pools didn't falsely manipulate stock values with the expectation of windfall profits and all the while knowing such fraud would hurt, even devastate many? The SEC owes it's very existence to these documented facts. Do you really need a citation for this? and how is the Stock Bubble fundamentally different from the Real Estate Bubble?

Since you seem to have trust that there were no prime movers engaging in fraud and theft, here's a brief overview

http://www.investopedia.com/articles/financial-theory/09/history-of-fraud.asp

@Czcibor (and also applies above) There is no question that it takes many factors to cascade into truly large scale events, but there are prime movers and generally the way to find them is "follow the money" - Who stood to gain?

 

[russ_watters]

Enorbet, you are mistaken. Your claims are required to be based on evidence and in particular everything we are discussing here (the topic of the thread, not your tangents) is actual data.

More on your previous post later. But the short of it is:
1. Stop posting wrong and speculated information.
2. Start posting sources.
3. Stop posting opinions about "why" because this thread is about "what".

 

[russ_watters]

All of my numbers in the previous post came directly from several wikipedia pages. I apologize for employing misdirection to get you to state how unadjusted figures can be misleading or more importantly how they do not tell the whole story.

What?!? So you purposely gave false information after wrongly accusing me of doing the same instead of acknowledging your error? And you did this to show something that isn't a problem with the thread, but apparently you still think it is because of the errors you made here?

Instead of purposely making your error worse, what you should be doing is acknowledging your error and fixing it.

So, since the Koch family is "nowhere close to as wealthy as Rockefeller" is it now your position that the rich got poorer and the poor got richer?

What? No! I never said any such thing and the wrong information you posted doesn't address that question at all! This is your mess, not mine!

Do you see the point?

No, I don't. What it looks like to me is that you have no idea what you are talking about and are making this stuff up as you go and/or misunderstanding what you are reading here and in other sources. You've made such a mess here, I'm considering deleting your entire contribution to the thread because I'm not sure it is salvageable. But here's your chance to fix all of that: Make a point, and make it a good one.

Nowhere have we documented for example tax rates then and now, especially including the nebulous loopholes that favor the very rich.

Fine: document it for us and explain what the data tells us.

...and changes in relative income matters. How can it not?

"How can it not?" is not a logical argument, it is a statement of faith.

Further: You need to stop your "Koch Brothers" tangent. It isn't relevant to the thread. This thread is about what, not why. But it looks to me like you have a strong belief in a "why" that is causing you to believe a "what" that isn't supported by evidence. You need to drop that and start looking at the evidence without a pre-assumed "why" to color your interpretation of it.

 

[Czcibor]

@Czcibor (and also applies above) There is no question that it takes many factors to cascade into truly large scale events, but there are prime movers and generally the way to find them is "follow the money" - Who stood to gain?

Let's see:
- top bankers whose banks were on state aid had their salaries curbed - not specially; (they would be insane rich anyway, and their excessive salaries are easier to justify during boom)
- investors - lost quite a lot - no;
- people who overspent and later asked for bankruptcy protection - not bad, but took a blow to their credit rating;
- people working in gov regulation bodies - seem to clearly benefit from the crisis. If everyone worked just fine, no one would think about hiring them in masses.
- insolvency lawyers - clearly had their best days during the crisis.

OK, my conspiracy theory involves civil servants and insolvency lawyers (they were seen during many insolvencies, benefited from them so are clearly involved). As you pointed out its a matter of subjective view.

More seriously: anyway why are we excluding less thrilling ideas like mixture of somewhat irresponsible actions of independent actors with addition of bad luck?

 

[enorbet]

I have no argument with dropping the Koch Family from discussion even though I see them as an example of "what" not a tangent of "why". Consider it fait accompli. I am willing to comply.

So, moving along (sorry if it's clunky, I don't yet know how to quote someone elses quote along with their response)-

Posted by Vanadium50 quoted and response by russ_watters -

1. Income is not wealth. Using one as a proxy for the other is like using velocity as a proxy for position. A small disparity in income, acting over time, becomes a much larger disparity in wealth."<snip> "3. Accounting is important. Perhaps this is best illustrated by example. Bob taught in the public school system and has just retired. He has a $40,000 a year pension. Joe taught at a private school system and has just retired. His 401(K) is returning $40,000 a year to him. Otherwise they have the same assets. Who is richer?

In most studies, Joe would be considered about a million dollars richer than Bob, even though their standards of living are identical. This is solely due to how we usually calculate wealth - we include defined contribution plans and exclude defined benefit plans. As the fraction of people with defined contributions plans instead of defined benefits plans rises, the calculated wealth disparity will rise, even if the standard of living disparity stays the same."

