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> Income and Wealth Disparity, what's the dealio?
Bikerdad
post Aug 21 2011, 08:11 AM
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A common issue raised by politicians seeking office and pundits is the subject of wealth and income disparity. The matter is already in play for this election cycle, with the President's "tax the rich" approach. Now, given that many politicians continue to return to this well, year after year, decade after decade, clearly it must carry some weight with some voters. So I have a simple question for debate:

What is wrong with increasing wealth disparity?
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Amlord
post Aug 23 2011, 02:30 PM
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QUOTE(AuthorMusician @ Aug 23 2011, 09:52 AM) *
Along the virtual edges of Wall Street exist high-end computers that perform trades faster than any human being can accurately conceive. You can't snap your fingers fast enough.

Running these computers are software programs that the brightest and best of our software developers create and make seven-figure incomes while doing so. They are paid millions to generate billions in revenue for big financial corporations, who are now actually people in the eyes of the SCOTUS.

Corruption to this depth has never been experienced before in any nation. We get to see what happens, and we have been seeing it. This can't be brushed off with a broad statement that all nations at all times have been corrupt to some degree. It's as meaningless as saying that weather has always been changing. So what?


Can you point to some actual corruption? Pointing out that computers make trades on Wall Street is not corruption.

QUOTE(AuthorMusician @ Aug 23 2011, 09:52 AM) *
The questions have to be what things will happen automatically to regulate the flow of wealth to the top, and concentration of that wealth among a few people, and what things will have to be enforced to regulate the flow of wealth within an economy that has computers, as described herein, at its edges. I'm not talking Apples here. These are top-of-the-line IBM and Oracle (formerly Sun Micro) machines.

One of the strengths of 18th Century capitalism was that it involved real-time human interactions. Today those interactions barely make a blip on the radar. The players on Wall Street aren't people at all, but corporations with computers who can afford the programming talent. Although I dedicated the greater portion of my life to advancing the computer field, this part of it brings shame. I am sorry the tech was put to this purpose, and I really didn't see it coming. It seemed that computerized trading would actually open the doors for the average income earner to learn investing and trading. However, with powerful computers in the mix, it has become a monster that may be out of control.

This is how the economic system is rigged to always gather money from the marks and funnel it to the top. Then when the economic system fails, the government is there to bail out the forces of greed, the Republicans are there to shift the burden to the middle class (original marks), and so the entire system is bound to eventually fail.

It will fail when the marks no longer have investment funds to plunder and too much wealth has concentrated at the top among too few people. If wealth no longer flows through an economy, the economy stagnates and dies. Those at the top will be left with worthless fiat money in the form of numbers within computers that have also become useless.

What then? I hate to think about it. Hopefully, we'll be smart enough to avoid that situation.

You have given no evidence that what you say is occurring will lead to financial ruin. You've actually demonstrated that money is flowing through the economy without human intervention. Those computers aren't stifling the movement of money, they are speeding up the movement.
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akaCG
post Aug 23 2011, 02:46 PM
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QUOTE(quarkhead @ Aug 22 2011, 06:39 PM) *
QUOTE(akaCG @ Aug 22 2011, 12:57 PM) *
What is wrong with increasing wealth disparity?

In and of itself, nothing.

QUOTE(AuthorMusician @ Aug 21 2011, 06:00 AM) *
What is wrong with increasing wealth disparity?

Loss of a middle class that leads to the collapse of the economic base, thereby fomenting violent revolution, military coups, currency instability, organized crime, and basically what has happened in Mexico.
...

Obviously, then, we need to institute policies that will take us back to the GINI Index readings of the 60s and 70s, a period well known for its admirably low levels of societal upheaval, political violence, organized crime, currency instability, etc.

I get that you're being sarcastic... but said sarcasm implies you are making a link between lower income inequality and greater social upheaval. That's an incredibly bold assertion. Are you prepared to back it up with anything other than random correlation? Please, do tell. How exactly was a relative lack of income inequality the cause of "societal upheaval, political violence, organized crime, currency instability, etc?" The world wants to know! I'm certainly interested in knowing your answer, as I happen to have a bridge for sale.

Er, no, "said sarcasm" implies nothing of the kind.

"AM"'s post claims that increasing wealth inequality leads to increasing social upheaval. A claim that implies that wealth inequality and social upheaval are linked in positive correlation/causation fashion, i.e. that high levels of wealth inequality ---> high levels of social upheaval, while low levels of wealth inequality ---> low levels of social upheaval.

