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Challenging the myth that the rich are specially-talented wealth creators (lse.ac.uk)
141 points by sjclemmy on May 29, 2016 | hide | past | web | favorite | 213 comments

> If you buy some shares in M&S or BP on the stock market, the money you pay goes to the previous owner, not the company. You are what Keynes called a ‘functionless investor.’ When such so-called ‘investments’ pay off they extract wealth from the economy without creating anything in return.

This doesn't seem very coherent. How could a company ever sell stock to raise capital, if the people who bought that stock didn't have a functioning market to resell it on?

Obligatory link to Hans Rosling's economic play-by-play of the last 50 years: https://youtu.be/hVimVzgtD6w?t=4m12s

I think capital allocation is sometimes too abstract for people to see the value in.

If I bought some land, built a windmill with my bare hands out of stone and wood that I cut and shopped myself, and became the flour producer for the entire region, people tend to say it's a deserved reward.

If I bought that company, paid people to do all the work setting up a dozen more windmills, paid people to manage the new bigger company, and then sold it again to the highest bidder, now suddenly I'm rent-seeking and profiting off of the poor. Even if those things wouldn't have gotten done without this intervention.

It's like a Ship of Theseus: If you split up the flour company into its constituent pieces and slowly hire other people to do them, at what point does it become unethical rent-seeking?

Even someone who buys an income stream solely to ride it out with the minimum amount of maintenance is at least taking a risk to their capital. And even if they protect it with an insurance policy or similar, they're at least locking up the money for a dedicated purpose usually for an extended period of time. People are often afraid of taking risk or limiting their options, so people who do so are providing some value.

For your last point, I would also add that the sale of such a income stream is a private consentual business relationship. Neither the seller or the buyer is being exploited. I feel like communists like the author simply don't understand the time value of money.

There's one thing this communist logic doesn't take into account: risk. Ownership and risk are inherently tied to one another. Thinking only about scenarios where this risk already passed and then calling owners "parasites" is survivorship bias in the purest form.

Communists took ultimate risk when they risked their lives overthrowing capitalism as a system, being it Russia in 1917 or Cuba in 1953.

That statement's not entirely factually correct, lies by omission, but most importantly, doesn't have anything to do with the risk in question.

Sure thing. A sparrow bravely takes risk of competition for food among other sparrows. And this is not that exact risk the hawks take.

Communists slew far more anti-Communists than anti-Communists slew Communists, by orders of magnitude. Lenin, Stalin, Mao, Pol Pot, Castro, Ho: all killed far more after they took power than were killed by those they overthrew.

Rent seeking is jargon. It doesn't refer to running a business.



It refers to the economic consequences of things like regulatory capture and corruption.

You are are applying the standard definition of rent/rent seeking used by economists. But MichaelBurge's post is using the language of the original article, which claims that renting out an apartment, or making capital gains from a business, "rent seeking".

So MichaelBurge is making a valid critique of the original article, whether or not the article was correct in using the term "rent seeking"

The original article is naively expanding the definition to include simply "owning things which are worth money/time", i.e. the time value of money is somehow rent-seeking corruption.

A better way of putting it would be that your investment might improve the economy only via side effects (e.g. the investor who you purchase the shares from is able to invest that money in a new business venture or buying actual goods, or a boost to the company's share price from your buying activity [if you're a massive fund owner] encourages new businesses to start up in that industry or makes it cheaper and easier for them to raise capital)

Your contribution to the wealth of the economy from buying the stock is only the effect of the marginal increase in the speed of transaction and price from the share owner selling to you rather than having to wait for the next, possibly lower bidder on the share. The contribution to the economy made from you passively holding the stock is only the effect of the marginal boost to the share price from you not selling on entrepreneurs, lenders and investors. The average gain you make from share price appreciation is likely to be more than that; the difference is economic rent.

Given there are already enough stock investors for trades to be made in microseconds with tiny spreads, the positive effect of an individual secondary market stock trade is so close to zero as to make the "functionless investor" characterization broadly correct.[1] Moreover, since your decision to purchase secondary market stock has an opportunity cost; you might otherwise have invested it directly in producing something in a market without such ready access to capital, its effect on economic growth might be net negative.

[1]of all the circumstances where economists treat transfer payments as irrelevant, this one might be the most justified

The margins are where economic points must be argued though.

Your same logic could be applied to consumers. Any one individual buying products does not keep the economy functioning. We could say they're "functionless consumers."

Except if you extend that logic to all consumers, there is no economy.

Similarly, any one secondary investor might not make or break the existence of functional capital markets. But if you extend that logic to all secondary investors, suddenly there are no longer any primary investors.

Sure, all economic activity is measured at the margin, but all businesses depend on the marginal consumer pushing them into profitability to survive. On the other hand, most businesses function perfectly happily without any secondary market investors or any realistic prospect of selling on the secondary market in the foreseeable future. Absence of secondary market liquidity reduces the sources of investment available to growing businesses, but doesn't drive it to zero, and thus the real economy tends to be much less sensitive to the marginal dollar invested in blue chip stocks than the marginal dollar consumed.

Perhaps even more importantly, I also pointed out that (i) the marginal contribution of buying secondary market stocks to the growth of the economy is substantially less than their average 7% annual return for the passive investor and (ii) because the risk adjusted return of this economic rent is an attractive alternative to investing in creating new capital, it can in certain circumstances even have a negative effect on economic growth. Those were the real points Keynes was trying to make.

How could a company ever sell stock to raise capital, if the people who bought that stock didn't have a functioning market to resell it on?

It could be a lifetime or time-limited right to a dividend, with voting rights attached. This would prioritise sustainable profit generation with a long-term view, and eliminate the current malaise of seeking short-term spikes in share price.

... And it would further concentrate global wealth into the hands of a few (after you're no longer getting the dividends where do you think they'll go?).

Given that there are no owners, to the employees seems reasonable. With shares eliminated like this, we can have a such a system.

Perhaps through some kind of all employee profit sharing system that all the employees agree on. Alternatively, if there has to be ownership, ownership of the company can be split between all employees, and the profits shared amongst them accordingly.

I should divulge that by HN standards I am a screaming commie. I think unions are a good idea, and I think inheritance tax should be pretty much 100%. I'm not necessarily in favour of this employee-owners profit redistribution system, but it's an answer to the question of where profits should go if there are no rentier shareholders.

>Given that there are no owners, to the employees seems reasonable

By what standard? Does a new employee get the same percentage as every other employee? If so, how is that fair when certain positions objectively have much more impact on the success of the company? If not, who decides allocations for new employees and who the allocations should come from?

Also, who is going to put up the capital in the first place to start the business if there is no return?

These are all questions that have answers. Such companies do already exist in Western liberal democracies operating roughly capitalist economies. You can find these answers yourself if you choose to. You can probably even think of some ideas yourself. We don't have to accept the economic system we are told is the one true way. We've seen where treating the economy like a religion leads.

If there were reasonable answers, you would have provided them. The reason you haven't is because they generally aren't sustainable and do not work. If they did, that model would quickly take over because employees would exclusively seek out companies where they are granted ownership without any capital commitment.

Companies do exist that are owned by their employees, and yet people do also get jobs at other companies that are not owned by the employees.

These facts would appear to contradict your statements.

I would only agree on inheritance tax if you simultaneously maintain quality free public education and social lifts.

Part of the reasoning here is that rentiers are not contributing to wealth creation and therefore their earnings on the rent are parasitic, therefore 'unjust and dysfuctional':

"Since it’s a payment for nothing that didn’t already exist, it’s a deadweight cost, and so not only unjust but also dysfunctional for the economy. "

The practice of renting exists as an option to owning. By renting, renters can engage in an activity with less up front capital to buying. For example, a contractor building a concrete sidewalk may choose to rent the mixer rather than owning it, so that it's cost is a cost of sale for the service, rather than a fixed cost that requires maintenance, storage and transportation. In that sense, the rental is a component of a larger transaction involving actual work being performed, and not parasitic. Moreover, by offering the mixer for rent, the 'rentier' reduces the total number of mixers that need to be produced, as it is a shared resource to contractors and they each do not need to own their own.

The same principle pertains to business. A fast growing startup may know they only need a space for a short time and will grow out of it. So it would make no sense to purchase the property they will inhabit for a short time. The rent they pay is an alternative to mortgage or cash, and it makes sense for their business purposes, which in theory do produce something of value.

In the example of home rental, making homes available for rent enables families to live in accommodations that they would not be able to purchase. These accommodations are not without cost to the owner: Taxes, utilities, maintenance, security and administration are all associated costs that rent payments offset. What the rentier provides in most cases, is a better quality of life than the family could have if they were forced to own the property they lived in.

"In the example of home rental, making homes available for rent enables families to live in accommodations that they would not be able to purchase. These accommodations are not without cost to the owner: Taxes, utilities, maintenance, security and administration are all associated costs that rent payments offset. What the rentier provides in most cases, is a better quality of life than the family could have if they were forced to own the property they lived in."

