Do the Rich Capture All the Gains from Economic Growth? • Hacker News Board

Re: Do the Rich Capture All the Gains from Economic Growth?

#181

Post by TulliusCicero » Thu, Oct 25, 2018, 8:40 PM UTC

NickM wrote: post #34

TulliusCicero wrote: post #16

The whole thing he is explaining is just regression to the mean. Yes, if you take people who are currently rich and people who are currently poor, over time the poor will likely go up in income and the rich go down. Using this as a counterpoint to accusations of the rich taking all the gains is like pointing out that a wealthy duke could only pass his whole dukedom to one of his children, and the others would have to…

The whole thing he is explaining is just regression to the mean. The author directly addresses this further down in the article. Regression to the mean is a possible explanation of the numbers he cites, but it doesn't refute the main point he's making, which is that some numbers suggest poor people capture more of the gains from economic growth than is widely thought.

It's not just a possible explanation, it's the most obvious one. It's a well understood phenomenon that results in exactly what he's discussing here.

> some numbers suggest poor people capture more of the gains from economic growth than is widely thought.

Some individual poor persons will, yes. "The poor", as a class, will not.

Re: Do the Rich Capture All the Gains from Economic Growth?

#182

Post by skookumchuck » Thu, Oct 25, 2018, 8:41 PM UTC

jimbokun wrote: post #176

skookumchuck wrote: post #139

It's never been easier or cheaper for anyone to invest in the stock market and capture a share of those gains.

If you have free cash flow.

The US is not divided into two categories - 1% with everything and 99% who have nothing.

Re: Do the Rich Capture All the Gains from Economic Growth?

#183

Post by charlieflowers » Thu, Oct 25, 2018, 8:42 PM UTC

T2_t2 wrote: post #178

JimboOmega wrote: post #174

Earlier quoted context omitted.

That, to me, is what really seals it all as ridiculous. My parents had the standard of living they had with only my father working and in a fairly normal government job. That as enough to support my mom and 2 children while also saving for retirement. That standard of living now would require both parents working and being rather successful in their white collar careers. Even as a reasonably successful person in an a…

That needs a citation. If you cut out everything we have they didn't - cable TV, Netflix, computers, internet, cafes, restaurants, Kindle, better choices in grocery food and alcohol - and ate the sort of cheap food people lived on, things like meatloaf and crappy ingredient dishes, I reckon it would be entirely possible. The only thing that is prohibitively expensive today vs 1980 is housing. The reasons for that are…

Education? Tuition bubble? Healthcare?

Re: Do the Rich Capture All the Gains from Economic Growth?

#184

Post by esotericn » Thu, Oct 25, 2018, 8:44 PM UTC

jimbokun wrote: post #173

ryandrake wrote: post #106

Earlier quoted context omitted.

Exactly. I probably earn 2X what my father made, inflation adjusted, when he was my age. Buuuut, I pay 5X what he paid for housing, 20X what he paid for healthcare, ∞X what he paid in student loans, have a commute 6X longer than his, live in a house 75% the size of his (he also had two houses at my age, by the way), work 1.25X his hours and have a crappy 401k rather than a nice defined-benefit pension. Comparing just…

Shouldn't those things be factored into the "inflation adjusted" calculation? (housing, healthcare, student loans...)

Yes, they should, but they are not, and realistically cannot be.

Inflation statistics are almost useless in calculating quality of life for this reason.

They calculate an average over a population. An example of why this is silly, is that the average 40 year old both has lower personal inflation _and_ can weather inflation much more readily than the average 20 year old.

Re: Do the Rich Capture All the Gains from Economic Growth?

#185

Post by petersellers » Thu, Oct 25, 2018, 8:45 PM UTC

snikeris wrote: post #136

JustSomeNobody wrote: post #124

Earlier quoted context omitted.

Not horrifying: When your refrigerator dies and you can go buy another without blinking. Horrifying: When you misplace a $20 bill and now you can't pay your rent. It's really simple to understand.

Okay, being poor can be horrifying. But I don't see what's horrifying about the fact that some people have more wealth than others.

The fact that inequality exists is not the problem, it's the severity of the inequality that is the problem.

Take an extreme example - out of a population of 1000 people you have 1 person owning 99% of the wealth, with the other 1% distributed to the other 999. Does that seem like an efficient, properly operating economy to you?

Obviously there is some balancing needs to happen, the trick is figuring out where the fulcrum should sit for the most efficiency.

Re: Do the Rich Capture All the Gains from Economic Growth?

#186

Post by pierrebai » Thu, Oct 25, 2018, 8:45 PM UTC

Am I completely mis-reading the report? By following the same people, the report grossly states that someone's salary tend to go up with age. How revolutionary! I'm pretty sure the vast majority of people draw better salaries with teh more experienced they get. This has nothing to do with the repartition of the increase of the economy.

