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My simplified response to Paul Graham's simplified essay

blog.rongarret.info

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Re: My simplified response to Paul Graham's simplified essay

#101
post #90

Earlier quoted context omitted.

> globally increasing inequality At a global level, inequality has not been increasing. Globalization has been a huge win for developing nations in this regard (and the people who have paid the price are low-wage workers in developed nations like the US). This is not to say that we have to conclude that globalization has been a good thing overall for developing nations - there are lots of problems it has caused for t…

According to this UN report: http://www.un.org/en/development/desa/policy/wess/wess_bg_pa... global inequality has been increasing despite convergence of inter-national mean incomes. The rich have been getting richer faster than the poor have been catching up.

> global inequality has been increasing despite convergence of inter-national mean incomes.

This is a misuse of terminology. Generally when people talk about "global inequality" they are speaking either of median (not mean) incomes or median standard of living, (which is most accurately tracked by median PPP-adjusted incomes). The latter is more common in political and non-academic circles, because standard-of-living is largely what people actually care about at the end of the day.

I didn't say that inequality within individual countries hasn't been increasing - and in fact, one of the major criticisms of globalization is linked to the divergence of opportunities within developing countries. But it's undeniable that globalization has caused median standard-of-living to converge globally and median standard-of-living to increase in developing countries, and the convergence of mean incomes globally between countries provides rough evidence of this..

Re: My simplified response to Paul Graham's simplified essay

#102
Capitalism is the best system for distributing wealth and governing trade - and simultaneously one of (though perhaps not the) worst forms of government. Societies that lose the ability to maintain that distinction - from either side - are inexorably doomed. We have regressed to a point where our grasp of that dichotomy seems tenuous at best.

Re: My simplified response to Paul Graham's simplified essay

#103
post #54

Earlier quoted context omitted.

> This is a meaningless statistic It's only meaningless if you cherry-pick your examples and draw your opinions from those examples. For 99 percent of the population, wealth is a fair reflection of the actual comparative wealth of individuals.

It's hardly cherry picking. I don't know exactly the percentage, but let's say 50% of the US population is net in debt. So all these people are poorer than the millions in developing nations without a penny to their name? As above, I would argue no, they are not. Hence this statistic doesn't mean much.

The point of the statistic is not living standards, which you are focusing on. The point is who controls the wealth. A person with a negative net worth is not wealthy. The person who holds the note for their debt, is. A loan is an asset on the loaner's books, and yes, it will be included in the calculation of relative levels of wealth.

Re: My simplified response to Paul Graham's simplified essay

#104
post #10

PG's simplified essay seems like attack on a strawman; he's mainly arguing that inequality is good, but then mostly everybody agrees with that. The issue people see (and PG conveniently ignores) is increasing inequality - not locally increasing (i.e. an enterpreneur becoming rich because of a successful business idea), but globally increasing inequality, which happens because of rent-seeking, tax avoidance, buying po…

Non-avoidable seems very hard to do to me.

Within the law, there only has to be one loophole per generation. Existing structures (I have no knowledge of this stuff) may hide the transfer of inheritance. It's really hard to look at every transaction and verify that it's not inheritance.

That money can always leave for a different set of laws, so it might be convenient to go die in a different country. Crypto currencies would make it hard to identify any money coming back in as inheritance. Or people just simply leave the country and refuse to pay. How would we convince every country on the planet to enforce this tax?

It may not even be permanent. These are long time lines so it's possible the tax will be there for one presidential cycle and gone the next. People with large amounts of inheritance can afford to wait.

Re: My simplified response to Paul Graham's simplified essay

#105
One step in solving it is adding more marginal tax rates. It's silly that they stop at 400k and 39%. I'd also introduce progressive taxing on capital gains as that's a primary way the wealthiest individuals get around income tax. The estate tax should also be progressive. These ideas aren't popular and would never get passed since the government is ruled by the wealthiest Americans but they would indeed be steps in the right direction.

Re: My simplified response to Paul Graham's simplified essay

#106

Earlier quoted context omitted.

