The basic point is that he gets paid more whilst not doing more "work". For those whom "Work" is the only lever they use to convert into money, they see inequitable work:cash ratios as "unfair" (a morality statement).
Market economies do not function on work, but on value. He did the same work in a high value scenario. A glass of water provided in the middle of a developed city is worthless and thus free. A glass of water provided at the right time in a desert is invaluable and thus expensive.
My takeaway is this: Always meet the highest value need you can, and as well create additional value by helping others to meet higher values than they current do. Low placed people may not be able to "work" their way to upper echelons, but they can invent, intuit or otherwise create high value leverage of their's and others' work. I dont see it as unfair that a person making $1 a day is unlikely to become a deca-billionaire in their lifetime (total mobility); instead I want to ensure they have some mobility so that they can always better their situation, maybe by an arbitrarily selected 2x multiplier.
I couldn't disagree more. As a society (and this goes from a community to a global scale) we should make it a priority to give everyone the resources to meet their maximum potential. I don't mean that we should give everyone a million dollars to invest of their own. What I mean is that we should ensure that everyone gets provided with a good education and food/water/shelter, etc.
The author specifically mentions the people making about $7 a day doing manual labor in Qatar, and that they were a lot shorter than he was primarily due to lack of nutrition. Do you believe that these people should only be able to aspire to making $14 a day? Maybe not all of these individuals are hard workers (by nature. I'm sure they are essentially forced to be hard workers to survive) or smart, but a lot probably are, and it's because of an unfair system that didn't give them access to food and education that they have to work in Qatar to make a living.
You may see this is simple economics, but I see this as a modern form of slavery: keep people poor, underfed, and uneducated so that they will always be a cheap source of grunt labor.
> keep people poor, underfed, and uneducated so that they will always be a cheap source of grunt labor.
Poor, underfed, and uneducated is the default position for human beings. We were born into this world, as a species, with nothing.
There is no conspiracy to "enslave" anyone, nearly all public health and wealth measures over the last 100 years are overwhelming up and to the right. That growth did not happened through magic or luck and certainly not from some misapplication of noble intentions (see communism), but through the slow accumulation of societal benefits, over time, across an open market economy.
It is not and will never be "fair", there will never be equality of outcomes, but jesus, we've faired a lot better under this system than by the whims of kings and politburos trying to distribute "fairness" with a clumsy iron fist.
>We were born into this world, as a species, with nothing.
Some people are born with nothing, others are born with just about everything. Many laws, regulations, etc exist so that JUST existing with nothing is not feasible.
It is nigh impossible to live in this world like the birds do, flying from one food source to the next, roosting wherever you find comfort. Those with means have entire departments to police the underclass off of their property and setup obstacles to make sure riff-raff does not even get on the public property next to their private property (just look at how public transport is set up in big cities).
We protect those with means, ensuring those without cannot even live without selling their labor. Die or work. It's a little like slavery (I KNOW there are large differences between traditional slavery), you must be able to see that?
>but through the slow accumulation of societal benefits, over time, across an open market economy.
Pretty sure most of the improvements we have made for the common man, at least in the US, have come at the behest of those born with nothing standing up and saying "we won't work unless the rewards are distributed better/we get a 40 hour work week/we get cleaner and less dangerous work conditions/etc."
>It is not and will never be "fair", there will never be equality of outcomes,
No one wants equality of outcomes, equality of outcomes would not seem fair to most people. Instead we want equality of opportunity.
We can improve, most of us know it, and even though most improvement will only effect our kids or grandkids, I will still keep bitching that we need to improve until we're AS GREAT AS WE CAN BE.
>Pretty sure most of the improvements we have made for the common man, at least in the US, have come at the behest of those born with nothing standing up and saying "we won't work unless the rewards are distributed better/we get a 40 hour work week/we get cleaner and less dangerous work conditions/etc."
Yes. These improvements were won through the most thoroughly and deeply market behavior possible: raising the price on what you're selling.
Labor price-gouging capital is a beautiful sight to see. Usually only capital remembers it can do that.
Don't forget that the initial response to labor price-gouging capital was to hire armed goons (like the Pinkertons) to break the strikes. The fight between capital and labor that ultimately led to something more balanced wasn't a purely voluntary economic transaction - there was plenty of violence involved on both sides.
And don't forget that a big part of why many Western countries started to invest more into welfare is because after 1917, their governments realized that the alternative could well be an armed uprising, and that they need to keep their citizens sufficiently content to prevent that - even if that means they have to force the wealthy to share more of their income.
(Note, I'm not saying that Soviets somehow achieved better results. The point is solely that the threat of a socialist/communist revolution was a significant factor in capitalist countries shifting away from unregulated capitalism and towards welfare state.)
> Labor price-gouging capital is a beautiful sight to see. Usually only capital remembers it can do that.
This was a pleasure to read, although it made me wonder what the optimal unit of labor is to still have a functioning competitive market. If all capital was controlled by one entity, no market could exist -- that's basically why the US has anti-trust laws. The same is true for labor. Seems like for each market there must be an optimal unit of labor (number of workers in a union, for example), to balance well-being of an individual worker with functioning of the market. Hard problem, though.
Yes, the problems that monopoly creates are analogous problems to the problems with large unions. The union management seeks to increase their own power, and the larger the union, the more possibility to abuse that power. However, the upside of having an institutional way to apply political pressure for the benefit of the worker can definitely outweigh whatever abuses and inefficiencies most unions create.
> Some people are born with nothing, others are born with just about everything. Many laws, regulations, etc exist so that JUST existing with nothing is not feasible.
Rubbish. Nothing stops you from wandering off into the wilderness, except for the fact that it's a crap way to live. You just feel entitled to the benefits of modern civilisation, without the costs.
And why should some people benefit from progress, while others are left to live in the wilderness? (Considering only few people actually contribute to progress.)
Because progress is the net result, directly or indirectly, of the work of everyone living in that society. When you pay taxes, when you buy things, when you select which products to buy, you're contributing.
Begin with fallacies and you shall conclude nonsense.
As a species, once we reached apex predator status, we were already born with the entire Earth's resources as our inheritance, not nothing. Somehow those got divided up and almost never was it via the mechanisms of an open market economy -- only in exceptional circumstances did those mechanisms provide a modicum of mobility, especially during technological transitions. The rest of the uplift was through outright redistribution, either through the occasional enlightened king's edict, the politburo's fist, or the exercise of raw political power in the legislatures of the world.
An unfettered open market economy that gets farther and farther from initial conditions ends in a revolution.
My guess is that a lot more people would support the redesign of how the land and natural resources are being distributed, but for some reason only redistribution of income generated from work is discussed in such conversations.
Maybe not what you intended, but I see your statement as a dichotomy, while the reality is more nuanced than that. For instance, most mainstream right-wing parties in Europe accept some kind of universal health coverage, which seems almost socialist in the US. Sure, I'd choose the US over Cuba or North Korea without thinking as my home, but several European countries, as well as Canada, before the US.
>Poor, underfed, and uneducated is the default position for human beings. We were born into this world, as a species, with nothing.
Have you had a look at 19th century philosopher Peter Kropotkin's The Conquest of Bread? Here's an excerpt:
>For thousands of years millions of men have laboured to clear the forests, to drain the marshes, and to open up highways by land and water. Every rood of soil we cultivate in Europe has been watered by the sweat of several races of men. Every acre has its story of enforced labour, of intolerable toil, of the people’s sufferings. Every mile of railway, every yard of tunnel, has received its share of human blood.
...
>The shafts of the mine still bear on their rocky walls the marks made by the pick of the workman who toiled to excavate them. The space between each prop in the underground galleries might be marked as a miner’s grave; and who can tell what each of these graves has cost, in tears, in privations, in unspeakable wretchedness to the family who depended on the scanty wage of the worker cut off in his prime by fire-damp, rock-fall, or flood?
>In virtue of this monstrous system, the son of the worker, on entering life, finds no field which he may till, no machine which he may tend, no mine in which he may dig, without accepting to leave a great part of what he will produce to a master. He must sell his labour for a scant and uncertain wage. His father and his grandfather have toiled to drain this field, to build this mill, to perfect this machine. They gave to the work the full measure of their strength, and what more could they give? But their heir comes into the world poorer than the lowest savage. If he obtains leave to till the fields, it is on condition of surrendering a quarter of the produce to his master, and another quarter to the government and the middlemen. And this tax, levied upon him by the State, the capitalist, the lord of the manor, and the middleman, is always increasing; it rarely leaves him the power to improve his system of culture. If he turns to industry, he is allowed to work — though not always even that — only on condition that he yield a half or two-thirds of the product to him whom the land recognizes as the owner of the machine.
I'd really recommend a read, I used to think as you did, that we are born poor. In reality, we are born with the riches of the world around us, yet ungraspable.
I actually agree with much of that assessment; I just don't think it paints the full story over the arc of history. I also don't think access to and domain over raw materials or "riches" equates to wealth in the same way having access to charcoal is not the same as creating carbon fiber. Transforming those materials into useful technologies has happened exactly because of things like property rights (ownership), open markets, and the rule of law. It might not be perfect, but so far it does seem to work for our common benefit, over time, even acknowledging the hardships those toiling in the mines do seem to bear.
Its feels a bit myopic to pretend like the the miner mining iron ore 150 years ago used in the creation of a steam engine somehow only benefits from his direct wage, and not indirectly from the product he's helping to create. Yes, the direct monetary benefits accrue to the owners, but by and large those owners produce things of value (increasingly so) to society in a way that that makes that miner's great-grandson far far better off than a "lowest savage" today. I think this is the same false litany that tells us the world is getting worse and worse (especially for the poor), whereas data tells us the exact opposite.
So not everyone gets to be an owner and be directly rewarded, and that work is certainly hard, but we do all seem to share in the collective benefits ownership creates.
The thing is that technology and society has progressed much further than our social and economical structures. I think the sharing economy is a great insight into one aspect of where we are going, but it isn't enough.
Most of the growth was being appropriated by "the 1%" of its time - see e.g. the Gilded Age - right until the point where the governments started forcing some redistribution through taxation and welfare programs. Until that happened, the social benefits were extremely meager.
Well, what's going on in Qatar IS slavery for all intents and purposes. The workers are imported from southeast Asia, and their employer holds their passport, preventing them from leaving. In a free market people need to be able to have a choice to freely leave. Many of those workers would probably leave if they could.
The same motivation driving Southeast Asians to work in Qatar drives Mexicans and Central Americans to the United States to work as legal or illegal migrant workers ... some of the latter working independently, most working for a series of established companies.
The big difference between Qatar/middle-east and the U.S. is that in the U.S. the business culture does not have as much recent history of indentured servitude, and has ever-diminishing use of unsafe practices (e.g., dangerous pesticides applied by farm workers without adequate protection). My father-in-law saw over the past 20 or 30 years many such Latin American workers come through furniture and manufacturing plants in North Carolina where he managed H.R. ... and they were paid very fairly and worked very hard, conscientiously, thoroughly. A fair number were found to have registered with false Social Security numbers and had to move on, but my father-in-law says it always was a loss for the plant. Those in the U.S. illegally still had to hazard the trip, and face deportation always ... but they mostly can leave any employment situation, or go back home, at any time.