In many parts of the UK this just isn't the case any more. There is a serious lack of housing due to many factors (the bigots will tell you it's all the fault of immigration) but the short story is that the competition for rental property is so fierce now that in many places, monthly rent to the private landlord is higher than a monthly mortgage payment would be to buy a similar property.

So why don't people just buy? Well, there is a shortage of houses to buy, and you can't usually get a 100% mortgage. You need to put down a substantial cash deposit towards the purchase price of the house, for example 15, 20 and even 25% in some cases.

So why don't people just save up for a deposit? Well, if you need to spend £250k on a very modest 3-bedroom house, you are looking at anything from £37.5k plus fees.

Housing is so expensive now in relation to average income, that people are effectively priced out of the market forever, unless they win or inherit a lot of money. It is not possible to save that amount in any reasonable time scale.

So why not get a second or third job? Maybe they'll work themselves to death before they need that house? Only joking, people have to work long hours at their main jobs nowadays. The contract may say 37.5 hours per week, and that's what you get paid for, but "You're all professionals..."

> the competition for rental property is so fierce now that in many places, monthly rent to the private landlord is higher than a monthly mortgage payment would be to buy a similar property.

This is not a malfunction of the market. Economically renting is always expected to cost more than buying. Renting has advantages over buying:

* No need to have a significant amount of cash to deposit

* Flexibility to move out into a larger or smaller house that better fits your needs

* No exposure to the risk of changing housing prices (which don't always go up, and can be hugely impacted by policy)

* Less headaches over maintenance, etc. This is (typically) your landlords responsibility.

So, just like a flexible airfare is more expensive than a 'no changes allowed' fare, it makes perfect sense that a rental house on average is more expensive than owning a house. Also, if rental prices are lower than the mortgage cost, the owner should probably do something different with that house.

TL;DR: rental prices are expected to be higher than owning, because renters are willing to pay a premium, and because landlords otherwise have no incentive to let out a property in the first place.

Parent's comment still stands, but you have to take the regulation into account: * people can live in a bigger house than they could otherwise afford, e.g. if they can't make the deposit * people can live in a bigger house than they could have the mortgage for. (e.g. Dutch regulation you can mortgage 4.5x your yearly salary. If you make 40.000 Eur that is 180k, which perhaps buys you a small studio in Amsterdam). Renting you could probably live in a 250k valued house, because those restrictions don't apply.

Two of these aren't true in the U.S. as I was reminded during a recent eviction where we had to find a new place in 30 days. Let's address them.

"No exposure to the risk of changing housing prices (which don't always go up, and can be hugely impacted by policy)"

In our case, the homeowner thought the home was undervalued or marketable rent wasn't good enough. Just wasn't enough ROI. So, he sold the house out from under us to put the money in a better investment. Many years of on-time rent payments meant nothing. So, yes, renters have to worry about that stuff with quick, dire results when a problem happens.

" Flexibility to move out into a larger or smaller house that better fits your needs"

Most renting these days is done by agencies with formal procedures and tactics to maximize value for them. So, we had to fill out lots of paperwork, get credit checks, and otherwise go through the ringer. They were also all pushing us to accept a higher rate or trying to include stuff in the contract where we fix any problems in $80-200 range. All sorts of stuff. Fortunately, a friend at an agency that knew we were good tenants luckily pulled strings and got us a place just in time.

I imagine that if we were homeowners we'd have had that flexibility of moving into houses that fit our needs. We could shop around, identify the best deal, and move in at our own pace. Unfortunately, we were renters. That meant we had to act on homeowner's short timetable plus fit within the needs of renting agencies who were so picky we wouldn't have had a place.

Suddenly, renting doesn't sound so rosy, eh? ;)

>No exposure to the risk of changing housing prices

Except when your 12 month lease expires and they jack up your rate 20%. If anything renters are at greater exposure to changing housing prices. Renters don't benefit from drops in pricing, and they only have detriment from increases. At least home owners benefit from one side.

Rents must be tied to drops in pricing in the long run. If rents don't drop with the price of houses, investors would swoop in to buy the high ROI housing, and existing renters would make home purchasing a higher priority as opposed to buying stocks, paying off other debt, or spending their disposable income.

Also, having a uncertain monthly expense is not nearly as much of a risk as having 100% or 200% of your networth tied to a volitile and usually zero-sum housing market. The counterfactual of owning a diversified portfolio of stocks and bonds is much better from an investment perspective.

> investors would swoop in to buy the high ROI housing

They do, all the time.

> existing renters would make home purchasing a higher priority

They can't, there's such a low supply of housing in the entry-level price points

> uncertain monthly expense is not nearly as much of a risk as having 100% or 200% of your networth tied to a volitile

Most people do not own the vast majority of their home. Worst case scenario, they buy a house, it goes down a lot in value, and they do a strategic foreclosure and declare bankruptcy. Considering the average American has little to no savings and therefore nothing to lose in bankruptcy, there's really not much a downside. In fact they may even profit from it tremendously in other ways, such as wiping out their credit card debt at the same time.

The ones that do have any sizeable amount of savings are 40+ years old today and have benefited in insane amount in housing prices over the past two decades. Their home values will never go down anywhere near the amount they have gone up.

Compare this to a guaranteed, unavoidable loss with ever increasing rent prices. If rents actually do drop with housing prices over the long run, it certainly hasn't mattered at all for decades given the long term trend of the American housing market.

Renting also has the nice added benefit to landlords and capital owners that it can take tremendous portions of the working classes income while exclusively transferring wealth from them every month so they can never get ahead.

One of the greatest necessary advents in the near-term for prosperity of all is the correction of housing towards smaller, more affordable dwellings out of control of the rentiers racket that has now infected property ownership at a near global scale.

> landlords otherwise have no incentive to let out a property in the first place.

Come on. I buy a house for 100k, and rent it out for a bit less than the mortgage repayments. In 10 years, I sell it for 200k. How is there no incentive to rent in that period?

Many very desirable localities are experiencing this in US, though people generally still can find lower costs with exceptionally longer commutes.

In Southern California the shortage in these desirable are is mostly driving by locals. In Santa Monica, I have observed a lot of development get killed by local activist groups who are mostly made up of not wealthy people on rent control. They have no upside that I can think of in the skyrocketing prices or rents. Though they are protected from the consequences by rent control. Yet they still very consistently vote against more housing, even if it's 20% mandatory affordable below market units...

The reasoning seems to be "if only all these gentrifiers stopped moving here and those who are here moved out!", but that's not gonna happen so long as jobs are blocked by impassible traffic.

So in Santa Monica, it's not the rich that are creating the problem. They are simply optimizing their lifestyle to have more free time by using resources at their disposal. If slightly more dense housing was built (Santa Monica averages about 1.5 floors from my observation), it could easily double the supply with only a modest gain in height. Utilities would have to be expanded, but that can be funded with the developments.

All true, and the problem exists in many geographies. However, I don't think a shortage of housing is caused by rentiers or super-rich, which is the topic of the article. More to do with government policies in most cases.

The answer to this is build more housing. Who or what is preventing that?

The rich will capitalize on that and will create endless waves of constructing and reconstructing 'social housing'. They will become super rich and will form a layer with vested interest in maintaining hundreds of thousands being poor. This is France.

All kinds of things. Large organisations (supermarket chains like Tesco) holding onto vast "land banks," new property being bought up and left vacant by foreign investors as fast as it can been build (a big problem in London and Cambridge), construction companies and their investors who want to restrict the supply to keep prices high, a lack of suitable places to build new housing (lack of infrastructure, protected countryside...). Everywhere I look I keep seeing new flats (apartments) being built where offices used to be but they are empty, so it's a bit of a mystery. Maybe these are of the wrong type or these are examples of the ones the foreign investors are buying?

Foreign "investments" in property are almost universally bad. I give you Vancouver, London, SF, and NYC as just a few examples. The very rich in other economies buy large amounts of "investment" property and do nothing other than drive up prices against - and out of step with - the local economy. This drives out the locals, and causes many actual residents to wonder how someone, even on a good salary, could afford a local property.

A lot of these foreign investments come from China. I don't know a solution - if I had buckets of money I'd love to have property abroad (although more for living, less as investment). I don't know what restricting local investments in property would do economically, but I know the current lack of restrictions cause terrible hurt to locals.

I always wonder at lack of reciprocal thinking in these kinds of views. People don't mind buying cheap stuff from foreign countries but think there's something wrong or bad when the people that received their money use that money to buy something in their country.

This is exactly part of the whole deal. It's inseparable. Why would they sell you something in the first place if they couldn't buy anything back?

The buying up and hoarding of land and property is just one symptom of broader wealth concentration into the hands of global elite. Like you said, its universally bad, but when you have so much wealth (on a macroeconomic scale) and nowhere to in the immediate term invest it to produce reliable returns, you instead towards hoarding scarce resources as a store of value - gold, land, and essential crops and anywhere else you can trade fiat / volatile stock into less risky properties.

