Riffing on Wealth Inequality

Oh, and re: "The question why?," my point is that we might ought to ask people why they seek to "fix" inequality before we agree to debate the mechanics.

Paul Graham apparently doesn't think to ask.

This link works better:

http://www.paulgraham.com/paulgraham/inequality...>

There's plenty to disagree with, but it all starts with the question, "Why?"

IMO, there is a big difference between "the rich get richer and the poor get poorer" mentality which fuels collectivism and the "the rich get richer and the poor get richer, too" reality that we live in.

Thus, rather than "fixing" inequality, the emphasis should be on educating those who don't understand it, and protecting those who do from those who refuse to accept the truth.

Unfortunately, we have a political left in this country that finds it more convenient to feed on ignorance than to remedy it.

For a good read on inequality, see http://www.paulgraham.com/inequality.html.</p>

I'm with Paul on this one. Giving people an incentive to be on the upside of the inequality will cause them to take business risks to create wealth and achieve that end. When they succeed, lots of folks benefit. If inequality is not allowed, these same folks will not take the risks needed to create wealth, and everybody suffers.

"Most education majors at ou colleges and universities spend more time learning about 'diversity' and how not to offend students than they do about science, math, and reading."

You seem to be agreeing with my point. Kids need to be "offended" if their values are wrong.

The education professors are left-wing liberals. Teachers themselves are regular middle-class people often not especially political except to the extent that they've been brainwashed by the teacher's union to oppose educational reform. But otherwise, they just to the job they're told to do.

"(3) liberal political correctness that prevent teachers from telling the kid that the values being taught to him by his mother and his peers are wrong values."

I would argue that on this point it is the opposite; political correctness is preventing parents and peers from telling kids that what their liberal, politically correct teachers are telling them is crap. Most education majors at ou colleges and universities spend more time learning about "diversity" and how not to offend students than they do about science, math, and reading. It is no wonder that kids coming out of public schools don't know anything because those who are "teaching" them don't know anything either. This isn't the fault of the teachers so much as it is the fault of the leftist-dominated education establishment.

Incidentally, the best way to break this cycle is through private school systems that would be more able to make hiring and firing decision based on knowledge and performance. Schools of education would be forced to change their policies once a sufficient amount of their graduates failed to find employment. Students aren't going to pay for an Ed degree if it isn't going to get them a job in education.

"Or more precisely still, a desire to make themselves feel better by seizing a presumed moral high ground."

I would say that it is this motivation above all others that drives the redistribution crowd. I think that if you asked the average "poor" person, they would tell you that they just want a decent job an a chance to earn a living. It is those who, oftentimes not poor, take up the crusade against the rich in the name of the poor that want a handout or redistribution. They become what Sowell referrs to as the "anointed" and embark on a self-righteous crusade to make themselves look like they "care" more than the next guy. This could be motivated by guilt, but I think that the guilt motivation turns into a drive to take some moral high ground. This of course fails in reality because no one who advocates stealing from the rich for any reason can ba said to be on some moral high ground.

It got me thinking as well.

I actually believe inequality *is* rising -- or, to put it more precisely, social mobility is slowing. I think this is because misguided government policies hurt the poor more than the wealthy.

Take primary education. If you are an ambitious student growing up in a dysfunctional, or even just uninspiring family, schools can provide an important counterweight. By mucking up elementary schools, government is jeopardizing opportunities for millions of poor kids.

Increased business regulations disproportionally hurt small businesses. Somebody mentioned "The Millionaire Next Door" and that 80% of millionaires in the US are self-made. True, and most of them did it by starting their own business, something that becomes harder to do as regulations and taxes compromise the small business environment.

As incumbents pass laws to protect their seats, it becomes harder to fund election campaigns, which in turn favors the already wealthy. The problem here is more indirect, but probably does contribute to a widening gap.

These are just some ways a growing Federal government is retarding the economic dynamo, hurting the least privileged.

In terms of debating with progressives -- or anyone, actually -- it can be useful to accept the issue up-front. If I had been debating with Ms. Boushey, I would have said, "Yes, I agree that inequality is rising, and here's why." You throw them for a loop and get to set the terms of the debate. I've also found that people are more likely to listen if you agree with their concern. Of course, you shouldn't say anything you don't believe, and I'm not suggesting Prof. Roberts should have taken this approach, seeing as he's a much more capable and knowledgable debater than I am.

H-Sigma and J-Pertz,

Some public schools continue to produce literate young men and women. My Memphis suburban bookstore hired dozens over the past 13 years. Of course, illiterate folks never set foot in a bookstore, so my college freshman employees are probably not a representative sample.

Illiteracy is not likely to be a problem in upper middle class suburbs. It's the urban and small town schools here in Texas that have low reading and math scores. I agree that disinterested parents and disruptive peers increase the challenges for public schools. But those schools share some of the blame.