Those workers stuck in Qatar / middle-east are unfortunate suckers reeled in by bastards and an uncaring system both in their countries of origin and in Qatar.
So ... on to the interesting part ... what are those Latin American workers in the U.S. doing with the majority of their wages? >>> They're by-and-large remitting that money back home to plow into joint RENT-SEEKING ventures with family / friends back home. They endure the hazardous journey, sub-standard housing, time away from family and their own comfortable culture, and two or three simultaneous jobs, because they have the initiative and need to build the nest egg so they can escape the "wage slavery". <<<
That's an interesting comparison of the cultural situations of migrant workers in the US and elsewhere. I used to live in Texas and also saw that legal/illegal migrants were in general hard-working, paid relatively fairly, and sent their wages back home to invest.
I'm curious about your use of the phrase, joint "rent-seeking" ventures. I looked up the definition of rent-seeking on Wikipedia: "seeking to increase one's share of existing wealth without creating new wealth", which tend to "result in reduced economic efficiency". Was that implied in your use of the phrase? If so, what kind of ventures did you have in mind? I imagine that migrant workers send their money home to invest, typically by starting businesses (or buying land..?) with family and friends - which isn't necessarily "rent-seeking"?
> As a society (and this goes from a community to a global scale) we should make it a priority to give everyone the resources to meet their maximum potential.
Provided that I am willing to concede this point for the sake of the argument: what makes you think that your redistribution model will actually allow everyone to achieve their maximum potential?[1]
Given that similar redistribution systems have been tried before, where governing bodies were thinking they actually know what's good for "everyone/society", but all of them miserably failed, what differentiates your proposed approach from what have been already implemented?
[1] I don't even know what "achieving maximum potential" means. Is it achieving someone's goals in life? Producing the most widgets possible? Killing as many unbelievers as possible to get into heaven?
They all miserably failed? The US does this to an extent right now: we have a decent (of course it's not the best) public education system, and we have programs like SNAP/TANF/Section 8 so that children don't grow up underfed on the street. There's no reason it could not also be done globally; the global GDP/capita is about $15k.
Of course, simply providing these services doesn't always cut it. Look at the generational poverty in the US "ghettoes" for obvious confirmation of this. But in general it's a good thing to do and it benefits people. It's certainly not impossible and definitely does not always miserably fail.
For maximum potential, I mostly mean the ability to do what you want in terms of jobs with only intelligence and work holding you back, not the circumstances you were born in.
> we have a decent (of course it's not the best) public education system
What's your take on the current student loans situation where almost everyone is able to obtain resources to go to a limited number of colleges and pay for whichever degree they like? Should we expand this and instead of loaning money give it away for free, if this goes towards achieving maximum potential? In your opinion, how much would a regular 4 year degree cost in such a case?
We should be looking at ways to reduce the cost of college. Education doesn't need to be a hand-holdy 4 year summer camp, and I think the expectation that it should be is based on cultural expectations. The loan based payment model is only a problem because it's leaving a certain subset of students in a lot of debt with degrees that don't enable them to pay it off. I definitely don't think we should just give everyone unlimited money to study, nor do I think the solution is going the Western-Europe route of making college free, but only for the X% of students that do best on entrance exams.
Do you want to reduce the cost, or do you want to increase accessibility? There are a finite number of colleges, so reducing cost does not necessarily increase accessibility. An incentive to build more colleges may increase accessibility, but may or may not exacerbate prices.
Another model might be to increase subsidy for fields with more guaranteed profit centers, while decreasing the amount of subsidy for fields in which a career profit is less likely, such that loans are more likely to be paid off. This again may make college cheaper, and/or more accessible, but may fail to yield enough trained workers to deliver in necessary but unprofitable fields.
That said, I'm not just trying to poop on the idea, but to highlight that "cost" is not the only rubric of accessibility, and that "cheaper" doesn't necessarily yield the results you're looking for, and may actually result in contrary outcomes from what we expect.
I think there is a huge problem with the student loan method of funding college in that it causes much more inflation than simply funding public universities who in turn would supply low or no cost tuition.
Entrepreneurs have incentive to ensure everyone meets their maximum potential because this is the place where there is the most to extract.
If my value is $10 per day and someone makes my value $20 per day, there is $10 per day worth of value for us to negotiate over. We _both_ have an incentive to maximize my potential.
Also:
>we should ...
thats a morality statement but without a canonical source of ethics that some do not ascribe to. But, I would assume that "self interest" is more or less universal, and thus we can build systems that use self interest to ensure good outcomes for all.
Real life isn't just an elaborate Austrian economics simulator. In this case, there are a lot of complex dynamics at play: will workers emigrate elsewhere if trained well (Basically the IIT problem)? Are constituents/subjects ok with reductions in their quality of life so that other people can be provided these resources.
To act as if the market will magically fix this is lazy and not realistic.
Also yes of course I used "should", as I am giving my opinion on this situation.
Giant companies are incentivized to kill the competition and then jack up prices while also lobbying for their interests with lawmakers. Said markets will also only give you the choice between products that you don't want, when you really want something that only a government would take on. Another thing that is distorted is that if a transnational corporation has a factory in one country, sends it to one of their factories in another country, and then sends it back again because it's cheaper, that gets counted as international trade. It's hardly an export, it's a way to protect investors from having to pay market rates.. Corporations get massive protections from government, I wouldn't really call it optimal resource distribution if government interference
Neither will a combination of the two, bury I think it might come closer. I think the free market people have some legitimate fears; a government that tasks itself with "fair redistribution of wealth" is pretty easily abused. "Fairness" lends itself to loose interpretations which target particular groups, for example, all of the white/male privilege rhetoric in the last decade. I don't particularly want my wealth redistributed because of someone's hate for my demographic.
You know what I meant to say: the real world does not adhere to economic thought as strictly as many would claim it does. The main reasons are usually due to some additional complexity that economic models fail to account for. Humans like being able to describe things in terms of cogent, concise rules, and in doing so can oversimplify and lead themselves to faulty conclusions.
> the real world does not adhere to economic thought as strictly as many would claim it does
That's absolutely true, and if anything the assumptive concepts that underly how government creates regulations are more dependent on "economic" principles than the assumptive concepts that underly how businesses work.
"people don't always do the most rational thing" is so often used as an excuse for government to intervene and make choices for people. As if government itself is not made and run by people who also don't necessarily (individually or collectively) make 'rational' decisions, only now given a really big stick.
There are other ways besides government to provide for people, even when doing so does not fulfill an obviously incorrect model of human as the hyperrational self-maximizer.
The core fallacy here is believing that we can all agree to supersede biological imperatives and everything will all go fine. The challenge of society is the establishment of a system that cooperates with biology to create a peaceful, prosperous environment for all members of that society.
Humans are naturally competitive. Humans have tribal instincts (which include a default hostility to known outgroups). Humans have a fundamental tendency to hoard resources to ward off the mortal dangers of scarcity and decay, visible in our dietary inclinations just as much as in the way we handle the abstraction of money. Like most other successful animals, we have an instinct to secure resources not just for ourselves but for the generations that will follow after us.
These are inborn instincts and impulses, installed by millions of years of evolution. They cannot be hand-waved away. As a species, we are stuck with them, for better or worse.
Throughout the 20th century, we see the rise and fall of economic policy that refuses to acknowledge these realities. This willful blindness inflicts a large amount of suffering on the populations that fall for the delusion that we are now superhuman.
The argument is not that physical impulse does not need restraint, nor that society shouldn't have structure and authority. It is merely that our social systems need to exist as background processes that optimize and refine our basic natures instead of trying to pretend like they don't exist.
Just as denial of the underlying structure of computer systems will, at best, seriously impede performance, denial of the underlying structures of human psychology will, at best, bottleneck any society.
Hardcore socialist redistribution systems are so denialist that they result in the equivalent of a nation wide Blue Screen of Death shortly after bootup. Let's take notice of the blood and agony of the 20th century and not install SOCIALISM.DLL anymore.
The pretense of tying the state of the system as is to biology seems to amazingly silly. We are the product of billions of years of evolution. Society is a much more recent artifact that has already seemed to go through several stages over thousands of years none of which has had time to leave much of a mark on the underlying biology.
In the words of jack nicolsons character in as good as it gets sell crazy someplace else we're all stocked up here.
Right, that's what I said. Any cultural ideals, let alone modern ones, haven't been around long enough to make a dent in our biology ... so we should stop pretending that our instincts are irrelevant and that we can just say "ALL HUMANS WILL NOW COOPERATE IN PERFECT SOCIAL HARMONY, BY DECREE FROM THE GREAT LEADER" and expect it all to go swimmingly.
Useful social systems contemplate typical human behavior and account for it in a reasonable way, instead of pretending that it won't apply.
When you create a central chokepoint for all ownership and economic resources, the distributors show massive favoritism for the ingroup (generally government bureaucrats and their relatives), while the rest of the population is essentially left to starve.
Anyone who claims the purity of their political philosophy or their strength of character or the quality of the education of their central planners will prevent this from occurring under their implementation of centralized resource distribution is essentially claiming to hold a trump card over human biology, and they should be immediately discounted, because that's not how it works. Instead, we keep trying to reboot it, hopeful that this time, the superhumans are in charge.
It is disappointing to see that juvenile dismissals like yours are apparently now countenanced on HN, especially when they're the result of a misreading in the first place.
We also have lesson from the 1920s to draw from and the breaking up of monopolies. Social security has social in the name, and nobody wants that social program to die off without something better replacing it (except for some crude wealthy folks). This isn't an install/uninstall thing. More of an alloy of waxing/waining ideas.
I agree that it's probably more useful to conceptualize economies as kernel subsystems with complex interdependencies rather than individual drivers. :)
Why is your assumption a better assumption than say children, the elderly, and disabled should be taken care of. outside of a psychopath compassion is also more or less universal.
Your assuming there is just one person. In the real world finding someone well trained is almost always
much cheaper and lower risk than training someone.
> I couldn't disagree more. As a society (and this goes from a community to a global scale) we should make it a priority to give everyone the resources to meet their maximum potential. I don't mean that we should give everyone a million dollars to invest of their own. What I mean is that we should ensure that everyone gets provided with a good education and food/water/shelter, etc.
Although I totally agree with this, individuality also plays a big role in development. The unfairness for someone is the good luck of another one thanks to his parents or grandparents. All conditions been equal, individuality will always makes society unequal. I think we should at least guarantee a worthy life to everyone.
But then what you do with someone that can't make a living but don't want to get educated? If you give him enough to live, he will still be a second class citizen.
You are totally ignoring the crux of his argument, which is centered on ownership; how we decide who owns what, how we tax owned things versus earned-through-work things, and how we tax the things people do with what they own.
Yes, a piece of property earns rent because it has 'value' to someone else; however, who gets to earn that value? At some point, this piece of land was 'unowned', and then someone came along and said 'I own this'. Do we let them keep that forever? Do they have to pay society a fee for being able to claim it as their own? Can they give it to their kids for perpetuity? Can they do anything they want with it? What about the air above it, or the ground below?
These are all very important questions, and there isn't some 'true' moral answer to them that is the right way to govern property rights. There are easier moral arguments to make about ownership of property I produce, but not about land or natural resources.