By way of "said sarcasm", I responded to "AM"'s claim by pointing to the 60s and 70s, a period of substantially lower levels of wealth inequality BUT substantially higher levels of social upheaval, thus exposing the fallacy of drawing a link between levels of wealth inequality and levels of social upheaval.

IOW, it's "AM" who's claiming that there's a link between wealth inequality and social upheaval, while it's I who's claiming that there isn't.

Hope that helps.

ps:
Now that you know what it is that "said sarcasm" actually implies, would you kindly let the rest of "the world" know?

ps2:
Best of luck selling that bridge.

EDITED TO ADD:

QUOTE(Mrs. Pigpen @ Aug 22 2011, 04:20 PM) *
QUOTE(akaCG @ Aug 22 2011, 03:57 PM) *
QUOTE(Mrs. Pigpen @ Aug 22 2011, 12:31 PM) *
...
Here's a summary of the relative position of the US in 2008 regarding income disparity.

According to this, the United States has the highest level of "income inequality" of any country in the OECD (except Mexico and Turkey) as well as the highest level of wealth inequality, wealth inequality being much higher than the income inequality. The top 10% in the US have 28% of total income, but 71% of total net worth.

The OECD summary, unfortunately, provides no wealth inequality comparisons between the U.S. and other OECD countries. Here's one that does (chart on page 6), which shows the following (ascending order of wealth inequality; "eye ball" approximations):

OECD-24 average: .65
Germany: .66
Canada: .69
U.K.: .70
France: .74
Sweden: .75
U.S.: .79
Switzerland: .80
Denmark: .81

I'd say we're in pretty good company.

Actually, the report did offer this comparison, though summary didn't....as it was only a 'summary'. Here's a more comprehensive link. It's table one, left side, entitled 'gap between rich and poor' (2005). And our company looks to be more Poland and Turkey than Denmark or Germany.
...

No, neither the full report nor its summary offers a comparison of WEALTH inequality. They only offer a comparison of INCOME inequality. The only bit that I could find in the full report that even approaches the general neighborhood of offering a comparison of WEALTH inequality is on page 6, where it states:

"Intriguingly, the difference between income and wealth disparities is largest in countries with relatively equal distribution of incomes, such as Germany and Sweden."

That's it.

QUOTE(Mrs. Pigpen @ Aug 22 2011, 04:20 PM) *
...
I don't understand the reference to chart (6) in your link as a wealth disparity comparison...I'd think if you want to make a comparison of wealth inequality you'd compare the difference between rich (highest 10 percent) and poor (lowest 10) or something like that, which is pretty straightforward...not some extrapolation of the Wealth Gini coefficient versus percentage gpd taxed? huh.gif

No problem. It wasn't as easy to find as income inequality statistics/papers/articles (Gee, I wonder why? Surely it's got nothing to do with the fact that, instead of Turkey and Mexico, it puts the U.S. in the company of Sweden, Switzerland, Denmark, etc.. /), but here is an analysis thereof in those terms, which shows the following:

Wealth owned by top 10%

Switzerland 71.3%
United States 69.8%
Denmark 65.0%
France 61.0%
Sweden 58.6%
UK 56.0%
Canada 53.0%
Norway 50.5%
Germany 44.4%
Finland 42.3%

BTW, as far as Sweden specifically is concerned, its wealth inequality seems to be severely understated:
QUOTE
...
Looking at wealth concentration, the difference between Sweden and the U.S. is also significant when comparing official numbers. In Sweden the share of total private wealth held by the richest 1 percent of households is about 20 percent. The corresponding number in the U.S. is 35 percent. However, there are a number of aspects about Swedish wealth that are not well captured by these statistics. There is, for instance, plenty of anecdotal evidence suggesting that large sums of money have been moved out of the country to avoid taxation. It is also well known that the values of closely held companies are likely to be seriously underestimated.

And what about rich, successful Swedish citizens, such as Ingvar Kamprad, founder and owner of IKEA? Is it obvious that they should not be included? We have tried to estimate the effects of adding these factors, and the results are astounding. When including wealth abroad, the share held by the wealthiest 1 percent increases to around 30 percent; when also adding underestimated wealth held in Sweden, the share is close to 35 percent; and when also including the wealth of the super-rich Swedes who have left the country (but remain citizens), the share is almost 40 percent—that is, higher than in the U.S. Our attempts at making similar corrections for the U.S. series resulted in almost no change in wealth concentration.
...