The Florida solution seemed the most promising to me: provide vouchers to students in poor performing schools. From what I've read, introducing competition resulted in higher test scores for both students who transferred out and for the schools they left behind. Apparently the poor performing schools feared losing funds so much that they shaped up. Vouchers won't work in single-school small towns, though.

John Pertz: "That is the funniest thing that Ive read on this blog is a while. Publicly funded education as a force for social good within the United States, tell that to the 12th grade kid with first grade reading skills who was the focus of a John Stossel special report on public schools in America."

I'm a product of public schools, and while it wasn't the best education, it's better than being illiterate.

I was careful to write "publicly funded education" and not "public education," leaving open the option that there are other acceptable models of education besides government operated schools, but they do require funding.

The illiterate 12th grade was failed by (1) a mother who doesn't care about education; (2) peers who don't care about education; (3) liberal political correctness that prevent teachers from telling the kid that the values being taught to him by his mother and his peers are wrong values.

Half Sigma said:

"Publicly funded education is a redistribution of wealth from rich to poor children. So you are opposed to publicly funded education. Without such education, the poor children would wind up illiterate and unable to contribute to a modern society.

Based on how awful things would be without publicly funded education, I have to conclude that well thought out wealth redistribution is a good thing (as opposed to poorly thought out, such as "here is your monthly stipend rewarding you for having a kid out of wedlock")."

That is the funniest thing that Ive read on this blog is a while. Publicly funded education as a force for social good within the United States, tell that to the 12th grade kid with first grade reading skills who was the focus of a John Stossel special report on public schools in America.

>Publicly funded primary education, preferably provided through private institutions, is one of the few wealth transfers I can understand.

And one of the few the founding fathers considered constitutional. I'm okay with it too, just don't think its necessary anymore. If we all had our taxes back, I don't think we'd see too many disadvantaged kids. Its still the law for kids to attend school. If parents refuse to pay, they will be forced to find a charitable institution.

Wealth is a complex topic that makes it difficult to compare today with tomorrow, but yesterday is settled. If you can buy your needs for less money today or a better quality good for the same money than you could yesterday, even if you made the same amount of money, your wealth has increased.

However, I do believe that you a optimistic in your belief that it will always be so. We have some rough financial seas ahead of us (you can always expect some) and I have some confidence that there will be periods of contraction of wealth creation relative to wealth destruction (dead weight loss).


One thing I was just wondering was whether some saving grace might be had in the fact that not only will demographic crunch happen at different times around the world, but that Europe will likely experience it before the US. Not only might it be a cautionary tale and speed up a solution, but will also be a test bed for solutions.

Publicly funded primary education, preferably provided through private institutions, is one of the few wealth transfers I can understand. I cannot see why a child should be forced to start out at a disadvantage because his parents cannot or will not fund his education. I also believe it is critical that our nation educate all of its future workers. I guess I would prefer vouchers of some sort.

>or is not comfortable because of a lack of some key things such as transportation to get to work and health insurance.

Most poor do not live in cities and buy used cars and trucks for a few hundred dollars, the rest live in cities where they have access to public transport. There are very few more without transportation. More than 60% own one or more cars according to the household survey - then to that we must add all those without cars living in cities with public transport and to that add those living on college campuses or at home wiht their parents. I suspect you end up at around 90-95% by that point. After that you have some substance abusers etc who may borrow a car or get a ride form others because they have gotten themselves in a bad spot.

>Based on how awful things would be without publicly funded education, I have to conclude that well thought out wealth redistribution is a good thing

Why would it be awful? A hundred years ago, this may have been true. Today there is a catholic school, other charity schools, scholarships etc within short distance of everyone; most people would get a big refund from government if we got rid of public schools and could use that money to pay for the school of their choice. Between the free or very cheap private choices (such as catholic school or schools with generous scholarships) and the tax refund, people would be much better off without public education.

SaulOhio,

Re; "I tend to get the feeling that people who want income redistribution actually are more interested in pulling down the rich than helping the poor. Its just an impression I get from talking to such people on the internet..."

I get the same impression. But I've also noticed that it isn't the poor I'm usually talking to on the internet. I've known poor people - and I've actually been poor. The poor don't care about discussions such as these. They're too busy trying to make ends meet to waste time on envy or conspiracy theories. It isn't envy that drives the social justice crowd - its guilt. More precisely, a desire to make non-guilty feeling people like me feel guilty. Or more precisely still, a desire to make themselves feel better by seizing a presumed moral high ground.

Don Boudreaux "For the record: Of course I do not believe that we should "redistribute" wealth for any reason"

Publicly funded education is a redistribution of wealth from rich to poor children. So you are opposed to publicly funded education. Without such education, the poor children would wind up illiterate and unable to contribute to a modern society.

Based on how awful things would be without publicly funded education, I have to conclude that well thought out wealth redistribution is a good thing (as opposed to poorly thought out, such as "here is your monthly stipend rewarding you for having a kid out of wedlock").

Thanks for the explanation, Mcwop.

I agree that mass transportation and health care could be improved. My solution is to removed government from both.

