
Joseph Stiglitz Says American Inequality Didn’t Just Happen - rbanffy
http://evonomics.com/nobel-prize-economist-says-american-inequality-didnt-just-happen-it-was-created/
======
ScottBurson
Something came up yesterday, in the discussion about business schools, that I
think is also relevant here. A lot of people — as in, practically everyone —
has been persuaded over the last half-century or so that the board of
directors of a public corporation have a legal responsibility to maximize
shareholder value. The general acceptance of that fiction is resulting in a
tremendous amount of wealth transfer from the middle class to the rich, as the
long-term performance of firms is sacrificed to making the next quarter's
numbers.

And it _is_ a fiction. Here's a thorough takedown:
[https://hbr.org/2017/05/managing-for-the-long-
term](https://hbr.org/2017/05/managing-for-the-long-term)

This makes a lot of good points, but one I find particularly telling is that
maximizing shareholder value is not even a well-defined goal, because it
doesn't specify a time frame. A public company could be run in such a way as
to cause wild swings in the share price, and the day traders and HFTers would
love it, because surfing volatility is how they make their money. Of course no
one thinks that those are the shareholders whose value should be maximized,
but someone who accumulates a position over a couple of months betting on the
price going up after the next quarterly earnings report, and who plans to sell
shortly thereafter, really isn't that different — and yet somehow these are
the people who have managed to seize the narrative that they are the
shareholders whose value maximization counts.

And the consequences of people believing this are just massive. Offshoring,
reductions in R&D, stock buybacks, a general failure to invest in the future —
all of these are driven, to some extent, by this idea that the stock price
must be goosed at all costs.

~~~
mjfl
Why does maximizing shareholder value imply a transfer of wealth from middle
class to wealthy? Middle class people can and should be shareholders.

~~~
ScottBurson
Most corporate stock is owned by the wealthy:
[https://www.investopedia.com/news/stock-ownership-slips-
ineq...](https://www.investopedia.com/news/stock-ownership-slips-inequality-
creeps/)

Furthermore, it is mostly hedge funds that benefit from short-term price
gains, as they're frequently leveraged, often with options. Long-term holders
like individuals and mutual funds are usually unleveraged.

~~~
mjfl
Even if most corporate stock is owned by the wealthy, in terms of relative
wealth changes all that matters is a person's personal percentage investment
in the stock market. For example, if you have a middle class person who has
80% of their retirement savings (wealth) in stocks and a rich person who has
50% of their wealth in stock (because of liquidity concerns for example - and
this is common) then if the stock market goes up by 20%, then the middle class
person's wealth increases by 16% while the rich person's wealth only increases
by 10%. In that situation inequality is _reduced_ by maximizing shareholder
value, so I think it's totally incorrect to say that maximizing shareholder
value increases inequality in general.

People need to educate themselves on personal finance matters like this
because inaccurate thinking towards seriously emotional issues like this has
dangerous consequences.

~~~
laurencerowe
Maximizing shareholder value concentrates returns in the hands of shareholders
over employees. This has a significant distributional impact as for most
income from employment dwarfs income from investments.

~~~
mjfl
again, why do you treat employees as a distinct group from shareholders? At
many companies, employees are the shareholders.

~~~
FridgeSeal
Shareholders in that they have some shares, but not nearly on the same scale:
shareholders have far more available money to invest and as such, investments
pay off in a far larger way than for your average employee.

------
fallingfrog
Favorite quote: "Those at the top have learned how to suck out money from the
rest in ways that the rest are hardly aware of—that is their true innovation."
Rings true to me. That's why labor markets are purely competitive but the
markets for products are dominated by price fixing. It's why you get more jail
time for stealing a car than cheating your employees or customers to the tune
of millions of dollars. And so on.

~~~
pdkl95
> markets

We regularly hear people concerned about the _hypothetical_ existential threat
of a paperclip maximizer AI being invented in the future, yet this concern
reliably ignores the AI overlords _we already have_ : paperclip^Wprofit
maximizing corporations. The VM for this type of AI has an incredibly slow
clock rate and an extreme CISC ISA that often modifies itself in the RTC
interrupt. The AIs are not a _future_ threat; they already enslaved us.

The problem is our _unregulated capitalism_. Until that is addressed[2] we are
merely debating which profit-maximizer AI we want to serve.

(my thanks to Charles Stross for the maximizer-AI/corporation metaphor[1])

[1]
[https://media.ccc.de/v/34c3-9270-dude_you_broke_the_future](https://media.ccc.de/v/34c3-9270-dude_you_broke_the_future)

[2] I suggest heavy regulation to _protect_ the useful parts of capitalism.
Left alone, capitalism destroys the very markets it needs to survive.

