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View Full Version : Who cares about the income gaps?




eugenekop
12-08-2010, 02:09 PM
Below is what I wrote at http://www.politicsforum.org/
I know you all agree with me, but I thought I'd still share this with you.

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What makes people so uncomfortable about the gaps between the rich and the poor? Why should anyone care what the gaps are? Why does it even play a role in government decisions? There are people who are in the most real sense a million times richer than myself, I don't hate them because of it, and I don't want to take their money. Why is it that envy became a matter of public policy?

Recently Israel became a member of the OECD, and since then OECD has constantly pressured Israel to do something about the income gaps. IMF (the International Monetary Fund) viciously complains about our gaps as well. How come the gaps in Israel are so big they say, it hurts the economy! But why does it hurt the economy if the western countries with the highest GINI index (with the highest income inequality), Singapore, Hong-Kong and the United States have also the highest GDP per capita (economic output)? And how come these same countries have also among the highest median incomes in the world (http://adamcadre.ac/calendar/13127.php)?

The grand fallacy that the majority of people subscribe to is that economics is a zero-sum game. If Bill Gates has 50 billion it means the general public is 50 billion poorer. It is of course nothing close the truth. There is no limit to wealth, and wealth in the free market is not made at the expense of someone, it is made in supplement. As the greatest popular writer of economic matters of our times, Thomas Sowell, put it succinctly:



The biggest fallacy in terms of being the foundation of other fallacies, is what I call the zero-sum fallacy. That's the notion if one party gains, the other party must lose when in fact, it would make absolutely no sense for the transaction to go on (voluntarily) unless both parties gained....


So why do we still hear about income disparity from international financial institutions? If it is not about economic efficiency, then what is it about? The answer is much more sinister than what why'd like to believe. I'll quote another Libertarian who summed this perfectly.



Think about it. What are the values we try to inculcate in our children? Generosity, sharing, joy for the good-fortune of others. And what values do we condemn in them? Resentment, envy, and the inability to rejoice in (or at least respect) the achievements of others. Yet when it comes to the fashioning of economic and social policy we somehow think its ok to reverse these values and extol the benefits of enforced equality, elevating resentment and envy to national virtues. Echoing Adam Smith, how can what are vices of private behavior become virtues when practiced by government?

Elwar
12-08-2010, 02:10 PM
Classism.

Acala
12-08-2010, 02:22 PM
I agree with your point, BUT:

This is not a free market and the law has been skewed in such a way that the working poor and middle class have been screwed for the benefit of those who control government. Regularions, licensure laws, labor laws, banking laws, inflation, and so on all conspire to increase the wealth gap far beyond what it would be in a free market. Many of those laws also acts as barriers to upward mobility.

So while a wealth gap in a free market is not a matter of concern, it IS a matter of concern when it is exacerbated and to a large extent institutionalized in our fascist economy.

virgil47
12-08-2010, 02:25 PM
Below is what I wrote at http://www.politicsforum.org/
I know you all agree with me, but I thought I'd still share this with you.

************************************************** **************


What makes people so uncomfortable about the gaps between the rich and the poor? Why should anyone care what the gaps are? Why does it even play a role in government decisions? There are people who are in the most real sense a million times richer than myself, I don't hate them because of it, and I don't want to take their money. Why is it that envy became a matter of public policy?

Recently Israel became a member of the OECD, and since then OECD has constantly pressured Israel to do something about the income gaps. IMF (the International Monetary Fund) viciously complains about our gaps as well. How come the gaps in Israel are so big they say, it hurts the economy! But why does it hurt the economy if the western countries with the highest GINI index (with the highest income inequality), Singapore, Hong-Kong and the United States have also the highest GDP per capita (economic output)? And how come these same countries have also among the highest median incomes in the world (http://adamcadre.ac/calendar/13127.php)?

