@secretwealth--I've discussed that paper, as well as many others like it from Pew, with a family member who is a research director there. They'll admit a flaw with papers like that is that they can only draw correlations and conclusions from data that can be accurately assessed. Are wealthy kids more likely to stay wealthy because of their level of education? Or because they think "rich"? (everyone here has read The Millionaire Next Door for a reason) It's the same with poorer kids. Is it the lack of education, or do they think "poor"? Are middle class families stuck because wages are stagnant, or because the explosion of media and internet access (and the advertising that goes with it) has acted like a steroid injection into the concept of Keeping up with the Joneses?
I would say all of those concepts play an important role, but the ideas that are harder to quantify (thinking "rich") get less air time because they can't be studied as easily.* Income inequality is not the only factor at play, and may not even be the dominant factor--but it's the quickest to track and chart, and almost anyone with an elementary level of education can understand it. In a world of 2-minute media soundbites, numbers and charts take precedence over more complicated ideas. It's why someone like David Bach who's had many good (better) ideas is known for the "latte factor" or why Jacob gets media attention for living on $7,000/year instead of an idea like the web of goals.
If you took my kids, or GandK's kids, or Dragline's kids, and cut them off financially at the age of 18, what economic class would they end up in as adults? Even if you denied them the option of going to college, I would wager that they would find a way to live the life they wanted and take care of their own financial needs--it's the way they've been taught to think. College would help, an inheritance would help, but other factors are just as important.
I guess that addresses Spartan's argument that I don't care about the numbers. I do care. I just wonder if changing other factors (like turning away from consumerism) will have more of an effect on inequality than trying to flatten out the curve through direct government intervention.
*Pew studies (and others) remind me of standardized tests in school. Standardized tests are really good at assessing skills that are easy to test, but shouldn't be the only way kids are judged, and don't always reflect other important skills kids learn in school like discipline, integrity, resourcefulness, and problem-solving.
-----
Wow, that got...long.
tl;dr The numbers are only a part of the problem. Redistribution won't solve anything long term without changing the underlying behavior.
income inequality
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secretwealth
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" Are wealthy kids more likely to stay wealthy because of their level of education? Or because they think "rich"? (everyone here has read The Millionaire Next Door for a reason)"
I'm glad you brought up TMND, which discusses this issue; a number of rich kids are dependent on their parents for gifts (economic outpatient care). That book would argue that they don't think rich in terms of production, but rather consumption.
It's disappointing to see two recurring themes here: 1. Instead of talking about income inequality, people just bitch about their taxes; 2. A worship of the wealthy, as if they are somehow different. We all know how compound interest works and how wealth gravitates to wealth--why would you just forget this mathematical fact and laud the rich as just thinking smarter about money?
I'd like to see a study of the economic backgrounds of art history majors and engineering majors. Think rich indeed!
I'm glad you brought up TMND, which discusses this issue; a number of rich kids are dependent on their parents for gifts (economic outpatient care). That book would argue that they don't think rich in terms of production, but rather consumption.
It's disappointing to see two recurring themes here: 1. Instead of talking about income inequality, people just bitch about their taxes; 2. A worship of the wealthy, as if they are somehow different. We all know how compound interest works and how wealth gravitates to wealth--why would you just forget this mathematical fact and laud the rich as just thinking smarter about money?
I'd like to see a study of the economic backgrounds of art history majors and engineering majors. Think rich indeed!
I'm not bitching about my taxes. I'm pointing out the tax system is inefficient by using a personal example, and also pointing out how people react to them.
Taxes come up when discussing wealth inequality because traditionally that is the mechanism the voters use government to push the agenda. Let's not pretend almost everyone who is upset about wealth equality doesn't favor raising taxes on high earners...it is by far the most common solution.
You can find YT vids of Pres. Obama saying he'd raise taxes, even if it'd reduce the total revenue collected, in pursuit of social aims like wealth equality.
We are a Constitutional Repbulic, not a democracy, for a reason. Sometimes the masses are asses. There is no finer example than the Black Codes and Jim Crow laws.
The wealthy, as defined by assets, are different. They've consumed less than they made over a period of time and enjoyed that compound interest. A million dollar windfall doesn't make you a millionaire. That's why most lottery winners don't keep their winnings, and most that inherit lots of money don't keep it.
According to MND, median income for a millionaire is $131,000. If we use $1mil+ in invested assets as the definition for the wealthy, most of the wealthy are from the middle earning class, not the upper earning class.
Therefore, most of the wealth inequality in this country, measured by # of people, comes from the middle class, not the upper class.
This is a forum full of people who reject piles of stuff as the measure or key to happiness. Why would you expect these people to be especially concerned about the fact piles of stuff aren't equally distributed?
Taxes come up when discussing wealth inequality because traditionally that is the mechanism the voters use government to push the agenda. Let's not pretend almost everyone who is upset about wealth equality doesn't favor raising taxes on high earners...it is by far the most common solution.
You can find YT vids of Pres. Obama saying he'd raise taxes, even if it'd reduce the total revenue collected, in pursuit of social aims like wealth equality.
We are a Constitutional Repbulic, not a democracy, for a reason. Sometimes the masses are asses. There is no finer example than the Black Codes and Jim Crow laws.
The wealthy, as defined by assets, are different. They've consumed less than they made over a period of time and enjoyed that compound interest. A million dollar windfall doesn't make you a millionaire. That's why most lottery winners don't keep their winnings, and most that inherit lots of money don't keep it.
According to MND, median income for a millionaire is $131,000. If we use $1mil+ in invested assets as the definition for the wealthy, most of the wealthy are from the middle earning class, not the upper earning class.