China has gotten very rich in the last twenty years, but it has been nothing close to an equal rising tide of prosperity. There are now uber-rich competitive with the greatest dynasties of Euro-American enterprise that want to do something with all that wealth, and particular relative to the West they have a problem with their stock market being heavily state controlled and thus an undesirable place to safety hoard capital.

There is a value to time that is often discounted in naïve valuations. Why is rent justified? Because using land for a day, and using it for a year have very different values. Its not just land that's being paid for; its land use over time. This raises its ugly head in discussions worldwide. Folks must come to understand that time is truly money.

Unless subsidized or losing money, the rent is more than a mortgage payment would be. If we had low enough transaction costs it would be better if everyone just owned their homes via mortgage for even short time frames.

In Israel, in the 50's-80's, in government housing there was a kind of rent that accumulated towards payment of your house. And i'm not 100% sure, but maybe even if you needed to move houses(in coordination with government rent company), the collected money would have transported with you to your new house.

EDIT: just to add context - Israel had a huge challenge - it was created with the goal of being a home for every jew globally - and most have come - which lead for a huge demand for housing, for many poor people. And for the first decades of it's history it was mostly successful at that. And it didn't seem to inhibit growth or employment.

Rent-to-own in general exists as a concept in many places, but it has a sour reputation due to the predatory practice of vanishing equity. Essentially, a renter is sold on a higher rent price on the premise that it will result in their eventual ownership. However, if they fail to make rent or must leave early for various circumstances, they have no equity to recoup. In some cases, this serves as an incentive to force out a tenant, and in worse cases, that's the design of the scheme from the beginning. Government housing programs tend not to fall under this category, but I have heard of some governments (e.g. Singapore) revoking housing rights without return of any capital as a penalty for certain violations.

Yes, under capitalism, everything that can be corrupted will be corrupted. This generally seem to be less of a problem for the nordic countries somehow, probably a combination of strong regulation and a culture a bit more geared towards fairness.

BTW, Singapore has an home ownership rate of 90%, so it seems like a big success.

>Unless subsidized or losing money, the rent is more than a mortgage payment would be.

That is demonstrably false. Renting is more than a mortgage interest payment would be. Unless you feel like you have some special knowledge about the local real estate market, your capital is likely better off in the stock market.

Mortgage paymenets are almost entirely interest in the early years. So in many cases there's little difference.

Rental real estate works on leverage to a greater degree than is possible with stocks. Most banks won't make loans to invest in the stock market. They will make loans for investment property. So if you have $100,000 you can buy maybe 4 or 5 $100,000 rental properties, and have your tenants pay off the loans. Not as likely that you can take $100,000 and buy $400,000 - $500,000 of stocks, at least not as an unsophisticated individual investor.

While a regular bank won't give you a loan to invest in the stock market, stock brokers will: It's called margin trading, and it's exactly borrowing using the stock you have as collateral, just like you put the house as collateral in a mortgage. Since stocks are far more volatile than real state, you are allowing your broker to sell your assets if your account is about to go underwater, in what it's known as a margin call.

You can have a 5:1 margin account, like the one you describe, as an individual investor: If you have 100K to put in a brokerage account with your own money, you definitely have enough money for a brokerage to let you do it. It's just that it requires attention, because with a 5:1 ratio, a 5% loss just became a 25% loss. Ignore the market in the wrong week(say, in early October 2008), and all your margins get called, and you are in deep trouble.

Still, if you have 5 $100K rental properties, and you aren't bleeding a lot of money for a company to take care of it all for you, chances are you are still paying quite a bit of attention to your apartments anyway.

As far as whether mortgages or rentals are more expensive, it completely depends on the local market and local laws: In a pro-renter environment, rental is more expensive, because nobody wants to rent apartments out: People would rather let apartments sit empty. In a pro owner environment, at a place losing population, renting might be cheaper.

>Mortgage paymenets are almost entirely interest in the early years. So in many cases there's little difference.

People generally don't buy houses in order to rent them. Usually houses are rented out when the owner is moving and decides to rent it out rather than sell, at which point the owner has a substantial amount of capital in the house.

And? Are they supposed to let people use the house for free? It seems like communists are willfully ignorant of the time value of money.

Quite the contrary. Communists understood that only labour creates value, and education gives more value providing opportunities to more sophisticated labour, aka technology, inventions. This is why they gave housing for free to everyone agreed to provide honest labour within the system. The system had flaws, was not free from corruption, but it worked. My mom spent 5 years in toxic plant, was awarded 3 bedroom flat in modern house for free. It allowed her to invest more into my education and give musical education to my brother.

I think you replied to the wrong comment?

Access to capital gives larger landlords preferential rates, terms, and prices compared to individual buyers.

Unless the rental unit is a standalone single family home (and sometimes even then), economies of scale in maintenance and upkeep result in those costs being cheaper to a landlord.

Downpayments required for loans with good terms have opportunity cost to the buyer. On average over the long term, it has been appropriate to assign that downpayment a discount rate which is a net negative against average market returns.

If realestate markets are stable or reasonably increasing, mortgages are safe. But renting reduces risk of being stuck in an upside down loan, and risk reduction has value.

Despite all of these factors, you're right that rent includes profit, so in many cases it's wiser to purchase. But it's not as globally true as the parent comment suggests. The best choice comes from a balanced assessment of a variety of factors.

The problems with owning are:

1) You have to buy for resale, not to fit your budget best. People tend to want to max out their mortgages these days. And if you are trying to sell into a downturn, it can be a problem.

2) Fees at time of sale. 6% twice ( once at purchase, once at sale ) eats 12% for the life of the mortgage.

TTIP is pushed by corporations, not individual rich people. A corporation will want that even if every one of its stockholders has a below-median wealth. More generally, organizations and people working for them will pursue their goals and these goals will be misaligned with the interests of the population at large even if nobody is involved whose net worth is particularly remarkable. If corporations are eliminated and most work is done by government agencies, then these new organizations simply become more shielded from all sorts of punishment from the population compared to corporations.

The rising nominal wealth of the richest people since 2008 is largely a result of asset price inflation resulting from low interest rates; the wealthy person is not more wealthy, however, holding a more expensive stock if the dividends and the profits are about the same as they used to be when interest rates were higher and stocks were cheaper, in fact the wealthy person is largely worse off since risk-free income is gone.

As to "unjust and dysfunctional"... aren't we all. At least a rich person can lose money in a variety of scenarios and can be intimidated by this possibility. A tenured academic pays no price whatever he does, so he's more scary that way.

edit: I'm not saying people aren't responsible, just that many of those responsible aren't that rich, and even if you mandate a ceiling on wealth and income, guess what, people will still want to get things done (because you will have a mechanism making them want to, otherwise nothing gets done - of course you can very much choose that, too), and guess what, people will get "their" things done at your expense.

In fact it's people who blame the rich who claim that people aren't responsible (their money/assets - the thing making them rich people on top of just "people" - is responsible.) I'm absolutely saying that people are responsible, and taking money from people will not solve very much.

This is not to say that nothing can be done; jailing wealthy criminals is a good start. A great economist whom nobody will blame for excessive concern for the welfare of the wealthy who'll be glad to show you his list of things to do, but who's nonetheless not "Pikettian", is Dean Baker.

> A tenured academic pays no price whatever he does, so he's more scary that way.

...well, with the exception of reputational damage, which has significant meaning to a lot of people in academic pursuits. There's also the low risk with any especially egregious matter that the tenured professor might lose that status.

Some people value their money. Some people value their brand. Some people value their time. Some people value success. Anyone can be "intimidated by the possibility" of losing what they value, and all of those, among many others, are neither infinitely accessible nor perfectly sustainable.

Please. Corporations are run by people. People with agendas. And at the upper echelons it's agendas to make them selves as rich as possible. This idea that somehow people aren't responsible is absurd. Presumably you work for a corporation. Do you check your brain at the door when you go in and turn yourself over to Master Control at the start of each day? No, of course not. It's long past time to give up this fiction.

There are people at all levels of society who's agenda is "make them selves as rich as possible" from drug dealers and pimps to restaurant owners, car dealers, realtors, lawyers, doctors, you name it. Nothing special about corporate executives.

The scale of their power is what makes them special. Tell me, when was the last time you made a decision than tanked an entire regional economy, or perhaps ruined the finances of a thousand families while lining your pockets? When was the last time you decided to simply ignore the law and then had the government come to you shaking how to change it to make you legal again? When was the last time you had law changed for your personal benefit? I don't think you can.

That's what makes it different.

Exactly. I saw such things with my own eyes.

We all have.

It is a finger pointing game today.

The rich say, it is not our fault, the corporations are doing that.

The corporations say: We have to do that, because the "market" is demanding higher interest rates!

