
A Simple Fix for Our Massive Inequality Problem - untangle
https://www.nytimes.com/2017/11/30/opinion/inequality-social-wealth-fund.html
======
DoreenMichele
Have they not heard of Adam Smith's _The Wealth of Nations_? *

IIRC, prior to Smith's famous book, the wealth of nations was viewed in terms
of gold kept in the coffers of the kings. This was increasingly a source of
puzzlement because it was failing to explain why some nations were thriving
and others were not. This seminal work has been credited with being single-
handedly responsible for transforming our understanding of _wealth_ as "gold
in the king's coffer" to what we now refer to as GDP. Wealth of a nation is
measured by its productivity, not the money in the bank.

While I agree we need to do something about the current trend towards
concentrating money in the hands of the few, clearly at the expense of the
many, this is not the way to do it. This in no way protects the productivity
that gives rise to these riches. In fact, it is likely to undermine said
productivity.

There is no limit to how much people can spend. If you just cut everyone a
check, whether you call it Basic Income or American Equity, the money will get
pissed away. It will not get invested in a better future.

We have to find ways to address the underlying structural problems that are
causing the 1 percent to effectively bleed the masses for more. We also must
do so without creating perverse incentives. This is a case of "the cure they
are recommending is worse than the disease."

* [https://en.m.wikipedia.org/wiki/The_Wealth_of_Nations](https://en.m.wikipedia.org/wiki/The_Wealth_of_Nations)

~~~
vannevar
"...the money will get pissed away."

This is a common misconception about money. It never gets 'pissed away', it
just changes hands. How fast it changes hands, and the degree to which it
leaves productive assets in its wake, are the determining factors for economic
health. The question is whether money spent by individuals on daily
necessities would ultimately be better for the economy than money spent by
high speed traders exchanging commercial paper or by a surgeon buying a second
yacht. I don't know the answer to that question, but in no case is the money
'pissed away'. To paraphrase Al Gore, there is no 'away' to piss it into.

~~~
DoreenMichele
"Easy come, easy go" is a well known phenomenon. How you get your money
influences how and what you spend it on. Most lottery winners are bankrupt
within 5 years (about 2/3s of them).

I know someone who got fired, got six weeks severance pay, drove to a vacation
spot with a friend and blew six weeks pay in one three day weekend on sex
workers and cocaine. They then moved back home because they couldn't afford
their apartment anymore. Six weeks severance pay plus unemployment benefits
could have bought them their ongoing independence.

I would call that _pissing money away._

Edit: Changed _hookers_ to _sex workers._ They were called _hookers_ back in
the day.

~~~
vannevar
It doesn't matter as much what he got for his money, as where it goes from
there. The question is whether the money has a faster path to productivity via
the sex worker or drug dealer than it would via a hedge fund manager. And that
is not an easy economic question to answer, all moralizing aside.

~~~
DoreenMichele
I think that completely discounts the negative long term impact on his life,
which seems particularly egregious in a discussion where I am being criticized
as if my remarks are an act of callous disregard for the welfare of the common
person.

You don't care that he flushed his own life down the toilet, just as long as
sex workers and cocaine dealers invested it well after they cleaned him out.
And then you criticize me for "moralizing."

~~~
vannevar
You're correct, it _does_ discount the impact on his life because that impact,
however emotionally compelling, is irrelevant to the point of the subthread.
Which is that, short of literally destroying it, money is never 'pissed
away'\---it simply moves on to someone else. People often confuse the benefits
(and moral implications) for the spender (which are often pretty clear, as in
this case) with the broader economic benefit of the transaction to the economy
(which is much less clear). Ie, "someone made a bad moral choice in spending
their money, so that _must_ be bad for the economy." Not necessarily.

~~~
DoreenMichele
So, his inability to buy a house for himself and the fact that he continued to
live with parents for many years has no bearing on our discussion of the
economy and the creation of wealth?