~~~
pitaj
> unregulated capitalism

Ah yes, the unbridled laissez-faire capitalist markets throughout the world.
It couldn't possibly be that our markets are more regulated than ever before,
or that the very regulations and bureaucracy meant to protect us have caused
these failures.

No no no, it's _capitalism 's_ fault. It's certainly not that government power
has for decades been exploited by the incumbents to kill competition.

The _market_ has failed. Now government regulation is necessary to protect us
from the evil rich corporations who want nothing but profit. Rest assured, if
we allowed them to operate freely it would result in catastrophe!

~~~
ComradeTaco
The US has allowed complete unbridled capitalism during the gilded age.
Quoting Wikpedia "From 1860 to 1900, the wealthiest 2% of American households
owned more than a third of the nation's wealth, while the top 10% owned
roughly three fourths of it.[61] The bottom 40% had no wealth at all.[59] In
terms of property, the wealthiest 1% owned 51%, while the bottom 44% claimed
1.1%"

So pure, unregulated capitalism, lead to wealth inequality far, far more
extreme than our current situation.

58 Peter R. Shergold (1982). Working-Class Life: The "American Standard" in
Comparative Perspective, 1899–1913. University of Pittsburgh Press. pp. 5–7,
222, 224. ISBN 978-0822976981.

59 Steve Fraser (2015). The Age of Acquiescence: The Life and Death of
American Resistance to Organized Wealth and Power. Little, Brown and Company.
p. 66. ISBN 0316185434.

~~~
WalterBright
And yet there was explosive growth in the middle class in that era, the poor
moving up into the middle class, and the US moving into a superpower economy.
The standard of living went up, way up.

~~~
lifeisstillgood
I would argue that is a "despite the greediest Robber Barons that ever Robbed,
wealth was created by the industrial age on such a scale that some escaped and
was shared more equally"

------
specialist
Also true:

Creating the middle class was a deliberate, hard fought policy choice. The USA
has done it (massive redistribution of wealth) three times. We're overdue for
the fourth cycle.

Wealth and Democracy: A Political History of the American Rich [2003]
[http://a.co/6rMyoc1](http://a.co/6rMyoc1)

 _" The Second Gilded Age has been staggering enough in its concentration of
wealth to dwarf the original Gilded Age a hundred years earlier. However, the
tech crash and then the horrible events of September 11, 2001, pointed out
that great riches are as vulnerable as they have ever been. In Wealth and
Democracy, Kevin Phillips charts the ongoing American saga of great wealth–how
it has been accumulated, its shifting sources, and its ups and downs over more
than two centuries. He explores how the rich and politically powerful have
frequently worked together to create or perpetuate privilege, often at the
expense of the national interest and usually at the expense of the middle and
lower classes.

With intriguing chapters on history and bold analysis of present-day America,
Phillips illuminates the dangerous politics that go with excessive
concentration of wealth. Profiling wealthy Americans–from Astor to Carnegie
and Rockefeller to contemporary wealth holders–Phillips provides fascinating
details about the peculiarly American ways of becoming and staying a
multimillionaire. He exposes the subtle corruption spawned by a money culture
and financial power, evident in economic philosophy, tax favoritism, and
selective bailouts in the name of free enterprise, economic stimulus, and
national security.

Finally, Wealth and Democracy turns to the history of Britain and other
leading world economic powers to examine the symptoms that signaled their
declines–speculative finance, mounting international debt, record wealth,
income polarization, and disgruntled politics–signs that we recognize in
America at the start of the twenty-first century. In a time of national
crisis, Phillips worries that the growing parallels suggest the tide may
already be turning for us all."_

~~~
pitaj
The middle class was not created via redistribution of wealth. It came about
through _wealth creation_. It existed long before the New Deal and WWII.

~~~
jonathanyc
If you’re going to make a drive-by comment whose content is just “the GP is
wrong,” you should at least back it up with some evidence, especially when the
GP has provided a source.

~~~
true_religion
The "source" is just inane fluff.

It reads like a book review. It _hints_ at topics, but never declares what is
to be said about them.

It was such an imposing wall of text, that I read it thrice hoping to fine
_anything_ that I could reply to in argument, but there's simply nothing
there.

It's not evidence.

It's not a source.

It's not even an argument.

It's a teaser to buy the book and find out if the book has an argument within
it.

~~~
specialist
Kevin Phillips is an economist that served multiple administrations and
teaches. He has no shortage of published works, interviews, reviews,
criticisms.

I encourage you start your quest by clicking the handy link provided.

