Is Increasing Inequality Acceptable If Everyone Benefits?

[lavinia]

While I don't see how equality can fairly exist in any economy, I do see how some inequality can be unfair and even oppressive. One does not need a slave economy to have exploitation. There is little doubt in my mind that our economy has become increasingly exploitive over recent decades. For instance, young people today are often asked to work for no pay - as "interns" as they are euphemistically called.

The current disparity in income in the United States is discussed by Paul Krugman. As I understand what he says, this is a modern trend that began during the 1980's. The book I read, Peddling Prosperity, is probably not his most relevant book but I found it informative. He argues that the current level of income inequality is an aberration.

I think of money as a large river. Where it flows determines the character of an economy. Today much of it flows into the military, into semi-monopoloistic businesses, such as agribusiness, and into high stakes gambling in financial and commodities markets. For instance, among the wealthiest people in our country now are essentially professional gamblers. I think it a fair question to ask whether this is a healthy trend.

 

[Pythagorean]

http://www.npr.org/blogs/money/2015/02/11/384988128/the-fall-and-rise-of-u-s-inequality-in-2-graphs

 

[OmCheeto]

If that was what the abstract said or implied one might well mock it. It did not. The author made comparisons, e.g. "more likely", "higher quality", "more optimistic", not absolute statements.

Ugh. After reading the paper, I can only say that, in any discipline, other than the "Social" sciences, this paper would have been laughed at.

"A 3lb chicken in 1997 cost a mere 9.5% of what it did in 1920"

Well, let's see -- one image is drawn with statistics and the other is a cartoon. One is real, the other is a joke.

It's always nice to get an agreement from you, Russ. Horowitz's paper is a joke.

I think I posted in one of the older threads, that I had an electrically powered air conditioner in my window, something which no Pharaoh could ever have dreamed of. And therefore, I, as a mere pauper, live better than a king.

What a bunch of hogwash.

Yes, here's the author's CV and 15 page list of papers in the Phrenology journals and books on same, similar to the CV of most politicians.

bolding mine

Skreeetch! I didn't realize until just now, that you were just joking.
His CV is most laughable.

My apologies.

 

[mheslep]

Ugh. After reading the paper, I can only say that, in any discipline, other than the "Social" sciences, this paper would have been laughed at.

"A 3lb chicken in 1997 cost a mere 9.5% of what it did in 1920" ...

Is that amusing to you because you think it is not true, or because you think it is not relevant?

 

[OmCheeto]

Is that amusing to you because you think it is not true, or because you think it is not relevant?

It's about as relevant as my Pharaoh analogy.

I think I should have unsubscribed a couple of weeks ago from this thread, when I agreed that inequality was not bad, but inevitable.
Even your Horowitz, buried in his papers, admits what the "real" problem is.
I'm not sure why he buries it though.
Some people just seem to like others to listen to hours of their blather, I guess.

Unsubscribe.

 

[russ_watters]

UI think I posted in one of the older threads, that I had an electrically powered air conditioner in my window, something which no Pharaoh could ever have dreamed of. And therefore, I, as a mere pauper, live better than a king.

What a bunch of hogwash.

You should ask someone without air conditioning whether that is hogwash or not. It's amazing how quickly we become so accustomed to luxury that it becomes mundane.

 

[mheslep]

Ugh. After reading the paper, I can only say that, in any discipline, other than the "Social" sciences, this paper would have been laughed at.

"A 3lb chicken in 1997 cost a mere 9.5% of what it did in 1920" ...

Is that amusing to you because you think it is not true, or because you think it is not relevant?

It's about as relevant as my Pharaoh analogy.

US meat consumption per person per year, lbs.

 

[jz92wjaz]

I've lived in a poor area of a developing country. Living without A/C was no big deal. It was regularly 95 and everybody is just used to it. I value a washing machine way more than I value A/C (and I'm pretty sure Pharaoh didn't have to wash his own clothing).

Some people I know who don't have running water and live in tiny makeshift houses have cell phones and TVs, so there is some truth to that comic posted earlier.

 

[russ_watters]

I've lived in a poor area of a developing country. Living without A/C was no big deal. It was regularly 95 and everybody is just used to it. I value a washing machine way more than I value A/C (and I'm pretty sure Pharaoh didn't have to wash his own clothing).

Fair enough, but it is just one of many examples of technologies we take for granted today. For my part, I spent one summer without air conditioning and it was my Plebe Summer at the Naval Academy in 1995. I think it is still the hottest summer on record for that area. The only time I wasn't sweating the entire summer was when I was in the shower (I hate cold showers, but I took them anyway). It was pretty awful.