Therefore, most of the wealth inequality in this country, measured by # of people, comes from the middle class, not the upper class.
This is a forum full of people who reject piles of stuff as the measure or key to happiness. Why would you expect these people to be especially concerned about the fact piles of stuff aren't equally distributed?
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George the original one
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> If we use $1mil+ in invested assets as the
> definition for the wealthy, most of the wealthy
> are from the middle earning class, not the upper
> earning class.
I think you've misinterpreted something. How does that jive with the top 1% owning 50+% of assets?
> According to MND, median income for a millionaire is $131,000.
MND was written in what, year 2000? $131k family income was in the top 5-10% at that time. NOT MIDDLE CLASS!
[just checked... first ed MND was October 1996]
> definition for the wealthy, most of the wealthy
> are from the middle earning class, not the upper
> earning class.
I think you've misinterpreted something. How does that jive with the top 1% owning 50+% of assets?
> According to MND, median income for a millionaire is $131,000.
MND was written in what, year 2000? $131k family income was in the top 5-10% at that time. NOT MIDDLE CLASS!
[just checked... first ed MND was October 1996]
Sigh. Once again: the solution to "The casino is ripping us off" is still not "Become better at blackjack." My question focused on changing an economic system which is unfair based on rent-seeking and other manipulative behaviors which create high income inequality (again, as opposed to the low income inequality existing in other countries).
The solution is NOT to become better at living with the (shrinking) scraps you are thrown by those in political control, but to actively participate in political action.
But if political action is rejected outright, well, yes, THEN I don't have an answer for you. You can only change politics by engaging in politics.
I see this again being turned into a matter of "rich people are rich because they are better/smarter/more talented" (and especially "I am rich because I am in some way superior to the "natural slaves"[sic]") I sadly realize that I may be insulting some sense of elitism here.
So if you feel you are above working with the rest of the population and prefer isolated solutions that only change your own personal position relative to the rest in a losing game, well, yeah, I have little to offer in terms of solutions because, quite frankly, it renders me speechless.
To turn the table, what's the suggestion based on personal responsibility when we've had another round of 40 years of stagnating real wages despite a 40% increase in productivity? Or two or three. The political apathy advocated here has already cost the average worker a 40% raise.
Let me state the following yet again: A lot of the current inequality is NOT the result of differences in skill, but the result of rent-seeking. And the solution to this is political because the problem is political.
Now we can talk about merit and personal responsibility all we want, but it is a rearrangement of chairs on the Titanic when you accept rising systemic redistribution of resources from the masses to a select few. I'd guess that our frugal "millionnaire mindset" must seem oddly cute to a trust fund kid.
Yes, there's the problem of the prisoner's dilemma in democracy where one man doing something all by himself has little effect, but we all are worse off in the end by choosing the comfortable path of willful ignorance.
It is indeed a sign of slave mentality to throw the towel when facing a system built to rip you off. Yes, you may have to engage with the less educated and meddle with "average people". Sorry.
I can only second Spartan Warrior's obeservation that if even we give up here, how can we expect anything from people in less fortunate circumstances.
The solution is NOT to become better at living with the (shrinking) scraps you are thrown by those in political control, but to actively participate in political action.
But if political action is rejected outright, well, yes, THEN I don't have an answer for you. You can only change politics by engaging in politics.
I see this again being turned into a matter of "rich people are rich because they are better/smarter/more talented" (and especially "I am rich because I am in some way superior to the "natural slaves"[sic]") I sadly realize that I may be insulting some sense of elitism here.
So if you feel you are above working with the rest of the population and prefer isolated solutions that only change your own personal position relative to the rest in a losing game, well, yeah, I have little to offer in terms of solutions because, quite frankly, it renders me speechless.
To turn the table, what's the suggestion based on personal responsibility when we've had another round of 40 years of stagnating real wages despite a 40% increase in productivity? Or two or three. The political apathy advocated here has already cost the average worker a 40% raise.
Let me state the following yet again: A lot of the current inequality is NOT the result of differences in skill, but the result of rent-seeking. And the solution to this is political because the problem is political.
Now we can talk about merit and personal responsibility all we want, but it is a rearrangement of chairs on the Titanic when you accept rising systemic redistribution of resources from the masses to a select few. I'd guess that our frugal "millionnaire mindset" must seem oddly cute to a trust fund kid.
Yes, there's the problem of the prisoner's dilemma in democracy where one man doing something all by himself has little effect, but we all are worse off in the end by choosing the comfortable path of willful ignorance.
It is indeed a sign of slave mentality to throw the towel when facing a system built to rip you off. Yes, you may have to engage with the less educated and meddle with "average people". Sorry.
I can only second Spartan Warrior's obeservation that if even we give up here, how can we expect anything from people in less fortunate circumstances.
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George the original one
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@Seneca - Ignorance of the numbers is part of the problem. You think $131k family income in 2000 was middle class, but it's not. See http://en.wikipedia.org/wiki/File:Unite ... 7-2003.svg (numbers are inflation adjusted to 2003 dollars).
At the time MND was published, waaaay back in 1995, $131k was most definitely a wealthy family's income. Only the top 5% of families pulled in that sort of money.
MND's point was that most families could move up to that 5% bracket by a lifetime of frugality and having made the correct choice for a career. Screw up on the career and you don't make it. Screw up frugality and you don't make it.
ERE's point is a little different: be ultra-frugal, bypass the system, and avoid the lifetime sentence for career mistakes.
At the time MND was published, waaaay back in 1995, $131k was most definitely a wealthy family's income. Only the top 5% of families pulled in that sort of money.
