Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

TED and inequality: The real story

tedchris.posterous.com

Post reply on HN
Print view View original

141–150 of 202 posts

Re: TED and inequality: The real story

#141

Post by michael_fine »

Androsynth wrote: post #137
WalterBright wrote: post #135

Earlier quoted context omitted.

His talk makes the mistake that spending money is what drives the economy. This is a fundamental error. What drives the economy is people creating value. When people have created value, they can exchange that value for things they want from other people who have created value. Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it t…

Thats a good point. Wouldn't the logical conclusion to that point be that it is a mistake to think that a businesses purpose is to create jobs (as opposed to value)?

Yes. Fundamentally, the goal of a business is to create value, in the form of lower prices or better services.

The reason there is so much political emphasis on job creation is that the unemployed are a small but vocal minority, who's political decisions may rest almost entirely on job growth. Whereas value benefits a lot of people in a small way, but value alone probably will not be enough to sway someone's voting decision.

Re: TED and inequality: The real story

#142

Post by ktizo »

Gormo wrote: post #115
thaumaturgy wrote: post #98

Earlier quoted context omitted.

Gee, I was hoping to just take the time to transcribe the video and add a couple of comments here and there without having to defend its content. The necessity of demand is the 'elephant in the room' because so much of the political argument so far has revolved around increasing benefits for the suppliers, rather than increasing demand. The argument has been, "we're supposed to make the wealthy wealthier, and then --…

'Increasing demand' is itself a supplier-directed activity; it's one of the primary functions of marketing. It seems baffling to consider this from a political/macroeconomic perspective; how would you increase demand but through marketing activity, without your methods becoming coercive or oppressive? > If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher…

Some quick pie based economics.

Marketing only increases the amount of pie you get when compared to no marketing at all, it doesn't increase the amount of pie available to get however. The problem is not in grabbing more pie than everyone else, the problem is a shortage of pie being made available because certain people collect pies as a hobby and they are doing rather well these days and have fantastic new methods to collect and store pies, so leaving less pie around for everybody else.

Re: TED and inequality: The real story

#143

Post by liber8 »

Androsynth wrote: post #137
WalterBright wrote: post #135

Earlier quoted context omitted.

His talk makes the mistake that spending money is what drives the economy. This is a fundamental error. What drives the economy is people creating value. When people have created value, they can exchange that value for things they want from other people who have created value. Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it t…

Thats a good point. Wouldn't the logical conclusion to that point be that it is a mistake to think that a businesses purpose is to create jobs (as opposed to value)?

(Not trying to be snarky) Who ever said (or honestly believed) that the purpose of a business is to create jobs?

Re: TED and inequality: The real story

#144

Post by hristov »

Here is a wonderful little quote from the article:

"Also, for the record, we have never sought advice from any of our advertisers on what we carry editorially. To anyone who knows how TED operates, or who has observed the noncommercial look and feel of the website, the notion that we would is laughable."

For anybody that knows how to read press releases, this speaks volumes. It is indignant and righteous and yet at the same time it clearly leaves a loophole one can use to back out of the statement at a later date. Hint: one does not always have to seek advise to receive it. Sometimes the "advice" just comes to you.

Re: TED and inequality: The real story

#145

Post by JumpCrisscross »

gchpaco wrote: post #128
JumpCrisscross wrote: post #126

Earlier quoted context omitted.

The logical flaw is equating consumer demand with aggregate demand. There are other economies, e.g. Germany (industrial economy) and China (state economy, albeit transitioning), that aren't as reliant on consumer demand as America (consumer economy). His entire argument flows from this assumption.

Funny you cite Germany as not as reliant on consumer demand; one of the things that keeps being cited as hurting Germany right now is that the rest of the Eurozone is its major customers, and they can't afford German goods on account of depression.

I didn't say not reliant - I said not as reliant. At 57% of GDP, Germany's economy is still very reliant on consumption compared to, say, China at 35% [1]. Note that many government expenditures, e.g. Medicare, are counted as consumer spending.

The speaker's argument revolves around inequality, by leading to lower consumption by the lower classes, making an economy unsustainable. This assumes domestic lower class consumption is the driving force behind GDP, which further assumes a diminishing consumption function (consumption as a function of household income). The consumption function is, in fact, quite linear [2]. The speaker also ignores investment, public sector spending, industrial investment (firms buying from other firms), and export industries.

Thus, the notion of consumers being the only pillar of economic activity and by proxy job creation is faulty.

A better argument would be wealth concentration compromises meritocracy and the social trust that binds society together. This isn't a new argument. So the speaker elevates novelty over accuracy in pursuit of a perception of profundity, fallacy be damned.

[1] http://data.worldbank.org/indicator/NE.CON.PETC.ZS?order=wba... (2010 countries ranked by consumption/GDP)

[2] http://wps.aw.com/aw_miller_econtoday_12/0,7965,904285-,00.h...