There aren't many people earning money as rentiers of unimproved land. But it turns out that people are much more willing to make improvements when they have secure title to the land.
But who gets to rent out the apartment building? Well, the one who put an apartment building there, that's who. Why should anyone else get to?
In many places, unimproved land has a TON of value. In those places, in fact, many people buy a home just to tear it down and rebuild on the lot. They would pay MORE if the house wasn't there. There is a reason the saying in real estate is 'location, location, location' and not 'build quality, build quality, build quality'. The reason you can buy much larger homes for less money in other parts of the country isn't because the building materials or labor are cheaper, but because the land itself is cheaper.
Now, I am not saying that the building itself doesn't have value, or that the person who built and owns the building shouldn't be compensated for that investment and work, but it is disingenuous to pretend that the majority of the value is from the building and not the land itself (at least for most places where rent is high)
I am not in any way, shape, or form arguing that we should seize all private property in some kind of communist revolution; I am simply saying we need to think about how we divide up the value of something like real estate to fairly compensate and encourage development without promoting unfair and ineffecient rent seeking.
Just as a note for those unfamiliar, there's a whole economic philosophy around the idea of utilizing land rents (and also all other rents) for public goods: Georgism.[0]
>Do they have to pay society a fee for being able to claim it as their own?
In most areas, yes. There is a property tax that is charged as a percentage of the land's value. If the owner fails to pay this fee to society, society revokes his ownership, forcefully seizes the land if necessary, and resells the property to another person who is willing to pay the imposed fee.
One problem with property taxes is that they do not capture the ability (or inability) of the property to generate income - basically, whether and to what extent it is capital.
We also do have taxes on income produced by capital - that's capital gains - but, as the article points out, we tax them significantly lower than regular sweat-of-the-brow income, and offer more loopholes. In effect, our economic system incentivizes rent-seeking over labor.
The world "value" is always confusing. Oprah Winfrey is a billionaire presumably because she is valued for her ability to interview people (she basically talks into a microphone for large sums of money). If she left society and shacked up in the woods tomorrow it wouldn't impact my life in the least. On the other hand, my garbage pickup person does harder work and makes a lot less, but if there was a garbage collector strike I would not be happy. I value my garbage collector more than Oprah Winfrey and I would assume the average citizen does as well.
Using the phrase "They provide more value" as an umbrella phrase for why people get rich is understandable, but something just doesn't seem quite right about it.
The average citizen values YOUR garbage collector far less than they value Oprah.
They value their own, certainly, but that value is reflected by the enormous sums we collectively pay to have our garbage removed. The garbage industry is worth a lot more than Oprah.
You also pay (indirectly) your garbage worker a lot more than you pay (indirectly) Oprah, so things might be working out closer to how you value them than you'd expect.
I still can't get my head around the logic that a garbage collector gets paid next to nothing relative to someone who is paid millions to talk into a microphone and the reasoning is that the latter "provides more value". "They provide more value" just seems like a very partial catch phrase to make this all look less absurd than it actually is.
I think the difference is Oprah provides a little value to a lot of people (whether it be therapeutic, entertainment or what have you). Collectively, she is providing a lot more "value" because of the platform and distribution she has achieved. Your garbage collector provides great value to you, but no value to the grand majority of people.
My point was that each garbage collector is more valuable to the person paying for them than Oprah Winfrey is, but Oprah makes hundreds of millions of dollars and the garbage collector makes a typical wage. I understand the reasoning that Oprah provides a little value that is distributed to a lot of people and that the garbage industry in its totality is more valuable than Oprah. With all that, I still think it's a bit of a partial way to summarize whatever is happening here - and something about it just seems misleading. Then again, maybe I just think societies values and priorities are bizarre.
If millions of people each like Oprah enough to give her a dollar, she makes millions.
(pardon the napkin math) If you live in a town of, say, 25k people and your town has 10 garbage collectors (napkin math: each pair covers 1000 people's trash every weekday) each earning minimum wage 15k/year (if it takes 1min to pick up trash for an average household of 2, we get just over the standard 2k work-hour year. To me this sounds like fast operation and low house size. But the low end of the trash costs demonstrates the point), then each person in town is paying $6 to their garbage collectors. Even more considering benefits and non-labor costs. If healthcare, garbage truck maintenance and, I dunno, landfill fees (are those a thing?) cost the city a mere 100k/year, every person is paying $10 for garbage collection.
So in the napkin scenario, for each individual, garbage collectors are valued at 10x what Oprah is. And that's with all my napkin math assumptions choosing the lowest costs. Plausible scenarios could go as high as 100x individual value for garbage collection over Oprah mic talking. But Oprah can do her less-individually-important job for 1000x more people. It's an issue of reach.
She delivers less (absolute) value per person, but because of the way the business model works, she can reach more people.
If I build a local website and sell access to it for $10 in, say, Monaco (population: approx. 38,000 people) then I'll be making less money in comparison to the same situation but where the entire US is the market for said website.
The sewer treatment plant workers don't matter to me, unless I'm living in the town where this stuff is going down. If I'm not however, those workers have zero value to me.
@tqi So when you get down to the numbers and the prevalent value assumptions we all have, Oprah Winfrey (one person) provides more value to the country than 2/3's of the nations garbage collection workers. Even though that is apparently what the numbers say, I can't help but believe it is divorced from reality in terms of practical day-to-day life.
In other words, if the average person was forced to choose to either "get rid of" Oprah Winfrey or 2/3's of the countries garbage collection workers, which one would the average person pick?
*edited
You could easily replace Oprah with some other person. I am simply using her as an example because she is wealthy, popular and her creative output isn't easily quantifiable the way someone like Bill Gates might be.
Y'all're getting way too hung up on the colloquial connotations of "value" here. It's descriptive, not normative.
This is marginal value, the stuff that someone would give up in order to have one more of a thing.
A celebrity often makes money because, for whatever reason, nobody can easily and reliably produce an equivalent one on demand.
Folks working for wages in less-glamorous positions are doing valuable things for society, but fundamentally their pay is based on how easily society could replace them.
I never said Oprah Doesn't provide more value than one garbage man. I am saying that I don't understand how a task that is literally needed for society to function is less valuable than one that is negligible for society to function and I don't understand why the person who does the more needed task is paid less than the person who does the negligible task. It's really a philosophical question about values but I think entertaining it is more elaborate than a simple catch phrase. Also hierarchy of needs vs wants etc all come into play.
And you are guessing wrong. From what I've read she is probably one of the better people I would like to see in the role if "Billionaire"
I'm late here, but it's simple supply and demand. How much are you willing to pay to have your trash taken out? I'm guessing you won't pay 100k a year for yours. Someone will come and do it for far less. If nobody was willing to do it for less than 100k per house, you know what would happen? No, society wouldn't cease to function. People would take their own trash out. It's not hard, so it simply isn't worth billions of dollars.
I live in the middle of nowhere, don't have trash service, so I used to take it to the dump myself. Then my dad retired, and now I pay him a few bucks a month to take mine when he takes his. If this wasn't an option, I'd go back to doing it myself. This is why your local garbage man doesn't make as much money as Oprah. It's simple math and econ 101 supply and demand.
> I don't understand why the person who does the more needed task is paid less than the person who does the negligible task.
If your garbage man cost the community $80k per year, there would probably be 100 other dudes, all just as good at collecting refuse, offering to take his job and only charge $50k. That doesn't mean the disposal of all that waste disposal is not worth $80k (or $250k) to the community, but competition allows the community to pay less than the value it places on the service.
I bet there are also 1000 people lining up to underbid Oprah on whatever deals it is she is making with her partners(broadcast networks? advertisers?). But none of those people will attract nearly as many eyeballs. From the partner's perspective, it's simply a matter of choosing which TV personality will bring the most revenue (over and above their fee), and that's Oprah.
People are a disparate group and their needs matter only in proportion to their wealth. Something can provide negative value for a million people and be extremely valuable to bill gates and earn a lot of money.
The reason is that Oprah operates in what's called a "winner take all market". There are thousands of baristas, servers, and (probably) garbage collectors with failed dreams of stardom in Hollywood, etc. But you don't hear about them.
Garbage collecting is not winner take all. No single garbage collector can corner the market because the role doesn't require unique talent in the same way that being a famous talk show host does. Oprah's value is her unique personality, brand, style, mannerisms, business savvy, etc rather than any sort of utility (like removing up your rotting trash) that she may or may not provide.
Many people kind of happy produces a higher area under the curve than a few people really happy. Watching Oprah makes many people kind of happy. Your garbage collector every day makes you and the people on your block very happy (or relieved).
* Value is not just the price that someone pays for something. If I give a homeless person a laptop for free, that homeless person is receiving value despite it not being a non-monetary transaction. Garbage men are very valuable, but the full monetary amount of that value isn't necessarily paid for.
* It's possible that garbage collectors as a whole create more "value" than Oprah Winfrey. The difference is that the value created by garbage collectors is dispersed amongst millions of garbagemen and other people, while Oprah Winfrey gets to keep most of her value.
* There's an oversupply of people willing and able to pick up garbage relative to the supply of jobs. This puts downward pressure on the wages, ensuring that the compensation for their work is less than the true value generated.
To be [un]fair, these days Oprah makes a bit more money by apportioning time on her OWN media platform for other people to sell woo-woo lifestyle products. She's going to make more money from that than she ever did by appearing on camera personally. If she withdrew from society tomorrow, the people she left running her channel would still be doing work on behalf of the business, and would still be sending her checks.
She can't appear on camera 24-7, but that media empire she now owns chugs along even while she sleeps. That's why owners win.
Your garbage pickup person doesn't even own the route they clear. They can be replaced at the drop of a hat by someone else, or by a semi-automated garbage truck. They cannot effectively capture the value they do create. The guy who "owns" the routes via their contracts with the municipal/county council is the one that can suck most of that up.
It isn't those who create value that get rich, but those who can best capture created value.
I'll echo the disagreement of some other posters: despite your good intentions, your post misses the point of the article entirely and focuses on one specific thing that's only tangentially relevant.
The point being made that the rentier class, usually applauded for their success, in many cases does not take the risks so widely ascribed to it, and creates wealth for select few beneficiaries simply by having more wealth.
Surely you will agree that in a given locale, the amount of land is a fixed amount. A single entity is able to extract more value from land simply by denying others use of it, which is of dubious value to the society at large. I won't go so far as to declare property = theft, but you can't help but wonder about the negative externalities of a few parties owning the vast majority of land and developments in a given area.
Without ill intentions, people are forced to pay rent, allowing the rentier class to accumulate more and more wealth by simply doing nothing. This is in contrast to innovative companies that provide real value to customers and create wealth for all involved (e.g. a farmer buying a piece of machinery to produce more food)
The article is mainly about a subset of capitalism where money is produced for the owner class without the tangible value exchange for the people from whom that money is extracted, and about how surprisingly well it scales.
If they literally are "stuck" . Here we get into a nasty debate about spectrum of probability vs effort and the multipliers that should be reachable by end of life.
I definitely agree that a 0 probability despite maximum effort is unfair. In between is a grey area though.