MND's point was that most families could move up to that 5% bracket by a lifetime of frugality and having made the correct choice for a career. Screw up on the career and you don't make it. Screw up frugality and you don't make it.
ERE's point is a little different: be ultra-frugal, bypass the system, and avoid the lifetime sentence for career mistakes.
George, I'm not ignorant of the numbers. And not everyone even agrees that middle class is defined by an income level. That is a very complex discussion I don't think is important to the point I was making. If I could go back and take off the "middle class" nomenclature to keep it from distracting from the point, the point being most millionaires aren't execs, CEOs and inheritors, I would. They're mostly small biz owners and non-managers who save hard and long.
A fireman or highway patrolman in California could make $131 today. A household headed by a pair of people who picked up trash on the Caltrain in 2000 could've easily made $131,000 household income in 2000. (Today there are people that pick up trash on that train making $100,000 ea)
There are lots of ways to define whether or not that is a high income, first and foremost, where you live.
The president recently has been talking a lot about not raising taxes on middle class people making $250,000. Warren Buffett has said he thinks a million is where the high bracket "rich" should start. Then you can just take median income for the country and do standard deviations if you want.
A fireman or highway patrolman in California could make $131 today. A household headed by a pair of people who picked up trash on the Caltrain in 2000 could've easily made $131,000 household income in 2000. (Today there are people that pick up trash on that train making $100,000 ea)
There are lots of ways to define whether or not that is a high income, first and foremost, where you live.
The president recently has been talking a lot about not raising taxes on middle class people making $250,000. Warren Buffett has said he thinks a million is where the high bracket "rich" should start. Then you can just take median income for the country and do standard deviations if you want.
George, I'm not ignorant of the numbers. And not everyone even agrees that middle class is defined by an income level. That is a very complex discussion I don't think is important to the point I was making. If I could go back and take off the "middle class" nomenclature to keep it from distracting from the point, the point being most millionaires aren't execs, CEOs and inheritors, I would. They're mostly small biz owners and non-managers who save hard and long.
A fireman or highway patrolman in California could make $131 today. A household headed by a pair of people who picked up trash on the Caltrain in 2000 could've easily made $131,000 household income in 2000. (Today there are people that pick up trash on that train making $100,000 ea)
There are lots of ways to define whether or not that is a high income, first and foremost, where you live.
The president recently has been talking a lot about not raising taxes on middle class people making $250,000. Warren Buffett has said he thinks a million is where the high bracket "rich" should start. Or you can pretend income distribution is Gaussian, take median income for the country and do standard deviations.
A fireman or highway patrolman in California could make $131 today. A household headed by a pair of people who picked up trash on the Caltrain in 2000 could've easily made $131,000 household income in 2000. (Today there are people that pick up trash on that train making $100,000 ea)
There are lots of ways to define whether or not that is a high income, first and foremost, where you live.
The president recently has been talking a lot about not raising taxes on middle class people making $250,000. Warren Buffett has said he thinks a million is where the high bracket "rich" should start. Or you can pretend income distribution is Gaussian, take median income for the country and do standard deviations.
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George the original one
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> (Today there are people that pick up trash on that
> train making $100,000 ea)
Fantastic for them! If they're the only income in the family, at $100k/yr TODAY, then they're only in the top 20%. If you have a couple doing the same job, then their family is still below the top 5% TODAY.
Sounds like upper middle class (ignoring cost of living for their locale).
For what it's worth, we have street cops here in Portland that make $100k-150k per year, but they are few and far between and have to do a LOT of overtime to get there. So what? It still doesn't push their family's income into the top 5%.
> train making $100,000 ea)
Fantastic for them! If they're the only income in the family, at $100k/yr TODAY, then they're only in the top 20%. If you have a couple doing the same job, then their family is still below the top 5% TODAY.
Sounds like upper middle class (ignoring cost of living for their locale).
For what it's worth, we have street cops here in Portland that make $100k-150k per year, but they are few and far between and have to do a LOT of overtime to get there. So what? It still doesn't push their family's income into the top 5%.
@Felix
"Sigh. Once again: the solution to "The casino is ripping us off" is still not "Become better at blackjack." My question focused on changing an economic system which is unfair based on rent-seeking and other manipulative behaviors which create high income inequality (again, as opposed to the low income inequality existing in other countries).
The solution is NOT to become better at living with the (shrinking) scraps you are thrown by those in political control, but to actively participate in political action.
But if political action is rejected outright, well, yes, THEN I don't have an answer for you. You can only change politics by engaging in politics."
Aha -- yes, you have identified the real issue -- its not inequality per se, its rent-seeking and manipulative (psycnopathic) behavior. I heartily agree that those things should be curtailed as best we can do it. But I think you would still end up with inequality because of the people who get rich by virtue of providing valuable products, services or ideas. Which leads me back to a point that inequality is the symptom, not the real problem itself. It seems to me that we should focus on bad/undesirable behavior simply because its bad and undesirable and not try to measure success by merely measuring inequality without inquiring deeper. It does lead you to defining those behaviors, but that's why we have laws and lawmakers and get to argue and vote about those things. (And I bet you were wondering where the antitrust laws came from.)
Historically, gross inequality, especially based simply on power structures, is unstable and leads to revolutions (France, Russia,etc.) As Dylan sang, "when you've got nuthin', you've got nuthin' to lose". We're not there (yet) and hopefully never will be.
@jennypenny -- not sure my wife would agree about your assessment of my children. But the youngest one could probably get the older ones in line.