I don't want to give a lot more details about this person's life. It is a real
person and giving too many details amounts to gossiping about them. But I
think you are in error. The impact it had on this person's life has other
impacts.

I don't know why you think this is some appeal to emotion. It isn't. A person
who cannot get their life together because of one youthful indiscretion has
long term consequences that impact the wider economy.

This is likely part of why such stories are _emotionally compelling_ : Because
it actually matters.

I am not generally not talk about morality in the sense that other people do.
I am not too happy to have the concept of morality injected into the
discussion in such a way that it slings mud all over me at every step of the
way. I am not talking about morality. I am talking about what makes for a
healthy system that serves both the commoner and the rich person well. Our
current approach doesn't do that.

One of the reasons it does not do that is because I have seen a number of
statements by wealthy people to the effect that they live with a lot of fear
due to their wealth plus the state of the world. I thin this fear is
legitimate and I think it tells us that a system that makes the ultra rich
richer by bleeding the common person is a fundamentally unhealthy system that
serves no one well, not even the rich people soaking up the extra money and
wondering if they will need to abscond to Australia in their jet should the
crap hit the fan.

I think this fear is part of why so many tech giants talk so much about things
like creating basic income. They want to be able to stop living in fear that
someone is going to want them dead because the world is going to hell for so
very many people and this makes them a potential target.

~~~
vannevar
"So, his inability to buy a house for himself and the fact that he continued
to live with parents for many years has no bearing on our discussion of the
economy and the creation of wealth?"

We're only talking about the marginal impact of the money itself---in this
case, his six weeks of severance. That he didn't invest it more productively
certainly has some small impact, but the point is that he didn't actually
destroy its value, he simply transferred it to someone else. Had he gone off
to live happily alone in the mountains as a Buddhist monk, he would've been
similarly unproductive. I assume you would've found that more admirable, but
the economy doesn't care what we find admirable. It only cares about how fast
money moves, and whether or not it leaves productive assets in its wake. He
obviously didn't use his severance directly on productive assets, but a lot of
people don't. It doesn't mean that they can't be a vector for efficiently
getting it to people who do. That's the harder question to analyze. Given the
choice between a spendthrift living a dissolute life of debauchery, and a monk
who ceremoniously burns all his worldly possessions and lives in solitude, I
suspect the economy prefers the spendthrift.

~~~
DoreenMichele
_Had he gone off to live happily alone in the mountains as a Buddhist monk, he
would 've been similarly unproductive. I assume you would've found that more
admirable_

Yeah, I am done with this. In spite of me stating that this is not about
moralizing, you keep projecting moral nonsense onto me.

The only thing I am talking about is this guy blew through a lot of money in a
single weekend and this had long term negative repercussions for his entire
life. He went back home to his parents and then never really cut the umbilical
cord again. It interfered with his ability to live as he saw fit for many
years afterwards and to this day. He threw away his one shot at ever getting
to be an adult and live on his own terms.

To be perfectly clear, if he had blown through all that money for cocaine and
sex workers, come back revitalized, stood up to his parents and said "Yeah, I
don't care about your opinions about my life" and sold his second car to make
it possible to keep his independence, I might well feel that was money well
spent. But that isn't how it went down. Instead, he tucked tail, moved back
home and then never lived down what an untrustworthy "loser" he was in the
eyes of a lot of people whose opinions mattered to him.

Edit: Trying to stop using the F word like a substitute for _very._

~~~
vannevar
I meant no offense. I understand that the guy's story is a sad one, and that
he could've spent the money more productively. He could've been a better
person. None of that has anything to do with what happened to the money
_after_ he spent it, which was the point of my original comment. If the focus
is on the guy and his behavior, and the money that comes in and out of his
life, it says very little about how much that money is contributing to the
economy. Like a lot of things, it's the economic _network_ that matters, and
his position in it, and not so much his direct marginal contribution to it (or
lack thereof).

If he had been terminated without any severance, he might've still moved back
home and never lived it down. And the money would've taken some other path
through the economy, maybe a more productive one, maybe a less productive one.
Either way, it wouldn't be pissed anywhere, it would just travel a different
path through the network.