Effort is irrelevant though, if they spend their effort on something that could never succeed or is useless or irrelevant to the market then their effort should obviously fail and it is not unfair. So it matters a lot what they choose to apply effort to. Generally life is an IQ test and rewards those who make optimal choices WRT events in their life.
> Generally life is an IQ test and rewards those who make optimal choices WRT events in their life.
Do you think that if you'd been born in a slum you would have a decent chance of winning in the IQ test & optimal choice events in your life? I would imagine that almost anyone reading these comments has been unbelievably fortunate to be born into relatively wealthy circumstances & had things like "books" around to help bolster their IQ.
That is completely untrue. When researchers have actually taken the time to do IQ testing in poor communities, they find a similar distribution of high and low IQ's as in the general population. There are a lot of 130 IQ people living in the slums.
Americans went from riches to soup lines (living in slums/squalor) over various periods of time. Though their IQ did not vary over that same time period.
A strong signal IQ is not, maybe a nice tailwind, but that doesn't help much if you are born in the bogs.
When you get to the bottom of this kind of thinking, there's always some form of a just world fallacy. Despite the fact that the wealthy engineer circumstances to keep the poor in their diminished condition for their own profit, it's never "unfair" because of this foundational error. See also programmers thinking they're "highly paid" despite years of collusion by tech giants to reduce their salaries and capital owners eroding what they do earn through rent-seeking real estate investments.
The term "rent" in the phrase "rent-seeking" has nothing to do with the meaning of the term "rent" as payment pursuant to a lease.
Rather, the phrase rent-seeking refers to seeking money without actually providing any economic value. It would be more accurate to view such payments as taxes (often levied by a private entity). Adam Smith categorizes income into profit, wages, and rent. Rent-seeking refers to the last one of these.
In a traditional residential lease, the landlord is responsible for the maintenance and upkeep of the property along with property taxes and, sometimes, some of the utility payments. Residential rent is based upon the value of the property as a residence, along with maintenance, taxes, etc that the landlord is responsible for. The income the landlord receive, according to Adam Smith's classification, is profit rather than rent.
Capital owners typically receive profit by controlling profitable assets such as stocks, bonds, and real estate.
I might be misunderstanding, but it seems like the landlord's income would include economic rent as well as profit by this definition.
You might imagine a residential lease where you agree to perform maintenance and upkeep and pay property taxes in return for a reduction in the lease cost. But this wouldn't reduce your lease cost to $0 - you're still paying for the privilege of being allowed to live there, so doesn't this fall under the traditional definition of "economic rent"?
>Despite the fact that the wealthy engineer circumstances to keep the poor in their diminished condition for their own profit
Is there anything specifically you think the author has done to "keep the poor in their diminished condition"? Or is the act of owning rental property oppressing? What should the author do in his circumstance? He could stop investing in rental property, but would his investment in other areas be oppressive? Should he quit teaching rich people in Qatar so that he doesn't earn enough to engage in investments?
> Low placed people may not be able to "work" their way to upper echelons, but they can invent, intuit or otherwise create high value leverage of their's and others' work.
How would you suggest slave-labor in Qatar, who's lives are literally disposable to our global society, create this leverage? [serious]
Slaves have frequently been among the most high-status, most powerful people in their society.
The slave who manages an important man's affairs is himself an important man.
Concubines frequently wield power through their well-placed lovers. At the historical extreme, Wu Zetian was a concubine who worked her way up to being formally crowned emperor.
The Mamluk Turks were slaves. This didn't stop them from taking control of the government and even enacting a requirement that the Sultan be a Mamluk (children of Mamluks, not being slaves, were not eligible).
Chinese eunuchs were also slaves, and also took control of the government on multiple occasions.
These are, IMO, exceptions. Most slaves probably got worked half to death, beaten, and generally abused. Certainly history tells us that many slaves simply died en route from where they were captured. I can't prove this, but it's much more likely than the fate of high-status slaves.
That varies depending on time and place. There were islands in the Caribbean (IIRC) where slaves had a life expectancy of 3 years after arriving from Africa. After importations of slaves were banned, but slavery was not outlawed, the slave population was shrinking. Births could not keep up with deaths. Though, tbf, some of what I read about that surmised that slaves had to be using some form of birth control as well (as a form of protest to the brutal conditions).
Yes, I suppose so. That probably falls under "Never attribute to malice what can be explained by stupidity."
Sorry, I wasn't looking to shoot you down. I read some very interesting research into this some years ago and I basically participate here to get some chance to talk with people.
I was under the impression I was responding to the question
>> How have slaves ever historically created leverage?
They do it in all of the ways that other people do.
> Because what you just wrote sounds an awful [lot?] like a defence of slavery.
I will note that in another thread from today, https://news.ycombinator.com/item?id=14651019, you can see people speaking with approval of a company that funds training for its employees with a provision that, should they leave the company within a longish period of getting the training, they owe a large lump sum to repay the training costs. This differs in no way from a traditional contract of slavery, under which, if you want to leave your current employer, you must pay them a large lump sum.
Owing someone money if you stop working for them is in no way equivalent to being required to pay them money in order to be allowed to stop working for them.
We don't say someone who has taken out a loan is a slave to their lender. And giving that person the option to pay that loan off more efficiently via labour doesn't make it slavery.
Market economies don't function on value but on price.
There are plenty of high-value activities that go undervalued -- a general class of these are termed public goods. There's also the confusion of financial value with economic value.
If a good cannot either capture the value it creates (nonrivalousness, non-excludability), or if it creates economic value, but not to a class of direct users who have what Adam Smith called "expressed demand", that is, discretionary or available liquidity, then it produces no financial value, and, in a market system, is underprovisioned.
At the micro level, your decisionmaking is going to be determined by financial aspects. At a macro level, we should focus far more on overall economic value. Alternatively, structuring the micro world to reflect the macro more appropriately (basic income, employer of last resort, generalised support of public goods) might work.
>There are plenty of high-value activities that go undervalued
I think given the distinction you're making, it would be better to say these activities are underpriced.
But I agree with your point. Far too many proponents of capitalism seem to believe the economy is somehow inherently fair because all prices reflect utility creation.
Another factor here is that demand is distorted by wealth. Things that provide value to rich people will be priced higher than things that provide equivalent value to poor people. A yacht seems unlikely to be as valuable to its individual owner as an equivalently priced amount of food is to many different people.
"Underrewarded" would probably be better wording, though "priced" fits with the terminology I've used elsewhere (I try to be consistent, I'm not always).
Some of these are underpriced, in the sense that the price doesn't repay the contribution.
Some are overpriced, in the sense that those who would benefit highly from access cannot afford them. (Though that might also be considered an inssuficient provision of income or spending power.)
The overall outcome is that a resource allocation which would improve net social common weal isn't made, that is, the goods or services are underprovisioned as a whole.
This echoes a lot of the same sentiments that Paul Graham puts forth in his essay "How to Make Wealth"[1].
Basically, the claim is "money is not wealth" (or as put above, money is not value). Money is a tool, used for three things:
1. making it easy to trade if you can't barter (i.e., be a medium of exchange)
2. store wealth (i.e., store value)
3. measure wealth (i.e., be a unit of account)
Wealth on the other hand deals with actually making the economy better off. Creating a startup that makes widgets faster and cheaper then ships them out over the interwebs moves the needle forward. Both of these scenarios create wealth.
I think there's still an argument to be made over the apparent inequality between how much work is required to create a certain amount of wealth. And certainly, owning wealth while doing no work is another story entirely.
> A glass of water provided at the right time in a desert is invaluable and thus expensive.
If you travel a real desert, you'll realize that water is always offered for free[1] to people in need. As is bread. And that is the very idea of basic income: Provide essentials for free.
[1] Disclaimer: I did about 20k miles by car in Western Sahara and the south of Morocco in the last 4 years.
And what happens if a thousand people show up and there is not enough of that limited resource in the desert for all of them?
We live on a planet of finite resources, without controlling the number of people drawing from said resources you will over load the system, this and human nature are fundamental issues with the idea of Universal Basic Income
> And what happens if a thousand people show up and there is not enough of that limited resource in the desert for all of them?
By the time water and bread are this rare you have long stopped thinking in economic terms, armed yourself and probably got killed. If it is a temporary outage, you can count on people to help each other.
> Without controlling the number of people drawing from said resources you will over load the system
From an economic point of view we don't have to worry about food and water, just about its distribution.
Realizing that I'm going halfway Godwin on you here: "Controlling the number of people drawing from said resources" is a very.. weird thing to say when the resources in question are water and bread.
You are over-generalizing the "basic necessities/basic income" to "resources". People who only have their "basic income" won't be able to purchase rare resources, they just won't have to worry about a roof over their head, water and bread. Why does everyone assume that people don't want more? You want to go on a holiday? You work. You want that bigger TV, a car or just a new game? You work.
>Realizing that I'm going halfway Godwin on you here: "Controlling the number of people drawing from said resources" is a very.. weird thing to say when the resources in question are water and bread.
That's an asinine assumption, UBI is never restricted to simply bread and water, you ignore the reality that UBI is free to be used, however. Arguing for a basic sustenance program is entirely different than UBI models.
No reason to bother delving deeper into demographic issues
The problem is for a lot of people, they'd need something more like a 10x multiplier or more. (Eg the folks he references trapped working as cheap labor that can't even leave without the company's permission, who likely can't even afford travel).
for the record I'm speaking of a "Real" multiplier (taking in account inflation / standard of living) . IMO if every generation is 2x-ing their parent's lifestyle, its nearly instantaneous wealth in the scale of humanity.
In the developed world today's poor live like kings of old. In 1000 yrs I would imagine that their poor will live better than our wealthy "Playboys" of today. I see nothing wrong with people being in different places, so long as they have the ability to better their circumstances.
The ability (and actuality) of improving circumstances is more or less happiness, happy lives are definitionally worth living.
Poor people in the developed world do NOT live like kings of old. They have bosses. They struggle to find mates. They live in small, impermanent homes with no land of their own. They tend to be in debt, and don't even understand how permanent that debt will be for them. They're socially at the bottom.
This is nothing like a king, who could have a large family, and was well fed, had permanent shelter, didn't pay rent, etc etc. How ridiculous.
You are mixing social class with quality of life. Despite being at at the top of the social pyramid, kings of the past did not have many things that most of today's poor (in the US) do, like electricity, running water, air con, motor vehicles, antibiotics, the Internet etc.
Because they are strongly tied; we are social animals. Are you saying for millions of years, our ancestors on average had lower quality of life than the developed world's poor?
It turns out electricity, air con, motor vehicles, and the internet are not the source of happiness, as much as advertising would like us to think otherwise. I bet your average homeless person in America would happily trade for a life in time past if it meant family, community, offspring, and the like. So much of our work today is meaningless, the same can't be said for our evolutionary history as apex predators.
Along many facets, yes, life is much better. But let's not pretend that we haven't regressed in many ways, for much of the population on Earth.
I'm measuring quality of life in terms of Maslow's hierarchy of needs here. For most of recorded history, the poor often lacked the absolute basics like water, food, clothing and/or shelter, and they continue to do so in many parts of the world. But in the developed world, these problems are largely solved, and issues of social belonging -- Maslow's third layer and above -- come to the fore.