The grand fallacy that the majority of people subscribe to is that economics is a zero-sum game. If Bill Gates has 50 billion it means the general public is 50 billion poorer. It is of course nothing close the truth. There is no limit to wealth, and wealth in the free market is not made at the expense of someone, it is made in supplement. As the greatest popular writer of economic matters of our times, Thomas Sowell, put it succinctly:




So why do we still hear about income disparity from international financial institutions? If it is not about economic efficiency, then what is it about? The answer is much more sinister than what why'd like to believe. I'll quote another Libertarian who summed this perfectly.

Marxism and the wealth redistribution that goes with it. In reallity it is the use of class warfare to balkinize the U.S. population. You know divide and conquer!

ChaosControl
12-08-2010, 02:45 PM
I dislike the gap.

I don't think it should be so large, but I think it is mostly so large because of government involvement to begin with.

I think people should receive based on on the worth they labor for, so I think workers should make more and owners and executives less, but again I don't think that is for government to be involved with.

akforme
12-08-2010, 02:56 PM
They hate the rich because they lobby for government power, they don't realize it's the power that's the problem because giving the state more power is always their cure. They see government as what they were told in text books, not an unaccountable force that is up for sale for the highest bidder, that will always help those who lobby over those who vote. They hate government they just don't realize it because they've been trained to just hate the right. It's like they can't see the forest thru the trees.

jmdrake
12-08-2010, 02:59 PM
The biggest fallacy in terms of being the foundation of other fallacies, is what I call the zero-sum fallacy. That's the notion if one party gains, the other party must lose when in fact, it would make absolutely no sense for the transaction to go on (voluntarily) unless both parties gained....

Here's the problem with Sowell's logic. There are third parties who have opportunity costs. Sure if Walmart puts the local grocer out of business, the people who shop and Walmart and Walmart have both "gained". But the other guy just lost. Same goes for the crappy junk bought at Walmart that was made in China for garbage wages.

Now before someone goes all "You're against the free market" on me, hear me out. The reason the crappy junk can be made so much cheaper in China than in the U.S. is that the federal government puts restrictions on U.S. businesses that don't exist in China. And sometimes this happens as a result of Chinese malfeasance. For example, when China sold lead coated toys to American, the federal government responded by passing a law requiring all toys be tested for lead paint. But you can't find lead paint in America! Common sense would dictate American toy makers would be exempt. Well one toy maker was exempt. That was Mattel the very U.S. company that had imported the poison toys from China in the first place!

Alright. Long post for a short point. There are losers in the current system largely because government meddling helps create them. We don't do ourselves any favor by pretending they don't exist.

eugenekop
12-08-2010, 03:13 PM
Look guys I disagree with you about this argument that the government makes the gaps larger. Hong-Kong, the most Libertarian state on the planet has also the highest income gaps in the western world.

Acala
12-08-2010, 03:20 PM
Look guys I disagree with you about this argument that the government makes the gaps larger. Hong-Kong, the most Libertarian state on the planet has also the highest income gaps in the western world.

Do you understand how inflation takes value from out of people's pockets?

Do you understand how business regulation inhibits competititon?

Do you understand how licensure laws create barriers to peeople trying to imprvoe their income?

If not you need to hit the books again. If so, then right there you have three mechanisms whereby government enriches the upper economic classes by holding down the lower economic classes

eugenekop
12-08-2010, 03:22 PM
If not you need to hit the books again. If so, then right there you have three mechanisms whereby government enriches the upper economic classes by holding down the lower economic classes

Yes, but at the same time it decreases these gaps by massive welfare programs. How else can you explain bigger income gaps in countries with less developed welfare systems, such as Russia, Hong-Kong, Brazil, etc...?

akforme
12-08-2010, 04:26 PM
We could give everyone on this planet the same amount of money today and by tomorrow you'd have income gaps.

VBRonPaulFan
12-08-2010, 04:31 PM
I dislike the gap.

