Income inequality is not the problem, it's a symptom • Hacker News Board

Re: Income inequality is not the problem, it's a symptom

#221

Post by sytelus » Sun, Jan 03, 2016, 10:18 PM UTC

yummyfajitas wrote: post #218

sytelus wrote: post #174

Earlier quoted context omitted.

You are missing a big point. Sure super rich can only utilize fraction of their wealth however rest of the wealth rarely gets utilized to increase productivity of the society. The majority of investments in their portfolios (as per Piketty's carefully collected data) are actually in non-productive activities such as real estate, hedge funds, HFT, derivatives, commodity manipulation and so on. These investments manipu…

How are real estate, hedge funds or derivatives non-productive? A hedge fund or derivative investment ultimately directs productive assets towards real world uses. If the wealthy are getting high returns from this (and Picketty claim the wealthy get the highest returns), then the wealthy are better at directing real investments to their most productive use. Could you point me to the place in Picketty where he does mo…

Money invested in real estate doesn't get used to manufacture goods and services or start industry or research or education or anything good for humanity. It's "sleeping money" as far as economy is concerned. In fact, it's worse because as more and more real estate gets owned by super rich and their investment arms, it puts more pressure on middle class by having to cut higher and higher portion of their income on mortgages and lowering their lifestyle standards, savings and risk taking abilities. As per some reports, as much as 30 to 70% of super rich portfolio gets directly in to real estate investments. As they buy up premium estates in major cities around the world, supply gets constrained, more people gets priced out of home ownership and must agree to pay ever increasing rents to those investors. It should be bewildering to anyone that this situation exists even though population hasn't been increasing much in western countries. This is known as "economic rent" (look up the term in Wikipedia) where investor strives to create a setup that passively generates income ad infinity without contributing to society. It's essentially creating generational entitlement system whereby suddenly usual economics like "you get what you worked for" no longer applies. The real estate has been primary tool for centuries to add phenomenal gains in to most of the super rich wealth and Piketty's data shows that it is the primary reason why wealthy are acquiring more wealth at rate much higher than overall GDP increase. It's hard for most people to see this because many times they are home owners benefiting from this while in reality they are not and also because they don't realize that real estate is basic human necessity just like air and water. No one wants Chinese billionaires or entities like Blackrock to buy up all of the water supply, inflate its price and then ration it to people with bidding wars. So the assertion that as super rich gets more richer, they benefit society by starting industries is pretty misguided. So far the data shows that this kind of productive investment has much lower returns than non-productive investments because of higher risk factors. So if rich were doing only doing productive investments, they would not be able to acquire more wealth at current pace.

Re: Income inequality is not the problem, it's a symptom

#222

Post by puredemo » Sun, Jan 03, 2016, 10:22 PM UTC

ZeroGravitas wrote: post #219

losvedir wrote: post #151

Earlier quoted context omitted.

> the owners (or share holders) would not be multi-billionaires, only single-digit millionaires at most. Mmmm, I don't think your numbers add up... There are 500 people in the US who have more than a billion dollars. If we made them all "single digit millionaires", we'd be looking at a one time wealth transfer of less than a $1T dollars, or about 25% of the US Federal Budget for one year. Sure, that would make for a…

I liked how you undermined your own argument. If we truly are back where we started then we just do it again, and continue with the money being given to people who then spend it.

How do you remove billions in net worth more than once? It doesn't exist the second time.

Re: Income inequality is not the problem, it's a symptom

#223

Post by sytelus » Sun, Jan 03, 2016, 10:53 PM UTC

vixen99 wrote: post #184

sytelus wrote: post #177

Earlier quoted context omitted.

If you truely believe in property rights, you will get in big trouble from philosophical point of view. For example, if you live in US then very likely you will need to surrender your property to last know Native Amarican owner :). In Saudi Arabia, the ancestors of Saud family declared entire country as their private property. The result was that when oil was found there in 1930s, about 2/3 of the income was used by…

But you choose to ignore the other extreme. I mean that of 100% abolition of property rights, i.e., a recipe for anarchy. Of course you can truly believe in property rights when they are set according to an evolved legal constitution. That's how human beings work to form a better society. There is no such thing as 'trouble from a philosophical point of view' unless one thinks that the space between ALL and NOTHING is…

