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On January 16 2019 06:40 Nyxisto wrote:Show nested quote +On January 16 2019 05:35 Ghostcom wrote:
Why is rising inequality in countries building up wealth not an issue? The only case I can see this to be true is if everyone have enough money to simply be hoarding which I frankly do not think is the situation many - if any - countries (maybe Luxembourg or another similarly small country with a large out-of-country workforce?). If you have a country with close to no wealth and you assume that people keep at least some portion of their newly accrued wealth, and that some people generate more wealth than others, then inequality is going to increase by definition. A perfectly poor country is perfectly equal. A moderately wealthy country is not, but simply because some people engage in more productive ventures than others. Some people getting richer faster than others isn't a big deal at all, and there is no way to prevent it that doesn't end in disaster, and no obvious reason why this is bad in and of itself.
There is that simple fact that people die. So if you were right and the creation of wealth would be exclusively tied to the productivity of a person, then a general rise in wealth and a rise in inequality over multiple generations implies that a future generation has produced superior top-achievers. But, the prequisite that productivity is the only source of wealth still holds, right? Hence, productivity itself cannot be dependent of wealth.
Then the only explanation left would be that those future generations produce genetically superior offsprings. Which I heavily doubt.
I personally rather think of it like this:
If productivity of an individual was the only source of wealth, then the distribution of wealth should be stable over generations. The fact that it is not shows us, that wealth is not exclusively tied to productivity.
In my opinion, wealth develops (positively) as a variable of wealth and productivity.
Or mathematically:
w_dot(t) = f(w, p)
Taxing wealth accordingly is the way to eliminate w from that function f, because it puts a price on storing wealth as a pure matter of creating more wealth, without hurting productivity at all. Indeed, statistical observations come to the conclustion that wealth taxes are some of the most economy-friendly taxes you can have, while taxes on wages or consume are generally said to be bad for productivity.
And hitting a stable, competitive distribution of inequality would be the way to measure the correct price for wealth in that model.
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I'm not opposed to some reasonable level of wealth taxation, especially in low growth, non-dynamic countries. Property and land taxes are widely underused. But most of the world's wealth has only been created fairly recently, and Gates or Bezos are not rich because their grandparents handed them a treasure chest full of gold. So if you want people to innovate (and it's generally a good idea to have these people around), then inequality will always exist. (maybe even get worse at the very top with the rise of tech giants)
Eliminating inheritance entirely is probably also not possible practically without draconic politics, and politicians should always be mindful about how to capture taxes. The French tax on the superrich generated barely any returns and produced a lot of bad press. The effectiveness of redistribution policies is often neglected and it just turns into symbolic politics.
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A quick update from Sweden. Five months after the election a deal regarding a future government seems to have been reached. It will be a Social Democrat + Green government supported by Center and Liberals and accepted by Left.
The agreement reshapes the political map quite a bit with broken political blocks(C+L+M+CD) and possibly emerging new ones.
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On January 16 2019 11:44 Nyxisto wrote:
I'm not opposed to some reasonable level of wealth taxation, especially in low growth, non-dynamic countries. Property and land taxes are widely underused. But most of the world's wealth has only been created fairly recently, and Gates or Bezos are not rich because their grandparents handed them a treasure chest full of gold. So if you want people to innovate (and it's generally a good idea to have these people around), then inequality will always exist. (maybe even get worse at the very top with the rise of tech giants)
They are rich because rich people invested into them.
The shares they own are priced through the wealth that others have inherited (and that wealth in itself is priced that way).
If you want people to innovate in a competitive enviroment it is generally a good idea that they are first and foremost independent from whether a state planer or an investor believes in them - and expects them to share with him a greater return than he has invested - or not.
Eliminating inheritance entirely is probably also not possible practically without draconic politics, and politicians should always be mindful about how to capture taxes. The French tax on the superrich generated barely any returns and produced a lot of bad press. The effectiveness of redistribution policies is often neglected and it just turns into symbolic politics.