I don't think it should be so large, but I think it is mostly so large because of government involvement to begin with.

I think people should receive based on on the worth they labor for, so I think workers should make more and owners and executives less, but again I don't think that is for government to be involved with.

I think that's silly. Anyone can swing a hammer, it takes a great mind to tell a group of people how/where to swing them to create a meaningful building.

Laborers are paid less because anyone can do it. Not everyone has a analytic, innovative mind. That is why owners/exec's get paid more. Serious mental exertion can be much more tiring than physical...

jmdrake
12-08-2010, 04:56 PM
Yes, but at the same time it decreases these gaps by massive welfare programs. How else can you explain bigger income gaps in countries with less developed welfare systems, such as Russia, Hong-Kong, Brazil, etc...?

I can't believe you're putting Russia in your list with a straight face. Russia became bankrupt in large part because it had a much more developed welfare system than the U.S. And ultimately the "massive welfare programs" are an illusion because they are based on counterfeit money.

eugenekop
12-08-2010, 04:58 PM
The best argument someone came up in that forum was:


Because if a society is improving, it should improve equally for all segments of society, not more for one and less for another.

To which I replied with the following:

The problem is that empirically, the more egalitarian is the increase in overall well being, the less increase overall there is. That's why the highest growths rates (by GDP or by average income) are achieved in countries with the least amount of welfare spending. Let's take the following example.

Two countries A and B have absolutely egalitarian income distribution. Then country A decided to go the Libertarian way. Let's then assume that the yearly growth in country A will be divided unequally - 4/5 goes to the rich and 1/5 goes to the poor. Country B decided to adopt the "Swedish model", so the growth will be divided more equally - 3/4 to the rich and 1/4 to the poor. According to almost endless evidence which shows that egalitarianism inhibits growth, we can safely assume that while country A increases its wealth by 20% each year, country B increases its wealth only by 10%.

Let's start with a net wealth of 1 trillion for each country, and look at how these countries develop.

The increase in the wealth of the poor in billions , by country:
After 1 year:
A: 240 (total: 1200)
B: 275 (total: 1100)
After 2 years:
A: 288 (total: 1440)
B: 302 (total: 1210)
After 3 years:
A: 345 (total: 1728)
B: 332 (total: 1331)

As you see, even though at the beginning the poor of country B have increased their wealth more than the poor in country A, the situation reverses itself after 3 years. After 5 years the total increase in wealth will be bigger for the poor of country A. In 10-20 years the poor of country A will be richer than the rich of country B. This continues to grow exponentially, until in theory the poor in country A will be millions of timer richer than even the rich of country B.

ChaosControl
12-08-2010, 05:21 PM
Look guys I disagree with you about this argument that the government makes the gaps larger. Hong-Kong, the most Libertarian state on the planet has also the highest income gaps in the western world.

It still has corporations who have limited liability. That is one of the major problems. Corporations shouldn't exist, they are a government creation.

ChaosControl
12-08-2010, 05:25 PM
I think that's silly. Anyone can swing a hammer, it takes a great mind to tell a group of people how/where to swing them to create a meaningful building.

Laborers are paid less because anyone can do it. Not everyone has a analytic, innovative mind. That is why owners/exec's get paid more. Serious mental exertion can be much more tiring than physical...


It can be, but not usually is that the case. Just because anyone can do something doesn't mean they shouldn't be paid for it. Their labor creates value in something, they should be entitled to receive back the value they create. This is why I prefer businesses being owned by employees instead of stock holders who do nothing but click a button to buy shares and vote on board members. Yes the executive who has spent years in the business and has the experience and makes a lot of decisions that are needed should be paid more as they are responsible for creating more value, but the discrepancy of pay you see in large corporations is ridiculous. There is no way an executive should be paid 50x more, let alone 300x more than any other worker in the organization. After all the executive is still nothing without all the laborers.

