
A Guide to Statistics on Historical Trends in Income Inequality - indigodaddy
https://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on-historical-trends-in-income-inequality
======
digitalmaster
So looks like the 80s is when things start going south (increased income
inequality) so I looked up who was president during that time, then looked at
their wiki page to see their economic policy and found this gem of a quote:

"Soon after taking office, Reagan began implementing sweeping new political
and economic initiatives. His supply-side economic policies, dubbed
"Reaganomics", advocated tax rate reduction to spur economic growth, economic
deregulation, and reduction in government spending."

~~~
rwcarlsen
As an engineer and computational scientist, drawing conclusions from
correlations like this is absurd. Maybe Reagan was good for income inequality
or maybe he was bad for it. Did you control for the other variables before
drawing your conclusions? What about:

* The governments' legislation and economic policies in countries like the USSR, China, etc. in the 80s

* Changing technology especially communication technology

* Changing levels of education in the world.

* Lingering/diminishing trends/effects from wars like: Cold War, Korean War, Vietnam War, etc.

* Changing age distribution of humans in western countries,

And on and on. The world economy is extremely complex with heavy nonlinear
feedback effects. How can you possibly state things like Reagan caused X
w.r.t. the world wealth distribution with such confidence?

~~~
boomboomsubban
>As an engineer and computational scientist, drawing conclusions from
correlations like this is absurd. Maybe Reagan was good for income inequality
or maybe he was bad for it. Did you control for the other variables before
drawing your conclusions?

Drawing absolute conclusions in this area is nearly impossible, and we can't
say with any certainty that Reaganomics caused this problem. The evidence does
seem to suggest that the policies are not fixing the problem, which is a far
easier claim to make. They might not be the cause, but it seems very likely
they aren't the solution.

~~~
setr
Given that you don’t know what would occur without reagonimics, even that much
isn’t safe to say. It’s quite possible that reagonimics is in fact helpful,
just not enough to overcome other negatives in the environment (so in sum, a
loss). Removal may very well increase the rate of inequality.

In other words, with just the evidence provided, you can’t safely say much of
anything beyond “it started getting worse in the 80’s”

~~~
boomboomsubban
>Given that you don’t know what would occur without reagonimics, even that
much isn’t safe to say.

Yes, I can. The current situation seems undesirable. While it's possible that
the situation would be worse without Reaganomics, the actual situation is
still undesirable. Looking towards the future, it seems unwise to continue a
plan that led to undesirable results.

~~~
JoshuaDavid
Your argument proves too much. Consider the following example:

> You are diagnosed with Type II Diabetes. Your doctor tells you to monitor
> your blood sugar and take insulin. This situation seems undesirable. While
> it is possible that the situation would be worse without monitoring your
> blood sugar and taking insulin, the actual situation is still undesirable.
> Looking towards the future, it seems unwise to continue a plan that led to
> undesirable results.

~~~
boomboomsubban
If Reaganomics came from a trained professional who were basing their
recommendations on the best theory science had developed through
experimentation, I would not advocate changing the policy. That is not the
case though, as we both agree that reliable evidence is scant.

Going forward, there isn't a great theory showing that Reaganomics is worth
continuing, and the hypothesis that different policies would provide a better
outcome seems worthy of testing.

------
WhompingWindows
What's the best solution to this - if wealthy and high-income individuals get
more power via political lobbying, they can then gain more wealth and higher
incomes, gaining even more lobbying power. They can also flood the media with
advertising money and propagandist messaging to convince voters to care more
about less impactful issues. It feels like an endless cycle to me.

Other than war or complete societal upheaval, what can actually be done to
solve the problem?

~~~
jjoonathan
I'm still amazed at how effectively we have collectively shunned thought along
these lines by turning the founding father of the relevant branch of
economical philosophy into a real life he-who-shall-not-be-named. Anyone who
wants to talk about these problems either has to either re-invent the wheel or
mention the unmentionable name and doom themselves to immediate dismissal as a
kook.