~~~
_Tev
Seems more like appeal to authority rather than an argument.

------
sokoloff
I half wonder if the issue of inequality is that America may have a fatter
right tail on the distribution rather than an ever-narrowing tail. Instead of
only having the Rockefeller, Vanderbilt, etc 0.001% wealthy, we have a 5-6%
band of households who are millionaires[0] and that makes the wealth more
visible when it’s a handful of people in your town or social circle than when
it was only a handful of people in the nation.

In other words, things might be getting better for the upper middle class as
compared to 150 years ago, while the lower and lower middle class remains
similarly situated. (If you model their economic contributions as hours-of-
labor, that’s not all that surprising an outcome.)

[0] Mere millionaire is nearly meaningless at this point IMO despite the
political rhetoric against the “millionaires and billionaires”. A million
bucks, half tied up in a house, provides a passive income stream of around
$20K/yr. It’s the $10MM (maybe $7MM) mark where I start to think of unequal
privilege being a possible concern.

~~~
bilbo0s
I know this will sound provincial to the HN crowd since it's very Silicon
Valley oriented, but a thought occurred to me while reading this comment. The
thought that it's pretty amazing that there are places in the US where, say, 5
million in assets is "middle class". I understand the thinking, it's just that
where I come from all of the guys with 5 million in assets are considered to
be pretty F'n rich. I don't know anyone in the town I grew up in who would say
that 5 million was "middle class". We wouldn't even call that "UPPER middle
class". In my hometown they, (we? cognitive dissonance, sorry), would say that
guy is LOADED.

It's that existence of these two completely different economic realities that
makes the inequality issue at once so intractable, and so critical to address.

~~~
dcosson
I don’t think it’s really that intractable. The traditional middle class
lifestyle in the US for the past several decades involves getting married,
probably having a few kids, and buying a 3 bedroom house to live in. Probably
even in the towns you’re thinking of, that describes a middle or upper middle
class lifestyle.

The thing that’s crazy is that this can cost 2-3 million dollars in many
places in the Bay Area. The housing crises in affluent cities is absolutely
the driving factor of our growing inequality issues. It’s been shown in
different ways in many studies. We need to build a lot more housing if we hope
to make any real progress on these issues (and in desirable places like the
Bay Area it probably requires shifting the ideal to be a 3 bedroom condo
rather than a standalone house).

~~~
leetcrew
> The thing that’s crazy is that this can cost 2-3 million dollars in many
> places in the Bay Area. The housing crises in affluent cities is absolutely
> the driving factor of our growing inequality issues.

how can this be so? i agree it sucks that {insert middle class profession}
can't afford a 3br in the bay area or NYC, but how can that be the root cause
of inequality across an entire nation? there are tons of affordable 3br houses
around where i live (mid-size coastal city).

i see that it is a bad thing for service workers the wealthiest cities to be
pushed ever further from their place of work, but this seems like a more local
problem.

~~~
bobbygoodlatte
I also don't agree it's the root cause, but certainly it's a big contributing
factor. Buying that 3 bedroom house in a more affordable area might be a smart
idea, or it might severely limit one's economic mobility. Most of the jobs
that mint new members of the upper / upper-middle class are based in big
cities. Living elsewhere might mean trading class mobility for housing
security, a trade-off that some don't have to make.

~~~
leetcrew
> Most of the jobs that mint new members of the upper / upper-middle class are
> based in big cities.

i feel that this claim is exaggerated. anecdotally, i live in a suburb of a
midsize city. i rent a 3br house for under $2k a month and there are tons of
tech companies within a 25-45 minute drive of my dwelling. an entry level job
at any of them would easily put a person in the high end of middle class
incomes for this area.

to be sure, companies in the wealthiest US cities offer experienced employees
compensation that is unmatched anywhere else. but for entry level and/or
average skilled developers, it seems like SF, NYC, etc. are the only places
where you _aren 't_ guaranteed an upper-middle class lifestyle.

------
jessaustin
I suspect this is covered in greater detail in the book from which TFA is
excerpted, but this description of rent-seeking through control of the
government is incomplete. In addition to one-sided transactions with the
government, large firms benefit from their regulatory control of the
commercial environment, enforced by the government. Smaller firms and
individual people will always negotiate and compete from a disadvantage,
because they have no say in how business will be conducted. Regulators like
SEC and FCC pretend that their purpose is to rein in the excesses of big
firms, while spending almost all of their time and resources ensuring that we
cannot do business with anyone besides big firms.

~~~
lobster_johnson
I can see that happening in cases of regulatory capture (e.g. present-day EPA
and FCC), but how would it happen otherwise?

