

An Idiot's Guide to Inequality - lvevjo
http://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-idiots-guide-to-inequality-piketty-capital.html

======
eamsen
"Oxfam estimates that the richest 85 people in the world own half of all
wealth." This is not what Oxfam's estimates say, it contradicts them. Here is
the original quote: "The bottom half of the world’s population owns the same
as the richest 85 people in the world."

~~~
xux
What point are you trying to make? Those two statements are the same.

~~~
gipp
That is absolutely not the same. One is referring to half the wealth in the
world, one is referring to the wealth owned by the poorest half of the world
(which is strictly less than half by definition, and in this case far less
than half).

Doesn't make the fact not-disgusting, just slightly less so.

EDIT: Wow, 5 corrections in two minutes.

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Daishiman
It's amazing to me just how well some political factions in the US have
indoctrinated the public to believe that the defense of the common good is
some sort of threat to American values, which include, in theory the support
and participation in your community.

It's gotten to the point where not even poor people are willing to listen or
support many of the policies that promote their well being while not being a
significant burden to anyone.

~~~
webXL
I only know about life, liberty, and the pursuit of happiness and e pluribus
unum. Perhaps I'm indoctrinated, but are you sure you are free of
indoctrination?

The poor aren't supporting policies that promote their well-being? Without
evidence, that straw man is pretty easy to knock down.

~~~
Daishiman
Do I _really_ have to go through the motions? I'll bite:

\- The US is, among the developed nations, the one with the highest income
inequality, and growing \- Unlike practically all wealthier and a remarkable
number of poorer countries, the US has no social safeguard for people in case
of medical emergencies. People die from not being able to pay medical
procedures. And this is objectively a bad thing, from every possible metric.
\- The inequality in education among the rich and poor impedes social
mobility, again in a manner unheard of in many places. \- Countries who have
succeeded or are succeeding in closing the inequality gap do so through a set
of consistent, well-researched policies which all have the same effect and
lead to overall greater quality of life. \- The power of law enforcement in
the US has fewer and fewer checks, leading to the police to have an oppresive
attitude towards the populance which, when combined with the privatized prison
system, leads to the highest incarceration rate in the world, not
coincidentially led by poor people, with an astounding amount of non-violent
offenders.

This list can keep growing as long as I have time, so I'll just leave it at
that and conclude the American working class has a naive to nonexistant notion
of class struggle and suffers tremendously because of it.

------
refurb
_" Likewise, if you’re a pharmaceutical executive, one way to create profits
is to generate new products. Another is to lobby Congress to bar the
government’s Medicare program from bargaining for drug prices. That amounts to
a $50 billion annual gift to pharmaceutical companies."_

This "fact" always annoys me. Yes, Medicare can't directly negotiate with drug
companies. However, there are two mechanisms that provide substantial
discounts for drugs that Medicare buys.

1\. All drug manufacturers must report the price they sell their drugs for to
the government every quarter. That data is used to create the ASP (average
selling price). This is the price Medicare pays. If a drug company starts
offering discounts on their sales to private insurers, that get added to the
ASP.

2\. For drugs covered under Medicare Part D (pharmacy benefits), there is
something called the "donut hole" where a patient has to pay the full costs of
the drug. That is being phased out by 2020. Drug companies will have to pay
for the donut hole themselves. The discount varies with the drug price, but
for example, if a drug costs $5000 in a year, drug companies will have to pay
$1300 of that back to the government.

So yes, Medicare doesn't directly negotiate with drug companies, rather they
legislate big discounts.

------
autokad
i grew up in a poor family around a lot of poor people. i'm not rich, but
definitely out of the poor category. even as a child, i was amazed at the
plethora of bad decisions (or simple refusal to give important things a second
thought) of the poor people around me, family included. an example was a
couple years ago when i mentioned how wonderful it is that we can take free
online classes from institutions like harvard, stanford, wharton, etc, and its
absolutely free! how wonderful!! their response 'what do i get out of it'.

its not just anecdotal either, numbers have shown that those that already have
educations are the ones that are mostly uses these resources. for a very large
amount of the poor, i feel its them, not 'us'. the opportunities are there,
and america may have disadvantages for those not well off, but we certainly
have more poor people than whats justified by those disadvantages.

we created a system where people who are smart and ambitious can thrive. we
also created many opportunities in that system, and those same people are the
ones that take advantage of them. I think thats a huge part of this 'gap'.

the 2nd part happens to be with the time that we are in. most of this 'wealth'
has been either inflated up by the fed's massive additions to the money supply
(which does only help the rich but it is fully implemented and endorsed by
democrats) and annother reason for the gap is the internet barons of the
present age.

