20 year study of global wealth demolishes the myth of ‘trickle-down’ • Hacker News Board

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#301

Post by cycomanic » Wed, Dec 08, 2021, 2:51 PM UTC

codegrappler wrote: post #2

I guess I’m not surprised that a bunch of folks who have made a career out of advising politicians on income inequality….discovered income inequality in their study. The two questions in my mind are: 1. Should we trust the government to spend the money more wisely than the folks who earned it? Or said another way, how do you combat the almost inevitable corruption you see with large government spending? 2. What will…

Do you seriously believe that income or wealth is strongly correlated with the amount of hours one puts in? In fact one of the clearest things shown by the pandemic is that many of the most crucial workers in society, which often put in insane ours, and without whom much of society would stop working are also the most underpaid. I can tell you nobody would notice if wall street investment bankers would stop working for a couple of months, but everyone would notice if the rubbish collectors would stop working.

Research shows that inequality is largely due to starting conditions and some luck. In fact some research shows that if we don't work against it (i.e. tell people how they spend their money) inequality just grows [1]. Also it's funny, how many say we should not take the money from the rich and "tell them how to spend the money", but at the same time are quite happy with a large buerocratic apparatus dictating every aspect of live for poor people.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#302

Post by d--b » Wed, Dec 08, 2021, 2:51 PM UTC

flavius29663 wrote: post #254

d--b wrote: post #222

The thing about trickle down is that even the water analogy is backwards! It's combining many small streams that make up the big rivers... as in: give money to the lower classes, they will consume stuff and so the money will end up in the pockets of whoever produced the goods (usually large companies -> the sea?), and there the money will flow back up as income (clouds/rain?) and that will feed the small streams over…

> the wealthy can only consume so much That is exactly the point. The wealthy cannot consume too much, so they will invest the rest. Investment means factories and jobs for the poor. The government could take the money and do the investments themselves, but that never really works well. With so many inefficiencies, the governments would slow down the economic development significantly. Communist countries had 5 year…

My point is that investement isn’t money that flows from the rich to the poor, like the trickle down analogy would suggest. Investment is meant to be recouped. It’s always about creating a bigger pie…

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#303

Post by JackFr » Wed, Dec 08, 2021, 2:52 PM UTC

romwell wrote: post #256

ImprobableTruth wrote: post #221

Earlier quoted context omitted.

I'm curious as to what you even mean by "money goes offshore" and how does that cause it to appreciate? And of course investing is good - how could you even argue against that? Businesses need funding. And yes, governments in fact do invest in both companies and private housing, I don't understand why you think this is some gotcha. It's just that on average governments tend to do worse at investing, so it's generally…

>how does that cause it to appreciate? Seems like you missed a step. The thing that appreciates is the financial product that this money buys. >I'm curious as to what you even mean by "money goes offshore" Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.

A financial product is ultimately a claim on real assets. That is their essence.

Buying stock in an IPO in a multinational corporation based in Taxhavenlandia is capitalizing a presumably enterprise which will generate a positive return. I can understand that you might be concerned about capital leaving the country rather than being invested domestically, but I'm not sure you've been advocating capital controls.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#304

Post by off_sounder » Wed, Dec 08, 2021, 2:52 PM UTC

Correct me if I'm wrong, but shouldn't we be looking at whether the people at the bottom gained more wealth, rather than what percentage of the gains they hold?

The wealthy will always have more opportunities bc of the 80/20 rule, and the fact that inequality is inherent in all animals. It is called "trickle down" after all, not "ration down."

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#305

Post by naruvimama » Wed, Dec 08, 2021, 2:52 PM UTC

socialdemocrat wrote: post #290

naruvimama wrote: post #65

Speaking from a historical perspective. The East India company/ies pretty much won much of the world for Britain & Europe. Europe was neither wealthy nor technologically more advanced than India. But the Church with its christianising mission and doctrine of christian discovery allowed the pooling of resources. Concentration of wealth is important and the wealth did trickle down to other countries of Europe. A modern…

Europe was more technologically advanced than India. I know it is popular with revisionism, because people like to explain away Western dominance as if being alone about excelling at being a bigger asshole than everybody else. Reality is that Europe conquered the world because it was economically and technologically superior to all other nations. Neither India nor China had modern science that developed in Europe in…

You need to check your facts. East-India company had nothing to sell and was spending its gold.

It was precisely because of the concentration of wealth (from Europe) and the hemorrhaging of gold that it desired conquest and taxing the locals.

Political weakness in India as against strong crown and church in Europe made conquest easy, but it did take a long time and it was mostly indirect (100s of princely states).

Industrial revolution in Britain started 4 years after they set up their trading port in Calcutta and most definitely copying Industrial knowledge.

If all they wanted was spices, they could have got that from North and West Africa, or in their new colonies in the Americas.

Populations go through ups and downs as do their wealth and power, everyone copies not just China. Nobody grows in isolation.

The idea that Europe suddenly started innovating from the dark ages and became industrial needs to be revisited. Call it revisionist all you want.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#306

Post by throwaway0a5e » Wed, Dec 08, 2021, 2:53 PM UTC

pydry wrote: post #181

throwaway0a5e wrote: post #120

Earlier quoted context omitted.

