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How the Rich Got Rich

inc.com

91–100 of 121 posts

Re: How the Rich Got Rich

#91
post #77

Here's the IRS pub that's the basis for the article: The 400 Individual Income Tax Returns Reporting the Largest Adjusted Gross Incomes Each Year, 1992-2009 http://www.irs.gov/pub/irs-soi/09intop400.pdf The Tax Foundations take ( http://taxfoundation.org/article/fortunate-400 ) is a little different. Interesting that in the 18 years that the report covers none of the taxpayers were on the top 400 list for all years.…

Good point.

There is a similar report by Harrison Group which surveyed 3,000 pentamillionaires ($5 million net worth) and found that almost all pentamillionaires made their fortunes in a big lump sum after a period of years.

http://finance.yahoo.com/news/pf_article_103017.html

Re: How the Rich Got Rich

#92

Given that the tax structure massively prefers capital gains to other forms of income, it is unreliable to look at the reported tax percentages as a measure of where the money is actually coming from. For example, many of the uber-rich structure payments for their labor such that they are taxed as capital gains.

Exactly, the article is ignoring any sort of cause and effect for why the numbers are the way they are. If the US changed tax policy to favor other types of income, how the rich divide their income would change to fit.

Re: How the Rich Got Rich

#93
post #39

Earlier quoted context omitted.

"to drive down the price of capital?" But that's exactly what we do see. Interest rates are absurdly low. Interest rates are the price of capital. The fact that you can select a sample of outliers who won big on risky investments doesn't change the overall statistical situation. Most capital is still getting low returns.

Interest rates are the price of capital I think that's inaccurate. The price of the capital is its cost of opportunity. Interest rates are the price of debt.

Interest rate (ideally) = rate of inflation + the risk involved + cost of opportunity.

Re: How the Rich Got Rich

#94
post #67

Earlier quoted context omitted.

Being pro property, primarily in the form of land, in the US is linked to virtue. A republic eventually is founded on the virtue of its citizens, not laws or paper. So property owners, as steak holders in society, are thought to be better behaved. Yeoman farmers are independent and self sufficient which makes them less likely to be manipulated into abusing power. Moving towards a manufacturing/finance society changed…

Being pro property, primarily in the form of land, in the US is linked to virtue. The US is a post-apocalpytic nation. Literally. The indigenous people and cultures were so badly wiped out by a variety of factors (some with European fault, some without) as to leave a sense of an untamed wilderness (actually, there were probably advanced agrarian societies over every inch of the US at one time) and an abundance of lan…

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Re: How the Rich Got Rich

#95
post #86

Earlier quoted context omitted.

It could have something to do with what we mean by "value". Apparently Marx derived his thinking from an assumption that value of something is more or less proportional to the amount of labor put into producing it [1]. What he missed is that if you're putting labor into making something nobody wants (the classic example being toothless combs for bald men), you are not only failing to producing any value, you're argua…

> What he missed is that if you're putting labor into making something nobody wants (the classic example being toothless combs for bald men), you are not only failing to producing any value, you're arguably reducing the overall wealth present in the market. The labor theory is no longer a part of mainstream economics, replaced by marginal theory [2], but I suppose many people still imagine value of things as equal to…

I just read the article you linked. It's full of utter nonsense; it is not serious economics. One example: it talks at length about how there are different forms of value, namely individual value (which any normal economist would call production cost), and social value (the actual amount the commodity sells for). It then goes on to say, "there are two basic forces that govern the way individual values become social values" [emphasis mine]: (A) average productivity, and (B) interaction of supply and demand. The first is described mostly correctly. When describing the second, the article says, "We only learn how much labor society has put into widget making when we enter the market and compare the products of our labor with the rest of society." Okay, but that is not the only thing we learn from the market price. We also learn whether the society needs our commodity at all. Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all.

But here is where the article is most clearly wrong:

> But most important to the MudPie theory, demand doesn’t create the social value of a commodity. It only helps determine if labor has been apportioned to the right tasks. Labor is creating the value

First, the article is contradicting itself. It reduces everything to "labor is creating the value" -- if that were the case, why mention "governing" force (B) above at all? Also note, which value are we now talking about? Individual or social? (I assume the latter). Second, it conveniently presents the MudPie argument as "belief that demand is creating value". No, that is not what the MudPie argument says at all. It is the recognition of demand (which is an intellectual process) that is creating value, and that value can be (although not always is) wholly separate from the labor cost (or the "individual value").