Posted by russ_watters -

"This comes largely from the fallacy that wealth is a zero sum game: "the rich get richer while the poor get poorer."

Where is the citation that supports that this is a fallacy? Even if given that wealth is not a zero-sum game, such as described in Pareto optimality http://en.wikipedia.org/wiki/Pareto_efficiency , the strongest criticism of that is wealth concentration -

http://en.wikipedia.org/wiki/Wealth_concentration]"[/PLAIN]
Given an initial condition in which wealth is unevenly distributed (i.e., a "wealth gap"[6]), several non-exclusive economic mechanisms for wealth condensation have been proposed:

A correlation between being rich and being given high paid employment (oligarchy).
A marginal propensity to consume low enough that high incomes are correlated with people who have already made themselves rich (meritocracy).
The ability of the rich to influence government disproportionately to their favor thereby increasing their wealth (plutocracy).[7]

In the first case, being wealthy gives one the opportunity to earn more through high paid employment (e.g., by going to elite schools). In the second case, having high paid employment gives one the opportunity to become rich (by saving your money). In the case of plutocracy, the wealthy exert power over the legislative process, which enables them to increase the wealth disparity.[8]

Because they are non-exclusive, it is possible for all three explanations to work together for a compounding effect, increasing wealth concentration even further.

That seems to support that inequality and reduced mobility if not poverty are at least linked and tend to grow wider.

@russ_watters - With all due respect I suggest you ask yourself if you have held yourself to the same scrutiny and standard to that which you apply to me and other responding members.

It seems to me that repeatedly anyone who disagrees with you, at least on this subject, including respected sources, are dismissed as liars or fanciful idiots, and that position seems politically driven faith/opinion, not Science, since at least 8 times in this thread you refer to opposing politics as (a sampling)

"clever, ambitious, dishonest politicians" "We allow politicians to frame issues, which often means the questions we care about are posed as lies.""We need to stop accepting being lied to about poverty""We need to stop accepting being lied to about inequality"

etc etc. and with no citations supporting that these specific assertions are lies.

To me this smacks of typical political isolation wherein an X-wing (insert right, left, whatever) advocate can entirely dismiss any line of thinking and evidence without even reading it simply by noting a label of "Oh that's Y-wing (alternate accordingly) and therefore a lie and unworthy of any concern or examination" or like so many dismiss Darwin without ever bothering to read "Origin of Species" justified by their perception it is a plot full of lies in conflict with their interests and/or conclusions.

I have 6 posts in this thread which contain 7 links, and 3 additional references to publicly available documentation (more, as of this one) yet you still maintain that I have not provided citations. One of those was even to refute myself in the honest admission of an error on my part on housing expectation. Have you demonstrated such honest self regulation? Also, in all fairness a couple responses were to clarify what I meant in a previous post, as requested, so no citation was possible or needed for example to define what I meant by "engineered crisis". So since it is clearly not "no citations", by what criteria should I use more? If I state that "a^2 + b^2 = c^2" describes a right triangle do I need to cite Pythagoras?

I'm truly not trying to be facetious. It's relatively easy to determine what needs citation in hard science. In social science, not so much. What criteria should all members employ here in so-called Social Science?

The only "authority" of which I am aware that I referred to that I have not given citation was a description of a public TV news documentary in my first post regarding buying power in 1929 for which I can not find a video or transcript on the internet yet. Since then (and until such time as I can find it) I have not referred to that at all, let alone as a given, but simply omitted it altogether.

Regarding relative wealth of Rockefeller I most assuredly did NOT post false information as those figures were direct from wikipedia, which I stated. I simply did not go the extra mile to adjust their numbers and when you pointed that out, I used that as a demonstration of how statistics can be skewed. I did not set out to deceive you but sought to "roll with the punch" by showing how easily anyone can be deceived or mistaken by not looking under the presented stats. You have most often been diligent in this area, and set a good example, but not always in each and every case. That is probably to be expected in forums where commonly considerably less than 24 hours research and editing goes into a post.

Furthermore I have never attacked your character nor assumed you were lying. The truth is I have enjoyed many of your posts in the hard science areas. It just seems the old adage of "never discuss politics or religion" still holds true, at least here in this thread where it is impossible to extricate economy from politics, and where you resort to such disrespectful personal affronts like

" What it looks like to me is that you have no idea what you are talking about and are making this stuff up as you go"

in what seems an attempt to personally discredit someone (in this case, me), bringing nebulous doubt on anything stated regardless of citation or merit and again as if I had posted not one single citation.

More to the continuing dialogue -

3. We need to stop accepting being lied to about inequality. Inequality isn't poverty. If I give you $1,000 and give the person next to you $2,000, you just got richer, not poorer. If people start recognizing that a rich person getting richer does not mean they are going to have more trouble making ends meet."