back in the late 1990s, bill gates was worth more than the bottom 50% of the
country. if figures like that are still withstanding, how do you think its
distorted now that we have brin/page, zuckerberg, bezos, etc etc?

~~~
crdoconnor
Being poor renders it very difficult to think long term as the survival
instinct kicks in. If you have to constantly worry about whether you can put
food on the table and pay the electric bill tomorrow, you simply stop thinking
about what happens next month.

This instinct kicks in on such a low cognitive level that it's almost
impossible to suppress.

This makes it very easy to leech profits from the underclasses through payday
loans. The profit is made at the point that the survival instinct programs
them to ignore.

This is why outright prohibition of payday loans usually has a positive impact
on the financial wellbeing of the underclasses.

Unfortunately, even the middle and upper classes who struggle with giving up
smoking still look down on the set of people who take payday loans, thinking
that their superior intelligence and good sense is what leads them to not be
suckered.

Empirical study on the effect of poverty on short term thinking:

[http://www.theatlantic.com/business/archive/2013/11/your-
bra...](http://www.theatlantic.com/business/archive/2013/11/your-brain-on-
poverty-why-poor-people-seem-to-make-bad-decisions/281780/)

Study on the effect of banning payday loans on the financial health of the
underclasses:

[http://www.federalreserve.gov/pubs/feds/2013/201381/201381pa...](http://www.federalreserve.gov/pubs/feds/2013/201381/201381pap.pdf)

~~~
jandrewrogers
You are conflating cause and effect. Being poor does not make it very
difficult to think long term but the lack of discipline required to make good
short term choices has the effect of keeping you in poverty over the long
term. A pattern of good short term choices tends to lead to getting out of
poverty whether one is thinking long term or not.

I lived a significant portion of my life in pretty severe poverty; I was
raised in it. It requires a decent amount of discipline to not _waste_ money
even when you are hungry and can't pay the bills, and many poor people do not
have that discipline and therefore stay poor. Many non-poor people have the
same lack of discipline but can simply afford to be more wasteful. Given two
choices that solve an immediate problem (e.g. hunger) people will often choose
the one that is most wasteful of their money even though they know they are
poor.

I was never the world's most disciplined person but I did manage to bootstrap
myself out of poverty in fairly boring fashion working low-paying jobs. As
long as I had an income (never guaranteed) I always managed to spend less
money than I earned. It is pretty shocking the percentage of people in poverty
that are obviously wasteful with their limited resources but it also explains
their long term outcome.

I earn a fine income today but my spending stopped rising with my income a
long time ago. Old habits of not spending frivolously on low-value things die
hard I guess.

~~~
hibikir
He's not conflating cause and effect: There's plenty of Psychology and
Behavioral Economics research on this. People end up thinking that the money
they save will disappear with unexpected expenses, so they spend it, because
the stress of not having enough money to eat is 'healed' by wasting money,
which later makes sure you won't have any money to eat. It's a feedback loop,
as bad choices lead to bad outcomes, which increase the chances of even more
bad choices. I've seen it happen in people that you'd originally think that
they had a whole lot of self discipline: For instance, a very Ph.D student
that constantly stressed about how poor she was. Even after her income moved
up, it took months for that mindset to go away, because the fear of something
wiping her out just made her decisions completely irrational.

You had the discipline to fight it: That's great. But that does not mean that
other people's experiences are like yours. Go read the literature.

~~~
vixin
Go read the literature? What does that mean. It means anything you choose to
select from it.

And apparently other's people's experiences are only significant if presented
by you "I've seen it happen in people that you'd originally think that they
had a whole lot of self discipline:"

------
CapitalistCartr
In discussions like this the numbers matter. To quote Heinlein, “What are the
facts, and to how many decimal places? You pilot always into an unknown
future; facts are your single clue. Get the facts!"(1) Piketty's book suffers
from poor numbers and bad maths, making his conclusions useless. If he is
right, he needs to support it with sound numbers.

Chris Giles in The Financial Times found his numbers wanting. (2) In Piketty's
response(3), he downplays the importance of the questions, focusing on the
European numbers. FOr5 the US numbers, he recommends substituting the numbers
of Emmanuel Saez (Berkeley) and Gabriel Zucman.(4) But those numbers are based
on reported capital gains taxes without adjusting for major changes in the law
and changes in the definition of capital gains.

I don't know if Piketty is right or wrong, but I know his Excel spreadsheets
are not adequate evidence. I'd like him to be right; I think wealth disparity
in the USA since 1980 is more due to legal maneuvering than merit. I also know
my thinking it isn't evidence.