So, who is to blame: "The Market"?? The politics that do, what the "market" wants, or the workers, that do not work 10% fast every year to secure the rising interest rates?

We have created a system, that allows everybody to say, that it is not his or her fault, it is just the system. The politics also say, it is not their fault, that they fostered the system, because the business professors told them so. The scientists are also not to blame, because it is the "nature" of the money ...

So it is just a law of nature?

No, by nature, societies are better of, when everybody has his share and even when differences exist, some kind of sense for justice is implanted in every human being.

Today's system of zero responsibility has the power to destroy every basis of human societies. Some day, the super-rich will realize that nobody else is left, that cleans their rooms or empties their trash-cans ... while living themselves behind big walls and barb-wire.

They won't need people to clean their rooms and empty their trash. That's what the robots are for.

They just stay their safe rooms with Tom Perkins waiting for his kristallnacht.

Then, they also can enjoy the (sole) company of robots.

Butlers are cheaper and more comfortable.

The important point to notice here (I have seen comments previously posted that talk about the "1 percent") is that a middle-class American and people in other countries with similar levels of prosperity is very close to the world 1 percent level of income and of wealth. The simple fact of the matter is that today's "average" people in developed countries are staggeringly rich compared to most of human experience for most of history.


There are a few things I disagree with.

1) Income from rent is not unearned. The reason it is called unearned is because nothing new was created. However, many services are this way. For example, fees paid to lawyers, or insurance fees and so on. Income earned from rent is income that comes from providing a service which is shelter or land for other uses.

2) Investment income is not parasitic. A share is a portion of a company. If someone buys a share, they are buying into ownership at a price they think is worthwhile. The prices of the shares are largely based on the value of the company. The value of a company can continue to go up and so profits come from the company being more valuable, not parasitically. Also, many shares provide dividends which is income and the right to vote.

3) It doesn't make any sense to me that rentiers free ride on the labour of others. Do they not have to pay for the goods and services they use?

" The prices of the shares are largely based on the value of the company. "

The perceived value of the company you mean. This site regularly discusses companies that make almost nothing with huge valuations. Like with shares, once they're sold they generally benefit a few financially who play the game yet again. Very little is created in the process.

Whereas, the instances that have capitalists investing into new businesses or expansions in old ones do typically create some value for the economy. The capitalists also stand to make money, too. World of difference.

Shelter and land are not a service but a physical resource.

Your ATF in your muscle cells is not a service but physical resource. But what if its release molecular mechanics will be patented? Shall you pay for your every muscular contraction to a patent holder?

I do not stop to fascinate about the very concept of owning the land. How can you own something that preexisted the monkey your ancestors originated from? The answer to this question is the key to understand what are the super rich and why you are living in the city.

They are a physical resource but renting them is subject to contractual agreements between parties because what is actually being paid for is a _right_ to use land not the land itself. A renter must provide maintenance of a property for example. Another way to think of it is to say that a taxi provides a service temporarily, not the physical car itself. Renting is similar.

Yeah, selling a right to use land is not a service either.

It is literal trolling.

If renting things is trolling then the world is full of trolls. If the solution to this is to confiscate resources for collective government to control, all that is being done is transferring the right to rent from one group of trolls to another. Then we have to start debating which group of trolls we would prefer to negotiate with. I already have my answer for that one.

I'm not sure all renting is trolling, but I do agree that the world is full of trolls.

I said nothing about confiscation, government control, or transferrence of (made up) rights.

Honestly, I do not even care about how "fair" the wealth distribution is. They have their billions. All I want is some job security. I think most average people feel the same way.

My feelings exactly. Just because they have an outrageous amount of money doesn't mean there isn't enough for me.

From a developer perspective many aspects of the current system (with respect to resource usage and allocation) look like technical debt. Governments may try to make ends meet with limited budgets and come up with sometimes nonsensical or just not really thought out solutions to problems. Meanwhile the world learns about the Panama papers and related things, getting the impression, that not everybody is happy with contributing back to the community at large.

The simple minded software developers solution would be to radically cut out the cruft (complex laws and tax systems) and implement a simplified version, that would be harder to game and easier to debug.

...but in the world of software, everyone wants programs that work better. The very rich have no short term interest in a system that's hard to game. Therefore they're going to use their considerable influence to prevent just that.

You probably are talking about some alternative Universe. In this world programs are made to make certain shareholders rich by exploiting certain markets. Including creation of encapsulated artificial markets with maintaining artificial needs, Facebook being the good example.

Well, I've seen some cases of developers keeping things complex for their own self-interest, e.g. "Job Security".

You could make a similar analogy here...

HN tends to be extremely reactionary to posts like this. Perhaps because the tech/startup scene is all about getting rich quick, or perhaps because HN has come to partially reflect the personal views of PG.

There will be a reckoning. The world is 'unsustainably unequal' at the moment. There are huge problems on the horizon - superbugs, climate change, resource depletion, environmental degradation, overpopulation. These problems can only be solved when governments act in the interests of all of humankind. This will not happen when the 1% hold all the money and all the power (which is the same thing).

I hope we can reign in the rentiering, tax-avoiding, propaganda-publishing rich and reclaim democracy before Something Bad happens. Otherwise, when the SHTF, the 1% will deservedly shoulder all the blame. And that will be the reckoning.

i understand your sentiment here, and in the view of history this is true. The problem is that now, or very soon, we are/will be in a state where the 1% can easily put down the 99% politically, socially, financially and yes militarily. So there may be a reckoning at some point. But it will and badly for the 99%. This was mostly true throughout history as well, it's just become a more certainty now.

100.000 british men simply cannot control 350 million Indians, if those Indians refuse to cooperate.

Throughout history it has been the case that sustained perceived inequality inevitably leads to revolution. We're nowhere near that point, but if trend lines continue and the middle class gets wiped out, it will happen. Democracy is supposed to prevent things from getting that bad, but we have seen that free elections are easily manipulated when you control the money and the message people hear, which is why these presidential elections will once again be a vote for either of two pro-super-rich candidates.

Ironically it is in the super-rich's best interest to raise taxes on themselves to stop this from getting out of hand.

If you look at previous eras of great wealth inequality such as the French revolution or the events leading up to the New Deal, the working classes were desperate enough to rise up. Either through force, or through sufficient threat of force they brought about changes that restored some balance to the system.

Nowdays, particularly in America, there is enough wealth to go around such that nobody is really that desperate. The masses are sufficiently pacified, but not so secure that they get funny ideas or opt to drop out and become hippies. We've got them exactly where we want them. So long as no substantial portion of the population goes hungry for more than 3 days everything is cool.

There's other things that have been working well. The ongoing threat of terrorism, black people, and mass surveillance keeps people in their place. Replacing mainstreet with wal-mart, increasing secularism, and the killing off of local media outlets with the internet is very useful for destroying community cohesiveness. It all helps to cultivate the perception that if everything goes to hell, you are alone in the universe and no one will help you. Unless some unknown unkown emerges to throw this all out of balance, there won't be any meaningful pushback, and the 99% will continue to serve us as a natural resource to be exploited.

Sure they can. Their weapon is the media instead of bullets. They just have to convince at least half of them the British policies benefit them. Plus provide them with guns. They'll shoot the other half for the British. Just like Democrat vs Republican politics and media in the U.S.. Nation can't win if it's divided and fighting each other over the actions of elites who they continue to fund and vote in. ;)

... And yet Gandhi was right. Those 100,000 British men failed and India is today the world's largest democracy.

He was right and wrong. He was right that 100,000 British men couldn't use lead with obviously-bad situation to control India. He was wrong given small numbers of men used a careful combo of military, money, and media to control U.S., Britain, and India. Currently, India mainly serves as cheap labor to support money-making operations in U.S., Britain, and other countries.

Gandhi was ultimately wrong: original exploitation was simply using tactics without psychological acceptance today's tactics have.

But in the case of India, didn't they try the other way and it didn't work for them, so they decided to go on the way of liberal economic reforms, while still adapting patent law to their unique circumstances(which i fully support) ?

You'd have to be more specific. I haven't studied India's history that much. I just know the result of globalization have been a fraction of a few countries' populations get rich essentially doing nothing while most population produces that wealth. And some countries almost totally do that for benefit of others. India appears to be one of those countries. So, it's in a modern form of economic slavery to rich, imperialist countries that now use capitalist tactics instead of bullets.

I'd still be interested in whatever historical points or patent differences you're talking about. I'm also assuming you're Indian as well?

Not Indian, Israeli.

Patent differences i'm talking about: The justified way India doesn't follow the western law on pharma patents.

Historical point: Up until relatively recently,India did have a closed economy, but did a lot to open their economy to foreign trade and investment(for example in the past you couldn't open a foreign subsidiary in India, Now there's even Amazon in India).

As for capitalistic tactics etc, that's definetly true. Just look at how much of the important contributions to silicon valley came from Indian people, both brain-drained and outsourced.

"Not Indian, Israeli."