While at that instant both are certainly richer, it does not stop there. It is not static. The dynamic effects are that the 1st party who got twice as much ($2000), changes demand commonly increasing prices which can reduce the 2nd party's buying power or even nullify it below a certain threshold to which the 1st party may not be vulnerable.It is not entirely unlike getting a raise that puts one in a higher tax bracket resulting in less "takehome".

Simply put and to use your example of game theory, if the 2 parties are playing poker and the next hand has an ante that rises to $1500, the 2nd party is out of the game and takes a complete loss while the 1st party has a chance to win and increase his total capital.

Additionally, the 1st party may hire an accountant to minimize his tax burden on that gift, while the 2nd party cannot afford to do so (or is ill-educated to understand the net gain) and loses more of his gift to tax.

While I don't think I fully comprehend the subtle differences between types of leverage http://en.wikipedia.org/wiki/Leverage_(finance) The 1st party has more leverage of at least one of those. This doesn't even consider that the 1st party can buy politicians to pass laws that favor his investments and disfavor the 2nd party's. The wealth concentration factor simply increases this disparity in every measurable way as shown in the above wiki and also in the below book which largely prompted this whole thread and has been referenced several times already .

The Original Post by Vanadium50 starting this thread asked (in fair discussion of and in contrast to an article from MIT)

"Suppose I could wave a magic wand, and double the income of everyone in the bottom half, and triple it for everyone in the top half. This would benefit everybody, at the cost of increasing inequality. Would this not be a good thing?

According to the book that heavily influenced the MIT article, Capital in the 21st Century, this is not only not a good thing it is a bad thing because of the net effect of wealth concentration. The book was an influence on the Princeton and Northwestern studies conclusion that the US is now an Oligarchy because of exactly that wealth concentration. This book is not mere opinion but rather an extremely well researched and documented treatise on the nature of economies.

http://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century][/PLAIN]
Nobel prize-winning economist Paul Krugman called the book a "magnificent, sweeping meditation on inequality"[17] and "the most important economics book of the year — and maybe of the decade."[16] He distinguishes the book from other bestsellers on economics as it constitutes "serious, discourse-changing scholarship."[18] Krugman also wrote:

At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame. ... Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.[17]

I strongly suggest to anyone interested in modern economies reading as much of it that you can find. Better, buy the book and read it all.

I have sincerely sought to be respectful of you personally, russ, while disagreeing with some of your assertions, but frankly if you find this offensive just go right ahead and delete my posts as you have threatened to do. IMHO that will only support one of the precepts of my personal biased opinion (and make no mistake we all have them) that applies in economics and politics just as it does in forums, that it is not a level playing field if the strong can and do prey on the weaker, and at the very least in business, historically many do. I contend that I have not created a mess. The mess exists in and of itself "in the wild" because politics and socio-economics are in process and seemingly in as perpetual "whose ox is gored?" conflict and as contentious as "chosen people".

 

[russ_watters]

Saw this on the 6 o'clock news tonight, a new report by the OECD concluded that:

Key findings:

http://www.oecd.org/social/Focus-Inequality-and-Growth-2014.pdf (4 page overview, The full report and source data are linked on 4th page)

Could you be more specific about where the "full report", is, because I'm not seeing it. And this summary does not address how they made their key finding (!?).

 

[OmCheeto]

Just skimmed the comments in this thread, as some were longwinded, and void of much substance.
My opinions, regarding this thread, and the topic:

This thread:
Economics, is apparently not a "Social Science", as I learned 8 years ago, but requires a new "Antisocial Science" field, all by itself.

The topic:
The premise of the original article seems to have been twisted from the start of the OP. Even as a left-winger, the notion that "inequality is bad", is ludicrous. What is bad, is hyper-inequality. Whitewashing hyper-inequality, with doctor vs potato picker salary, is just a waste of time.

In all of these economic debates, I always find, although calling someone stupid is verboten, so many rich and varied alternatives, are available: Liar! Clueless! etc. etc. etc.

 

[russ_watters]

Even as a left-winger, the notion that "inequality is bad", is ludicrous. What is bad, is hyper-inequality.

What is "hyper-inequality" and why is it bad? Or was that a joke?

 

[OmCheeto]

What is "hyper-inequality" and why is it bad? Or was that a joke?

After half an hour of googling, I can't find where I once told you, something to the effect; "I'll put a smiley in my post, when I'm joking"

Here's an example of past PF, Om researched, "hyper-inequality".

hmmm... How is John doing now? I really can't fault the man. Like that Texas family, who won the, "mer-cans are doin' a Palinesque drunken fight fest! Thayr distractud! let's kill the 'DEATH TAX'"!

Cha-Ching!

