Wealth Shown to Scale
mkorostoff.github.ioI disagree on the the thrust of the argument - that people (including comparatively wealthy individuals like doctors and lawyers) oppose changes to tackle wealth inequality because they don’t understand the gulf of wealth between them and the ultra rich. In my experience it has nothing to do with that - rather these people know that they will ultimately end up as the main target for any such law, not these billionaires. Time and time again the wealth of the middle classes ends up as collateral damage in attempts to tax the very top.
This is absolutely it. Any taxes on just the ultra wealthy raise so little money for the rest of the population that any large scale money raising requires taxes on doctors, lawyers, engineers, small business owners, etc.
Pro-government spending advocates don’t like to emphasize this because people become a lot less supportive of these things when they see members of their own community getting hit.
> Any taxes on just the ultra wealthy raise so little money for the rest of the population that any large scale money raising requires taxes on doctors, lawyers, engineers, small business owners, etc.
That's very much untrue. What is true is that no one even bothers reducing the favorable tax treatment of the ultrawealthy, only taxing high-end labor income and pretending. As long as both long-term capital gains and pass-through business income are extremely tax-favored, it doesn't matter what rates or brackets you set for normal income, you arent really taxing the ultrawealthy. You could raise tremendous revenue by eliminating those favorable categories and treating all income as income, and only raising nominal rates by adding new brackets above the current top bracket. The reason that isn't done isn't that you can't raise enough revenue that way, its because the ultrawealthy are very good at propagandizing that the forms of income they earn vastly disproportionately ought to be untouchable.
>The reason that isn't done isn't that you can't raise enough revenue that way
Nah, it's coz any bill that attacks the ultrawealthy can be spiked to attack the moderately wealthy instead (ideal) or as well as (failing that it's better to make them allies).
This is where lobby $$$ really pays off - when tweaking the less overtly visible finer details of bills.
This pairs with a PR campaign of:
* We simply dont have that much money.
* You'd be better off not taxing it because then we wont innovate and then youll be sorry.
* We will leave the country entirely and then youll be sorry.
* You're next on the government hitlist (weirdly this one works even seems to on people who earn, like, $40k a year).
> That's very much untrue
How so? It’s basic math. The middle and upper middle class is still responsible for the vast majority of income.
> you arent really taxing the ultrawealthy. You could raise tremendous revenue
See, you’re getting confused because it’s not “tremendous” in the scheme of tax revenue. The only thing that would accomplish is helping with income inequality (i.e. it’s punitive towards the rich). This is fine if that’s your goal but it’s not going to pay for anything like basic income, universal healthcare, or major infrastructure. It won’t even balance the existing budget.
> The reason that isn't done isn't that you can't raise enough revenue that way,
Yes it is, full stop. A 100% tax rate on the top .1% would bring in about 500 billion annually (~$3 mil * 150 mil filers * 0.001) . That’s not even enough to cover the “cheap” infrastructure bill being proposed.
> they earn vastly disproportionately ought to be untouchable.
Careful with that. You’re also talking about how much of the middle classes retirement is structured there. Long term capital gains are used by everyone.
It would certainly help if the ultra wealthy and global corporations would just pay their fair share rather than use possible combination of barely-legal structures to avoid being taxed, bribe officials to create special exemptions, offload money to tax heavens and scare-monger about losing jobs whenever an actual tax increase is due.
The USA cannot even properly finance the IRS to go after the super wealthy tax cheats. Their bought-and-paid-for politicians would rather the IRS stick it to the little guys, ffs.
The top 10% are paying over 71% of income taxes in the US. Who are you to say what their "fair share" is?
No, The whole point is that 71% is not fair, it should be closer to 95%...
Based on what? Why not just say 100% at that point?
the powerful write the rules. always has been the case.
do you know of any societies that managed to sustain a dynamic where that's not the case?
I literally cannot think of any at all. Just some very brief temporary aberrations.
Well, yes. Might makes right, no question there.
The question is how far the powerful are willing to push the system in order to maintain their relative status (relative to each other, not to 'us') and how much the disenfranchised are willing to take.
If the powerful are careless, an angry mob will spice up the game. But of course that's just opportunity for other powerful entities to advance their relative status.
Saying “the powerful write the rules” is pretty much tautological.
Of course the powerful write the rules. Most people access an individuals power based on their ability to make and break rules.
I would say rhetorically that ex post facto (am i using that right? kind of like caused by definition) taxes on the ultra wealthy that don't achieve that aren't actually taxes that target the ultra wealthy, but rather just marketing.
I think Biden has tried get ahead of that issue with his no higher taxes on 400k pledge. We'll wait to see the reality though.
Biden's promise has already morphed into "household's making more than $400,000", not individuals.
Suddenly all those dual tech worker couples in Silicon Valley are wealthy!
Context: According to [0], $400,000 is in the top 1% of individual income across the US. It's in the top 3% of household income within California [1] and top 2% in SF/Oakland/Fremont [2].
0: https://dqydj.com/income-percentile-calculator/
1: https://dqydj.com/income-percentile-by-state-calculator/
2: https://dqydj.com/2018-income-percentile-by-city-calculator/
Right, this puts them in the category of lawyers, doctors, small business owners, etc.
It’s no longer a tax on the rich, it’s just a tax on successful upper middle class.
Dual tech worker couples making more than $400k in Silicon Valley are wealthy, and always have been. There's no suddenly about it.
They aren't ultrawealthy members of the capitalist class, sure. But they are definitely wealthy, and pretending that they aren't is just phenomenally out of touch.
“Wealth” is not income. Thinking like yours changes the calculus on if specialization is worth it.
Train for 10 years to be a doctor to make $400k a year for 10 years at 50% taxes or just work for 20 years at 150k at 30%?
I don’t disagree but plenty of people I know who voted for Biden didn’t think it applied to them.
$400k per year barely lets you buy a home in the Bay Area.
And regardless, what makes you think they’ll stop at $400k? That’s the point. Eventually a tax bill gets passed some couple making $150k need to “pay their fair share”.
