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The Biggest Economic Divides Aren’t Regional, They’re Local

nytimes.com

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Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#41

Post by barry-cotter »

jmharvey wrote: post #37
hash872 wrote: post #26

Earlier quoted context omitted.

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

One reason the Forbes list is so dominated by self-made entrepreneurs is that it's relatively easy to verify their wealth based on public records. Jeff Bezos' net worth is, to a first approximation, the same as his stake in Amazon, which is regularly reported in SEC filings. The wealth of the Rockefellers/Morgans/Vanderbilts is less concentrated in any single company, so if they don't voluntarily disclose their finan…

Thankfully they get divorced occasionally so we can be reasonably sure that no matter how discreet they are they are not the shadowy powers that actually control the US. Divorce lawyers want as much money as possible for themselves and for their clients and they don’t care if you hold your wealth in a well balanced diversified portfolio or if it’s all in one company.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#42

Post by barry-cotter »

danharaj wrote: post #13
hash872 wrote: post #8

Earlier quoted context omitted.

Much of Piketty's work has been widely debunked, especially r > g, so I'm not sure why one would start with his thesis. Top 1% income earners are typically business founder-owners, and reams of evidence from the Forbes 400 to tax data show that the wealthiest in US society are entrepreneurs who again created their own business- not rentiers living off of inherited wealth. (Anecdotally, children of inherited wealth th…

> Much of Piketty's work has been widely debunked, especially r > g Big claim.

Challenging the Empirical Contribution of Thomas Piketty's Capital in the 21st Century

Thomas Piketty's Capital in the 21st Century has been widely debated on theoretical grounds, yet continues to attract acclaim for its historically-infused data analysis. In this study we conduct a closer scrutiny of Piketty's empirics than has appeared thus far, focusing upon his treatment of the United States. We find evidence of pervasive errors of historical fact, opaque methodological choices, and the cherry-picking of sources to construct favorable patterns from ambiguous data. Additional evidence suggests that Piketty used a highly distortive data assumption from the Soviet Union to accentuate one of his main historical claims about global “capitalism” in the 20th century. Taken together, these problems suggest that Piketty’s highly praised and historically-driven empirical work may actually be one of the book’s greatest weaknesses.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2543012

How Different Studies Measure Income Inequality in the US Piketty and Company Are Not the Only Game in Town

...

The results from at least four studies were compared for three measures of income change: change in median incomes, share of growth captured by the top 10 percent, and the changing income share of the top 1 percent. In all cases, Piketty and Saez (2003) were the outlier, showing the most increased inequality. And in all three measures of income change, Piketty, Saez, and Zucman (2018) found much less growth in income inequality than Piketty and Saez (2003). This brief does a meta-analysis of different findings to estimate a “consensus” level of change. Applying Canberra Group (2001, 2011) recommendations, I find that instead of stagnating, real median incomes grew by just over 40 percent (1 percent a year) from 1979 to 2014; the top 10 percent of the income ladder captured 45 percent of income growth from 1979 to 2014; and the share of the top 1 percent grew 3.5 percentage points. All studies find that income inequality rose after 1979, but common perceptions that all income gain went to the top 10 percent and middle class incomes stagnated (or even declined) are wrong.

https://www.urban.org/sites/default/files/publication/99455/...

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#43

Post by ForHackernews »

hash872 wrote: post #20
ForHackernews wrote: post #11

Earlier quoted context omitted.

https://www.theatlantic.com/business/archive/2017/06/the-hoa... > They then pass those advantages onto their children, with parents placing a “glass floor” under their kids. They ensure they grow up in nice zip codes, provide social connections that make a difference when entering the labor force, help with internships, aid with tuition and home-buying, and schmooze with college admissions officers. All the while, th…

The belief system here makes me incredulous. How exactly does the average upper middle class worker support 'occupational licensing' and 'restrictions on the immigration of white-collar professionals'? Can you outline the exact steps that they've taken to, say, support occupational licensing? When did a pro-occupational licensing candidate run for office? The latter is especially ironic because so many people believe…

> The vast majority of regular people secure employment based on actual credentials and not 'connections', especially in tech

Is that really true? Anecdotally, I have been far, far more likely (perhaps 95% of the time vs I'd be very surprised to hear if you've had a different experience.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#44