Re: TED and inequality: The real story

#147

Post by utunga »

WalterBright wrote: post #135
thaumaturgy wrote: post #75

I watched the video after reading TED's response, and I'm skeptical of some of their claims, but I can also see why they didn't initially choose to publish it on their site. The video is at http://www.youtube.com/watch?v=bBx2Y5HhplI Since it's short, I'll go over it point-by-point. 1. "It is astounding how significantly one idea can shape a society and its policies. Consider this one: if taxes on the rich go up, job…

His talk makes the mistake that spending money is what drives the economy. This is a fundamental error. What drives the economy is people creating value. When people have created value, they can exchange that value for things they want from other people who have created value. Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it t…

I don't think its fair to describe that as a fundamental error. Rather, your explanation while OK as far as it goes is overly simplistic. Yes, its the real value not the currency that we are after, but you also have to take into account secondary effects like 'aggregate demand'. Perhaps that's an ideological bent of yours or perhaps just omission?

Either way, the process of creating 'real value' on both sides cannot get started in some cases because neither A nor B has any confidence (or capital to support their confidence) that the other side will have the currency to buy the real value they intend to create.

Sure, the currency itself just goes around in circles, and only acts as a catalyst to creation of the 'real value' we are after. But by injecting actual currency to one side or the other (through tax cuts or other means) we increase the aggregate demand and thus amount of flow of this currency in the economy as a whole. This could then (hopefully) increase the confidence of A and B that the other will buy their real value and thus is a way to restart the circular flows of productivity that ultimately creates jobs (and real value).

His talk sort of just assumes you are aware of all the above. His actual point is that by giving tax cuts to the wealthy instead of workers a greater percentage of the stimulus / tax cut stays in bank accounts and thus the effect on aggregate demand is less.

Re: TED and inequality: The real story

#148

Post by alttag »

liber8 wrote: post #143
Androsynth wrote: post #137

Earlier quoted context omitted.

Thats a good point. Wouldn't the logical conclusion to that point be that it is a mistake to think that a businesses purpose is to create jobs (as opposed to value)?

(Not trying to be snarky) Who ever said (or honestly believed) that the purpose of a business is to create jobs?

I've heard it said by several politicians in political speeches. (Not to start a partisan battle, but it my recollection, they were primarily U.S.-ian Democrats.) It's typically couched as a social responsibility to hire, or a responsibility to hire locally rather than outsource/offshore.

Re: TED and inequality: The real story

#149

Post by einhverfr »

thaumaturgy wrote: post #75

I watched the video after reading TED's response, and I'm skeptical of some of their claims, but I can also see why they didn't initially choose to publish it on their site. The video is at http://www.youtube.com/watch?v=bBx2Y5HhplI Since it's short, I'll go over it point-by-point. 1. "It is astounding how significantly one idea can shape a society and its policies. Consider this one: if taxes on the rich go up, job…

I was watching Steve Keene's talks on what's wrong with Neoclassical Economics (one: http://www.youtube.com/watch?v=XZKjQtrgdVY) as he shows why economists get all this wrong. Its strange to me that economists make assumptions tat each marginal dollar gets spent the same way regardless of who it is given to....

Re: TED and inequality: The real story

#150

Post by ealloc »

WalterBright wrote: post #135
thaumaturgy wrote: post #75

I watched the video after reading TED's response, and I'm skeptical of some of their claims, but I can also see why they didn't initially choose to publish it on their site. The video is at http://www.youtube.com/watch?v=bBx2Y5HhplI Since it's short, I'll go over it point-by-point. 1. "It is astounding how significantly one idea can shape a society and its policies. Consider this one: if taxes on the rich go up, job…

His talk makes the mistake that spending money is what drives the economy. This is a fundamental error. What drives the economy is people creating value. When people have created value, they can exchange that value for things they want from other people who have created value. Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it t…

> Simply handing people money to spend is not stimulative because it does not create value. Put another way, taking money from A and giving it to B so B can buy things from A does not (and cannot) make A wealthier.

Sure they can, according to some models.

Here's the argument: Say A and B produce goods for each other, and so A might buy something from B for $5, and B might come back and buy something from A with the same $5. They are happily creating value, trading back and forth. Now, say something scares A so that he wants to save some of his money instead of spend. Then B is getting less income from A, and so she also becomes worried about her future income and spends less. Then A gets even less money, and is even less willing to spend. As you can see there is a feedback cycle where A and B produce (and spend) less and less. This is a recession.

Now give B some money, possibly even taken from A. Now B is getting a more reliable income, an is more willing to spend on A, who thus earns more and becomes more willing to spend on B, and so on in positive feedback.

This is basically Krugman's "Babysitting Co-op" scenario.

Post reply on HN