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Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

niskanencenter.org

31–40 of 102 posts

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#31

> At the same time that the major factors expanding the economic pie were losing momentum, other powerful forces emerged that would push toward dividing the pie more unequally The framing of the issue influences what conclusions one draws. Here, the authors think of the economy as a "pie" created by "factors" that gets "divided up". What naturally follows is that if some get a bigger "slice" than others, it is inhere…

I am not sure if the story of "creating" wealth is correct. When I look at people like Bezos or Gates I am not sure they created as much as they were able to gain a larger share of a market. I think without them we would have been fine and other players would have been in the market. So I think to some degree they took wealth from others. I also don't believe that the top 1% (or pick another number) are creating more…

> are creating more wealth than they did 50 years ago

But they are - this is due to the huge productivity gains brought about by the application of computers.

For a small example, in the 1960's and 70s, my dad was writing a book, using a typewriter. Every set of revisions meant typing the book over again (to get a clean manuscript). My mom helped out, spending hours and hours banging out a new manuscript. I still feel bad for her doing that boring, numbing work, but that's how things were in those days.

In the 90s, my dad used a text editor to make revisions and just pushed a button to print out a clean manuscript.

Not only that, his computer was cheaper than his old typewriter was. Despite it being cheaper, the computer company got rich off of this. It also took my dad far, far less time to create a new book. It didn't sell well, but the computer company hardly stole their wealth from my dad.

P.S. The typewriter was also a big productivity gain over what went before - laboriously drawing each letter by hand. Companies made a lot of money selling typewriters, and that was wealth they created.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#32

Earlier quoted context omitted.

Bob starts with 11 units of utility. Fred starts with 2. It costs 1 unit of utility to exist. Each of Bob and Fred invest their remaining utility in the utility market, which grows at 10% per year regardless of what either of them do. 25 years later, Bob has 109 units of utility, and Fred has roughly 12 units of utility. At the beginning of this thought experiment, Bob had 5.5x the utility units of Fred. At the end,…

But this thought experiment has no connection to what causes most people to make more money than others. That's that they get jobs that pay different amounts of money. There is no guaranteed 10% per year investment. The most significant structural factor that creates wealth inequality is personal conduct and talent, and the second is that some people have crappy parents. Third is location. None of it is society [1],…

Or they come from wealth. It does not require a massive inheritance to get ahead here - it requires enough to be exposed to the market, which most Americans don’t get.

The 10% above is to make this example clear and easy, not a specific asset class.

We can discuss to what extent people receive opportunities to gain significant personal income, but I strongly disagree that personal conduct and talent are the primary factor. The number one rule of the world is “people respond to incentives” - there are massive structural deltas in incentive landscape and opportunity exposure as a function of background. You can have amazing parents who do right by you, and grow up poor and stay poor for want of exposure to opportunities and the market.

Because year-over-year growth is runaway, time in the market is of extreme importance too. In a very real sense - every second you don’t have more assets in the market than the next person, they are pulling away from you in literally exponential manner.

A huge amount of it is society, and there’s a lot of light between “let’s try to make society better by preventing the gravity-like accumulation of capital entirely into a modern feudalist state” and “communist slavery”.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#33

Earlier quoted context omitted.

This is lazy libertarianism at its worst. > But a free market economy is not a pie. Of course it is. Wealth is exclusionary control over finite resources, and coercive control over others (particularly their labor). My ownership of my car literally means the right to exclude others from the usage of it. > Bob creating more wealth than Fred does not mean that Bob took it from Fred. Yes it does. Property law violently…

> ask any open source developer about this I am a full time open source developer, and wealth is created.

You are mistaken. Goods and services are created, and then control over them is allocated via property law.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#34
post #19

Earlier quoted context omitted.

Consider rock musicians. Suppose there were two concerts, one playing a Beatles song with the Beatles performing it (yes I know two of them are gone). Another venue is playing the same songs, just as well, but by a cover band. Which concert is going to make boatloads of money, and which will barely be able to pay the electric bill? Copyright has nothing to do with it.

You'd be surprised how lucrative tribute bands can be. Some draw better than surviving members of the group they're covering.

> surprised

Not really. The surviving members may be too lazy, incompetent or drug addicted to put on a good show.

But I can't see a Stevie Nicks or Amy Winehouse imitator doing that well :-) Their magic is pretty safe.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#35
post #13

Earlier quoted context omitted.

Consider rock musicians. Suppose there were two concerts, one playing a Beatles song with the Beatles performing it (yes I know two of them are gone). Another venue is playing the same songs, just as well, but by a cover band. Which concert is going to make boatloads of money, and which will barely be able to pay the electric bill? Copyright has nothing to do with it.

