Wealth Distribution

[Mr. Bigglesworth]

The best way to decentralize wealth, stabilize the country and help your family is to start a small business.

I don't disagree.  My brother's been a highly successful entrepreneur for 20 years now.  I myself have spent the last 15 years at a firm trying to bring more transparency and consumer value to the financial services sector.  We've done great by our shareholders, but are only slowly chipping away at the market imperfections that have so many people overpaying their financial firms without even knowing that they're doing it.

But you aren't responding to the data I put up there or the questions I posed. 

Are you saying, "No, I don't care about those data or those trends.  They're not a problem in America."  Or are you saying, "I don't like those trends, but the best way to fix them is to start a small business." 

I'm not trying to score points here debate-style.  I'm just trying to determine if there's common ground.

The latter. Over concentration of wealth hurts everyone around including the country.

I like to use ecosystem vs. economic system as an analagous pair.

Money is like energy, it drives the whole modern system. Complex ecological systems are more robust and resistant to environmental stresses. They are self moderating (in the long term). Disasters are more quickly rebounded from.

A complex robust economic system would allow nature to take its course (yes, no governmet bailouts OR SUBSIDIES) and it would be diversified.

People can readily see a healthy ecosystem/economy. A forest of trees for example. What many don't understand is that that big old healthy forest/economic system is ONLY MADE POSSIBLE  because of all the activity by critters/plants that are small and numerous.

Big corporations/Multinationals (like trees) can only exist when the little critters are numerous and healty... building soil and making nutrients that allow for the trees existence.

They represent a small but significant portion of the ecosystems stored wealth... and they die! All that stored energy/money is released back into the ecosystem for use by the litter soil and nutrient producing critters.

In our economy, these big ass trees must release their stored wealth sooner or later, otherwise the system suffers and it becomes less robust.

If you can follow that analogy, then you understand why I dislike corporations and accumulation of wealth.  "Let the energy flow throughout the ecosystem! Let the wealth flow throughout the economy!"

It is a good analogy.

Let me throw in that in economic analysis what is flowing is often money as a representation of wealth, or rates of transactions, representing rates of economic activity. Maybe think of that as a nutrient in the ecology analogy. The economy is one thing of many needed for the society to thrive. If all of the nutrient, like calcium or carbon say, gets hoarded by one species the rest of the ecosystem dies which later kills the hoarding species.

diversity and turnover/cycling of energy are key

Diversity fine. The rest is coolaid. Think about what it means if an ecosystem is full of creatures eating each other quickly or slowly. What improves? All you get is more entropy wasted into space. Their lives are not improved at all. The biggest employer of economists is the government. Why do they recommend cycling money velocity faster and faster? Well they get a piece of the action every time of course. So government gets to move more money by the heroic politician's direction to improve the lives of the masses. Really? How would it have been used before? Did it create anything real? Did extra mass suddenly spring into the universe? Extra energy? Extra anything in the real world as opposed to more fiat cycles for the accountants to count? The only thing you can hope for is that some of it was used for investment in which case it may have a return slightly larger that what was there before. You certainly don't know the return is higher than if it went to an NPO like Heart and Lung or Canadian Diabetes, etc.

The reason Science people and accounting people can never understand each other is accounting is a system you have to practice and accept that it works. A science person will look at it then think back to the real world. What is all this multiplier shit? What is the bank's deposit ratio? What is a ponzi scheme? M1 vs M3? Its all a bullshit model that does not jive with physical reality. No wonder they can't predict worth shit. The longer countries delude themselves with fairytales the longer they have to keep avoiding increasingly bitter medicine. We arnt in debt we can print more. What about real wealth? Many of us in western countries will take a vacation in the EU countryside sometime. A place like Tuscany or a place like the idilic farm of the General in the movie Gladiator. Are those farm lives in Spain, France or Italy really poor? The EU economies on paper are weak. The people seem relatively poor ON PAPER.

As a person in government beware the multiplier trick. I didnt buy it in school, I never will. Counter cyclical macro stabilization on the other hand is real.

[LongBlade]

Capital gains are taxed at a lower rate because they're taxed twice: once when you earn it and once when you invest it.

[airboy]

Capital gains are taxed at a lower rate because they're taxed twice: once when you earn it and once when you invest it.

Not so.  Dividends are taxed twice (corporate level and individual level), capital gains are not.

Capital gains taxes are lower to encourage longer run investing and building businesses instead of fast trading.

[airboy]

Two other facts I'd like to call out more clearly.

First, just because someone calls for higher taxes of a certain type doesn't mean that they're calling for higher taxes.  We can argue until the cows come home about what role government should play in a democratic, industrialized society and how much money they'd need to fund those activities.  But it's simpler to argue about whether we should redistribute the taxes, so that certain groups pay a larger or smaller share of the total.