The New Republic has a pithy way of putting this: money doesn't buy happiness, but poverty increases sadness. In other words, you may not be happy just because you have 3 square meals a day and a roof over your head, but you would be a lot less happy if you didn't.
80% of the hierarchy of needs is immaterial, so at best your argument is weak. In many cases people will actually sacrifice physiological needs to fulfill the spiritual, intellectual and social ones (flipping the need pyramid)
Quite a few poor people still die from not having medical attention where a king would almost always have a personal physician at his side - a king of old would have a much higher chance of survival from a wound that would kill a modern poor person who couldn't afford medical care.
I don't think you can prove that assertion. The personal physician to the King of Olde would not know about Germ Theory, nor about the importance of basic hygiene and cleanliness. A modern poor person at least has a chance to learn about such things, and there is a significant number of people who provide medical care for free to those in need.
i agree that improving your circumstances is the best thing.
i also dont dismiss standard of living arguments, i think they are valid. but i think they aren't the whole picture. i think alot of how we feel depends on how we compare to those around us. 100 thirsty people in a desert are much more pissed off if you add 1 person with excess water standing right next to them not giving them any. so, some consideration to the overall shape of the distribution of wealth is necessary in my opinion.
> 100 thirsty people in a desert are much more pissed off if you add 1 person with excess water
The analogy isn't entirely correct. If the thirsty people got all the water they could drink and a guy joined that owned a lake... They shouldn't really complain.
It's literally better for everyone, even if the wealth distribution is worse.
>instead I want to ensure they have some mobility so that they can always better their situation
and tis is why I feel that there is an active oppression of access to quality education. The sentiment you share above is NOT shared by MANY and likely most of the deca-billionaire class...
Keeping people stupid has value to those who would benefit from stupidity (governments, institutions, corporations and entrenched wealth) -- thus platitudes and "foundations" with very very slow if any progressive impact are the true status quo...
The trick is to keep people holding themselves down by providing them the baggage to keep their minds off the unlimited and focused on the limitations.
this seems thoughtful, but there are some absolutes that get in the way of this relativistic argument. one is that people who are really poor cant eat enough, and die sooner. to me, it is unfair that you would have a shorter life because you are not born into wealth.
Wow I am astounded that all the comments so far are trying to tear down this person and what he is saying, and very transparently because there seems to be something threatening about this idea that he got where he has through luck. Why do people find this idea so threatening?
I got where I am today due to luck. I did work hard. But I know other people who work hard too. Who are just as capable. They just didn't get assigned to the class with the really awesome, motivating teacher. Or randomly picked out of the pile by a recruiter for a call. Or happen to wind up working somewhere where they made friends with a guy who was well connected. Etc.
To discount luck's role in how people get successful is a huge blind spot.
>To discount luck's role in how people get successful is a huge blind spot.
That's the fantasy of meritocracy, fulfilling itself. When someone thinks that gold coins spray from their asshole every time they update a Git repo, they can comfortably presume their role is paramount in the value created. Of course, every library linked, every bit of infrastructure required, every calorie of energy delivered, every man-year of education needed by users - this all disappears in a cloud of self-regard.
And being "capable" in the first place is largely due to luck also. What is being "capable?" Intelligence, education, discipline, motivation? Intelligence is largely genetics and your socioeconomic status as a child. Education? Intelligence plus socioeconomic status as a child and young adult. And a fair bit of luck too (i.e., admissions, etc.). Discipline? Parent's socioeconomic status and probably some genetic/psych/environmental influences. Point being, just being capable of being "capable" has much to do with things outside of your control. Most are unaware or dismissive of this. Goes back to the old adage of being born on third base and congratulating yourself for hitting a home run.
Because outside of winning the lottery it isn't 100% luck that results in haves vs have-nots. There is a degree of luck involved, but there is also preparation and opportunism (aka making your own luck). True universal basic income completely ignores this aspect, as does absolutist critiques of the rentier system we have today. Is it fucked up that a line arbitrarily drawn in the sand resulted in the division into piss-poor and uber-wealthy? Yes, but that's a ridiculous over simplification and it's not obvious that the solution is to socialize the distribution of wealth. That is communism by another name and I don't recall that working out very well for anybody in the 20th century.
... As an owner I wish this were true. For me and most owners I know work is mandatory, and its 60 hour weeks and a lot of sleepless nights. There is no safety net. There is no unemployment. I get no workman's compensation. I have no employment law protections. Its, as one HN comment said some time ago, "a suffering contest" a lot of the time.
"2. ...your stuff will keep on making money forever."
... Again, I wish this were true. Lifetime income producing investments are hard to find where volatility, fees, inflation, taxes and life's circumstances don't erode value. Sure, the truly wealthy are set. But most business owners are not truly wealthy, and the exit strategies just aren't there in many industries.
"3. We can get entrepreneurship without the enormous rewards to ownership we have today"
... Anyone whose dealt with the day-to-day grind of owning a business would be especially offended by this comment. A firehose of pain, suffering and risk flows to the owner in the form of litigation, regulators, employees, vendors, customers, bank officers, etc., etc. I've equated it to a "lazy susan" dispensing aggravation in every conceivable form. Its the reward - if you can get it - that makes it worthwhile. Try just getting divorced as an owner and you become an instant convert to rewarding ownership.
Yes, rent-seeking monopolies are bad. Yes, more needs to be done to create opportunities for wealth creation by employees - to give them the freedom to say "no". No, punishing ownership isn't the answer.
UPDATE x2: I'm really not confusing types of owners. The author's thesis is broad not only in the article, but in his works in general. Access to passive income investments (eg. REIT's) is among the few places small business owners can go to rent-seek. Rent seeking is bad under a few sets of conditions but doesn't deserve author's indictment.
You're conflating two different roles: owner and operator. While many owners, particularly of smaller businesses, wear both hats, your responses to points (1) and (3) arise out of wearing the operator hat, not the owner hat.
For the companies that comprise most of the economy (less than half of U.S. GDP is attributable to small businesses), ownership and operatorship are distinct roles. The CEO of GE is not the company's owner; the shareholders who own GE don't face the travails of operating it.
US small businesses, collectively, are the largest employer of US citizens, especially at the margins of society where the author's "right to say no" is at its weakest. Its these small businesses, trying to accumulate wealth through property rights and rent-seeking, that would be disproportionately impacted were the author's philosophy to be adopted.
I think OP is not talking about the kind of owners you're thinking of. "Owner" of a startup, or "Owner" of a unvested equity package etc. are not his intended group.
I think its more like people who can easily meet their needs/wants even while holding something like a dividend fund or w/e. Owner of sufficient passive income assets that any extra effort or income or ROI is only gravy.
You are mixing together business owners and rentiers (property owners). Very different things. Property owners don't need to work 60-hour weeks unless they are the sole handyman for 100+ houses.
A lot of work goes into property ownership. There is an entire industry that exists to relieve property owners of that burden: property management companies.
The tradeoff is that if you use a property management company, most of the profit from your properties flows to them, because they don't work for free. There is also a non-negligible risk involved in moving your control of your assets over to a barely-interested third party.
Truly passive income is rare, and it always involves a dollar-and-cents tradeoff in how much profit and oversight you're willing to forfeit to others in exchange for open time.
Very few people are Scrooge McDucks with all the time in the world to swim around in a vault full of gold coins, and of those rare people who could, even fewer actually find that to be a worthwhile use of their time.
The key takeaway here is that everyone has got their problems and concerns, and in this competitive world, it is naive to assume that anyone can maintain their position without significant effort.
Sure, but the $/hour return is much higher that the average job. 'A lot' isn't a good quantifier. I bet the same people who live in the house he rents work a lot more for a lot less money.
>Very few people are Scrooge McDucks with all the time in the world to swim around in a vault full of gold coins
True, but there are a lot more people who comfortably live off money their investments and properties make. This isn't about the 1%.
>The key takeaway here is that everyone has got their problems and concerns, and in this competitive world, it is naive to assume that anyone can maintain their position without significant effort.
Key takeaway from where? The author point still stands. The takeway from the article is that people don't get paid according to their hardwork, rather it is a lot of luck.
It is naive to assume anyone can maintain their position without significant effort, sure. But it is also naive to declare that without knowing for certain. I personally know people who work less than hour a week and make as much as the average software engineer in the US.
Sidenote:
This whole thread is sad to read. Most comments take a single part of the article then start to bash the author or question the validity of his thesis. Many on here didn't even bother to read the article properly, which I assume the topmost parent of this comment chain is also a part of.
Life isn't fair, and many people have trouble with coping with that fact. I just didn't think HN would have trouble with that too.
Okay, so research the author to better understand the context. He rejects the Hobbesian ideal that a social contract, enforced by a central power, provides critical scaffolding upon which wealth and prosperity can exist in a society. On this point he confuses the existence of Hobbes Leviathan, with how and where that power is applied. Removing property rights isn't just unrealistic, it doesn't work where its been applied.
The author also advocates for the employee's "right to say no". On this point I agree, in that employees should be able to accumulate wealth and have options. There should not be a one-way street.
No one is advocating for removal of property rights, sheesh. The author is pointing out the realities of life today, and I'm just surprised how you tend to bring in these complexities to divert such a simple point.
The many ideas that people had a couple centuries ago don't hold up so well anymore. The population of the world when the book you refer to was published (17 century) was 8% of what it is currently. Resource utilization was a fraction of what it is today.
Today natural resources are dwindling and powerful people are quicker than ever at capturing anything of value. There is an imbalance in what one can do with their best efforts today, and that's not fair.
Acknowledging the faults in our current society is a better path to take rather than advocating for the arguments put forward by someone who probably couldn't fathom today's world.
Property management companies do not take the majority of the profit. They often work for marginal fees based on the unit itself - somewhere around 10% of yearly rent. On top of that are fees for the maintenance of the building. Depending on how you bought the place you may need to pay financing -- or not. The rest is pure gravy.
And that's just the rent. Next you also need to take into account the appreciation of the underlying asset - the land the property is built on. This is where the majority of the profits from home ownership come from.
A lot of work goes into property ownership. It's just not very expensive.
I'm not mixing anything together. The intellectual property, real property or personal property you are referring to is the product of all the risks and costs I'm talking about. And, the rent-seeking from that property is the reward. And, that rent-seeking is very much taxed, contrary to the author's contention, at multiple levels and in many ways.
>intellectual property, real property or personal property you are referring to is the product of all the risks and costs I'm talking about
What? I'm sorry but that went straight over my head. You said
>... As an owner I wish this were true. For me and most owners I know work is mandatory, and its 60 hour weeks and a lot of sleepless nights. There is no safety net. There is no unemployment. I get no workman's compensation. I have no employment law protections. Its, as one HN comment said some time ago, "a suffering contest" a lot of the time.
Which looks very much like something a startup owner, or atleast a new business owner would say. I can assure you a property owner will sing a very different tune.
>And, that rent-seeking is very much taxed, contrary to the author's contention, at multiple levels and in many ways.
The author didn't deny that. He just said how he was re-investing the income therefore isn't going to get taxed on the rent. This again tells me that you didn't read the article properly.
Owning real estate means that your income is market rent - carrying cost - amortized capital expenses.
