I've heard the argument before that you want to encourage, as the article calls it, rent seeking because it demonstrates flaws in the market/regulation and if more people exploit them they become more visible. When they're sufficiently visible they can be addressed by the public. It seems like this cycle must exist in order to make progress in economic regulation. It also feels like a society needs a strong leader who can unite people under a preferred economic policy in the first place. No progress will be made endlessly bickering over preferred political ideaology and thrashing on regulatory laws and guidance. How do you make progress in the US where we endlessly bicker over policy direction and have marginalized the utility of a strong leader? I don't know.
Joseph Stiglitz Says American Inequality Didn’t Just Happen
101–110 of 222 posts
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#102Earlier quoted context omitted.
We don't have a time machine. Everything consumed today is produced today (disregarding short term storing in warehouses, that only goes so far). I don't buy the argument "but... future generations!" Future generations have to deal with whatever their situation is at their future time. They don't have to send anything back through time to us. If they are so impressed by abstract numbers in computers that their econom…
Future generations have to deal with whatever their situation is at their future time I’m not talking about “generations”, I’m talking about us . The people who enjoyed an easy credit-fuelled boom in the 00’s didn’t fully understand that they were merely spending their retirement money now (or rather, then)
It does not change what I wrote. There is no time machine. What is produced now and the services brought now always are for the people living now.
Now, whether society allocates less resources to some people and more to others despite being perfectly capable of producing enough for all is an entirely different question, that's a problem at any given point in time. Such as right now, today, in the by far richest country on this planet in the last four billion years. The numbers stored in computers don't force this upon us (there is no law of nature that connects the tiny electrical charges in silicon with a family not getting adequate housing, a dentist, or food despite all of those easily available, or easily producible), that is all completely man-made.
"Saving for retirement" on an economic level must be one of the biggest scams in history. Unless the government stores products and services (like doctors) in warehouses to be used 50 years from now for retirees paying to get all of that produced and stored right now - and I don't think the government or anyone does any of that that - on an economy level there is no such thing as "saving for retirement". What will be needed in the future will have to be produced in the future. They also don't need "saved money" of today in the future, since it's all virtual they can and will create that on the fly anyway, just like today (money creation process).
It could be useful if the original purpose was still true: When resources (work, machines) are scarce, do you use them to fulfill today's consumption dreams, or do you use them to build capacity for the future, i.e. instead of building consumer goods you build more and better machines and factories. In that case "saving" actually has a meaning. However, today we don't live in an economy that has that restriction. What is not being consumed now does not increase the work put into future productivity in any meaningful way or amounts. Well, maybe in some countries, but hardly anywhere in the West.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#103Earlier quoted context omitted.
We can all stay on the same page by expressing the numbers as percentage-above-cost-of-living. Or, we just represent this dollar amount as X, where X is how much money you need to live comfortably off passive income for any given region. In the case of SV, it’s $5-10M. In other places, it’s $1M.
I'm not sure it should be based on cost-of-living at all. If it is, then you're middle class while living in SV, but all of a sudden rich when you sell your home, collect the equity, and move to Montana. It should be enough to say, only rich (or soon to be rich) people can live in SV.
It sounds like SV is becoming the monaco of the US; you need to be rich to just get by there.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#104I half wonder if the issue of inequality is that America may have a fatter right tail on the distribution rather than an ever-narrowing tail. Instead of only having the Rockefeller, Vanderbilt, etc 0.001% wealthy, we have a 5-6% band of households who are millionaires[0] and that makes the wealth more visible when it’s a handful of people in your town or social circle than when it was only a handful of people in the…
You don’t have to wonder. The data is out there. While there are “more millionaires” than before, that’s a bogus metric due to inflation. You have to look at concentration of wealth as a percentage and a ratio between. Wealthy and poor and “middle class”. If you do that it’s obvious what the issue is; wages have stayed very flat for the poor and middle class and almost all wealth gain has been concentrated in the top…
Why wouldn't wages stay flat for the poor and [bottom half of the] middle class? I think of the value of a dollar as pegged to the value of an hour of undifferentiated labor rather than pegged to an ounce of gold or barrel of oil. (Said differently, basic wages and inflation are tied to each other: inflation of wages is linked roughly linearly to inflation of prices.)
People selling hours of labor are selling those hours in some ratio of dollars and that's what their labor is worth. What's happening on the high end is that advances in technology, finance, and manufacturing have made gains in excess of inflation, and under that set of conditions, of course wealth flows to the owners of those advances.
(I'm not saying that what we have today is exactly right, but I'm sharing my mental model of why it's entirely unsurprising.)
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#105Earlier quoted context omitted.
