An Idiot's Guide to Inequality

http://www.nytimes.com/2014/07/24/opinion/nicholas-kristof-idiots-guide-to-inequality-piketty-capital.html

by lvevjo • 12 years ago

71 40 12 years ago

Daishiman2• 12 years ago

It's amazing to me just how well some political factions in the US have indoctrinated the public to believe that the defense of the common good is some sort of threat to American values, which include, in theory the support and participation in your community.

It's gotten to the point where not even poor people are willing to listen or support many of the policies that promote their well being while not being a significant burden to anyone.

webXL• 12 years ago

I only know about life, liberty, and the pursuit of happiness and e pluribus unum. Perhaps I'm indoctrinated, but are you sure you are free of indoctrination?

The poor aren't supporting policies that promote their well-being? Without evidence, that straw man is pretty easy to knock down.

Daishiman2• 12 years ago

Do I really have to go through the motions? I'll bite:

- The US is, among the developed nations, the one with the highest income inequality, and growing - Unlike practically all wealthier and a remarkable number of poorer countries, the US has no social safeguard for people in case of medical emergencies. People die from not being able to pay medical procedures. And this is objectively a bad thing, from every possible metric. - The inequality in education among the rich and poor impedes social mobility, again in a manner unheard of in many places. - Countries who have succeeded or are succeeding in closing the inequality gap do so through a set of consistent, well-researched policies which all have the same effect and lead to overall greater quality of life. - The power of law enforcement in the US has fewer and fewer checks, leading to the police to have an oppresive attitude towards the populance which, when combined with the privatized prison system, leads to the highest incarceration rate in the world, not coincidentially led by poor people, with an astounding amount of non-violent offenders.

This list can keep growing as long as I have time, so I'll just leave it at that and conclude the American working class has a naive to nonexistant notion of class struggle and suffers tremendously because of it.

msoad• 12 years ago

I didn't know income inequality harms the top 0.1% too. This is giving me hope that this issue will be fixed in the United States.

eamsen• 12 years ago

"Oxfam estimates that the richest 85 people in the world own half of all wealth." This is not what Oxfam's estimates say, it contradicts them. Here is the original quote: "The bottom half of the world’s population owns the same as the richest 85 people in the world."

xux• 12 years ago

What point are you trying to make? Those two statements are the same.

fchollet• 12 years ago

They are not. The bottom 50% of people owns a fraction much smaller than 1/2 of all available wealth.

What Oxfam is saying is: if you rank people by wealth on the x axis then plot their wealth of the y axis, the integral (sum, or area under the curve) of the function on the first half of the graph is equal to the integral on the last 85 points. Try actually drawing it, it might help you understand.

wickedlogic• 12 years ago

No they are not. If the bottom half owns the same as the top 85, and the top 85 own 30%....

bane• 12 years ago

There's a large group of people between the bottom half and the top 85 people that hold quite a bit of wealth.

CapitalistCartr2• 12 years ago

The bottom half of the World's population not only don't have a representative half of the World's wealth, they basically own diddly squat compared to their numbers.

gipp• 12 years ago

That is absolutely not the same. One is referring to half the wealth in the world, one is referring to the wealth owned by the poorest half of the world (which is strictly less than half by definition, and in this case far less than half).

Doesn't make the fact not-disgusting, just slightly less so.

EDIT: Wow, 5 corrections in two minutes.

Paradigma11• 12 years ago

This statistic is completely inflammatory and bullshit anyway.

Why?

It uses netto worth so for example academics with student loans and good social security or the bancrupt industrial tycoon are worse off than the indian farmer with his small farm.

oldmanjay• 12 years ago

There are always a lot of confident assertions (on all sides) when it comes to this issue, but not a lot of hard facts. It's really difficult to know what to believe, and it's almost impossible to have a reasonable discussion because people get so emotional about it.

RA_Fisher• 12 years ago

All you need to need to know is that Piketty did his voluminous analysis in Excel.

autokad• 12 years ago

i grew up in a poor family around a lot of poor people. i'm not rich, but definitely out of the poor category. even as a child, i was amazed at the plethora of bad decisions (or simple refusal to give important things a second thought) of the poor people around me, family included. an example was a couple years ago when i mentioned how wonderful it is that we can take free online classes from institutions like harvard, stanford, wharton, etc, and its absolutely free! how wonderful!! their response 'what do i get out of it'.

its not just anecdotal either, numbers have shown that those that already have educations are the ones that are mostly uses these resources. for a very large amount of the poor, i feel its them, not 'us'. the opportunities are there, and america may have disadvantages for those not well off, but we certainly have more poor people than whats justified by those disadvantages.

we created a system where people who are smart and ambitious can thrive. we also created many opportunities in that system, and those same people are the ones that take advantage of them. I think thats a huge part of this 'gap'.

the 2nd part happens to be with the time that we are in. most of this 'wealth' has been either inflated up by the fed's massive additions to the money supply (which does only help the rich but it is fully implemented and endorsed by democrats) and annother reason for the gap is the internet barons of the present age.

back in the late 1990s, bill gates was worth more than the bottom 50% of the country. if figures like that are still withstanding, how do you think its distorted now that we have brin/page, zuckerberg, bezos, etc etc?

