Mommy, why are poor people poor?Follow

Wrong. That's my point. There is no macroeconomic analysis when someone simply says "Our economy is going in the wrong direction because the gap between rich and poor has grown".

A macroeconomic analysis would be something like what I asked him to provide: Show me that this actually makes things worse for "the poor", "the working class", "the middle class", etc. Show me in real terms. At each economic level, are the people within that percentile better or worse off today than at some point in the past where the income gap was smaller.

More importantly, in order to prove the assumption, you'd have to show that each of those groups are worse off at every point in history where that income gap was smaller. If this is not true, then the assumption that an increased gap is "bad" is false.




Sure. But when someone talks about relative earnings, they are talking about currency. I'm more than happy to talk about other factors that measure real relative standard of living over time. But other people (like Smash) just want to talk about relative dollars and call it a day.



I'm not conflating them. I'm specifically arguing that relative dollars of wealth/income isn't how we should measure true economic status. How about targeting that argument at the folks making the simplistic "rich vs poor" arguments?




Except it is almost always used as a blanket proof of something "wrong" with the US economy.



I think there's a difference between measuring rates of various social ills and comparing them to rates of income inequality within given geographical areas at the same point in time, and making a broad claim about changes in income inequality over time. One does not lead logically to the other. Saying that areas in which income inequality are high have higher social problems than areas that have lower income inequality does not mean that if income inequality increases over the next 50 years, that the rate of social problems will be higher in 50 years than today.

I also happen to disagree with the simplistic conclusions arising from most of those studies. I think they tend to be examples of how to manipulate social statistics to support an argument you already want to support rather than allowing the stats to lead you to a conclusion. In the US, it's likely that the areas with the largest income inequality are not going to be the areas with the most rich people, but the areas with the most poor people. The correlation is more likely to be between poverty and social problems. A fact which no one is disputing. That this happens to also correlate to areas with high income inequality is simply a fact of math, not causation.


Let's not forget that when people usually talk about this, it's within the context of a gap growing over time. And usually with the assumption that because the rich are getting relatively richer, that this makes the poor relatively poorer. I don't think that assumption stands up to reality.

Edited, Nov 5th 2013 6:14pm by gbaji

Which is arguably true of all command economies. They cannot "focus on wealth creation". The very concept is alien to a command economy.



I suspect we're using different definitions of wealth. China has not created enormous wealth. It can barely feed its population. What China has done, similarly to what the Soviets did, is focus the nations productive capacity into a single location, while minimizing the amount of that capacity which is used for more than basic subsistence for its people. This allows it to appear to have a whole lot of wealth, but it's really an illusion. It's not sustainable. Over time, the percentage of that capacity required for that basic subsistence will grow until that excess wealth shrinks to nothing. Then their system will collapse.

Barring significant change, there is no other outcome they can expect.



Er? Are we using different definition of "command economy" as well? What the US did to create the boom of the 50s was remove significant amounts of government controls over the economy. They freed up the market, eliminated the "excess profits tax", lowered tax rates overall, and in general allowed the rich people to do what they wanted with their money and reap a greater percentage of the profits. The result was the biggest economic boom the world has ever seen.

That was not a command economy. It was the opposite.



Only if you can show that it will actually cost more dollars than otherwise. I'm talking specifically about economic cost. I think that a lot of people talk about this, but very few succeed in actually showing that such costs exist, much less that they are greater than the cost of enacting their social programs.



Give me an example then. If you're so sure that economic conditions are such that it is a good bargain, then show me this.



That's not a terribly helpful comment.



Everything else staying the same? Yes. But then you're assuming external factors that you're not defining in the question, aren't you? That's somewhat pointless, isn't it? I mean, anyone can ask a question with what appears to be an obvious answer and then go "haha! You're wrong, because these other factors I didn't mention happen, making your choice a bad one!!!". Um... What's the point?