Post by drb91 »

hash872 wrote: post #8
DataWorker wrote: post #3

This seems like an obvious consequence of globalism and the nature of the labor market. Also seems consistent with Picketty’s thesis about capital growth. The days when being a US citizen gauranteed affluence are coming to a close. To see the future look at California; refugees from Guatemala living amongst young millionaires, mostly immigrants also. A global community, sliced into ever narrower tranches by the invis…

Much of Piketty's work has been widely debunked, especially r > g, so I'm not sure why one would start with his thesis. Top 1% income earners are typically business founder-owners, and reams of evidence from the Forbes 400 to tax data show that the wealthiest in US society are entrepreneurs who again created their own business- not rentiers living off of inherited wealth. (Anecdotally, children of inherited wealth th…

> entrepreneurs who again created their own business- not rentiers

I sense you're implying a meaningful comparison there. Why is being an entrepreneur better (or indeed, distinct at all) from being a landlord?

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#45

Post by hash872 »

mdorazio wrote: post #33
hash872 wrote: post #26

Earlier quoted context omitted.

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

I went to the trouble of actually buying the paper you cited and, surprise, it doesn't say what you seem to think (did you only read the abstract?). Here are the key findings: - Among the top 1%, 69% earn pass-through business income in some form - At the 99th percentile, business income only accounts for about 40% of total income The majority of what is described in the abstract (and a lot of the focus in the paper)…

While I did not purchase the document, I did rely on famous economist Tyler Cowen to summarize it. I feel pretty comfortable with that decision as he's an SME.

> the 1% are mostly working people who supplement wage income with some kind of side business income. This is exactly what you would expect if you think about lawyers, doctors, software developers, consultants

This is.... not what I would expect, at all. If you told me my thesis was just wrong and that the 1% (not .1%) just made wage income, I could accept that. But- you think it's normal for highly paid professionals to work a self-employed side gig, and that's what tips them into that top percentile? Like, a Bain consultant is going out and doing some extra side consulting in her copious spare time outside of her 80 hour a week job? This seems bizarre & unlikely (I am just relying now on your interpretation of the paper).

Worth noting that high-earning doctors, lawyers, some developers can be self-employed, and so neither an employee or employer (especially for doctors I think that's the path to the highest income). Not sure how that factors in to the paper

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#46

Post by hash872 »

mdorazio wrote: post #34
hash872 wrote: post #30

Earlier quoted context omitted.

The Kochs are active executives within their companies, which is a huge % of net worth. Wikipedia states that their stakes were worth $1.1 billion in 1983 when the brothers took them over, obviously they are worth vastly more now. It's not like they're rentiers who never worked- they still created most of their current wealth. This seems to be true for a number of 2nd generation wealthy. If r > g is true- why are the…

You seem to be assuming that the ultra rich keep their wealth as personal wealth. This is pretty far from what actually happens. In most cases they setup foundations with large endowments instead of directly passing it to heirs (though the heirs are often board members and never have to work a day in their life). You mention the Rockefellers as an example. Guess what foundation has a $4.1 billion endowment, 105 years…

> Where is Bill Gates putting all his money?

He has.... pledged to give 99% away to charity by the end of his & Melinda's life? I don't think 'foundation' in this case means what you think it means. It's not a secret tax dodge to pass it on to their children indirectly, their heirs will get very little

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#47

Post by wolco »

hash872 wrote: post #8
DataWorker wrote: post #3

This seems like an obvious consequence of globalism and the nature of the labor market. Also seems consistent with Picketty’s thesis about capital growth. The days when being a US citizen gauranteed affluence are coming to a close. To see the future look at California; refugees from Guatemala living amongst young millionaires, mostly immigrants also. A global community, sliced into ever narrower tranches by the invis…

Much of Piketty's work has been widely debunked, especially r > g, so I'm not sure why one would start with his thesis. Top 1% income earners are typically business founder-owners, and reams of evidence from the Forbes 400 to tax data show that the wealthiest in US society are entrepreneurs who again created their own business- not rentiers living off of inherited wealth. (Anecdotally, children of inherited wealth th…

Yes we do it is called placing import duties to increase the price to match local prices.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#48

Post by mdorazio »

hash872 wrote: post #45
mdorazio wrote: post #33

Earlier quoted context omitted.