Link: http://sacc-usa.org/currents/col/guest/new...-in-inequality/

Intriguing, no?

Here's some additional intriguing reading:

http://www.thefiscaltimes.com/Articles/201...Deck.aspx#page1

This post has been edited by akaCG: Aug 23 2011, 04:02 PM
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AuthorMusician
post Aug 23 2011, 04:48 PM
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QUOTE(Amlord @ Aug 23 2011, 10:30 AM) *
You have given no evidence that what you say is occurring will lead to financial ruin. You've actually demonstrated that money is flowing through the economy without human intervention. Those computers aren't stifling the movement of money, they are speeding up the movement.


First off, you can't afford the caliber of computers at the edge of Wall Street. Second off, you cannot afford the top software developers. Neither can anyone else but the major corporate players on Wall Street: the investment bankers.

What's corrupt about this is systemic. The draw is from the relatively small investors to the big guys, since the investing playing field is so skewed toward the giant investment firms that can afford the computers and software development talent.

WSJ on high-frequency trading

CNN - Computers Rule Wall Street

So sure, the computers are speeding up the movement of money from the bottom of the economy to the top. That is the problem, since the movement back down is anemic and will eventually become non-existent. Then the economy collapses.

But you are right -- computers have put the peddle to the metal, and we speed onward toward the cliff.

It would be a good graphic to plot out the growth of the computer industry in terms of computing power verses the growth in wealth disparity. Not sure if anyone has done this, but I can envision it. Correlation or cause/effect?

Wired Magazine: Algorithms Take Control of Wall Street

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Hobbes
post Aug 23 2011, 05:34 PM
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QUOTE(Dingo @ Aug 23 2011, 04:50 AM) *
QUOTE(Hobbes @ Aug 22 2011, 09:44 PM) *
If you're going to play the corruption card, I'd lay it more on the politicians

Whose buying them?


Everyone with money, and their own desire to have more of it and distribute it to those they know. Corruption frequently works both ways with politicians--lots of people anxious to give them money for favors, and they can also steer contracts towards companies where their friends and relatives work, which were frequently essentially dummy corps set up for just that purpose. But I suspect your intention in the question is to steer that blame towards the recipients. If so, let me ask you this...who is guilty of corruption, the person who asks for a favor, or the one who grants it? We don't have the phrase 'no harm in asking' for no reason. You have to look also at who has the power in the transaction. It is usually the politician...they're the ones able to bend the rules or direct the funding.

QUOTE(AmLord)
Those computers aren't stifling the movement of money, they are speeding up the movement.


I would argue that that is exactly the problem...these systems increase volatility, velocity, and magnitude. Take them away, and daily fluctuations on Wall Street wouldn't even be worth discussing, which is how it should be--the value of companies on Wall Street doesn't really change much on a daily basis. Further, because of these computers, you have many companies running comples hedge funds involving billions of dollars, which is far more than they can cover if they're ever wrong, which they are all bound to be at some point in time.

QUOTE(AuthorMusician)
One of the strengths of 18th Century capitalism was that it involved real-time human interactions. Today those interactions barely make a blip on the radar. The players on Wall Street aren't people at all, but corporations with computers who can afford the programming talent. Although I dedicated the greater portion of my life to advancing the computer field, this part of it brings shame. I am sorry the tech was put to this purpose, and I really didn't see it coming. It seemed that computerized trading would actually open the doors for the average income earner to learn investing and trading. However, with powerful computers in the mix, it has become a monster that may be out of control


It isn't 'may be' at all. It IS out of control. As I stated above, most of the daily perturbations of the stock market are due to computer trading. Almost all stock transactions are conducted now by these systems, switching in and out of positions on a daily, or even hourly or minutely, bases. What even more insidious is that they have enabled the growth of all of the CDO's and other means of leveraging these transactions. The total value of all CDO's is many many times the sum total of all wealth on earth. How does that make any sense? What happens if (when?) they go bad, too...dwarfing the relatively minor amount contained solely within Mortgage Backed Securities? We have built a computer driven house of cards.