------
TangoTrotFox
I think the first thing that conversations like this need are data. I ran into
this [1] when actually searching information on the chiseling out of the
middle class. And that paper does describe that. In 1979 the middle class
controlled 46% of all income, and the upper/rich classes controlled 30%. Today
(well at least today as of 2014) the rich and upper class control 63% with the
middle class left with 26%. There's even been a chiseling out of the middle
class as a whole declining from 38.8% of society to 32% of society.

But the eye opener is this. This is the change in the size of each economic
group between 1979 and 2014 as a percent of the total population:

\- Rich: 0.1% -> 1.8%

\- Upper Middle Class: 12.9% -> 29.4%

\- Middle Class: 38.8% -> 32%

\- Lower Middle Class: 23.9% -> 17.1%

\- Poor or Near-Poor: 24.3% -> 19.8%

Statistics like this are certainly subject to biased interpretation and
'massaging'. If one is curious about the source, wiki has a section on the
political stance of the Urban Institute [2]. Though the paper itself is very
transparent in their methodology and extremely readable. I found it all eye
opening to the point that it actually changed my worldview.

[1] - [https://www.urban.org/research/publication/growing-size-
and-...](https://www.urban.org/research/publication/growing-size-and-incomes-
upper-middle-class)

[2] -
[https://en.wikipedia.org/wiki/Urban_Institute#Political_stan...](https://en.wikipedia.org/wiki/Urban_Institute#Political_stance)

~~~
kieranmaine
And here's some extra info that accompanied this data: "The growth in the rich
and upper middle class and the declining proportion of the population in the
middle and lower classes indicate widespread economic growth between 1979 and
2014, but that growth was not distributed equally. On average, incomes grew 53
percent over the period. If the growth had been equally distributed (figure
3), then the shift upward would have been much greater. At the extremes, the
proportion of the poor and near-poor population would have dropped to 12.8
percent, and the proportion that is rich would have barely increased (to only
0.5 percent of the population) because the growth among the near-rich with
even growth would have been much less than what happened with uneven growth.
With even growth, the size of the middle class would have declined but the
growth in the upper middle class would have added another 6 percentage points
and reached over a third (35.2 percent) of the nondependent adult population."

~~~
TangoTrotFox
Absolutely. But at the same time I think most people have a fundamentally
incorrect view of society. If we just break those classes into
rich/middle/poor we have in a very short period of time (1979 to 2014) gone
from:

\- rich: 13% -> 31.2%

\- middle: 38.8% -> 32%

\- poor: 48.2% -> 36.9%

There has been a major migration of people upwards in society. The poor are
becoming middle class and the middle class are becoming rich. I think most
people instead think society is remaining stagnant with all the wealth going
to the same people, even more incorrectly that society is becoming more poor
except for a small handful of people.

We are doing some things _seriously_ right. You would never imagine this from
how things like inequality are normally framed. Like mentioned I certainly
didn't. I found this study looking to confirm my bias that society was
actually deteriorating (or at best stagnating) socioeconomically. The problem
is that is utterly and absolutely wrong!

------
true_religion
When cities were popular places to live, they were expensive places where
service workers couldn't afford housing alone in the city center. Clerks,
secretaries, and assistants would rent lodgings---often shared rooms---in
boarding houses, or attics and spare rooms in other people's houses. Everyone
else with less stable jobs, either slept in their place of business If they
were lucky, or slept in dormitories, and "flop houses".

In the US, I'd hesitate to call it an improvement when the cities became
unpopular, and the newly minted middle class chose to live in the suburbs,
with tech parks, and factory parks. Then the poor could live affordably in
cities, which people would still go to for entertainment, but crime _sky-
rocketed_ , and educational opportunities plummeted till inner city schools
were the worst in the country.

To me, the issue of the underclass is systemic. You can't bandage over it with
rent-control, or _temporary_ welfare programs. The only way to deal with it is
a universal entitlement that anyone, of any income, benefits from like for
example universal healthcare which in Europe has leveled out infant mortality
rates between the poor and the middle classed.

If we could provide education, food and housing in the same universal way, it
would eliminate much of the issue of inequality.

------
sunstone
There will always be a few companies that make outsized margins due to unique
market circumstances. These would include the likes of Google, Amazon, Boeing
and Disney for example. But companies like these are a red herring when trying
to get to the root cause of inequality in America.

The real cause is the regulatory capture of the Republican party by business
generally and the subsequent maintaining of that process through, first,
gerrymandering and subsequently, gaming appointments to the Supreme Court.

It will be a difficult and long process to reverse this attack on the public
interest.

------
walshemj
But the American revolution being a revolution (as many of the others at the
time) was for the benefit of the rich landowners.