Who cares about the price of a house in San Francisco when your income makes it a struggle to buy weekly food.
If you're talking about buying a house anywhere, you're already outside the "I'm poor" status.
What this attitude says to me is that too many people have more solidarity with the ultra rich than their peers. Not to even mention those whose income is lower than their own. Hence, a tax on the ultra rich, is somehow very likely - in their mind - going to affect them as well. On the contrary however, a benefits cut, or perhaps a benefit grant, is just a waste of cash and will never benefit them somehow, even though things like paid vacation in Europe is universal.
I'm sorry but to me this attitude hasn't worked out all that well for the common man in the US (no vacation, parental leave, health care etc), but still you believe in the propaganda by default.
Hah, I'm not from the US (I'm actually from one of those European nations you mention) and I see it from a different angle - the tax burden on higher income earners here is so enormous that people will find ways to work less to keep their earnings down, as the government just takes most of it. It has become a problem with doctors particularly - they will often opt to work fewer hours in order to earn less, as it simply isnt worth the extra time. This has made doctor access harder, which is a double disaster when you realise that the tax payer is the one who paid to train them in the first place. It is hard to argue that people paying tax in that bracket aren't doing enough already, and shouldn't be weary of any proposed increases in taxation.
> people will find ways to work less to keep their earnings down
Even if that is true and significant, I don't really find high income people skipping overtime to be major problem?
But I'm curious to read more about the claim that doctors skipping overtime due to high taxes, can you share a link?
Furthermore, the aim can't be to institutionalise overtime through tax cuts (I don't believe it would work either and those would in turn have other effects) but to increase the amount of doctors.
Sure: this is about a slightly different specific of taxation here, but its sums up the arguments the doctors have: https://www.bma.org.uk/bma-media-centre/bma-says-the-chancel...
Also to clarify - it isn't about overtime. Previously full time (40 hours a week)doctors have switched to part time (2-3 days a week), to avoid hitting the 60% rate.
That seems much more targeted and specific than the usual right wing talk about taxes causing high income people to work less (which implicitly values that above redistribution). It's also not a result (as in, X% of doctors have cut their working hours) but a plead (we may do this unless!).
> Time and time again the wealth of the middle classes ends up as collateral damage in attempts to tax the very top.
What are examples of this happening?
The problem is you can't tax freedom.
Having a big pile of leverageable assets, even if you have little income, gives you a lot of insulation from many of the costs and risks we all come across in life. For example, freedom from paying rent, freedom from having to obtain and service debt, and freedom from having to worry about job security.
Meanwhile your doctors and lawyers give 40% of their income to the state and still have student debt, mortgages, may be forced to live in a high CoL area, and may have to live with high stress.
And every day people don't really understand wealth. There's a dumb competition advertised on TV here in the UK where you can win a £3M ($4.2M) house on the coast, and a sports car. While it's glamorous, upending your life to move to live in this home is deeply impractical for most people. The cost of maintaining and protecting it would likely cost the entirety of a median UK salary. That's not freedom.
Absolutely. It reminds me of way back when the NDP (left-wing party in Canada) was asked "who is rich?" and the answer was "a family of 4 making more than $60k per year". That honesty did not go over well at all, but it's the truth. There aren't that many ultra-wealthy. To raise real money, the definition of rich pretty quickly drops to the top 10-25% of income earners and suddenly some dude making $80k per year is being told he's rich.
I'm learning economic concepts so some of my notions and questions end up being naive. Would appreciate if someone could clarify/answer this.
It's a fair guess that vast majority of Bezos's wealth is in Amazon equities. Which are valued as such by the participants in US equity market. A thought exercise, what would happen if he were to liquidate all of that $180+B in equities? Safe to say he will get less than $180B in cash that could he could use for charities, moonshot projects etc.,
There's also a matter of confidence. How will the markets react if the founder of Amazon were to liquidate his Amazon holdings? So it seems to me that not all of his wealth is usable. Does it mean we need better ways of gauging wealth? Especially when trying to assert things like "X% of his wealth is enough to house all homeless veterans for an year". His wealth is locked up in some form which though is valued in USD won't translate 1-1 to other forms of wealth.
You're hypothesizing that he might want to spend 180 billion dollars in a single day?
If you don't assume that it makes no sense to assume he'd want to liquidate it all at once.
Liquidity != wealth
Illiquid wealth != unreal wealth.
It's really odd how many people seem to have been led to believe it is equivalent though... I'm curious to know where they all picked up this misconception.
I mean that is broadly how we come to compare wealth, we don't spend much time going into the weeds of how that number came into being and what assumptions were made there. So I'm not surprised that some people think that of money.
That being said he has gone through a divorce, he did lose a good chunk of his assets pretty quickly. Sure it was just a reallocation of assets, but unless you specifically want all of that money in cash you don't need do actually sell it. Banks for example will give you cash against the value of shares, allowing you access to liquid funds while you're slowly selling the equity.
Anything specific cause you want to spend all of that money on will probably have a limit at which you can spend at, there just isn't enough stuff in the world or people offering services to absorb all that wealth instantly. Trying to cure all the world's diseases will very quickly consume all lab and relevant researcher capacity, which will only grow at the rate people start skill retraining to this new lucrative career.
So I'm not sure it matters? I mean assuming the underlying share value doesn't freefall for some reason.
>we don't spend much time going into the weeds of how that number came into being
Because number of shares owned x current market price on an actively traded public corporation just isn't all that complicated. Where are the weeds?
Using $ as a measure of wealth whether liquid or not is absolutely normal in all sorts of contexts. I struggle to see why anyone would object
>absorb all that wealth instantly.
I asked before why anybody would want to spend $180 billion in a single day. You seem to have tacitly assumed that he would but I'm uncertain why. Or, alternatively, why this unreal hypothetical matters in this context.
Bill Gates is in the slow process of liquidating his entire MSFT fortune and spending it/rebalancing it, proving that being rich on that level is no impediment to actually using your wealth. Bezos is doing the same with a billion sold here and there to build rockets too. Where are the weeds?