My coworker owns about a dozen 2-4 family properties and spends about 10 hours a week on them. Most tenants are section 8, which means he's paid on time by the government and gets above market rate for marginal property. He probably nets around $250k.
> UPDATE: I'm really not confusing types of owners. The author's thesis is broad not only in the article, but in his works in general.
I totally agree with your points, but only when talking about the traditional/entrepreneurial sense of "business owner." The article is talking more about owning equity in a business, whether that's real estate (which is his example), or just investing in businesses. He even explicitly states that:
> Owners do not have to be entrepreneurs. They don’t even have to be competent. They can hire competent people to manage their money for them. The amount of 'entrepreneurship' in my story was miniscule.
In other words, if you're very wealthy, you can invest in diversified REITs and have exposure to the real estate market. You do not (and cannot, really) work on these projects, and your investments -- ownership of real estate through REITs -- will keep making money. That's not to say it's without risk, of course: the market could crash, the funds could fail to return on investment, the business could collapse.
Again, I think that for the HN crowd, your critiques are totally valid and I agree 100%. I just think this article is more about "hey, if you're really wealthy, your money can work for you!"
I think there's a huge difference between an owner of a small company and a majority owner in a major corporation or that a CEO of said major corporation. The former has little, if any, support beyond a small circle of friends, associates, and business partners. The latter has an entire tax system setup to let them fail and come up smelling like roses. Not to mention the latter has many more options and seem to be rewarded by stockholders for failing (aka golden parachute).
You are wrong. The author is very much concerned about the employer-employee relationship. Not only did I read the article, I also read the OPs bio and glanced at his philosophy toward property rights. He appears to have come to the conclusion that the social contract isn't really beneficial, and that Hobbes state of nature isn't a thing, and that left to their own devices - people's better angels will bring about higher social equality.
Consider that land prices (and therefore rents) basically reflect the surrounding economy. By buying land you are essentially profiting from the work of everyone else in that economy, forever, and only taxed minuscule property taxes.
IMHO https://en.wikipedia.org/wiki/Henry_George had the correct solution; tax land (though not the structures developed on it) at it's full market rental value. And the concept should apply to ownership in all resources.
> My first big lucky break happened in 2009 when Georgetown University hired me as a philosophy professor on their campus in Qatar
Apparently going to high school, studying and passing the SAT, applying and being accepted into university, studying, passing, and graduating university is just luck.
Have we we reached peak luck yet? Is there nothing ever we can do to improve our circumstances and our lives?
This is like a new age of economic predestination, where everything has been predecided for you by God and there's nothing you can do. Calvinist and BI proponents apparently have a lot in common.
Being born into circumstances that even enable you to accomplish all of the above definitely falls into the category of luck, in my opinion.
Eg if you're born to wealthier parents, you likely have more time in the evenings/weekends to study, which makes all of the above easier than say, if you were born to a poorer family and had to work 20-40 hours / week to contribute to your family's income.
Next, being born with the right genetics that enable a natural talent/ability to understand a particular area well enough to get through all of that education and into a good job, is also a form of luck.
Sure there's a level of discipline and effort required to get there even when you've got all of the "luck" - but part of the article's point is that there are certain people that are born into certain situations which they can literally never raise themselves out of (without some kind of very very good luck).
"My first big lucky break happened in 2009 when Georgetown University hired me as a philosophy professor on their campus in Qatar
'Apparently going to high school, studying and passing the SAT, applying and being accepted into university, studying, passing, and graduating university is just luck.'"
let's finish the paragraph, shall we:
"My first big lucky break happened in 2009 when Georgetown University hired me as a philosophy professor on their campus in Qatar. Georgetown-Qatar, which is funded entirely by the Qatar government, has to pay an enormous premium to get faculty to agree to live and work in Qatar. I get paid three times as much as my wife. I teach half as many classes. She’s a full professor. I’m only an associate."
hey, quite a lot of people go to high school, pass their sats, get into a university and earn a degree, but almost none of them are offered a professorship in qatar, where they earn three times as much for half the work. quite a fortuitous circumstance, and one which wasn't in control of the author. so, luck.
> applying and being accepted into university, studying, passing, and graduating university
Perhaps he is lucky enough to have parents that could afford college for him so he could invest in property rather than "invest" at getting to a $0 debt level.
It's also luck that the university exists in the first place. The system we exist in has build infrastructure for people to better themselves, and to turn around after earning millions of dollars and say "I did this all by myself" is disingenuous (or at the very least, incredibly ignorant).
I'd attribute most people's position in life to 5-10% "bootstraps" and 90-95% circumstances.
> Apparently going to high school, studying and passing the SAT, applying and being accepted into university, studying, passing, and graduating university is just luck.
some of that is the luck of being born in the right place.
also, many people did all that and still did not get hired at that place
> Apparently going to high school, studying and passing the SAT, applying and being accepted into university, studying, passing, and graduating university is just luck.
I genuinely thought you were sarcastic. Being born in circumstances that allow you to do that is luck, even in the developed world.
Well yes, I consider who your ancestors are as part of being lucky, as you don't do anything to deserve who your ancestors are. What would you call it?
Context and motivation. Being able to provide an experience for your descendents motivates you to act. Without that ability, there is no reason to do anything.
It's interesting to trace the evolution of Calvinism in the United States. There's an argument to be made that Calvinism minus the divinity of Christ equals modern liberalism and the liberal market economy. A lot of the same attitudes and practical programs carry over without the spiritual context [0].
On the subject of the article, I thought this was going to be someone with a large capital surplus providing a basic income to someone "unluckier" than them to argue the benefits of basic income, rather than advocating to increase taxes (but probably still not on them since he made a point of saying how he hardly pays any).
> Apparently going to high school, studying and passing the SAT, applying and being accepted into university, studying, passing, and graduating university is just luck.
Well all of those things do have a lot to do with what kind of opportunities in life you started out with. Look at the SAT [1] or college graduation rates [2].
> Is there nothing ever we can do to improve our circumstances and our lives?
I think this is a hyperbolic reading of of this article. Obviously the author knows they worked hard. They just know that they had opportunities which other hard working people didn't have. What's wrong with that?
> [in the US] people who don’t need their income are taxed less than people who do
I'm not American; I don't know the tax structure. But I can't even imagine that this could possibly be true, or what is true that is meant.
Without looking it up, I would assume that the USA subscribes to progressive taxation, under which the richer pay more tax in both absolute and relative terms.
Even if it has a flat rate of tax, (a structure, incidentally, that makes far more intuitive sense to me) the richer are still paying more tax in absolute terms, and equal in relative terms.
Different types of income at taxed at different rates. The US Federal Income tax is rather progressive, with those at the bottom paying a negative rate (so they get more back than they pay in) and the bottom 40% paying effectively 0%.
Taxes on investments, as this author is likely alluding to, are taxed at a different rate that can sometimes be lower than, say, someone in the top 20% is paying, even though the person earning the money through investments may be making millions and have a net worth of $1 billion. Warren Buffet posts his taxes each year, if you want to see a simple example of this. There are various arguments for and against this, but most of them are too simple and focus on the extremes. Overall though, this could be improved and optimized.
US taxes are weird (I think?) in that there are the posted rates, and then we all deduct lots of things (mortgage interest, charitable contributions, etc) and end up with an effective rate that is sometimes significantly lower.
Person A is a football player and makes $1 million in salary per year. This is all taxed progressively, meaning that Uncle Sam takes off 39.6% of most of his income. As a result, he pays close to $400k in taxes.
Person B is an investor. He invests in Applied Materials, and they have a very good year. His stock is now worth $1 million more than it was at the beginning of the year. Some of it, he sells - he's gotta eat, after all. That sold stock is taxed like income. Note that as long as he isn't living like a rockstar, he probably didn't sell enough to put him into the top tax bracket; he's just paying his expenses.
The remainder is taxed at about 20% - capital gains is taxed at a lower rate. Thus, because he can control how much of the stock he sells, Person B ends up paying somewhere around 60% of the tax that Person A pays.
This system screws over people who make most of their income through salary and benefits those who make most of their "income" through investments.
This description isn't quite right, though you're mostly in the right direction.
If you buy a share of stock (or any other asset) you don't pay any taxes until you sell it (or you die) and realize the income. That income is called a Capital Gain and is taxed either at Short Term or Long Term rates. Short Term gains (under 1 year) are (more or less) taxes just like regular income. Long Term gains (over 1 year) are taxed at a lower rate.
There are generally pretty good reasons for the different rates and the US is not at all unusual in this way. Virtually all countries have similar setups. The UK (where OP is from) does this.
It's also worth nothing since the blog author was talking about real estate that rent collected from residential real estate is NOT a capital gain, but is ordinary income.
It's even worse than you describe. For the part he doesn't sell, no taxes are owed on the capital gains. Only when capital gains are realised, are taxes owed. If he holds onto that stock forever he can keep compounding forever, without every being taxed.
Not always true about paying taxes - inherited assets are "bullet-vested" to the time of inheritance, with taxes only on increase in value after death.
> Well you also can't spend paper gains, you have to sell and therefore pay taxes.
Wealthy people don't have to spend their capital. They have enough income through e.g. dividends. E.g. Warren Buffett bought (through Berkshire Hathaway) Coca-Cola in 1989, and has never sold a single share. He has indicated he plans to keep holding on to them forever. Hence, he will never pay taxes on the capital gains.
> And you could, you know, lose money in the stock market.
It's not so much that it benefits people who get income from investments as protects them from inflation. If you hold on to something for ten years and sell it for the same amount in constant dollars, the tax you pay on the increase in actual dollars is really a wealth tax.
In the US income tax is progressive but only a portion of the tax structure. The biggest factor is that capital gains are taxed at a much lower rate than earned income. (income from selling labor) There are also a number of flat amount / percent taxes, many of which vary by state. Finally, the tax structure is sufficiently complicated that those who can afford skilled accountants can further lower their paid taxes considerably through tricks and loopholes.
If you keep your money invested and never cash out, then you never pay tax. He mentions this later in the article. Also if you don't buy anything you don't pay sales tax.
I believe the author is referring to the lower tax on capital gains than on income in many situations. I haven't read it personally, but I understand that Thomas Piketty's “Capital” discusses this at length where there's a built-in structural favoring towards capital's rent over labor's wages.
Also tax havens and loopholes I suspect. Bon Jovi has some number of strawberry bushes on his estate so that he can count it as a farm for tax purposes.
It's the American metric - In America, the richer you are, the more you're able to afford hiring shifty accountants and lawyers who hide away your money and get you out of paying taxes. The more you're able to create offshore accounts and shell companies to hide your earnings. The more you're able to pay off politicians and others to look the other way while you do this.
The metric the author is using is the fantastic state American politics are in.
Can someone clarify this piece for me? I don't understand how the author is able to completely avoid taxation on the rents.
>My wife and I don’t need the money we make from owning most of the business. We live off the salaries of our jobs, and reinvest virtually our entire share of the business. These reinvestments count as “losses,” and so officially we have never made any income or paid income taxes on our share of the business.
If they took any sort of money from their business, it would be taxed as income. But if the money just stays inside the business and is used to buy more rental buildings-- what's there to tax? So the business keeps growing and growing.