And the devolved nature of the Republic meaning that reforms that the UK and
Europe went through haven't happened has nothing to do with it?

~~~
zzzeek
You fail to take into account the New Deal and many decades of progressive
taxation, the Civil Rights act, etc. The current inequality crisis only got
started for real in the 1980s.

~~~
refurb
The biggest equalizer was world war 2. The new deal created a few social
programs but didn't drastically change wealth distribution.

------
eecc
Just how many publicity funded post-doc research programmes could be funded
with Zuck’s stash?

When you say someone is worth N billions, that’s all money that’s out of the
economic and spending budged loop; trophies to vanity and greed hanging over a
fireplace

------
tim333
I think the root of the problem is that US political decisions can be bought
to a larger extent than in most countries by giving money to campaigns,
lobbyists, PACs and the like. Then for some billionaires it's a simple
calculation - why not give $100m to get taxes lowered on themselves if they'll
get $500m back in tax breaks. The recent 2017 tax bill is a typical example
which slashes corporate tax while adding $1.5tn to the deficit which will be
paid by normal working people down the line.

------
ppereira
The distincion between creating value and hacking the economic system is
interesting.

“Think of Alan Turing, whose genius provided the mathematics underlying the
modern computer. Or of Einstein. Or of the discoverers of the laser (in which
Charles Townes played a central role) or John Bardeen, Walter Brattain, and
William Shockley, the inventors of transistors. Or of Watson and Crick, who
unraveled the mysteries of DNA, upon which rests so much of modern medicine.
None of them, who made such large contributions to our well-being, are among
those most rewarded by our economic system.”

~~~
lajhsdfkl
I think it should be obvious that you won't get rich unless you sell
something... None of those people sold things or seemed to be interested in
the process of selling things (except Shockley and that point is moot since
the coinventors/creators reaped the rewards).

Is it really that surprising to people that you wont become rich unless you
convince thousands upon thousands of people to hand you money?

What our system rewards are practical products that provide value that the
average working class person would want to spend money on.

~~~
api
Your last paragraph is no longer really correct. The largest rewards have for
some time been going to equity plays and financial schemes. You don't build a
company for customers but for the next round of investors, and your product is
its stock. In the extreme these can be highly clever and polished versions of
the "big store" scam where nearly all actual value is flimsy or illusory.

This is because all the money is now at the top. Your customers are the ones
who can pay.

A related phenomenon is Internet companies where the user is the product.
Advertisers and others who want user data or access to attention have far more
money to spend than users. Computing has transformed into a surveillance
platform to monetize users because users are not the ones paying for anything.

~~~
lajhsdfkl
> The largest rewards have for some time been going to equity plays and
> financial schemes

The largest rewards are going to people using their money to finance the
creation of businesses that create products people want to buy? Yeah that
makes sense to me.

~~~
amarkov
You're mixing up levels of indirection. Financing the creation of businesses
that create products people want to buy isn't itself an example of "practical
products that provide value that the average working class person would want
to spend money on".

You can say that what our system rewards is always _derived from_ practical
products the average person wants, but that doesn't seem like a useful way to
think about things.

~~~
lajhsdfkl
Can you explain to me in simple words what you are refuting in your comment?

Nowhere did I suggest that the _only_ way to become rich was to sell practical
products. I will state that this is the primary way people acquire vast
amounts of money and that whether people become rich via second order and
abstract systems such as financing makes no difference. Ultimately the
products would not exist without the financial system that was in place.

~~~
amarkov
It's a lot easier to get a $250k position at Morgan Stanley than build a
business generating $250k in profit. If more people go the latter route,
that's just a matter of a larger denominator, not an indication of what's
actually being rewarded.

------
YeGoblynQueenne
>> The theory that came to dominate, beginning in the second half of the
nineteenth century—and still does—was called “marginal productivity theory”;
those with higher productivities earned higher incomes that reflected their
greater contribution to society. Competitive markets, working through the laws
of supply and demand, determine the value of each individual’s contributions.
If someone has a scarce and valuable skill, the market will reward him amply,
because of his greater contribution to output. If he has no skills, his income
will be low.

"Productivity" here means the amount of income one generates, for their
employer or themselves. So in other words, if someone is good at making money,
they are productive and should be rewarded with more money.

For instance, people like me, who make their living sitting in front of a
computer screen all day are paid significantly higher salaries than people who
do back-breaking, physical work, like fruit pickers.

