
Massive new data set suggests economic inequality is about to get even worse - clumsysmurf
https://www.washingtonpost.com/news/wonk/wp/2018/01/04/massive-new-data-set-suggests-inequality-is-about-to-get-even-worse
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jldugger
It'd be nice if the article this news story bases it's premise around
([https://scholar.google.com/scholar?hl=en&as_sdt=0%2C38&q=%22...](https://scholar.google.com/scholar?hl=en&as_sdt=0%2C38&q=%22the+rate+of+return+on+everything%22&oq=the))
wasn't a non-peer reviewed working paper that self-cited unpublished research.

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rwnspace
That would be far too close to careful journalism in the empirical tradition.
Can't you see we're in the middle of a culture war, and we need articles on
the front-line every 24 hours?

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xbmcuser
I don't see how income inequality can change without higher taxes on the rich.
The middle class earns 10 spends 10. The rich earn 100 spends 20 is taxed 20
invests the remaining 60. So next year middle class earns the same 10 the rich
earn 100+investment returns. Add inflation and the middle class each year
looses purchasing power and more wealth shifts to upper class. It's simple
math and the way the tax systems in most of the world work is not going to
change.

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WalterBright
The middle class is quite capable of investing in the stock market. 50% of
Americans own stock.

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c256
This story suggests (to me) that number is high, rapidly decreasing, and
somewhat misleading, since it includes people with any level of 401k/similar.
What’s your source?

[http://www.businessinsider.com/why-so-few-millennials-
invest...](http://www.businessinsider.com/why-so-few-millennials-invest-in-
the-stock-market-2016-7)

~~~
WalterBright
I read in the Seattle Times recently, sorry I don't remember the particular
article. The figure did include indirect investments, such as via pension
plans.

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phs318u
I’ve often wondered when the cognitive dissonance between belief in the
promise of achievable prosperity, and the reality of a vanishingly small
chance of achieving it, would become too much to bear for an armed and
increasingly dispossessed populace.

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WalterBright
With a hundred bucks anyone can start an investment program in stocks. In
contrast, I saw on the news the other day that the average lottery ticket
"investor" puts in $250/yr, and lottery investors skew heavily towards lower
income people.

$100 in the S&P 500 last January would be worth $120 today. And low income
people are pretty much exempt from capital gains taxes.

The democratization of the ability to invest in companies like Microsoft and
Amazon is one of the great opportunities that exist in America today.

~~~
rdlecler1
And given that these people are willing to invest in lottery tickets, what's
the odds that they'll make good stock market investors?

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WalterBright
Given that monkeys randomly throwing darts seem to do better than
professionals, I'd say the odds are very good they'll do better than the
lottery.

The ROI (Return On Investment) for lottery tickets is negative 53%.

[https://www.theawl.com/2012/02/how-much-can-you-expect-
as-a-...](https://www.theawl.com/2012/02/how-much-can-you-expect-as-a-return-
on-that-2-powerball-ticket/)

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almost_usual
>if you were a typical investor

I’m not sure what “typical investor” means in this context. Shoveling money
away in a diversified account and never touching it? Investment practices
aren’t static and have changed quite a bit over the time measured.

Even if investment practices were static you still need to factor in human
emotion to investing. It’s easy in retrospect to see “If I kept my money in a
diversified market I would have received +x% over y time”.

But humans don’t think this way. Day to day events have much more influence on
how someone makes a decision than long term forecasts.

The Great Depression wasn’t just a slow down to our economy, many people
believed capitalism was coming to an end. This happened weeks after one of the
strongest bull market periods in United States history.

If you were to travel back in time and tell someone on Black Tuesday “don’t
worry, use dollar cost averaging and you’ll be rich in 90 years” they would
think you were insane.

This research also fails to recognize most millionaires in that time period
were immigrants from poor families. Their frugality and tolerance for high
risk entrepreneurial activities is what made them wealthy to begin with.
Trustfund children rarely make as much as their parents. They settle for low
risk careers like “doctor” or “lawyer” which pay high salaries but do not
generate large sums of wealth. They also tend to be UAWs (Under Accumulator of
Wealth).

“A $250,000 per year doctor is an "Under Accumulator of Wealth" if his/her net
worth is less than the product of their age and one tenth of his/her realized
pretax income.” - The Millionaire Next Door

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walterkobayashi
And Republicans want to give more tax breaks to millionaires and billionaires.

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WalterBright
Lowering corporate tax rates helps stock values, and 50% of Americans own
stock directly or indirectly (via pension plans).