LibForestPaul
12-08-2010, 05:32 PM
Yes, but at the same time it decreases these gaps by massive welfare programs. How else can you explain bigger income gaps in countries with less developed welfare systems, such as Russia, Hong-Kong, Brazil, etc...?
explanation #1:
Because the top no longer need to fear the bottom in those countries. If they were, they would be providing welfare.

eugenekop
12-08-2010, 05:44 PM
By the way, does anyone have data about the relation between welfare spending and growth?

oyarde
12-08-2010, 08:50 PM
By the way, does anyone have data about the relation between welfare spending and growth?

Look at California .

eugenekop
12-09-2010, 01:47 AM
There is the Rahn curve (http://www.economicshelp.org/blog/economics/the-rahn-curve-economic-growth-and-level-of-spending/)
But I can't find a real list of countries with growth rates vs public spending figures.

ForeverAlone
12-09-2010, 03:23 AM
It can be, but not usually is that the case. Just because anyone can do something doesn't mean they shouldn't be paid for it. Their labor creates value in something, they should be entitled to receive back the value they create. This is why I prefer businesses being owned by employees instead of stock holders who do nothing but click a button to buy shares and vote on board members. Yes the executive who has spent years in the business and has the experience and makes a lot of decisions that are needed should be paid more as they are responsible for creating more value, but the discrepancy of pay you see in large corporations is ridiculous. There is no way an executive should be paid 50x more, let alone 300x more than any other worker in the organization. After all the executive is still nothing without all the laborers.

Exactly, we should pass a law making laborers and executives pay more fair and equal. :rolleyes:

How exactly would you remedy this if it's so bad? I don't think "if we had a free market" explanation would work. We had much more of a free market at the beginning of the 20th century and there were plenty of super rich people that got rich with little or no help from the government. And they may have been paid upwards of 500x more than the people they hired.

And corporations are not simply government creations. Corporations can exist in a free market. Did you get that from the liberal propaganda film "The Corporation?"

jmdrake
12-09-2010, 06:17 AM
It can be, but not usually is that the case. Just because anyone can do something doesn't mean they shouldn't be paid for it. Their labor creates value in something, they should be entitled to receive back the value they create. This is why I prefer businesses being owned by employees instead of stock holders who do nothing but click a button to buy shares and vote on board members. Yes the executive who has spent years in the business and has the experience and makes a lot of decisions that are needed should be paid more as they are responsible for creating more value, but the discrepancy of pay you see in large corporations is ridiculous. There is no way an executive should be paid 50x more, let alone 300x more than any other worker in the organization. After all the executive is still nothing without all the laborers.

There's no law barring workers from buying stock in the companies they work for. That said some workers have lost their shirts investing in the companies they work for.

Koz
12-09-2010, 06:35 AM
do you understand how inflation takes value from out of people's pockets?

Do you understand how business regulation inhibits competititon?

Do you understand how licensure laws create barriers to peeople trying to imprvoe their income?

If not you need to hit the books again. If so, then right there you have three mechanisms whereby government enriches the upper economic classes by holding down the lower economic classes

+1000

Koz
12-09-2010, 06:50 AM
I think that's silly. Anyone can swing a hammer, it takes a great mind to tell a group of people how/where to swing them to create a meaningful building.

Laborers are paid less because anyone can do it. Not everyone has a analytic, innovative mind. That is why owners/exec's get paid more. Serious mental exertion can be much more tiring than physical...

On some level this is true.

I just met a carpenter/contractor that was about to go out of business about a year ago. He was looking for a better way to ply his trade but make an actual profit and put food on the table. His idea was ingenious. He got a job to build a gazebo for around $8k, which he did. He made a few bucks, but in the end he surmised that if he would have built it in his barn without moving tools and driving time he could really control costs. So, he went looking for some more gazebo work and built the next one in his barn. Present day he has built around 100 gazebos this year and he makes all of them in his barn and transports them to the location. He told me next year he should (after materials and labor) make around $250k. He has one employee.