Picking fruit is really hard work and although you don't need a university
degree to be employed as one, it is not the kind of job that everyone can
easily do. Now that the UK is leaving the EU, fruit producers are starting to
have problems with employing people to pick their fruit, because local workers
will not do the job. "Will not" but also to a large extent "cannot" [1].
Agricultural work is not just a matter of good will- one needs to be able to
accomplish very physically demanding tasks. People who have spent most of
their working life as office workers do not have the experience, or the
stamina, to do agricultural work, even if they had the inclination. They might
be enticed to give it a try, if only the salaries for this type of job were
comparable to their usual fare. They're not- fruit pickers typically make
minimum wage.

And yet, agricultural work is an important part of the economy. Not to mention
that, without it, city-dwelling, office-working types like myself have nothing
to subsist on. We depend on the work of those low-paid workers who are poor in
formal skills but high in ability and determination, but we treat their job as
inferior, indeed less "productive" and therefore deserving of rewards than
ours.

Inequality is certainly constructed, and ideas like "marginal productivity
theory" are at the root of this construction. Much like god-given ruling
rights of Western monarchies their use is to justify and legitimise absurd
social injustices, so that we can all cling on to the belief that the current
state of affairs is not so bad after all.

___________________

[1] [https://www.theguardian.com/politics/2018/feb/11/british-
far...](https://www.theguardian.com/politics/2018/feb/11/british-farmer-moves-
fruit-growing-to-china-over-brexit-uncertainty)

 _Catalin Constandis, a Haygrove farm manager, said British workers did not
want to pick fruit because it was too physically demanding.

“In my team in the past two years, no English people have worked here. We had
some graduates once; they didn’t last a day,” said Constandis, who has just
become a British citizen._

------
lumberjack
Is this not true everywhere though? The only difference is that in some
countries, you have 80% of the population within one tax bracket of each
other, so it is really hard to pass legislation that will piss off 80% of the
electorate. In more unequal countries, you have more stratified demographics,
so you can pass individualized legislation that will only attack one tax
bracket at a time, thus ensuring that you do not piss off too much of the
electorate in one go.

~~~
bmpafa
Unless you can short-circuit that system by convincing the lower tax brackets
that their success hinges on minimizing the taxation of the top-bracket.

Then the whole thing just sort of goes to hell.

~~~
toasterlovin
That’s a nice theory. Except that the top tax brackets pay way more in income
taxes, both in dollars and as a percentage of income.

Also, the viewpoint you advocate is extremely patronizing. It assumes that a
large swathe of voters are just rubes who have been taken in by parlor tricks
and sleight of hand. Have you considered the possibility that, instead, they
have taken the earnest position that the point of democracy is not to use the
votes of the many to take from the few, but rather to set up a system that is
reasonably fair to all?

~~~
bmpafa
> Except that the top tax brackets pay way more in income taxes, both in
> dollars and as a percentage of income.

My guess is that once you factor-in payroll taxes & regressive consumption
taxes, the poor contribute a larger % of their income than do the rich.

> ...the viewpoint you advocate is extremely patronizing.

W/ all due respect, spare me the crocodile tears. Using economic chicanery to
persuade huge swathes of voters is a storied tradition in electoral politics
(as is accusing those who would call it chicanery of having 'no respect for
the common man,' or whatever).

> ...is not to use the votes of the many to take from the few, but rather to
> set up a system that is reasonably fair to all?

I'd love for democracy to take from the many and give to the few, but for
_some MYSTERIOUS reason_, the many don't appear to have much to spare these
days.

So, until the Gini coefficient starts to tick-back towards this "reasonably
fair" system you mention, I'll likely stick to my rube-like habit of
suspiciously asking '_cui bono_?'

------
eriktrautman
The demonization of businesses and businesspeople in favor of original
inventors completely misses that the value of an invention is zero unless it
is connected with actual use cases.

------
known
Isn't rent seeking a type of pyramid scheme?

~~~
lajhsdfkl
Not at all.

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bobthechef
I am opposed to all forms of unjust extraction, whether that's the rich
ripping off other people and taking money they are not owed, to the poor
feeling entitled to the money of the rich for the singular reason that they're
poor. It is unjust for the rich to engage in theft and usury, even if done for
the greater good (consequentialism). It is unjust for the poor to engage in
theft or feel entitled to the money of the rich simply because they are poor
and that X's poverty somehow automatically entitles X to Y's money. Charity is
possible, but charity by definition is not something someone is entitled to,
even if it is good to practice it. Indeed, a culture of charity is healthier
because it simultaneously requires engagement of the giver with the needs of
the receiver and does not insult the dignity of either party by maintaining it
as an act of free giving and free receiving instead of institutionalizing a
cold, obfuscating, and bureaucratically-managed dependence.