Keeping the current system going is also not possible without draconic policies. The far-right rise + Show Spoiler +which by the way often uses the argument that rich people are somehow superior beings produced by superior breeding between them. People like Donald Trump, white-supremacists and their likes seriously believe that they are biologically superior, through the argument that they are richer and that can only come through more productivity
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On January 16 2019 11:44 Nyxisto wrote:
So if you want people to innovate (and it's generally a good idea to have these people around), then inequality will always exist. (maybe even get worse at the very top with the rise of tech giants)
This is a myth. Past a certain amount of income, creativity has absolutely nothing to do with the possibility of a greater reward.
Mere common sense is enough to tell us that technical innovation occurs more quickly and efficiently through open-source collaborative contribution than through proprietary, closed development: the more minds you have to work on a problem or a project, the better the results will be (if organized properly). Wikipedia and Linux are two great examples.
You also have to zoom out a bit and realize that inequality and inefficiency are cousins. The logic of a neoliberal market economy determines what can and cannot be done by creators, purely for the sake of profit. This is the only reason why you have the absurd and wasteful practice of planned obsolescence, which restricts people's freedom to innovate extremely durable goods, or ways to share goods so that less are produced (which we desperately need to do in order to curb climate change).
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They are rich because rich people invested into them.
The shares they own are priced through the wealth that others have inherited (and that wealth in itself is priced that way).
If you want people to innovate in a competitive enviroment it is generally a good idea that they are first and foremost independent from whether a state planer or an investor believes in them - and expects them to share with him a greater return than he has invested - or not.
BigJ i'm not sure i'm reading this right, are you saying that if someone has an idea a service a product, But not the resources to take advantage of it, Then its non-competitive for them to seek investors to realize that idea? also why is all the money that someone invested "inherited"?
I feel like i'm misunderstanding so If you could clarify I may be way off here.
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On January 16 2019 08:11 Big J wrote:Show nested quote +On January 16 2019 06:40 Nyxisto wrote:On January 16 2019 05:35 Ghostcom wrote:
Why is rising inequality in countries building up wealth not an issue? The only case I can see this to be true is if everyone have enough money to simply be hoarding which I frankly do not think is the situation many - if any - countries (maybe Luxembourg or another similarly small country with a large out-of-country workforce?). If you have a country with close to no wealth and you assume that people keep at least some portion of their newly accrued wealth, and that some people generate more wealth than others, then inequality is going to increase by definition. A perfectly poor country is perfectly equal. A moderately wealthy country is not, but simply because some people engage in more productive ventures than others. Some people getting richer faster than others isn't a big deal at all, and there is no way to prevent it that doesn't end in disaster, and no obvious reason why this is bad in and of itself. There is that simple fact that people die. So if you were right and the creation of wealth would be exclusively tied to the productivity of a person, then a general rise in wealth and a rise in inequality over multiple generations implies that a future generation has produced superior top-achievers. But, the prequisite that productivity is the only source of wealth still holds, right? Hence, productivity itself cannot be dependent of wealth. Then the only explanation left would be that those future generations produce genetically superior offsprings. Which I heavily doubt.I personally rather think of it like this: If productivity of an individual was the only source of wealth, then the distribution of wealth should be stable over generations. The fact that it is not shows us, that wealth is not exclusively tied to productivity. In my opinion, wealth develops (positively) as a variable of wealth and productivity. Or mathematically: w_dot(t) = f(w, p) Taxing wealth accordingly is the way to eliminate w from that function f, because it puts a price on storing wealth as a pure matter of creating more wealth, without hurting productivity at all. Indeed, statistical observations come to the conclustion that wealth taxes are some of the most economy-friendly taxes you can have, while taxes on wages or consume are generally said to be bad for productivity. And hitting a stable, competitive distribution of inequality would be the way to measure the correct price for wealth in that model.
quote from the US national library of medicine:
Researchers have conducted many studies to look for genes that influence intelligence. Many of these studies have focused on similarities and differences in IQ within families, particularly looking at adopted children and twins. These studies suggest that genetic factors underlie about 50 percent of the difference in intelligence among individuals
so yes, people with higher intelligence will on average produce offspring with higher intelligence. There are also non-genetic factors like work ethics, world view and upbringing which often run in the family (the article states that surroundings also are significant).
Those are naturally not the only factors for wealth and productivity, nor are they guaranteed to fire, but they have a significant influence.