I'm not against property right at all. I was just making logical argument to poke holes to show that something is at miss in asserting in its puritanical form. The property rights are generational because of ability to transfer those rights. This immediately establishes generational lock down if resources are limited while keeping less fortunate out. This applies to resources such as real estate and political power however not to resources that are unlimited such as creativity and innovation. A large number of people currently live in poverty because there is simply no way for them to acquire education, nourishment or healthcare because they couldn't chose their parents correctly. This doesn't necessarily imply re-distribution of wealth or socialization programs or welfare state or guaranteed basic income or even charities as the solution. In fact, they are almost certainly not the solution. I think we do not yet have correct model for economic rights and rewards established for modern human society. It is also likely that purely economic solution does not even exist given the innate human nature. In that case, the technology might be our only savior where by one day we can have virtually unlimited energy source and robotic savants to create age of abundance.

Re: Income inequality is not the problem, it's a symptom

#224

Post by rubyfan » Sun, Jan 03, 2016, 11:18 PM UTC

Spooky23 wrote: post #97

rubyfan wrote: post #45

Earlier quoted context omitted.

Clearly the parent does not believe in property rights when they believe unskilled non-differentiated labor should be rewarded with above market rates by force and at the expense of Walmart's shareholders. That individuals believe government should be directed at investors who risk their property to create wealth in order to take by force that property to redistribute it is perhaps the most offensive sentiment. > The…

Let them eat cake! (The concept didn't work out so well for Marie Antoinette) If a revolution comes and you find yourself thrown up against a wall somewhere, remember your comment this evening.

Not quite the same sentiment and you have mis-attributed the quote.

If a violent revolution comes, I'd be thinking more about those pervasive comments touting a belief that theft of private property is somehow justified. I'd suspect those making such comments would be a little more regretful to see their rhetoric fulfilled.

Re: Income inequality is not the problem, it's a symptom

#225

Post by rubyfan » Sun, Jan 03, 2016, 11:19 PM UTC

paulddraper wrote: post #206

Spooky23 wrote: post #97

Earlier quoted context omitted.

Let them eat cake! (The concept didn't work out so well for Marie Antoinette) If a revolution comes and you find yourself thrown up against a wall somewhere, remember your comment this evening.

A Revolutionary Tribunal, powered by HN/Reddit/Twitter. Truly terrifying.

The wet noodle revolt!

Re: Income inequality is not the problem, it's a symptom

#226

Post by danieltillett » Sun, Jan 03, 2016, 11:37 PM UTC

tempestn wrote: post #183

danieltillett wrote: post #170

Earlier quoted context omitted.

As a non-member of the ultra rich all I can do is look in on the peeks they give us via the media. I am willing to admit that it is possible that they are exactly like you and me, but they certainly don't appear to be. In regards concrete claims the ultra rich appear to far more to the economic right than the average person. I am sure you are aware of this.

> In regards concrete claims the ultra rich appear to far more to the economic right than the average person. Are you sure that's true? It may be, but there are certainly plenty of counter-examples. Gates and Buffett immediately come to mind, as well as presumably many of the people on this page: http://givingpledge.org/

I am not to sure how to the left Gates and Buffett actually are, but they are really good examples of ultra rich with the perspective of the upper middle classes. Unlike the hereditary ultra rich, they are self-made men who grew up in upper middle class families. The fact that they want to give away their wealth rather than pass it on to their children is a sign they recognise the morally corrosive nature of inherited wealth.

If I were asked I would be keen to lower taxes on incomes and raise taxes on inheritances. We really don’t need a self-perpetuating parasitic overclass.

Re: Income inequality is not the problem, it's a symptom

#227

Post by yummyfajitas » Mon, Jan 04, 2016, 1:29 AM UTC

sytelus wrote: post #221

yummyfajitas wrote: post #218

Earlier quoted context omitted.

How are real estate, hedge funds or derivatives non-productive? A hedge fund or derivative investment ultimately directs productive assets towards real world uses. If the wealthy are getting high returns from this (and Picketty claim the wealthy get the highest returns), then the wealthy are better at directing real investments to their most productive use. Could you point me to the place in Picketty where he does mo…

Money invested in real estate doesn't get used to manufacture goods and services or start industry or research or education or anything good for humanity. It's "sleeping money" as far as economy is concerned. In fact, it's worse because as more and more real estate gets owned by super rich and their investment arms, it puts more pressure on middle class by having to cut higher and higher portion of their income on mo…

You seem to believe the rich have the ability to somehow buy up all the supply of some good (land, water) and then arbitrarily raise the price.