I know this will sound provincial to the HN crowd since it's very Silicon Valley oriented, but a thought occurred to me while reading this comment. The thought that it's pretty amazing that there are places in the US where, say, 5 million in assets is "middle class". I understand the thinking, it's just that where I come from all of the guys with 5 million in assets are considered to be pretty F'n rich. I don't know…
I don’t think it’s really that intractable. The traditional middle class lifestyle in the US for the past several decades involves getting married, probably having a few kids, and buying a 3 bedroom house to live in. Probably even in the towns you’re thinking of, that describes a middle or upper middle class lifestyle. The thing that’s crazy is that this can cost 2-3 million dollars in many places in the Bay Area. Th…
> The thing that’s crazy is that this can cost 2-3 million dollars in many places in the Bay Area. The housing crises in affluent cities is absolutely the driving factor of our growing inequality issues.
how can this be so? i agree it sucks that {insert middle class profession} can't afford a 3br in the bay area or NYC, but how can that be the root cause of inequality across an entire nation? there are tons of affordable 3br houses around where i live (mid-size coastal city).
i see that it is a bad thing for service workers the wealthiest cities to be pushed ever further from their place of work, but this seems like a more local problem.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#106Favorite quote: "Those at the top have learned how to suck out money from the rest in ways that the rest are hardly aware of—that is their true innovation." Rings true to me. That's why labor markets are purely competitive but the markets for products are dominated by price fixing. It's why you get more jail time for stealing a car than cheating your employees or customers to the tune of millions of dollars. And so o…
> markets
We regularly hear people concerned about the hypothetical existential threat of a paperclip maximizer AI being invented in the future, yet this concern reliably ignores the AI overlords we already have: paperclip^Wprofit maximizing corporations. The VM for this type of AI has an incredibly slow clock rate and an extreme CISC ISA that often modifies itself in the RTC interrupt. The AIs are not a future threat; they already enslaved us.
The problem is our unregulated capitalism. Until that is addressed[2] we are merely debating which profit-maximizer AI we want to serve.
(my thanks to Charles Stross for the maximizer-AI/corporation metaphor[1])
[1] https://media.ccc.de/v/34c3-9270-dude_you_broke_the_future
[2] I suggest heavy regulation to protect the useful parts of capitalism. Left alone, capitalism destroys the very markets it needs to survive.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#107Earlier quoted context omitted.
I think it should be obvious that you won't get rich unless you sell something... None of those people sold things or seemed to be interested in the process of selling things (except Shockley and that point is moot since the coinventors/creators reaped the rewards). Is it really that surprising to people that you wont become rich unless you convince thousands upon thousands of people to hand you money? What our syste…
> I think it should be obvious that you won't get rich unless you sell something... None of those people sold things or seemed to be interested in the process of selling things Obvious under the current system maybe. Obvious that it should be so, and that it's better that it's so, or that it can only ever be so? Not so much. I, for one, think that society would be so much better if production of value like what Einst…
> I, for one, think that society would be so much better if production of value like what Einstein did or what Tesla did etc, was rewarded with richness, rather than selling something.
Unfortunately, there's no mechanism for doing this in a decentralized, dynamic fashion.
The great strength of markets is their decentralized and dynamic nature. They are the original hivemind and crowd-sourced wisdom. Of course, they have many weaknesses (especially with the corruptibility of governments). But for now, it seems these weaknesses are best handled by continually attempting to apply layers of patches and one-off fixes, instead of altering it fundamentally. Perhaps advanced AI will enable a new paradigm... although I would certainly not want to rush into such an enormous change.
I do agree that we can do a better job of rewarding and incentivizing fundamental research and innovation. But it's not going to be easy. Part of the problem is that it often take significant hindsight to know which breakthroughs are the most important.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#108Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the middle class to the rich, as the long-term performance of firms is sacrificed to making the next quarter's numbers.
And it is a fiction. Here's a thorough takedown: https://hbr.org/2017/05/managing-for-the-long-term
This makes a lot of good points, but one I find particularly telling is that maximizing shareholder value is not even a well-defined goal, because it doesn't specify a time frame. A public company could be run in such a way as to cause wild swings in the share price, and the day traders and HFTers would love it, because surfing volatility is how they make their money. Of course no one thinks that those are the shareholders whose value should be maximized, but someone who accumulates a position over a couple of months betting on the price going up after the next quarterly earnings report, and who plans to sell shortly thereafter, really isn't that different — and yet somehow these are the people who have managed to seize the narrative that they are the shareholders whose value maximization counts.
And the consequences of people believing this are just massive. Offshoring, reductions in R&D, stock buybacks, a general failure to invest in the future — all of these are driven, to some extent, by this idea that the stock price must be goosed at all costs.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#109But the American revolution being a revolution (as many of the others at the time) was for the benefit of the rich landowners. And the devolved nature of the Republic meaning that reforms that the UK and Europe went through haven't happened has nothing to do with it?
You fail to take into account the New Deal and many decades of progressive taxation, the Civil Rights act, etc. The current inequality crisis only got started for real in the 1980s.
Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen
#110Earlier quoted context omitted.
So do you have an actual proposal for how we should be rewarding these people? Your rhetorical question provides no value. I want to know how we should decide who should be rewarded, how we can obtain the money to reward them and what benefit does rewarding them in this fashion provide to society.
> So do you have an actual proposal for how we should be rewarding these people? Sure. An innovation tax, and a group of cross industry and academic people (e.g. a mix of successful founders, engineers, great researchers, Nobel winners, plus a jury of common folk etc) that decides, every e.g. 5-10 years, who gets to share the money among a shortlist of potential benefactors. "Hmm, looks like this Turing person did go…
That seems like an amazingly gameable system. In particular, it would reward the ones who are best at taking credit, which are not necessarily the same ones that did the actual innovating. Further, it requires the deciding group to be reasonably free of prejudice. As little as a few decades back it would have completely ignored any contributions by women, for example. Finally, I would not be surprised if an outsized amount of the 'prize money' went to friends/family/acquintances of the people in the decider group.