> Where are the weeds?
I've been describing them? "number of shares owned x current market price on an actively traded public corporation" doesn't mean that you can execute it. So it's not perfectly valid, to the point where you need specialist knowledge to even know at what rate you can expect to get that turned into liquid cash, or convince the seller to accept shares at their market value, which not all sellers will be willing to do. I'm sort of confused why you don't see any issues with that definition of wealth, when the simple act of attempting to exercise that wealth suddenly means you have less of it? The same is not true of cash for example...
A more accurate measure might be, "number of shares owned x current market price on an actively traded public corporation with a rate of loss over a specified time period, where if you wish to access the money faster, the rate of loss will increase based on this model" or something to that effect. I'm sure someone who actually knows the intricacies of this will be able to chime in with the expected amount of money you will end up with given that size of equity stake to some specified error margin.
> I asked before why anybody would want to spend $180 billion in a single day.
Well if you take spend as a transfer of wealth, then I mentioned a divorce which would fit as a significant wealth transfer that happens the instant the document is signed, Inheritance would be another.
> Bill Gates is in the slow process
The fact that you are describing it as slow is an impediment it may not be much of one, but it is an impediment. These are those weeds.
>I've been describing them?
I really dont think you have. You've been describing a hypothetical weed that doesnt manifest IRL.
>doesn't mean that you can execute it.
Coz you defined "execute it" in such a wildly unrealistic way that in no way resembles how any person actually or would want to "execute" that level of wealth.
>I'm sort of confused why you don't see any issues with that definition of wealth
Coz I'd never want to spend $180 billion of wealth in a single day either. The more wealth I have the more I'd want to draw out spending it.
>the simple act of attempting to exercise that wealth suddenly means you have less of it?
That is the point of liquidating your wealth and spending is it not?
>Well if you take spend as a transfer of wealth
They aren't the same. "Spending" wealth typically requires liquidation.
>divorce which would fit as a significant wealth transfer that happens the instant the document is signed
You are confusing liquidity and wealth again, I think. Bezos's wife wasnt given ~40bn in cash. No monetary transaction took place.
>The fact that you are describing it as slow is an impediment
It's slow because Bill Gates wants to spend the rest of his life spending his fortune. Your presupposition is seemingly that although he is doing this the wealth he is and will spend "isnt quite real" or "should be discounted" because he can't squeeze all that spending into one day.
Is that correct? Please, indulge me by answering this question directly.
You're making a lot of short points without actually describing any reasoning behind them.
If you just want to disagree that's fine, but I was actually looking for a discussion? For example:
>>I'm sort of confused why you don't see any issues with that definition of wealth
>>the simple act of attempting to exercise that wealth suddenly means you have less of it?
>Yes, that is kind of the point of spending.
I don't understand why you're trying to say here, I'm saying in a situation I want to give someone $100 cash, I would be upset if the process of handing them the money results in them getting $80 cash. When I say "suddenly means you have less of it?" I don't mean I have less money, that's obvious, I mean the recipient receives less money than I expected or they expected. I can absolutely hand over the equity, but as I said it may not be accepted.
>>Well if you take spend as a transfer of wealth
>They are actually not the same thing at all.
Ok, how would you describe spend? How is a wealth transfer specially distinct from spending.
You keep handwaving away the fact that there is a difference between an equity valued at X and cash of X value. There is a difference, such that you can't treat them as the same thing. We merely use the current market value as a way of computing it, but it is in no way pinned to that value.
-- EDIT as responding to parent edit --
> Your presupposition is seemingly that although he is doing this the wealth he is and will spend "isnt quite real" or "should be discounted" because he can't squeeze all that spending into one day.
> Is that correct? Please, indulge me by answering this question directly.
I'm merely pointing out that the numbers we bandy about aren't accurate.
Ultimately wealth is buying power.
If we're talking about someone who owns $100k in Amazon stock at the current market value, I think we'd be happy to say that the person in question has $100k in buying power, they could sell all of that stock and then buy $100k worth of goods with it.
Someone who has $100B in Amazon stock can't do that, they're buying power isn't $100B. Now what exactly it is, is a fascinating question. I'm saying that based on different specified timescales it's different, if that person wanted to get their hands on $10B in 1 month, 6 months and 1 year, they would have to sell a different quantity of their equity stake to achieve that. In fact if the underlying asset goes up in value over that time period then it may even be worth more. However I'm talking in terms of "discounting" because a lot of assets value goes down if you try and trade them, primarily because the seller wants to buy them at less than their "current value".
So to summarise, I'm not questioning the "realness" of his wealth, I'm simply stating that at those quantities of illiquid wealth, how to actually utilise the buying power of your wealth is not that straightforward. The fact that we use "number of shares owned x current market price on an actively traded public corporation" is just a way to get a nice easy number that hides a lot of interesting detail.
On this topic, there was a really interesting money stuff article that went into how private equity firms were selling small stakes of their company to "price" their equity suddenly allowing their owners to declare themselves billionaires. They sold some of their assets, but by allowing the market to "price" them we accept they now have more wealth.
>It's slow because Bill Gates wants to spend the rest of his life spending his fortune. Your presupposition is seemingly that although he is doing this the wealth he is and will spend "isnt quite real" or "should be discounted" because he can't squeeze all that spending into one day.
>Is that correct? Please, indulge me by answering this question directly.
You did not answer the question.
If you aren't at all concerned with the central point of this discussion and simply wish to abstractly discuss the nature of liquidity and wealth then I will leave the discussion here. There are economics textbooks that explain the topic to the layperson better than I would.
Sorry, you added the question after I'd read and responded to a previous version of your question, I'm currently answering it.
Regrettably you still did not commit to a direct answer.
"I'm merely pointing out" was a response of evasive prevarication in spite of me asking you to be direct.
Three comments later all I'm reading is a very strong implication of disagreement with no concrete reasons mixed with a lot of sowing of doubt based on ancillary points.
I think this is a good time to end this discussion. If you do truly still disagree with me and wish to start again, please could you write a response to the parent comment with specific reasons? Thanks.