Some argue that b/c the rich benefit unjustly from our money, we are, as an
act of justice, entitled to extract their wealth. The problem with that
position is that instead of addressing the problem, it normalizes the
pathologically unjust exploitation of the rich. It gives the rich even more
incentive to pillage b/c of the categorical levying taxes on wealth. It erodes
respect for ownership and property, things that are necessary for the good of
human beings and the maintenance of social order (eminent domain has a place,
but I'm talking about the common case, and even then, compensation is due). It
legitimizes greed. It normalizes theft through taxes since taxation that goes
beyond covering the administrative costs of the state and the financing of
necessary public services is unjust. The net effect is that the rich, along
with the gov't they control, become virtual slave owners on whose graces the
poor are made dependent (no doubt, this is useful during elections). The
middle class is in effect sandwiched between an exploitative upper class and a
lower class beholden to the rich, encouraging animosity toward the middle
class from both ends. That the government controls taxation does not mean all
that much when the rich have significant sway over the government. The tax
revenue in such situations is more likely to be used to fund things that
benefit the rich, such as a public education that conforms to the designs of
the rich.

One way to counter the excessive accumulation of wealthy is to require
companies to make workers stakeholders in the companies they work for. What
percentage they should own I don't know, but enough to be able to
significantly influence things like the compensation a CEO receives. This
would eliminate the need for unions as something distinct from companies since
all parties have skin in the same game.

Other ways are the elimination of corporate subsidies that create monopolies
and a subsidiarist approach to the distribution of political power, making it
difficult for the rich to maintain power over its diffuse allocation.

It is a mistake to think that state socialism is the solution to state
capitalism. In fact, they are two sides of the same coin and reinforce one
another until they are effectively indistinguishable.

------
quantumofmalice
As is so often the case, the first comment explains more than the entire
article:

"Economic division was built into USD: you either pay interest on Treasury
bonds, or you live off it."

~~~
ItsMe000001
I don't see it. Money moves the real world each time it changes hands (except
for in purely financial transactions), so why would only the two tax paying
and the getting-interest-from-government-debt steps have a real world impact?
The cycle of money is far larger than that. It's certainly possible I'm
overlooking some larger aggregate effect because I'm not taking a far enough
step back.

I also don't think it is all so clear because I assume the distribution of
entities holding gov. debt is not the same as " the top 0.1% vs the rest" (I
found [https://www.thebalance.com/who-owns-the-u-s-national-
debt-33...](https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124)
but let's continue...). Don't banks, insurances and pension funds also hold a
lot of it? Furthermore, we cannot simply look at who owns those entities, the
funds they get directly and indirectly from holding government bonds don't go
directly to the owners after all but are used in their business. So I don't
think that one sentence helps all that much because no, I don't think it's
that simple.

~~~
quantumofmalice
Well, you aren't alone: most professional economists ignore banking and debt
entirely. To paraphrase Paul Krugman: "It's just money we owe ourselves."

Historically, however, debt has been social nitroglycerine, which is why
Christianity outlawed usury and Judaism had a 50-year debt jubilee built into
it. We will relearn this lesson eventually, but in the meantime our bandaged
finger goes wabbling back to the fire.

~~~
gaius
_It 's just money we owe ourselves_

Not quite true: it’s the money we owe our _future_ selves.

So you can arrive in the future and find that the pension that should have
been waiting for you there was borrowed by past-people and they never paid it
back. And you can’t go back in time to demand it back.

~~~
ItsMe000001
We don't have a time machine. Everything consumed today is produced today
(disregarding short term storing in warehouses, that only goes so far). I
don't buy the argument "but... future generations!" Future generations have to
deal with whatever their situation is at their future time. They don't have to
send anything back through time to us. If they are so impressed by abstract
numbers in computers that their economy crashes and they become unable to feed
themselves something else is wrong - it's not the fault of those abstract
numbers, and I would think they are either pretty stupid _(unlikely, unless
heavy metal poisoning becomes a global phenomenon and global IQ relative to
today goes the path shown in "Idiocracy")_, or their system of a society is
extremely dysfunctional.

Money is an _idea_ , nothing more. It is incredibly flexible, humans can do
with it whatever they want, whenever they want. Did you notice, looking at
history, that whenever there was a crisis humans discovered that "money" is
not an obstacle? For example, financing wars (WWII especially), or the recent
crisis.

~~~
gaius
_Future generations have to deal with whatever their situation is at their
future time_

I’m not talking about “generations”, I’m talking about _us_.

The people who enjoyed an easy credit-fuelled boom in the 00’s didn’t fully
understand that they were merely spending their retirement money now (or
rather, then)

~~~
ItsMe000001
It does not change what I wrote. There is no time machine. What is produced
now and the services brought now always are for the people living now.