Saw a good special on CNBC on what's wrong with Wall Street that pointed this out. One of people interviewed, a very wealthy Wall Street investor, mentioned that back in the 50's, investors and engineers used to get paid about the same. He felt that was about right--both are highly technical fields to involve a lot of analysis. Now there is no comparison. Wall Street Investors routinely make millions, if not tens or hundreds of millions a year, while engineers make, what, $60 - $70K? Think about what that means on a macro scale as well. All of our brightest are naturally going to go where the money is, shuffling it around for profit, as opposed to becoming engineers actually building things.

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Dingo
post Aug 23 2011, 07:28 PM
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QUOTE(Hobbes @ Aug 23 2011, 10:34 AM) *
QUOTE(Dingo @ Aug 23 2011, 04:50 AM) *
QUOTE(Hobbes @ Aug 22 2011, 09:44 PM) *
If you're going to play the corruption card, I'd lay it more on the politicians

Whose buying them?


Everyone with money, and their own desire to have more of it and distribute it to those they know. Corruption frequently works both ways with politicians--lots of people anxious to give them money for favors, and they can also steer contracts towards companies where their friends and relatives work, which were frequently essentially dummy corps set up for just that purpose. But I suspect your intention in the question is to steer that blame towards the recipients. If so, let me ask you this...who is guilty of corruption, the person who asks for a favor, or the one who grants it?

Except it is far more gun at the head and overt bribe than that. "You, don't do things to enhance our private wealth and we will take our money to some political opponent who will. And by the way if you play nice there is a nice fat lobby job waiting for you when you retire." Both parties to a corrupt transaction are corrupt or corrupted.

Corruption in the broadest sense, and this transcends legal or illegal, means a special interest diverting public wealth to themselves that should be expended on the greater public good. I think of it as the cancer analogy. The part, cancer, advances itself at the ultimate expense of the body. And I don't buy the notion that the greater good is too obscure to determine and is just some stalking horse for socialism.

Cleaning up the environment is a greater good, shifting away from fossil fuel is a greater good, providing a basic level of medical care, including supportive family planning, for all citizens is a greater good, breaking up on the air media monopolies and assuring local public input is a greater good, public libraries are a greater good, public parks and wilderness are a greater good, assuring one person one vote honestly counted is a greater good, building the solid sustainable infrastructure of a civilized society is a greater good. And when that greater good is diverted by private interest bribes to public figures, which parenthetically increases wealth disparity, that is corruption.
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Belshazzar
post Aug 23 2011, 07:53 PM
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As others have pointed out, simply comparing disparities across nations doesn't tell us a whole lot. What means more is looking at how and why it's changed within them. This paper (Gottschalk 1997), though dated, is an interesting look at changes in wages from a number of angles, and the basic trend (increasing wages across all income groups up to 1980 and diverging post-1980) holds true with the last decade included as well.

What I find the most interesting is the implications this might have for financial stability. This IMF working paper notes the similarities in inequality and debt and financial leverage in the 1920s and 2000s. In short, the spike in inequality leads to a spike in consumer debt (i.e., the increased income going to the wealthy gets "recycled" to lower classes in the form of debt), eventually leading to a collapse when the debt bubble becomes unsustainable. In addition to that, there's a historical similarity as well. The 1920s saw the erosion of the agricultural base (which was a much larger part of the economy then) due to a number of factors including the beginnings of the Dust Bowl and the glut of products due to the end of World War I (some interesting reading on that here). In the last few decades, it's the manufacturing base rather than the agricultural base that erodes.
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akaCG
post Aug 23 2011, 08:24 PM
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"Hobbes":

1.
Here's some perspective on the matter of all those derivatives:

"$596 Trillion! How can the derivatives market be worth more than the world's total financial assets?"

2.
Here's some more perspective, by way of a personal anecdote:

Back in 1996, I was a trader in the Eurodollar futures pit at the Chicago Mercantile Exchange. On an average day, I would do about 40 transactions (20 buys, 20 sales). Each transaction involved 10 Eurodollar contracts, on average. A Eurodollar contract's notional value is $1 million. Thus, the total notional value of my daily trades, on average, amounted to ... 40 * 10 * $1 million = $400 million

Over 250 trading days, that comes out to a total annual notional value of my trades of ... $100 billion. About what Bill Gates AND Warren Buffett are said to be currently worth.

My income that year: a little over the U.S. median at the time.

3.
And here's yet more perspective, by way of a chart of S&P 500 Index volatility over the past 20 years:

http://finance.yahoo.com/q/bc?s=%5EVIX&...&q=l&c=

Point being, perspective matters. There's much less to all those scary numbers than meets the eye, once one looks behind the headlines and delves into the details.