~~~
fixermark
In fairness, attempts have been made to translate the revolution part of his
ideas into functional policy at least twice now and both events have included
massive violence (and one has followed up that massive violence with a general
mismanagement of public resources to the detriment of the "unconnected," not
unlike the pain inflicted upon them by the previous ruling class).

At this point, the burden of proof is on the theory to show merit. It's a bit
like Extreme Programming in that regard---looks great on paper, but how many
times does it get to fall short of its promises before people stop blaming the
implementers for "holding it wrong" and start talking seriously about the
flaws in the originating theory?

Perhaps also like XP, however, pieces of it do seem worthwhile and are bearing
fruit in the nations that have adopted them.

~~~
beat
I've done XP. It was awesome.

As for the two attempts to implement Marxism (assuming you're speaking of
Russia and China here)... in Russia, you can't separate it from Leninism and
Stalinism. Is Marxism the problem, or the authoritarian government?

China is more interesting. China is still ostensibly a Marxist nation, right?
Per World Bank data I just looked up, China's per capita GDP (in constant US
dollars) was lowest in 1962, at $71.91. That's per year. In 2017, it's
$8826.99. Constant dollars, mind you. That's 123 times more.

I have a hard time calling that a failure of any sort.

There hasn't been large-scale political violence in China since the end of the
Cultural Revolution in 1976. That ten-year period killed 5-10 million on the
high end. Which is, of course, quite bad, but in comparison to the 50-80M that
died in ostensibly capitalist Europe during WWII, it doesn't seem that
outsized.

So for burden of proof, I think you need to argue that an alternative model
would have resulted in less political violence and more economic prosperity
than that for China. Good luck.

~~~
merlincorey
> There hasn't been large-scale political violence in China since the end of
> the Cultural Revolution in 1976. That ten-year period killed 5-10 million on
> the high end. Which is, of course, quite bad, but in comparison to the
> 50-80M that died in ostensibly capitalist Europe during WWII, it doesn't
> seem that outsized.

> So for burden of proof, I think you need to argue that an alternative model
> would have resulted in less political violence and more economic prosperity
> than that for China. Good luck.

The Communist China's Great Famine[0] is said to have caused the deaths of
tens of millions of people, as much as 30-40M, depending on who is
guesstimating.

I am not sure I would call that a triumph of economic prosperity for China.

[0] [https://www.npr.org/2012/11/10/164732497/a-grim-chronicle-
of...](https://www.npr.org/2012/11/10/164732497/a-grim-chronicle-of-chinas-
great-famine)

~~~
beat
Famines were not exactly unusual in backwards agrarian nations recovering from
50 years of nonstop civil war and foreign occupation. European nations, before
modernization, had famine problems, even without war. As Hans Rosling pointed
out, famine killed much of the Swedish population in the late 19th century.
From 1845-1850, Ireland lost a quarter of its population to famine and
emigration to escape famine - 10-15% of the country starved to death under
ostensible capitalist rule. And there are plenty more examples where that came
from.

So blaming it on communism seems a little off to me. Matter of fact, one could
easily argue that communist revolution is a _consequence_ of capitalist
failure, not a cause of failure on its own.

~~~
merlincorey
I certainly didn't mean to imply that Communism was the cause of the famine.

I meant to instead do what you seem to be doing - pointing out a bit of
economic turmoil that lead to great loss of life. Mine just happened to be
accounting for on the side of the ledger labeled "Communism".

Does it make the Great Famine any less an economic blow to Communist China
that there are also historical examples of large famines in capitalist
societies?

I'm not sure it does.

------
darkerside
Is there an inherent problem with income inequality? Would you rather live in:

* World 1, where everybody has x, except one person has 100x * World 2, where everybody has .5x and is thus totally equal

(I realize assets and income are not equal, but I think the point stands)

~~~
munk-a
I don't really understand why this scenario is worded this way, it seems like
World 2 where everybody has .5x is just worse due to World 2 getting the
shaft. Here's a setup:

* World 1, where everybody has x except one person has 100x

* World 2, where everybody has 1.2x

I think World 2 pretty clearly wins but this is a bit of a strawman to begin
with. I'd personally rather live in a world where the poor have x and the rich
may benefit by having 6x in extreme cases.

I agree with the general concept that incentives can increase productivity and
different people are adding different amounts to society, I disagree with the
idea that some people are equal in skill to 100,000 other people and need to
be rewarded accordingly.