> there is a difference between an equity valued at X and cash of X value.
Indeed, based on my readings and thought exercises this is absolutely correct.
In case of equity it is the market i.e., the collective belief of participants in the market is what is backing the value. As we see once in a while market for specific stocks could vanish leaving nothing backing that value. Where as in case of cash it is backed by the US government. That is a big difference.
For a day-to-day retail equity trader you could assume there is close to 1-1 correspondence between equity and cash. But at scale that 1-1 mapping breaks down.
I'm guessing you did not scroll far enough along to read the response to this exact argument:
https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE...
Bezos has been selling his shares for years.
The market is still betting that Amazon can exploit more people faster every year and earn money (i.e. profit) from them.
> So it seems to me that not all of his wealth is usable
Bezos is the richest, so we don't have examples quite at that scale. That said, we have some pretty big (eg gates, buffet) announcing liquidation & donation without anything bad happening. So, he probably could sell his amazon shares and do something else with them.
You are approaching some "it's complicated" questions that occur at scale though. It's true, for example, that if Bezos wanted to liquidate immediately, that volume of shares is probably more than the market could buy. It might temporarily crash the stock, if handled wrong. Finance people know how to do this right though, so I think we can say that all of that wealth is usable.
There's also the other side, what Bezos would spend that wealth on? You can only buy what exists. Say Bezos decides to solve homelessness and housing scarcity in his state forever. He sells his amazon shares (slowly, carefully) and buys half a million houses. There aren't that many houses for sale, so rices would skyrocket. Say he decides to build instead, to avoid that. The state only has so many builders, roofers, cement shops, cranes... only so much capacity to produce houses. Building or buying half a million houses in Washington quickly is probably near impossible. You might cause detrimental side effects by trying. Normal people couldn't buy a homes, because Bezos has bid up the price of everything. OTOH, builders and pre existing property investors will get rich. Inflation probably happens.
This is the kind of problem governments often face. At some scale, common sense economic concepts/abstractions like the cost of building a house break down and underlying realities leak in. Only so many houses exist.There's only so much labour, materials, capacity to produce.
A rung or two higher up the meta ladder, a common demonstration of macroeconomic weirdness is the "paradox of choice." What would happen to an economy if everyone saves 100% of their money? All shops & restaurants are empty. There's no work. Businesses fail, default on loans. Share prices crash. It's simply impossible for a whole economy to save. Saving (and more controversially, borrowing) doesn't exist at macroeconomic scale. An economy can't save or borrow. Shutting down car factories today doesn't make it produce more cars tomorrow. So, we can't all save for a car this year to buy one next year.
Thank you for a detailed and informative response.
> ....only has so many builders, roofers, cement shops, cranes... only so much capacity to produce houses....only so much labour, materials, capacity to produce.
IMO the underlying problem to solve is mobilisng this capacity. And the $$ to do so needn't come from rich people. The US anyway has been running budget deficit, there's also this ~$2T infrastructure bill. Some of that money could be used to solve housing/health/education problems and as an added benefit it'll provide jobs to the US citizens. I'm sure this will have 2nd order adverse effects but they I guess they won't be as disruptive.
I am not saying inequality is a problem; but taxing rich doesn't seem to solve it. It will lead to endless debate and lost time. It will take the focus away from the underling problems which is rotting basic human needs -- food/health/housing/education. The government should address underlying causes that lead to inequality and spend on infrastructure in a big way.
So... I don't think there's a universal "underlying problem." Everything has a context. Mobilising the capacity of an economy is, IMO, a macroeconomic question. Besides being big and involving the whole economy, macroeconomics is almost synonymous with monetary economics... the economics of money.
So, I don't think you can seperate it from tax and monetary policy.
His wealth is locked up in some form which though is valued in USD won't translate 1-1 to other forms of wealth.
You should also consider that Bezos can access his wealth in more ways than simply selling his stock. It can be used as security against debt for example. Should Bezos decide he wanted to he could borrow many billions of dollars secured against some of his Amazon stock today (assuming his contracts with Amazon don't preclude doing that). Bezos could also donate stock to a charitable trust, which could then sell it with much less market disruption. Or he could use dozens of other financial mechanisms available for accessing his wealth.
People are keeping wealth in holdings because they are not taxed. If they would liquidate they would have to pay let's say for the sake of the argument half of it as tax. I don't think market is a problem here.
The bigger problem is what are you going to with that money? Obviously not consumption. You are not going to buy more tshirts and burgers.
You are going to invest in pet projects, like google glass or Bezos cockrocket [1]. Or finance some causes, like Gate's attack on malaria - good stuff.
Why 50%? Assuming we are talking about Bezos and AMZN the max tax would be 20% for long term capital gains?
He'd certainly get much less than $100B, but he'd still get a lot. The share price of amazon is mainly driven by the revenue/expenses/growth opportunities of the company, which will not have changed just because bezos is cashing out, so it won't collapse completely.
That's not unique the the ultra rich, though. Many people have most of their wealth locked in a house. If they needed to sell at very short notice they would have to sell at a significant discount.
There's a pretty big difference between owning $180bn and owning Amazon. At this scale he's more like the monarch of Amazonland than the owner of Bob's Dry-cleaning.
I'm not sure that implies there should be a regime change in Amazonland, though. In some ways it implies the opposite. Annex Amazonland, overthrow King Bezos, and you're faced with the challenge of administering the damn thing yourself.
Bezos has already stoped administering Amazonland. The king has found ambitious lackeys to do that work.
Why don’t we overthrow the king, then reward those that remain to keep the whole thing going.
You are focusing on numbers which will lead you nowhere. The reason the US has a struggling population is that the US has a population that didn't have a good education and training. If you want to make a population richer, you need to train people to do things (ie: Plumbing, installing an Air Conditioner, becoming an ophthalmologist, etc...). As evidenced by the latest stimulus checks, giving people money will only create inflation and a shortage of low-wage workers. The US is very rich and connected, so lack of raw resources is not one of its issues.
