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Wealth doesn't trickle down – it just floods offshore, research reveals (2012) (theguardian.com)
247 points by simonebrunozzi on Apr 10, 2016 | hide | past | web | favorite | 209 comments



Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet. All the arguments about investment and job creators falls flat; we have gobs and gobs of excess capital desperately seeing some productive investment. Capitalists don't need any more capital at the moment.

(Reminds me of the hedge fund carried interest exemption, which primarily benefits less than 100 people in the USA, with the vast majority of the benefit to the tune of > 1 billion dollars going to about ~5 people. So much so that they spent millions lobbying Congress to stop any attempt at closing the loophole and succeeded.)

I wish the old Soviet Union was still around. The communist revolution scare put the fucking Fear of God into the capitalist class.


Complaints about the carried interest issue bug me. (It's not an exception -- it's just how partnerships work.)

IMO the problem has nothing to do with carried interest or hedge funds in particular. I think the real issue is our bizarre idea that certain types of income (long-term capital gains) are special and should be taxed less. Hedge funds (and only the kind that generate long-term gains) are just easy things to pick on.

Have you noticed that pretty much every large corporation carefully avoids corporate taxes and arranges for its principals' income to be mostly long-term capital gains or qualified dividends? It's the same failure mode, minus the hedge fund.

So yes, I think Congress should fix the problem, but I don't think that carried interest is the problem.


In a perfect game system you'd probably make labor income taxes less than capital gains on investment. Yes you want to encourage investment but you also want to feed the economy with monetary velocity or cash money.

The fact is lower/middle class labor income workers put more directly back into the economy than the wealthy "job creators", so who are the real job creators? Demand is the job creator!

Demand comes from people that spend having cash. Capital locked up in hoarding does not help the economy as much especially in downturns. Lower/middle class spend almost all their incremental income dollar while the rich typically spend less than 5% of each incremental dollar. If the lower/middle class has cash then you have demand, demand leads to investment, and jobs/growth.


> In a perfect game system you'd probably make labor income taxes less than capital gains on investment

Indeed you would [1]. According to some legal scholars, wages earned from labor were/are not supposed to be taxed at all in America. The tax code was designed to tax investment gains only. Just imagine if that were upheld

> The fact is lower/middle class labor income workers put more directly back into the economy than the wealthy "job creators"

By doing what? Consuming consumables marketed to them by Corporations? The same Corporations that would just as soon replace most of their menial labor with robots.

Also, I'd curb your exuberance towards believing the lower/middle class "puts more back into the economy", because to the extent the lower/middle class is increasingly replaced by robots or cheap foreign labor, if this is your true belief then we should institute a universal income. Because that's going to "put more back into the economy".

> Demand comes from people that spend

But for example, planned obsolescence encourages spending. But is planned obsolescence really a tangible benefit for the "people that spend"?

Also, imagine if "cash" was of fixed supply (Bitcoin) rather than inflationary. In which case, you could make paper gains over time by not spending it or investing it. Wouldn't this provide more people with financial security given the risks and complexity of investing money in general?

[1]: https://en.wikipedia.org/wiki/Tax_protester_statutory_argume...


> Also, imagine if "cash" was of fixed supply (Bitcoin) rather than inflationary. In which case, you could make paper gains over time by not spending it or investing it. Wouldn't this provide more people with financial security given the risks and complexity of investing money in general?

New currencies are needed but bitcoin and old school gold for that matter encourage hoarding, gold is worse because the control of gold is owned by physical mining. At least bitcoin doesn't leave monetary value up to physical mining, but still it does encourage hoarding. If a currency gains value over time doing nothing then investment will be lower.

Fiat currencies encourage investment because the value of your money goes down if it sits and is hoarded. Even though control of the currency is by the Fed and shadowy banking cabals, at least it spawns investment by wealth as they like to increase their money not see it slowly fade away to inflation.

Investment is key to growth/innovation but there has to be some demand there. Demand creation is always overlooked, when wages aren't raised, when companies move out of the US etc. These things directly impact demand and purchasing power of consumers at all levels eventually.

What will the robots build, sell or manage if noone has any money to buy anything? I don't necessarily buy that robots will remove all work. Computers were supposed to do the same, it has just enabled productivity gains to do more with less. There will always be more work to do, we haven't even explored very far off this rock. We need robots at every level but it won't mean less work, we'll have robot armies and it will enable entrepreneurs to do more with less.


Consumers don't buy 2% more chicken at the grocery store just because "inflation is 2%". That's total nonsense with no basis in reality. And investors will still make traditional investments in a deflationary environment, BTC denominated loan markets and "IPOs" are the case in point to that end.

Granted, in a deflationary environment, investments will be less profitable if the projects being invested in are dependent on consumers spending money frivolously.

> Investment is key to growth/innovation but there has to be some demand there. Demand creation is always overlooked, when wages aren't raised, when companies move out of the US etc. These things directly impact demand and purchasing power of consumers at all levels eventually.

Society gains purchasing power at large in a deflationary environment.

And note that, if the American economy grows 10% in a year, the Fed will still strive for inflation. If economic growth is 10% and inflation is 1%, the upper echelons of society will have skimmed 10% off the top, robbing society of that growth. Conversely, in a Bitcoin world, the 10% economic growth is returned to the savers in the form of more purchasing power.


>What will the robots build, sell or manage if noone has any money to buy anything? I don't necessarily buy that robots will remove all work.

I believe we will witness the rise of the leisure economy. Most people who still hold jobs will perform them in fields related to tourism and leisure activities, such as yoga teachers, tour guides, climbing, diving, boxing, golf instructors, etc. Basically robots/computers will eventually perform all tasks which do not necessarily require a human. Or in other words: The leisure industry will always require humans because it's catering for human experiences and not human needs.


Most tax protester arguments are bunk. Many or all of them are debunked in this FAQ: http://evans-legal.com/dan/tpfaq.html

For the aspect that you're referring to, see the question for "The income tax cannot apply to wages, because that would be a “direct tax” that must be apportioned in accordance with the Constitution":

> The income tax that was challenged in the Pollock decision was similar, and the majority opinion first struck down the tax on incomes from property (i.e., rents, interests, and dividends), but then went on to state that, if only the tax on interest, rents, dividends, and other income from property were ruled unconstitutional, “this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way a tax on capital would remain in substance a tax on occupations and labor.” Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601, 637 (1895). The majority opinion therefore held that the entire tax act was unconstitutional, believing that Congress would invalidate the entire tax act rather than tax only “occupations and labor.” (The minority opinion in Pollock believed that the entire tax was constitutional, and so did not need to distinguish between income from property and income from employment.)

> That a tax on wages and other compensation for labor would have been constitutional even before the adoption of the 16th Amendment was confirmed by the unanimous decision of the Supreme Court in Brushaber, in which the court stated:

>> “Nothing could serve to make this clearer than to recall that in the Pollock Case, in so far as the law taxed incomes from other classes of property than real estate and invested personal property, that is, income from ‘professions, trades, employments, or vocations,’ (158 U.S. 637), its validity was recognized; indeed it was expressly declared that no dispute was made upon that subject, and attention was called to the fact that taxes on such income had been sustained as excise taxes in the past. Id. p. 635.”


Aaron Russo, award winning film producer, argues the opposite quite convincingly in an interview conducted with a former IRS Commissioner, here:

https://youtu.be/O6ayb02bwp0?t=33m

The IRS and Federal Reserve system is corrupt to its very core. The 15 minute interview linked should establish that.


It's interesting because, as a layman, this sounds a lot like what Keynes said: aggregate demand is the most relevant factor. Hell, using those ideas pulled us out of the great depression.

Then there's the Friedman supply-side argument that only aggregate supply matters. The demand curve is effectively vertical. Arguably, this seemed to have heaved Britain out of stagflation thanks to Thatcher. We now see raging inequality that these policies seem to promote.

Between these two theories of macroeconomics, it seems to mW that we swing between either extreme without considering a middle ground - both are important. Either extreme seems to have a long-term negative effect. When aggregate demand falls sharply in a recession, measures to rectify seems appropriate. This keeps people spending in a time where they typically wouldn't. When businesses struggle, due to a shock in supply, measures to ease this on that end too seem appropriate.

In a way, it seems a lot of economics is used with political bias. Certain all-or-nothing theories tend to be used as the means to an ideologue's ends within a democratic system.


What if the middle ground just gives you the worst of the both worlds. What if the idea of measuring the success of an economy via an aggregate quantity is flawed?

It seems to me that optimizing for aggregate demand or aggregate supply will merely result in redistributing to politically connected individuals who are able to convince the authorities that their programme will improve that metric.


In fairness, if economics is the study of allocation of scarce resources, which is implicitly a study of human behaviour wrt a limited resource in individuals, slightly larger functional groups (families and firms) and then large populations as a whole, then surely we are within the realm of psychology and sociology.

The thing is that psychology gives us ideas that shows how humans can be influenced individually (think foot in the door or an incredible offer that ain't really an incredible offer). Sociology gives us ideas of how humans can be influenced in groups that, in literal terms, will give away their freedom and rights with tears of happiness in their eyes to a charismatic speaker who says the right things in hard times.

How does supply and demand fit in all of that when the assumption in the model is that we behave rationally? How does the work on habit formation fit into that? How does peer pressure?

I smoke cigs. I pay for take out food and chocolate. Before I got a car, I'd get a cab to work even though I had a bus pass. Now I'm not holding myself up as a model of the actual man but that's the point: the homo economicus is like the description of someone's ideal of homo sapiens. Ideally, that's how we should make decisions about resources. In actuality, I think it's just far off the mark to cause what would be sound decisions to work out not so well.

Economics to me is like a social science trying to be used as a hard science and in a position to be quite dangerous.


Taxing capital gains less than ordinary income is a crude method to ensure that you're not being taxed on your losses (in terms of real purchasing power). Unless that's fixed first, there is no way you should be paying for losses.

Based on today's taxation laws, if you bought a stock for $100 10 years ago, and sold it for $110 today, you'll be taxed for the $10 "gain" even though in real terms you lost a fair amount of money. Calculating the real loss (not the nominal gain) is complicated because you need to consider inflation each year into the calculation and the IRS doesn't allow for that.

Not disagreeing that capital and labor need to be taxed at the same rate, but the situation is trickier than just saying "lets tax all gains and wages at the same rate".


The benefit of inflation is punishing unproductive investments and keep capital in play. Which is why economists want 2-3% not 0. As such low long term capital gains taxes are a bad idea economically. Ideally the tax rate should increase for every year an asset is held. Such that there is no bias for liquidating new assets instead of old ones.

Which is effectivly the same as paying capital gains each year. On the flip side the annual rate could be set as low as 5% or capital gains = 1 - (0.95^(number of years)). Which is actually rather close to inflation targets.