Now, whether society allocates less resources to some people and more to
others despite being perfectly capable of producing enough for all is an
entirely different question, that's a problem at any given point in time. Such
as right now, today, in the _by far_ richest country on this planet in the
last four billion years. The numbers stored in computers don't force this upon
us (there is no law of nature that connects the tiny electrical charges in
silicon with a family not getting adequate housing, a dentist, or food despite
all of those easily available, or easily producible), that is all completely
man-made.

"Saving for retirement" on an economic level must be one of the biggest scams
in history. Unless the government stores products and services (like doctors)
in warehouses to be used 50 years from now for retirees paying to get all of
that produced and stored right now - and I don't think the government or
anyone does any of that that - on an economy level there is no such thing as
"saving for retirement". What will be needed in the future will have to be
produced in the future. They also don't need "saved money" of today in the
future, since it's all virtual they can and will create that on the fly
anyway, just like today ( _money creation process_ ).

It _could_ be useful if the original purpose was still true: When resources
(work, machines) are scarce, do you use them to fulfill today's consumption
dreams, or do you use them to build capacity for the future, i.e. instead of
building consumer goods you build more and better machines and factories. In
that case "saving" actually has a meaning. However, today we don't live in an
economy that has that restriction. What is not being consumed now does not
increase the work put into future productivity in any meaningful way or
amounts. Well, maybe in some countries, but hardly anywhere in the West.

~~~
gaius
_What is produced now and the services brought now always are for the people
living now_

So farmers should eat their seedcorn now and worry about what to sow only when
it’s already the next season?

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whataretensors
Lets not forget how the rich have gated out the young intelligent from early
markets, where 1000xs happen, through the corrupt SEC's accredited investor
regulation. This ensures that rich can keep shotgunning into YC batches and be
successful.

This is why I'm all in on cryptocurrency.

------
dcow
I've heard the argument before that you want to encourage, as the article
calls it, rent seeking because it demonstrates flaws in the market/regulation
and if more people exploit them they become more visible. When they're
sufficiently visible they can be addressed by the public. It seems like this
cycle must exist in order to make progress in economic regulation. It also
feels like a society needs a strong leader who can unite people under a
preferred economic policy in the first place. No progress will be made
endlessly bickering over preferred political ideaology and thrashing on
regulatory laws and guidance. How do you make progress in the US where we
endlessly bicker over policy direction and have marginalized the utility of a
strong leader? I don't know.

~~~
dredmorbius
Source?

~~~
dcow
An old economics major roommate.

~~~
dredmorbius
A storied though difficult-to-cite source.

Sounds vaguely Schumpertarian.

Though your first description is mor National System / Friedrich List.

------
montrose
His thesis is that changes in government policy are the cause of the
increasing economic inequality in America. But a simple thought experiment is
enough to disprove this: imagine what Larry Page would have done in 1950 vs
1998. In 1950 he would have become a professor or gone to work for Bell Labs.
In 1998 he was able to start his own company and become a billionaire. But it
wasn't changes in government policy that made this possible. It was the rise
of microcomputers and networks that made this possible. And Larry Page's case
is the rule, not the exception.

~~~
alex_young
> In 1950 he would have become a professor or gone to work for Bell Labs.

Why wouldn't he have started one of the numerous profitable companies of the
50s? It seems more likely that an entrepreneur would do that rather than work
in another field.

> In 1998 he was able to start his own company and become a billionaire.

This appears to prove Stiglitz' point doesn't it? There was no deficit of
innovation in the mid 20th century, all without massive economic inequality.

~~~
aphextron
>This appears to prove Stiglitz' point doesn't it? There was no deficit of
innovation in the mid 20th century, all without massive economic inequality.

The main argument of Keynesianism always comes down to the baseline of wealth
for all people though. The average person today is far wealthier than the
average person in 1950, and that's the real goal. Not necessarily equality of
outcomes for each individual.

~~~
kevin_thibedeau
I make less today than my entry level junior engineer salary 20 years ago
after adjusting for inflation and cost of living. All ships do not necessarily
rise.

Wage and salary suppression is a real thing and will eventually bring our
society to the breaking point. We are just beginning to feel the first
tremors.

~~~
aphextron
>I make less today than my entry level junior engineer salary 20 years ago
after adjusting for inflation and cost of living. All ships do not necessarily
rise.

Yet a person in the third world is now able to feed a whole family and live in
relative comfort even on the cut rate salaries of outsourced programming work.
The point is that as long as the total amount of wealth generated in the world
increases, the ends justify the means.