I agree though that wealth taxes are generally the way to go, especially those affecting those who have more money than they can meaningfully spend. To be fair a lot of their money gets invested in funds which in turn produce jobs and I'm fairly sure an investment fund is on average more efficient at getting projects done than the state would be. But if equality and redistribution is the goal then wealth taxes are an unobtrusive way of accomplishing this.
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On January 16 2019 19:33 Taelshin wrote:Show nested quote +They are rich because rich people invested into them.
The shares they own are priced through the wealth that others have inherited (and that wealth in itself is priced that way).
If you want people to innovate in a competitive enviroment it is generally a good idea that they are first and foremost independent from whether a state planer or an investor believes in them - and expects them to share with him a greater return than he has invested - or not. BigJ i'm not sure i'm reading this right, are you saying that if someone has an idea a service a product, But not the resources to take advantage of it, Then its non-competitive for them to seek investors to realize that idea? also why is all the money that someone invested "inherited"? I feel like i'm misunderstanding so If you could clarify I may be way off here.
What I am saying is, to realize an idea you need to borrow capital to be capable to buy at capital prices for "means of production". So for the innovator it would be better, if the capital prices would be lower to begin with. The investor wouldn't have so much money then, but the innovator wouldn't need so much money to begin with. So the innovator would
a) be less dependent on investors, giving the consumer market more power to judge whether a product is good
b) start with less debt that cuts into his income
b) is the reason in my opinion, why capitalist systems have less average growth the more inequal they become. More and more of productivity has to be put aside, so that investors keep on investing, which is necessary so that innovators have the money supply to get into the market and create growth.
The state can take actions such as deregulation, shifting the tax burden away from investment and innovation, subventing innovations and investment, taking debts instead of the innovators, lowering credit levels to essentially replace debt with lower debt to soften the loss in innovation and growth. But ultimately it just creates a less and less just enviroment, poverty and can't solve the problem because the general dynamic persists. Unless it starts tackling capital prices and inequality.
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I am a big fan of inheritance taxes in this regard. You don't take anything away from the people who earned the money and produced the innovations. The only thing you tax is the utterly unearned money that people inherit solely due to being born to the right parents.
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On January 16 2019 19:41 Archeon wrote:Show nested quote +On January 16 2019 08:11 Big J wrote:On January 16 2019 06:40 Nyxisto wrote:On January 16 2019 05:35 Ghostcom wrote:
Why is rising inequality in countries building up wealth not an issue? The only case I can see this to be true is if everyone have enough money to simply be hoarding which I frankly do not think is the situation many - if any - countries (maybe Luxembourg or another similarly small country with a large out-of-country workforce?). If you have a country with close to no wealth and you assume that people keep at least some portion of their newly accrued wealth, and that some people generate more wealth than others, then inequality is going to increase by definition. A perfectly poor country is perfectly equal. A moderately wealthy country is not, but simply because some people engage in more productive ventures than others. Some people getting richer faster than others isn't a big deal at all, and there is no way to prevent it that doesn't end in disaster, and no obvious reason why this is bad in and of itself. There is that simple fact that people die. So if you were right and the creation of wealth would be exclusively tied to the productivity of a person, then a general rise in wealth and a rise in inequality over multiple generations implies that a future generation has produced superior top-achievers. But, the prequisite that productivity is the only source of wealth still holds, right? Hence, productivity itself cannot be dependent of wealth. Then the only explanation left would be that those future generations produce genetically superior offsprings. Which I heavily doubt.I personally rather think of it like this: If productivity of an individual was the only source of wealth, then the distribution of wealth should be stable over generations. The fact that it is not shows us, that wealth is not exclusively tied to productivity. In my opinion, wealth develops (positively) as a variable of wealth and productivity. Or mathematically: w_dot(t) = f(w, p) Taxing wealth accordingly is the way to eliminate w from that function f, because it puts a price on storing wealth as a pure matter of creating more wealth, without hurting productivity at all. Indeed, statistical observations come to the conclustion that wealth taxes are some of the most economy-friendly taxes you can have, while taxes on wages or consume are generally said to be bad for productivity. And hitting a stable, competitive distribution of inequality would be the way to measure the correct price for wealth in that model. quote from the US national library of medicine: Show nested quote +Researchers have conducted many studies to look for genes that influence intelligence. Many of these studies have focused on similarities and differences in IQ within families, particularly looking at adopted children and twins. These studies suggest that genetic factors underlie about 50 percent of the difference in intelligence among individuals so yes, people with higher intelligence will on average produce offspring with higher intelligence. There are also non-genetic factors like work ethics, world view and upbringing which often run in the family (the article states that surroundings also are significant). Those are naturally not the only factors for wealth and productivity, nor are they guaranteed to fire, but they have a significant influence. I agree though that wealth taxes are generally the way to go, especially those affecting those who have more money than they can meaningfully spend. To be fair a lot of their money gets invested in funds which in turn produce jobs and I'm fairly sure an investment fund is on average more efficient at getting projects done than the state would be. But if equality and redistribution is the goal then wealth taxes are an unobtrusive way of accomplishing this.