TheOtherHobbes• 12 years ago

If you have no experience of good education, how are you supposed to know what good education can do for you?

America used to have first-rate public schools. So did many other Western countries. A lot of the early computer pioneers from the late 40s to the late 60s came up through that system, and it's a fair bet that technology would have developed more slowly without it.

But for some reason teaching the proles to think and improve themselves doesn't meet with universal approval, and public education now is much less generous than it used to be.

At the same time there's been a constant propaganda onslaught from low-information media that shapes perceptions about what's interesting and important, and that media menu doesn't include learning cool stuff for fun or for profit.

So people end up educationally damaged and demotivated for a reason. Pigeon-holing them as 'lazy and unmotivated' is a very lazy way to misunderstand what's happened to them.

crdoconnor4• 12 years ago

Being poor renders it very difficult to think long term as the survival instinct kicks in. If you have to constantly worry about whether you can put food on the table and pay the electric bill tomorrow, you simply stop thinking about what happens next month.

This instinct kicks in on such a low cognitive level that it's almost impossible to suppress.

This makes it very easy to leech profits from the underclasses through payday loans. The profit is made at the point that the survival instinct programs them to ignore.

This is why outright prohibition of payday loans usually has a positive impact on the financial wellbeing of the underclasses.

Unfortunately, even the middle and upper classes who struggle with giving up smoking still look down on the set of people who take payday loans, thinking that their superior intelligence and good sense is what leads them to not be suckered.

Empirical study on the effect of poverty on short term thinking:

http://www.theatlantic.com/business/archive/2013/11/your-bra...

Study on the effect of banning payday loans on the financial health of the underclasses:

http://www.federalreserve.gov/pubs/feds/2013/201381/201381pa...

obvious_throw• 12 years ago

In which upper-class HN tells someone who grew up poor how poor people think. And then downvotes the heretic, despite relevant, first-hand experience contribution to discussion. Nice.

jandrewrogers• 12 years ago

You are conflating cause and effect. Being poor does not make it very difficult to think long term but the lack of discipline required to make good short term choices has the effect of keeping you in poverty over the long term. A pattern of good short term choices tends to lead to getting out of poverty whether one is thinking long term or not.

I lived a significant portion of my life in pretty severe poverty; I was raised in it. It requires a decent amount of discipline to not waste money even when you are hungry and can't pay the bills, and many poor people do not have that discipline and therefore stay poor. Many non-poor people have the same lack of discipline but can simply afford to be more wasteful. Given two choices that solve an immediate problem (e.g. hunger) people will often choose the one that is most wasteful of their money even though they know they are poor.

I was never the world's most disciplined person but I did manage to bootstrap myself out of poverty in fairly boring fashion working low-paying jobs. As long as I had an income (never guaranteed) I always managed to spend less money than I earned. It is pretty shocking the percentage of people in poverty that are obviously wasteful with their limited resources but it also explains their long term outcome.

I earn a fine income today but my spending stopped rising with my income a long time ago. Old habits of not spending frivolously on low-value things die hard I guess.

MisterBastahrd• 12 years ago

Those wonderful online classes require a working computer and an internet connection to take them, and aren't worth the printer paper you print the results out on. Unless there's a reputable non-profit organization that can validate the results of those classes and make them worth recognizing, they create a bit of education for the consumer but are worth little in the working world.

Udacity is much better than most MOOCs at this, given that most of them have a limited window for which you can submit projects for completion. My anecdote: I wanted to take classes from Coursera on data science, but I am the sole developer for a publisher and have worked 60-70 hour weeks during the time that they've published the classes due to a project crunch. I don't currently have time to keep up with the course material in order to complete the class satisfactorily.

Now, you can rebut that somewhat by saying that we have free public resources in libraries to take advantage of, but when you're raising a kid and working a shift at the grocery store, you don't have much time to be in the library, most of which have very short hours on Saturdays and are closed on Sundays.

What we need are cheaper computers and subsidized internet access.

refurb• 12 years ago

"Likewise, if you’re a pharmaceutical executive, one way to create profits is to generate new products. Another is to lobby Congress to bar the government’s Medicare program from bargaining for drug prices. That amounts to a $50 billion annual gift to pharmaceutical companies."

This "fact" always annoys me. Yes, Medicare can't directly negotiate with drug companies. However, there are two mechanisms that provide substantial discounts for drugs that Medicare buys.

1. All drug manufacturers must report the price they sell their drugs for to the government every quarter. That data is used to create the ASP (average selling price). This is the price Medicare pays. If a drug company starts offering discounts on their sales to private insurers, that get added to the ASP.

