The idea that we don't live in a purely zero-sum world is deeply counterintuitive to most people and is, as you point out, one of the major hurdles in the way of more public support of progress, growth and wealth generation.
I would add though that while the absolute amount of wealth inequality isn't necessarily a problem in economic terms or as a matter of improving human wellbeing (as the pie is getting bigger for all), the "feeling" of living in a society with higher inequality seems to be a big problem for human psychology, as it drives a sense of unfairness. This in turn leads to social unrest and political challenges. So from that pov, there might be a need to curtail the extremes of wealth inequality as much as possible
Yes, I agree. But in a number of studies I have read, most people are perfectly fine with wealth inequality so long as that they felt it was fairly earned. That's one reason why I think policymakers should target unearned rents; eliminating rents reduced aggregate inequality while simultaneously improves fairness.
I strongly agree with the focus on unfairness rather than inequality. I think people frequently are often getting the cause and effect backward. Equal returns on unequal contributions is every bit as unfair and as disruptive to "social unrest" as the opposite. Inequality is a mathematical relationship. Unfairness is a matter of social policy. And any attempts to "curtail" inequality of outcomes needs to also be seen as fair.
Well, and we can’t undercut the fact that “more wealth” equals “more power.” It’s not that wealth inequality *feels unfair,* but that it actually is when it comes to making decisions that affect the whole country!
Yes, this is true. I see this as more a political problem than an economic one. I am writing an article on a new form of democracy that may help prevent dynastic wealth/power.
There are many ways in which power and influence can be unequal, with wealth just one of dozens. Not sure what the argument is to equalize wealth, rather than other factors such as voice of academics, persuasive reach of media, sheer numbers of unions, and so on. I think Madison had it right that the better approach is to allow and encourage competing factions rather than trying to hobble everyone to the lowest common denominator.
Where to start, um, the wealthy don't create wealth; they capture it. Innovation creates wealth, which the wealthy distort for their own purposes. They control innovation by dictating laws favorable to themselves and then use ROI to distort what innovation can and will come to market. People believe the wealthy capture most of the wealth is because they do. Once they have captured innovation with investment and foolish right to exclude patent law, they then proceed to capture as much of that wealth as possible.You have conflated the creation of wealth with the capture of wealth. So, even though the pie has grown, their share of it has grown faster. Adam Smith not so famously wrote,
"... the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. "
So, this pursuit of high ROI, according to Smith, is leading us to ruin.
Smith also wrote,
"... but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens."
Smith again wrote,
"It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. "
Your argument isn't with the public but with the observations of Adam Smith in Wealth of Nations.
No amount of smartphone upgrades can hide that. Of course none of this matters. Given the sheer volume of toxic waste being dumped into the environment every minute, all this discussion is doing is rearranging the deck chairs on the Titanic.
A man starts a company. He puts in 80 hours a week, comes up with a product or service that people like. Because people like it, they buy his products and invest in his company, making that company valuable.
10 years later, that man is a billionaire because he was the majority shareholder. Thousands of people have jobs and millions more have larger retirement accounts because of this company. So....what did he do wrong? If the people didn't think the product or service has any value, they would not have bought or invested in it.
As Swami below correctly pointed out, it's not the wealth inequality that matters as much as how it was obtained. It can be created (as in the example above) or captured. The tax code and political system should seek stop wealth capture while promoting its creation. The fact that someone is rich doesn't automatically mean that wealth was captured, we need to take to distinguish between the two.
YGTBFKM! It wasn't the 80 hrs a week at the beginning that was the problem, it was all the shitfuckery during the next 10 years that you glossed over. If you want to know what I'm talking about, just look at any of the tech companies' court cases.
Again, your argument is with Adam Smith The Father Of Capitalism (ASTFOC), you should discuss it with him. He plainly stated, that people who live off of stock will deceive and oppress the public, and have on many occasions, deceived and oppressed the public.
But more to the point, money is power, and power corrupts. And that's not going to change anytime soon. Let's look at actual solutions, shall we? It's along the lines of investing in whatever Buffet does. You don't have to know everything he does to know that his investments pan out. So what do corps do? Well, to begin with, they started mutual companies for insurance. Why make someone else a profit when you can keep it for yourself. Next, why spend money on developing products when you can just free-ride on open source. Next, claim to be for competitive markets but undercut your competitors and buy them out at every opportunity.