>I think we're quite close. USA: 5% unemployment, GDP per capita of $55,000, 78.74 years life expectancy, Human Development Index: 8, etc. EU: 9% unemployment, GDP per capita $38,000, 78.82 years life expectancy, Human Development Index: 6 average, etc. Yeah, we're not "close." Meanwhile countries like the BRIC nations, especially authoritarian autocracies like China or Russia, with terrible inequality and 100x the p…

Except that's the "official" unemployment number. Here's how it's calculated, cribbed directly from the Bureau of Labor Statistics [0]: * People with jobs are employed. * People who are jobless, looking for a job, and available for work are unemployed. * The labor force is made up of the employed and the unemployed. * People who are neither employed nor unemployed are not in the labor force. Think about those points…

This is the way unemployment is calculated all over the world, so it does not affect the parent's point, which is comparative.

Re: My simplified response to Paul Graham's simplified essay

#107
post #23

Perhaps I am an ignorant. A little background about me: * I live in NYC * I live with my parents, still very young as a recent grad * I don't make tons of money, but with overtime I probably make 80K? I don't really count my money these days. * I do spend money on monthly gym membership (I should suspend that to save $100 since I am too busy haven't been there for a few months), netflix and couple other stuff. * I gi…

I'm in a similar situation to you, but:

* One year out of college, you're in the top 30% of the US: http://www.nytimes.com/interactive/2012/01/15/business/one-p...

* You didn't mention loans, so I'm assuming you were able to graduate college mostly or completely debt-free

Just these two points mean you're doing better than most people in the US, and much better than most people in the world. You never have to worry about about food or shelter, you have plenty of disposable income, you can support your family.

Your comment seems to be phrased as "I'm as average guy, and I can be happy with what I have", but you're not average. 80K is "tons of money" for most Americans your age, most people aren't so comfortable that they never have to worry about money, most people can't throw away $100 a month without noticing.

So you're right, discussion about inequality does need a context, but your context is that you're well into the top half of society.

Re: My simplified response to Paul Graham's simplified essay

#108

The only thing I don't like people to repeat about 1% owns 50% wealth is because that's just a mathematical truth from Pareto principle. If 20% populations owns 80% resources. Just recursively applying Pareto principle. You see 0.8% populations owns 51.2% resources. So we are in fact now efficiently using resources around the world to support 7 billions populations. Of course this ignores our biological tendency of p…

The Pareto distribution has a parameter (alpha in the mathematical formulation used on Wikipedia). If the value of that parameter evolves over time that might demonstrate an evolution of economic inequality.

But indeed access to credit and amount of debt makes it hard to interpret the results on wealth. Income distribution might be easier to interpret.

Re: My simplified response to Paul Graham's simplified essay

#109
post #74
post #10

PG's simplified essay seems like attack on a strawman; he's mainly arguing that inequality is good, but then mostly everybody agrees with that. The issue people see (and PG conveniently ignores) is increasing inequality - not locally increasing (i.e. an enterpreneur becoming rich because of a successful business idea), but globally increasing inequality, which happens because of rent-seeking, tax avoidance, buying po…

I say this over and over again in all my comments on the subject, but wealth passed on through inheritance has fallen a lot. I don't know why its always assumed to be true that all this wealth that's driving inequality is inherited. It's not true. > Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scor…

Forbes 400 represents mostly principals of public business enterprises that are super-successful, and is dominated by stock wealth. It doesn't capture private assets. It's also ephemeral -- for every Bill Gates, there are plenty of multi-billionaires who decend into the depths of multi-millionairehood when their stocks implode.

Beyond that, you're going to have trouble measuring stuff. There are folks in upstate NY still inheriting and generating income from property acquired during the Dutch colonial period. Many, many people are members of LLCs or corporate officers who have the ability to direct money their way and control lots of money that doesn't necessarily "pass" to them and trigger inheritance taxes.

I have some family members who are wealthy enough to think about generational wealth for their descendants. So they structure their life to compartmentalize risk and maximize the ability to transfer wealth at low/no cost. Their homes? Owned by a pseudo-anonymous Nevada LLC. Cars? Owned by another LLC. Investment properties? Owned by individual LLCs, which are in turn owned by some other corporate entity.

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