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AuthorMusician
post Aug 23 2011, 09:02 PM
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QUOTE(Hobbes @ Aug 23 2011, 01:34 PM) *
Saw a good special on CNBC on what's wrong with Wall Street that pointed this out. One of people interviewed, a very wealthy Wall Street investor, mentioned that back in the 50's, investors and engineers used to get paid about the same. He felt that was about right--both are highly technical fields to involve a lot of analysis. Now there is no comparison. Wall Street Investors routinely make millions, if not tens or hundreds of millions a year, while engineers make, what, $60 - $70K? Think about what that means on a macro scale as well. All of our brightest are naturally going to go where the money is, shuffling it around for profit, as opposed to becoming engineers actually building things.


While in the IT trenches, my best year was just above $80k, and that only lasted one year. Then houses of cards fell, one of them being MCI/Worldcom, the outfit to which I'd been contracted. My IT career never got completely back on the tracks afterward.

For those of us who can dig into an article about math, this is a good read:

Wired Magazine - Recipe for Disaster: The Formula that Killed Wall Street

It's amazing how much is being done with the high-powered computers on the edge of Wall Street. Trades are done in microseconds, and sophisticated/proprietary data analysis software triggers them. Even Twitter accounts are being followed now, ferreting out insider information released unwittingly by narcissistic morons:

Computers Read the News Faster than You Can and a Whole Lot More of It

What had once been a human economic system has become a cyber nightmare. Is our reason to exist merely to scrape money together and feed the machine? I'd rather be in The Matrix.

This problem is worldwide as well. If regulations are to be put into place, they will need to be done on that scale, which may evolve into the human population against the machines. Much like The Matrix, we have built them ourselves.

My personal horror is that now I realize that I contributed to this. It wasn't much, but it was something. Maybe I can make amends somehow, maybe through writing, before my time to pass on comes.

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Dingo
post Aug 24 2011, 12:06 AM
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QUOTE(AuthorMusician @ Aug 23 2011, 02:02 PM) *
For those of us who can dig into an article about math, this is a good read:

Wired Magazine - Recipe for Disaster: The Formula that Killed Wall Street

This is the kind of stuff that gets me.

QUOTE
Bankers securitizing mortgages knew that their models were highly sensitive to house-price appreciation. If it ever turned negative on a national scale, a lot of bonds that had been rated triple-A, or risk-free, by copula-powered computer models would blow up. But no one was willing to stop the creation of CDOs, and the big investment banks happily kept on building more, drawing their correlation data from a period when real estate only went up.

"Everyone was pinning their hopes on house prices continuing to rise," says Kai Gilkes of the credit research firm CreditSights, who spent 10 years working at ratings agencies. "When they stopped rising, pretty much everyone was caught on the wrong side, because the sensitivity to house prices was huge. And there was just no getting around it. Why didn't rating agencies build in some cushion for this sensitivity to a house-price-depreciation scenario? Because if they had, they would have never rated a single mortgage-backed CDO."


It's like jumping off a cliff and thinking the ride down will last forever. That's not investing. That's like being in some collective insane trance.
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Bikerdad
post Aug 24 2011, 04:41 AM
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QUOTE(CruisingRam @ Aug 22 2011, 12:26 PM) *
BINGO- we have a winner- it is because the rich in our country so often come about it dishonestly through corruption. There are way too many Dick Cheneys and Ken Lays and not enough Warren Buffets.
It's hilariously ironic to me that you hold up Warren Buffet as a "good rich guy" when he built his fortune in one of the industries that you truly despise, insurance. devil.gif
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CruisingRam
post Aug 24 2011, 06:37 AM
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QUOTE(Bikerdad @ Aug 23 2011, 08:41 PM) *
QUOTE(CruisingRam @ Aug 22 2011, 12:26 PM) *
BINGO- we have a winner- it is because the rich in our country so often come about it dishonestly through corruption. There are way too many Dick Cheneys and Ken Lays and not enough Warren Buffets.
It's hilariously ironic to me that you hold up Warren Buffet as a "good rich guy" when he built his fortune in one of the industries that you truly despise, insurance. devil.gif


There are a great deal many industries that were okay and even honorable once that have slipped out of that category. There was a time once when a man would jump out of a window in shame over losing his customers money on wall street- now they give themselves bonuses. There was a time, before they were corrupted, that insurance was an honorable business. EDIT whistling.gif

This post has been edited by Jaime: Aug 25 2011, 01:27 PM
Reason for edit: Edited to remove flame bait
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access forbidden
post Oct 8 2011, 04:01 PM
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QUOTE(Bikerdad @ Aug 21 2011, 08:11 AM) *
What is wrong with increasing wealth disparity?