You missunderstand. To justify the even further increased inequality, under the assumption that wealth is not a problem, the offsprings have to be quite genetically superior to their own parents, not just the average person. (or the rest has to get dumber accordingly) If they were only as good as their parents (were relative to all others), the distribution of that generation would still resemble that of the last generation if wealth doesnt matter.
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Ah ok, my bad. Yeah there's zero doubt in my mind that wealth creates wealth, or more broadly expressed that stable systems favor the strong ones (rich/influential). So I definitely agree that wealth is a snowball effect.
To be fair there are some elements that lower inequality or at least shuffle the cards new, f.e. technology leading to the development of new products, or like you proposed taxes. The problem with the latter is that it's hard to enforce high taxes on powerful people for multiple reasons (influence, ability to change citizenship, tax gaps etc).
On January 16 2019 20:22 Simberto wrote:
I am a big fan of inheritance taxes in this regard. You don't take anything away from the people who earned the money and produced the innovations. The only thing you tax is the utterly unearned money that people inherit solely due to being born to the right parents.
I totally understand the sentiment, but for the people who earned the money guaranteeing that their children will have a pleasant and secure life is a driving factor.
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That is a valid concern, but we can and in many cases have created an inheritance tax that does not impact the working class passing on their wealth to their children.
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On January 16 2019 23:22 Plansix wrote:
That is a valid concern, but we can and in many cases have created an inheritance tax that does not impact the working class passing on their wealth to their children.
Indeed. You can do something like having the first 100k tax free, than having increasing tax brackets to something like 90% for anything above one million (random numbers to show what i think would roughly make sense).
This still allows you to give to your children all the advantages that being the child of someone wealthy imparts on them, all the things that you imparted upon them while you were still alive, and more money than most people earn during their lifetime in inheritance. But it means that you don't have a hereditary wealth-aristocracy, where people are wealthy because one of their forefathers did something productive, and money makes more money if you are not incredibly stupid with it.
Also, the big advantage of heavily taxing inheritances would be that you would need to tax labour and consumption less. So you have more money during your lifetime, but your children have less unearned money.
Details are of course a bit iffy, because you need to deal with the ways people already try to circumvent inheritance taxes, like gifting stuff to their children or leaving the country. But none of that is unsolvable.
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I totally understand the sentiment, but for the people who earned the money guaranteeing that their children will have a pleasant and secure life is a driving factor.
Aren't they usually adults before their parents die? I personally think if their relentless pursuit of wealth was for their kids a lot less wealthy kids would complain about being neglected af by their parents.
I'm also of the opinion that we could have 0 billionaires and still motivate people toward innovation and hard work.
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People here trying to argue that reproduction somehow compounds intelligence is a biology 101 error. As long as above average intelligent people intermingle with the general population, regression to the mean occurs and people revert back to an average level of intelligence. If this wouldn't be true, we would have 400 IQ people and people that are ten meters tall. And what would you know, the same dynamic even applies to wealth, 90% of which is lost in three generations or less. . In other words, the children of Bill Gates will likely be less rich, and the children of Ronaldo will be marginally worse at soccer.
So unless the rich suddenly start to live on the moon or bring aristocratic mating back there's no reason to believe that most wealth will be accrued through inheritance.