This guy still swings the hammer, he just found a better way. Oh, and he is charging about 15% less than anyone else because he can control costs. He's making these $8k gazebos for around $3k.

This is capitalism at it's best. No income redistribution needed.

eugenekop
12-10-2010, 08:50 AM
Continuing my journey of evangelism :-)


Everyone will agree with the basic principle that if two individuals agree to perform a transaction that doesn't hurt any another individual, this transaction should be legal.

Yet despite the simplicity of this principle, and economical principles in general, so many economists and government officials can't see this simple truth. Instead they are busy "stimulating" the economy. So they take some money from one person and give that money to another, whether this is achieved by playing with the interest rates, by quantitative easing, by subsidizing some financial institutions and industries, or by setting restrictions and regulations on currently unpopular businesses.

In order to find our way in this maze of complexity we must turn to the basics. If two people trade with one another, it is always a mutually beneficial transaction. Now do we want people to be satisfied in our country by trading freely with each other, or we want the government to play god and take money from some people and give it to others because the government thinks it will "stimulate" or "stabilize" the economy. What is economy anyway if not a collection of individuals making individual decisions? How can the economy by stimulated if some voluntary transactions are banned and other voluntary transactions are taxed more than others? Surely some people will be stimulated by this income redistribution, but to cloak what is nothing but income redistribution as "stimulation" to the "economy" is dishonest at best.

Let's not give the socialists deceive us. There is nothing wrong with the economy, in fact the word "economy" is meaningless. As long as we are able to trade freely the "economy" will always be sound. But as soon as we subject ourselves to income redistribution for the "sake" of the economy, we become victims of institutionalized robbery.

RedStripe
12-10-2010, 08:57 AM
As others have said, the massive income gaps we see are largely the byproduct of government favoritism at a subtle, structural economic level (the very rules of the game, rather direct overt acts of assistance).

But let's not stop there. Let's consider libertarian strategy and the history of liberty as a phenomenon. If you don't think that economic elites and political elites come hand-in-hand, you are a fool. If you don't think that the government is and always has been of, by, and for the rich, you are a fool.

A high concentration of wealth in a small number of hands, in disproportion to the rest of a society, is perhaps the most important ingredients of tyranny. It is a phenomenon that, not by accident, is almost always associated with the existence of a powerful state controlled by those very same hands.

Centralization of political power and centralization of economic power aren't even really separate phenomenons. They are mutually-reinforcing social trends. Just as war is the continuation of politics by other means, politics - and the state - is the continuation of economics by another means.

Travlyr
12-10-2010, 09:24 AM
On some level this is true.

I just met a carpenter/contractor that was about to go out of business about a year ago. He was looking for a better way to ply his trade but make an actual profit and put food on the table. His idea was ingenious. He got a job to build a gazebo for around $8k, which he did. He made a few bucks, but in the end he surmised that if he would have built it in his barn without moving tools and driving time he could really control costs. So, he went looking for some more gazebo work and built the next one in his barn. Present day he has built around 100 gazebos this year and he makes all of them in his barn and transports them to the location. He told me next year he should (after materials and labor) make around $250k. He has one employee.

This guy still swings the hammer, he just found a better way. Oh, and he is charging about 15% less than anyone else because he can control costs. He's making these $8k gazebos for around $3k.

This is capitalism at it's best. No income redistribution needed.

This is capitalism at it's best. But, this is illegal in many places due to county zoning laws. In many zoned counties, the authorities would prevent this carpenter from applying his innovative skills to compete and produce a better product by placing unnecessary regulations, fees and fines.

This carpenter who does not have to succumb to government business oversight has a competitive advantage over the carpenter who must get permission, licenses, permits, industrial use buildings, and yearly inspections.

Government regulations on business fail to protect the consumer while they demand extra expenses on business which, in turn, have no choice but to produce lower quality products, or not compete.