Theoretically there is nothing wrong with a "disparity."
There will always be disparities in one thing or another.
But income disparity is a symptom of the state of the economics of a society, so it becomes a symbol of inequality.

The issue of the middle class is a non-issue. The term, middle class, can mean just an income bracket, but it also means a specific social class.

Middle class in Germany was among the most nationalistic segments of society and sided with the conservatives and military class in supporting World War I.

As a social class, the middle class are not nice guys. Nobody likes them except consumer manufacturers and vendors because they buy their products. They mistreat the working class and poor. The upper middle class does not like them.

More important than income disparity is disparity in rights and opportunities and privileges. The emphasis on amount of income is actually a misleading issue that liberals mistakenly obsess about.


QUOTE(CruisingRam @ Aug 22 2011, 06:26 PM) *
It seems clear that extreme wealth disparity involves using money to rig the system to a great degree. I call that corrupt. A corrupt system is ultimately unstable, with compensating charity being only a band aid solution.

BINGO- we have a winner- it is because the rich in our country so often come about it dishonestly through corruption.


The poster has not shown that wealth disparity necessarily involves corruption. Can we say that Bill Gates, Warren Buffett, or Steve Jobs achieved their wealth by that corruption, or used it after they gained their wealth?

So to say that wealth was achieved by corruption does not appear to me necessarily related to disparity. This is tantamount to accusing anyone who has more wealth than we do of being more corrupt.

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akaCG
post Oct 27 2011, 03:22 AM
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From today's PBS News Hour program, an interview that delves into the thread's topic:

"Does U.S. Economic Inequality Have a Good Side?"

Superb.

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post Oct 27 2011, 03:41 PM
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QUOTE(akaCG @ Oct 26 2011, 10:22 PM) *
From today's PBS News Hour program, an interview that delves into the thread's topic:

"Does U.S. Economic Inequality Have a Good Side?"

Here’s the CBO statement that brought about Paul Solomon’s interview of Richard Epstein.
http://www.cbo.gov/doc.cfm?index=12485

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akaCG
post Oct 27 2011, 04:25 PM
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QUOTE(BoF @ Oct 27 2011, 11:41 AM) *
QUOTE(akaCG @ Oct 26 2011, 10:22 PM) *
From today's PBS News Hour program, an interview that delves into the thread's topic:

"Does U.S. Economic Inequality Have a Good Side?"

Here’s the CBO statement that brought about Paul Solomon’s interview of Richard Epstein.
http://www.cbo.gov/doc.cfm?index=12485

And here's an analysis of the CBO report:
http://blog.american.com/2011/10/7-reasons...ome-inequality/

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BoF
post Oct 27 2011, 04:35 PM
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QUOTE(akaCG @ Oct 27 2011, 11:25 AM) *
QUOTE(BoF @ Oct 27 2011, 11:41 AM) *
QUOTE(akaCG @ Oct 26 2011, 10:22 PM) *
From today's PBS News Hour program, an interview that delves into the thread's topic:

"Does U.S. Economic Inequality Have a Good Side?"

Here’s the CBO statement that brought about Paul Solomon’s interview of Richard Epstein.
http://www.cbo.gov/doc.cfm?index=12485

And here's an analysis of the CBO report:
http://blog.american.com/2011/10/7-reasons...ome-inequality/

I am sure those on ad.gif are intelligent enough do their own analysis rather than rely on a right-wing blog like you do so frequently.

Just more of your usual P-R-O-P-A-G-A-N-D-A.
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akaCG
post Oct 28 2011, 12:11 AM
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More analysis in response to the CBO report:
QUOTE
...
I hate to be the bearer of good news just as the Occupy Wall Street movement is gathering steam, but protesters can stop worrying about rising inequality and go home. New evidence suggests that the super-rich got hit by the recession much harder than the rest of the 99 percent. This doesn’t mean that they will be filing for food stamps any time soon. But it does mean that, contrary to progressive mythology, natural market forces might be restoring some semblance of cosmic justice.
...
New data from the University of Chicago’s Steven Kaplan shows that, despite government bailouts, in 2008 and 2009 the adjusted gross income of the top 1 percent — a disproportionate number of whom work in the financial industry — fell to 1997 levels. All in all, the fat cats took a 20 percent income hit, compared with the 7 percent lower earners suffered in the aggregate.
...
But if the wealthy are not as well off as they once were, the middle classes were never as poorly off as liberal pundits claim. Indeed, their case that income disparity is growing rests on the notion that national productivity grew four times faster (1.95 percent per year) than median household income (0.49 percent per year) between 1979 and 2007. The remaining 1.46 percent in annual productivity gains, they postulate, must have gone straight into the Swiss bank accounts of the rich.