But you do highlight part of the point I'm trying to make. People present simplistic claims and assumptions, separating them from external factors, and applying them absent those factors. But then when someone challenges those claims, they fall back to arguing that some unmentioned factors will magically appear that make them work. But that's pointless as well, right?

Um, it doesn't work that way either.

Just because X doesn't cause Y 100% of the time doesn't mean X doesn't cause Y at all. Every time I stab someone with a knife they don't die, but people can die if I stab them with a knife.

Edited, Nov 5th 2013 6:53pm by someproteinguy

Have you been to China?

There is real wealth being created by central command. There is a lot to dislike about their authoritarian policies, but they are moving China forward, economically.

For the most part, economic prosperity across the board has been highest when that increase in gap has been highest. It's more like the exception is the other way around. Sometimes, when the gap increases, economic conditions get worse. But usually? They get better.

Nope, unrelated. Not an open question. Income inequality has pretty much zero net effect on economic growth. Over-performing economies can have a wide disparity, under performing economies can have a wide disparity, etc. The idea that there's a structural link is a marketing ploy, quite literally. There is, let me state...once again, no economic model that shows how wealth is distributed by a society is tied to that societies overall economic growth. In layman's terms, a society can choose to have a tiny ruling class and a large serf class or it can choose to have a broader distribution of wealth and a large middle class. The choice is basically an ethical one and not one of economic outcomes (there does actually seem to be a net benefit to more even distribution particularly in high income per capita systems, but it's fairly technical and you won't understand it, so let's ignore it for now) Given that, the reasoning for choosing the tiny ruling class option is fairly lacking. The primary reason it somehow succeeds to the degree it has in the US is largely the big lie of success = money = hard work = talent, which, of course, isn't at all how that works. It's a compelling fantasy, though.

Commence hand waiving and "simple" ""explanations"" of how this isn't the case, I guess.

Also China is currently debating whether they should back their currency in Gold or not. Which instantly makes their currency much more attractive to international investment than any major currency out there namely the USD

No. No, they aren't. Given their policy of manipulating CNY to control balance of trade, the idea they'd peg it to any commodity is beyond comical. Now, if I were trying to sell abject suckers bullion or coins or whatever, it does sound like something I'd probably make up out of thin air.

While obviously not enough to make a strong case

This realization would have been a good starting point. The US economy isn't the only economy to exist. There are many, many, examples of differing states of wealth distribution and the impact on growth, per capita GDP, etc. There just isn't much impact.

Actually I would love to see these models you have talked about. I am interested in knowing which relevant economies have wealth equality. Not even China has wealth eqaulity. The reason there is no impact is because we have no data.

Unless of course you have data from a country that has had wealth equality in their past...no?

Edited, Nov 6th 2013 1:41am by rdmcandie

Actually I would love to see these models you have talked about. I am interested in knowing which relevant economies have wealth equality. Not even China has wealth eqaulity. The reason there is no impact is because we have no data.


Not true. I'm not going to post 10,000 words trying and failing to explain it. Google scholar exists, you can type. Carpe deim.

I just can't believe some of the things that get debated here sometimes-- and the sheer amount of ******** you can pay people to write to spoon feed to all the John Galt zealots of the world to help them rationalize their cult-like devotion to a true "free market" and all the depravity that comes with it.

To clarify, I've been reading on this topic outside of this thread, and some of the things I am seeing makes me really want to punch the **** out of someone.

Needless to say, during an economic downtrend the only wise investment is in ****.

So you can't even direct me to one nation that has had true wealth equality, Shocking.

Yes. And done business there. Have you?



I'll have to respectfully disagree with you on your use of "real wealth". They've created a large pool of capital which their government can use because they've concentrated their economic output into the hands of that government, while allowing nearly zero to be held in the hands of their citizens (more or less the same as the soviet model, just implemented differently). This concentration gives the appearance of "vast wealth", and to be fair they are at least being somewhat smarter with it than the Russians were, but the very model they're using is essentially doomed to failure. It's just a matter of how long it takes to fail, not if it will.