The downside of inflation is that is screws the poor and redistributes wealth to the already rich. The former is evidenced by our need to continually increase the minimum wage and the latter occurs because the middle class is pushed into investments to beat inflation, socializing business risk while leaving the gains to the already wealthy.


Inflation punishes people who assets. Poor people only suffer when their nominal wages don't grow to match inflation -- but that's exactly the same as their employers lowering wages in an inflation-free environment. Inflation is only superficially related to the problem of real wage reductions.


> Poor people only suffer when their nominal wages don't grow to match inflation.

That is exactly the policy intent of inflation.

http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig...

"..in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."

In other words there is this aggregate value called "employment" that it's politically expedient to optimize, and the way to do that is to tweak the markets to screw the poor and transfer that wealth to the rich.

Well, yes, if you create a moving wage treadmill that forces people to work harder or fall off, you will get higher employment rates.


I would argue that as a design it has nothing to do with inflation (I'd be happy to consider any evidence that this is its purpose but I am not aware of any). Rather it is more to do with the "bunching" of income when assets are sold. If I earn a return of 10%/yr for 10 years and sell and asset I have to consider all of those gains as income occurring all in the year I sell it rather than 10 years of income.


It is complicated to account for inflation, and there would certainly be a lot of debates about the details, but I think we should do it anyway. It's ridiculous that in a low-inflation environment such as the one we've been in for several years, capital gains are still taxed at a much lower rate than income. In a normal- or high-inflation environment, we should do our best to estimate the real gain, and tax that at the income rate.

But personally, instead of increasing the capital gains tax to match the income tax rate, I'd rather see us lower the income tax to be closer to the capital gains rate, and make up the difference with a federal VAT. Taxing consumption just makes more sense than taxing income.


>carried interest [is] not an exception -- it's just how partnerships work

Oh bollocks. Carried interest is blatantly income for the fund managers. Treating it as anything else for tax purposes is down to basically bribing politicians. The whole concept of calling it "carried interest" rather than income is a US only invention.


The trouble with high taxes on capital gains and dividends is that the corporation itself is subject to a rather high tax already. So the underlying productive activity in a corp is taxed twice on its way to the ultimate owners. (Barring trickery.)


If I could rewrite the tax code myself, in addition to treating capital gains and ordinary income the same, I'd seriously consider sharply reducing or even eliminating the corporate tax.

As you said, the corporate tax is an annoying form of double taxation, but governments have also proven to be terrible at actually collecting the corporate tax from big corporations. So really it's the smaller corporations' owners being double taxed.

The one thing I don't like about that scheme is that it makes C corporations into a way for anyone to defer taxation as long as they like. This isn't necessarily a terrible thing, but it could make sense to force owners of corporations (or at least of new fancy untaxed corporations) to realize their gains periodically.

Obviously this isn't 100% thought out. But neither is the current US tax code.


Dividends, yet. But not all stock growth is due to realized profit. Look at AMZN for example.


Also, how can we expect companies to be not evil, when this is a winner-takes-all economy, where a move in favor of environment or society can result in the downfall of the company?

Capitalism is said to promote competition, but in reality, eventually only one or two big companies survive in a certain market (see Google, Facebook, Amazon, &c). In my view, antitrust laws should be extended so that we can have more competition.


I hold a similar, not exact, position as you. Namely, the trickle down is bullshit part.

But reading your comment made me think and question. The mega-elite's capital is growing due to their investments and it's showing no clear signs of slowing down [1]. How are they continuously extracting income of the middle and lower classes (and upper too)? How are they feeding their wealth at a mostly positive rate? Insider trading isn't enough to answer this question. Nor is stagnant wages because some sectors are paying well.

I think if economists can state how the wealthy are getting wealthier, in a granular way, then maybe the masses can find a better way to fight back. I.e. there is excessive profits to reap and only the wealthy are finding it, let's expose it and use it to the masses advantage.

[1] The great recession is a clear sign where the mega-elites came out with MORE wealth than before the bubble.


> How are they continuously extracting income of the middle and lower classes (and upper too)?

1. Through ownership of the means of production. Profit from said means largely goes to the very rich, or to the upper-middle class - almost everyone below them does not really participate in the stock market, and most definitely don't participate in ownership of non-public firms.

2. As such, as lower classes create wealth, it flows upward. When the economy grows quickly, that wealth tends to get re-invested into building more means of production. But at the end of the day, those investments are on aggregate, expected to generate returns.

So, through growth, you can postpone the trickle-up, but unless there's a huge societal shift, at the end of the day, even if the pie grows, the lower classes won't get any more pieces of it.

Caveats: (Yes - quality of life has gone up in the developed world thanks over the past century. That is due to technological advancement. Yes - quality of life has gone up in the developing world due to globalization. But how many people in Bangladesh making sneakers own shares in their employer? How much of the Western economy will the people doing all the work that keeps it running have come to own over the past 30 years?)


There is a recent and much discussed analysis of wealth concentration:

https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

I haven't read it so this comment isn't an endorsement of it and so on.


Great suggestion. It's on my to-read list maybe it's gone up a few notches now. I hope someone who's read it could give some feedback on it though.



> I think if economists can state how the wealthy are getting wealthier, in a granular way, then maybe the masses can find a better way to fight back.

Actually, I think the refusal of moderate, science-literate professionals to "listen to the people" unless it's parsed and vetted by a professional like an economist is part of the problem. It takes urgency away from the problem, makes it some interesting thing to ponder on breaks from working on an app for a yuppie consumer, rather than a big ominous issue that requires vast amounts of thought and dedication.

This Marxist academic (from UChicago I think) had an eloquent blog post [0] about, from which here I take some highlights:

> My problem isn’t with numbers, pie charts, and databases as such. My problem, rather, is with this celebration of a depleted epistemological ecology—not because I love epistemological diversity as such, either, but because I think poli.sci’s ongoing and dead-on impression of an epistemological wasteland functions as a prophylactic against the immediacy, urgent, and (as Bartels would admit) valid claims made in other epistemic registers.

> But that’s what liberalism is, really: the absorption of the immediacy of a political sense into the studied, slow time of useless intellection, the conflation of taking-time and having-a-(truer-)thought.

> I used to giggle at the scientism of early Marxism—Marx and Engels, Lenin and Luxemburg, Lukacs and Althusser, on and on. But now I’m beginning to think that this scientism wasn’t supposed to achieve any kind of scientific positivity, that Marxism’s valorization of the scientific didn’t intend a valorization of positive knowledges. (Stalin, we might say, wasn’t part of the plan.) What Marx desired in seizing hold of the term “science” was to create and defend a space in which plebeian forms of knowing could be entertained as knowledge—a knowledge that doesn’t require validation from positive or theoretical science, but rather productive transcription into it.

[0] http://clrjames.blogspot.ca/2014/04/ideas-whose-time-has-bel...


I think you could go through the Forbes 100 list and ask "where did that money originally come from?"

You'll find a lot of variance, but most of them boil down to: provided a good or service that people were willing to pay money for (meaning they preferred the good or service more than the money it cost them).


I don't doubt that most of them worked very hard and took a lot of risks to get where they are now. I respect these people immensely. But no human could work hard enough or provides enough of a service that they deserve to earn tens of thousands of times more than the people who actually do the labor.

Bardeen co-invented the transistor and the theory of superconductivity, yet even though his work was recognized with two Nobels, he didn't die a billionaire. Zuckerberg made a social network barely different from the others, but because he was able to market it better, or was just at the right time at the right place, he's now a billionaire. I respect Zuckerberg, but if he is able to earn 35e9 USD and Bardeen isn't, even though both did what they loved, the system is broken.


Who, at the front end actually did that work, and how were they compensated ?


They were compensated based on whatever they agreed to. What beyond that should they get? And who would decide such an arbitrary thing - what government panel of bureaucrats should that be left to?

At the very front-end is the founder, who typically works without pay as necessary, and typically works far harder than their employees, while shouldering far more responsibility. Millions of businesses get started under that exact scenario every decade.

Employees get paid for their labor. An entrepreneur doesn't have such legal protections or guarantees and is paid for their risk (it's critical to note that 95%+ of all new businesses fail over five years). When I create something, I do so without taking a paycheck initially - perhaps for a very extended period of time. Try convincing an employee to do that at a routine job bagging groceries.

If the employee didn't like it, they were welcome to go through the extremely difficult process of starting and building a successful business instead. It's dramatically more difficult to build a business to the point where you can earn $60,000 per year, than it is to get a job making $60,000 per year.

Sam Walton didn't start out being rich. If his 37th employee didn't like the terms of employment, they were welcome to compete with him if they could. He contributed a million fold more to the business succeeding than any given grocery bagger, and also took on drastically more personal risk. Beyond that, the morality of it is such that the property of Wal-Mart belonged to Sam Walton, and there's no need for entrepreneurs like him to apologize for that ownership, it belongs to them fair and square (the sole counter argument is to say that violence should be used to steal property and to mostly or entirely abolish private property rights). If an employee wants their own property, then let them create it, and let them provide the money to pay employees for their labor.


You make an excellent and fair point if it stops at this. The problem starts when the successful business starts to take advantage of loopholes with their wealth(lobbying, offshoring income, jobs) to advance their ability to make profit at the expense of the labor that doesn't have this ability. So although the pact seems equitable in the beginning- it breaks down one side take unfair advantage of their position. German labor is an example of where the workers have managed to gain from the productivity of the companies mostly through organized labor but also because the companies realize its better to share the wealth. Hence- I'm only guessing we don't see super-rich German billionaires.


This would all be fine and good (just, even?) if nobody was ever coerced into agreement or agreed under duress. You seem to neglect the role of power in extracting preferable terms (and thus wealth).

There often isn't anything "fair and square" except in this idealized notion of some perfect environment you've painted.


What would help equal the playing field in negotiations is if the potential employee had the backing of a union to enforce a fairer contract.

A single laborer vs a well-monied and well-lawyered corporation is not a fair negotiation. See Apple & Google colluding to keep wages down for software engineers.

Union contracts with employers could also ease the damage to the middle and lower classes done by automation.

> Sam Walton didn't start out being rich.

Sam Walton is an outlier. His actions are responsible for driving down the wages and benefits of a sizable number of people and making them dependent on government services for what should be be provided by their employer.


That only scratches the surface and I have done it. I think more through analysis needs to be done.


Well, it came from being the children of people who provided a good or service, and likely in large part due to illegal unfair competitive advantage.


> I wish the old Soviet Union was still around. The communist revolution scare put the fucking Fear of God into the capitalist class.

This is to an odd degree very right, it also forced leaders in nearby countries to take their social responsibilities seriously which lead to the Scandinavian brand of Social Democracy (which is now eroding away due to the lack of any perceived 'real' solution on the left).