But there are enough holes in this argument for a Zuccotti Park cleanup crew to drive a fleet of garbage trucks through. ...
...
After they reach a certain income level, [many Americans] can trade more work for greater leisure, a luxury that only the filthy rich enjoy in poor countries. Were this not the case, the ranks of the Zuccotti Park protesters might have been thinner by about a third. A recent survey by business analyst Harrison Schultz and Baruch College professor Hector Cordero-Guzman found that about 30 percent of them had individual incomes between $50,000 and $150,000-plus (about the same percentage as are under- and unemployed). These people have obviously decided that they have enough money, and that they’d rather use their spare time protesting than working.

Surplus wealth, then, is driving the Occupy Wall Street movement as much as the alleged growth of income inequality. Somewhere, Joseph Schumpeter, the political economist who predicted that the very wealth that capitalism generates will undermine the intellectual case for capitalism’s existence, must be saying, “I told you so.”

Link: http://www.thedaily.com/page/2011/10/27/10...ome-dalmia-1-3/

The Schumpeter reference brings to mind the ole Chinese proverb:

Not enough food on the table: One problem. Enough food on the table: Many problems.

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Jaime
post Oct 28 2011, 10:12 PM
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Please note that off-topic/unconstructive posts have been removed from this topic. Please stay focused.

DEBATE:
What is wrong with increasing wealth disparity?
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akaCG
post Nov 2 2011, 07:16 PM
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Here's a different angle, from the world of physics, on the thread's title question ("Income and Wealth Disparity, what's the dealio?"):
QUOTE
...
An engineering professor at Duke University (Adrian Bejan) and a physics professor at Boston University (Eugene Stanley) are independently leading researchers to answer questions about income inequality. And their answers are fascinating. The “gap,” they argue in different ways, is natural — much like gravity or running water.
...
“Constructal theory,” says Bejan, “is the view that the generation of designedness in nature is a phenomenon of all physics.” And all physics includes “everything, animate or inanimate, geophysical and societal.”
...
“According to constructal theory,” writes Bejan, “this phenomenon [design] can be reasoned on the basis of one law: designs persist in time by changing into configurations that offer progressively better access to the currents that flow through the territories.” The short version? Systems evolve according to their ability to handle flow. And Bejan has demonstrated the constructal law at work time and again, in wildly diverse contexts.
...
Bejan and collaborator Sylvie Lorente say these designs exhibit a property they call “few large and many small.” That means flow systems normally organize like river basins or veins in the body: big currents are connected to ever-smaller streams. If the law stands up across multiple areas — college rankings, well-paid jobs or wealth — all will exhibit a similar pattern.
...
That wealth tends to concentrate among few people naturally is not an argument that it ought to. Nor is it an argument that it ought not to. But the functional aspects of Bejan’s and Stanley’s independent work on wealth disparity should raise important questions. In particular: When we try to interfere with the functions of a natural law — e.g. via government intervention and redistribution — do we run the risk of futzing up this flow system for everybody? After all, “freedom is good for design,” says Bejan.

We can’t answer such questions today. But Bejan and Stanley give us promising new entry-points for conversations about wealth, want and redistribution. If the American wealthy are the trunk in our economic tree of life, we may be wielding axes and saws at our peril.
...

Link: http://dailycaller.com/2011/10/31/the-phys...wealth/?print=1

Hmmm. Interesting. Looking forward to the upcoming book.

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Dingo
post Nov 3 2011, 01:21 AM
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QUOTE(akaCG @ Nov 2 2011, 12:16 PM) *

Thanks, I was able to glean two valuable insights from this article.
1. If you do the kind of things that attract money you are more likely to get rich.

2. If you already have money you are in a better position to make more of it.

It's almost like E=IR in its elegance. flowers.gif
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