~~~
malandrew
Well you actually do end up with 0.5x instead of 1.2x because in World 2 you
have eliminated the profit motive that drives progress forward. Basically you
forego all progress that would have happened with the opportunity to profit by
creating and inventing things and then making those things faster, cheaper and
better.

~~~
munk-a
Sorry, so part of your scenario to divine why wealth inequality isn't so bad
is an assumption (without grounding or explanation) that a lack of wealth
inequality necessarily leads to high levels of economic inefficiency?

I feel like your initial question is just coming from a very disingenuous
place, the discussion of the relative economic efficiency of unequal vs.
perfectly equally distributed wealth is a bit aside from the question of how
extreme wealth inequality is. So I suppose, I agree that wealth inequality
does provide value, but it does so in very small doses which we have greatly
exceeded at this point.

~~~
malandrew
The view that "wealth = money" is myopic. Wealth is access to goods and
services. At any point in time, money is just the means to get more goods and
services, but over long periods of time, goods and services becoming cheaper
and more accessible is a form of wealth.

[https://fee.org/articles/you-are-richer-than-john-d-
rockefel...](https://fee.org/articles/you-are-richer-than-john-d-rockefeller/)

The problem with people who focus on inequality is that they completely ignore
∂t. If you're trying to improve the lives of 7.6 billion people, time is of
utmost importance.

~~~
munk-a
I agree entirely with you in theory. I agree that increased compensation
drives innovation and that innovation is the primary driven of our standard of
living. In ~1700 france if the extreme wealth of the monarchy and clergy had
been redistributed to the common folk their standard of living would almost
certainly be below that of people living in slums in the modern day. I think
that over the last three hundred years we've all gotten to a place where we're
much better off, but the relative standard of living people experience has
slid downward in the first world in recent decades and I think that is an
issue that's worth solving, or at least finding the source of so we can
mitigate it in the future.

------
rb808
This is a very US - centric view. With globalization I think a different
picture emerges. Increasing global trade has hurt US (and Other Western)
working classes with de-industrialization, where many more people foreign
countries have been lifted out of poverty.

~~~
munk-a
The US has, on a global scale, long had higher standards of living than a
large remainder of the world so balancing US workers with foreign workers to
elevate the standard of living in third world countries isn't a bad thing. The
issue is more that while this process was happening a small segment of the US
population has managed to sequester a nearly incomprehensible portion of that
wealth for no good reason.

~~~
rb808
> long had higher standards of living than a large remainder of the world

Not really 200 years ago most Americans were scratching a living in a new
world fighting off the natives and importing slaves.

>The issue is more that while this process was happening a small segment of
the US population has managed to sequester a nearly incomprehensible portion
of that wealth for no good reason.

Agreed its a big change from the 60s and 70s.

~~~
munk-a
Sorry, to clarify here, long is defined as ~80 years, which, I'll grant, isn't
actually very long. My apologies for the confusion.

------
CryoLogic
Another side of this to consider, is that low-skill many jobs today are
literally not worth as much as they used to be.

In labor economic there is a very well established understanding that jobs
requiring high levels of skill are typically harder to fill hence corporations
must pay more to get those individuals.

But the reverse is true, low skill jobs are easy to fill so we don't have to
pay as much.

But here's the kicker, many branches of economics focus on technology as a
eliminator of work. Basically, two guys becomes one guy and a machine.
Eventually a machine might replace both of the guys.

There is an intermediary between a job being automated entirely away though,
where a physical human's work loses value. McDonalds for example has been
rolling out automated ordering systems so that they don't have to employ as
much "front-office" staff. If they keep those on payroll, there job brings
much less value to the company than it did prior.

Technology creates skilled jobs (aka maintain the robot) and eliminated
unskilled jobs. But technology can also reduce the value-add of another
unskilled employee.

What I am getting at is the sad truth that it's totally possible unskilled
labor is not worth as much as it used to be.