2. For drugs covered under Medicare Part D (pharmacy benefits), there is something called the "donut hole" where a patient has to pay the full costs of the drug. That is being phased out by 2020. Drug companies will have to pay for the donut hole themselves. The discount varies with the drug price, but for example, if a drug costs $5000 in a year, drug companies will have to pay $1300 of that back to the government.

So yes, Medicare doesn't directly negotiate with drug companies, rather they legislate big discounts.

CapitalistCartr2• 12 years ago

In discussions like this the numbers matter. To quote Heinlein, “What are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!"(1) Piketty's book suffers from poor numbers and bad maths, making his conclusions useless. If he is right, he needs to support it with sound numbers.

Chris Giles in The Financial Times found his numbers wanting. (2) In Piketty's response(3), he downplays the importance of the questions, focusing on the European numbers. FOr5 the US numbers, he recommends substituting the numbers of Emmanuel Saez (Berkeley) and Gabriel Zucman.(4) But those numbers are based on reported capital gains taxes without adjusting for major changes in the law and changes in the definition of capital gains.

I don't know if Piketty is right or wrong, but I know his Excel spreadsheets are not adequate evidence. I'd like him to be right; I think wealth disparity in the USA since 1980 is more due to legal maneuvering than merit. I also know my thinking it isn't evidence.

1) http://www.timeenoughforlove.org/Heinlein.htm

2) http://piketty.pse.ens.fr/files/capital21c/en/media/FT230520...

3) http://www.voxeu.org/article/factual-response-ft-s-fact-chec...

4) http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf

MaysonL• 12 years ago

Of course, there have been quite a few criticisms of Mr. Giles's analysis of Piketty. It seems to have been substantially worse (my opinion) than Piketty's errors.

See [1],"FT journalist accused of serious errors in Thomas Piketty takedown", [2] "Have Giles and the FT gone too far in the attack on Piketty?" (where the answer is "..On most points, Piketty has answered the points in a reasonable (and to me generally persuasive) way.", and [3] Piketty's response to Giles.

1) http://www.theguardian.com/business/economics-blog/2014/may/...

2) http://www.primeeconomics.org/?p=2723

3) http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec...

Dewie• 12 years ago

Unfortunately, equal opportunity is now a mirage. Indeed, researchers find that there is less economic mobility in America than in class-conscious Europe.

Class conscious Europe? Oh sure, broad stroke it up. Meanwhile, when it comes to superficial signs of class consciousness and the social norms related to that, I see American doctors introducing themselves as "Dr. <Name>", in both medical and civilian situations. People emphasizing or hinting at having gone to prestigious universities like the Ivy League kind. People referring to their bosses by sir/ma'am. Casually denigrating certain professions, especially janitors. All of these practices are kind of foreign to my part of Europe.

smm2000• 12 years ago

I seriously doubt anyone outside of military refers to their bosses as sir/ma'am. At least I never heard it and in many situation it will sound extremely sarcastic.

People like to talk about their achievments whether it's graduating from Ivy League, getting medical degree or finishing marathon. I do not think it's a class thing.

onetimeusename• 12 years ago

One thing I have wondered is if income inequality is demonstrably bad. If you read closely the author says that our economy grew quicker post WW2 when income was more evenly distributed but that is not conclusive. The author also says income inequality is bad but the only evidence given for this is that the gini coefficient of US is approaching some banana republics and S. American countries. I personally don't believe income inequality in those countries is the cause of adverse conditions but an effect of it, particularly corruption. The author says that at a certain point the money is used to buy luxury goods in some sort of "arms race" of the rich but I really don't care what the rich do with their money.

I do agree that using the word inequality is worse than using opportunity. I also firmly believe corruption should be ended but I still have not seen a strong argument for why income inequality is bad and I think from a probabilistic perspective, net worth of the wealthy would increase over time so who is to say it isn't a natural process?

saticmotion• 12 years ago

Another fact, that recently struck me, also seems to make inequality larger. I'm not quite sure how to put it into words, but I'll try.

If we take an average middle class family and a rich family. Both want to build or buy a house. Let's suppose the houses they want cost the same, e.g. $200.000. The rich family pays $200.000 and is done. The middle class family however, will have to take a loan of, let's say, 20 years at 4%. This family will eventually pay almost $300.000 for that same house.

So because the rich family can buy things without loaning, they actually pay less. This might seem obvious to some, or most of you, but it still strikes me as "unfair" (though it's perfectly fair that you pay interest on a loan).

jeremysmyth• 12 years ago

You're ignoring the opportunity cost of not keeping that $200,000 in the "rich family's" deposit account or asset portfolio. If I buy something to use for $200k, I can't invest that same amount to convert it to $300k (assuming the same 20 years @ 4%), so I effectively lose 100k over the same period for the same reason. While they're certainly not equivalent, they're closer than you suggest.

d4vlx• 12 years ago

Houses typically appreciate at better than 4% a year over 20 year time frames, although this is very location dependent. If they had bought in almost any city in the US with a population over a million they could have done much better.

http://www.census.gov/const/uspriceann.pdf

An Idiot's Guide to Inequality

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