As they buy up premium estates in major cities around the world, supply gets constrained, more people gets priced out of home ownership and must agree to pay ever increasing rents to those investors.

You are deeply confused. Buying up housing does not reduce the supply of living space; similarly, a rich person investing in a copper mine does not reduce the supply of copper. If the rich person makes improvements (e.g., buying land and building flats on it, buying a copper mine and expanding it) then they increase the supply.

Again, where in Piketty's book do you believe he shows that the rich buy up and artificially limit the supply of a scarce resource? Please cite a page #.

Re: Income inequality is not the problem, it's a symptom

#228

Post by yummyfajitas » Mon, Jan 04, 2016, 2:28 AM UTC

danieltillett wrote: post #170

yummyfajitas wrote: post #158

Earlier quoted context omitted.

In what way is it different? You keep asserting this without making any concrete claims.

As a non-member of the ultra rich all I can do is look in on the peeks they give us via the media. I am willing to admit that it is possible that they are exactly like you and me, but they certainly don't appear to be. In regards concrete claims the ultra rich appear to far more to the economic right than the average person. I am sure you are aware of this.

Lots of groups are far to the economic right of the average person. For example, this is probably true of people who subscribe to Scott Sumner's blog.

Is it therefore reasonable to say "I think the lives of people who read Scott Sumner's blog are fundamentally different to the average middle income person in the same way that royalty lives a different life to a commoner"? If not, why not?

Re: Income inequality is not the problem, it's a symptom

#229

Post by danieltillett » Mon, Jan 04, 2016, 4:49 AM UTC

yummyfajitas wrote: post #228

danieltillett wrote: post #170

Earlier quoted context omitted.

As a non-member of the ultra rich all I can do is look in on the peeks they give us via the media. I am willing to admit that it is possible that they are exactly like you and me, but they certainly don't appear to be. In regards concrete claims the ultra rich appear to far more to the economic right than the average person. I am sure you are aware of this.

Lots of groups are far to the economic right of the average person. For example, this is probably true of people who subscribe to Scott Sumner's blog. Is it therefore reasonable to say "I think the lives of people who read Scott Sumner's blog are fundamentally different to the average middle income person in the same way that royalty lives a different life to a commoner"? If not, why not?

I know you are a smart guy yummyfaijitas so I think I don’t need to point out the fallacy in this argument.

The ultra rich live a life that is very different to the rest of us. This is an interesting article on their views [1].

1. http://articles.latimes.com/2013/mar/22/opinion/la-oe-page-w...

Re: Income inequality is not the problem, it's a symptom

#230

Post by sytelus » Mon, Jan 04, 2016, 5:06 AM UTC

yummyfajitas wrote: post #227

sytelus wrote: post #221

Earlier quoted context omitted.

Money invested in real estate doesn't get used to manufacture goods and services or start industry or research or education or anything good for humanity. It's "sleeping money" as far as economy is concerned. In fact, it's worse because as more and more real estate gets owned by super rich and their investment arms, it puts more pressure on middle class by having to cut higher and higher portion of their income on mo…

You seem to believe the rich have the ability to somehow buy up all the supply of some good (land, water) and then arbitrarily raise the price. As they buy up premium estates in major cities around the world, supply gets constrained, more people gets priced out of home ownership and must agree to pay ever increasing rents to those investors. You are deeply confused. Buying up housing does not reduce the supply of liv…

When there are 100 houses and 100 buyers in market, demand and supply is met and likelihood that transactions will yield fair prices is high. When investors from China and Wall Street descend on markets, you suddenly have 200 buyers and only 100 houses in market. If you live in a major city in western world, go meet the real estate agent nearest to you. Ask them how many bidding wars happen and how many deals are all cash. Most all-cash deals are almost always investor purchase. This is the reason (along with local laws on new construction) why we have housing inflated by massive 10% a year even though population gain is all but negligible. The result is that typical family now pays huge chunk of their income in highly inflated mortgage payment which is nothing but wealth transfer from them to super rich who hogged up critical resource in the hope to increase their investment return.

As per Piketty's book, read this paper which has analysis on where major capital gains for rich come from: http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf.