Why Inequality Matters • Hacker News Board

Re: Why Inequality Matters

#291

Post by lsiebert » Thu, Oct 16, 2014, 5:55 PM UTC

Okay, I want to talk a little bit about how wealthy people would benefit in a more egalitarian society. But if we assume they are objectivist, there are some issues.

It's difficult to do so, because it's hard to say what can benefit a person who is wealthy already.

I mean I can point to data that suggests that people who earn better wages, get headstart, have libraries in their community, get a college education, etc are less likely to commit crimes, but your wealth probably means that you can afford good security.

I can say that in a more egalitarian society, vaccinations would be free, and thus you are your children are less likely to get diseases, but you have good health care, and so this isn't a huge issue.

So I guess the best way is to point out that in a more egalitarian society with free or low cost education and funding for research, general progress in the sciences would happen faster. You get better medicine, better technology, can potentially live longer. Also such an economy will grow more quickly, and while if there were more stringent taxes you may not gain as much of the pie as you could, a bigger pie would cancel that out.

Re: Why Inequality Matters

#292

Post by TeMPOraL » Thu, Oct 16, 2014, 5:55 PM UTC

yequalsx wrote: post #69

noarchy wrote: post #49

Earlier quoted context omitted.

>The problem with relying, even partially, on philanthropy to correct some of the imbalances of capitalism is that one encounters the free rider problem. Do you think that the free rider problem is corrected by state-run welfare programs? I'd be skeptical of such a claim, myself. >There is also the issue where a very wealthy person has as their philanthropic cause something which few others think is a good choice of…

Regarding your last paragraph. It's a problem if too much money is given to causes that don't really benefit society as a whole. There is also the fact that there are no instances of philanthropy ever being at a high enough amount to provide for the general welfare of all of the poor. Only government programs have ever been enough to do this. Government programs scale better than philanthropic ones. It is true that p…

Gates has an interesting take on that problem:

http://www.gatesnotes.com/About-Bill-Gates/Catalytic-Philant...

He sees philanthropy as a way to address the areas that both markets and governments miss. Markets are good at greedy[0] optimization and growth, but are full of stupid coordination problems. Governments are good at solving some of those, but suffer from some of their own both internally and at global scale. Philanthropy, being basically rich people throwing away money on stuff they think matter, can cover some additional blind spots.

[0] - "greedy" as invoking computer science connotations, not "evil capitalist" connotations.

Re: Why Inequality Matters

#293

Post by squozzer » Thu, Oct 16, 2014, 5:56 PM UTC

I think what people miss about consumption taxes - beyond its' regressive nature - is that everything in the end is a form of consumption. The distinction between capital, labor, and consumption is false - it only has meaning once you account for expected outcome.

Capital = purchases expected to generate a profit. Labor = purchases expected to generate work. It need not generate a profit necessarily - e.g. paying someone to mow your lawn. Consumption = purchases expected to generate pleasure, or avoid pain.

I'm sure the basis of these distinctions rest on some idea of social utility - that trying to turn a profit has more social utility than eating a Twinkie. Maybe we should examine that assumption also.

And consider how these notions entangle themselves in practice. A company car intended for non-personal use is considered an asset to the company, and treated as capital. But a similar car used for commuting is considered a consumption item.

Re: Why Inequality Matters

#294

Post by CharlesGust » Thu, Oct 16, 2014, 5:56 PM UTC

Bill Gates gives sound reasons for maintaining the estate tax, and I agree with the general proposition of having something like a consumption tax. But, I have a different take on the social utility of capital transfers.

Yes, what you invest in you tend to get more of. But, each capital transfer does not destroy the capital. So, if you are buying a yacht, that capital goes to the designer, the builders, the welders, the suppliers, etc. Now, the point is that these people now have their own choices to do something with the capital received. Some of it will go for food, some of it will go for BBQ grills, some of it will go for big screen TV's. And, then the people receiving that capital will make their choices ad infinitum.

(Perhaps a performance artist alighting a million dollars in cash would actually destroy capital. They are undoubtedly more examples of waste)

I guess I can still see the incentives that would be built into a tax system (as they are built into ANY tax system) to alleviate what may otherwise be burdens on government into encouraging more social utility. But, I just wanted to emphasize that it is not that luxury spending has NO social utility, it just diffuses the social utility into multiple second order spending decisions.

Re: Why Inequality Matters

#295

Post by nhaehnle » Thu, Oct 16, 2014, 5:56 PM UTC

k-mcgrady wrote: post #143

harmonicon wrote: post #121

I have a lot of respect for Bill Gates because of his philanthropic efforts. However, I am very skeptical of the consumption tax argument. To me that sounds like a sales tax and sales tax is regressive. i.e. Tax on French baguette hits the poor more than the rich, since as a group they consume way more baguette. Even if it is just a special sales tax that targets the rich only, discouraging spending by people with mo…

People seem to be having a hard time with the consumption tax argument. I may be completely wrong but here's how I interpret it: 1. Like income tax you have various 'bands' 2. The more you spend/consume they higher the band you are in 3. Lower bands pay less 4. Someone with little money buying just the essentials consumes e.g. $10,000 per year. Band 1 (a tax of say 10%) starts above $10,000 and thus this person is ex…

That's how I interpret it as well, though I don't see how one would implement this. Would we all have to start collecting all our receipts, even for private purchases? That seems like a headache...