~~~
DoreenMichele
_I meant no offense_

Thank you.

Money can be spent in a manner that is harmful, that actually reduces value in
the world. It can also be genuinely lost or destroyed.

But I don't imagine you and I will ever bridge whatever communication gap is
happening here. So, I don't plan to "throw more good money after bad" in terms
of investing more of my time in what feels like an inane discussion.

~~~
vannevar
Don't give up, you're actually pretty close. Yes, it _can_ be spent in a way
that reduces value. And it can literally be destroyed (as I noted several
times above). In the latter case, we agree it's been lost. But in the case
where it's used to destroy value, the money itself still remains in the
system, and might very well be used to create greater value than what was
destroyed. For instance, a kid might buy a cherry bomb from another friend and
destroy a mailbox. But the kid he gave the money to uses that money to start a
business. The net value of the money's path through the cherry bomb to the
business _could_ be greater than if the first kid had donated it to a charity
instead. My point is that while we can make a value judgment on the kid's
spending, _we can 't say with certainty what the broader economic effect is._
Even if he's spending all his money on sex workers, cocaine, and cherry bombs.

~~~
DoreenMichele
_My point is that while we can make a value judgment on the kid 's spending,
we can't say with certainty what the broader economic effect is._

There is about a metric fuckton (TM) of data that shows that when people are
handed a big check that they didn't work for, it typically gets spent
differently than it would have been had it required blood, sweat and tears to
get the exact same amount of money. And the way in which it gets spent
differently is typically consumptive, usually with little or no long term
value and potentially a lot of long term harm.

This is a thing we can know with a fair degree of certainty. It is part of why
the NFL tries to provide some kind of financial literacy for its players. Most
of them will have a very short career in professional football. Probably most
of the ones who aren't there very long will never make that kind of money
again. They are trying to make sure that if some guy only make a quarter of a
million dollars one year of his life, it pays for something of long term
benefit, like a house or some retirement savings.

 _Don 't give up, you're actually pretty close._

This suggests you are the smart, knowledgeable person here to educate my less
smart, less knowledgeable self.

I was describing a communication gap due to differing mental frameworks for
the issue. I was not suggesting one of us was "dumber" than the other.

I moderated a smarty pants email list at one time. I am all too familiar with
the tendency for smart people to think they are smarter than the person they
are talking to. That attitude is not constructive and it is not something I
care to keep engaging with.

~~~
vannevar
_I was describing a communication gap due to differing mental frameworks for
the issue. I was not suggesting one of us was "dumber" than the other._

I should probably have said "we're pretty close". It _is_ the mental framework
that's the issue, or more accurately the frame of reference. Most of your
discussion is focused statically, on what a particular individual gets for
their money. And whether you want to admit it or not, there is a consistent
thread of moral judgment in your arguments. You talk about people spending
money on vices, and other people who receive money without earning it.

My frame of reference is global, looking at the two factors that actually
mathematically matter for economic growth: the velocity of money, and the
productive assets left behind. There is no moral component. In that frame,
it's entirely possible that spending that appears wasteful could actually be
part of a productive system. The net effect of an air conditioner is to
produce more heat, despite the fact that it blows cold air into your home.
Your original argument was that a basic income would be "pissed away" and be
economically inefficient. My response is that you're only looking at one side
of the system, like someone concluding that too many air conditioners might
cause an Ice Age. That basic income would pass back into the economy by way of
grocers, landlords, auto dealers, and yes, probably some liquor stores and
cigarette companies. It could nonetheless be a more effective way of
stimulating the economy than giving tax cuts to the wealthy.

------
holograham
simple sure but let's talk about what it would take to give a meaningful
dividend to all americans

If we used a conservative 3.5% average return to give $1,000 USD for each
American (~325M) you need nearly 10 Trillion dollars in this fund or over half
of our yearly GDP.

Now keeping in mind this would need to be generated from a tax on some
good/service/capital which obviously has a cost component at it's base. Just
getting the initial 10Trillion in a fund would be ridiculously hard. Now add
to that the fact that 1k is a pittance and figuring out a true basic income --
this is wayyyy more complex.

I'd like to point out a HUGE fallacy in this "simple" plan -- it only works in
low population high natural capital resource areas. Alaska and Norway happen
to be relatively remote/cold places with an abundance natural gas/oil.
Norway's 1T dollar fund would be comical at US scale.

