
On Inequality and Risk Capacity - ballmers_peak
https://www.theinformation.com/articles/on-inequality-and-risk-capacity?pu=hackernewsc8sk76&utm_source=hackernews&utm_medium=unlock
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vannevar
I'd agree that risk capacity (or element of ruin, as it's known in gambling
circles) is a big factor in rising inequality. But there are many other
advantages that the wealthy enjoy that may also explain the divergence. The
wealthy can borrow money at much more favorable rates, they can meet minimum
investment thresholds in ventures or funds that provide higher rates of
return, they benefit from economies of scale in large businesses, the list
goes on and on.

And just as there is no one major cause, there is no one major solution, like
a wealth tax. Rather, we need to overhaul much of our financial and business
regulation to favor decentralization. Limits on corporate and real estate
ownership, corporate board participation, and business advertising would all
go a long way toward reinvigorating small business and creating a healthier,
less homogenized economy.

~~~
fuzz4lyfe
I see the solution in another direction. For every monopoly I see I also find
a government enforcing that monopoly. Limit government power, not private
ownership if you wish to improve the lot of the average person.

~~~
vannevar
You confuse cause for effect. Emerging monopolies gain the power to warp
regulations in their favor by virtue of the concentration of wealth and power.
That concentration is an inevitable consequence of the wealth-income feedback
loop. Without limits on wealth, capitalism collapses in on itself like a black
hole.

~~~
fuzz4lyfe
> Emerging monopolies gain the power to warp regulations in their favor by
> virtue of the concentration of wealth and power.

Exactly. And no civilization on earth has yet solved the "Power tends to
corrupt; absolute power corrupts absolutely." problem at scale. In what
society does power not exist in some form? In even the most primitive of human
societies the first and best portion of the meal would be given to those who
had the most political favor. We have control of a single vector in this
equation, the size of the government. I see no other way.

~~~
vannevar
_I see no other way._

You're not looking very hard. As I suggested above, we can pursue government
policies (largely independent of government size) that favor decentralization.
We don't have to throw up our hands in defeatism. We have perfectly good
processes to implement these policies and improve our society. The only real
obstacle, frankly, is the kind of fatalistic passivity you're proposing.

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moose314
This is really what sold UBI for me. Making it possible for more people to
give entrepreneurship a try and explore their business ideas seems like it
could be very valuable to our society. I'm not saying it would be a slam-dunk
great investment, but it would do a lot to address this inequality of risk-
taking ability.

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gumby
It's not just overt financial risk. For example, tying health insurance to a
job makes it hard for many people to leave their job (to start or join a new
business).

Just as the roads provide an effective baseline for physical communication,
universal health insurance of some sort provides a baseline or substrate for
innovation.

There are other examples (e.g. clean air) but the health insurance case is
most significant in the USA.

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asciirobot
The cause of inequality is a combination of inherited wealth, workers not
having control of means of production, and a lack of real direct democracy in
how we make decisions as a society. This inequality is enforced with violence
by those hoarding all of the wealth and power. Both capital and the state are
to blame here.

Interesting mental exercises aside, this article is hard to take seriously.

~~~
323454
To start with just one of your assertions, I don't think "real" direct
democracy is likely to reduce inequality. As one example, California Prop 13
was passed by direct ballot and many would point to it as a major _cause_ of
inequality.

People vote mostly of out self interest, but mediating their expression of
self interest through elected representatives enables pragmatic compromises
that make the most good for the most people. Ultimately, I view representative
democracy as a recognition that the political process will always depend on a
small number of powerful people, so it's better if those people have some
accountability to the people. Direct democracy circumvents that political
process, forcing representatives' hands and blocking compromise. The result is
stuff like Brexit.

I do think there is a place for direct democracy, but it is very limited.
Historically it has been useful in affecting constitutional change e.g. the
1967 Australian referendum to grant citizenship to Aboriginals.

~~~
claudiawerner
There are also ideological factors at play here. When GP is arguing for direct
democracy they're not arguing for it in isolation, they're arguing for it as
opposed to the political-economic system of today which they see as under the
thumb of capital, which in part is due to the representative model. But simply
removing the representative model won't rid us of capital's totality, nor its
mechanisms (inequality through equality etc.)

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typenil
Let's not forget that government regulation specifically prohibits people
below a wealth threshold to take part in earlier stage investments.

"Accredited investor" is a complete joke of a term. It implies some kind of
education in the topic, but the only qualifications are making enough money
each year or having enough money in the bank.

As if no one making less than $200k has the money or the mental capacity to
invest in something risky.

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freshbagels
To say that risk capacity is the "real" source of inequality is simply
incorrect.

There are _plenty_ of people at or below poverty level who have little/no
aversion to risk - it's just that the high-stakes gambles accessible to them
are of a different nature than those accessible to a person of middle/upper
class.

Risks with high rewards associated with impoverished people:

    
    
      - Theft/robbery
    
      - Scams/fraud
    
      - Selling drugs/other illicit items
    

Risks with high rewards associated with the middle/upper class:

    
    
      - Investing (stocks, crypto)
    
      - Quitting your job to start a business
    

For the impoverished, the consequences and chances of things going awry are
stronger than a person of middle/upper class, yet they do pursue those risks,
likely at a higher rate than the upper/middle class pursues the risks listed
for them.

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jgalt212
Let's not forget ZIRP and QE Infinity:

[https://fortune.com/2019/05/02/fed-interest-rates-income-
ine...](https://fortune.com/2019/05/02/fed-interest-rates-income-inequality/)