Cool. Always like to see you all in security or legal discussions as you have interesting perspectives. :)

"Patent differences i'm talking about: The justified way India doesn't follow the western law on pharma patents."

I didn't realize they did that. I love that as I want serious changes to pharma patents here. It's basically legalized murder and unacceptable given what U.S. top causes of death are. So, I guess they did resist in some key ways. :)

"Up until relatively recently,India did have a closed economy, but did a lot to open their economy to foreign trade and investment"

Even the U.S. was isolationist for a while. It usually fails as both capitalists and consumers want the benefits of international trade. That opens them up to concessions. From there, we look at how they fair in ratio of benefit to their country vs to foreign countries. Germany, South Korea, Japan, and China seem to be examples of winners that ensure trade is very positive for them vs major countries. India seems to be one of the losers but has potential that's untapped.

"Just look at how much of the important contributions to silicon valley came from Indian people, both brain-drained and outsourced."

I actually don't know how many did outside smart people being hired at Google, etc to build key techs. Most of the groundbreaking stuff was American with VC or defense funding. Lots of improvements and experimental stuff (eg small players) involved foreigners. Big companies like IBM have their R&D in Israel, China, whatever brain-draining the crap out of them. So, it seems like a mix to me.

I guess what I'm getting at is that American innovators often got things started, becomes stagnant a bit, and then they start boosting it with foreign innovators. Other times, it's foreign innovators straight up making a contribution either here or over there. That gets monetized somehow by big players either through feature parity or acquisition.

Same, always a pleasure to to discuss stuff with you, you usually bring a lot of depth.

>> I actually don't know how many did outside smart people being hired at Google, ...

Leaving aside the entrepreneur(and the excessive hero worship around them), it's clear that startup companies highly depend on high quality employees. And the stats: Asian tech workers in Santa Clara are 50%[1].

Other stats: around 20% of US scientists and engineering are Foreign born. International students earn more than half of advanced STEM degrees in the U.S(and are probably behind half the university research). And what about second generation foreigners ?

And what about startups ? most of the successful startups in my country, which is known for startup quality, are bought before they can grow into to full form employing thousands.

And let's not forget - the effects are not linear - it's about ecosystems and power laws, things building on top of each other.

>> Germany, South Korea, Japan, and China seem to be examples of winners that ensure trade is very positive for them vs major countries. India seems to be one of the losers but has potential that's untapped.

Usually such growth path was through manufacturing, but there's some data from india hinting that china and manufacturing don't offer that path anymore, which is pretty worrying.

The election is looking like it will come down to Trump v. Sanders. Both of whom were the LAST choice of the "elite" who supposedly are pulling all the puppet strings.

I don't know how you can look at the democratic primary an think it looks like Sanders will be the nominee.

>Trump v. Sanders

Why do you think this?

Moreover, it there ends up being a violent reckoning, the outcome will be the 1% will be swapped out for a different 1% which will likely be worse than they are now. E.g. military junta or a bunch of mobsters.

"I can hire one half of the working class to kill the other half."

We can boycott the rich. And when we cant, we can just choose to buy from the least rich

Try. Boycot banks by giving them no money, maintain social lending in your local area, see what happen then.

That sounds more like a theoretical solution than a practical one. You'd need to get most of the population to ignore short-term convenience and pay higher prices for things (optimizing for a different metric than lowest cost). I don't think that will happen.

Just saw your comment. You beat me to it. Here's mine, though, which provides a key detail:


-French Nobles just before the revolution

> The problem is that now, or very soon, we are/will be in a state where the 1% can easily put down the 99% politically, socially, financially and yes militarily.

They don't seem to be doing so hot politically. The poor Koch brothers can't even buy a primary election anymore.

Why does government have to do something? Don't you suppose it's part of the problem? We have an economic system imposed on us that is unsustainable and redistributes from the poor to the wealthy in the name of economic stability, "growth" and "creating jobs" as if optimizing those metrics will necessarily be to the benefit of anyone but the top.

Because in the end, the "government" is the only thing maintaining some order. There is no civilization without it - and anyone that tells you differently just can't visualize where "government" exists in their example.

When the rules of society get out of whack, government can either help solve the issue, or double down on bad policies. When they do the latter, they eventually become chapters in history books.

Yes, certain (many) actors in government now are reinforcing the problems, but to solve many of them at scale, you need government to be involved, if not in charge.

Government is far from the only thing that maintains "order". I sincerely doubt that the 'fear of getting arrested' is the only thing that keeps me from murdering people on the street, for example.

Government is merely one component of society, (or "civil"-ization, if you want to be somewhat more colonial about your usage). Specifically, it's the axis of society where we condone the non-consensual use of physical harm (or threats thereof) for various purposes.

I guess what you are saying is that the list of purposes should be unconstrained ('whatever it takes to meaintain order'). My contention is that in general, an unconstrained mandate exacerbates social inequality because the agents of government will have self-reinforcing biases, and their unconstrained judgements can be weaseled into whatever justification they choose. Specifically to address your position, the pursuit of 'order' is ill-defined, and historically has led to very bad things like colonialism in the somewhat distant past, and things like racial profiling in more recent memory.

What constitutes 'order' is a very normative and subjective concept - for example, you might consider a group of young minorities hanging out on a stoop to be 'disorderly' and sic the police on them.

I agree government should be constrained. That said, while government may not be the only thing keeping you from murdering people, other reasons are not shared across the whole of society. We don't all organize around your religion or moral code, let's say, and because of that, we have government.

It's true that government as a group of representatives of all people is slightly different from the now self-aware monster the (U.S., insert-your-personally-experienced-representative-government-here) government has become. But it's still the single organization we all agree to work through, and so changes made across an entire society most likely have to go through that government.

If something has to be done on a large scale, government has to do it.

Massive change has to be through a medium that is culpable and transparent. That is, in theory, a position only a government can or should hold.

US government needs thorough reform, but the mechanism of change has to be a government in the end.

Since when are governments "culpable and transparent"?

They aren't completely, but they are more so than private institutions can (or should) be. What alternative is there?

Also, non-military portions of government in the US tend to be surprisingly transparent.

The problem is one of gross, immoral and unjustifiable inequality.

Everything else is just semantics, conjecture and informed or misinformed opinion.

I hope I live to see the day when the parasites of society meet their reckoning as I believe the idea of a more equal society coming about by reason as totally naive and foolhardy.

I hope we can reign in the rentiering, tax-avoiding, propaganda-publishing rich and reclaim democracy before Something Bad happens.

Frankly, I don't believe anything really bad happens to very rich people. A nice perk of becoming super-rich.

you must've missed your history lessons then.

the mobs always went for them first and killed their hole families. it hasn't happend in over 100 years though and its likely that it won't happen again, as the rich can buy automated defense systems nowadays that could slaughter any amount of revolutionaries that come knocking on their doors

When monarchy was hereditary, there was an obvious target. Now most rich persons are unknown out of a small circle. And they will take a jet to Switzerland or the Tropics.

The power is outsourced to politicians.

The funny thing is that the leaked memos to the super-rich describe exactly those threats to their wealth and existence.


Yeah, and to some degree, this feeling is what a lot of reactionary and anti establishment parties are doing well off of at the moment. Growing inequality means that there's a lot of votes for political parties on the far left and right whose solution to this is basically 'destroy everything'.

I suspect fears of this are also why 'identity politics' has become a scourge in the last few years or so. Why immigration is often used as the fear of the moment. Why so much of the media tries to paint people as bigots.

Because things were getting quite bad against the 1% beforehand, with stuff like Occupy being a good example. Getting people to turn against each other over gender, race, personal hobbies and interests, religion and minor social differences diverts the anger to targets that don't threaten them.

> HN tends to be extremely reactionary to posts like this. Perhaps because the tech/startup scene is all about getting rich quick

Claims like this are common but seem mostly to be cognitive bias. The community is divided, and people on each side of the divide perceive it as skewing the opposite way. I think it's because statements we disagree with stand out more starkly than the ones we agree with. Painful experiences are more memorable than pleasurable ones.

Violence can come from the left or the right. Sure, there might be a "reckoning" where the 1% are punished for their alleged misdeeds. Their might also be a "reckoning" where leftists are punished for spreading an allegedly subversive and counterproductive ideology. Both have certainly happened in the past.

The problem with your reasoning, is that you have already assumed that you've won the intellectual debate and so your opponents are only acting from self-interest. But the main "reactionary" posts (https://news.ycombinator.com/item?id=11796842 and https://news.ycombinator.com/item?id=11796746) contain good counterarguments to the article that you haven't addressed.

Western society/governments will start looking more and more like the Chinese I feel, cause western society hasn't found any serious alternate way of reigning in the 1%. It will most likely happen after the "something bad" stuff does.

China has greater ratios of inequality than the US. See World Bank figures: http://wdi.worldbank.org/table/2.9

Which would support the hypothesis. Greater inequality greater the tendencies for authoritarian control. US inequality is on a increasing trajectory with nothing likely to stop it. So where else do we end up?

