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Do the Rich Capture All the Gains from Economic Growth?

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Re: Do the Rich Capture All the Gains from Economic Growth?

#21

Post by izzydata »

rukittenme wrote: post #6

I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…

I agree, but if the steel industry grew 500% then I am willing to bet executives saw 499% of the benefit and all employees remained the same.

Re: Do the Rich Capture All the Gains from Economic Growth?

#22

Post by xhrpost »

irq11 wrote: post #9

I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis. The question is, what percentage of people are gaining? One success story can significantly affect the mean when you’re starting from a small number.

Another issue with just using averages and math: say you're looking at the housing crisis 10 years ago. Math says that the middle class actually had a net gain in wealth because when your house gets foreclosed on, you no longer have all that debt. 2006 -> buy $200k house with $190k mortgage. 2008 -> House worth $130k, still owe $175k. So net worth is -$45k. (This is not yet accounting for toxic assets in which you could assume the house not to be sellable and the owner thus a full $175k in debt). Owner defaults, net worth is now $0. A mathematical net worth increase of $45k, even though most people would agree this is a bad thing.

Re: Do the Rich Capture All the Gains from Economic Growth?

#24

Post by pulisse »

kazinator wrote: post #3

Adjusted for inflation, the US economy has more than doubled in real terms since 1975. How much of that growth has gone to the average person? According to many economists, the answer is close to zero. First of all, the population has increased from around 200M to 325M. The inflation-adjusted economic output would have to increase by that same factor just to say the same per capita .

The passage you quote is already talking about real GDP per capita. Aggregate real GDP has more than tripled in that time frame.

[1] https://fred.stlouisfed.org/series/A939RX0Q048SBEA

[2] https://fred.stlouisfed.org/series/GDPC1

Re: Do the Rich Capture All the Gains from Economic Growth?

#25

Post by metalchianti »

Floegipoky wrote: post #14

Tl;dr: Wealthy and poor cohorts are not necessarily stable over time, generational boundaries in particular seem to be a relatively strong predictor of change. However people who are now poor are just as poor as the poor of the 70s, while those who are now extremely wealthy are even more extremely wealthy than the rich of the 70s.

I bet that compound earnings are the main contributor here. It's much easier to save more money because you're wealthy and have more money. Across generations this effect is massive.

Re: Do the Rich Capture All the Gains from Economic Growth?

#27

Post by eyeinthepyramid »

kazinator wrote: post #3

Adjusted for inflation, the US economy has more than doubled in real terms since 1975. How much of that growth has gone to the average person? According to many economists, the answer is close to zero. First of all, the population has increased from around 200M to 325M. The inflation-adjusted economic output would have to increase by that same factor just to say the same per capita .

GDP per capita has doubled since 1975 in inflation-adjusted dollars according to this:

http://www.multpl.com/us-real-gdp-per-capita/table/by-year

Re: Do the Rich Capture All the Gains from Economic Growth?

#28

Post by JustSomeNobody »

rukittenme wrote: post #6

I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…

When you drive to another state, why are you entitled to use roads without potholes? You didn't contribute to that.

Re: Do the Rich Capture All the Gains from Economic Growth?

#29

Post by eyeinthepyramid »

xhrpost wrote: post #22
irq11 wrote: post #9

I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis. The question is, what percentage of people are gaining? One success story can significantly affect the mean when you’re starting from a small number.

Another issue with just using averages and math: say you're looking at the housing crisis 10 years ago. Math says that the middle class actually had a net gain in wealth because when your house gets foreclosed on, you no longer have all that debt. 2006 -> buy $200k house with $190k mortgage. 2008 -> House worth $130k, still owe $175k. So net worth is -$45k. (This is not yet accounting for toxic assets in which you co…

except, of course, for all the retirement funds that disappeared.

Re: Do the Rich Capture All the Gains from Economic Growth?

#30

Post by ergothus »

TulliusCicero wrote: post #16

The whole thing he is explaining is just regression to the mean. Yes, if you take people who are currently rich and people who are currently poor, over time the poor will likely go up in income and the rich go down. Using this as a counterpoint to accusations of the rich taking all the gains is like pointing out that a wealthy duke could only pass his whole dukedom to one of his children, and the others would have to…

> the identities of "those who are rich" are not completely stable.

And yet, for the US at least, it's become more stable than it was.

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