"Sigh. Once again: the solution to "The casino is ripping us off" is still not "Become better at blackjack." My question focused on changing an economic system which is unfair based on rent-seeking and other manipulative behaviors which create high income inequality (again, as opposed to the low income inequality existing in other countries).
The solution is NOT to become better at living with the (shrinking) scraps you are thrown by those in political control, but to actively participate in political action.
But if political action is rejected outright, well, yes, THEN I don't have an answer for you. You can only change politics by engaging in politics."
Aha -- yes, you have identified the real issue -- its not inequality per se, its rent-seeking and manipulative (psycnopathic) behavior. I heartily agree that those things should be curtailed as best we can do it. But I think you would still end up with inequality because of the people who get rich by virtue of providing valuable products, services or ideas. Which leads me back to a point that inequality is the symptom, not the real problem itself. It seems to me that we should focus on bad/undesirable behavior simply because its bad and undesirable and not try to measure success by merely measuring inequality without inquiring deeper. It does lead you to defining those behaviors, but that's why we have laws and lawmakers and get to argue and vote about those things. (And I bet you were wondering where the antitrust laws came from.)
Historically, gross inequality, especially based simply on power structures, is unstable and leads to revolutions (France, Russia,etc.) As Dylan sang, "when you've got nuthin', you've got nuthin' to lose". We're not there (yet) and hopefully never will be.
@jennypenny -- not sure my wife would agree about your assessment of my children. But the youngest one could probably get the older ones in line.
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jacob
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Again in no particular order...
1) http://en.wikipedia.org/wiki/Fundamenta ... tion_error <-- this bias would be a good idea to internalize and proceed to attempt VERY VERY hard to avoid. Because everybody is guilty [of being human]! As it pertains to this discussion everybody (including me) shows a tendency to ignore the side-effects of their proposed solutions and to oversimplify the case, e.g. "Some people in this group are evil, therefore lets pretend they're all evil".
2) I think jennypenny made a very good point in that reality is not as simply as statistics or "studies" show. There is indeed a strong tendency to only theorize about what can easily be measured. The fallacy is to confuse these "studies" for actual reality. Be very careful about drawing your conclusions from papers. Having worked in research and published a lot of them I know that only a fraction of the insight/knowledge actually gets published. All the tacit and unquantifiable knowledge stays buried
in the practitioner's mind because it doesn't fit the format of a
publication. In other words, if your entire knowledge came from reading papers, never working in the field generating new ideas, you have a very simplified toy view of the actual world.
3a) Wealth does indeed seem to be lost in the third generation (after floundering in the second). And yes, there are clearly cases of incompetent offspring who are undeservedly living off mom and dad's inheritance/gifts.
3b) From similar examples where some poor sod wins a million bucks in the lottery and proceeds to blow it all within a few years, it's a hint that poverty is not for the lack of money, but perhaps the lack of something else ...
3c) So yeah, maybe we should eliminate inheritances and lottery tickets. I do take comfort in the fact this works itself out in the long run. Sure kids might benefit from a rich parents, but they'll never benefit from rich great-grandparents.
4) However, it would also be an error to say that the only reason rich parents get rich kids is due to luck. Or analogously that the only reason that anyone reaches a better position is due to dumb luck. People who win marathons win because of luck. People who are good engineers are good because of luck. Etc. That's the error of dismissing any kind of effort as making any kind of difference.
That's the attribution error above! One of the reasons income equalizing gets so much forum resistance is that we have many examples of people who certianly did NOT attain their wealth through donations and compound interest but rather by smart money management. That is, they do NOT belong to the same group of people who did get rich that way. Yet it would seem that the income equalization proposal affects them just the same and so they complain.
This obviously also means that we in this group (attribution error again) tend to credit this to our personal skills.
5) Given how many different backgrounds there are on ERE, I'd say ERE works though. However, there's one thing we all have in common. Self-actualization. That is, we take a pro-active approach. We have agency. Not a victim mentality. I believe that "rich"-thinking is exactly that. "Poor"-thinking is exactly the opposite. Hence, ERE does not work for people without agency. And we make the error of assuming that we can just tell people what to do and have them proceed to go fix their own problems in the same way we'd do it. Because they just wont do that.
6) This relates to point 2 where income is the only measurable
quantity.
http://earlyretirementextreme.com/angry ... -poor.html <- Read this.
Especially the part about how the poverty line means something different to the "poor"-mind than to the "rich"-mind. Examples abound on this forum of "rich"-minds living way under the poverty line. This is doable because we have many different kinds of capital (social, technical, discipline, agency, ... ). The poor don't. Hence they need income and--tying into point 2 above + the angry people post---income is the only thing that we can measure and most people can relate to, the call is to give poor people more money.
7) However, an alternative solution is to give the poor a rich-mind. Part of the reason why countries like Sweden and Finland have such a high social mobility is that young mothers are EXTREMELY well supported and that the children are essentially raised equally by the government. In short, everybody under the age of 10 (or something) get EXACTLY the same opportunities and more importantly _values_. Note how this solution is entirely different from raising taxes on the 1% and giving out food stamps to the poor. Or even from giving vouchers for poor kids to attend rich kid school. Everybody gets the same. Note how this solution does not involve redistribution to achieve income equality. Rather it's a solution that aims at early-childhood equality. Given money to parents is worthless if the parents simultaneously claim that reading is for losers. Think outside the box, people!