What if there were two albums, entitled "Beatles Greatest Hits" and "Best of the Beatles" and the former is a compilation album and the latter is a solo album by former Beatles drummer, Pete Best. If a fan buys the second without realizing it is not a compilation album, should the Beatles not be able to defend their name being used to sell it? Or profit off of it?

Think of it like open source software, and the answer will be clear.

I.e. anyone can take the open source software I create and do whatever the hell they want with it. (I use the Boost license, which is the most permissive.) I encourage you to, too, if you want to profit from my work :-)

I don't think there's anything special about musicians that makes them different from open source developers.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#36

> At the same time that the major factors expanding the economic pie were losing momentum, other powerful forces emerged that would push toward dividing the pie more unequally The framing of the issue influences what conclusions one draws. Here, the authors think of the economy as a "pie" created by "factors" that gets "divided up". What naturally follows is that if some get a bigger "slice" than others, it is inhere…

Bob starts with 11 units of utility. Fred starts with 2. It costs 1 unit of utility to exist. Each of Bob and Fred invest their remaining utility in the utility market, which grows at 10% per year regardless of what either of them do. 25 years later, Bob has 109 units of utility, and Fred has roughly 12 units of utility. At the beginning of this thought experiment, Bob had 5.5x the utility units of Fred. At the end,…

This is inline with my reasoning. Certain circles say that the affluent are causation for capital markets operating efficiently. More specifically, that the purchasing power of the affluent are the source or "spring" from which economic activity is generated. It's just not true.

Economic activity is generated by the act of expenditure. The act is a threshold behavior relative to the an economic agent's ratio of liquid assets to fixed costs. "Hey, the rich spend a lot of the cash and pump the economy!". "Hey, conversely, the debt to income ratio of Bob will always disincentivize him against market participation!".

Back to your point. The financial system favors the wealthy because it's capitalism. Capital is power and power is influence. That influence has systemically skewed political and financial institutions to favor those with aggregations of wealth. This is also true in free enterprise markets where consolidation is a natural result of the economic cycle and economies of scale.

But, I wholeheartedly disagree with posing personal wealth inequality as a core driver of economic inequality in the US. I honestly see this as a symptom of vast market consolidation occurring since the 1950's. Bigger business structures eliminate structural redundancies in a market which can reduce costs for the consumer. But, the side effect is income hierarchies are stratified and flattened at a market level creating economic caste systems. And, being a vibrant and faithful patron of the free market system becomes a lot harder for normal guys like Bob.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#37

Earlier quoted context omitted.

Bob starts with 11 units of utility. Fred starts with 2. It costs 1 unit of utility to exist. Each of Bob and Fred invest their remaining utility in the utility market, which grows at 10% per year regardless of what either of them do. 25 years later, Bob has 109 units of utility, and Fred has roughly 12 units of utility. At the beginning of this thought experiment, Bob had 5.5x the utility units of Fred. At the end,…

But finite life expectancies effectively act as a cap on that process. In the very best case, you only have about half a century to compound wealth. Modern America is not very conducive to preserving intergenerational wealth. Of the top ten richest Americans, only one is not a first-generation billionaire. Rockefeller despite amassing an enormous fortune, equivalent to $400 billion today, does not have any heirs in t…

Rockefeller had a tax rate more than twice what today’s tax rate on the super wealthy is.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#38

> At the same time that the major factors expanding the economic pie were losing momentum, other powerful forces emerged that would push toward dividing the pie more unequally The framing of the issue influences what conclusions one draws. Here, the authors think of the economy as a "pie" created by "factors" that gets "divided up". What naturally follows is that if some get a bigger "slice" than others, it is inhere…

I am not sure if the story of "creating" wealth is correct. When I look at people like Bezos or Gates I am not sure they created as much as they were able to gain a larger share of a market. I think without them we would have been fine and other players would have been in the market. So I think to some degree they took wealth from others. I also don't believe that the top 1% (or pick another number) are creating more…

The creation of Google, for example, has added immeasurably to the wealth of the world. Ditto spreadsheets, operating systems. Thanks to Amazon, I waste a tiny fraction of the time my parents historically did shopping, since I don’t have to run to the store basically ever. I’m taking a free university course from one of the top people in the field in between bottle feedings, thanks to YouTube.

The economy is not a fixed pie, at all.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#39

Earlier quoted context omitted.

> ask any open source developer about this I am a full time open source developer, and wealth is created.

You are mistaken. Goods and services are created, and then control over them is allocated via property law.

Goods and services are created, i.e. wealth is created.

Re: Faster Growth, Fairer Growth: Policies for a High Road, High Performance Economy

#40

Earlier quoted context omitted.

You are mistaken. Goods and services are created, and then control over them is allocated via property law.

Goods and services are created, i.e. wealth is created.

Goods and services are not wealth, control over goods and services is wealth.
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