During a discussion with some family the topic of the very wealthy and the redistribution of thier money came up. Some made the claim that the rich wouldnt miss the money therefore there is not a problem taking it from them and giving it to the poor.
But if underconsumption is neccessary for investment, this isnt true is it.
The very wealthy consume very little of thier income. The vast majority is invested in one way or another. This creates a giant pool of resources available for investment.
If all of that excess income is confiscated and given to the poor and middle class, it is very likely that a large portion of the money would not be saved but consumed. The result being a much diminished pool of resources available for investment.
So it seems that the greater the redistribution policies the slower an economy could grow. So are more ultra wealthy people actually good for an economy? When people say the gap between the rich and poor is growing, should that really be seen as a good thing.... more resources available to grow an economy?
Any thoughts?
Underconsumption is relative to one's holdings of wealth. This....
The very wealthy consume very little of thier income.
Is a misnomer. The very wealthy consume VERY much (didn't Bill Gates just build a $170 house?). They just consume very little of their income.
But alas..
Is probably true for capitalism.
In States a fresh law is looked upon as a remedy for evil. Instead of themselves altering what is bad, people begin by demanding a law to alter it. ... In short, a law everywhere and for everything!
~Peter Kropotkin
Yes, practically all the money the government expropriates is consumed now, and can't be invested. You only have to look at the difference in standards of living since 1900 to notice that consuming all our resources now wouldn't make us better off. Technological progress raises standards of living more than equally distributing existing income.
But there are a lot of other problems with this kind of argument. Usually it ignores that income is not wealth. The fact that the super rich only exist because government protects them. Then some might have moral issues with massive state expropriation.
Southern: Some made the claim that the rich wouldnt miss the money therefore there is not a problem taking it from them and giving it to the poor.
They need to realize this is just legalized theft, plain and simple. Most people try to resist this claim, but work with them. Ask if taking a dollar from them is as morally reprehensible as taking $1,000. You've generally undermined their entire argument when you can demonstrate deviation from principle (it's ok to take money from the rich, but it's not ok to take any of my money). If you're up for it, you can ask them how people get "rich," and it doesn't take much effort to debunk any responses to "explotation," fraud," etc.
Southern: So are more ultra wealthy people actually good for an economy? When people say the gap between the rich and poor is growing, should that really be seen as a good thing.... more resources available to grow an economy?
Having more wealthy people is an indicator of a wealthier society. This is, as you said, good! Again, you need to challenge the individual who argues that the gap is growing by inquiring why this is occurring. The gap isn't really that important - rather, you want to observe an increase in wealth by everyone.
Epicurus ibn Kalhoun:Underconsumption is relative to one's holdings of wealth. This.... The very wealthy consume very little of thier income. Is a misnomer. The very wealthy consume VERY much (didn't Bill Gates just build a $170 house?). They just consume very little of their income.
Are you implying that the very wealthy consume very much of other people's incomes?
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EmperorNero, would you say that saved income is wealth?
Isnt that what I said? The point is that the super wealthy only consume ,oh lets say, 10% of thier $1 billion income. So that would leave 90% ($900 million) available for investment.
But if that 90% (900million) is redistributed to others who then in turn consume 80% (720 Million) of the free money, then there would be 20% (180million) as much available for investment.
So before $900 million available for investment.... after only $180 million available. Large scale redistribution would cripple investment.
They need to realize this is just legalized theft, plain and simple. Most people try to resist this claim, but work with them. Ask if taking a dollar from them is as morally reprehensible as taking $1,000.
They have no problem with stealing from the rich to give to the poor.... because the poor are better off and the rich well they will be rich either way. Their concern is for the poor, so I was trying to demonstrate how taking the money from the rich will actually make the poor no better off. Quite possibly worse off.
The truth is that this person will likely never come around. They are completely enamoured with anything "progressive" but I enjoy discussing things with them. It helps me stay sharp.
Usually it ignores that income is not wealth.
This is true. I guess I should say those with extreme incomes.
The fact that the super rich only exist because government protects them.
This is only true in some cases. Delving into that issue and the whole "steal from the rich and give to the poor, because the rich wont miss it" would be too much for one discussion.
Autolykos:EmperorNero, would you say that saved income is wealth?
I say... yes. I think. Why?
Southern:This is only true in some cases. Delving into that issue and the whole "steal from the rich and give to the poor, because the rich wont miss it" would be too much for one discussion.
As you pointed out, they are really stealing from the poor, because society will be so much less productive. Less investment means more expensive necessities and lower standards of living. And that has the greatest effect on the poor.
The ability of capital expansion, and capital accumulation is positively influenced by a rigid respect for private property. Capitalists will try not to expose their savings, especially on potentially expensive projects, unless they know their capital is secured.
In situations where their capital is un-secured what your doing instead is creating a counter-mechanism, or deterrent for capital expansion. In other words, your crippling your economies ability to grow, making everyone wealthy overall.
The problem here is large amounts of capital needs to pool(Savings) and be allocated to single expensive expansion projects. When you redistribute the capital across the board, you potentially disrupt the ability to assign large amounts of capital to single tasks. You are also moving capital away from an individual who has a low time preference, to many individuals who likely have very high time preferences.
In addition you destroy the incentive structure.
So lets recap.
So in short, redistribution of wealth, is an economic system of impoverishment.
Sorry for the slightly off topic response, but:
In the 1970s, rhetoric about income inequality created crack-brained home lending policies.
In the 2000s, those crack-brained policies caused a recession and hurt lower income groups the most.
In the 2000s, columnists stepped up rhetoric about ongoing income inequality and demanded more crack-brained schemes like mortgage relief for everybody.
In the 2030s, we'll probably see another giant crisis which will hurt lower income groups the most.
So here's the deal: we have a cycle where millionaire columnists like Paul Krugman complain about six-figure earners making too much money, reforms are demanded to save the middle class, those reforms hurt the middle class even more, and then more reforms will come to save the middle class, and those reforms will hurt the middle class even more. How about we stop this cycle and agree that a sound property rights system and sound financial institutions without cheap loans are more important than a tiny non-problem like income inequality?
EmperorNero: Autolykos:EmperorNero, would you say that saved income is wealth? I say... yes. I think. Why?
Well it seems like people certainly see the money they've received as income to be a form of wealth. You were saying that income isn't wealth, however. I wasn't sure whether by "income" you were referring to the flow rate itself, or the money that's been already received. My first instinct when hearing or seeing "income" is to think of the latter, not the former. But that's just me.
Autolykos:Well it seems like people certainly see the money they've received as income to be a form of wealth. You were saying that income isn't wealth, however. I wasn't sure whether by "income" you were referring to the flow rate itself, or the money that's been already received. My first instinct when hearing or seeing "income" is to think of the latter, not the former. But that's just me.
Yes, that's precisely what I was objecting to. We instinctively think that comparisons should refer to money that we already received, how much we have in the form of mansions and factories, not the flat rate that's coming in each month. But all the class warfare is just about the flat rate. It says: you make 100.000 and I make 50.000, so there is inequality. Or: you make 50.000 and I manke 50.000 so there is equality. It does not consider what either of us already has, only the flat rate matters. And for some reason people make that leap, they don't rationally distinguish the two concepts.
I think it's more accurate to say that the word "income" can simply be used in two different ways. One way is in terms of a rate. The other is in terms of an amount that's already been received. Neither usage is more correct than the other -- they're just different.
Of course, I agree with you that "expected future wealth" isn't actual wealth at all. :P