Most that wealth only exists on paper sadly. If they were to actually withdraw it all at once and spend it, the value of the money itself would rapidly decrease.

Likewise if you tried to tax all the wealth they are actually consuming, e.g. all their income or all their consumption, the amount doesn't come out so big either. IIRC it's between a few hundred and a few thousand dollars per person in the US.


But that's exactly a sign of the problem! The money represent abstract power, not specific goods and services. This IMHO runs completely against the idea of free market, and the expectation that people will either consume or invest, instead of saving money (in order to gain power by postponing the economic decision).


Yet ironically, the power derived from that wealth does not exist on paper, but is nonetheless very real.


Capitalism does not trend toward equality. If you were expecting that, you were wrong.

Capitalism trends towards greatest total utility (in the economics sense).

Capitalism would prefer 10 people with $50 and one person with $1000 over 11 people with $10.

We can't be surprised when that happens.


> Capitalism trends towards greatest total utility (in the economics sense).

No it doesn't. Having the majority of wealth concentrated in a few people who have way more than they'll ever need, many of that wealth being unearned (eg. rent seeking, inheritences), does not maximize total utility.


Capitalism trends towards greatest total utility (in the economics sense)

That's arguably a bit misleading, since greater equality gives greater utility, for a fixed-size pie.

It's pretty well established that utility is approximately proportional to the log of monetary value. So in your example of what capitalism prefers, total utility would be significantly higher if the $1500 were distributed equally over the 11 people.


What is ultimately better for capitalism:

$100 in capital held by each of 100,000 people, where chances are at least one will utilize the capital to invest in an innovative new idea or trade in a marketplace, or $10,000,000 held by 1 person, where chances are that person is an heir who plays videogames all day


Socialism as a bootstrap for the American lottery dream, eh ?


I think the best way to look at Capitalism is as a popularity contest. Popular products win. When technology advances to the point that it doesn't take as much labor to produce them, there are high barriers to entry, and distribution and communication of popularity are frictionless, you end up where we are - massive inequality.

Technology, i.e. 'increased economic efficiency' is the cause. It leads to a world where small players either become popular quickly or lose. And 99% of small players fall into the latter category.

People don't see this. They complain about inequality while they sport their iPhone apparently unconcerned that they are contributing to inequality by buying a popular product from a company that is sitting on more cash than some nations. But will they buy a phone from a small hardware startup, allowing a diverse phone market to thrive, employing an order of magnitude more people? Nope. And yet they complain about inequality, totally ignorant of its systemic nature and their part in it.


I'm wary of ever using the term "Capitalism" in any discussion, it's been misused, abused and overused so often it hardly ever means anything specific anymore. Nowadays it appears to be just a cue for people to engage in wild accusations. Let's rather talk of methods of allocation; for example a market based versus a state controlled distribution of goods.


> Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet.

Honestly, I don't think so. I believe we are merely returning to a state of the world that we've always been in - with the exception of the last 70 years or so. The existence of a large middle class is a distinct phenomenon of the 20th century, and specifically of the western countries. If I'm not mistaken then such a thing as a large middle class did never exist before anywhere else. It was always this heavily skewed distribution where 99% of the people own next to nothing compared to the 1%. I dont wan't to advocate for either of these two distributions here, just stating the historical context.


One of my favorite Professors once made the point that in Soviet Russia you could replace ''political power'' with ''wealth'' and it became a very similar system to the West. By law no Russians owned any personal property but the 1% ruling class (and really the 1% of the 1%) had more political power than everyone else combined. It was a capitalist system that used political power as its currency instead of dollars, which meant it was much less efficient (and personally cruel in many cases), but still tended towards extreme inequality.

As far as America today, aren't we ever just one election away from massive wealth redistribution?

As the ranks of the ''educated poor'' swell at the expense of the middle class, and we transition from an ownership economy to a sharing economy (wherein the average person now rents a condo forever and uses on-demand transpo and other services and owns very few material possessions), and access to the polls is increased as voter suppression is decreased and the impact of social media is fully realized (inevitable at some point), then we are in for some interesting times.


This is actually a good point that I never considered. I'm trying to think of a historical counterpoint, but the best I can come up with is the pseudo-middle class of ancient Greece. All the other long-term civilizations seem to have been composed of a royalty-level class and everyone else, from ancient Egypt through Rome and the Middle Ages.


Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet. All the arguments about investment and job creators falls flat; we have gobs and gobs of excess capital desperately seeing some productive investment. Capitalists don't need any more capital at the moment. The wealth they have isn't doing nothing. It's in investments. Secondly, if it was in nothing, that would only reduce the velocity of money, effectively making your money worth more. You could spread that money around, but the likely result of that is less investment and more consumption.


Consumption drives investment. Why on earth would you spend 10 million dollars to build a widget factory, when nobody has the money to buy widgets?


Consumption drives investment. There's always demand.

Savings fund investment. The more savings there are, the cheaper it is to find funds for investing in a project. The cheaper the capital expenditure, the easier it is to turn a profit.

Or are you talking about the paradox of thrift?


The first thing you do before investing in a new market is asking the question: "What's the return on this? Will anyone buy the things I'm selling? Are the margins positive?"

Having a lot of money searching for an investment won't do you any good when your widget factories don't have customers. Yes, borrowing money to build the factory will be cheap - but you still expect the factory to produce a return on your investment!


And, yet, long-term economic growth forecasts are the lowest that they've been in a really long time.


Could you clarify how the investment and job creation arguments fall flat?

My view is that invested money does not magically compound: While invested cash may be directly applied to financial instruments, the amount invested changes hands many times, and generates extra liquidity in the market, and will eventually, indirectly be spent on the Real Economy endeavours, where it will generate productive jobs.

If these endeavours are successful, they will generate dividends for those participating in the endeavour's risk. Ultimately, those guys who have no idea of the effects their "purely financial" investments had on the market, are indirectly paid by the real economy.

All of this of course considers a fair playing market, which does not happen in practise: Manipulators are parasitic and should be combatted.

Not being sarcastic: Please tell me where I'm wrong.


Personally my issue is lack of freedom in choosing currency. What if I don't want to use CAD in my store, but something else, something more local. It says a lot when as a Canadian I'm not free to choose what kind of money to trade in. What if I don't trust those who manage the currency? Additionally, a TON of cash is being siphoned into redistribution programs aka grants, social, etc plus their supreme administration costs. This money is making the bureaucrats rich and the people at the bottom doing the labor with less wealth to invest. I still believe there are the political capitalists and the market capitalists, we need more of the latter and more transparency as to who exactly is the latter in order to understand who is really contributing.


I'm not aware of the CRA disallowing you from doing business in USD/EUR/GBP? And you can open bank accounts in those currencies right inside of Canada (have done it myself for GBP, USD).


A few heads roll, the world keeps churning. And that has nothing to do with religion.

I'm a lot more afraid of our current endless population growth and the extinction of many marine species.

When this happens, most mouths will starve instead of a few, and there's no one else to blame, it's everyone of us.


How about taxing wealth then? That way the 99.99% can reclaim back that money via mob rule.


Question to the down voters:

If you think this is a bad idea, how else do suggest we redistribute the pool of capital to something more evenly distributed? Oversimplifying a bit but the choices are either, 1) Tax income 2) Tax wealth 3) Seize wealth.

Option #1 clearly isn't working as long term those with wealth (i.e. capital) grow their power, influence, and wealth further. Thus increasing the divide.

Option #3 doesn't work because there's an inherent "unfairness" to arbitrarily seizing the assets of others.

Option #2 has it's merits. Arguably a billionaire is getting a larger value from the security/tranquility of a peaceful existence than a pauper. Should the billionaire not pay more as a result? Think of it like negative interest rates but rather than doing it on just cash in the bank, it's on total assets. If I own a bunch of stores in a city, I arguably have more incentive to prevent riots and looting.


(4) Tax land

Land is the largest source of unearned revenue (rent-seeking).

The more you tax of something, the less you get, usually to the detriment of society. The one thing this does not apply to is land.

---

In theory I'm in support of taxing wealth and much prefer that to taxing income, but it's just too unrealistic. Wealth is so easy to hide (eg. offshore) and hard to value (since it's more than just counting money in the bank). The only plausible way I could see us taxing wealth effectively is if the world collectively got rid of physical cash and implemented negative interest rates on currency, but obviously that's not happening anytime soon.


What about non-land based wealth? Say an empire of digital services running on virtual servers in a data center owned by a service provider?


> Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet.

Nothing is wrong or broken.

Have that other 90% start and run their own businesses or go to school and get a degree in business that allows them to become a C level exec or invent a product and launch a startup.

90% of the people on this planet don't do SHIT. Because doing shit is HARD. Most are content working for someone who's willing to take risks, often with consequences to their own personal lives.

And that's OK. There's nothing wrong with that. Not everyone can be an entrepreneur or C level exec. Most people prefer simpler life.

For nearly a decade I lived across the street from a retired fireman. He put twenty years or so on the job and retired with a very generous pension and full benefits, for life. I watched as he amassed RV's, boats, jet ski's, Harley's, cars, etc. Living the life, as they say.

At the same time, almost everyone on the same block got up at five or six in the morning to go to work every day. Office workers, customer service folks, a couple of engineers, a couple of doctors, I know them all. And, in my case, well, it was 18 hours a day 7 days a week in the garage working on developing a product. For two years the external view was that I didn't have a job or didn't go to work, when, in reality, I was doing the equivalent of five jobs and was working every waking hour.

So, a couple of years later the product launches and it does very well. Seven figures per quarter very well. I decided it was time to replace our two cars, which had nearly 200K miles and were in bad shape. When the two mid-range (nothing fancy) cars appeared on my driveway the comments I got were, well, incredible. "Wow! You must have won the lottery!". "Dude! Did you rob a bank!". "You don't work, how did you buy these cars!". "Are you a drug dealer?".

Nobody EVER made a comment about the fireman being set for life when he did not contribute a dime to his pension plan that paid him six figures a year and his gold-plated health plan. No, the entrepreneur was the "drug dealer" on the block.

I created dozens of jobs through an incredible personal effort and sacrifice and somehow didn't deserve what I had. I was compared to the 99% purely based on my wealth.

Funny how everyone sees people who make money as undeserving purely based on how much they make yet have no clue what it may have taken to get there and can't be bothered to ask.

Please stop this nonsense of comparing the N percent to the M percent based on how much money they make or have. If you are going to do that, include HOW they got that money and, in particular, WHY the M percent couldn't be bothered to even try to do better, educationally or in business.

Hint: You are not going to become wealthy working at McDonalds or, in general, working as a employee at 99.99% of companies. The only corner case being joining a startup that goes public and your stock options make you wealthy. Like I said, corner case.

It's funny how people who often make the argument for this unfairness have their brains short-circuited when you ask them if it was unfair for Steve Jobs to become incredibly wealthy or, to use someone who's around today, Elon Musk.


You're trying to justify extreme inequality with an emotional moral argument over hard work. The fallacies you're making are:

1. Assuming wealth is earned (counter-example: inheritances, rent-seeking)

2. Assuming wealth is compensation for contributing to society (counter-example: rent-seeking)

Even if those two bullet points were true as you've assumed, I'd still argue that capitalism in its current form of extreme wealth inequality is NOT leading to a socially, economically, and technologically optimal society.

For one, poverty is a very real man-made problem. When all your energy is dedicated solely to surviving and you live paycheck to paycheck, of course you won't be able to do things like contemplate and pursue business opportunities (and then people like you call them lazy).

.01% of the population having more wealth than the other 90% is akin to being on an island of 100,000 people where 10 people own more land, bananas, etc. than 90,000 people.

Even if these 10 people were all Einsteins and Elon Musks like you'd probably claim, it's clear that this most likely isn't an optimum allocation of resources. Land that could be put to better use for the community (eg. farming, manufacturing) is hoarded for the pleasure of a few people. Resources are allocated for the pleasure and whims of 10 people (eg. luxury goods). Money sits vacant in bank accounts while business opportunities and opportunities to otherwise help the community go unrealized. Capital and power is so concentrated that it's effectively a monopoly, leading to a totally lopsided system that places the interests of these 10 people above the other 99,990. Want to start a business requiring a large investment? Not happening unless the "owners" approve, and probably not on favorable terms to you. You start to see things like debt slavery being required simply to partake in society (eg. education). The list goes on.

Also, you need to recognize that making a profit does not necessarily correlate to contributing to society (eg. renting out land you own, jacking up an HIV drug's price 5,000%, high-frequency trading, planned obsolescence), and contributing to society does not necessarily correlate to making a profit (eg. open source software, scientific research, taking care of a kid, teaching and having an educated populace). I'm not saying we need to abolish capitalism. Just that we need to recognize the imperfect nature of it, and seek to alleviate those problems.


You can always find extreme cases to support any conclusion. There are bad players at every level, rich and poor.

I do not appreciate victim mentality because i am the grandson of genocide survivors who made it despite having not a dime to their name, no education, no language and the most tragic experience one could possibly imagine. I have zero sympathy for victim mentality.

That does not mean I am not sensitive to the plight of those trapped by circumstances almost impossible to escape. We, as a society, must help them. I do what I can as often as possible.

I see lots of people complaining about the poor while sipping their $5 latte from Starbucks and typing their comments from a $2,000 Apple laptop. Very few of them will stop drinking their lattes and buy a $400 computer so they can donate money and time to help others. As they finish their latte they blame the rich and capitalism for all of the worlds problems. A mirror is a powerful device.


> Have that other 90% start and run their own businesses or go to school and get a degree in business that allows them to become a C level exec or invent a product and launch a startup.

Why not let them eat cake while they are at it too.


I think the issue people have isn't that 90,000 people have 90% of the wealth, it's the implications behind that figure. It's the imbalance between 6.6 million people who die every year from poor diet or malnutrition, something preventable by providing people with basic necessities such as food and clean water, and having 90,000 people owning collectively tens or hundreds of trillions of dollars.

Your argument would hold merit as soon as the the single mother of three in Somalia has every opportunity to do what you did. We are decades, if not centuries away from that. And until that point, I don't find it unreasonable that people will take issue with wealth imbalances.


The single mother in Somalia is a very different problem and it has nothing whatsoever to do with an entrepreneur in the Valley becoming wealthy because she pitched an idea to YC that got traction and worked her ass off to execute.

Let's make sure we are discussing things that are actually related.

Yes, we have to do more for people like the woman you describe. And, in some cases, they have to do something for themselves as well. In your hypothetical scenario (and that's all it is) it would be fair to ask why and how she ended-up with three kids before being able to provide for them. Is there a limit? Should anyone be able to have eleven kids, or fifteen, and we still look at them as responsible individuals?


> The single mother in Somalia is a very different problem and it has nothing whatsoever to do with an entrepreneur in the Valley becoming wealthy because she pitched an idea to YC that got traction and worked her ass off to execute.

The Venture Capitalists who invested in her idea could have just as easily put the 10s of millions of USD toward supporting single mothers in sub-Saharan Africa.

> Yes, we have to do more for people like the woman you describe. And, in some cases, they have to do something for themselves as well. In your hypothetical scenario (and that's all it is) it would be fair to ask why and how she ended-up with three kids before being able to provide for them. Is there a limit? Should anyone be able to have eleven kids, or fifteen, and we still look at them as responsible individuals?

There's a good chance it's some combination of having been raped, forced into an arranged marriage, and living in a community which punishes women harshly for undertaking abortions and having careers.

PS. Using "she" for a prototypical entrepreneur is just as sexist as using "he". Try using "they" next time.


>PS. Using "she" for a prototypical entrepreneur is just as sexist as using "he". Try using "they" next time.

Oh, please.


I think you're putting the elite class on quite a pedestal. Most of them aren't like you: they didn't get to where they are via hard work. Rather, they stole, cheated, played politics and took credit for other people's accomplishments. Yet others were born into wealthy families and had everything - education, jobs, connections, promotions - handed to them on a silver platter. In fact there's quite a few who haven't worked an ounce in their whole lives (unless you think playing golf with daddy's friends counts as work).


Sure, some of that does happen. Absolutely true.

There are also MILLIONS of people fucking off at work every day who do not deserve to have a job. GM had (has?) a clause in their union contract that did not allow them to fire people if their job was automated away. They had a building where 10,000 people would show up every day, year after year, get paid full salary and benefits only to read the paper and drink coffee all day.

I've worked with so many people, both as just another employee and as an entrepreneur, who fuck off all day or work sub-optimally that I sometimes wonder how some companies run.

I know a guy, a sales guy, who "worked from home" for a large multinational while earning six figures. He spent most of his time doing home improvement projects. He replaced his roof (himself), he built and installed new kitchen cabinets, he remodeled the entire house and painted it all.

My point, in case it isn't clear, is that if we are going to start to pass judgement based on who deserves what they have or they are getting let's make sure we are honest about passing said judgement at all levels. There are millions of people who do not deserve the jobs they have and millions more than are being carried by the work of others.

What do we do about them? Where is the evil?

I don't have a problem with the whole inheritance thing. If someone is born to a wealthy family and they get to float through life because of it, fine with me.

Let's bring it down to a lower level. If you have kids and you are fortunate enough to be able to buy them a car and pay for their college education, that's OK. Is is OK for some guy to think less of your kid or think ill of you for this? No, of course not. You might not be wealthy but you love your kids and want to help them get launched into the world. Different scales? Sure, but it is exactly the same thing.

The right attitude in life isn't to envy those who have more than you do but to try to better yourself and strive to help others as you do better in life. The first sentiment is destructive at a personal and national level. The second is constructive at a personal, national and global level. Only one of these outlooks in life result in improving life for everyone.

Sure, there are lots of assholes with money. There are lots of assholes without money. What else is new? The vast majority of people are good, money or not.


> I know a guy, a sales guy, who "worked from home" for a large multinational while earning six figures. He spent most of his time doing home improvement projects. He replaced his roof (himself), he built and installed new kitchen cabinets, he remodeled the entire house and painted it all.

You seem surprisingly judgmental about this given how upset you were about others not recognizing the effort you put into the business in your garage.


> There are also MILLIONS of people fucking off at work every day who do not deserve to have a job. GM had (has?) a clause in their union contract that did not allow them to fire people if their job was automated away. They had a building where 10,000 people would show up every day, year after year, get paid full salary and benefits only to read the paper and drink coffee all day.

Can I get a source for the GM thing? That sounds fascinating. I wonder how the incentives got perverted in that manner.

> My point, in case it isn't clear, is that if we are going to start to pass judgement based on who deserves what they have or they are getting let's make sure we are honest about passing said judgement at all levels. There are millions of people who do not deserve the jobs they have and millions more than are being carried by the work of others.

But I also wanted to point out that it's perfectly fine to pass judgment on these people as well. Do not create a false dichotomy. Addressing the systematic wealth-hoarding of the top 0.01% is far more impactful than addressing wasteful middle managers and workers purely because of the size of wealth involved.


I believe said poster is thinking of Toyota, where it is a lot less then 10,000 people. As a top Japanese corporation, this is expected of them - as an employee, you give your life to the company, in exchange for the company taking care of you, through thick or through thin.


The greatest crime a capitalist can imagine is an employee getting paid the amount they are promised, in excess of that they deserve. The greatest virtue a capitalist can imagine is an employer making profits in excess of their contribution.


Here's an article:

http://mu-warrior.blogspot.com/2006/03/general-motors-paying...

Also, just search for "gm paying people for not working"


"I don't have a problem with the whole inheritance thing."

Lowering or eliminating estate taxes results in extreme concentrations of wealth in only a few generations. The inheritance tax ("death tax") in the USA should be revived; it was a mistake to reduce it.


"Funny how everyone sees people who make money as undeserving purely based on how much they make yet have no clue what it may have taken to get there and can't be bothered to ask."

Funnier than that is how most people assume that the capitalist earned his/her wealth and thus deserves to keep it, when in actuality wealth is accrued largely through chance rather than skill. Should one be allowed to keep all winnings in a game that are due to chance? Or should one be limited to that portion of the winnings due to one's skill plus a bit of the portion due to chance (and let government take the remainder)?

"Wealth condensation in a simple model of economy Jean-Philippe Bouchaud, Marc Mezard":

http://lptms.u-psud.fr/membres/mezard/Pdf/00_BM_PA.pdf

As jivardo_nucci said once on this very forum:

* The simulation studies of Bouchaud & Mezard show that, regardless of initial conditions, wealth distribution ends up a Pareto distribution with a small percentage taking almost all of the goods. The take-away of Bouchaud & Mezard's studies: the very rich aren't rich because they earned it (i.e., because they are skillful or knowledgeable), they are rich mostly because they are lucky.

All my life I've assumed that, when people had a going concern or were rich, that they _earned_ their wealth. But Bouchaud & Mezard says they're, for the most part, simply very lucky.

If luck, rather than skill, is the source of one's wealth, then has one "earned" that wealth? How can one lay exclusive claim to something given by chance? I would contend that no such claim can be made.

In particular, I would contend that income gained through luck is fair game for government acquisition through taxation, and if it is possible to distinguish that portion of wealth due to skill from that due to luck (and such appears possible), then the "lucky" portion is open game for acquisition to be spent or redistributed as decided by the powers-that-be.

Wealth Condensation: Why the Rich Get Richer (and the poor poorer): http://iwillknow.jesaurai.net/?p=387 [old broken link]

The Mathematics of Inequality: https://www.austms.org.au/Jobs/Library4.html

FWIW Bouchaud & Mezard are not the only researchers whose models say this:

Chance helps the rich get richer, simulation study finds: http://www.world-science.net/othernews/110722_chance.htm


Go start a business and see if the reality you experience agrees with your current ideology.

Let's make it simple: Start a great local coffee shop wherever you live. People like coffee. It's a safe business, right? You know there's demand. All you have to do is create an excellent product that is more appealing than the competition. Then go get some funding, get a loan, mortgage your home or, if you have it, dump your entire life savings into the business to fund it.

Come back in five years and read what you just wrote.


That is a cliche'. FWIW been there, done that, got the T-shirt. I still think Bouchaud/Mezard is onto something almost revolutionary.

Bouchaud/Mezard's claims have a novel perspective but are consistent with other studies over the years. Society remains in a state of ignorance and denial of this simple idea:

The rich are lucky, not skillful. A person may benefit from his/her skill, but not necessarily from his/her luck. Society should determine the partition of luck/skill in wealth, tax the luck and reward the skill.

[Yes, I would tax lottery winnings very heavily, since they are nearly 100% luck!]


Is your point that they are going to feel unlucky in five years?

(Would it even take 5 years to go out of business?)


A man holding a cat by the tail leans something he can learn in no other way. -Mark Twain

That pretty much sums up my point.


Curious, what did you design?

I love heraring the stories of fellow entrreperneurs.


I suppose you were either there and knew what it entailed or are clear on your facts? The Soviet Union at one late stage couldn't even supply sanitary towels for half its population and thus women had to tear up old clothes to take care of menstruation. But who cares as long as it put "the fucking Fear of God into the capitalist class". It didn't of course and thank goodness because the last 20 years of capitalism has seen the greatest decline in world poverty ever in the history of humanity. That's the result of letting individual humans make decisions about how they want to trade goods and services with other human beings.

By the way, the Gini index ranks Bosnia, Ukraine, Ethiopia, Bangladesh, Egypt and Vietnam as more equal than the UK. But in which of these countries is it better to be poor?


I suppose you were either there and knew what it entailed or are clear on your facts? The Soviet Union at one late stage [...]

I think you missed the point. As long as there was still socialist idealism in the hearts of a sizeable proportion of the Western population, there was always the fear of a revolt in your factory or even country. So, people with capital had to keep their workers happy.

Now that virtually everyone in the West believes in the capitalist doctrine, not making it means that you are just a sucker who did not work hard enough, did not make the right choices, etc. So, you don't protest, you just work harder.


Huh. It would be a great irony if the realization became that capitalism and socialism need each other to thrive.


However tenuous the connection may be, this makes me thing of the central 'point' of the book Trying Not To Try. The author argues that societies oscillate between favoring conservative and 'liberal' values over time, and that neither extreme is ideal.

In a way, perhaps capitalism can be seen as the 'liberal' side, where there is an explosion of development and innovation at the expense of stability, social cohesion and safety.

Maybe our biggest long-term challenge is figuring out a way to maintain a balance and keep either 'side' from winning or at least stabilizing the oscillation a bit.


Is it ironic? Europe's great modern wealth is socialist capitalism.

The original canonical work on capitalism, Adam Smith's "On the Wealth of Nations" lays this out clearly.


It's kind of absurd to blame capitalism, when the vast majority of countries implicated are nothing close. Calling Russia or China capitalist is laughable, they are oligarchies greasing the wheels at every turn with extreme levels of corruption.

The US and others aren't immune, but your entire post is ridiculous. These are nations where the government officials pull all the strings, there's nothing free market about that at all.


A true Scotsman always pays his taxes!


Basic income doesn't solve this problem. I've worked with several executives who get to decide how much they want to "appear" to make in the United States -- all the rest is hidden offshore in stocks. The stocks they own have a very low "face value" -- since their value is set by transfers from other offshore stocks set up in a maze through different countries (so the Panama revelations won't catch them.) I have literally worked with executives hiding billions. Basic income does absolutely nothing to solve the problem of opaque financial instruments (derivatives, trusts, non-profits, and charities are also used to make money disappear. But mazes of offshores seems to be preferred by the rich people I have worked with - they are legal and well understood by all the big accounting firms.)

It would be very easy to make holding such stock illegal. And, considering the cost to our society and our world, any downsides would be outweighed by the incredible gain.


Doesn't solve what problem? It doesn't solve the "problem" of some people being very rich, but it does solve the problem of some people being too poor to meet minimal daily needs.


A guaranteed income solves the income problem -- but that shouldn't be conflated with the causes of that problem that it solves. The massive income inequality, which is arguably an underlying cause of the problem, requires different solutions. Ironically, by correctly solving income inequality it may obviate the need for a guaranteed income - since other solutions may have that as a side effect.


> It would be very easy to make holding such stock illegal.

Really? I think the USA already has many laws in place to make offshore tax evasion harder. These laws also have the effect of making it very hard for Americans to do (honest) financial stuff in other countries. For example, you want to buy a second home in another country, and maybe open a bank account there to take care of related bills? Or maybe you see some great investment opportunities in another country and want to open a brokerage account there, to buy some ordinary shares? Well, because of the laws already in place, many foreign banks don't want to deal with you, because complying with these laws is such a hassle. Well, I guess maybe it would be worthwhile for them if you were a billionaire. Also, you might end up with a tax bill of more than 100% of your gains back in the USA, if you're not careful.


It doesn't matter how hard you make tax evasion - if it's possible, then those with resources to spare will be able to game it, and those without will suffer.


It has been a standard practice to discourage tax laws by making them apply to everyone equally. But there is really no reason for that to be the case. Perhaps I have the advantage of having worked on Big Data problems with the NSA, and we live in a time when it is possible to write laws that allow people like you and me to have almost no "red tape" associated with our financial transactions. So, while I agree with your observations, I know that they are also a tactic used by the rich.


Since it appears you have first-hand experience, could you please explain what long term purpose of this hiding assets is? Do they just enjoy keeping it all to themselves, or they plan to pass on wealth to their kins, or something else?

Because as I see it right now, all that money sheltered effectively removed from US economy and as a result makes everyone a bit richer via deflation... Unless I am missing something.


They pay no taxes on any of the money. And they can still spend it offshore if they spend it from one of the offshore accounts "lower in the maze" of accounts. Also, products haven't been priced based on production costs for a long time -- a part of strategy is creating "effective monopolies" based on distribution channels, geographies, product mixes, and making such arrangements in conjunction with theoretical competitors, so the pricing is unfair and the unfairness is hidden (and the co-conspirators are paid off by purchasing offshore stocks which are designed to provide "pay offs") These are all things I have seen -- most of them more than once. So these accounts also facilitate pricing and strategies that are used to undermine our society -- and not just tax evasion.


This will keep going as long as people agree that survival of the fittest is a sound and fair argument to make the rules in society. Everyone is fending for themselves, and less and less people consider it to be a fair deal to contribute to society. So less join with it, and the one who do want to shield themselves from it. The result is rent seeking and an epidemic of tax dodging.

That's how the social net is slowing being deconstructed. I actually have a lot of sympathy for politicians who legitimately try to make people work together (not necessarily taking sides here). Seen how politicians are being systemically hated, I'm sure politics is actually a very tough job right now.


We're lucky that those evil businessmen line up to fill the pockets of the various nice politicians with tens of millions of dollars of, ahem, speaking fees and what-not - the politicians surely deserve it, with their "tough job" and all. As to favors given to businessmen in return for the money at taxpayers' expense - we can't really blame politicians for that, since being the nice people that they are, they just act on their nature of doing good!


How are politicians "systemically" hated?


Congress has a 11% approval rating. Nearly 90% of Americans agree that it's performing inadequately

Given that all 535 members won an election to get there, that is pretty surprising.

Widespread dislike of the entire political class is a new phenomenom in US politics. It seems to be driven by:

* Unprecedented polarization

* Filter bubbles -- new media makes it easy to hear only news you already agree with.

* Gridlock and dysfunction


> Given that all 535 members won an election to get there, that is pretty surprising.

I agree with your premise that politicians are generally disliked, but the obvious explanation of this is that voters disapprove of many of the representives they didn't vote for, especially those who belong to a different party or no party.


This is one of those re-occurring strawmen that just won't die and it's hurting the debate.

It becomes a self-fulfilling prophecy. Of course wealth does not trickle down. That's why it's defined as wealth. The real discussion to be had is the difference between lazy wealth (ex. real estate) and active wealth (investing in your own company)

The claim has never been that people like the Koch brothers somehow spend their wealth to the benefit of people "below" them and since it's their wealth then of course it's not trickling down.

The claim is that a lot of the wealth that is created from the millions of businesses which then result in jobs, a couple here, a couple there benefits people.

It's obvious that if you think about the ultra wealthy then the trickle down effect is minimal there is a limit to how many Bentleys you can own.

But if you take the large majority of small businesses and entrepreneurs who create a little but in quantity then wealth does trickle down. Working wealth that is.


Today's unbuilt factories do not stay unbuilt because nobody has the capital to build them, they stay unbuilt because they would not be profitable to operate. In that sense, the old standard defense of why we need capitalists has become much weaker than it used to be.


Sure but again you are talking about the wrong kind of wealth owners here. You are talking about the few. It's the many little wealth owners that are important.

This is why it's so much better for an economy with a huge middle class because that provides a lot of economic activity.

In other words.

Trickle down obviously doesn't work when we are talking about the 0.1% however it does work when we are talking the next 19.9% and it does work when we are talking the next 40%.

Not all wealth is the same. Passive wealth is of course not creating any value for society because it's passive. But active wealth is and so the trickle down economics does work just not all the way up.


Do most people work for large, medium, or small businesses?

I seem to recall reading somewhere that they work mostly for large businesses. If so, then "job creation" effect of small businesses is not that great.


The job creation effect isn't the argument here.

The argument is wether wealth is better while active rather than passive capital. People with great wealth don't spend proportionally as much as people with less wealth.

I.e. it's true that the wealth of the 1% doesn't trickle down but the 99% does because it's active and thats what makes the economy go around (economic activity, spending money)

But if you want to discuss that then:

"...American Business is Overwhelmingly Small Business. In 2012, according to U.S. Census Bureau data, there were 5.73 million employer firms in the U.S. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses, and businesses with less than 20 workers made up 89.6 percent..."


That just shows that almost all businesses in America are small businesses. It says nothing about whether most employees in the US are employees of large or small businesses.


Because that's not important to this discussion.

The point is that lots of small businesses are much better "consumers" because the they have much more needs than if you only had a few big companies.

The number of employees aren't important, the number of companies are.

The wealth which the trickle down economy critics talk about is not the wealth that is meant when talking about trickle down effects by most people.

The wealth that is meant is the wealth of the many small companies rather than the few wealthy who have most of their wealth in ex. real-estate.

The wealth of the few ultra rich isn't trickling down, but the wealth of the many small companies are because it's creating other jobs in other companies.

In other words.

If we live in a world were only 1000 people had any wealth their ability to stimulate the economy from their own needs aren't enough compared to their wealth.

But if we lived in a world where 100000000 are sharing the wealth then that alone creates much more economic activity.


Depends what you mean by "large businesses". The stats are in table [1]. Looks like the biggest companies (1,000+ employees) account for about 40% of private sector employment. Add another 7% if you think "large" is 500+.

Of particular interest is that those numbers have been growing quite a bit over the last 20 years.

[1] http://www.bls.gov/web/cewbd/table_f.txt


And I recall reading that 50% of Americans are self-employed or work at small businesses.


There doesn't seem to much in the article to suggest it doesn't trickle down, so the headline is rather sensationalist. They are saying that lots of it goes off-shore, but unspent wealth will not "trickle down" anyway (granted, there is perhaps more incentive to spend if the alternative is getting taxed, but the extent is unclear). These people are likely still spending quite a substantial amount back into the economy (and tax, although obviously nowhere near what they "should" be).

I do think there is general agreement that trickle down is not as effective as "advertised" but that doesn't mean zero effect.

It's also worth noting that the headline figures are total amount saved offshore across all countries, not the tax on that amount (or its returns) for a given country and its alternative internal tax structures.


Agreed. If they ever spend it, it'll trickle down. If they don't spend it, it'll be increasing the value of all the dollars that everybody else has - they've basically lending money to the rest of the world until such time as they decide to spend what they have, then it'll cause some inflation and the poor people will effectively be paying back that loan.

If they never spend it, then everyone else wins. Setting fire to money or burying it in a hole is like donating it to everyone else who also has money.

I don't understand what the problem is with a small number of people having a lot of money. What harm are they doing? Or is it simply plain old-fashioned jealousy?


> Or is it simply plain old-fashioned jealousy?

Please don't make the mistake of thinking this is jealousy. There are plenty of wealthy Americans who generally oppose the wealth inequality we have today, and I can't imagine they are jealous of themselves for believing that. I think that if one is empathetic to those who grow up in different environments (whether it be of a different race, religion, or income bracket) then the realization is that they should have equal opportunities to succeed. That, in my opinion, doesn't seem very likely if so much money remains at the hands of those in the top wealth echelons.

Could the nation succeed by putting business interests first? Perhaps, but at what cost to the vast majority of its people? To some, that cost is not acceptable.


> What harm are they doing?

You mean using their relative advantage as capital owners to manipulate commodity markets that literally causes millions of people to starve? That's just one example. But besides literally depriving people of life, what harm are they doing?

http://www.independent.co.uk/news/world/politics/the-real-hu...


If I was incredibly wealthy I would attempt to have a not insignificant portion if it offshore as a hedge against my local or national government instituting an out-sized tax on wealth or nationalizing my business.


Rich people do not need money. Give them more, they will invest it or hoard it. Give poor people money, they will spend it right away. Which helps an economy more?


The answer to this logical question is obvious. Unfortunately this is a debate that is dominated by emotions and not logic due to 100+ years of propaganda, brainwashing, M.A.D. scare tactics, and the fallacy of Malthusian-Darwinian ideology


They are breaking the social contract to operate. We give them limited liability, they give us the finger.


Is offshore money a good investment? Sounds to me it would just be sitting there passively, by the uncle scrooge mentality it would therefore be a gift to society. Money is an obligation of society to return something to the individual who owns it. If that obligation is never claimed, great...


The poor are really pro at spending money. Then can turn trickle down into firehose-up and given the chance.


This is an important difference between the rich and the poor. The poor actually spend their money.


Which means that BI would stimulate the economy in a way that trickle-down economics cannot.


You understand that "stimulate" in the Keynesian context means "cause inflation and lower real wages", right?

Why would this be a good thing in an economy at full employment?


> Why would this be a good thing in an economy at full employment?

This is a strawman argument. Apart from (arguably) Switzerland, what other economy is at full employment?

> You understand that "stimulate" in the Keynesian context means "cause inflation and lower real wages", right?

1. Real wages have been decreasing year-over-year since the '50s. BI would not change that.

2. This is the least of the worries for the 19.9 million Americans who live in abject poverty, and the many more who have to choose between paying rent, food or transportation (=cannot even afford to find a liveable job.)


The US is at 5.5% unemployment, the UK at 5.4%, Germany at 4.8%. This is the ballpark of the natural rate of unemployment.

Do you really believe there is a significant pool of workers who are unwilling to work currently, but might work if we inflated away the value of their sticky nominal wages (thereby fooling them into thinking they weren't taking a pay cut)? Where are they?

(1) is just not true. Real comp (which is actually what I should have said, since comp is what determines buyer and seller willingness to trade) has done nothing but increase. https://research.stlouisfed.org/fred2/series/COMPRNFB

If BI did not change this then it would not be stimulus. So which is it?


Just to be fair, you should include labor force participation when quoting those low unemployment numbers. If you include people who gave up looking for a job after the meltdown we're closer to 9% unemployment.


Don't forget to add underemployment to the list - people who have jobs, but not enough working hours to survive.

In the US, at least, an incredibly common opinion is that those people are scum, and deserve nothing. It's very strange to hear you call it the 'natural rate of unemployment.' The human impact poverty has on the unemployed is devastating. (Yes, there is also the working poor.)


It's very strange to hear you call it...

https://en.wikipedia.org/wiki/Natural_rate_of_unemployment

In the US, at least, an incredibly common opinion is that those people are scum

I've literally never heard this opinion expressed.

Certainly one can criticize the people you describe - they could work, but due to their pride or whatever, they refuse jobs because the nominal wage is too low. They refuse to solve their own problems so we need stimulus to trick them into doing so.

But this is a fairly uncommon position - most people have no understanding of sticky wages and don't understand that stimulus is about lowering real wages, or that people could find a job if they lowered their nominal wage demands.


> I've literally never heard this opinion expressed.

Pretty much everyone who thinks that the unemployed don't deserve state entitlements (Typically, because of the poverty of their character).

Nominal wage demands are held up at the bottom end by people needing to make a living wage. Yes, a skilled computer programmer asking for $7/hour could easily find work at the height of the dot-com bust - however, they'd still depend on handouts, be it from the state, or their relatives for survival.

And when we move down the wage track, things don't get any better. How would people already receiving close to minimal wage attain employability by lowering their wage demands?

This also only solve a problem for the individual, rather then society as a whole - it largely shifts unemployment around, and pulls everyone's standard of living down.


Pretty much everyone who thinks that the unemployed don't deserve state entitlements (Typically, because of the poverty of their character).

That's a completely different claim. It's also a claim you agreed with - you just acknowledged a few sentences down that many unemployed people could work if they chose to. Does this mean you also believe such people are "scum"?

Nominal wage demands are held up at the bottom end by people needing to make a living wage. Yes, a skilled computer programmer asking for $7/hour could easily find work at the height of the dot-com bust - however, they'd still depend on handouts, be it from the state, or their relatives for survival.

Where I am right now many computer programmers survive easily on $7/hour. It's considered a good wage except in tech hubs (Bangalore, Pune, Gurgaon). If your theory were right I should be surrounded by about a billion corpses.

But lets assume that one can't survive on $7. Suppose we adopted stimulus and inflation caused $10 post-stimulus to buy the same goods and services as $7 pre-stimulus. Isn't the person who suddenly became willing to work due to this trickery still failing to survive?

How would people already receiving close to minimal wage attain employability by lowering their wage demands?

You are correct that minimum wage can cause unemployment, particularly during recessions.


And then it floods back in in places like the Vancouver real estate market.


The article has nothing to do with trickle down or taxes: it just underscores that many people are not too excited about keeping their property in places where rule of law is rather peculiar. E.g. if you look at the title graphic, 2nd largest capital flight figure is for Russia -- I highly doubt its 13% (iirc) flat income tax is to blame for that.


Great article - "...new study suggests a staggering $21tn in assets has been lost to global tax havens. If taxed, that could have been enough to put parts of Africa back on its feet – and even solve the euro crisis"


some time ago, the definition of "trickle down" on wikipedia used to contain, in the first sentence, the statement that the goal is to achieve wealth distribution. the contradiction was too glaring, i presume ;) because, if so, then why not just give the money to the people? their spending will then inevitably reward and enrich those market actors that deserve it, leading to a much healthier market then one created by governments transferring money to arbitrary, politically connected capitalists.

ceterum censeo, basic income is the future!


Offshore is down. What were you expecting?


Isn't that clever?

Of course it is. Land is above "sea level" and all that.

(Except when it's not, but in the whole macro sense land must be above sea level)


Capital goes to where to where it will do the most work.


Counterhypothesis: capital goes to where it will extract the most wealth, without necessarily producing greater societal value. Often the inverse.


NB: This is a 2012 article.


Dated Saturday, July 21, 2012


Added.


Well, this is what you believe it does, but is it proven or at least fairly convincingly demonstrated by at least some model or more thoughtful argumentation?

I have not researched this topic or given any longer thought about this, so at this point I am honestly curious.

For example how would the market react to this? Mostly what would happen with prices of essential goods and housing?

More importantly, how would people react sexually? Would they start having more babies just because they now can? What group of people would pick up this behaviour?

For example in my opinion most of the possible wealth accumulation in the third world countries is destroyed by very high population growth (in most countries above 4 times in 50 last years; fortunately this decreasing in many places).

Is this mostly a solved problem for developed world?


We detached this subthread from https://news.ycombinator.com/item?id=11465477 and marked it off-topic.


Thanks! I did not expect it to explode like this.


Well, this is what you believe it does, but is it proven or at least fairly convincingly demonstrated by at least some model or more thoughtful argumentation?

Yes. It's been modelled extensively, and has been found to work, and it's worked in different pilot programmes over the past 40 years - https://en.wikipedia.org/wiki/Basic_income_pilots

Is this mostly a solved problem for developed world?

19.9 million Americans live in extreme poverty[1], so no it isn't.

[1] http://www.worldhunger.org/articles/Learn/us_hunger_facts.ht...


19.9 million Americans live in extreme poverty[1], so no it isn't.

The question was not about the living conditions of the people but about their reproductive behaviour.

I understand that this is mostly cultural phenomenon, so the question is, is this behaviour still prevalent in the dormant condition and will reappear when given opportunity.

Yes. It's been modelled extensively, and has been found to work, and it's worked in different pilot programmes over the past 40 years - https://en.wikipedia.org/wiki/Basic_income_pilots

Interesting list but I did not see any of my questions addressed there.


The amount of kids people have is dominated by whether they have easy access to birth control. Money is secondary to that.


And access to the birth control is mostly limited by the culture, not money.


And culture is shaped by money.


I would disagree. Money is artefact of the culture.

If you miss what I want to day by this, I would recommend you to read this nice essay: http://www.naturalhistorymag.com/picks-from-the-past/12476/s...


If you'd done even a tiny bit of research, you'd realize that there's actually a negative correlation between income and fertility.


Correlation, yes, but are also proposing that low income causes to have more children? I rather believe that the causes for both, low income and too many children are both cultural origin.

Why I believe that? All the attempts to easy the burden of the low income people by development of the better crops have gone directly into increasing the population instead of increasing the wealth and well-being.


The correlations exist within countries, not just between them. Moreover, as an individual country's wealth increases generally its fertility rate declines.

It seems like you have some bigoted beliefs and I challenge you to actually look at the data.


I think that you fail to understand the reasons behind the wealth increase. Wealth increase does not usually happen by itself. It happens mostly because people do something differently. This change is very often gradual inside the society.

Correlation between wealth increase and fertility rate in a single country is a very good indicator of this.

The main question posed in my original post is actually different.


> All the attempts to easy the burden of the low income people by development of the better crops have gone directly into increasing the population instead of increasing the wealth and well-being.

Do you have a citation for this opinion?


I think that visually most representative is the population graph provided here http://visualizingeconomics.com/blog/2007/12/09/comparing-po...

It does not include all the world regions, I understand that for example Eastern-Europe and most countries in Asia are missing, but I think that it communicates the bigger picture.


The evidence to back your opinion comes down to dubious correlation on a graph?


There's a lag between higher incomes, a stabler higher quality of life and having fewer children. About three or four generations at least.


> Would they start having more babies just because they now can?

Why would they ? Look around you, does it look like people take their income into account when they decide to procreate ?


I am poor and I can't imagine suddenly deciding I want kids if I came upon a lot of wealth. A jetski maybe but not children.

Some people just want a lot of children. I'm biased against it and I think people shouldn't have kids if they don't have the means to provide for them but I can't get a politician to support this platform of pay to play.

I don't think basic income should apply to children. Only adults who are free to spend the money as they see fit should be eligible. The amount of basic income should not change by the number of dependents.


What do you see as the purpose of basic income?

I see it as lifting everyone to a basic standard of living before wages are taken in to account. Not considering dependents means that those children would be penalised with a lower standard of living (food, clothing, dwelling) than I'd considered basic in the society they are in. Should some children not get to eat because their parents are especially fecund?

Overpopulation is a big issue but IMO needs addressing separately to provision of basic living standards.


Having children is a choice. I've never understood why welfare schemes reward people for having children and insist on socializing the cost of that choice.


Surely not giving welfare in this case is effectively equivalent to punishing the children for being born to parents too poor to support them?

That doesn't seem just, or sensible: disadvantaged children are more likely to end up in juvie or, later, in prison. Either outcome is significantly more expensive for the tax-payer than the welfare that could have helped them avoid prison.


Subsidizing poor procreation isn't a big concern in more equal societies because you know that child will have access to good education and opportunity regardless of her parents' standing. Therefore you stand a good chance of getting a positive ROI on that welfare when the child ends up climbing the ladder to productivity and pays back more in taxes over their lifetime.

In America you mostly end up with entrenched poverty continuing over generations.


I'd like to add that my premise in supporting basic income is to expand coverage so there is no means testing.

As far as infants and children under five go, I think we should go ahead and eliminate the qualification process for WIC. I'd also want to see expanded school lunch program so every kid gets to eat lunch at school.

Thank you for explaining this though. Overall, I couldn't have explained my position better myself.


This was actually my main concern when I posed the initial question of mine.

The question is that can these problems solved by just giving money to the people, or it does not change anything, or will it instead make matters worse.

I think that it makes sense to try to model it. I think that results of the pilots are interesting but I am not sure that they cover wider implications.


Because society needs children. Or at least, it always has in the past. And given that people are still prone to tribalistic thinking, it's a hard belief to wash away.

You may not notice it if you live in a relatively homogenous culture. But when your 'enemy tribes' plan to extinguish you by outnumbering you, it's a real concern.


It's not always a choice, the success rate for condom use is less than 100%.

You need to account for such edge cases: it's not just to punish a child because their fathers vasectomy failed, for example.

The benefit of children to society is at least in part socialised.


Any single birth control mechanism can fail, but that never means you're forced to bear a child if you don't want it.



I am seeing this response to many/all of the wealth disparity articles. I personally don't think this idea is properly analysed. I think people should rally for extension of basic services as human rights. Internet, electricity, food etc instead of a cheque at end of the month from the state. That seems more sustainable and works out as common infrastructure. Like roads for e.g. That will alleviate lives of many and will provide security, without creating any access and mismanagement in the system


That seems like a good thing: call it infrastructure which much be a basic right of all and then define what that is: education, housing, healthcare, food, electric, roads, public transport, clean water, internet, 2g and up, and so on. But then how much of this all? And can we resist the capitalist 'solutions' taking over? Like making healthcare available by mandatory acceptance by insurers and making insurance mandatory is not the way I think as someonr who lived in different countries and systems: once insurers are involved all breaks down as their job immediately is make money so all are worse off besides them. I went from mandatory private healthcare (completely subsidized if you make too little) to public and public is just better and more natural. My doctor does not care about cost and I get better healthcare because of it which is a basic human need imho.

Public transport made private is a joke in the countries I saw it. It was bearable when it was a public service: privatized it is the same or worse 'quality' but insanely expensive. So infrastructure indeed to me is better than BI however not if it is not clear how and within what boundaries it is handled.


I'm also not a fan of Basic income being used as a catch-all answer and I'm not a fan of BI, as it's described in a lot of recently popular future looking leftists camps.

But I am a proponent of BI generally. If we want post earnings wealth distributions (I don't think we can have our modern system of economy and governance without it), direct & simple redistribution is the best answer. Centralised provision of food is a terrible idea. It would destroy the economy of food production. Why do this? How is it better economically, more just or more effective to give people food or food stamps than it is to give them money to buy food?


I get you. I am definitely not in the camp of central provisioning of food. But how's that different from BI? BI is pretty much central provisioning of resources. Yes it's money. But that money translates to resources. That's the point I was trying to make when mentioning about beefing up common infrastructure to a point where it's next to free to a degree. In other words, basic income should be replaced with basic minimalist modern life style. Giving people money, creates all kind of access and may even cause more disparity. What if people spend all the money on video games or alcohol or foreign holidays.

Won't it be better instead of basic income we aim for better basic life for everyone?


I think the argument generally is: people will spend most efficiently and effectively when they spend the money on themselves, based on their own unique needs. This lowers the cost on everyone else, while providing maximum benefit to those in need.


It's a wishful thinking. If anything, people are worst money managers. Free money will simply be used to turn on pleasure centers. Ofcourse, there will be many who will channel the money wisely (80:20). But if argument is that basic income can be used for better life, why not simply give that better life as defacto infrastructure.


Is governmentally planned/allocated spending contrary to the wishes of the individuals really better? If someone gets more pleasure/utility from X instead of Z, why should we force them to consume Z instead of X? Where's the line? If Z becomes effectively a government mandate, would the commercial manufacture of Z become more or less efficient and competitive?

Would you rather get $100 cash, $100 Amex gift card, or a $100 Home Depot gift card as a gift? (Each of those can be used to buy something later in the list, but not the other way, or at least let's pretend that's the case.) In no case are you better off holding something later in the list.


The problem I see is that you're ignoring the real world decision making problems many people have.

Lets assume David owns and lives in a house where the roof has a leak, one which is slowly causing damage to the structure. David can't afford to repair his room. We have the option of David 1) giving David $1,000 or 2) giving David a $1,000 credit with a roof repair company or 3) repairing David's roof for him.

For the vast majority of Davids, all three options are equal as far as getting the roof fixed, but (as you noted) 1 > 2 > 3 as far as utility (since David could find someone to repair his roof for less, or he could learn to repair it himself).

The problem is that there is some subset of David's that will just spend the $1,000 on going out to dinner instead. David enjoys going out to dinner at nice restaurants and it's worth more to him (instant gratification, etc). However, next year at this time, David's entire house structure has rotted down and now he needs us to repair the whole thing. That's going to take $50,000 of our money.

We want a solution that is the most beneficial for the general case ($1,000) while still preventing the cases where the cost to us (society) isn't negatively impact. There's a lot of factors that go into that decision

1) What percentage of Davids would spend the $1,000 on going out to dinner and let their house rot?

2) What percentage of Davids would trade the $1,000 credit for $800, go out to dinner, and let their house rot?

3) How much are we willing to be negatively impacted by Davids with poor decision making skills? If it costs us $1,000 to repair the house later, we've only wasted $1,000 by giving him the cash at the start. If it costs us $50,000 to repair the house later, that's a much bigger impact.

4) How much are we willing to negatively impact the Davids with good decision making skills (reducing the utility of what they get from us) in order to mitigate the negative impact of the the bad-decision-Davids?

5) At what point are we willing to cut off the Davids with bad decision making skills? Are we willing to say "Here's the $1,000 dollars you need. If we come back next year and your house has rotted, you get to live in a cardboard box"?

6) lots of other questions...

There's a LOT of factors that going into making the "right" decision, if there even is one.


It's hard to react fairly to the analogy, because I know you're not literally suggesting that David's literal roof is any way anyone's problem except David's. (In the 1% of cases where you're literally arguing that, my response isn't much longer than "that's 100% David's problem". The house-owning David is so far ahead of the average American and few would reasonably suggest that free roof repair is a basic human right or governmentally subsidized/funded activity.)

If the analogy instead is meant to apply to general basic income topics, provided we're willing to remove more than 95% of the other enormous governmental support programs (replace, not augment), then I'm inclined to give cash and let the Davids figure it out.

I believe it's more wasteful to society and intrusive/insulting to the Davids to propose that "we know better than you" and erect even more governmental "choosing for the population" administrations. Is ketchup a vegetable? Is eating meat morally wrong? Is eating meat calorically efficient? Yes, there are Davids out there who will make poor choices with the money, but I believe there's more value in letting the individual decide than in me deciding for them (directly or via proxy).

> There's a LOT of factors that going into making the "right" decision, if there even is one.