8) Don't take this the wrong way, but I think I learn nothing from these discussions. I feel like I've seen it all before. The data. The ways people argue. The discussion patterns. This is part of why I'm trying to take this to the meta-level hoping to save you all some time in not having to spend ten years arguing before coming to the same conclusion.---That nothing ever changes. That politics is an eternal disagreement. The same arguments will be presented from each side over and over again. It goes like this:
A: Look at this Problem X. I think it's bad. I propose a solution which will solve the problem while proceeding to ignore side-effects Y because they are not important/relevant to me. This is because I think the people who are affected by X are innocent and the people affected by Y are evil.
B: I think side-effects Y are worse that the current state of X. Y is quite relevant to me. In fact, I don't see why X is a problem or if it is, then Y is certainly too steep a price to pay. This is because I think the people who are affected by X are guilty and why should the innocent people in Y suffer for that.
Then each side repeats their message a couple of times.
9) Lets look at the attribution link again. Here's how to avoid
attribution error...
a) Taking heed of "consensus" information. If most people behave the same way when put in the same situation, then the situation is more likely to be the cause of the behavior.
b) Asking oneself how one would behave in the same situation.
c) Looking for unseen causes; specifically, looking for less-salient factors.
From the angry people post, it's clear that there are two distinct
groups of people. The consensus of poor people in poverty suggests that the situation (others) is to blame. However, (b) suggests that the person is to blame, at least when you ask a bunch of self-reliant types in this forum, because when placed in such an environment we'd immediately begin to change ourselves and our behaviors.
Further, as jennypenny suggested, income might NOT be the salient
factor! It's not surprising that the highest spenders in this forum consider income to be the salient factor while the lowest spending do not. (When the hammer is your favorite tool, ...) Point (7) above suggests that childhood is the salient factor. The solution to income inequality/mobility on the policy level would be for the government to take a (much) greater role in equalizing childhood. That is, aim at the kids. Raise them the same way. Don't give the parents more money! If you want to make a personal difference, talk to the children you know about
agency.
1) http://en.wikipedia.org/wiki/Fundamenta ... tion_error <-- this bias would be a good idea to internalize and proceed to attempt VERY VERY hard to avoid. Because everybody is guilty [of being human]! As it pertains to this discussion everybody (including me) shows a tendency to ignore the side-effects of their proposed solutions and to oversimplify the case, e.g. "Some people in this group are evil, therefore lets pretend they're all evil".
2) I think jennypenny made a very good point in that reality is not as simply as statistics or "studies" show. There is indeed a strong tendency to only theorize about what can easily be measured. The fallacy is to confuse these "studies" for actual reality. Be very careful about drawing your conclusions from papers. Having worked in research and published a lot of them I know that only a fraction of the insight/knowledge actually gets published. All the tacit and unquantifiable knowledge stays buried
in the practitioner's mind because it doesn't fit the format of a
publication. In other words, if your entire knowledge came from reading papers, never working in the field generating new ideas, you have a very simplified toy view of the actual world.
3a) Wealth does indeed seem to be lost in the third generation (after floundering in the second). And yes, there are clearly cases of incompetent offspring who are undeservedly living off mom and dad's inheritance/gifts.
3b) From similar examples where some poor sod wins a million bucks in the lottery and proceeds to blow it all within a few years, it's a hint that poverty is not for the lack of money, but perhaps the lack of something else ...
3c) So yeah, maybe we should eliminate inheritances and lottery tickets. I do take comfort in the fact this works itself out in the long run. Sure kids might benefit from a rich parents, but they'll never benefit from rich great-grandparents.
4) However, it would also be an error to say that the only reason rich parents get rich kids is due to luck. Or analogously that the only reason that anyone reaches a better position is due to dumb luck. People who win marathons win because of luck. People who are good engineers are good because of luck. Etc. That's the error of dismissing any kind of effort as making any kind of difference.
That's the attribution error above! One of the reasons income equalizing gets so much forum resistance is that we have many examples of people who certianly did NOT attain their wealth through donations and compound interest but rather by smart money management. That is, they do NOT belong to the same group of people who did get rich that way. Yet it would seem that the income equalization proposal affects them just the same and so they complain.
This obviously also means that we in this group (attribution error again) tend to credit this to our personal skills.
5) Given how many different backgrounds there are on ERE, I'd say ERE works though. However, there's one thing we all have in common. Self-actualization. That is, we take a pro-active approach. We have agency. Not a victim mentality. I believe that "rich"-thinking is exactly that. "Poor"-thinking is exactly the opposite. Hence, ERE does not work for people without agency. And we make the error of assuming that we can just tell people what to do and have them proceed to go fix their own problems in the same way we'd do it. Because they just wont do that.
6) This relates to point 2 where income is the only measurable
quantity.
http://earlyretirementextreme.com/angry ... -poor.html <- Read this.
Especially the part about how the poverty line means something different to the "poor"-mind than to the "rich"-mind. Examples abound on this forum of "rich"-minds living way under the poverty line. This is doable because we have many different kinds of capital (social, technical, discipline, agency, ... ). The poor don't. Hence they need income and--tying into point 2 above + the angry people post---income is the only thing that we can measure and most people can relate to, the call is to give poor people more money.
7) However, an alternative solution is to give the poor a rich-mind. Part of the reason why countries like Sweden and Finland have such a high social mobility is that young mothers are EXTREMELY well supported and that the children are essentially raised equally by the government. In short, everybody under the age of 10 (or something) get EXACTLY the same opportunities and more importantly _values_. Note how this solution is entirely different from raising taxes on the 1% and giving out food stamps to the poor. Or even from giving vouchers for poor kids to attend rich kid school. Everybody gets the same. Note how this solution does not involve redistribution to achieve income equality. Rather it's a solution that aims at early-childhood equality. Given money to parents is worthless if the parents simultaneously claim that reading is for losers. Think outside the box, people!