For nth time can we please stop talking about 'tax-avoiding' as if it's something we should not do? Every sensible individual so arranges their affairs so as to avoid tax as much as possible within the law. Governments of whatever stripe set the tax rules. We citizens obey. Government is always free to change the rules to suit its tax raising objectives. Tax evasion is of course illegal.

As UK Judge Lord Clyde stated 'No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue'

Can I lobby the government to change the law to lower my tax bill? No, I'm not wealthy enough.

Top marginal income tax rates in the UK during the 60s were 98%.

The top marginal rates don't reflect what is actually paid in taxes. The tax laws are complex, very complex for high income people. Although the top marginal rates for individuals has come down dramatically from the highs of decades ago in the USA, the actual tax paid as a percentage of total income has gone up in the US for the top 10%.

The USA has a very progressive tax system. The top 20% of earners in the USA make 51% of total US income(2014) and pay 84% of total US income tax.

This data is pretty easy to find: OECD publications, see [1], WSJ see [2]

[1] http://darp.lse.ac.uk/resources/books/GrowingUnequal_OECD.pd...

[2] http://www.wsj.com/articles/top-20-of-earners-pay-84-of-inco...

My theory is it's a cartel of cartels. It was always a possibility given all the markets naturally seem to develop oligopolies and shift to cartel-like behavior. Buying off politicians to protect profit or market share was also common. So, what happened is that they started acting collectively for whatever interests them. They still compete or argue for other things but certain laws and trends are valuable for all rich capitalists.

Project Censored published a great report that surveys many of the organizations, their boards, and so on. First report whose theory is very similar to my own research.


As you can see, the boards have considerable overlap where people who appear to be competing in one sector are working together in another. There's also a clear incentive, per doctrine of maximizing selfish gain, for board members and CEO's to all give each other ridiculously high compensation while driving it down for laborers. The reason: they can. Why else?

So, it's a combination of corrupt politicians, elites at CEO/board level, and media whose boards work similarly. The worst part is that the media is critical to changing the situation but has financial incentive to avoid that ever happening. That's why they so deviously self-censor on these issues to the point Americans can't get mad enough about the specific problem to do something with specific solutions. Media never presents either. Instead, works on side issues or total distractions (esp shootings or celebs) that prevent threats to stability of plutocracy.

EDIT: Given not everyone likes this source, I'd be interested in any similar data and analysis from academics published in a peer-reviewed journal. No paywalls, though. Can't fight elitism with more elitism. ;)

I am giving you the important data point. 2010. Lady Barbara Judge in Astana. 2015 UK is building 5 new nuclear power stations, and public is generally unaware of the fact.

Her background is like a whose-who of scheming companies and groups. She was apparently pretty effective, too. Not that great an example, though, given people only care about nuclear so much.

Our best example in recent times is still 2008. In this case, the elites crash the whole system, get paid off for it, and get criminal immunity. This kind of event and resulting deal should be non-existent in a democracy. Whereas, in Iceland, they overthrew the dirty politicians, jailed them, jailed the bankers involved, seized banks, and reoriented their banks and news to prevent such things in future. Healthy democracy in action.

The media's role in keeping elite's schemes going is pivotal. I think the strategy has to be on them. Anyone doing a revolution should hit the media rather than just the government. Make sure each side gets a say with reporters digging into root problems and potential solutions. People can then push for what they believe will work through regular, government structures. They can't act without being informed. So, corporate media is root problem here.

Note: I've observed the same thing in Russia. Their media, at least RT, is even worse as it's basically a government spokespiece. Ours still compete with each other with at least several calling out government in big ways without anyone getting shot. The times they self-censor and are pervasively corrupt are protecting capitalist class that funds them. So, huge problem, but enough media protection here to maybe accomplish something. I'm more worried for Russians given Putin's recent laws on bloggers, etc plus risk journalists face in general.

In Russia censorship was always the cage. In the US it was always a skeleton.

That's an interesting way to state it. Could you elaborate to make sure I'm understanding the metaphor?

In the US professional media participants are literally trained not to touch sensitive parts of the social discourse. Hence the political correctness - the modern doublespeak, and natural avoidance of entire massive sets of facts underlying important social problems and drivers. E.g. no reports in the U.S. media on French toxic waste dumping to the sea within Somalian territorial waters. But! A hell lot of publications about 'somalian pirates' afterwards. When these poor fishermen were literally left without source of food not only for them, but for their next generations.

Just in case I am too thin, the US journalist will rarely if ever publish fact that will cost him a career prospect, or give him label of 'red'. Even if he or she has certain sympathies. This is self-censorship and it is very effective.

Appreciate the clarification and very interesting example with Somalia situation. I hadn't heard of that one despite avoiding corporate media where possible. That was kind of your point, though. ;)

So, I guess you're analogy means that the Russians in power (eg government) force the journalists to shut-up whereas in America the corporations and journalists do it themselves on sensitive topics for selfish gain? I'd agree with that if it's what your metaphor meant.

How does the title: "We need to challenge the myth that the rich are specially-talented wealth creators"

Become: "The very rich are unjust and dysfunctional" ?

It's a quote directly out of the byline. It is also, according to the author, the main thesis of his new book.

Is there some rule on here that the title of the submission must correspond exactly to the title of the linked article?

Yes, from the "Guidelines" link at the bottom of HN:

Otherwise please use the original title, unless it is misleading or linkbait.


HN only allows less than 80 chars for the title. The LSE blog Twitter account gave it this title.

Not a good title, though, because it's a cherry-picked quote selected for baitiness. Such things have a pronounced (and in this case dismal) effect on resulting discussion.

Much better to shorten the original a bit, which we've done above. If it's necessary not to use the original (because it's misleading, linkbait, or impossible to shorten), the next best thing is to find an accurate, neutral phrase from the article.

Does "unjust and dysfunctional" = "u r a fag" [DH0]?


Let me try and do a little better: I would argue that this kind of rhetoric is not significantly different from social movements in various countries of the 20th century, the end results were not quite as benign as its supporters anticipated: 'During the land reform, a significant numbers of landlords and well-to-do peasants were beaten to death at mass meetings organised by the Communist Party as land was taken from them and given to poorer peasants.[169] The Campaign to Suppress Counter-revolutionaries,[170] involved public executions that targeted mainly former Kuomintang officials, businessmen accused of "disturbing" the market, former employees of Western companies and intellectuals whose loyalty was suspect.[171] In 1976, the U.S. State department estimated as many as a million were killed in the land reform, and 800,000 killed in the counter-revolutionary campaign.[172]

Mao himself claimed that a total of 700,000 people were killed in attacks on "counter-revolutionaries" during the years 1950–52.[173] However, because there was a policy to select "at least one landlord, and usually several, in virtually every village for public execution",[174] the number of deaths range between 2 million[174][175] and 5 million.[176][177] In addition, at least 1.5 million people,[178] perhaps as many as 4 to 6 million,[179] were sent to "reform through labour" camps where many perished.[179] Mao played a personal role in organizing the mass repressions and established a system of execution quotas,[180] which were often exceeded.[170] He defended these killings as necessary for the securing of power.[181]' [typo edited] https://en.m.wikipedia.org/wiki/Mao_Zedong

> Does "unjust and dysfunctional" = "u r a fag"?

I would say referring to a person or set of people as unjust is a little bit of a category error, like saying "gravity is purple".

The correct thing is probably to chalk this up to lazy writing (it's not the only grammatical error in the piece) and interpret the author as actually meaning "A society or legal framework that allows rent seeking behavior is unjust and dysfunctional."

If we can agree approximately on criteria for "justice" and "dysfunctionality" (probably involving fairness and sustainability in one way or another) then this is a claim that's amenable to rational discussion and debate, and maybe even a little bit testable empirically.

Erm, how is "u r a red" any different?

Yes, it is precisely that. It's very easy to take shots at extremely rich people, because they won't bother to show up and defend themselves and nobody else will either.

The main problem I have with this is that it's not very interesting and doesn't solve anything.

Should extremely rich exist as a thing? What benefit does it bring humanity over the alternative?

There is no 'humanity' when we talk about power and wealth. There are those who can do everything for power and there are those who cannot. 'Humanity' is abstract. Wealth and power are always attributed to certain individuals and are very often drectly inherited.

This is the primary problem with the discourse. People can agree pretty universally a tyrant, dictator, or emperor is a bad thing. You do not want heredity to determine power, and you do not want one individual to have violent dominance over anyone else, because you will often be the "anyone else" if you are not the aggressor.

But that is about the only difference between how the modern gears of power operate versus how they did millennia ago. Rather than just kill your brothers and claim the throne and execute the dissidents and having your firstborn son inherit the crown from you, your children inherit ludicrous wealth that translates into the same power to buy the violent arm of the state for your own ends.