Jeff Bezos can have $200bn+ in the bank without affecting the economy. The effect of seizing these $200bn and distributing them is the same as quantitatively easing them into the economy. Some people exert power through work or politics. Some people have none and want to exert power through "journalism" and "shaping opinions". It's all fun and games until these people are elected (through populism probably coupled by a recession); which is when you need to prepare your luggage and get the hell out of such a place.
Quantitative easing swaps bank reserves for high grade bonds. How is that remotely equivalent to the forced liquidation and distribution of equity?
I'm talking about the hypothetical scenario where swapping $200bn worth of equity will generate $200bn worth of cash without disturbance to the market.
Obviously, this couldn't be less true and the market will collapse even before the selling starts.
How is that analogous to 200bn of bonds for 200bn of bank reserves?
Also factor in his capacity to raise more fund. Tomorrow if he go public with his space company, his wealth will increase
Collateral based loans
The rich aren't the enemy, rent-seekers are.
They may overlap, and Bezos may be both, but wealth and capital on their own are orthogonal to justice.
https://pbs.twimg.com/media/EHKZRLcW4AA1aju?format=jpg&name=...
I agree, Amazon isn't a public good. There is no way that Jeff Bezos owning Amazon shares makes me worse off.
Land is a public good. We have to compete for it but that doesn't mean private individuals should get a cut of the public wealth around the plot of land merely by owning it. It only makes sense to tax it or to turn it over to public ownership (the transition would obviously take decades).
> There is no way that Jeff Bezos owning Amazon shares makes me worse off.
They use their market dominance to reduce the income of authors resulting in less choice and lower quality books for you to read, while increasing the price of available books.
They use their vast wealth to buy out or strike deals with competitors, preventing any challenge to their hold on the industry.
As market maker and participant they use their exclusive market data to undercut their own providers resulting in more hoarded wealth for them but a less creative and productive society for all.
They engage in continual astro-turfing which alters public debate away from whatever is really going on and toward what the mega wealthy owners want people to believe.
And much much more.
Efforts to obtain monopoly rent ("supernormal profits by restricting output and hence increasing prices above its perfectly competitive level."[1]) is a subset of rent-seeking. The problem again, isn't the wealth itself, it is the fact that wealth is being expended to seek monopoly rent at great social cost.
[1] https://www.tcd.ie/Economics/assets/pdf/SER/1995/Alan_Dunne....
Rent-seeking might not be the only problem. Worker exploitation is also a serious issue on my list. How on earth can someone defend not paying a living salary for a full time job?
Add to that that the legal framework (talking about the USA) is seriously skewed to favor employers and disadvantages workers and any attempts to unionize. This has to stop.
Great point, but worker exploitation (like so many other problems) flow out of perverse rentier structures. In fact this is one of the first principles discovered about how rent works, termed the "law of rent" by David Ricardo over 200 years ago. I.e. that the rent collected from productivity will always be such that the remaining wages are only exactly as good as the "margin of production", a.k.a. the next best alternative to engaging with the labor economy, subsistence living. This is why you can have exploding productivity and still subsistence standard of living for labor, where the entirety of the excess is captured by rentiers.
> How on earth can someone defend not paying a living salary for a full time job?
Putting the employer on the hook for more aspects of the employee's well-being (healthcare, living wage) only increases the gap between employed and unemployed, therefore increasing the bargaining power of employers. I think it's better to have society provide a basic standard of living (most importantly housing and healthcare) to all poor people, employed or not.
Money is a public good as well. Money taken out of circulation is bad for the economy and drives a big chunk of economic problems in society. It's easy to tax so the valuation argument doesn't even make sense. There are companies with $100 billion or more in their bank accounts. That's a million paychecks that didn't happen.
Isn't it weird how it is possible to prevent other people from working by simply withholding money? Meanwhile we expect the people who couldn't work as a result of this withholding of money to keep working, we consider them lazy and not worthy of sympathy.
This is a total misconception. Anyone's $100B in a bank account has no bearing on money supply. In the short term, yes, money is taken out of circulation. But if that causes increased demand for liquidity, and banks are willing to meet that demand at the interest rate set by the central bank, money will be created by the loan that is initiated.
What dries up money circulation is not any one company's hoarding, but the banks' willingness to lend as a whole, and the economy's desire to borrow and spend as a whole.
Recommended reading: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...
What is a "living salary"?
If I'm a single mom with 3 kids, is the "living salary" the same as a single 20 year old who lives at home?
Short introduction to definitions in the field of applied economics, see OECD and WHO publications for details. A living salary is a colloquial phrase, more precisely we should talk about the net equivalised household income. Gender and marital status is irrelevant for the calculation.
Let us assume both household's single earner brings in 15382 €/a (EU-27/28 average net income for 2013). Household 1 with two juveniles and one child is 6688 €/a, poverty. Household 2 remains 15382 €/a.
Pretty low quality question. Of course the salary will not adapt according to individuals expenses and neither will it here in Scandinavia. However, the father will of course be obliged to pay child support. The mother will also receive a monthly allowance for each child. She will also likely be eligible to rent support. So children is a special case, but a living wage doesn't involve that.
How did you think this would actually work?
So the govt subsidizes the businesses low wages? Corporate welfare?
No. I've already written that obviously the amount of children of each individual can't determine what a living wage is supposed to be, but then you still twist this to be a question of subsidy to the business in bad faith?
It’s not bad faith. Plenty of arguments in the US have been around wages where the govt has to provide additional support. It’s called “corporate welfare”. The argument is the company should pay enough on its own.
Why can’t you have a conversation in good faith?
> Why can’t you have a conversation in good faith?
I think cloudfifty already answered the question in good faith. And honestly; this question comes over as a bit trolly.
But hey, I'll bite!
> The mother will also receive a monthly allowance for each child. She will also likely be eligible to rent support. So children is a special case, but a living wage doesn't involve that.