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rdlecler1
What about the other half?

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WalterBright
It was in reply to the person who implied breaks were only for millionaires
and billionaires, unless one believes that 50% of Americans are millioniares.

See my other post in this thread on this topic about the democratization of
stock investing in America. Of course, one must also choose to invest in
stocks as opposed to, say, lottery tickets.

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supreme_sublime
I still fail to see how "economic inequality" is a bad thing.

If you accept that we will never be equal (aka aren't a communist) then the
question becomes, what is a "good" level of inequality? How do you determine
that? Does inequality increasing actually mean anything?

I'd argue inequality is quite meaningless. Especially on a national basis.
Everyone can be equally poor, what good did lower inequality do then? Why
focus on inequality instead of something like poverty? As Louis CK tells his
daughter in an episode of Louis "The only time you look in your neighbor's
bowl is to make sure that they have enough. You don't look in your neighbor's
bowl to see if you have as much as them."

[https://www.youtube.com/watch?v=Jtxuy-
GJwCo](https://www.youtube.com/watch?v=Jtxuy-GJwCo)

~~~
dragonwriter
> I still fail to see how "economic inequality" is a bad thing.

It's a bad thing because it is an objective fact that it is a source of human
suffering. You might have a moral or aesthetic preference that humans _should
not_ respond to inequality that way, but that is no more meaningful than a
belief that they should not adversely react to oxygen deprivation.

~~~
supreme_sublime
Is it? I would love to see the proof of that. Afghanistan has one of the
lowest Gini coefficients in the world. So inequality doesn't seem to be their
problem.

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dragonwriter
You can look at the large body of work in the field of relative deprivation
then; there's strong evidence that it is a powerful factor for most in
developed countries, and it some evidence that it also is outside of the
worst-off in less developed countries, but the poorest in LDCs seem to have
absolute deprivation dominant as a source of disutility. (The research on LDCs
is thinner and more recent, as historically most of the work has been done in
relatively developed countries.)

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supreme_sublime
Sounds like envy to me. Which doesn't really seem like something we as a
society should cater to. Instead people should learn to either be happy with
what they have, or actively attempt to make steps to improve their life. There
is no option to take from others for your own benefit or the supposed benefit
of others, as that is theft.

But let's say that's just not how the world is, envy is certainly a very real
human emotion. What level of inequality is necessary to cause broad social
unrest? Do we have anything close to a situation like in Venezuela?

It is really cool how you are telling me to do the legwork and make your
argument for you. Definitely productive.

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dragonwriter
> Sounds like envy to me. Which doesn't really seem like something we as a
> society should cater to.

I'll repeat what i said before, anticipating exactly this line: You might have
a moral or aesthetic preference that humans should not respond to inequality
that way, but that is no more meaningful than a belief that they should not
adversely react to oxygen deprivation.

> It is really cool how you are telling me to do the legwork and make your
> argument for you.

If you need a simple starting point that is freely available online, _Income
Satisfaction and Relative Deprivation: An Empirical Link_ , D’Ambrosio, C. &
Frick, J.R. Soc Indic Res (2007) 81: 497.
[https://www.researchgate.net/profile/Conchita_DAmbrosio/publ...](https://www.researchgate.net/profile/Conchita_DAmbrosio/publication/225714229_Income_Satisfaction_and_Relative_Deprivation_An_Empirical_Link/links/57557c6208ae10c72b66a279.pdf)

But it's a big area of research, and if you are genuinely unfamiliar with it
and concerned at all with economic development and related public policy, you
are going to want to spend some time with the area

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dawhizkid
Can't say I'm surprised...my amateur investor tip is to buy stocks that cater
to the emerging poor or super rich and short or avoid anything in between.
There's a reason Dollar General has been rallying ($DG)...

I'm long CVS ($CVS) for the same reason...especially after having bought Aetna
I predict their "Minute Clinic" concept will cater to the emerging poor that
will become increasingly sensitive to rising healthcare costs for acute care
at traditional urgent care/hospital settings...

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thisisit
I guess this is one way to summarize the idiom - It takes money to make money.

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cryoshon
okay, silicon valley: disrupt income inequality. find a way to get rich by un-
riching the rich.

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trappist
See this is the sort of comment that makes me feel like people get upset about
economic inequality, rather than poverty, because poverty truly is not what
they see as the problem.

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uoaei
The money has to come from somewhere! And all the wealth generation attributed
to government practices goes by far into pockets of the rich. Reducing income
inequality is the only trickle-down economics that works.