I went to the trouble of actually buying the paper you cited and, surprise, it doesn't say what you seem to think (did you only read the abstract?). Here are the key findings: - Among the top 1%, 69% earn pass-through business income in some form - At the 99th percentile, business income only accounts for about 40% of total income The majority of what is described in the abstract (and a lot of the focus in the paper)…

While I did not purchase the document, I did rely on famous economist Tyler Cowen to summarize it. I feel pretty comfortable with that decision as he's an SME. > the 1% are mostly working people who supplement wage income with some kind of side business income. This is exactly what you would expect if you think about lawyers, doctors, software developers, consultants This is.... not what I would expect, at all. If yo…

Yes I think that's extremely normal. And that's exactly what the paper talks about - self-employed = pass-through income. If you're a lawyer or consultant and you bill your clients through your 1-person LLC (extremely common), your income is pass-through income and the paper would conclude that you are a "top earner" whose income comes from owning a business. On the doctor side, it's quite common for specialists to be technically self-employed and bill hospitals for their time rather than being a true FTE. See the issue with using the abstract comments here? Also important to note is that the paper isn't looking at individual earners, it's looking at households (it bases its information on tax filings, most of which for 1%+ people would be joint filings). If you and your wife each make $220k in total compensation (relatively easy in the Bay Area or NYC for example), congratulations, the paper says you're a 1% earner.

Back to my main point - if you want to talk about business owners in the job-creating sense vs. income, it's important to distinguish between 1% and 0.1%. The latter is composed mostly of medium-size business owners (a good thing!), but the former is not.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#49

Post by peterhadlaw »

matthewowen wrote: post #25
peterhadlaw wrote: post #18

Earlier quoted context omitted.

This book was a great read and I highly recommend it for anyone who wants a little more perspective on Piketty's work: https://campus.aynrand.org/works/2015/10/09/equal-is-unfair

Published by the Ayn Rand institute.

Publisher: St. Martin's Press (March 29, 2016) ISBN-10: 125008444X ISBN-13: 978-1250084446

Actually, no, that's just an article diving into the contents of the book. I figured might be helpful in case people didn't want to read the full book.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#50

Post by RestlessMind »

roenxi wrote: post #28
RestlessMind wrote: post #27

Earlier quoted context omitted.

Forbes 400 for 2018: https://www.forbes.com/forbes-400/#715eb42a7e2f Looking at top 40 (because it gets boring to look up bios after a while), I see the following folks who inherited companies founded by their family members: Charles Koch, David Koch, Jim Walton, Alice Walton, Robson Walton, Jacqueline Mars, John Mars, Abigail Johnson, Donald Bren, Lukas Walton, Leonard Lauder. That is 11 out of top 40 (or 27.5%) hav…

I don't know exactly what Mr. Piketty actually claimed, but that statistic pretty good evidence that return on capital vs the growth of income is not the major cause of wealth inequality. The major cause would be inheritance law and birth rates in wealthy families. Economic divides are a strange concern anyway; I don't see how I am unfairly disadvantaged by someone else's obscene wealth through winning the birth lott…

> but that statistic pretty good evidence that return on capital vs the growth of income is not the major cause of wealth inequality

I see 27.5% as too damn high to be among the richest in the world just based on birth lottery.

> I don't see how I am unfairly disadvantaged by someone else's obscene wealth through winning the birth lottery.

Wealthy people get disproportionate benefits in: legal system [1], healthcare [2], political influence [3]. I can go on, but there few examples are sufficient to see why someone should get these privileges just because of birth.

> What exactly is Jim Walton consuming that should be given to the poor?

Don't know about Waltons, but Koch brother are consuming their wealth to purchase political influence [4]. I would rather have it spent on poor.

[1] https://en.wikipedia.org/wiki/Peter_Thiel#Gawker_lawsuit

[2] https://www.nytimes.com/2017/06/03/business/economy/high-end...

[3] https://en.wikipedia.org/wiki/Dark_money

[4] https://en.wikipedia.org/wiki/Political_activities_of_the_Ko...

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