100% agree and the second-order application of that is exactly why I favor giving cash. Because what's "right" for David-1234567 is different from David-1234568 and I'd much rather have them decide, even if it means that David-1234569 makes choices that he later regrets. (If he doesn't regret it, but we regret it on his behalf, then there is no problem other than our own over-reaching and over-controlling of others tendencies.)


>What percentage of Davids would spend the $1,000 on going out to dinner and let their house rot?

I think it's reasonable to assume, an absolutely tiny percentage of them.

>If it costs us $50,000 to repair the house later, that's a much bigger impact.

In what way is this society's problem? David has already paid for the house, that means he has already done things for society worth more than the cost of rebuilding that house. If he lets it fall apart, that's his problem now.


You give food so that you solve problems of hunger instead of, for example, creating a problem of drug dependent hungry people.


You should research all tenets of basic income including the economic side of it by getting the opinion of actual economists on it before you make your decision. If you're not properly considering an idea then that leaves room for personal biases.

Government doesn't know how to run anything well, because the tenets of capitalism don't apply to government. The best managers of business are in the private sector where the real money is and where they have the most control.

The director of the FBI for example has a salary that tops out at about $200K plus benefits. No business manager who is truly great would want that job, so they don't. They incestuously promote from within most of the time and don't seek outsiders to fill top jobs. So nobody treats any government service as a business, and they get complacent and lose sight of the real goals, plus they don't tend to be able to budget. When was the last time you heard of a government department tightening it's belt on it's own? Private sector companies do it often to stay efficient.

Proper decision making starts with admitting that you can't possible know every angle to a particular issue. You can't be a great economist, a great businessman and a great government worker all-in-one. This is why business people surround themselves with people who DO know what they're doing (such as accountants, lawyers, engineers, marketers, etc).

How many hours have you spent researching basic income? Because extremely back-of-the-napkin math would tell you that a basic income of $20,000 is greater than the entire current government budget. Supporting a concept that would instantly consume over 100% of the current government budget is absolute madness.

Taxing rich people won't pay for this, even if you tax them at 90%. You have to squeeze the middle class and the lower class as well. Literally every level of the population suffers because working is no longer incentivised.


>Government doesn't know how to run anything well, because the tenets of capitalism don't apply to government.

Who built the freeway system, ran the Manhattan project, created CERN, put people on the moon, and sponsored the research that led to computing and the Internet?

>The best managers of business are in the private sector where the real money is and where they have the most control.

Given the number of incredibly destructive, if not downright stupid, CEOs in recent corporate history, that's simply not a reality-based argument.

>Literally every level of the population suffers because working is no longer incentivised.

Literally every level of the population is already suffering for much the same reason. Current forms of capitalism penalise long-term strategic investment in favour of asset sweating and smash-and-grab corporate raiding that provide short-term quick-fix profits but destroy long term growth potential.

Wall St will always prefer a quick buck now to a million dollar payout fifty years from now - and that's not a smart way to run a planetary economic strategy.


"Who built the freeway system, ran the Manhattan project, created CERN, put people on the moon, and sponsored the research that led to computing and the Internet?"

There's also all of the taxpayer-funded and govt-run basic medical research that the pharmaceutical and medical industries get a free ride on.


I just finished reading the second (paper-back) edition of Michael Lewis's Flash Boys and he has added an "Afterword" to the book that discusses the diversionary and duplicitous tactics used by Wall Street (Both HFT lobbyists and others) to re-frame the arguments he originally made in light of public discussion prompted by the book.

I found that one chapter almost as disturbing as the rest of the book.


You can add government health care to the list as well (at least for most of the west - excluding the USA).

Single payer provides better outcomes for the population at a lower cost per GDP.


> You should research all tenets of basic income including the economic side of it by getting the opinion of actual economists on it before you make your decision. If you're not properly considering an idea then that leaves room for personal biases.

There is now on HN enough discussions of and references to basic income that it would take half a lifetime to ponder it all.

The only take away from this huge corpus of advices, opinions and reasoning is that economists - just like everyone else - heavily suffer from biases that trickle down to the laymen and that economic science is burdened with many theories that raise so many internal and external contradictions that the only way to see if any theory holds at least a grain of truth is to implement it and then spend the next half century explaining why it should have worked and why it didn't.

In my misinformed opinion it all boils down to two problems: greed and psychopaths are ruining it for everyone else on a massive scale.


I'd argue that greed is natural and that the economic system we've invented is more toxic. You can't fix greed, because greed is just a term "outsiders" use for people who act in their own self interest.

People should be greedy. There just needs to be a system in place that aligns the greed of individuals with utility for humanity. I can imagine such a system, so I'm pretty optimistic for the future.


I agree that some level of 'greed' is good just like other animal-level motivations (anger, lust, etc). The problem is that unchecked they can be consuming make for poor decisions in the long view. Plus, they don't need to be legislatively encouraged, as they will always be present in humans in strong form.


I used to believe on something like you describe but now I have a different view, I tried to find some videos that explain it, there is several but to start with look at this one http://www.neweconomics.org/publications/entry/where-does-mo... .

Money is an illusion that can/is be created from nothing and one problem is for whom is it created in the first place ?

Governments do not need taxes to finance themselves they do/can create money from thin air.

Also: http://www.businessinsider.com/where-does-money-come-from-20...

Cheers !


Fiat money can be created out of thin air. Value cannot. Printing money and introducing it into circulation just imposes a hidden tax on other people. It doesn't address the issue posed by the OP.


Exactly and that's why we are paying this huge hidden tax for the top 1% to accumulate it.


Whatever happened to the principle that whoever makes the through legal trade gets to own it?

Why does the US have such gigantic monetary needs?

How on earth does the US get into 18 trillion of debt?

Where's all thr fruits of that money????

Surely the solution is not for the government to keep being given more of the people's money?!!

Government is a bottomless pit waste of money with very weak oversight - the more money you give the government - the more it wastes.

If people paid for the things they need directly, rather than have the cost/administration overhead of government, society as a whole would be richer.

Corporations don't use very many government services - so why should they be heavily taxed?

The more ridiculous the taxes in the US become, the more businesses will simply incorporate overseas.

The US taxes need to become radically lower and radically simpler - then the US stands a chance to actually collect taxes.

See Ireland 12.5 corporate tax rate.


With all the attacks from the left against allegedly "privileged" people, I can actually well understand why those people want to secure their property by moving it out of reach. The fun thing about this new outrage (the "Panama Papers") is that it will probably spawn more of that, in order to protect against the populist new regulations and taxations that will inevitably follow.

The only thing I find regrettable is that it is not available for average incomes - I would love to have something like that. In case some massive redistribution schemes appear along the horizon, maybe a new industry around that will evolve.


Hey, folks, go start a business before voicing opinion about these matters. It's just amazing how there's this recurring theme on HN of folks without a clue about business thinking they actually know something.

Better yet, this is HN. Go formulate a startup and apply to YC, let's see how far you get and what you learn about what it takes to provide excellent innovative products that people want to buy. You'll also learn the gut-wrenching realities of being an entrepreneur.

And then, a few years later, you'll find yourself having a surreal conversation with some know-it-all who never risked anything, never tried to innovate, never tried to launch or run a business, who is absolutely certain you are a greedy pig, your company is evil and the customer service person should be just as wealthy as you are.

You don't understand just how dumb some of these comments sound from the vantage point of someone who achieved success through continued struggle and effort spanning years and at great personal and financial cost.

There's nothing wrong with Capitalism. What's wrong is the victim culture we seem to be developing --which leads exactly nowhere at both a personal and national level.

I say this in the nicest possible way. Get a clue. Please.


Apparently complaining about living in poverty is victim culture. Apparently complaining about working two full-time minimum wage jobs while barely being able to pay the bills is victim culture. Apparently complaining about not being able to afford a quality education for your children (so that they do not have to live in the same poverty) is victim culture. Apparently complaining about not being able to afford healthcare is victim culture.

Sure, people doing startups or creating other businesses work hard, but that shouldn't be the norm. Working 40 hours a week as an employee should be enough. And by the way we're not even complaining about the people creating businesses, we're complaining about the people who inherit their wealth, get everything handed on a silver platter, and who still aren't grateful and don't want to pay their employees more than minimum wage. We shouldn't accept that kind of wealth in our society when there are people living in (extreme) poverty.


How dare you?

My grandparents arrived at these shores without a dime to their names, without command of the language, from a GENOCIDE where they endured the trauma of having seen members of their families raped and murdered. They woked their asses off and made it. And they instilled that culture on their children and grand children.

So, yes, fucking stop thinking like a victim. It's insulting.

Yes's there are those who absolutely need help. Stop complaining and go help them. Don't blame others.


Solidangle probably didn't know anything about your personal background. So you have no right to accuse him of being insensitive. Also, it's good that you were able to turn a bad situation into something good. However, the mere fact that you, individually, managed to succeed doesn't mean there's not a problem that's worth talking about. Your personal story is relevant, but anecdotal.


This comment is very one-sided and there are a couple of problems with it.

1) What if you just don't have that much to risk? What if a failed business startup means you're on the street and have literally no one to turn to? You sound as though you've either never been in that situation or you were in that situation and just didn't realize it. And that would make you dumb, not smart.

2) What if people just aren't turned on by competition? Running a successful business in the US means you have to compete fiercely in the market for customers. You have to adopt a certain kind of aggressive attitude that doesn't appeal to everyone (nor should it). Also, I propose that this kind of winner-take-all environment does not help when trying to do certain kinds of work (e.g. basic scientific research). What of all the scientifically-minded people who prefer a more open, less result-driven approach to problem solving? Are they just part of a "victim" culture?


I've been bankrupt, as in not a dime to my name, twice. That did not stop me.

Not saying everyone has to be an entrepreneur, not everyone is wired for the risk and dedication it entails. What I am recoiling against this this bullshit notion that there's a dirty inequality based solely on the amount of money someone makes or has. That is NOT the direct cause of poverty. It's pure nonsense. Comparing CEO salary to receptionist salary is nonsense. It's a victim mentality.

A friend of mine has a PhD in Physics and was working in aerospace. He did the math and determined he could not build wealth if he stayed on that path. He quit his aerospace job and started a non-tech business having nothing to do with his education. A truck driver could have started the same business. He failed. He dusted himself off and tried again. He now owns multi million dollar homes and has a pretty decent lives. Some if his aerospace "friends" resent him yet not one of them will quit their job to try and improve their lives.

Lack of education? $1,000 buys you a ticket to a number of countries where university education is free and the cost of living is super low.

No, the problem is having a victim mentality rather than being hell-bent to make it. It's easier.


There are a million good reasons why most people are not willing or able to go through bankruptcy twice.


This is a tragically ironic comment.




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