Wealth inequality isn't the only problem, but it is a very big problem. Once investors can influence politicians and markets, it's much easier to get those great returns by doing that, than innovating. Also, as stated earlier, investors only invest in moats, so real progress is often overlooked because they have no moats. That is the distortion that investors create. Not sure how many times I have to keep saying it. I assume you all agree because no claims otherwise. I'll repeat an example. A study was done comparing different remedies for sore throats. The winner wasn't the expensive pharmaceutical, but hot water and honey. Something no investor will invest in, at least until they can corner the market on honey.
Totally disagree. JKL specifically spoke against rent seeking and "capture." This is what Smith is decrying as well.
Producers and innovators can create immense wealth, of which they only get a portion. You just seem to wave this away. As for the assertion that they are getting more as a percentage, I would suggest that the "wealthy", is not a set class, and in even a remotely healthy economy is constantly changing. Furthermore, profits and prices are best seen as incentives and signals in a free market. Thus if profits are increasing (absent rent seeking), then the market is signaling for more of that product or investment. Failure to increase profit in these circumstances would thus be a sign of market failure and a less productive economy.
And developed economies are reducing the amount of toxic waste, not increasing it. It is poor and developing countries which are most guilty of toxic pollution.
So you disagree with Adam Smith The Father Of Capitalism (ASTFOC)? I think you should take it up with him.
As for absent rent seeking, YGTBFKM. Corps are all about rent seeking. There certainly is no absence of it. If you read the news, you will see an almost daily report of some company getting fined for, wait for it, rent seeking behavior.
As for investment, it distorts innovation. Only innovations with moats will ever get investment, which is why lean startup is gaining.
Failure to increase profits would be an indication of a market working. Constant increases in profits is an indication of market failure.
There are no free markets, just like there are no free lunches. As soon as a market starts, producers consolidate, you know, for efficiency and all. That eliminates the competition and voila you have ever increasing profits from rent seeking.
As for toxic waste, developed countries produce it and then dump it on developing countries. It is true that sometimes developed countries will produce their products and their toxic waste in developing countries, but rarely for local consumption.
Neo-liberalism is nothing but a long con. Open your eyes and look critically at what's going on. The oil market, a cartel, the diamond market a cartel, the stock market, a scam, food both an oligopoly and oligopsony. That one gets a twofer. Look at tech, either monopolies or oligopolies. Seriously dude, what planet are you from?
"As for toxic waste, developed countries produce it and then dump it on developing countries. It is true that sometimes developed countries will produce their products and their toxic waste in developing countries, but rarely for local consumption."
Untrue if you examine the data.
"Neo-liberalism is nothing but a long con. Open your eyes and look critically at what's going on. The oil market, a cartel, the diamond market a cartel, the stock market, a scam, food both an oligopoly and oligopsony. That one gets a twofer. Look at tech, either monopolies or oligopolies. Seriously dude, what planet are you from?"
You are describing the very same rent-seeking wealth capture that I am standing against and conflating it with capitalism and neoliberalism. Wealth generation is good because it promotes human opportunity, wealth capture, we agree is generally bad. You're not making a distinction between the two, I am, as do most "neo liberals."
I am not disagreeing with AS, I am disagreeing with your interpretation. Smith, JKL, and I are all decrying rent seeking, which we agree is a form of unfairness and exploitation. Exploitation is bad. It distorts free markets.
You, on the other hand, are distorting AS to be against markets rather than rent seeking and cartels. IOW you misread an attack on cheating in football (for an analogy) as an attack on football in general. There is no shortage of crime, theft, free riding, bullying and exploitation in human nature. If allowed, these same negatives arise in any complex human system. Markets aren’t an exception. The answer isn’t to throw out football, it is better rules and officiating.
I ran innovation at a large corporation, and I can assure your comment on innovation is an exaggeration. It isn’t completely wrong, as a "moat" would indeed allow us to capture more of the upsides of innovation, but it is a huge exaggeration. I could provide thousands of examples of product and tech advances generated by market competition which have improved the human condition.
Markets work (signal and incentive) by prices and profits going up and down, thus directing our efforts and attention. If profit only increased forever it would be a sign of a dysfunctional market. Of course, that doesn’t even remotely describe real markets in the US, where profit margins vary and the average lifespan of a corporation is around a decade.
Your "long con" is one of the major legs of the last two hundred years of human advance. Would you care to enlighten the rest of us on your recommendation for organizing billions of humans in decentralized coordination in the production of goods and services for the flourishing of humanity? I am genuinely interested.
Excellent essay! The perspective is valuable. I like the way you reframe inequality. Your pivot to rent-seeking made total sense. Both of these subjects have been on my mind. Good work!
The idea that we don't live in a purely zero-sum world is deeply counterintuitive to most people and is, as you point out, one of the major hurdles in the way of more public support of progress, growth and wealth generation.