Re: Why Inequality Matters

#296

Post by vidarh » Thu, Oct 16, 2014, 6:00 PM UTC

haberman wrote: post #268

saalweachter wrote: post #42

Earlier quoted context omitted.

The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about. People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. They're worried about maint…

> They're worried about maintaining a democratic society, where everyone gets roughly an equal say in how things go. Highly concentrated wealth is a threat to that. I agree inasmuch as it applies to government and media, but when it comes to entrepreneurship I could not disagree more. Making progress means taking some big risks. It is the nature of big risks that it's difficult to tell at the outset which ones will s…

It's easy enough to create systems that grants tax credits for investment vehicles as long as the returns are rolled over into new investments.

Many countries have preferential tax treatments for long term investment vehicles already.

But ignoring that: What is the evidence that this money is best spent by repeat entrepeneurs? Yes, there are some that do well. There's also a vast number of people that succeeds once and never again.

And consider that e.g. Tesla and SpaceX both have benefited immensely from government programs. Maybe society would be better off with wealth taxes were the proceeds were pumped into more programs like these, or even co-investment with private investors with an actual track record track record.

Re: Why Inequality Matters

#297

Post by neuromancer2701 » Thu, Oct 16, 2014, 6:01 PM UTC

forgingahead wrote: post #98

saalweachter wrote: post #42

Earlier quoted context omitted.

The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about. People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. They're worried about maint…

Currently, 436 people (Reps, Senators and President) control nearly 4 trillion dollars, the budget for this year. What should we do about them?

Three steps would improve the situation(IMO): Triple the House of Representatives Term limits(12 years both house total) Repeal the 17th Ammendment

Re: Why Inequality Matters

#298

Post by dragonwriter » Thu, Oct 16, 2014, 6:02 PM UTC

nhaehnle wrote: post #281

humanrebar wrote: post #96

Earlier quoted context omitted.

> People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. I'd go the other way in fact, if you are interested in redistributing wealth, you should encourage rich people to blow money on labor-intensive consumables. Using legal or social pressure to keep the rich from buying luxu…

I think you're right. Just FYI, the line of thought of Gates here is probably based on the idea that you need "capital" in order to have a productive work force. If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes. I personally don't buy the argument; I believe that it goes too far into abstract models, confuses finances for the real world, and…

> If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes.

Spending money doesn't make it go away, it just gives it to someone else. If everyone spent all their money for consumption, and no one invested, that would probably be a bad thing, but short of actually punishing investment compared to other uses of money, its hard to see how that would happen.

Heck, its particular hardest to see how it would happen with the rich, anyhow. Simple declining marginal utility means that past a certain point, the additional present consumption that people find useful drops off and the value of securing an adequate future support base by investing money now vs. consuming more now increases with increasing income. The idea that we need to tax-favor investment even more than we currently do by taxing only consumption (rather than taxing income, but taxing the income from investment favorably compared to "ordinary income" and particularly favorably compared to labor income) seems to be based on a conception of human behavior that has no support at all in how humans, and particularly the rich, actually use their money in the status quo system.

Re: Why Inequality Matters

#299

Post by cortesoft » Thu, Oct 16, 2014, 6:02 PM UTC

icebraining wrote: post #197

astazangasta wrote: post #166

Earlier quoted context omitted.

Don't speak for everyone. Personally I think the idea that we need wealth concentration at all is bogus. Investment is already performed by teams of skilled experts on behalf of the wealthy. We don't need individuals who simply perform the function of owning things and reaping the benefits for literally doing nothing. There are better ways we could be allocating capital. We also don't need wealth concentration to enc…

The vast majority of productive people act in the economy for modest rewards and the hope of a middle class life. Devil's advocate: the vast majority of productive people do the important everyday work, but don't perform major improvements in the state of the art. What about the inventors of life-changing technology? Would the vast majority of them invest years of their life in it if it only paid the same as getting…

I don't think the answer is a simple "No, they wouldn't invest those years of their life"

It seems in my experience that most people who invent life changing technology don't do it for the money; they do it because they like to create. Humans have an innate drive to create new things. While I think it makes sense to reward people who contribute to society, those rewards don't have to be unlimited.

Re: Why Inequality Matters

#300

Post by k-mcgrady » Thu, Oct 16, 2014, 6:03 PM UTC

nhaehnle wrote: post #295

k-mcgrady wrote: post #143

Earlier quoted context omitted.

People seem to be having a hard time with the consumption tax argument. I may be completely wrong but here's how I interpret it: 1. Like income tax you have various 'bands' 2. The more you spend/consume they higher the band you are in 3. Lower bands pay less 4. Someone with little money buying just the essentials consumes e.g. $10,000 per year. Band 1 (a tax of say 10%) starts above $10,000 and thus this person is ex…

That's how I interpret it as well, though I don't see how one would implement this. Would we all have to start collecting all our receipts, even for private purchases? That seems like a headache...

True, a system would need to be put in place. Would it be enough to just look at money going out of your bank account and report that? I guess there would be irregularities if you were sending money as a gift or to charity.