Re: Do the Rich Capture All the Gains from Economic Growth?

#187

Post by weberc2 » Thu, Oct 25, 2018, 8:47 PM UTC

harimau777 wrote: post #158

weberc2 wrote: post #135

Earlier quoted context omitted.

It's not really a tractable problem without concretely defining 'fair' and 'just'. It seems like you're driving toward something interesting (if only theoretical); I'd be really interested to hear from an economist.

That's a good point. I don't have much theoretical background in economics so I feel like I'm unintentionally speaking vaguely due to not knowing the correct/best terms and theories. I think the way I would define fair (and obviously this is somewhat a value judgement rather than objective fact) is that: I don't think its unjust that a CEO gets payed more than a line worker, but when the company succeeds then I think…

I guess the problem I have with terms like "justice" and "injustice" (not to pick on you specifically) is it seems to presume that poverty is the result of greed or nefarious motives when it's exclusively the result of economic inefficiency (sometimes this inefficiency is caused by greed). In failing to properly diagnose the problem, solutions come out which actually reduce market efficiency and thus perpetuate more poverty. Moreover, everyone already agrees that poverty is bad, so arguing about "injustice" instead of "optimizing the economy" seems unlikely to persuade anyone.

I'm already on board with eliminating poverty! Don't tell me "hiking the minimum wage is the right thing to do and the economics will work itself out", show me the math that says we can do it without inadvertently creating more poverty.

Re: Do the Rich Capture All the Gains from Economic Growth?

#188

Post by derekdahmer » Thu, Oct 25, 2018, 8:50 PM UTC

kwillets wrote: post #164

onlyrealcuzzo wrote: post #132

Earlier quoted context omitted.

Wait. Aren't rent, healthcare, AND education all included in the eight components of CPI? Isn't that how the government measures inflation? I think one of the big things left off is housing prices. But I'm pretty sure rent, healthcare, and education are part of it: https://www.bls.gov/cpi/factsheets/medical-care.htm http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94

Rent is not in the CPI. That's what made Shiller's work useful (comparing housing costs and CPI). Edit: Shiller was wrong (I asked him about this point after a lecture about his work on historical housing prices).

Rent is definitely included in the US CPI as "Rent of Primary Residence".

See all the weights here: https://www.bls.gov/cpi/tables/relative-importance/2017.pdf

Re: Do the Rich Capture All the Gains from Economic Growth?

#189

Post by manofstick » Thu, Oct 25, 2018, 8:52 PM UTC

maxxxxx wrote: post #143

onlyrealcuzzo wrote: post #132

Earlier quoted context omitted.

Wait. Aren't rent, healthcare, AND education all included in the eight components of CPI? Isn't that how the government measures inflation? I think one of the big things left off is housing prices. But I'm pretty sure rent, healthcare, and education are part of it: https://www.bls.gov/cpi/factsheets/medical-care.htm http://webapps.dol.gov/dolfaq/go-dol-faq.asp?faqid=94

I am not an expert but the way I have read about is that they also factor in better quality of items so even if your car costs 10000 more it's not counted as inflation because it's a better car compared to years ago and therefore has more value. I think the same is going on in health care and other areas. And excluding house prices is also a very questionable.

Yes, it's Hedonic Quality Adjustment [1]. If you follow through the example on the link, you see the negative CPI component, even though a) you can't actually buy the old version anymore - so you can't reap the "real" price benefit and b) the subjective experience ultimately for lots of these things is the same. i.e. a mid-level TV from 40 years ago probably gave the same hedonistic pleasure as one today. Arguably the older one gave more because of less other gadgets!

[1] https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...

Re: Do the Rich Capture All the Gains from Economic Growth?

#190

Post by beat » Thu, Oct 25, 2018, 8:55 PM UTC

T2_t2 wrote: post #178

JimboOmega wrote: post #174

Earlier quoted context omitted.

That, to me, is what really seals it all as ridiculous. My parents had the standard of living they had with only my father working and in a fairly normal government job. That as enough to support my mom and 2 children while also saving for retirement. That standard of living now would require both parents working and being rather successful in their white collar careers. Even as a reasonably successful person in an a…

That needs a citation. If you cut out everything we have they didn't - cable TV, Netflix, computers, internet, cafes, restaurants, Kindle, better choices in grocery food and alcohol - and ate the sort of cheap food people lived on, things like meatloaf and crappy ingredient dishes, I reckon it would be entirely possible. The only thing that is prohibitively expensive today vs 1980 is housing. The reasons for that are…

A quick look at education numbers finds that, since 1988, the cost of private four year college has doubled (in inflation-adjusted dollars), and the cost of state four year college has tripled.

Again in constant dollars, health care has seen a more than fivefold increase since 1970, from under $2000 to over $10,000 per capita. Constant dollars, mind you.

Health care and education costs are more or less fixed and unavoidable. They're more like fees than taxes, flat no matter the income.