Is Inequality Inevitable?

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JamesR
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Is Inequality Inevitable?

Post by JamesR » Wed Nov 06, 2019 8:07 pm

Is Inequality Inevitable? "Wealth naturally trickles up in free-market economies, model suggests"

Even if there wasn't a trickle-upward effect, I think there's still many other factors that can cause wealth/power to clump up. Things like winner-takes-all phenomenon, automation, disproportionally increased leverage, greater opportunities for moonshots, or seeking so-called "win/win" scenarios that protect existing wealth/power structures.

Campitor
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Re: Is Inequality Inevitable?

Post by Campitor » Wed Nov 06, 2019 11:34 pm

I couldn't read the article - required a subscription. There will always be inequality for a variety of reasons. Wealth is a result of a random circumstances harvested via a particular level of effort and knowledge that allows individual to exploit these circumstances. Wealth inequality is a problem only if the masses are starving. If you have a roof over your head, health, food, and freedom from debt, life is very good. There is a scope of control that individuals have over the aforementioned but its easier to blame someone else instead of curbing irrational resentment. The most corrosive enemy to living a happy life is self pity brewed in a pot of envy.

Do not overrate what you have received, nor envy others. He who envies others does not obtain peace of mind. ~ Buddha
Envy is pain at the good fortune of others. ~ Artistotle
Jealousy is information. It tells you what you desire, what you admire, what you despise in yourself. You could learn from the person you envy if you weren’t blinded by resentment. Learning feels better than loathing. ~ Marcus Aurelius

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unemployable
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Re: Is Inequality Inevitable?

Post by unemployable » Thu Nov 07, 2019 1:06 am

If you think capitalism has inequality, wait till you see socialism!

Sclass
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Re: Is Inequality Inevitable?

Post by Sclass » Thu Nov 07, 2019 6:36 am

unemployable wrote:
Thu Nov 07, 2019 1:06 am
If you think capitalism has inequality, wait till you see socialism!
Took the words out of my mouth. Party members have it good compared to the proletariat.

nikolaj
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Re: Is Inequality Inevitable?

Post by nikolaj » Thu Nov 07, 2019 7:01 am

Inequality is inevitable yes, but not because of economic policies.
Inequality arises from a difference in power. Having more power means that you can capture more resources, which makes you more powerful. It's a compounding effect.
There is much talk about rising inequality, but i think people have the wrong perspective. It's not that inequality is growing at an alarming pace, it's that inequality was historically low during the 1980's and now society is natually going back to more inequality. Think about how resources were distributed pre 1900's. And think about they were distributed before that, like in the 1600's or further back.

Using politics to limit rich people will never work. That is an attempt to use power to control powerful people. It is flawed from the get go.
The only thing that has worked historically, is economic growth in terms of technological innovation. New technologies create new jobs with high salaries for a few decades. Then as the new industries mature, salaries drop and profit is competed away.
Workers only have power when these high paying jobs exist, and they will go back to being powerless when technological advancement stagnates.

JamesR
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Re: Is Inequality Inevitable?

Post by JamesR » Thu Nov 07, 2019 7:34 am

There seems to be relationship between democracy and equality. So the more democratic a society is, the less inequality it experiences at that point in time. As inequality rises, it's probably a symptom of becoming less democratic.

And that's also a proxy of power, it's easier for the few to exert power over the many nowadays. So perhaps easier to get away with reduced democracy these days.

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Re: Is Inequality Inevitable?

Post by jacob » Thu Nov 07, 2019 7:58 am

Ironically, the article is behind a paywall ;-)

Hunter gathering societies are an example where wealth doesn't trickle up. The wealth that does quickly gets (ritually) distributed. There are certain features about the environment that makes it so. First, each person (man or woman) can't carry/run with more than about 20 pounds of stuff, so excess is abandoned or given away. Every adult can manufacture everything they own. Food is acquired like piecework. There's no point in storing it due to the 20 pound limit.

Such a society is independent on "stock" because the stock is free from everybody and everybody knows how to use it. Only resource flow matters and "wealth" is assigned by how good one is at directing the flow, e.g. a good hunter, a good tracker, or a good cook, etc.

Similar modern features are found in open-source development ... or blogging for that matter.

Inequality happens when stock becomes important. So anything from agriculture and up. Stock becomes important and relevant when it can be defended and the defense costs less than the value of the stock. If stock has a positive net advantage, then more begets more. The Matthew-effect. Complexity often makes the use of stock more efficient (up to a point), so concentration of stock => more complexity => even more stock... up to a point when deferred maintenance costs exceeds the flow from the stock. This is why farming -> cities -> kings -> countries -> .. collapse and restart.

IlliniDave
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Re: Is Inequality Inevitable?

Post by IlliniDave » Thu Nov 07, 2019 8:14 am

Yes.

If you frame wealth accumulation in a relatively free, free-market capitalist society as a sporting contest (just for the sake of illustration), a huge number of people aren't even playing or paying attention. For most of those accumulating wealth isn't high enough in their value hierarchy that they do the work required to master the sport. Among them are a slice to whom life has dealt a crappy enough hand that they might not have an opportunity to play even if they wanted to. I have my doubts any society can strip the Universe of that power.

For those that do play, most are amateurs and hobbyists. They learn the rudiments and practice them a little. And from there it's a continuum up to and through the professional ranks.

So far that's just talking about paying attention and expending effort (which includes achieving skill and exploiting talent). At any given rung of the continuum, "luck" also comes in and differentiates results among those who are peers otherwise. But it's hard to get around that whether you show up for the game and how much effort you put into it correlates with results.

It's a semi-team sport too, and one's teammates matter (parents/ancestors, associates/"connections", etc.). Warren buffet would likely be a lot less wealthy if he'd had me for a partner instead of Charlie M.

This of course is nothing new, Pareto's Distribution has been around for a while.

As in any human endeavor, any real world society that tries to base itself on free market principles will have cheaters, grifters, and rules that advantage some over others. One thing that I find bothersome is that relatively recently the counties surrounding Washington DC have leaped to top of the "wealthiest counties in the US" rankings. Politicians gladly listen to people who exercise their "freedom of speech" by holding out fistfuls of dollars.

I'm not sure I would buy a "trickle up" theory. The process is too deliberate. However, I have no interest in a society where the game doesn't exist. There are significant imperfections in the US system, but they are not why I'm wealthier than say my father or my brother, or less wealthy than my aunt. The reasons for those outcomes are the good reasons imbedded in our structure. We all made different uses of our freedom, which is how it should be.

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Re: Is Inequality Inevitable?

Post by tonyedgecombe » Thu Nov 07, 2019 8:49 am

No.

It's clear to see that different countries have wildly different rates of inequality. Lesotho has a Gini coefficient of 63% whereas Denmark is at 25%. Not only that but it does change over time, it has increased in the Anglo-sphere since the eighties, Mexico has seen it fall in the last decade.

The countries at the top of the distribution don't look particularly stable, the top ten includes Lesotho, Botswana, Sierra Leone, South Africa, Haita, Honduras and Zambia. My guess is most of these are going to be violently shifted to the opposite end over the coming decades. War and plague has a levelling effect.

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fiby41
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Re: Is Inequality Inevitable?

Post by fiby41 » Thu Nov 07, 2019 10:51 am

I read the article. I believe the first article on the website is free. Revisiting the page put the paywall in place.

If a thousand people participated in a transaction where the outcomes are if successful their net worth gets multiplied by 1.2 and if unsuccessful by 0.86. With fair dice and 2 people coming to make 1 transaction, eventually 1 person will have 99% of the total wealth purely out of randomness. The other 999 would have next to nothing although their expected outcome was positive gain in each of the transactions.

When you plot this on a unit square in terms of gini coefficient, ideally it should go from (00) to (01) and from (01) to (11). Practically it is a curve and US had 0.86.

For paragraph 1, since everyone is equally poor, there is low inequality for the 999 samples but as soon as you take into consideration the richest person the point changes position to the other end of the spectrum towards high inequality.

There was some discussion of the yard sale model of Anirban Chakroborti. Then the author introduced his own findings. I had lost the author by the time he introduced the Greek letter chi to represent something.

But the end result was that the authors model matched reality with a percentage error of 2% for empirical historical US data and that of Germany and Greece. The wealth inequality did not reach ideal conditions due to taxes and subsidies, which are too many to weave into the authors model for it to be useful.

Personally, I think this is a great argument for the case that god is a person.

7Wannabe5
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Re: Is Inequality Inevitable?

Post by 7Wannabe5 » Thu Nov 07, 2019 11:17 am

Yes. Male endowment is for the most part genetically predetermined and variously distributed.

Oops. Were we talking about money..? Again?

Jason
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Re: Is Inequality Inevitable?

Post by Jason » Thu Nov 07, 2019 2:10 pm

I think the "trickle upward effect" could apply to both topics.

7Wannabe5
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Re: Is Inequality Inevitable?

Post by 7Wannabe5 » Thu Nov 07, 2019 3:34 pm

@Jason:

Yup. It's kind of interesting how humans can frequently see mechanisms that "benefit me" as inevitable, while seeing other very similar mechanisms as clearly rigged.

I would be happy to continue this discussion with anybody willing to take a field trip to one of the classrooms full of severely impaired 3 and 4 year old children where I have taught at the rate of $15/hr.

Mister Imperceptible
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Re: Is Inequality Inevitable?

Post by Mister Imperceptible » Thu Nov 07, 2019 4:29 pm

why throw good money after bad

7Wannabe5
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Re: Is Inequality Inevitable?

Post by 7Wannabe5 » Thu Nov 07, 2019 5:15 pm

Money can’t buy kindness.

Mister Imperceptible
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Re: Is Inequality Inevitable?

Post by Mister Imperceptible » Thu Nov 07, 2019 5:38 pm

Kindness isn’t the most useful characteristic to determine sagacious allocation of resources.

In order to eat, the majority of us have to do more than be cute.

If I treat my garden with kind words and notions, but no water or light, nothing will grow.

jacob
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Re: Is Inequality Inevitable?

Post by jacob » Thu Nov 07, 2019 5:52 pm

On the flip side, trying to force or buy collaboration ... you get [less than] what you pay for.

Hence the importance of considering all the variables. Unequal what and where....
Debates generally don't capture the complexity of the system if the goal is to win [the debate].

IlliniDave
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Re: Is Inequality Inevitable?

Post by IlliniDave » Thu Nov 07, 2019 6:05 pm

https://mises.org/wire/american-middle- ... -good-news

This is somewhat topical re the US. The main takeaway to me is that even though it doesn't pace the growth of wealth in the 1% or whatever, the number of US people in the higher income cohorts are growing while the numbers in the lowest are falling compared to ~50 years ago.

Mister Imperceptible
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Re: Is Inequality Inevitable?

Post by Mister Imperceptible » Thu Nov 07, 2019 6:07 pm

I cannot say my goal is to win a debate here, because I do not know what the right answer is.

I will try to be more constructive.

Mister Imperceptible
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Re: Is Inequality Inevitable?

Post by Mister Imperceptible » Fri Nov 08, 2019 10:32 am

7Wannabe5 wrote:
Thu Nov 07, 2019 5:15 pm
Money can’t buy kindness.
Sorry for being nasty 7.

I experience life as a continuous crisis and I need to do a better job of communicating.

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