Except now the peasantry cannot just storm the castle, behead the king, and replace him with another. There are kings from across the globe that control your society through its economy, and the present incumbents of radically concentrated power will argue everyone is king when they own wealth in the global capitalistic system.

That, in practice, is pure deception[1], but you will have people by thousands at the bottom congregating to defend those off the chart, despite the ones at the top constantly using their power to harm all those below them.

If we did have what the rich claim we do - democratized distributed power - we would need dramatically less wealth inequality, because that wealth, and the distribution of it, represents who has authority in the global capitalist economy. That is not an argument for socialism, communism, fascism, anything political. It is a reflection of tautological truths about having a global capitalistic market system that determines who is powerful by way of capital and fiat ownership, and that if you want to have a more democratic humanity you must first deal with the fact that money is power, and when power is aggregated into the hands of very few, you don't have democracy.

We are not at the point to argue practicalities, or dogma, or anything else beyond understanding. What we need is just for near universal acknowledgement that this paradigm exists, is how the world operates today, and that you probably would want to do something about it because we can already universally agree we don't like tyrants, and that we should not like tyrants in any form they take, even the ones that are not immediately and obviously apparent to most.


> Rather than just kill your brothers and claim the throne and execute the dissidents and having your firstborn son inherit the crown from you, your children inherit ludicrous wealth that translates into the same power to buy the violent arm of the state for your own ends.

Except inherited wealth is at all-time lows.

If you look at the richest people in the world today, the majority of them made their own way into those ranks. They didn't inherit it from anyone.

I should have worded it better, but it is not just strictly biological children. There is an entire cultural social class above what most call "rich" that encompasses the heads of major universities, companies, investment firms, and governments that represent a fraction of one percent of the population but have consistently controlled the vast majority of capital and have gradually increased their ownership stake since the most democratized periods surrounding World War 2 (though they were only so democratized because the pool of people in consideration was smaller - part of the problem in modern global capitalism is that almost everyone on the planet is now a participant, and thus there are now billions of people to exploit and bully than millions in industrialized western states that simply cut ties to the rest of the world with the death of classical imperialism in the early 20th century).

In reality, money might not stay in one families direct hands, but upward mobility is at generational lows in the west, and in particular the number of successful new businesses, and those which elevate anyone out of the working class into either middle or upper class, are diminishing significantly[1].

[1]: https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

Would a yearly single flat tax of XX% of total net worth for every human in the world solve the problem? Essentially a literal redistribution of wealth, but could it work?

Flat taxes do not work, because the established system is one where there are two classes globally - the consumer class, that is productive to consume resources with the fruits of their labor, and the capital class, that owns the means of production and use the wealth that creates them to make more wealth.

If you take 30% of everyones income, the working class loses standard of living and upward mobility while the capitalist class reevaluates their investments to insure that, despite a 30% annual expense, you are growing your wealth regardless.

It is also a dangerous precedent. If your intention to tax sufficiently high to start peeling back the democracy distorting wealth inequality, the wealthy will just flee you, and you must remember - as they exist today, they are the arbiters of society, and dictate who lives and dies through economics. If anyone outright attacked them like that, you should expect a war in return.

That's why I said a global yearly total flat tax on total net worth, not income.

If that could be made to work and the pieces set up to work, would it be a solution?


That depends primarily on what alternative you are proposing. If you aren't discussing a specific alternative, then it's just the kind of unproductive sniping that I object to.

This is a rather poor article.

In particular, it seems to imply that the wealthy are inherently rentiers. By the logic of this article, virtually all investors are "functionless investors" since they are not directly investing in a business by buying shares from the business. Of course, this neglects the fact that having a market for shares is in fact necessary for anyone to buy shares in the first place.

Also, it would be nice to have a definition of how exactly the wealthy are "dysfunctional." They seem to be pretty functional at accumulating wealth. But they're also pretty functional at expanding and building a wealthy society—Apple made Steve Jobs very rich, but it also made all of us a little wealthier as well.

As for justice, today's rich are more meritocratic than any in the past.

About "rent seeking" and "passive income": Everybody gets old. Technology companies don't hire the old. And in technology, old is > 45. Which isn't that old given that my life expectancy is about 85. So, darn right I'm "rent seeking". And I save like mad so I can generate "passive income". I assume that I will be pushed out of the workforce very soon - and I don't want to live on welfare for 40 years. Nor do I want to be restocking the shelves at Target when I'm 80.

> If you buy some shares in M&S or BP on the stock market, the money you pay goes to the previous owner, not the company. You are what Keynes called a ‘functionless investor.’ When such so-called ‘investments’ pay off they extract wealth from the economy without creating anything in return.

Ummm, no: when you pay off the previous owner you reimburse him for the risk he took. What's this guy's solution — not allowing folks to sell their assets? That seems a bit extreme, and liable to destroy the economy utterly.

No problem with that. Its a system. Rich stays rich, poor stays poor. Exceptions only proves the validity of this general rule.


My favourite joke about 'How you managed to become a millionaire' has a morale that power and wealth is always inherited. Gates maybe a 'self-made' multibillionaire, but his very functioning in this quality only makes "rich stays rich" principle to stand. I would be fascinated would Gates finance social revolution in Mexico, to make people there less poor. Will never happen, because once you rich, you support agenda of the rich.

But wouldn't be irresponsible hubris for Gates to meddle in Mexico? It was when William Randolph Hearst meddled in Mexico.

If "social revolution in Mexico" looks like "social revolution in Egypt" then I fail to see a probable upside.

ok, call it 'social rearrangement'. Lets make Mexico more democratic, give more power to people, protect elections, and give basic income to every Mexican. Gates's money is more than enough to provide basic income to 10 generations of mexican people. Will never happen though.

I happen to work with someone who is still a citizen of Mexico living in the US ( there is family land in Mexico and he can't keep it and be a US citizen ) , and according to him, it's extremely complicated. The big complicating factor is probably the US War on Drugs.

But he has stories - like his brother fixed up a car nicely. There's a tax on that, and the car was simply taken, and his brother was taken to jail.

If you slosh money around in Mexico, chances are that somebody will take it upon themselves to collect it for themselves.

All this being said, Mexico itself seems to be slowly becoming less poor over time. They are, ironically, starting to have problems with people from Central and South America, both criminals an ostensibly non-criminals.

This is just fascinating. Thank you for sharing that.

What's the solution? I hear rants all the time, but no-one ever offers any concrete steps, or suggestions for new laws.

People always do. You can cap what they make at the executive level. The tax system, especially inheritance taxes, can be cleaned up to stop generational pileups of cash. Most importantly, laws should be passed to only allow individual voters to contribute to politicians' campaigns with a cap that prevents the rich from outspending the poor. Tax dollars can provide the rest to candidates that make it past a certain amount of local voting. Strategy, not dollars, will win those elections.

Those would've achieved a lot. There's other ideas like preventing overlapping boards of directors where competitors are in cooperative positions. One can highly tax investments like high-frequency trading that are parasitic on the economy while low taxes on anything highly likely to benefit it. No or few special laws for big companies or the rich. Better balance of budget between social concerns and war department with more focus on education and infrastructure. Subsidizes from taxpayers requiring good terms in company's charter for employees, I.P. licensing, whatever. Many things we can do.

Perhaps wealth re-distribution?

Does not work, will create just another layer of very rich. Look at Russia after 1992.

I don't see how russia proves anything. to me, what didn't work wasn't wealth redistribution, but planned economy. And planned economy has become mire viable since then, thanks to computers.

Russia after 1992 made experiment in wealth redistribution within capitalist system restored. The resjlt was devastated economy and creation of oligarchs. Read 'The Iron Heel' by Jack London, this is what happened in Russia when it turned back to capitalism.

Russia made one big "mistake" after 1992: "privatizing" the public sector by "gifting" enterprises to friends of Yeltsin. You could of course call this redistribution of wealth, but that's not what anyone has in mind here.

@physicalist. Far from that. Apart from few friends of Yeltsin, there arose an entire new generation of speculators, benefited from 'voucher privatisation'. Technically it was very much literal public wealth redistribution.

Revolution is the final answer, as always, the majority will win no matter what.

Taxes, welfare etc slow-down/mitigate that, but that's not enough for the so-called 99%.

I'm not sure I call a revolution "a win" - see the French revolution (hundreds of thousands dead in cleansings, country ruled by ruthless dictator) or Bolshevik or Chinese Communist Revolutions. I'm finding it hard to come up with a positive counterexample.

American revolution? Is that one a flop? (I mean for now, future trajectories aside.)

It's a good example IMO. I didn't come to my mind because I see it more as a colony liberating itself rather than internal turmoil - the ruling masters were mostly on another continent, so there was no problem of what to do with them after they lost power (and in America, the royalist fled to Canada, which was not an option in other revolutions as they didn't leave large areas of land loyal to the old order).

Quite possibly the only popular revolution of the modern age that didn't end in massacres. Probably because it was, despite all the rhetoric, controlled by a group of generally conservative oligarchs who really weren't trying to shake things up that dramatically.

