It turns out that wealth inequality isn’t about the 1 percent v. the 99 percent at all. It’s about the 0.1 percent v. the 99.9 percent (or, really, the 0.01 percent vs. the 99.99 percent, if you like). Long-story-short is that this group, comprised mostly of bankers and CEOs, is riding the stock market to pick up extraordinary investment income. And it’s this investment income, rather than ordinary earned income, that’s creating this extraordinary wealth gap.
The 0.1 percent isn’t the same group of people every year. There’s considerable churn at the tippy-top. For example, consider the "Fortunate 400," the IRS’s annual list of the 400 richest tax returns in the country. Between 1992 and 2008, 3,672 different taxpayers appeared on the Fortunate 400 list. Just one percent of the Fortunate 400—four households—appeared on the list all 17 years.
While it is true that we spend more than other countries [on medical care] in an accounting sense, we actually use fewer real resources: fewer doctors, fewer nurses, fewer hospital beds, shorter lengths of stay, etc. That means that from an economist’s point of view, we aren’t necessarily spending more than other countries.
Fuchs says that with an extra $1 trillion, we could have more bridges, more highways, more teachers, more R&D, etc. But once again, this confuses money flows with real resource use. We can’t devote more real resources to non-health care unless we use fewer real resources in health care. But if we copy other countries, the resource flow will go in the opposite direction. That is, in order to have more doctors, nurses, hospital beds, etc., we will have to have fewer teachers, fewer roads, less R&D!
The 80/20 rules, formally known as the Pareto Principle, is a common rule-of-thumb in lots of situations. In general, it says that 80% of all effects in a particular situation comes from only 20% of the causes in that same situation. If you can eliminate the right 20% of the problem causes, then you can get rid of 80% of the effects from those problems.
Reading Taleb’s “Antifragile”, he points out that the complaint against “the one percent” holding 50% of the wealth in the country is a natural outgrowth of the 80/20 rule. There’s no conspiracy, it just works out that way. Of the top 20%, 20% of them will hold 80% of that wealth; of that subgroup, another 20% will hold 80% of that wealth, and so on. Eventually we find that about 0.8% of a population will hold about 51.2% of the wealth, just as a rule-of-thumb. So, a baseline point of 1% of the population holding half the resources doesn’t seem that out of line to me, mathematically and statistically speaking.
The government currently backs about 90 percent of newly issued mortgages, through Fannie Mae, Freddie Mac, the Federal Housing Administration and Department of Veterans Affairs. To all intents and purposes, except for very large loans to very affluent people, there is no private mortgage market in the U.S.
More socialism. Or is it fascism? Via How’s Obama Going to Get U.S. Out of the Mortgage Market? – Bloomberg.
Consider the problem of polio, a disease that killed tens of thousands and ruined the lives of millions around the world in the 1930s through 1950s. One solution was to try to ease the suffering of polio victims, developing better iron lungs and systems of braces, wheelchairs, and prosthetics to make it possible that they could live some kind of life. This industry was enormous, and highly profitable.
The other solution was to develop a vaccine, the one that Dr. Jonas Salk finally perfected in 1952, and which showed itself to be effective within a decade. By the late 1960s, polio had been reduced sharply in the United States. Now, it is almost unknown here and in most of the rest of the world. Of course, the makers of braces, crutches, and iron lungs took a beating, because no one needed their products anymore. But the total costs to society were dramatically reduced, even accounting for the “loss” to the equipment manufacturers.
When it comes to waste management, we are at the stage of manufacturing braces and iron lungs.
A country where government spending accounts for 40% of GDP is NOT a capitalist one. It is a socialist one. And if the republicans had any balls they would start calling the democrats the “socialist” party because that is what they are.
You want to find empirical studies that show free trade to be harmful to free-trading nations? No problem; you can find them. You want to find empirical studies that show government stimulus spending to be a sure-cure for what ails a slumping economy? There are plenty of such data-rich studies out there. You want to find empirical studies that show that violent crimes aren’t deterred by the death penalty? Not a problem. You want to find empirical evidence that increased rates of handgun ownership increase citizens’ likelihood of dying of gunshot wounds? Many such studies are available.
You can also find plenty of empirical studies showing the opposite of what is shown by all of the above studies. And these other studies are, as a group, no less carefully done than are the studies that they contradict. And these other studies, also, are done by scholars no less credentialed and no less objective than are those scholars who produce the contrary findings.
That’s the reality of the social sciences. It’s not an exercise in simple observation of simple and self-defining facts, only one or two of which change at any time.
via Where Are My Data?!.
When there are many factors that have an impact on a system, statistical analysis yields unreliable results. Computer simulations give you exquisitely precise unreliable results. Those who run such simulations and call what they do “science” are deceiving themselves.
Beware also of models that fit historical data (especially “corrected” or “adjusted” data) but do not provide accurate predictions. This applies to macroeconomics, climate change, the stock market, social “sciences”, and other complex systems with high causal density. You have to be very very careful you aren’t fooling yourself with these models; and, as noted by Feynman, “yourself” is the easiest person to fool. Via Causal Density is a Bear | askblog.
To build a financial system meant building institutions (foremost, the Bank), and that in turn meant constitutional construction. Everyone on all sides eagerly mobilized the “original public meaning” of the Constitution, only to discover that it would carry only so far. Those arguments, moreover, were part of a vituperative, sharply polarized and, over long stretches, closely divided debate. (McCraw records the often razor-thin margins on votes on the Bank, the debt, and internal improvements.) The stuff that we now take for granted and cite, reverently and/or precedentially, as constitutional wisdom easily could have come out the other way. In our current confused debate, it’s good to hold on to all of that at the same time: the Constitution as a lode star; the limits of mere interpretation and the impossibility of a Constitution beyond all politics; and the recognition that the Constitution can survive and, in a real sense, rests on political strife.
Germany, the ECB and rest of the EuroThieves did something innovative.
They simply ignored Parliament and came up with a scheme that didn’t require a vote.
We’ll see how this works out for them.
This, incidentally, is exactly what happened here with GM. It was blatantly unlawful to protect the UAW’s pension fund, which had no senior standing while trashing senior bondholders. The government did not care and did it anyway — and the courts permitted it.
This has been the repeated means by which you are stolen from. When you enter into an investment, whether you make a deposit in a bank or buy a bond or something else, you are buying into a capital structure in a given place with a given and declared level of both risk and potential reward. You price that risk and your willingness to enter into the transaction with the full understanding of where you are in that capital structure.
When that is unilaterally changed retroactively you are being stolen from.