John Paulson, the man who made his first billions shorting the housing market, had a terrific 2013 after several years of malaise but is having a mixed 2014. He made a $1 billion bet on Botox-maker Allergen and supports Valeant Pharmaceuticals' proposal to buy the company. He's also bullish on Puerto Rico, which he called the Singapore of the Caribbean. The son of an Ecuadorian immigrant, Paulson once[...] more

Uh oh. This was a good thread too:

How to...:

Yeah, that's why I stopped talking politics at work...there just aren't enough dope slaps in the world for every deserving person to get theirs.​

34.

 

[Vanadium 50]

I find the argument that inequality is bad because it leads to politically active rich people kind of hard to swallow. What's the difference between Tom Steyer and the Koch brothers - all billionaires who are politically active? And, in a democracy, isn't the purpose of money in politics to try and convince people of your opinion? I say "try" because there plenty of examples of elections where one side poured a whole lot of money into it, and still lost. NY-19 is an example: Eldridge outspent Gibson 2:1, and lost by 30 points.

 

[Pythagorean]

I find the argument that inequality is bad because it leads to politically active rich people kind of hard to swallow. What's the difference between Tom Steyer and the Koch brothers - all billionaires who are politically active? And, in a democracy, isn't the purpose of money in politics to try and convince people of your opinion? I say "try" because there plenty of examples of elections where one side poured a whole lot of money into it, and still lost. NY-19 is an example: Eldridge outspent Gibson 2:1, and lost by 30 points.

Of course that's the purpose, but shouldn't public interest take precedence? Income inequality doesn't lead to politically active rich people - they were always there. But because money facilitates power, the interests of the non-rich become under-represented. Anyway, there's two separate issues here: money in politics and inequality. If there's no money in politics, then inequality isn't an issue. To me, money in politics is the more pressing (and solvable) issue. Inequality is more of an emergent phenomena, we can try and patch it up, but we can never have complete control over the forces that lead to inequality.

 

[mheslep]

I find the argument that inequality is bad because it leads to politically active rich people kind of hard to swallow...

I suspect inequality is a minor driver of these rich players, and that a government with large revenues and an inscrutable set of laws is a major one. Why? Because, as the bank robber said, that's where the money is. With a relatively small government (8% of GDP circa 1900) an Andrew Carnegie uses his fortune to build hundreds of libraries and tours his native Scotland; with a large one I suspect he instead applies himself to become Senator Carnegie and to work a deal to get his enterprise an ACA waiver.
.

 

[billy_joule]

Could you be more specific about where the "full report", is, because I'm not seeing it. And this summary does not address how they made their key finding (!?).

The link in the "source" section leads you to the full report here:
http://www.oecd-ilibrary.org/social...its-impact-on-economic-growth_5jxrjncwxv6j-en

 

[Chronos]

How bad would poverty be without the wealthy? The 'poor' are not fed and housed by the 'poor'. There are people all over the world who would [and do] kill for the opportunity to be 'poor' in the USA, or most any other 'evil capitalist' nation.

 

[Vanadium 50]

Several people have made the point that income inequality causes a loss of income mobility. Here is a study of that (behind a paywall, I am afraid) - "
Income Inequality and Intergenerational Income Mobility in the United States (Social Forces,doi: 10.1093/sf/sou092), by Dierdre Bloome of the University of Michigan. Figure (1) in her text shows the rise of inequality since about 1968 and the dramatic uptick since about 1980. Figure (2) shows income mobility (which is defined so that a low value indicates high mobility) which is consistent with flat or, if anything, decreasing (i.e.towards more mobility) over time.

Comments: The absolute intergenerational mobility in the US is about 0.47. My understanding of the way this is defined is that if you take a group of 30 year olds, 47% of the difference in their incomes can be explained by their parents' income when they were 30 year olds. Unlike many other measures, this follows a cohort, so you are looking at less inequality per group than you are with the US as a whole, where income inequality is driven largely by where you are in your career (the difference between two 20-year olds or two 70-year olds is smaller than the difference between a 20-year old and a 50-year old)

Bloome seems to expect a positive correlation between income inequality and income mobility. I would too. I would have thought that if one had relatively stagnant income mobility, that this would reflect in a higher inequality. (i.e. inequality is the effect, not the cause) That's not what the data show.

Bloome tosses out some possible reasons for this. I can play the same game, and I think we're seeing two factors moving in opposite direction. One is that there is a very strong correlation with intergenerational educational attainment. If you can afford to pay full freight, you can send your kid to any college that will take him. However, at the same time, college has gotten less rigorous. The price of college has gone up, but the value has dropped, and as such, the advantage is evaporating. I can't prove this is the reason, but it would explain this somewhat counter-intuitive result.