So say the doctor fronts someone money so they can invest in a business, say buying more garbage trucks for their garbage truck fleet or something. Surely the return on that is earned income? Throwing the money at your preferred wall street instrument of choice is the same thing but with half a million layers of abstraction and redirection all of which involve middle men who either take cuts or otherwise get paid for…

>Surely the return on that is earned income? No. Why would it be? Those layers of abstraction cut out the risk such that in many cases cash is the riskier instrument.

>No. Why would it be?

Because the doctor had to evaluate the investment opportunity and risk what they invested.

>Those layers of abstraction cut out the risk

And that's why you only make pennies on the dollar doing it that way vs the risky way of picking specific things with high growth potential to invest in.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#307

Post by xondono » Wed, Dec 08, 2021, 2:53 PM UTC

romwell wrote: post #195

xondono wrote: post #166

Earlier quoted context omitted.

> give a million hungry people $20 each, and see $20M return to the economy the next day as they spend it on food. That’s not a return, the economy doesn’t work that way.

You seem to be confusing the concept of money going into and out of the economy with "return on investment".

Parent called it a return.

The “return”, or benefit of the operation can’t be properly understood without taking into account that you’ve taken that 20M$ from some people to give it to (presumably) others.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#308

Post by OneTimePetes » Wed, Dec 08, 2021, 2:53 PM UTC

SamoyedFurFluff wrote: post #168

JackFr wrote: post #149

Earlier quoted context omitted.

> as the billionaire holds on to whatever financial product they bought forever as long as it appreciates faster than inflation. Another word for that is investment. Where do you think that money goes? You don’t earn returns on money that isn’t doing anything.

> Where do you think that money goes? You don’t earn returns on money that isn’t doing anything. Yes you do? That’s what assets are.

Thats ghost towns were noone lives.Art that nobody really appreciates. Companys that produce nothing anyone can really afford. Value is artificial scarcity and the power to uphold it.

To trade a investment, is to dig a hole and sell the void.

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#309

Post by opportune » Wed, Dec 08, 2021, 2:56 PM UTC

WastingMyTime89 wrote: post #98

netcan wrote: post #52

In college, I studied Ronald Coase's famous 1920s papers. The major application ATT was infrastructure stuff. Coase's argument was that "given 0 transaction costs," it doesn't matter who owns what property or right. The market will achieve efficient solutions as firms sell each other radio spectrum or whatnot. Policy should focus on minimizing transaction costs and let the market organize itself. Circa 2005, I heard…

> In any case, the "wealth disparity" discussion is almost always badly anchored. The first thing to understand about wealth disparity is that it maps pretty much to wealth. More wealth, more wealth disparity... almost universally. Many or most people have no wealth, depending on your semantics of "wealth." Therefore, if the value/quantity of wealth rises, wealth disparity rises. I agree with you but it remains a pro…

This is not necessarily true because wealth parked in such a manner doesn’t enter the economy.

We have a general problem in that people do not consume enough to grow our economy. Now, endlessly increasing consumption sounds bad, but it’s basically required for the economy to keep growing in real terms, since it’s the main component of GDP. Most wealthy people, not even billionaires but lots of run-of-the-mill hundred-thousandaires and petit millionaires, save a lot of their money including their ROI, or at the very least spend money less quickly than they make it.

If people spent money more or said “enough” earlier in their wealth accumulation journey, asset prices would be lower and the economy would be bigger. This is good in a lot of ways because capital goods like land really ought to be inexpensive to allow the economy to grow. Same with stocks. Assuming a constant risk-free rate of return (ie treasuries) it’s actually better for equities to have a lower P/E ratio - it’s cheaper to purchase cash flow.

I think this general lack of propensity to spend, or basically hoarding, is caused by our perpetually low interest rates and also general government policy that is leading to inflated asset prices. But there is also a cultural aspect to it though. There are a lot of “middle class millionaires” these days with $10m+ fortunes who basically don’t spend it. It’s their right to do so, but it’s stifling growth for the reasons I’ve outlined

Re: 20 year study of global wealth demolishes the myth of ‘trickle-down’

#310

Post by ImprobableTruth » Wed, Dec 08, 2021, 2:57 PM UTC

romwell wrote: post #256

ImprobableTruth wrote: post #221

Earlier quoted context omitted.

I'm curious as to what you even mean by "money goes offshore" and how does that cause it to appreciate? And of course investing is good - how could you even argue against that? Businesses need funding. And yes, governments in fact do invest in both companies and private housing, I don't understand why you think this is some gotcha. It's just that on average governments tend to do worse at investing, so it's generally…

>how does that cause it to appreciate? Seems like you missed a step. The thing that appreciates is the financial product that this money buys. >I'm curious as to what you even mean by "money goes offshore" Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.

So you're just talking about buying stock/assets then? I don't know what other financial products you mean.

>Buying stock in an IPO in a multinational corporation based in Taxhavenlandia would be one example.

Even if this were the case, the only bad part would be evading taxes. To generate a profit, it still has to be an investment in a profitable venture, which increases overall economic productivity. (I also don't think there's any indication that this happens on a large scale, otherwise the stock index of any such Taxhavenlandia should show this)