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Subject: Modest thought on risk and inequality rss

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Kelsey Rinella
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I've seen it mentioned that income inequality isn't as big a deal as liberals think, because there's lots of mobility, with many different families represented among the top 1% in any five-year period (or something similar).

It occurs to me that this is exactly what we'd expect if opportunity is substantially tied to risk. Those who are well off enough to be able to tolerate large losses can take big risks without potentially disastrous consequences. Some years, that'll pay off big; other years they'll lose big, but overall they make a much better return on their labors than those who are poor enough that a year in which they earned no money would be catastrophic for their family.

So I'm not seeing how this defuses the concern about wealth inequality. Thoughts?
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Luke Wunderlin
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I cannot see how income/wealth inequality is/or should be an issue. With the premise that people shouldn't have a say in whom one can date/marry, why should anyone have a say in how much a person makes/owns? Any solution I have seen to "Income/wealth inequality" infringes on the rights of private property rights (progressive taxation, income redistribution, etc). The wants of the many do not, and should not trump the rights of the few.

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Kelsey Rinella
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shaftdiggity wrote:
I cannot see how income/wealth inequality is/or should be an issue. With the premise that people shouldn't have a say in whom one can date/marry, why should anyone have a say in how much a person makes/owns? Any solution I have seen to "Income/wealth inequality" infringes on the rights of private property rights (progressive taxation, income redistribution, etc). The wants of the many do not, and should not trump the rights of the few.

meeple


I actually agree with that, I think; nobody should have a say in how much a person makes/owns. But they do--some people control the capital necessary to make money. These people are able to determine who else is able to make money. That kind of stinks, but it's efficient enough that we're all better for it, so we accept it. However, we mostly think that everyone ought to have an opportunity to be one of the people with the capital (an equal opportunity, other things being equal).

I suspect we'd feel similarly if there were some massive societal benefit to having a small number of people control who gets to marry whom--that system should at least avoid causing any further injustices than the power imbalance necessary to it.
 
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The problem is not specific inequality of wealth but systematic inequality. If in practice as well as in principle wealth and power are equally accessible to all, then there is no problem. The problem rises when the status of wealth and power becomes self-perpetuating so that in practice wealth and power are not equally accessible to all, even if in principle they are.
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Josh
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shaftdiggity wrote:
The wants of the many do not, and should not trump the rights of the few.
meeple


The problem with making that an Axiom is that if the wants of the many aren't served to a certain minimum then they'll simply dis-invest from the system. This has in the past normally been done with various implements of destruction. Interestingly it may also be a part of the rise in voluntary removal from the workforce. If I can 'get by' with no effort, and busting my ass only has a 5% chance(figure pulled from ass) of earning me much more than 'getting by', I can see a non-violent form of disinvestment occurring. This is not a clarion call to remove the safety net to 'boot out the slackers' Those same 'slackers' will burn down the farm if you remove the bare minimum without providing opportunity they feel is tangible to match.

As I've said before, Welfare benefits the rich more than the poor.
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One of the aims of society is generally assumed by a lot of people to be the efficient allocation of resources. Indeed, many people claim that the way it efficiently allocates of resources is one of the big selling points of capitalism. Extreme wealth inequality suggests a poor allocation of resources to me.
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shaftdiggity wrote:
why should anyone have a say in how much a person makes/owns?


With the exception of someone earning and then using their own resources and nothing else, doesn't some else always have a say in how much someone earns?
 
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Mac Mcleod
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rinelk wrote:
I've seen it mentioned that income inequality isn't as big a deal as liberals think, because there's lots of mobility, with many different families represented among the top 1% in any five-year period (or something similar).

It occurs to me that this is exactly what we'd expect if opportunity is substantially tied to risk. Those who are well off enough to be able to tolerate large losses can take big risks without potentially disastrous consequences. Some years, that'll pay off big; other years they'll lose big, but overall they make a much better return on their labors than those who are poor enough that a year in which they earned no money would be catastrophic for their family.

So I'm not seeing how this defuses the concern about wealth inequality. Thoughts?


Facts about the turnover here
http://mjperry.blogspot.com/2009/01/significant-turnover-in-...

And some info about their tax rate:
http://wweek.com/portland/article-17350-9_things_the_rich_do...
Key points
3) the wealthiest pay a lower tax rate than most americans.
4) Many of the very richest pay no taxes at all

Finally..http://blogs.wsj.com/wealth/2011/11/16/the-1-who-fall-down-t...
Quote:
The incomes of the top 1% are even more volatile. According to the paper, 57% of the top 1% of earners in 2007 remained 1% earners in 2009. That means that 43% of the one-percenters fell off the top rung during those two years – with most falling to the 90% plus crowd, but with 8% falling to the 50% to 90% group.


Keep in mind that some (many?) of the 1% don't "fall" out of the top 1%-- they just grow wealthy slower than others who bump them out of the top 1%.

Finally- consider the way the last financial meltdown played out. A lot of people got very rich illegally and took a small amount of money from a lot of people (including the tax payers) and paid "fines" which were a fraction of the amount they earned illegally.
And the government didn't prosecute them.

Quote:
Income Inequality, Mobility and Turnover at the Top in the U.S., 1987 – 2010
Gerald Auten
Geoffrey Gee
And
Nicholas Turner
Cross-sectional Census data, survey data or income tax returns (Saez 2003) generally show increasing income inequality in the U.S. for the past several decades.
...


STATUS IN 2007 OF DEPENDENTS AGE 15-18 IN 1987
I.e. if your parents were in the bracket on the left column-- here is your income now. I.e. 13.65% of the children of 1%'ers are 1%'ers themselves.

1987Inc Died NotFnd Negative First 2nd Mddle 4th Highest Top10% Top5% Top1%
Lowest 2.27 8.07 0.53 26.57 17.35 18.45 17.08 9.67 4.22 1.67 0.36
Second 1.48 4.90 0.68 16.77 19.13 20.97 21.61 14.46 5.92 2.28 0.44
Middle 1.37 3.09 0.38 13.54 15.11 21.32 24.22 20.97 10.19 5.31 0.78
Fourth 1.00 2.12 0.79 10.41 13.30 19.30 24.75 28.32 13.92 5.77 1.29
Highest 1.17 1.90 0.55 8.17 9.08 15.72 24.10 39.31 25.19 15.26 4.23
Top 10% 1.17 1.59 0.76 8.64 7.55 12.33 21.77 46.19 30.16 18.89 5.53
Top 5% 1.05 1.50 0.83 7.50 6.84 11.68 20.07 50.54 34.28 22.93 7.65
Top 1% 1.09 1.87 1.38 6.37 7.57 10.64 15.53 55.54 43.22 32.49 13.65


Basically if you had a low income in 1987, you died at over twice the rate of the top 5% and close to twice the rate of the highest and over the fourth income bracket.
1% of the turnover appears to be due to death (so 4 per year- so over 15 years, about 60 died out of the top 1%).

Interesting that the top 10% and up died at a higher rate than the 4th income quintile. Long work hours? Type "A" personalities?


Other than that- this is my hot button so I'm going to opt out on this one.
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Income and wealth work differently for people who aren't living off the income from a "normal" (95%er) job. An analysis of the "high end" has to include things that don't show up or aren't useful for the "low end".

For example:
* A very large income from a stable source will quickly be converted into something else as a direct result of tax optimization
* A huge income isn't required to stay rich
* ...

(PS: This post is just about being careful with statistics - it's consistent with the OP's "modest proposal", and doesn't imply any of the numbers or conclusions that have been posted are wrong)
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