If we continue to base our salaries entirely capitalistically, maybe these
gaps will widen as low skill employees become less and less valuable while
high skill employees gain value but less of them are required.

~~~
bluGill
Moral of this story: become high skilled. If you are high skilled not only do
you make more money in absolute dollars, but also the things you want to buy
are cheaper in absolute dollars.

There are plenty of things to automate for the foreseeable future. I don't
know what the correct answer for kids 100 years from now will be: they have
the figure out their own answers.

------
autokad
i wish people would call out the fed.

their primary metric for increasing interest rates is wage inflation. so they
play wack a mole when people start seeing income growth, a recession comes,
and employers have all the bargaining rights again.

yet despite the fed's goal of smacking down wage growth _ahem_ , inflation,,
nobody points a finger at them.

------
maneesh
I posted my take on this recently on Facebook. (And I recently gave a TedX
talk on the same concept entitled "Money: The Greatest Story Ever Told" [1])

Here is an image of the entire world's Money supply [2].

In my eyes, the majority shift occurred due to two things:

1) Ending the gold standard peg

2) Creation of the derivative market

1 --- Ending the Gold Standard Peg

In 1971, Nixon severed the connection between Gold and the US-Dollar. The USD
now became purely fiat --- no actual resource backed the USD anymore.

This allowed the dollar to change. Banks could create money -- really. Credit
could be expanded and offered to customers. Debt could become an asset, and
banks could trade.

But the most interesting part is that it led to #2 --- the Derivate market

2 -- Creation of the Derivative Market

By removing the gold standard tether, money became _anything that people
believe in_

In 1973, the first derivative began to trade.

And banks utilized this to create futures, contracts, warrants, swaps --- bets
against bets against bets against bets. The money isn't really there. It's
just a financial instrument traded to hedge against fluctuations.

It's a betting system. And it's turtles the whole way down.

Here's the crazy part. The global derivatives market is 1.4 QUADRILLION
dollars. That is, 20 times larger than the GDP of the entire WORLD.

In the picture attached --- see that giganticly long section at the bottom?
That is derivates. It outweighs the rest of the world's money by FAR.

1.4 Quadrillion USD are in derivatives. Guess how much money world-wide is in
coins and banknotes? $5 trillion.

That is --- derivatives are 280x the amount of coins and bank notes in THE
ENTIRE WORLD.

[1]
[https://www.youtube.com/watch?v=9G0F-VUPTa4](https://www.youtube.com/watch?v=9G0F-VUPTa4)
[2] [http://money.visualcapitalist.com/worlds-money-markets-
one-v...](http://money.visualcapitalist.com/worlds-money-markets-one-
visualization-2017/)

~~~
wuliwong
Glad to see someone mention the "temporary" cessation of the dollar's
convertibility to gold. From my perspective that would mark the most important
event for this topic but it is hardly discussed.

~~~
maneesh
I never understand why people see these actions all happening simultaneously
-- a invention of infinite money will of course go to the top, and create
inequality between the rich and poor -- because that's how compound interest
works.

But for some reason, that doesn't seem to even register on people's radar.

------
rukittenme
Reganomics, the end of Breton Woods, the end of the "Gold Standard",
"Stagflation", "Peak Oil", population growth, immigration, greying population,
healthcare, welfare, tax cuts, globalization, capitalism, communism.

Oh don't mind me, just pulling excuses out of my ass. I love posts like these
and I especially love their graphs. Less so for the (little) content they
contain. More so for people's reactions to the content. Its confirmation bias
bait all the way down!

I don't mean to be so negative and critical. I'm just tired of people trying
to explain the state of the world from a single graph!

Income inequality could be increasing for different reasons at different
times. It might not be increasing at all (depending on how you define income)!

\---

Let's stop drooling over graphs and have an actual conversation about the
"problem". Who am I richer than and why? Who is richer than me and why? Maybe
if we answer these questions we can solve income inequality (assuming we still
want to solve it all).

~~~
0181109
Considering that certain paths of inquiry are off limits socially, both Left
and Right, I don't think you'll get that any time soon.