As I said before, most wealth creation has yet to occur, logically most of it cannot possibly be inherited by definition. Inequality will not increase as a result of inheritance, but the opposite, more and more opportunity opening up for entrepreneurs to reach billions of people within months or years.
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On January 17 2019 04:11 Nyxisto wrote:People here trying to argue that reproduction somehow compounds intelligence is a biology 101 error. As long as above average intelligent people intermingle with the general population, regression to the mean occurs and people revert back to an average level of intelligence. The reality is, rich people tend to marry other rich people, and successful educated people tend to marry other successful educated people.
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Thanks for clarifying BigJ. That is interesting, I don't know if I agree with you but its something to think about.
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On January 17 2019 04:32 Dangermousecatdog wrote:Show nested quote +On January 17 2019 04:11 Nyxisto wrote:People here trying to argue that reproduction somehow compounds intelligence is a biology 101 error. As long as above average intelligent people intermingle with the general population, regression to the mean occurs and people revert back to an average level of intelligence. The reality is, rich people tend to marry other rich people, and successful educated people tend to marry other successful educated people.
That people marry people in their own socio-economical cohort because they have similar preferences isn't surprising and there's nothing wrong it it. The suggestions however that this is due to some genetic advantage or eternal wealth transfer is wrong, because it is a simple fact that there is no caste of intelligent super-humans, and that wealth is eroded over the course of only relatively few generations.
So, unless we're talking about a wealthy descendant of some merchant family in Venice, if two successful people meet today they likely do so because they're skilled and educated, not because they've inherited a great deal of intellect or money.
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On January 17 2019 04:11 Nyxisto wrote:And what would you know, the same dynamic even applies to wealth, 90% of which is lost in three generations or less. . In other words, the children of Bill Gates will likely be less rich, and the children of Ronaldo will be marginally worse at soccer.
Do you have a link to the actual study. I have heard that argument over the last 10 or maybe 15 years multiple times. I personally would like to read such a study for once, because:
- There are studies indicating the extreme opposite, like this one: https://www.independent.co.uk/news/world/europe/florence-rich-families-social-mobility-same-as-1427-a7056141.html
Such studies are usually scientifically very hard to judge because actual data on wealth is often lost, or has never been recorded. Even in recent times we don't collect actual data on superrich people for matters of privacy. Although recent estimates are obviously quite indicative, while old data has to be taken with quite a grain of salt.
- Piketty's work on the subject of wealth distribution in 2013 was said to be a groundbreaking work in the field of acquiring wealth data from former centuries. Longrun statistics seem to be generally very hard to acquire on that topic and have only been unlocked in quite recent years, through digitalization of data and global networking. Yet, the first times I have heard that argument of 3 generation wealth loss has been quite earlier than 2013, which makes it peculiar.
- If it is an American study, take into account that the US still has some of the higher wealth taxations in form of the "estate tax" and used to have much higher ones: https://www.taxpolicycenter.org/statistics/exemption-level-1916-2017
I don't know what the measure of "three generations" is and which three generations have been observed, but those New Deal politics, which have been applied between 1935 and 1976 might have had quite an effect on it! Both, directly taxing inheritance and disincentivizing buying capital for the sake of acquiring familiy capital.
Same goes for losses of family wealth in Europe through WW1 and WW2. Obviously, if the solution to this question is to wage a world war, it is not worth it for most of us. I personally believe you will find few periods of peace that can be seen as indicative, due to war: https://www.theatlantic.com/business/archive/2017/02/scheidel-great-leveler-inequality-violence/517164/
- Depending on how you define "rich" and "losing wealth", it may very well just be a representation of my argument:
![[image loading]](https://i.imgur.com/SFQdZhg.png)
In this normalized graphic, I define the "top 20%" as rich, define the level of wealth they hold as "being rich" and then observe that many of them don't make "being rich" anymore when distribution becomes more exponential. They simply just couldn't keep the level, relative to the increased wealth of the superrich. They may not even have lost anything, they just devalued in relation to even richer people and are thus not considered rich anymore if we use the same quantile of wealth.
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Three generations is a really long time. That is the distance between us today and world war 2. I’m not sure just waiting for the wealthy to lose the money “naturally” is a good plan, especially since this isn’t erosion. The people with the money are going to try to hold onto the money.
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EPT