Case A: the owners take a paycheck of $100,000. It gets taxed at 30%, they get $70k.
Case B: the owners take no paycheck but instead buy a $100,000 property through the business with the business's earnings. They pay no tax but now own a $100,000 property which will now augment the business's earnings further. Down the road years later, they finally take a paycheck at $300,000, which is taxed down to like $180,000 or something. Still more than 2.5x the Case A payout, and let's not forget they own that much more property now on top of everything else.
This isn't true in the United States if the business is organized as an LLC which is definitely the most common way of handling residential real estate. I, like bigtunacan, am very curious about this part of the story. It doesn't really add up.
EDIT: thinking about this more I suppose that one possibility is that the operator brother is taking basically all of the rent as income and the financier brother, instead of making a return from rent, is hoping to make a return from appreciation (selling the houses later for a profit). TBH this doesn't seem super likely to me either, but it's possible.
I really don't think that the author is correctly explaining his tax situation (which is fine. it wasn't the main thrust of the post).
But in Case B, wouldn't they have to pay the corporate income tax on that $100,000 before they buy the next property (39.1% in 2017)? I thought each property is a capital expense which gets depreciated over time. So you can't buy a second property with your profits and deduct it as an expense in the current year. Am I missing something?
Ignoring the logical fallacies the author makes, one thing jumped out at me. He's not buying the average home in South Bend. If he's only paying $180/year in property tax, the assessed value of his average home is around $9K. A quick look at Google shows the median price (from Zillow, so a grain of salt is recommended) of $65K. If he and his brother are buying up $9K homes, his average mortgage is under $50/month. I'm sure that he's doing the socially responsible job of only charging his tenants just a little over his full costs...
Keep in mind, this piece is based on an older one. Looks like it dates to 2010. He probably bought up mediocre places during the end of the housing bubble for very little money.
Guy in financially comfortable position feels guilty, decides his education, willingness to live in Qatar, etc shouldn't really be worth this much, completely discounts the idea that anything actually matters, it is all merely "luck" and that's it.
Sounds like an existential crisis, not really a good commentary on the concept of basic income.
Guy reads an interesting article that threatens his idea of success, incorrectly summarizes the article and resorts to personal attacks against the author.
Sounds like threatening core beliefs makes you defensive, not really a good commentary on the article itself.
FYI: I am a woman. I am homeless. I get a lot of flak from people because I am not pro UBI when people seem to think I should be simply because I am homeless. Instead, I believe we need to view our current situation as The Second Industrial Revolution and do whatever the next evolutionary step is to make paid work a lighter burden while raising quality of living for the masses. I am pro gig work done right.
Also, your comment is basically a personal attack.
Mine is a criticism of the actual article. The reply to mine is a personal attack against me, a member of this site. This is generally understood to be a violation of the site guidelines, though they don't explicitly say "no ad hominems."
In Comments
Be civil. Don't say things you wouldn't say in a face-to-face conversation. Avoid gratuitous negativity.
When disagreeing, please reply to the argument instead of calling names. E.g. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."
No it wasn't. You literally claimed the author had a mental break down. That's not an attack on the article, it was a direct attack on him. I literally formed my comment exactly as you did to relay that point.
You seemed to have taken such issue with the idea that the guy is lucky, you attacked him personally rather than attack his point. I don't entirely agree with the author. I don't entirely disagree with him. But if you want to make a point, attack his conclusions, not him.
Existential crisis and mental break down are not remotely the same thing. And noting that he seems to simply feel he somehow doesn't deserve this or feels guilty and his article is also not really well backed is a valid criticism. This piece looks to me like someone venting emotionally about their guilt at feeling they don't really deserve more than others. This is not really a good argument for creating basic income. Many people feel guilty for being born into wealth and privilege. That guilt is not some kind of objective evidence that basic income will solve the problems we currently face where we generally expect automation to eliminate certain jobs.
It's fine for people to think basic income will be a good solution to the situation before us. I don't happen to agree with that position. But personal guilt and appealing to some just world fallacy is not a substantive argument for why we should try to make this happen.
> And noting that he seems to simply feel he somehow doesn't deserve this
At no point in the article does he say that. He simply stated he was lucky. He was born in a country that made it such that he would NEVER be able to end up like the workers he encountered. Thats absolutely true. That makes him (and you) lucky and certainly more successful relative to them.
> his article is also not really well backed is a valid criticism
This is a story about something personal, its not a scientific piece. His "backing" is simply that being born where he was, in part, is the reason he is where he is. That's not subjective, that's an absolute fact.
> This piece looks to me like someone venting emotionally about their guilt at feeling they don't really deserve more than others.
You are free to interpret it that way, but he never actually indicated anything you took from it. It seems your own perspective on basic income highly skewed your perspective before you started to read it, and everything he said was used to justify your preconceived notion.
> Many people feel guilty for being born into wealth and privilege.
I would imagine the majority don't.
> That guilt is not some kind of objective evidence that basic income will solve the problems we currently face
No, studies (some of which have recently began) will indicate whether or not basic income will work. This is an article about someones personal experience, once again, not a scholarly article or study.
> It's fine for people to think basic income will be a good solution to the situation before us. I don't happen to agree with that position.
Unlike you I think it's something that needs to be studied before I draw any conclusions. The irony here is your just as guilty as what you accuse the author of: you emotionally respond to something with zero evidence for (or in your case against) it.
Look, I read the article and inferred that he feels guilty. There isn't really any substance there and it is full of ridiculous assertions indicating that his labor, willingness to live in Qatar and stewardship of capital all have essentially zero real value and, thus, do not justify his cushy existence. This is a bad path forward for how to make the world a better place. If no one is doing any labor and no one is acting as a good steward, the world rapidly goes to hell. Even if you posit that all our jobs will be replaced by robots, we will need good stewards if we want good quality of life generally for all people. Someone will have to make decisions about the robot factories, etc. Given how widespread an impact those things would have, these would need to be wise to a very high standard in order to not be disastrous.
Then you come in and mirror my language and start off with "guy..." I am an active participant on HN and open about my gender. You referring to me as a guy tells me you don't actually recognize me or know who I am. It also tells me you didn't so much as click through to my profile. It is trivially easy to determine my gender and you didn't do that much. That means you know literally NOTHING about me, thus all statements that follow your description of me as a guy are made up out of thin air. They aren't any kind of valid criticism with any kind of basis in actual facts.
As for UBI, I am not closed minded about it. I am willing to consider a good argument for it. In fact, I would love to see a good argument for it. But I don't think an experiment like the one being done by Sam Altman tells us anything useful. It is obvious on the face of it that if a small subset of people get extra funds for a specified period or time, they will tend to do better than most people around them. This is not real world conditions for what will happen if UBI becomes a reality.
I think there are much better proxies to look at for trying to infer what will happen with UBI and these are real world examples. This includes things like what happens when someone wins the lottery (2/3s are bankrupt within 5 years) and actual historical efforts to share and share alike (communism, which was supposed to be a peasant paradise, but was a disaster). I have had pertinent classes in things like Social Psychology for trying to gauge what is likely to work with actual human beings in actual reality, not some experiment. I also write about my thoughts on UBI and related matters here:
Hey, South Bend made an article on the internet and it wasn't even about our mayor!
Rental income here is a bit weird because you have in general a very poor town, with a very expensive private university with old money funding houses for students. I bought my house here for a fair bit less than it would cost to rent something half the size.
I live in an area where college students cause an imbalance between the cost to rent vs buy (the purchase prices in the area are lower than you'd expect given the rents).
I'm constantly surprised that the market doesn't arbitrage this away. I suppose that is due to the fact that the real estate market is less efficient than others (both due to liquidity and transaction costs) and that being a landlord is harder than people suspect.
In either case, its always made me leery of rental real estate as an investment vehicle.
He talks about the unfairness of "our economic system" but he makes his income from Qatar's economic system. Qatar likes to spend their oil money on western professors to give themselves an air of legitimacy.
As for renting out property, it's never effortless or risk-free. If it was, the rate of return would drop to that of other minimum risk assets (e.g. treasury bonds).
Our economic system is global even if our politics are not. The salaries Qatar pays are as influential in his life as any job he could have gotten stateside. The prices of oil and coffee beans are set internationally. Raising the minimum wage locally influences global capital flows away from your area, removing regulations directs global capital towards you. Zoning laws that restrict building and inflate property values will attract investors 5 time zones away on the other side of the planet.
On some level, this is basically "capitalism 101." If I don't need my resources now, I can put them to work so that I can later benefit from them. This leads to me having productive assets, which pay me some return.
If I could not acquire productive assets, there would be much less reason to save. And it's unclear how one would save, as banks would likely not exist either. You can solve this problem somewhat by having a centrally planned economy. But then you have the problems that hit those.
The problem here isn't that capitalism lets you have productive assets that give you a return. It's that when r > g (when the rate of return of capital is greater than the growth rate of output), inequality increases dramatically. The greater the difference between r and g, the greater the rate of increase in inequality.
This is laid out super bare in his example: he bought a house. That house is in an area that surely is past its prime in terms of growing rate of GDP growth. Which means r > g. And that means his assets give him relatively good returns, which in turn compound, which has the net effect of him getting far, far ahead of everyone else who lives in that area.
The benefit of productive assets is that people who otherwise would not be able to produce high value outputs are stuck making lower value ones. By working with another's assets an individual can create more value than alone, and somehow split the difference with the asset owner. Workers maybe need to start to fight for a better split, but that is beyond the scope of this article.
Yes, yes. Or governments can enforce a more equitable split through taxes. But you still have to give some benefit to those who save, else there will be no reason to do aught but consume all one produces.
* Our economic system claims to reward "work", but the reality is that it rewards ownership and extracting economic rents.
* Increasing value does not necessitate that being the result of one's "work". For example, land values rising are the result of other peoples' work (eg. neighboring properties, government policies, general economy). The landowner is compensated through the labor of others.
* Economic rents aren't taxed enough ("The business pays property taxes, but they average about $15 per house, per month – minuscule compared to the rent we make.")
* Labor is taxed too high relative to capital gains
* "Luck" plays a huge factor, and luck and hard work aren't mutually exclusive. If I'm born into a poor family in a ghetto, naturally I'm going to have less opportunities than being in an upper class family with enough funds to perpetually support me (eg. Mark Zuckerberg, Bill Gates)
* We need a Universal Basic Income, ideally funded by taxes on economic rent (eg. land value tax)
Our economic system is like a big game of monopoly where all the properties are already owned. You start off with whatever money/property you inherit from your parents, and have to work yourself up. Meanwhile, the rentiers are profiting off the backs of the laborers without doing anything. Sure it's possible to add "properties" to the board (ie. starting businesses), but that doesn't scale.
At least Monopoly had a UBI in the form of the $200 you get every time you pass "Go".
Agree - seems to be a greatest hits of personal finance ideas with current buzzwords mixed in like "basic income" and "privilege" that aren't central to the post. Be a saver not a spender. Invest in things with strong cash flows relative to the purchase price. Use your personal connections, such as family members that can make good business partners. Take lucrative boring jobs if you can stomach them. Be lucky.
The core of the article is luck into making way more money than you need. Use spare luck to find a honest someone that knows what to do with that money. Retire.