~~~
lev99
If the United States wanted a fund the same size proportional to population of
Norway's it would need 65 trillion dollars, which is about the same size as
the total value of the top 60 stock exchanges in the world.

The NYT article made me think it was a good idea, but this comment inspired me
to run the numbers myself. It's impossible to run a UBI with this type of
system in the United States without total state ownership. Why would they
publish something like this?

~~~
hguant
>Why would they publish something like this?

It's as if people in the world have agendas that allow them to handwave away
things like facts.

In all seriousness, it's an op-ed, so the NYT hasn't subjected it to their
standards of journalistic rigour, and it's written by a lawyer/blogger who
works for a think tank called Demos. Maybe I'm biased from living in DC/the
Beltway for so long, but in my head whenever I read 'works for a think tank,'
I substitute 'professional liar'. The author is the very definition of someone
pushing an agenda.

~~~
lev99
> The author is the very definition of someone pushing an agenda.

I understand people have reasons for writing appealing lies. I understand part
of the job of a think tank is to write and publish their ideas.

I do not understand why The New York Times would publish a policy idea that is
impossible. A critical thinking person can conclude that the investment fund
model cannot be applied to The United States in a meaningful way. The New York
Times is one of the most respected news papers in the world. In my mind,
publishing this article has the effect of decreasing the paper's reputation
among people that critical analyzed this policy proposal. This is damaging the
The New York Times' greatest asset, the reputation of their brand.

I do not know a lot about newspapers generally, or The New York Times
specifically. What I do know is this discourages me from investing more of my
attention into The New York Times.

------
fvdessen
The inequality problem only exists if you look at absolute wealth numbers, and
not the level of confort and opportunities that wealth affords.

The amount and the quality of goods and service that is available to even the
lower income bracket has never been better; most families can afford access to
a car, a washing machine, food from around the world, unlimited entertainment,
unlimited knowledge, air travel, telephone, etc. etc.

Put another way, all the money in the world can't buy you a better phone than
a 1000$ one, and that phone is only marginally better than a 100$ one, which
everybody can afford. And that is how it works for most things nowadays.

The reason people are so pissed about inequality, is that despite people
having material and service equality like never before, social status remain
extremely unequal. But that is human nature, and no amount of money
redistribution can change it.

~~~
c0ur7n3y
That may be true for some physical objects, but not for things like a secure
retirement, protection from crippling health-care bills, and secure (non-bank-
owned, non-landlord-owned) housing. There are vast and real inequalities
there.

~~~
fvdessen
All those inequalities you cite are paradoxically the consequence of the vast
increase of wealth and services accessible to everyone.

The retirement insecurity is a consequence to lifetime expectancy having
increased vastly beyond retirement age. The health care bills ? You couldn't
even get them before, as all the healthcare one could expect was penicillin,
aspirine, bandages and hot soup. Housing ? People would live with their
parents until and even after they married. Now people can afford to move out
and divorce.

Social behaviour and expectations have changed to fill in the opportunities
offered by newfound wealth, driven by the search for longer life and higher
social status.

------
gozur88
>Wouldn’t the enormous wealth that our increasingly productive society is
generating, which now flows into just a few pockets, be a fair source?

This has never been done successfully in an economy not based on resource
extraction without destroying the engine that produces that "enormous wealth".

The whole thing is both well intentioned and incredibly naive.

~~~
frgtpsswrdlame
>This has never been done successfully in an economy not based on resource
extraction without destroying the engine that produces that "enormous wealth".

So it's a good idea as long as we constrain it to our natural resources?