I would add though that while the absolute amount of wealth inequality isn't necessarily a problem in economic terms or as a matter of improving human wellbeing (as the pie is getting bigger for all), the "feeling" of living in a society with higher inequality seems to be a big problem for human psychology, as it drives a sense of unfairness. This in turn leads to social unrest and political challenges. So from that pov, there might be a need to curtail the extremes of wealth inequality as much as possible
Yes, I agree. But in a number of studies I have read, most people are perfectly fine with wealth inequality so long as that they felt it was fairly earned. That's one reason why I think policymakers should target unearned rents; eliminating rents reduced aggregate inequality while simultaneously improves fairness.
I strongly agree with the focus on unfairness rather than inequality. I think people frequently are often getting the cause and effect backward. Equal returns on unequal contributions is every bit as unfair and as disruptive to "social unrest" as the opposite. Inequality is a mathematical relationship. Unfairness is a matter of social policy. And any attempts to "curtail" inequality of outcomes needs to also be seen as fair.
Very true!
Well, and we can’t undercut the fact that “more wealth” equals “more power.” It’s not that wealth inequality *feels unfair,* but that it actually is when it comes to making decisions that affect the whole country!
Yes, this is true. I see this as more a political problem than an economic one. I am writing an article on a new form of democracy that may help prevent dynastic wealth/power.
Well I can't wait to read about that idea!!!!!
There are many ways in which power and influence can be unequal, with wealth just one of dozens. Not sure what the argument is to equalize wealth, rather than other factors such as voice of academics, persuasive reach of media, sheer numbers of unions, and so on. I think Madison had it right that the better approach is to allow and encourage competing factions rather than trying to hobble everyone to the lowest common denominator.
Yes, that makes sense to me too.
Where to start, um, the wealthy don't create wealth; they capture it. Innovation creates wealth, which the wealthy distort for their own purposes. They control innovation by dictating laws favorable to themselves and then use ROI to distort what innovation can and will come to market. People believe the wealthy capture most of the wealth is because they do. Once they have captured innovation with investment and foolish right to exclude patent law, they then proceed to capture as much of that wealth as possible.You have conflated the creation of wealth with the capture of wealth. So, even though the pie has grown, their share of it has grown faster. Adam Smith not so famously wrote,
"... the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin. "
So, this pursuit of high ROI, according to Smith, is leading us to ruin.
Smith also wrote,
"... but to narrow the competition must always be against it, and can only serve to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens."
Smith again wrote,
"It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. "
Your argument isn't with the public but with the observations of Adam Smith in Wealth of Nations.
No amount of smartphone upgrades can hide that. Of course none of this matters. Given the sheer volume of toxic waste being dumped into the environment every minute, all this discussion is doing is rearranging the deck chairs on the Titanic.
A man starts a company. He puts in 80 hours a week, comes up with a product or service that people like. Because people like it, they buy his products and invest in his company, making that company valuable.
10 years later, that man is a billionaire because he was the majority shareholder. Thousands of people have jobs and millions more have larger retirement accounts because of this company. So....what did he do wrong? If the people didn't think the product or service has any value, they would not have bought or invested in it.
As Swami below correctly pointed out, it's not the wealth inequality that matters as much as how it was obtained. It can be created (as in the example above) or captured. The tax code and political system should seek stop wealth capture while promoting its creation. The fact that someone is rich doesn't automatically mean that wealth was captured, we need to take to distinguish between the two.
YGTBFKM! It wasn't the 80 hrs a week at the beginning that was the problem, it was all the shitfuckery during the next 10 years that you glossed over. If you want to know what I'm talking about, just look at any of the tech companies' court cases.
Again, your argument is with Adam Smith The Father Of Capitalism (ASTFOC), you should discuss it with him. He plainly stated, that people who live off of stock will deceive and oppress the public, and have on many occasions, deceived and oppressed the public.
But more to the point, money is power, and power corrupts. And that's not going to change anytime soon. Let's look at actual solutions, shall we? It's along the lines of investing in whatever Buffet does. You don't have to know everything he does to know that his investments pan out. So what do corps do? Well, to begin with, they started mutual companies for insurance. Why make someone else a profit when you can keep it for yourself. Next, why spend money on developing products when you can just free-ride on open source. Next, claim to be for competitive markets but undercut your competitors and buy them out at every opportunity.