That's not really what personal finance are about. Unless Vegas Holiday Brochure count as Personal Finance: go to a casino, win big, retire.
Being lucky and being privileged are definitely related. Privilege isn't just the color of your skin but the opportunities you're born with (rather than earned).
Basic income is also related, because it's purported as a system to fix the inequalities discussed in the article. Whether or not it will fix those inequalities is another discussion, but it's certainly relevant to the topic.
The article is about something that should be obvious, capitalism: money goes to the capital owner.
Of course this has a lot of problems, but it's the best we have today. On this system, the rules of the game are: we need to work and spend less than we earn, and use the money to accumulate more capital, an not buying more things.
BLS says about 153 million Americans are currently working(1). Gallup says 52% of American Adults are invested in the stock market(2). There are about 235 million adult Americans. 52% of that is 122 million.
153 million laborers vs
122 million stockholders
Pretty close! And that's just stockholders. There are, of course, many other forms of capital.
If someone is deriving 90% of their income from labor, and 10% of it from stocks, then I don't think it's meaningful to call them "capitalists". It's technically true, yes, but in a way that doesn't make sense in the context of this discussion.
In class terms, a capitalist derives the vast majority of their income from capital, a laborer from labor, and the middle class has both as significant sources of income.
A worker owning a handful of shares of stock isn't a capitalist, or even petit bourgeoisie.
I agree with the author's points. There have been, almost certainly, Einsteins who have lived and died in poverty without ever having tasted a book. I feel like a basic income for everyone is supportable and would give people falling to an unknowable fate the lift they need to go beyond surviving.
Less work seems to need to be done with tech advances today, but the only thing a job replacing robot seems to do is take the incomes of two u people and give it to the person who owns the robot. The slippery slope is that we will eventually do this for most jobs, if we survive long enough as a species, and I agree we need change to evolve as our society does.
I'm having a lot of fun lately thinking about everything in cryptotokens:
Everyone gets 3 basicMealTokens and 1 basicFun token.
However, in SF, there are only sfMealTokens which require 20 basicMealTokens.
In Vietnam, 1 vietnameseChickenPlatterToken is only half a basicMealToken.
Tech workers are paid in techWorkTokens which can be exchanged for 200 basicMealTokens each or 100 basicFunTokens, or 1/1000th of a Tesla token.
Token transfers have friction so it is advantageous to maintain a surplus of tokens most easily transferrable (least hops) to what you want.
To ease this, SF maintains a sfBasicToken and makes the market to transfer tokens from all over the world to sfBasicTokens. sfBasicTokens have an advantage in that you can pay for things easily instead of paying 67.34 redditStatusTokens.
Some old geezer is willing to sell his house for a legacy usdToken, a token so old it had a physical representation and no historical memory.
The basicFoodToken ideas doesn't pan out. SF starts giving out sfBasicFoodTokens instead. However large numbers of people realize an arbitrage mistake and live like kings in Thailand, taking advantage of the buying power of sfTokens due to the Thailand people wanting to make it big with their startup dreams in the Bay Area.
Its not two big lucky breaks it should be actually three big lucky breaks. Being born as a human is the first lucky break every human being on the earth gets. If you think about it 'merit' is man made. Nature most of the time works on pure chance.
I think it's awesome to make critics about how capitalism is bad by using Qatar where basically no freedom exists and everything is controlled by the state. Not even mentioning actual slavery.
What I got out of this was the suggestion to fund Basic Income by taxing unearned income. I'd like to read more on how the numbers would actually work out. If that were the only funding source of BI, then how much impact would that be on the rich, and how much benefit would that be for the people that could use BI?
The US collects about $1.5 trillion from income taxes per year. A bit of googling leads me to believe that about 10% of that is from capital gains so that's 150 billion. Let's say we 2x capital gains rates and (magically!) earnings from capital gains don't go down.
So we have $150B for our Basic Income. There are about 300 million Americans (I rounded down to make the math easy). $150 Billion / 300 Million = $500 each per year.
Read this essay (which is, as it goes, pretty good), then go back and take a look at, say, the first book of Adam Smith's Wealth of Nations. In particular the prices of commodities, labour, stock, and rent, as well as the factors influencing wages of labour (chapter 10).
From Ricardo, we get the Iron Law of Wages, and the Law of Rent. Key to understand is that these move in opposite directions:
* Wages tend to the minimum subsistence level, all else equal.
* Rent rises to claim the surplus value afforded.
That is, wages are based on the input costs, whilst rent is based on the output value (use value). The third element, price (sometimes "exchange value"), is what's at question.
(I distinguish cost, value, and price as three distinct concepts. This is a long-standing question, and in my view, a grossly confused one, in economics. They're related, but not deterministically. In the long term, C <= P < V. Bentham's "utility" is an exceptionally red herring. More, very much in development: https://redd.it/48rd02)
Note that this means that rent is determined by the pricing behaviour. If you're a "business owner" but you're not capable of extracting rents, you're either selling commodities or labour, you're not collecting rent. The term here is in the sense of economic rent. Simply "owning a business", without the economic circumstances which give rentier power, isn't sufficient -- don't confuse what it is you're doing with the systemic construct in which you're doing it. Weiderquist emphasises this point specifically, several commenters here clearly haven't grasped it.
Another elided discussion: rents are associated with access control, and can be thought of as authority over some (virtual or physical) gate. They're a natural element of any networked structure, in which nodes and links exist, most especially where some nodes have higher value, or control more flows. I believe though can't yet show that all cases of rent involve a fundamentally networked structure, again, virtual or real. My concern is that this may be a reflexive definition, I'm trying to determine that it is or isn't.
Another element of this is compensation for labour. Smith lays out five elements determining this, and I find them durable and comprehensive. In the Widerquist's case, the combination of requisite skills, and comparative unattractiveness, of teaching in Qatar, allow him to claim both a high wage and favourable working conditions (including a lighter-than-typical workload). This falls straight out of Smith. That is, he earns his salary "by doing a job few others are both willing and able to do".
If you're looking at the macro view, realise that these don't scale. That is, the innate and acquired capabilities to teach at University level are not widely distributed through the workforce, and the lack of appeal of various sorts of work is sufficient to dissuade (or prevent, or disqualify) others from taking part in it.
There are other elements here as well: the complimentarity of time and skills, on the one hand, with money, on the other (the classic business partnership). Tax structures (and who they benefit). The relationship of wealth and political power. Smith again: "Wealth, as Mr Hobbes says, is power." One of the shortest and clearest sentences in WoN, incidentally.
I can conceive of a combination of bad choices that could place a person in such a predicament. Unlikely choices, but choices, when taken, certainly resulting in the described outcome.
It's not an inaccessible scenario, but unlikely to be anything other than a forced outcome for someone like the author. For those in mind, who actually face the true reality, it's usually accidental.
He makes his living teaching the children of totalitarian aristocrats at a faux university, is saving for the future on the backs of the poor back at home, and gets a kick out of having indentured servants at his beck and call.
I wouldn't shed a tear when his little empire of dirt collapses.
If you live in America you can do what you want. You can study hard and get a scholarship to college even if you are really poor as a kid. I know a poor Mexican immigrant who's kids all got college degrees for free. It doesn't really matter if you grow up poor (in America). There are many people who are very rich precisely because being poor as kids drove them to work hard. What does matter is if you grew up in a stable family. If you don't have that you get really whacked out paychologically, and it can affect people for their whole lives. People look to the government to tax and spend to solve social problems. However, oftentimes the government is the cause of such problems in the first place. For example, we see a huge number of people in prison today. Well studies show that 60% of people in prison grew up without a father in the home. The government today actively promotes divorce and children out of wedlock through paying single mothers. The "compassion" has raised a generation of young people who are lost. America has more money than ever but our families are falling apart, torn up by divorce and pornography, and our young people are paying the price. The government should focus on supporting strong families, and you would watch and see so many major social problems evaporate. I know that I am where I am today because of my dads positive influence on me. Without his support I would be nowhere right now. Every kid needs a loving family. It's time the government starts trying to promote that.
Of course in Quatar they have serious human rights issues that need to be resolved. I'm just talking about in America.
> I know a poor Mexican immigrant who's kids all got college degrees for free.
I know many upper middle class kids who got college degrees for free (parental scholarship).
> It doesn't really matter if you grow up poor (in America)
Like I said above, and the author claims, it does seem to matter quite a bit if you grow up poor or not poor.
> There are many people who are very rich precisely because being poor as kids drove them to work hard.
There are probably many more who are rich precisely because being rich as kids drove them to being rich as adults.
> However, oftentimes the government is the cause of such problems in the first place.
Oftentimes you drive on the roads the government provisioned, visit the parks past presidents enacted, live in the security our GI WW2 vets created, so on and so on.
for the articles description: "how [the economy] rewards people who own stuff rather than people who do stuff"
i cant believe i never summarized my own feelings that succinctly. of course the reality is it does both, but i think its way out of balance towards ownership rather that doing.
i smell tautological reasoning. people are paid what they deserve cause thats what the market decides? ok- if that is your premise, then i have a couple follow up q's:
1. do thieves deserve the money they steal?
2. are there people who profit from things that are legal but shouldn't be?
those are abstract q's that i think point out how saying "people are paid what they deserve" is wrong. if you reject that because you draw a distinction between "deserve" and "value they create", then i think "value" is kind of meaningless. in that case, it has the literal meaning you ascribe to it (i.e. it is what you call the amount of money someone pays for something), but nothing beyond.
i run into this view very often on here- that capitalism is fair because it pays you what you are worth. but thats so so lazy. you may not agree with me about how its unfair, or that its even worth worrying about, but id hope you would grant me that that premise is just a way to not think about the issue.
Property tax is $15 per month in South Bend for a house? Wrong.
Capital gains is taxed lower than income? Wrong -- sometimes it is, sometimes the other way around. Multiple factual errors.
> Capital gains is taxed lower than income? Wrong -- sometimes it is, sometimes the other way around
Capital gains is always taxed equal (for short-term gains) or less (for long-term gains) than "generic" income, except for a few edge cases (e.g., in the very-low income range where additional labor income has a negative net effective tax rate due to EITC and child tax credit and long-term gains have merely zero taxes.)
Property tax is $15 per month for a house in South Bend, IN? lol.
Capital gains is taxed lower than income? Wrong ("it depends").
I stopped reading there.
The basic point is that he gets paid more whilst not doing more "work". For those whom "Work" is the only lever they use to convert into money, they see inequitable work:cash ratios as "unfair" (a morality statement).
Market economies do not function on work, but on value. He did the same work in a high value scenario. A glass of water provided in the middle of a developed city is worthless and thus free. A glass of water provided at the right time in a desert is invaluable and thus expensive.
My takeaway is this: Always meet the highest value need you can, and as well create additional value by helping others to meet higher values than they current do. Low placed people may not be able to "work" their way to upper echelons, but they can invent, intuit or otherwise create high value leverage of their's and others' work. I dont see it as unfair that a person making $1 a day is unlikely to become a deca-billionaire in their lifetime (total mobility); instead I want to ensure they have some mobility so that they can always better their situation, maybe by an arbitrarily selected 2x multiplier.