8) Don't take this the wrong way, but I think I learn nothing from these discussions. I feel like I've seen it all before. The data. The ways people argue. The discussion patterns. This is part of why I'm trying to take this to the meta-level hoping to save you all some time in not having to spend ten years arguing before coming to the same conclusion.---That nothing ever changes. That politics is an eternal disagreement. The same arguments will be presented from each side over and over again. It goes like this:
A: Look at this Problem X. I think it's bad. I propose a solution which will solve the problem while proceeding to ignore side-effects Y because they are not important/relevant to me. This is because I think the people who are affected by X are innocent and the people affected by Y are evil.
B: I think side-effects Y are worse that the current state of X. Y is quite relevant to me. In fact, I don't see why X is a problem or if it is, then Y is certainly too steep a price to pay. This is because I think the people who are affected by X are guilty and why should the innocent people in Y suffer for that.
Then each side repeats their message a couple of times.
9) Lets look at the attribution link again. Here's how to avoid
attribution error...
a) Taking heed of "consensus" information. If most people behave the same way when put in the same situation, then the situation is more likely to be the cause of the behavior.
b) Asking oneself how one would behave in the same situation.
c) Looking for unseen causes; specifically, looking for less-salient factors.
From the angry people post, it's clear that there are two distinct
groups of people. The consensus of poor people in poverty suggests that the situation (others) is to blame. However, (b) suggests that the person is to blame, at least when you ask a bunch of self-reliant types in this forum, because when placed in such an environment we'd immediately begin to change ourselves and our behaviors.
Further, as jennypenny suggested, income might NOT be the salient
factor! It's not surprising that the highest spenders in this forum consider income to be the salient factor while the lowest spending do not. (When the hammer is your favorite tool, ...) Point (7) above suggests that childhood is the salient factor. The solution to income inequality/mobility on the policy level would be for the government to take a (much) greater role in equalizing childhood. That is, aim at the kids. Raise them the same way. Don't give the parents more money! If you want to make a personal difference, talk to the children you know about
agency.
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jacob
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@Felix - Let me demonstrate a point by antiphrasing your post
BEGIN MIRROR IMAGE
In effect, you're saying "poor people are poor because they're unlucky/victims/being exploited"... and you feel like you're above
trying to work on individual solutions because after all, a person's failure is never their own fault but always attributable to a bad society or "them"/other people.
What's the solution when 60% of the population eventually ends up on government transfers and the few supports the many to such an extent that they just stop showing up? No amount of voting for more money is going to produce any wealth even if it was decided by majority. The lack of productive effort, because it's easier to get paid due to political graft, is eventually going to drive the country bankrupt.
To reiterate: A lot of the current inequality is simply due to making consistently bad choices despite knowing better because it's possible to get away with it. And the solution to this is to make the resulting pain more apparent. Not protect people from it. Because people don't learn by rational discourse. They only learn by experiencing the actual consequences of their actions.
We can talk about equality all we want, but spending the time destroying the lifeboats on the Titanic in order to make chairs for everybody to sit on while the ship is sinking is "folly". That mindset must seem oddly cute to those in charge of rearranging the chairs.
There's the problem in democracy when a populist majority decides things in their favor at the cost of a minority. It is in fact not a democracy and eventually the minority refuses to be slaves to the majority and they rebel. It's a sign of slave mentality to accept being exploited and victimized while blaming others. Yes, you may have to educate yourself and try harder. Sorry.
END MIRROR IMAGE
Now, will you agree that the above could easily have been said by some other political participant? You'll find some version of it above. Similarly, there are more extreme versions of your statement and more extreme versions of the anti-statement that I wrote based on yours. There are statements in the middle. Most statements will be somewhere between those two.
Effectively we have a distribution of many different takes on the matter. The purpose of the democratic process is to figure out where the compromise is between all these different positions. The compromise is described the median of that distribution. That median moves very slowly.
Slow is a good behavior for something as big as a country. Revolutions tend to be bad. Big and slow is good.
Now, if you look at this thread from a neutral point of view...I prefer mathematically, trying to understand both positions so I can better predict them and act accordingly... you will find that people do indeed participate in the democratic process. It's just that they disagree with you and resist you.
You said: "My question focused on changing an economic system which is unfair based on rent-seeking and other manipulative behaviors which create high income inequality (again, as opposed to the low income inequality existing in other countries)."
So it seems like you wish to change the system to another system which is unfair (from some other perspective, not yours) using rent-seeking (transferring wealth from A to B) and other manipulative behaviors (political debate) to create high income equality.
Your end is different. Your means are the same. The means are still politics as usual. As such it'll be subject to debate and results will come slowly.
I faced the same issue with ERE. I would love for the whole world to adopt anti-consumerism, become self-reliant, reduce the waste, and work much less. However, there was/is no way I can accomplish this politically. So that's why I created ERE in its current form:
Individual action in an environment of a fixed and very slowly changing political system.
There was a story about a person who wandered the beaches throwing
stranded starfish back into the water. "Why do you bother to do this?", people asked, "There are millions of stranded starfish, so what you do ultimately doesn't matter and doesn't solve the problem." "It matters to this one," said the person and threw another starfish back into the water.
That's my point wrt political action. I think that individual action helps more than standing with a sign saying "According to statistics, the beaches are full of stranded starfish. Which makes me sad. We should make a law that tells people to throw them back into the water."
I know... because I was one of those who were waving such signs for quite a while.