In this case, rent support would come from the state and if the mother in question is also working, you could classify this as additional support. So, if the mother is working, she should get a salary high enough to not warrant this kind of support. (Given that rent is usually highly dependent on the location of the property, not having such a support could further push gentrification and require longer commute for the mother in question. In this case we also need to make sure that the day care for the kids doesn't suffer in quality if the mother in question has to move to a less desirable living location.)
In general, we should not do corporate welfare. In particular there might be cases where we need to support people, even if they are working.
I'm not repeating myself again. But given your comment history I'm sure that you're just here in bad faith in general.
Avoiding the question just makes me think you don’t have an answer.
For the last time. The concept of a living wage is not adapted on an individual basis. The problem of the US wrt a living wage is certainly not that single mothers of 3 children are the standard model, and you know that, hence bad faith. You can't change the subject to your own trolly question if it constitutes "corporate welfare" and expect an answer.
You sound very upset.
It sounds like in Scandinavia you don’t worry about corporate welfare. That’s news to me, but good to know.
> You sound very upset.
Not really, but what's the purpose of this particular reply other than to try to wind me up?
You’re avoiding answering the question.
I've answered both your original questions multiple times:
> What is a "living salary"?
> If I'm a single mom with 3 kids, is the "living salary" the same as a single 20 year old who lives at home?
Your diversion with focusing on a new totally unfruitful topic is not my problem.
So you’re saying Scandinavia is ok with subsidizing the salary of certain people to make it a “living salary”?
That’s a yes/no question. Not sure why you’re struggling to answer it.
I’m surprised that people continue to share that graphic with a straight face.
If “rent-seeking” contributes to people becoming wealthy then the two notions don’t remain orthogonal. The chances of finding more rent seeker among the wealthy is far higher than more rent seekers among the non-wealthy.
Additionally the size of “problems” that a single low-wealth rent-seeker causes is not equivalent to the amount of “problem” created by a single high-wealth rent seeker.
I agree with all of your points and still believe that rent seeking is the root cause to be addressed, not wealth in and of itself. Wealth is just stored labor. It is value neutral, and everyone has the right to the fruits of their own labor. It is only rent, unjustly collected from others' labor via force or monopoly that is illegitimate.
Taxing the ultra-wealthy is possible, and they still get to be ultra-wealthy afterward. We already do it, the discussion is only “how much?” and what to do with the money. That’s a tractable problem. (Incidentally - the rich have been winning this argument for a long time, as their effective taxes fall and fall and fall.)
On the other hand, proving that a specific piece of income is “economic rent” - I think that’s intractable and only produces loss on both sides. It’s a fight to the death for the accused, a hill they’ll die on. The idea is appealing at a surface level but I can’t see any way forward with it.
Tax people who can afford to be taxed. The alternative is hardly going to work.
> Tax people who can afford to be taxed. The alternative is hardly going to work.
Tax harmful externalities and rent-seeking. The alternative is unjust and illiberal.
The current inequality is massively unjust.
Declaring the clearest and most effective ways of solving it as "unjust" because they clash with your particular ideology perpetuates a vastly worse injustice—one that costs millions of lives, rather than merely feeling wrong.
I simply disagree. A tax on rent is the most effective and efficient method of redistribution, justified by well studied economic principles. It will create more wealth and save more lives than the alternative. No other tax is clearer or more effective, even in theory.
If you have a minute, just browse the "Economic properties" section of the wiki page on Georgism: https://en.wikipedia.org/wiki/Georgism#Economic_properties
You didn’t address anything here.
> Taxing the ultra-wealthy is possible
The ultra-wealthy's what? Their wealth is held offshore, their income is more than offset. You want to tax yachts? They'll buy jets. Taxing the symptom is playing tax law whack-a-mole (and the mole is rich and the hammer is limp, and the mole pays the hammer's mortgage). Tax the cause. Their rent-collecting mechanisms are much more immobile and difficult to hide.
> and they still get to be ultra-wealthy afterward.
Not a justification.
> We already do it
Doesn't mean it's right.
> the discussion is only “how much?”
It's not right to presume we can take from someone just because they can afford it. The only policy that makes sense to me is to reclaim the portion of the public good that is privatized via rent seeking. If someone got ultra wealthy by their blood, sweat, and tears, as long as they did so without collecting rent or causing negative externalities, I don't care if they can buy and sell Andromeda.
> and what to do with the money.
The reasonable thing to do with the money is to offset negative externalities (pollution, climate change, illiteracy, etc.) and equally redistribute the rest (citizen's dividend).
> (Incidentally - the rich have been winning this argument for a long time, as their effective taxes fall and fall and fall.)
The only way to reverse this trend without massive deadweight loss is a tax on land rent.
> On the other hand, proving that a specific piece of income is “economic rent” - I think that’s intractable and only produces loss on both sides. It’s a fight to the death for the accused, a hill they’ll die on. The idea is appealing at a surface level but I can’t see any way forward with it.
I disagree. The simplest form of economic rent is that on nature. A tax on the unimproved value of land, and a carbon tax are simple, straightforward examples anti-rent, anti-externality measures.
Genuine question. Ia rent seeker being used as a metaphor here?
The economic definition is being used: https://en.wikipedia.org/wiki/Rent-seeking
(there is debate about which activities qualify, but the gist is obvious)
While I love the UX of this site and how well executed it is, I think it’s spreading misconceptions about how the world works.
Human behavior is driven by contagious imitation (monkey-see monkey-do), and we all pile into the same behaviors at the same time, so this inequality will always exist. No matter how equitable the system.
Of all the content on the internet, 1% of it gets 99% of the traffic. Of all the movies on Netflix, 1% get 99% of the eyeballs. Of all the businesses on earth, 1% get 99% of the customers. Of all the stocks in the stock market, a tiny percentage generate ALL of the returns. I could go on and on.
Fundamentally, value-creation in a connected world results in an exponential (log) function, not a linear one.
And people’s brains turn to mush when trying to comprehend exponential vs. linear growth.
You can look at similar wealth curves in the supposedly more equitable nordics to see how similar they are if scaled up to a population the size of the US. On an exponential curve, extending the x-axis 100X further results in equally extreme outcomes like Jeff Bezos.