~~~
gozur88
Well, it's not a spectacularly _bad_ idea under those conditions. But it's not
like companies don't already pay for drilling, mining, and grazing rights on
federal land. Right now the money doesn't go into a special fund, though, and
in any case it's not much divided over 340 million people.

Norway's sovereign wealth fund is significant because there just aren't that
many Norwegians.

------
firstplacelast
Rich people are only rich because poor people aren't willing to kill
themselves in large numbers.

The best thing any individual can do to reduce inequality is to only
contribute to institutions that do not exacerbate inequality.

Is the median wage at your company less than the wage required to buy the
cheapest home within a 2 hour commute of your office? You're likely
exacerbating inequality every single day.

Are one or more people at the top of your company working on buying their next
Ferrari or second/third home? You'renliklwy exacerbating inequality every day.

If poor people were more willing to die than to contribute to the same
companies and people that fuck them over and the middle class was more willing
to work for themselves instead of contributing to greedy corporations all for
a mediocre home, then we would have much more equal power structures in this
country.

Every single person in this country is responsible for the way it is. Being at
the bottom isn't an excuse to fall in line and do exactly what your masters
tell you everyday.

------
cameldrv
I think we already have this -- it's called Corporate taxes. Nominally 35% of
all of the profits of every U.S. corporation are paid to the federal
government. In practice after deductions it's about 20%. His analysis of where
the money comes from amounts to either diverting money from the federal budget
in one way or another, or increasing taxes.

It seems to me that the real problems here are this: An increasing share of
GDP is going to corporate profits, and away from wages, due to deunionization,
globalization, immigration, and automation. Government policies are mostly
responsible for the first three. This stagnation of wages has combined with
the post war relentlessness of Madison ave, which programs us to increase our
consumption, even though there is no new income to support it. The result is
decreased savings and increased debt among the bottom 90%.

------
cholmon
FTA, "It’s called a social wealth fund, a pool of investment assets in some
ways like the giant index or mutual funds already popular with retirement
savings accounts or pension funds, but one owned collectively by society as a
whole. One that paid dividends not to the few, or even just to the shrinking
middle class lucky enough to have their savings invested, but to everyone."

~~~
crooked-v
So, effectively the same thing as a basic income guarantee?

~~~
danans
The end result is a basic income, but this is more about _how_ that would be
accomplished, and it ties the income to the wealth if the country.

The income is drawn from a dividend on a kind of sovereign wealth fund which
would be gradually capitalized with government assets, increased wealth and
capital gains taxes, and possibly directly via the Fed (rather than the Fed
capitalizing private banks).

This is in contrast to other schemes that directly pay the UBI based on more
progressive taxation.

In the end it is still redistributive, but it redistributes capital downwards
and not just income.

------
gricardo99
This sounds pretty much like what Sam Altman proposed the other day[1].

Posted on HN here:
[https://news.ycombinator.com/item?id=15789108](https://news.ycombinator.com/item?id=15789108)

1 - [http://blog.samaltman.com/american-
equity](http://blog.samaltman.com/american-equity)

------
tabeth
I've yet to see a diverse _company_ with no inequality, let alone a diverse
society.

On that note, I wonder how feasible it would be to have a company who uses
profit to fund an endowment and then later vows to only pay employees a
percentage of the _gains_ from said principal. That'd be neat (assuming you
could find employees to agree to said payment method).

Assuming the company has no shareholders, wouldn't it exist in perpetuity? If
this works, perhaps a similar scheme could work to fix real life inequality --
force rich people to invest their money and give the gains to the poor. Rich
people don't lose any money (other than the opportunity) and poor people
thrive. Win win?

------
indubitable
I agree in principle. Alaska's state fund has worked phenomenally well. But
there's a problem -- coincidentally one Alaska has recently faced. A fund with
meaningful returns would be measured, quite rapidly, in the trillions of
dollars. That is an enormous incentive to 'borrow just a little from' to solve
this issue or that issue.