BEGIN MIRROR IMAGE
In effect, you're saying "poor people are poor because they're unlucky/victims/being exploited"... and you feel like you're above
trying to work on individual solutions because after all, a person's failure is never their own fault but always attributable to a bad society or "them"/other people.
What's the solution when 60% of the population eventually ends up on government transfers and the few supports the many to such an extent that they just stop showing up? No amount of voting for more money is going to produce any wealth even if it was decided by majority. The lack of productive effort, because it's easier to get paid due to political graft, is eventually going to drive the country bankrupt.
To reiterate: A lot of the current inequality is simply due to making consistently bad choices despite knowing better because it's possible to get away with it. And the solution to this is to make the resulting pain more apparent. Not protect people from it. Because people don't learn by rational discourse. They only learn by experiencing the actual consequences of their actions.
We can talk about equality all we want, but spending the time destroying the lifeboats on the Titanic in order to make chairs for everybody to sit on while the ship is sinking is "folly". That mindset must seem oddly cute to those in charge of rearranging the chairs.
There's the problem in democracy when a populist majority decides things in their favor at the cost of a minority. It is in fact not a democracy and eventually the minority refuses to be slaves to the majority and they rebel. It's a sign of slave mentality to accept being exploited and victimized while blaming others. Yes, you may have to educate yourself and try harder. Sorry.
END MIRROR IMAGE
Now, will you agree that the above could easily have been said by some other political participant? You'll find some version of it above. Similarly, there are more extreme versions of your statement and more extreme versions of the anti-statement that I wrote based on yours. There are statements in the middle. Most statements will be somewhere between those two.
Effectively we have a distribution of many different takes on the matter. The purpose of the democratic process is to figure out where the compromise is between all these different positions. The compromise is described the median of that distribution. That median moves very slowly.
Slow is a good behavior for something as big as a country. Revolutions tend to be bad. Big and slow is good.
Now, if you look at this thread from a neutral point of view...I prefer mathematically, trying to understand both positions so I can better predict them and act accordingly... you will find that people do indeed participate in the democratic process. It's just that they disagree with you and resist you.
You said: "My question focused on changing an economic system which is unfair based on rent-seeking and other manipulative behaviors which create high income inequality (again, as opposed to the low income inequality existing in other countries)."
So it seems like you wish to change the system to another system which is unfair (from some other perspective, not yours) using rent-seeking (transferring wealth from A to B) and other manipulative behaviors (political debate) to create high income equality.
Your end is different. Your means are the same. The means are still politics as usual. As such it'll be subject to debate and results will come slowly.
I faced the same issue with ERE. I would love for the whole world to adopt anti-consumerism, become self-reliant, reduce the waste, and work much less. However, there was/is no way I can accomplish this politically. So that's why I created ERE in its current form:
Individual action in an environment of a fixed and very slowly changing political system.
There was a story about a person who wandered the beaches throwing
stranded starfish back into the water. "Why do you bother to do this?", people asked, "There are millions of stranded starfish, so what you do ultimately doesn't matter and doesn't solve the problem." "It matters to this one," said the person and threw another starfish back into the water.
That's my point wrt political action. I think that individual action helps more than standing with a sign saying "According to statistics, the beaches are full of stranded starfish. Which makes me sad. We should make a law that tells people to throw them back into the water."
I know... because I was one of those who were waving such signs for quite a while.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am
"8) Don't take this the wrong way, but I think I learn nothing from these discussions. I feel like I've seen it all before. The data. The ways people argue. The discussion patterns. This is part of why I'm trying to take this to the meta-level hoping to save you all some time in not having to spend ten years arguing before coming to the same conclusion.---That nothing ever changes. That politics is an eternal disagreement. The same arguments will be presented from each side over and over again."
-Jacob
I don't contribute very often on the forum - but I follow it fairly closely. I've noticed that when I read through the political posts, I've gravitated towards quickly skimming all posts until I get to one of Jacob's - which I'll slow down and read more carefully or even read a couple times. I think this pretty much explains why.
Just thought I'd throw that observation out there as someone who will read this type of discussion but has no desire to participate. Jacob nails the reason why - it's always the same pattern and there's rarely anything useful that comes from it because the different sides disagree at fundamental levels that are never reconciled.
-Jacob
I don't contribute very often on the forum - but I follow it fairly closely. I've noticed that when I read through the political posts, I've gravitated towards quickly skimming all posts until I get to one of Jacob's - which I'll slow down and read more carefully or even read a couple times. I think this pretty much explains why.
Just thought I'd throw that observation out there as someone who will read this type of discussion but has no desire to participate. Jacob nails the reason why - it's always the same pattern and there's rarely anything useful that comes from it because the different sides disagree at fundamental levels that are never reconciled.
@jacob: Yes, you can mirror my argumentation style and you can use that style for many arguments in many different contexts. The reason I picked it was that I found it necessary to break through the wall I seemed to be talking to. The position of "taking politics serious" seems to be looked at as either a complete waste of time or as shady business on principle.
I agree that personal choice does matter big time in personal finance, especially in the short run rather than the long (politically influenced) run. How could I be on an ERE forum like this without believing it?
However, I still think that giving up on all things politics is a mistake as it leaves the highly influential field of politics to others. I guess it is the argument usually attributed to Plato "the chief penalty is to be governed by someone worse if a man will not himself hold office and rule."
Even a libertarian viewpoint would require politics to achieve, well, less politics.
That position is usually either neglected, belittled or strawmanned into demanding high taxes or wanting inflation, being envious of the rich, being a mooching lowlife, hating people of skill, demanding unearned gains/handouts or wanting socialism or another utopian society.
I've had all of the above arguments thrown at me.