Some people I know who don't have running water and live in tiny makeshift houses have cell phones and TVs, so there is some truth to that comic posted earlier.

In some developing countries, things get flipped-around and develop out of order. It doesn't make the luxuries any less amazing that they happen in a different order, though: a cell phone is also a luxury a Pharoh couldn't possibly have dreamed of.

And let's get our eye back on the ball here: it doesn't matter how much you and OMC are impressed by such technologies. The fact of the matter is that you have them and no amount of subjective downplaying of their importance will ever make it better to not have them than to have them. Standards of living continue to improve, across all demographics in the Western world, and in most of the rest of the world too.

 

[Bystander]

Russ quoted earlier post: "Some people I know who don't have running water and live in tiny makeshift houses have cell phones and TVs, so there is some truth to that comic posted earlier."

And replied, "In some developing countries, things get flipped-around and develop out of order. It doesn't make the luxuries any less amazing that they happen in a different order, though: a cell phone is also a luxury a Pharoh couldn't possibly have dreamed of."

It's a consumer choice to text or watch TV rather than eat. Those who don't like what the consumers are doing should take their complaints to the consumers.

 

[Nikitin]

You might want to look at this: http://www.heritage.org/research/reports/2013/07/productivity-and-compensation-growing-together

Heritage is a right-wing site, to be sure, but what I draw from this is that there is enough data out there taken under enough different conditions and methodologies that one can draw many different conclusions. I started this thread with the MIT article; it gives the methodology it used. If you want to argue that the methodology is wrong, have at it. If you want to argue that it must be wrong because it draws conclusions different from "real life" - i.e. a different study with a different methodology - I don't think people will find that very convincing.

Stipulating that your plot is the correct one, though, I think Rose has a very good point: if increases in productivity do not benefit most workers, why should we have government programs to support higher productivity? Someone who believes that plot represents "real life" should be opposed to government programs intended to raise productivity, n'est pas?

I don't see how my post and the MIT article disagree. Indeed, from what you summarized in the OP, theirs and mine opinions seem to be the same: inequality is increasing.

As for the graph I posted, fine. Granted, I am no economist, and I do not have time to read everything on this issue in detail either. However as I'm sure you are well aware, one can twist statistics easily by using different methodologies and interpretations of data for political purposes. Look here for another economist's take on the issue http://www.epi.org/blog/understanding-wedge-productivity-median-compensation/.

As for your second argument: Uhh I suppose the solution is to support higher productivity while taxing the richer heavily, so they won't accumulate too much capital, like they do here in Europe.

 

[Czcibor]

Hey, I've found one interesting article on NYT. You know, we're happy when inequalities go down, right? So we should rejoice the last crisis because it hit the top layers of society especially strong, thus reducing this evil inequality:

http://www.nytimes.com/2015/02/17/u...e=MoreInSection&pgtype=article&abt=0002&abg=0

:D

 

[Evo]

Look here for another economist's take on the issue http://www.epi.org/blog/understanding-wedge-productivity-median-compensation/.

All right, now that this is under GD, no more "blogs" as sources, it's against the rules.

 

[Vanadium 50]

Czcibor brings up an interesting point. If reducing inequality is a virtue in and of itself, how much worse off are we willing to make the poor in order to reduce inequality. If we could make the Walton family millionaires instead of billionaires at a cost of $10 for every poor person, should we? $100? $1000? Reducing their quality of life to that of poor Londoners in the 19th century? Poor Calcuttans in the 18th century? Poor Judeans in the 1st century?

This is the other side of the question "how much inequality are we willing to generate if it helps the poor?"

 

[thankz]

no one seems to say that the reason that their is inequality is that poor people settle for less, don't know enough to earn more and don't inherit wealth.

if you live in china where for 20 square miles the only place to work is a textile factory do you risk starving to leave that area to go out into the unknown for an education?

"that's just the way it is, some things will never change... that's just the way it is... but aww don't you believe them."

I have a theory that after four generations the rich don't know how to keep wealth anymore, they need fresh blood that are hungry and so a few of the lucky poor will make it. we need the rich, there has to be an incentive to create, manage, succeed, organize and grow else we'd all be moss on a stone.

now gimmi your money edit: maybe this had nothing to do with anything but after dealing with the 'poor' (I'm poor myself but that won't be forever) everyday I say let um die, I KNOW first hand just what a bunch of scumbags most are. you have to ask yourself just what good a person does in this world and I don't try and look at it as a question of morality or circumstance but it is what it is, and who am I to judge? I'm probably better than no one else but still I think I'm the most special, don't we all (the healthyist mindstate lol).

i'll stop the rant now.