It did not ended with a massacre only because it started with that. Ask ghe First Nations. Lacotas for example.

That's kind of an idiotic comment. The thirteen colonies had almost no contact with the plains tribes, like the Lacota, precisely because the British government had attempted to block passage of settlers past the Appalachians after the Seven Years War.

No. But rich will not give up their power. Anarcho-syndicalism has the answer and there are very successful experiments in modern days Spain with communas.

"I know more about how you should spend your money than you do"

Nearly all people, rich and poor, make decisions for personal gain.

Agreed. At some point, its important for the powerful to change their tactics. They often fail to adapt to their new power (that wealth brings). This is the reason for anti-trust laws, regulations on banks (which have been largely dismantled) etc. Because so few people rethink their motivations when their power to affect people goes from one-at-a-time (like most of us) to thousands and then millions of people. If they stay capricious and selfish then every whim, tantrum and greedy indulgence hurts society in ways they have failed to consider. Some few have made the transition, often at the urging of family.

Like Czarina Ekaterina said, oh I do not understand what is wrong if you have no bread, you can always eat some cookies.

Yes but the basis of determining what is gain vs loss is not fixed into specific action sets and can be changed for the betterment of all.

Very rich are just average people; meaning there's a mix of types of people that are very rich; aka billion or more.

Feel like most people have never known anyone super rich or for that matter, very poor.

Lastly, while it's true that there are more super wealth individuals than likely any point in history currently - the quality of life is also better on average too.

> Very rich are just average people; meaning there's a mix of types of people that are very rich; aka billion or more.

Being very rich is by definition not being average. There are ~1,800 billionaires in the world and none are average.

I see, then what by definition is an average person?

Joe the Schmoe, 15-75K USD per year in the 1st world. Barak the Schmack, 10-100 usd per month in the 3rd world.

Surprisingly there is no more the 2nd world. since the USSR is no more and Ivan the Plan had no salary comparable to its monetary value, but a hell lot of social services he and his family used for free. Like free education for example.

I see, the super rich have more money than the super poor; how obvious, no idea why I missed that.

Any idea if there other differences, or are the super rich and very poor on average the same? If not how so?

Also, might be worth noting if this is based on meeting people in the real world?

I am in the unique situation to answer your question. I know what it is being very poor, quite literally suffered from hunger in 1993-94. And now I am adjusting value propositions for old family owners real estate in Europe. The difference is that these old families in a way shaped policies in their countries of residence to make their lives comfortable. E.g. private islands with golf courses in the heart of national nature reserve, and no one else allowed build anything close, or around the location. They are not directly writing laws. They are influencing persons, incentivise entire lifespans of policy makers to make necessary outcomes. So the first and very important difference - planning horizon. Poor people plan for days if not hours. Super rich plan for years, if not decades. Really powerful people plan for generations.

You're talking about resources, which is the same thing as saying the the rich are rich and the poor are poor.

I'm saying people are people, super wealth people are not a certain special type of person, nor are they the same type of people.

Someone with an average amount of wealth (e.g. not much) would be a good place to start.

So they're just like everyone else?

remember 1917 in Russia, and how much the SovietUnion did for the world and its nations until 1991, by just removing the rich and concentrating power with government, led by proper ideology. Stalin got the country of illiterate peasants with ploughs and left it with 100% literacy, and the nukes.

Please don't do this here. Nothing good can come of it, only ideological flames that engulf this site.

We detached this subthread from https://news.ycombinator.com/item?id=11796698 and marked it off-topic.

And many millions of innocents dead.

Hardly thousands. 240 000 people die every year in car accidents and no one prohibits cars. Millions died in WW2, but it is not the USSR to blame for it.

How many Indians were killed for the US to prosper?

We are speaking about fhe better system you never tried. No rich, no poor, everyone has a job.

>Everyone has a job

I visited cuba in 1998 for a few weeks. I was staying with a family who hosted visitors like my father and myself for a little extra foreign currency on the side. The father of the family that we were staying with was a chief economist in Castro's government.

I will never forget riding the elevator at the university in Havana. There was a woman whose job it was to press the buttons in the elevator after you told her what floor you wanted to go to. She was there every day.

I can't imagine that was a very fulfilling job for her, as there was clearly no point as people could just press the buttons themselves.

Jobs still need to be productive on some level

You are surprisingly right. Small state like Cuba with monocultural agriculture and lack of industry is destined for that. But even in these hard conditions Cuba has a better and more people oriented medical care system than the US has and is exporting medical know-how to the third world.

Why its not USSR to blame? USSR allied with Nazi Germany and attacked many free nations. Finland, Estonia, Latvia, Lithuania, Poland. Everywhere leaving destruction, death and misery. War war followed with bloody enforcement of communism in occupied nations.

Sorry to disappoint you, but Latvia, Estonia and Lithuania happily united with USSR the way Austria was united with Germany. And since my father was born in exact place and time you are referring to, I can make you sure that my family archive contains enough proof of the view that is quite contrary to your rhetorical exercise.

In just 10 years after WW2 ended, Latvia for example, became from being allotments of Britain and Sweden a modern industrial country. And now this time is called in Latvian school history books 'the period of unnecessary development'.

Soviet apologist on HN, I regret answering to you. Bye.

Hardly thousands

That is a barefaced lie. Forgetting the rest of the evil attributable to Communist ideology, the Ukrainian Genocide alone is evidence that it was many more than "hardly thousands": http://www.ncas.rutgers.edu/center-study-genocide-conflict-r...

Indeed, one need only consider the ease of which one could immigrate out of USSR, or other Communist states for that matter, to know something was seriously fucked in your glorious worker's paradise. How good can a political system possibly be when that same system makes it illegal to leave the country and your own citizens are willing to risk their lives to get out? I think if you look back on history, the real stand-out achievements of the Communist system are really it's unrivaled ability to systematically dole out want, suffering, and death to all but a political elite.

Given the logic of your last arguments however, I can easily see why someone such as yourself can look past the facts of the matter and support such a murderous, despicable system such as Communism.

Pointing to accidental deaths, or deaths from wars, or other misdeeds as somehow justifying the volitional and indiscriminate murder of whole populations defies logic. Someone else's wrong does not justify the sort of violence that your original posting obliquely supported.

In the end, your willingness to claim the great benefits of Communism while evading the methods used to cement the power of Communist party officials over the population should be red flag enough to any sane-minded person to reject you and your wares. Even then I would argue the equality of misery produced by the Communist to be no great achievement. Oh... and as for never trying it... I've never been burnt to death either, but I'm smart enough to know I want no part of it.

In reply to ommonuist's claim that there is "no such thing as the Ukrainian genocide", see https://en.wikipedia.org/wiki/Holodomor. There's clearly some doublethink going on trying to justify the mass murder of the system he wants to impose on the West.

You know, in 20 years Wikipedia will tell it was only the US who fought Germany in WW2 and someone on HN equivalent will point to that article as a proof of his knowledge. History is not without the sense of irony.

This was not equality of misery. It was equality of opportunities. My father was a factory worker, my mother was from peasants family. They were able to put me into high class secondary school and I was in position to select any university after graduating from it.

In the modern UK this is financially impossible for a family like that to give that kind of education to their kids.

Besides, there was no such thing as 'Ukrainian genocide', its a part of modern US political discourse to maintain the US political agenda in the Eastern Europe, hence the research you are referring to.

In 1989 about 8% of the population of the Soviet Union had been through tertiary education. The modern UK sends nearly half its young adults to university, including an awful lot of people whose parents are manual labourers (we don't, admittedly, have any peasants)

> remember 1917 in Russia,

Yep. 'Someone' tossed a Bolshevik grenade at Russia, and made sure that Eurasia would be knocked out for the rest of the century.

Worked brilliantly.

What do you mean 'knocked out'? The social justice maintenance system in the USSR worked. There were no rich, but your honest labour and intellectual efforts were properly rewarded there up to end of the 60-ies. That was foundation for prosperity of the 80-ies. But elites betrayed the country and in 90-ies it was over.

Just out of curiosity, who is that "someone"?

I like good old propaganda. Looks like a citation from "Pravda".

'Pravda' stands for 'The Truth'. If you have rich, there will be a lot of poor. Maintain the lifestyle when being rich is immoral, you have no poor, everyone has a job and the streets are safe. This is my impression of the USSR of the 80-ies.

Did you live there?

Yes, I graduated in 1988.

Being separated from other people causes brain damage. This truth works on many levels.


Read through that reddit thread, can you relate ? Empathy certainly is a function of social distance. The very rich are very distant, have very little empathy, and are therefore mentally ill.

No, they are OK. They just have other problems, not another scale like 'I do not have 100K to close my mortgage and that guy has no extra 2BN to buy that robotics facility in Korea'. They live in another dimension. It is called power, when they decide about values of your currencies for example - remember what Soros did to the sterling pound.

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