Basically, everything humans do results in extreme inequality.
So while we should certainly raise taxes on the mega-rich, the goal shouldn’t be eliminating exponential inequality altogether. Because it’s a base property of humanity.
I don't understand the concept or the graphics are rendered wrong on my computer.
Better would it be do explain with a standard distribution (what wealth isn't). Lets assume that 1 SD of income corresponds to 10 cm. So 3SD or 60cm, basically your screen size, corresponds to 99.7% of the population.
Some random data from the internet: "The median household income in Franklin County Ohio is about $43,000 although the average household income is closer to $54,000. The standard deviation of household incomes is about $30,000. You pick a random sample of 50 households. What is the chance the average household income in your sample is over $60,000?" https://online.stat.psu.edu/stat100/lesson/8/8.3
Household income may be even two earners. But assuming broadly 50k, sd 50k per person to make it easier and taking into account more affluent areas, only a few people make more than 200k per year.
Now lets assume Bill Gates or the Oligarch of your choice makes 10% ROE on his wealth. If he has 100 Billion, this is 10 Billion a year. This should be 200,000 Standard Deviations. If one SD corresponds to 10 cm, this should be 20 km on our scale.
So we can see the income of 99.7% of the population on our screen, but Bill Gates income would be 20 km away.
(Hope I made no mistake, feel free to correct)
PennState used an extraordinary bad example to teach the normal distribution, they chose a case where you have a fat tail distribution.
Nice graphic, but also a bit misleading.
Bezos would never be able to immediately realise that amount of assets in to useful cash. So saying no human deserves this amount of wealth is kind of already fulfilled? He may have 2 or 3 billion as cash maybe.
I agree to an extent with this view, though the reality is complicated.
The wealth of the ultra-wealthy doesn't exist in bank accounts or vaults of gold, but in assets, and largely assets which have appreciated. The $13 billion dollar single-day appreciation in Bezos's wealth wasn't from someone cutting him a check, but as a result of an increase in the value of his holdings (largely Amazon, Inc., stock).
And liquidating those holdings would not result in receiving the full closing-bell price for that day --- a movement the size of Bezos's on the market would itself influence the price. (A very similar situation exists for other novel assets, notably cryptocurrencies, whose "market value" is something of a polite fiction.)
At the same time ...
... the ultra-wealthy can excercise their wealth without liquidating or spending it, largely by using it as collateral against loans or for investments in other areas. At sufficient scale, the mere threat of making a move in some direction (investing in an industry or market or backing a politician, party, or legislative initiative).
In both instances, the key point is that money doesn't behave at these scales as most people reading this are given to understand. Much as with relativistic physics and quantum mechanics, our quotidian experiences don't give us the proper intuition for these phenomena.
The author responds to this at about $14.8 billion into the "400 richest Americans" section, see [0], which they link to.
0: https://github.com/MKorostoff/1-pixel-wealth/blob/master/THE...
What's "cash"? A marketable security?
I'm insanely poor by these standards but wealthfront will front me hard cash using my account as collateral with one click i think up to 30%. Super cheap interest rate.
Bezos has way more favorable banking. Even if he was 'only' worth $10-15 billion I bet he could get 2-3 billion in hard cash overnight.
He might not hold a lot of cash, but he doesn't need to he can get it immediately without selling.
Not just that, he could trivially offload 15 billion without price moving at all.
Tons of private equity M&As have happened at much larger valuation.
There are many, many ways that wealth is realized without spending it. Once you get past a few hundred million you literally cannot spend the money as fast as it comes in.
These billionaires aren't amassing wealth to spend it on things, they're gathering it for power, leverage, status, prestige, legacy reasons etc, and using it to influence and control the world to further their own agenda.
In Bezos's case, he built a company that literally didn't even exist 27 years ago. It's gotten so huge, because globalization has gotten so effective. That's true of all tech companies: they benefit disproportionately from globalization and network effects.
As far as what to do about it? The only solution could be to break up Amazon, Google, Apple, etc. Taxation is not it. The Federal government and the Fed controls the money printer and influences how high these stock valuations are getting. They're a large part of the problem.
We can't print trillions of dollars without side effects in supply, demand and price mechanics. In this case, dollars are chasing productive growth assets as yields in bonds hit the floor and go under zero in some countries.
The growth in inequality correlates with the growth in the national debt, and monetary supply growth.
Why isn't a tax rate that increases proportionate to your wealth workable?
At this point I think there must be a propaganda campaign to convince people down this line of thinking. Bezos could realistically liquidate the majority of his wealth, though obviously not all at once. Look at how much Gates has liquidated.
>Bezos would never be able to immediately realise
Why would he want to? Who tries to spend 100 billion all at the same time? Nobody wants 100 billion in cash in their bank account either.
I think you're confusing liquidity and wealth.
Why is it a problem for Jeff Bezos to have this much wealth?
As a human society, we produce and we consume things. It sucks if some people consume a lot and not enough is left for others. I'd rather see us pile on people who overconsume rather than on those who overproduce.
A lot of the comments (not all) really personalize the issue by using Jeff Bezos as the villain, when it's the system and laws that have allowed him to capture so much wealth that is the problem. And IMHO, that's the part that needs addressing, by putting a progressive tax in place.
Jeff's not the enemy - he's been amazingly successful within the rules that we as a society have made. Some of these rules are oppressive and bad and we should fix them.
A simple calculation can show that, with just defense budget of top 10 country, the world could install enough solar cell to power the world day and night, forever. But will we do it ? I don’t think things can go stupider that this. Future generations will see us in the same level of stupidity with which we see flat earth believer from centuries ago.
Nice work!
People don't really have an understanding of how much wealth has been coalescing in the last thirty years and this is a good start as showing them how skewed things really are.
Seriously; this is dangerous. Concentrating that much wealth in such few hands is bound to have negative consequences. And all of us professionals really should get onboard trying to tackle this.
Of note: The yearly GDP of america is 21 trillion.