Yes, people have widely different levels of skill and to a large degree this changes their capability of earning money in a market system. That is Paul Graham's argument of differences in skill set. And that's true. I don't argue against this.
By now, basically I'm merely trying to defend the legitimacy of social democracy as a tool against the collateral damage of laissez faire capitalism. It's a notion rather common in central Europe, so it is very odd to have such a strong opposition to it. What I am also saying is that this system of social democracy can be hijacked so that it does not mitigate the effects of free markets but rather amplifies them even more, leading to social unrest in the end, which is probably bad for everyone. The poor starve and the rich are beheaded, everybody loses.
Yes, on an individual level personal responsibility and individual skill, agency and proactivity do rule. But why throw out the baby with the bathwater and ignore the political side of things because of it? Why throw it away completely and take what I see as an antipolitical stance, rather than saying "You'll personally have faster results taking care of your own shit, BUT you can influence the system in the long run if you engage in political debate to some degree, too".
You said:
"So it seems like you wish to change the system to another system which is unfair (from some other perspective, not yours) using rent-seeking (transferring wealth from A to B) and other manipulative behaviors (political debate) to create high income equality.
Your end is different. Your means are the same. The means are still politics as usual. As such it'll be subject to debate and results will come slowly."
Yes, precisely. The means are politics. Politics won't go away. It influences society profoundly. Now either it can provide a buffer against capitalist side effects (wanted by people like myself), do nothing (wanted by libertarians) or redistribute money from bottom to top (what it's doing right now, not wanted by 99% of the population).
Politics will do what those who influence it most are saying. So I believe that not engaging in this is a mistake.
I agree that personal choice does matter big time in personal finance, especially in the short run rather than the long (politically influenced) run. How could I be on an ERE forum like this without believing it?
However, I still think that giving up on all things politics is a mistake as it leaves the highly influential field of politics to others. I guess it is the argument usually attributed to Plato "the chief penalty is to be governed by someone worse if a man will not himself hold office and rule."
Even a libertarian viewpoint would require politics to achieve, well, less politics.
That position is usually either neglected, belittled or strawmanned into demanding high taxes or wanting inflation, being envious of the rich, being a mooching lowlife, hating people of skill, demanding unearned gains/handouts or wanting socialism or another utopian society.
I've had all of the above arguments thrown at me.
Yes, people have widely different levels of skill and to a large degree this changes their capability of earning money in a market system. That is Paul Graham's argument of differences in skill set. And that's true. I don't argue against this.
By now, basically I'm merely trying to defend the legitimacy of social democracy as a tool against the collateral damage of laissez faire capitalism. It's a notion rather common in central Europe, so it is very odd to have such a strong opposition to it. What I am also saying is that this system of social democracy can be hijacked so that it does not mitigate the effects of free markets but rather amplifies them even more, leading to social unrest in the end, which is probably bad for everyone. The poor starve and the rich are beheaded, everybody loses.
Yes, on an individual level personal responsibility and individual skill, agency and proactivity do rule. But why throw out the baby with the bathwater and ignore the political side of things because of it? Why throw it away completely and take what I see as an antipolitical stance, rather than saying "You'll personally have faster results taking care of your own shit, BUT you can influence the system in the long run if you engage in political debate to some degree, too".
You said:
"So it seems like you wish to change the system to another system which is unfair (from some other perspective, not yours) using rent-seeking (transferring wealth from A to B) and other manipulative behaviors (political debate) to create high income equality.
Your end is different. Your means are the same. The means are still politics as usual. As such it'll be subject to debate and results will come slowly."
Yes, precisely. The means are politics. Politics won't go away. It influences society profoundly. Now either it can provide a buffer against capitalist side effects (wanted by people like myself), do nothing (wanted by libertarians) or redistribute money from bottom to top (what it's doing right now, not wanted by 99% of the population).
Politics will do what those who influence it most are saying. So I believe that not engaging in this is a mistake.
@Felix- the United States is consistently ranked as being the most culturally individualist country in the world. If we use Ben Franklin as the proto American, consider the work of some of our most studied philosophers, Thoreau, Emerson etc, read Democracy in America or Wealth of Nations, there shouldn't be surprise that among Americans individualism is more commonly preferred to collectivism as compared to European nations.
http://www.clearlycultural.com/geert-ho ... vidualism/
http://www.clearlycultural.com/geert-ho ... vidualism/
The video has excellent display of data. It does make me wonder what things would be like with different distribution.
They needed someone else to narrate though. I made it to 0:46 seconds of the video until I realized it was time to stop listening to guy and just look at the charts.. Another funny moment at 2:28
Why is it that so many people want to fight against what is natural? (it is mostly only opinion that this is a bad thing). Wealth, power, etc. will nearly always become balanced near Pareto levels (80:20). Per the video, the actual wealth distribution fits Pareto principles exactly. Ta-da. It is balanced. This is how mother nature (or God?) intends it to be. We can try awful hard to make it not so, but it will eventually go back to this.
They needed someone else to narrate though. I made it to 0:46 seconds of the video until I realized it was time to stop listening to guy and just look at the charts.. Another funny moment at 2:28
Why is it that so many people want to fight against what is natural? (it is mostly only opinion that this is a bad thing). Wealth, power, etc. will nearly always become balanced near Pareto levels (80:20). Per the video, the actual wealth distribution fits Pareto principles exactly. Ta-da. It is balanced. This is how mother nature (or God?) intends it to be. We can try awful hard to make it not so, but it will eventually go back to this.
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secretwealth
- Posts: 1948
- Joined: Mon Jun 27, 2011 3:31 am