 

[Muti]

Hahaha...

 

[Nikitin]

Hey, I've found one interesting article on NYT. You know, we're happy when inequalities go down, right? So we should rejoice the last crisis because it hit the top layers of society especially strong, thus reducing this evil inequality:

http://www.nytimes.com/2015/02/17/upshot/inequality-has-actually-not-risen-since-the-financial-crisis.html?action=click&contentCollection=The Upshot&region=Footer&module=MoreInSection&pgtype=article&abt=0002&abg=0

:D

You're failing completely to grasp the point. The ideal is that income should be distributed more equally, not that the rich must suffer.

 

[russ_watters]

You're failing completely to grasp the point. The ideal is that income should be distributed more equally, not that the rich must suffer.

I think you missed the point: the poor suffer when inequality drops, not just the rich. As V50 asked: how much are you willing to make the poor suffer in order to have better equality?

I think the basic problem in these discussions is that even after seeing the data in black and white, people simply refuse to accept it (consciously or unconsciously).

 

[russ_watters]

I think the basic problem in these discussions is that even after seeing the data in black and white, people simply refuse to accept it (consciously or unconsciously).

Let me say that a different way:
Logic would suggest that if equality is improved by taking money from the rich and giving it to the poor, that the poor get richer as a result. That may be true in isolation, but the data shows us that a general rise in inequality goes hand-in-hand with a rising economy that lifts everyone -- just not lifting them equally.

 

[Evan Maxwell]

I am still not sure how you could have complete inequality without devaluing the skills of those who have spend extra years in school or had years of back breaking job training in order to learn said skill set. I still do not see how the artificial inflation that eliminating wealth gaps would cause would not lead to drastically lower standards of living for everyone, standards that would be considered simply intolerable by many if not most Americans.

I am not cool at all with the fact that so few people have so much of the wealth around the world. But I think that finding innovative ways for everyone, using their own natural abilities, to be more industries and creating an economy where we have as many opportunities to move up remains to me the best possible solution.

 

[jz92wjaz]

We've had years of growth in the past without high inequality. An economic decline is one way to lessen inequality (the wealthy invest more money in the markets than the poor do), but it's obviously not a good way to do it. There are certainly other ways to minimize inequality that don't leave the poor worse off.

Inequality and growth appear to be correlated, but I can't think of a good argument for why high inequality would cause greater growth, or medium to low inequality would cause a decline and harm the poor.

 

[russ_watters]

Inequality and growth appear to be correlated, but I can't think of a good argument for why high inequality would cause greater growth, or medium to low inequality would cause a decline and harm the poor.[re-ordered for flow]

We've had years of growth in the past without high inequality.

Yes, but have we had growth without growing inequality? Inequality doesn't corellate to growth rate it correlates to the level of economic development -- at least it has for the past 60 years or so in the US (and in other examples, such as China).

An economic decline is one way to lessen inequality (the wealthy invest more money in the markets than the poor do), but it's obviously not a good way to do it.

So, then, the other side of the coin: if a declining economy with declining inequality is a bad thing, then why isn't a rising economy with rising inequality a good thing?

There are certainly other ways to minimize inequality that don't leave the poor worse off.

Perhaps. I'd be curious to know what they are.

 

[Collin237]

Despite tax rates falling for the rich, I think most people would agree that tax policy in most of the developed world is quite progressive...

The problem isn't what the policy is, but that some people can avoid paying what the policy says they should.

 

[StatGuy2000]

I know that this post is very late, but this Wikipedia article regarding the work of complexity economist Sam Bowles is of relevance to the question of inequality and economic success of nations.

https://en.wikipedia.org/wiki/Samuel_Bowles_(economist)

Here is his website, which have several articles related to the emergence of economic inequality.

http://tuvalu.santafe.edu/~bowles/

http://tuvalu.santafe.edu/~bowles/2002JEP.pdf

 

[jedishrfu]

Over time the inequality of things changes and so this thread has too. It has had a long glorious history of posts and so its time to close it, say goodbye and wait from someone anew to create a more contemporary thread on the same topic someday.

Thanks to everyone for contributing here.

Jedi