Wealth inequality isn't the only problem, but it is a very big problem. Once investors can influence politicians and markets, it's much easier to get those great returns by doing that, than innovating. Also, as stated earlier, investors only invest in moats, so real progress is often overlooked because they have no moats. That is the distortion that investors create. Not sure how many times I have to keep saying it. I assume you all agree because no claims otherwise. I'll repeat an example. A study was done comparing different remedies for sore throats. The winner wasn't the expensive pharmaceutical, but hot water and honey. Something no investor will invest in, at least until they can corner the market on honey.
Totally disagree. JKL specifically spoke against rent seeking and "capture." This is what Smith is decrying as well.
Producers and innovators can create immense wealth, of which they only get a portion. You just seem to wave this away. As for the assertion that they are getting more as a percentage, I would suggest that the "wealthy", is not a set class, and in even a remotely healthy economy is constantly changing. Furthermore, profits and prices are best seen as incentives and signals in a free market. Thus if profits are increasing (absent rent seeking), then the market is signaling for more of that product or investment. Failure to increase profit in these circumstances would thus be a sign of market failure and a less productive economy.
And developed economies are reducing the amount of toxic waste, not increasing it. It is poor and developing countries which are most guilty of toxic pollution.
This is correct. There is a distinction here that too many people want to ignore.
So you disagree with Adam Smith The Father Of Capitalism (ASTFOC)? I think you should take it up with him.
As for absent rent seeking, YGTBFKM. Corps are all about rent seeking. There certainly is no absence of it. If you read the news, you will see an almost daily report of some company getting fined for, wait for it, rent seeking behavior.
As for investment, it distorts innovation. Only innovations with moats will ever get investment, which is why lean startup is gaining.
Failure to increase profits would be an indication of a market working. Constant increases in profits is an indication of market failure.
There are no free markets, just like there are no free lunches. As soon as a market starts, producers consolidate, you know, for efficiency and all. That eliminates the competition and voila you have ever increasing profits from rent seeking.
As for toxic waste, developed countries produce it and then dump it on developing countries. It is true that sometimes developed countries will produce their products and their toxic waste in developing countries, but rarely for local consumption.
Neo-liberalism is nothing but a long con. Open your eyes and look critically at what's going on. The oil market, a cartel, the diamond market a cartel, the stock market, a scam, food both an oligopoly and oligopsony. That one gets a twofer. Look at tech, either monopolies or oligopolies. Seriously dude, what planet are you from?
"As for toxic waste, developed countries produce it and then dump it on developing countries. It is true that sometimes developed countries will produce their products and their toxic waste in developing countries, but rarely for local consumption."
Untrue if you examine the data.
"Neo-liberalism is nothing but a long con. Open your eyes and look critically at what's going on. The oil market, a cartel, the diamond market a cartel, the stock market, a scam, food both an oligopoly and oligopsony. That one gets a twofer. Look at tech, either monopolies or oligopolies. Seriously dude, what planet are you from?"
You are describing the very same rent-seeking wealth capture that I am standing against and conflating it with capitalism and neoliberalism. Wealth generation is good because it promotes human opportunity, wealth capture, we agree is generally bad. You're not making a distinction between the two, I am, as do most "neo liberals."
I am not disagreeing with AS, I am disagreeing with your interpretation. Smith, JKL, and I are all decrying rent seeking, which we agree is a form of unfairness and exploitation. Exploitation is bad. It distorts free markets.
You, on the other hand, are distorting AS to be against markets rather than rent seeking and cartels. IOW you misread an attack on cheating in football (for an analogy) as an attack on football in general. There is no shortage of crime, theft, free riding, bullying and exploitation in human nature. If allowed, these same negatives arise in any complex human system. Markets aren’t an exception. The answer isn’t to throw out football, it is better rules and officiating.
I ran innovation at a large corporation, and I can assure your comment on innovation is an exaggeration. It isn’t completely wrong, as a "moat" would indeed allow us to capture more of the upsides of innovation, but it is a huge exaggeration. I could provide thousands of examples of product and tech advances generated by market competition which have improved the human condition.
Markets work (signal and incentive) by prices and profits going up and down, thus directing our efforts and attention. If profit only increased forever it would be a sign of a dysfunctional market. Of course, that doesn’t even remotely describe real markets in the US, where profit margins vary and the average lifespan of a corporation is around a decade.
Your "long con" is one of the major legs of the last two hundred years of human advance. Would you care to enlighten the rest of us on your recommendation for organizing billions of humans in decentralized coordination in the production of goods and services for the flourishing of humanity? I am genuinely interested.
Excellent essay! The perspective is valuable. I like the way you reframe inequality. Your pivot to rent-seeking made total sense. Both of these subjects have been on my mind. Good work!