The top 400 wealthiest could purchase 246 Nimitz class aircraft carriers, and still have about $2B in change ($5M each). The US has 10 (of 20 total US carriers). Or, put another way, the top 400 could duplicate the entire US Navy fleet 5 times over (so, like, 55 super carriers, 100 carriers, 340 destroyers, 330 submarines, 2560 F/A-18E/F, etc.) and still have $370B in change ($925M each).
Missing: median US Black household wealth, $24,100; median US Hispanic household wealth, $36,100. Numbers as of 2019.
https://www.federalreserve.gov/econres/notes/feds-notes/disp...
Lifetime budgetary impact by race:
White: +$200,000 Black: -$751,000 Hispanic: -$588,000
Puts your numbers in perspective
Source: https://www.govinfo.gov/content/pkg/BUDGET-2014-BUD/pdf/BUDG...
where is that in the document?
no hits on the numbers you provided.
Means with Top 5 country defense budget, we could solve all humanity’s problems? Who are we kidding really ? Why target rich people?
Re: "No single human needs or deserves this much wealth." Thanks for your opinion. That's all it is. There's no validity to that position. Wealth is not based on need or "deserving". In Jeff's case it's based on smart business, hard work and accomplishment. What have you accomplished?
I'm always wondering how the capital gains work for the rich, or rather how they work around it. In case he sells the Amazon stock, it means he is due 28.6% American capital gains tax ie. 53 billion USD? I don't think so... the wealth of the richest basically have multiplied in the last 2 years...
A society that is extreme in one category is likely to be extreme in other categories as well.
Europeans were very fond of killing each other in the first half of 20th century for the profit of the richest industrialists. Divide, agitate, conquer, reap the profits.
War is a Racket
Well, that is what happens with a positive time preference. Being wealthy today is better than being wealthy tomorrow.
If you were to sit down and think about how war creates wealth you would at first think that it can't because it costs money to go to war and pillaging ruins the source of the spoils.
However, the urgency of money (interest on debt) creates a desire to have it earlier than later. If you can pay your debts back sooner you avoid paying interest. Therefore it is in your best interest to overharvest your farms, overfish the waters, overgraze the field, exploit your workers and pillage the village. Of course, the same applies to the lender. He wants to earn as much money as possible so he must obtain it as early as possible so that his interest compounds.
Of course in practice inflation puts a damper on that form of extortion and causes the time preference to shift negative. If your money is losing 50% of its value in 20 years you'd accumulate as little as possible and would rather receive money in the future because the amount of value you produce hasn't decreased which means you get twice as much coin in the future to represent the same amount of value.
I can think of no better illustration of the inequality in our society than this: the poor and middle class drink £5 bottles of wine purchased from Aldi, while the rich drink £50,000 bottles of wine. It’s truly shocking.
I am most grateful for my Logitech MX Master 2 mouse scroll wheel and a shift key. Hold shift, give the scroll wheel enough momentum to undo the parking brake, and let physics do the rest.
Matt if you're here, can you add an atom/rss feed?
Bezos's wealth comes out to be about $500 per person.
I would be more than happy to pay $500 to another Bezos that provides my life was as much value.
Amazon is so convenient!
I wish they included a few more things at the end, like "US National Debt", "Total US Government Debt", etc.
Erm, how about the wealth/money controlled by the Federal government? That's much bigger than anything shown here.
And, in theory at least, belongs to and serves the people as a whole.
Not one single solitary exclusive and extraordinarily privileged human being.
In theory. In practice, this wealth is controlled and overseen by privately owned commercial banks that look out for the interest of their owners, i.e. primarily the super-wealthy.
Would that wealth be more or less accountable to the people at large if it were in a small number of private hands?
> in theory at least
creating inflation sure helps people as a whole!
Best way to wrap your mind around wealth.
1 thousand seconds = 16.6 minutes
1 million seconds = 11 days, 13 hours
1 billion seconds = 32 years
1 trillion seconds = 31,688 years
I find these scrolling websites unergonomic and not at all that good at getting the point across (other than "yeah, it's a lot").
Also, with the text-length budget of that site I think it's a shame it doesn't explain what wealth, profit, liquidity and cash-on-hand is.
Better visualisations imo:
- Tom Scott: A Million Dollars vs A Billion Dollars, Visualized: A Road Trip https://www.youtube.com/watch?v=8YUWDrLazCg
- How rich are Jeff Bezos and Elon Musk in Minecraft terms https://www.youtube.com/watch?v=PvttV8EIoGA
> No single human needs or deserves this much wealth.
Why not?
Yes. That was a rather arrogant stab of jealousy. Big piles of concentrated wealth sometimes gets spent on important projects that governments (ie. normal people) won't or can't do.
Let's just pray that our feudal overlords invests wisely!
Or not. It doesn't matter. Some already have so it can't get any worse. They've already generated enormous value in doing the thing that made them rich.
They're not feudal lords. We own our own property, not Bezos. He has almost no power over us. If nobody told you he was so rich, you wouldn't even know. That's how little it matters beyond jealousy.
the scales apparently change?
it took me a lot longer to scroll through bezos orannge than 185x the 1 Billion Blue rectangle.
xkcd's "Money" graphic gives a sense of other value comparisons, in a somewhat logarithmic sense, ranging from $1 to the roughly $2.4 quadrillion dollars of all human economic activity to date (as of 2012 when the infographic was made).
Genuinely curious question. How do you guys pull xkcd comics just like that? Do You save interesting comics for future use or do you remember the comic and google it to find it?
Some I remember generally. A very few I recall directly ("Duty Calls" is 386, as in the Intle chip.)
"Money" made an impression at the time. I DDG'd "xkcd money" to pull the URL.
Other times I just suspect that there's a relevant xkcd and try some keywords.
"Duty calls" as in "Someone is wrong on the Internet!", I'm fairly sure. Hey, it's that new hot processor, so a fairly memorable number. "Little Bobby Tables" is 327 IIRC; also the CI capacity of an old American V8 engine (a Ford, I think).