Alaska has been facing a multi billion dollar budget deficit as they
recklessly spent during times of high oil prices -- ironically not dissimilar
to the events that led to the initial creation of the fund. So what was their
solution? The governor unilaterally slashed payments from the fund - a
decision that was challenged and then upheld in the state courts. We can write
all the sort of legalese we want to try to prevent this from happening, but I
think the current state of society illustrates quite clearly that laws are
subject to the views of those in power. For instance are the actions of the
NSA and CIA the sort of government programs the founding fathers intended to
allow when passing the 4th amendments? I doubt many would say yes, yet here we
are.

And I'm not even considering the inevitable graft involved in the management
of such a monumental fund. Ultimately, I just do not think this sort of idea
is possible in the US on a national level. State level initiatives are a very
interesting idea, however.

~~~
SubiculumCode
There is definitely a difference between state budgets and federal budgets:
fiat currency.

~~~
dragonwriter
Perhaps more immediately significant is virtually all states have
constitutional requirements for short-term balance of operating budgets, and
often strict constitutionsl rules on approval and use of debt financing, while
the federal government has neither.

Fist currency in principal allows monetizing budgets (either in general or
debt specifically), but this is avoided in practice (and one reason for
independent central banks is to provide confidence that political actors will
not engage in monetization.)

------
ccachor
Maybe a simple fix is to make the Federal Reserve aware of the problems they
are creating.

~~~
AnimalMuppet
Why do you think they are _not_ aware?

Note well: "If they were aware, they would fix it" is not a valid response.
Fixing inequality is not a part of the Fed's mandate.

------
weberc2
"Wouldn’t the enormous wealth that our increasingly productive society is
generating, which now flows into just a few pockets, be a fair source [of
money to initialize the fund]?"

So wealth redistribution was the punchline after all.

~~~
mtpn
Inequality refers to unequal _distribution of wealth_ so in fairness what
could this article have been about, if not some suggested mechanism for
distributing wealth differently?

~~~
weberc2
The issue is the specific mechanism for distribution--taking wealth from
people. Another mechanism would be taking proceeds from natural resources, or
improving education to enable a broader range of people to succeed in the
market. My point isn't that these are better options, just that redistribution
is not the only kind of distribution.

My issue with this article is that it claims a fund mechanism makes the
inequality problem simpler, but it is still subject to all of the same
problems that plague the existing redistribution schemes.

~~~
mtpn
> taking wealth from people

None of the ideas in the article truly boil down to this, except maybe some
specific implementations of taxation.

> redistribution is not the only kind of distribution.

I’m trying to understand this, but I can’t.

------
shove
"That would never work" protest citizens of country whose military spending
surpasses that of the next eight countries combined.

------
languagehacker
If you enjoy Matt Bruenig's writing, check out the [People's Policy
Project]([https://peoplespolicyproject.org/](https://peoplespolicyproject.org/)),
which he heads. Matt's a fantastic writer in the space of social issues and
economic policy.

------
Namarysanghata
I am no economics expert but I found this idea to be very promising. Moreover
the concept of buying more stocks during a downturn could resolve the boom and
bust cycle.

Perhaps this national wealth fund could pay out this citizens dividend or ubi
as a cryptocurrency?

------
guelo
> Norway uses its fund not to directly pay out dividends but as a source of
> revenue for its famously generous welfare state.

That wouldn't work in the good ol USA because the rich would use racisim and
sexual panic to turn people against the welfare state and divert the money for
more tax cuts for the rich. In this country the only bennefits that stick
around are direct benefits that are mostly targeted at the upper middle class,
such as the mortgage interest deduction or 529 college saving fund.

------
Y7ZCQtNo39
The Social Security fund kind of sounds like what is described in the fourth
paragraph.

------
ng-user
What if I told you there were no "Simple Fixes" for "Massive ____ Problems"

~~~
heimatau
It's so simple...no one will do it. Lol.