1)
[http://www.timeenoughforlove.org/Heinlein.htm](http://www.timeenoughforlove.org/Heinlein.htm)

2)
[http://piketty.pse.ens.fr/files/capital21c/en/media/FT230520...](http://piketty.pse.ens.fr/files/capital21c/en/media/FT23052014c.pdf)

3) [http://www.voxeu.org/article/factual-response-ft-s-fact-
chec...](http://www.voxeu.org/article/factual-response-ft-s-fact-checking)

4) [http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf](http://gabriel-
zucman.eu/files/SaezZucman2014Slides.pdf)

~~~
MaysonL
Of course, there have been quite a few criticisms of Mr. Giles's analysis of
Piketty. It seems to have been substantially worse (my opinion) than Piketty's
errors.

See [1],"FT journalist accused of serious errors in Thomas Piketty takedown",
[2] "Have Giles and the FT gone too far in the attack on Piketty?" (where the
answer is "..On most points, Piketty has answered the points in a reasonable
(and to me generally persuasive) way.", and [3] Piketty's response to Giles.

1) [http://www.theguardian.com/business/economics-
blog/2014/may/...](http://www.theguardian.com/business/economics-
blog/2014/may/29/ft-journalist-errors-thomas-piketty-takedown)

2)
[http://www.primeeconomics.org/?p=2723](http://www.primeeconomics.org/?p=2723)

3)
[http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec...](http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014TechnicalAppendixResponsetoFT.pdf)

------
onetimeusename
One thing I have wondered is if income inequality is demonstrably bad. If you
read closely the author says that our economy grew quicker post WW2 when
income was more evenly distributed but that is not conclusive. The author also
says income inequality is bad but the only evidence given for this is that the
gini coefficient of US is approaching some banana republics and S. American
countries. I personally don't believe income inequality in those countries is
the cause of adverse conditions but an effect of it, particularly corruption.
The author says that at a certain point the money is used to buy luxury goods
in some sort of "arms race" of the rich but I really don't care what the rich
do with their money.

I do agree that using the word inequality is worse than using opportunity. I
also firmly believe corruption should be ended but I still have not seen a
strong argument for why income inequality is bad and I think from a
probabilistic perspective, net worth of the wealthy would increase over time
so who is to say it isn't a natural process?

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saticmotion
Another fact, that recently struck me, also seems to make inequality larger.
I'm not quite sure how to put it into words, but I'll try.

If we take an average middle class family and a rich family. Both want to
build or buy a house. Let's suppose the houses they want cost the same, e.g.
$200.000. The rich family pays $200.000 and is done. The middle class family
however, will have to take a loan of, let's say, 20 years at 4%. This family
will eventually pay almost $300.000 for that same house.

So because the rich family can buy things without loaning, they actually pay
less. This might seem obvious to some, or most of you, but it still strikes me
as "unfair" (though it's perfectly fair that you pay interest on a loan).

~~~
jeremysmyth
You're ignoring the opportunity cost of not keeping that $200,000 in the "rich
family's" deposit account or asset portfolio. If I buy something to use for
$200k, I can't invest that same amount to convert it to $300k (assuming the
same 20 years @ 4%), so I effectively lose 100k over the same period for the
same reason. While they're certainly not equivalent, they're closer than you
suggest.

~~~
d4vlx
Houses typically appreciate at better than 4% a year over 20 year time frames,
although this is very location dependent. If they had bought in almost any
city in the US with a population over a million they could have done much
better.

[http://www.census.gov/const/uspriceann.pdf](http://www.census.gov/const/uspriceann.pdf)

------
msoad
I didn't know income inequality harms the top 0.1% too. This is giving me hope
that this issue will be fixed in the United States.

------
Dewie
> Unfortunately, equal opportunity is now a mirage. Indeed, researchers find
> that there is less economic mobility in America than in class-conscious
> Europe.

Class conscious Europe? Oh sure, broad stroke it up. Meanwhile, when it comes
to superficial signs of class consciousness and the social norms related to
that, I see American doctors introducing themselves as "Dr. <Name>", in both
medical and civilian situations. People emphasizing or hinting at having gone
to prestigious universities like the Ivy League kind. People referring to
their bosses by _sir /ma'am_. Casually denigrating certain professions,
especially janitors. All of these practices are kind of foreign to my part of
Europe.

~~~
smm2000
I seriously doubt anyone outside of military refers to their bosses as
sir/ma'am. At least I never heard it and in many situation it will sound
extremely sarcastic.

People like to talk about their achievments whether it's graduating from Ivy
League, getting medical degree or finishing marathon. I do not think it's a
class thing.

------
oldmanjay
There are always a lot of confident assertions (on all sides) when it comes to
this issue, but not a lot of hard facts. It's really difficult to know what to
believe, and it's almost impossible to have a reasonable discussion because
people get so emotional about it.

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RA_Fisher
All you need to need to know is that Piketty did his voluminous analysis in
Excel.