Consider the following example. I buy a used or antique piece of furniture from someone who used to own it and who now believes the piece is quite useless since it is old. In addition, the owner does not mind selling me the piece at a low price since he had got out from the 20 years of using it all the "value" he believed he could get out of it. On inspecting the piece, I determine that the piece was made by a known designer. I resell the piece for ten times the amount I paid for it, and for three times its retail purchase price when it was new. Where is the labor here (ignoring transportation cost)? The answer is that the "labor" here is in me recognizing the potential value of the piece either from the appearance or through matching the label through a catalog (about 5 minutes of work). Now exactly the same process will occur when a reseller of a commodity finds a more profitable way to sell it. The reseller is creating value.

TL;DR There is also intellectual labor involved after the item is made but before it is sold, ignored by Marx entirely and purposefully.

Re: How the Rich Got Rich

#96
post #7

The Rockefeller quote is interesting "If your only goal is to become rich, you'll never achieve it." But I've always felt Citizen Kane's was more accurate: "It's easy to make a lot of money, if that's all you want to do is make a lot of money."

I always thought that what Rockefeller meant was that you need love something else and the money will come from hard work at that. Loving money itself won't bring you it.

Re: How the Rich Got Rich

#97
post #86

Earlier quoted context omitted.

> What he missed is that if you're putting labor into making something nobody wants (the classic example being toothless combs for bald men), you are not only failing to producing any value, you're arguably reducing the overall wealth present in the market. The labor theory is no longer a part of mainstream economics, replaced by marginal theory [2], but I suppose many people still imagine value of things as equal to…

I just read the article you linked. It's full of utter nonsense; it is not serious economics. One example: it talks at length about how there are different forms of value, namely individual value (which any normal economist would call production cost), and social value (the actual amount the commodity sells for). It then goes on to say, "there are two basic forces that govern the way individual values become social v…

> Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all.

Seriously? Again? My goodness. Listen, we have already established you are the kind of person that goes around pretending to discredit an entire branch of economics without having the slightest clue about what that branch even claims to say. Fine. But repeating the same nonsense after being told that it is nonsense is just too much. The entire freaking idea revolves around how individual labor which under capitalism is done by private initiative is converted to social labor, which is through market mechanics accepted as socially necessary. Of course that whether or not that labor was in fact desired, has some value for society, is a factor, and that is a fundamental aspect of the LTV. The Wikipedia article explains this, the article I linked to explains it, I explained earlier that value under the LTV is realized at the point of sale, ie, when someone actually goes through and establishes the usefulness of the labor invested by exchanging something (usually money) for it.

The rest of your post conflates price with value, which are different things according to Marxian thought, so again it is pretty useless as far as "debunking Marx" goes. Again, this is even explained in the Wikipedia article you linked to but that obviously haven't read.

Now, do you want to believe the LTV and everything Marx wrote is wrong without having any actual idea of what that is? That's cool. Just don't try to have a conversation with someone that has bothered to read it and think you can get away with it.

Re: How the Rich Got Rich

#98
post #76
post #37

Earlier quoted context omitted.

No, he is saying that $1B in wealth (about 400 people) generates $77m (threshold to make list of highest earners) in income assuming a 7.7% rate of return (which seems unrealistically high to me).

Actually, I'm saying that if the 200+ Americans with >$2 billion in wealth consistently generated more than 4% return on capital, then at least 50% of the top 400 earners should stay relatively the same year after year (since those with >$2 billion usually stay billionaires). The fact that only 27% have appeared more than once suggests that those with more than $2 billion in net worth are reporting returns less than…

Appreciating assets don't count as income. They very well may be minimizing income while still maintaining growth. When they sell those assets, they make the list.

Re: How the Rich Got Rich

#99
post #97

Earlier quoted context omitted.

I just read the article you linked. It's full of utter nonsense; it is not serious economics. One example: it talks at length about how there are different forms of value, namely individual value (which any normal economist would call production cost), and social value (the actual amount the commodity sells for). It then goes on to say, "there are two basic forces that govern the way individual values become social v…

> Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all. Seriously? Again? My goodness. Listen, we have already established you are the kind of person that goes around pretending to discredit an entire branch of economics without having the slightest clue about what that branc…

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Re: How the Rich Got Rich

#100
post #97

Earlier quoted context omitted.

I just read the article you linked. It's full of utter nonsense; it is not serious economics. One example: it talks at length about how there are different forms of value, namely individual value (which any normal economist would call production cost), and social value (the actual amount the commodity sells for). It then goes on to say, "there are two basic forces that govern the way individual values become social v…

> Since the article talks about "social value" it almost implies that our commodity will always have some value to the society (it's called "social" after all), but that is often not the case at all. Seriously? Again? My goodness. Listen, we have already established you are the kind of person that goes around pretending to discredit an entire branch of economics without having the slightest clue about what that branc…

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