Why is there a monopoly on productivity?

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We know that IQ and many other traits related to success is normally distributed. But for some reason, wealth is connected to the Pareto distribution. Is there a relation between the two?
 

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  • #2
scottdave
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As far as wealth, looking at the extremes, if you have almost nothing, then practically everything that you earn goes toward the essentials like food and shelter. There is usually nothing available to save up to increase your wealth. On the other extreme, if you have a lot more than needed to take care of the essentials, you can invest the excess into ventures with the potential to earn you even more money.
 
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  • #3
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As far as wealth, looking at the extremes, if you have almost nothing, then practically everything that you earn goes toward the essentials like food and shelter. There is usually nothing available to save up to increase your wealth. On the other extreme, if you have a lot more than needed to take care of the essentials, you can invest the excess into ventures with the potential to earn you even more money.
That is true. But a higher intelligence should be able to increase one's productivity on average to compensate, at least somewhat, so that the wealth distribution wouldn't be as skewed as it is. I mean a poor but really smart person should be able to have some of his/her personal reality under control, as one would expect, whether through raw innovation, cunning, mental endurance, problem solving, whatever.
 
  • #4
256bits
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his/her personal reality under control, as one would expect, whether through raw innovation, cunning, mental endurance, problem solving, whatever.
You already have listed a few of the other "items" that cannot influence whether or not a person can achieve their lifelong goal of becoming supper-rich.
 
  • #5
scottdave
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I think @56bits meant "can influence". But it is more than just IQ, problem solving, or innovation. There has to be ambition to have more money or stuff. Some people get to a point where they are happy with what they have, or maybe they just are happy with what they get for the amount of effort.
Or they desire to use their talents in a different fashion, like doing charity. These are just a couple of factors.

But I still think the big reason for the skew is: if you have a lot of money, it is much easier to make more money. The rich person can afford to take some risks with investing. If one business venture fails, they still have money to try a different one. The one that pays off can be expanded to have even more profit.
 
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  • #6
Vanadium 50
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How does the title have anything to do with the topic?
 
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  • #7
scottdave
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How does the title have anything to do with the topic?
I wondered that, too. What is the procedure to fix. Just ask the OP to change it?
 
  • #8
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I think @56bits meant "can influence". But it is more than just IQ, problem solving, or innovation. There has to be ambition to have more money or stuff. Some people get to a point where they are happy with what they have, or maybe they just are happy with what they get for the amount of effort.
Or they desire to use their talents in a different fashion, like doing charity. These are just a couple of factors.

But I still think the big reason for the skew is: if you have a lot of money, it is much easier to make more money. The rich person can afford to take some risks with investing. If one business venture fails, they still have money to try a different one. The one that pays off can be expanded to have even more profit.
That's very much true. A very intelligent person cannot simply will themselves into being super rich because there are risks in taking the necessary ventures to get there. Unless one is a genius and innovates on a completely exceptional level(Think Einstein, Millennium Prize Winners, Bill Gates etc). Or they marry into it. Those are the only other risk free ways I can think of.
 
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  • #9
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How does the title have anything to do with the topic?
I would imagine that the Pareto distribution has something to do with the fact that only small percentage controls all the means of production, has the highest levels of creative innovation, etc. Which is a monopoly of sorts because of the extreme skew. That is the implicit premise in my title. Because while IQ is normally distributed, there might be cognitive capacities that haven't been considered to account for that skew in wealth/productivity. Or not. It's worthy of discussion.
 
  • #10
russ_watters
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We know that IQ and many other traits related to success is normally distributed. But for some reason, wealth is connected to the Pareto distribution. Is there a relation between the two?
Wealth is cumulative and persistent. Income is a better fit for the traits associated with success (and "success" is more typically associated with/defined by income) and the income distribution shows it. Trying to correlate wealth and "success" is not appropriate.
 
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  • #11
russ_watters
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I would imagine that the Pareto distribution has something to do with the fact that only small percentage controls all the means of production, has the highest levels of creative innovation, etc.
So it's a follow-up question to the conclusion you reached before even asking the question? Yikes! Mind if we change it to match the question in the OP?
It's worthy of discussion.
Maybe, maybe not. But in either case a totally different question.
 
  • #12
jbriggs444
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We know that IQ and many other traits related to success is normally distributed
The premise is incorrect. It is well known that IQ is not normally distributed.
 
  • #13
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Wealth is cumulative and persistent. Income is a better fit for the traits associated with success (and "success" is more typically associated with/defined by income) and the income distribution shows it. Trying to correlate wealth and "success" is not appropriate.
What about the creative genius needed to innovate. Is that normally distributed as well? Surely people that innovate well enough can just become rich if the innovation is truly good. I would't really call this an income though. More like cashing in on a really good idea.
 
  • #14
jbriggs444
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What about the creative genius needed to innovate. Is that normally distributed as well?
First, come up with a measurement procedure. Then we can ponder whether the distribution of measured values is or is not normal.
 
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  • #15
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The premise is incorrect. It is well known that IQ is not normally distributed.
It's close enough
 
  • #16
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First, come up with a measurement procedure. Then we can ponder whether the distribution of measured values is or is not normal.
It's not really possible. We can't really define creativity. It's one of those things where we just know it if we see it. Maybe we can operationalize it by observing new inventions and it's frequency.
 
  • #17
jbriggs444
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It's not really possible. We can't really define creativity. It's one of those things where we just know it if we see it. Maybe we can operationalize it by observing new inventions and it's frequency.
Pick an answer. Can we measure it or can we not?

[If we do it by counting inventions then it's not normally distributed -- it's positive and discrete]
 
  • #18
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Pick an answer. Can we measure it or can we not?
How about yes. Just approximate it by new inventions/patents/creations and whatnot.
 
  • #19
jbriggs444
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How about yes. Just approximate it by new inventions/patents/creations and whatnot.
Then the answer is no. It is not normally distributed.
 
  • #21
jbriggs444
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Is it skewed?
Undefined -- you have not come up with a measurement procedure.

What argument are you hoping to make based on the shape of some curve that you cannot even define or measure?
 
  • #22
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Undefined -- you have not come up with a measurement procedure.
Sure. The histogram of patents among the population
 
  • #23
jbriggs444
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Sure. The histogram of patents among the population
Without looking for the source data, it is clear that there is a big spike at "zero inventions" with a tail going one way. There is no tail going the other way.
 
  • #24
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Without looking for the source data, it is clear that there is a big spike at "zero inventions" with a tail going one way. There is no tail going the other way.
Yes it's zero inflated for sure. Most people generally don't invent things.
 
  • #25
jbriggs444
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So now that we've come up with a scale for creativity (number of patents granted), where are you trying to go with this argument? What has the shape of this histogram to do with the price of peanuts?
 
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