John,

Do not mean to imply that. Just pointing out that income inequality in and of itself does not cause the conditions I describe to exist. Things such as poor public transportation are often caused by government bungling, and misappropriation of the resources already within their realm. There are ways to create an environment where transportation and health insurance are more accessible without lowering wealth and income in the upper tiers.

Mcwop,

I assume you mean that those in the higher quintiles should provide public transport and better health insurance for those in the lowest quintile. Why? We're already allowing them to live in this country without paying income taxes. For many we provide subsidized housing and large "tax credits", which are in fact welfare. How much more should we burden the folks who are actually carrying the burden already? Please note from persson's post what life is like in a more socialist economy.

OOps. "to investment". My bad. Too early in the morning.

I tend to get the feeling that people who want income redistribution actually are more interested in pulling down the rich than helping the poor. Its just an impression I get from talking to such people on the internet, and I bet they would deny it, but I am pretty confident in this impression I get.

Of course, the way to help the poor most is to investment in industry, which is what redistribution would hinder, so their actions fit the motives I suspect, rather the ones they admit.

There is an interesting discussion at Angry Bear on inequality

http://angrybear.blogspot.com/2006/03/income-inequality.html

I posed a similar question as Don, in that inequality does exist, but what does that mean, what problems does it cause, and what are the solutions. Commenters offered some honest answers.

What I gathered from the discussion is that the lower income group is gripped by fear, and envy or is not comfortable because of a lack of some key things such as transportation to get to work and health insurance. Another issue is that wealthier folks have an advantage when petitioning government, by using campaign contribs - or as I call these - bribes.

I do not feel that the lack of these things is caused by the existence of inequality. You can kill off the top quintile, and I suspect that the poor will still lack these things. Providing better public transport or health insurance does not require a smaller gap either. Petitioning government would be easy to eliminate through legislation (no more campaign contribs), and then it is 1 man 1 vote (you do not need to narrow the income inequality gap to accomplish this).

Vouchers anyone???????????????

In Sweden the younger generation are poorer than the older generation. The employment rate is lower for the younger generation. The older generation who own their homes without any debt is in a good position. The system with high taxes (50% of GDP) leads to economic disaster. The poor pays 60% of their income in different kind of taxes - on income, VAT, gas, heating oil....... Social security is 33% on the wages.

asg,

I agree that future generations will have a tougher hill to climb because of the undeliverable promises made through social security and medicare. My view of the future, though, differs from yours. I believe we'll work it out without resorting to civil unrest and disorder. Some "solutions" I foresee:

1. Means-testing of benefits will likely result in less inequality of income across the retiree group. Ants like me who saved all our lives will lose out to my sibling grasshoppers.

2. An increase in retirement age may also increase the nation's GDP and the government's FICA revenues.

3. A reduction in military spending will lead to not just a corresponding loss in world status, but also a reduction in our world police responsibilities.

I don't think I'm being overly optimistic.

For the record: Of course I do not believe that we should "redistribute" wealth for any reason, and least of all to reduce the wealth of rich people.

I asked this question in my post in order to explore, in my own awkward way, the mindset of those who are enthusiastic about "redistribution."

Oops, I see my Treo mangled my comment above. Sorry. It should have read...

I assume you're joking. That redistribution could likely make the children of the poor poorer by slowing growth due to lessened incentives due to the redistribution. I've not many parents who would choose to reduce the future well being of their children in order to somewhat increase their own material well being.

Incidentally, I always found that to be a flaw of Rawls' difference principle (since you brought him up). The difference principle is static in nature and doesn't take into account how well off the descendents of players will be.

Is there anyway we can exclude trailer trash from posting on this blog?

Those kind are so pathetic. They even seem proud of their dire circumstances!

I think the view that younger generations will have higher incomes than older ones, despite programs like Social Security and massive deficit spending, is naive. Those programs may very well lead to civil unrest and disorder, as government reneges on promises it has made (or adopts confiscatory tax rates), undermining the institutions and rule of law that make possible the level of wealth creation we are accustomed to.

Don wrote: "So maybe we should instead focus on “redistribution” not so much to raise the living standards of poor people but to lower the living standards of wealthy people – so that homeless folks, and people living in mobile homes and in housing projects, won’t see people a great deal richer than they are."

I assume you're joking. That redistribution could likely make the children of the poor poorer by slowing growth due to lessened incentives due to the redistribution. I've not many parents who would ch

By "poor," I mean in my post only "poor" relative to typical, middle-class Americans in the early 21st century.

I am offended by your description of people living in mobile homes as "poor".

I live in a very nice 3 bedroom mobile home in NM. I was under the poverty line for a few years - I was a college student and used student loan money to pay my mortgage. However, we are now back in the top quintile - my husband and I are both trained in computer science. We will move in the next few years an dbuy a proper home - but this has been a great first home, on 13 wooded acres, of plenty a decent size for a couple (1240 sq ft).

In fact, our standard of living was higher than most in Europe, with a bigger home, two cars, nicer electronics etc.