Second, as Airboy suggests, an inheritance tax is the biggest tool you can use to spread the tax burden more heavily to the wealthy.  But another tool that I think also works mighty well is capital gains taxes.  It seems kinda silly to me--nay, preposterous even--that income people get from capital gains (effectively "money making money") is generally taxed at a lower rather than income people get from working with their own hands.

If we're talking about rewarding personal industry and hard work, it seems to me like a no-brainer that we at least equalize those two.

As I mentioned in point #1 above, what rate we set those at is up for debate.  But I think increasing capital gains taxes' share of the total tax pie would be a net win for society.

The reason for lower capital gains rates is to encourage people to build a business or to invest in financial insturments for the long-term, not the short term.  There are some very good economic reasons for doing this.

But I strongly agree that almost all of the capital gains tax rates benefit those who are wealthy - i.e. those who have the wealth to make investments.

[Windigo]

The best way to decentralize wealth, stabilize the country and help your family is to start a small business.

I don't disagree.  My brother's been a highly successful entrepreneur for 20 years now.  I myself have spent the last 15 years at a firm trying to bring more transparency and consumer value to the financial services sector.  We've done great by our shareholders, but are only slowly chipping away at the market imperfections that have so many people overpaying their financial firms without even knowing that they're doing it.

But you aren't responding to the data I put up there or the questions I posed. 

Are you saying, "No, I don't care about those data or those trends.  They're not a problem in America."  Or are you saying, "I don't like those trends, but the best way to fix them is to start a small business." 

I'm not trying to score points here debate-style.  I'm just trying to determine if there's common ground.

The latter. Over concentration of wealth hurts everyone around including the country.

I like to use ecosystem vs. economic system as an analagous pair.

Money is like energy, it drives the whole modern system. Complex ecological systems are more robust and resistant to environmental stresses. They are self moderating (in the long term). Disasters are more quickly rebounded from.

A complex robust economic system would allow nature to take its course (yes, no governmet bailouts OR SUBSIDIES) and it would be diversified.

People can readily see a healthy ecosystem/economy. A forest of trees for example. What many don't understand is that that big old healthy forest/economic system is ONLY MADE POSSIBLE  because of all the activity by critters/plants that are small and numerous.

Big corporations/Multinationals (like trees) can only exist when the little critters are numerous and healty... building soil and making nutrients that allow for the trees existence.

They represent a small but significant portion of the ecosystems stored wealth... and they die! All that stored energy/money is released back into the ecosystem for use by the litter soil and nutrient producing critters.

In our economy, these big ass trees must release their stored wealth sooner or later, otherwise the system suffers and it becomes less robust.

If you can follow that analogy, then you understand why I dislike corporations and accumulation of wealth.  "Let the energy flow throughout the ecosystem! Let the wealth flow throughout the economy!"

It is a good analogy.

Let me throw in that in economic analysis what is flowing is often money as a representation of wealth, or rates of transactions, representing rates of economic activity. Maybe think of that as a nutrient in the ecology analogy. The economy is one thing of many needed for the society to thrive. If all of the nutrient, like calcium or carbon say, gets hoarded by one species the rest of the ecosystem dies which later kills the hoarding species.

diversity and turnover/cycling of energy are key

Diversity fine. The rest is coolaid. Think about what it means if an ecosystem is full of creatures eating each other quickly or slowly. What improves? All you get is more entropy wasted into space. Their lives are not improved at all. The biggest employer of economists is the government. Why do they recommend cycling money velocity faster and faster? Well they get a piece of the action every time of course. So government gets to move more money by the heroic politician's direction to improve the lives of the masses. Really? How would it have been used before? Did it create anything real? Did extra mass suddenly spring into the universe? Extra energy? Extra anything in the real world as opposed to more fiat cycles for the accountants to count? The only thing you can hope for is that some of it was used for investment in which case it may have a return slightly larger that what was there before. You certainly don't know the return is higher than if it went to an NPO like Heart and Lung or Canadian Diabetes, etc.

The reason Science people and accounting people can never understand each other is accounting is a system you have to practice and accept that it works. A science person will look at it then think back to the real world. What is all this multiplier shit? What is the bank's deposit ratio? What is a ponzi scheme? M1 vs M3? Its all a bullshit model that does not jive with physical reality. No wonder they can't predict worth shit. The longer countries delude themselves with fairytales the longer they have to keep avoiding increasingly bitter medicine. We arnt in debt we can print more. What about real wealth? Many of us in western countries will take a vacation in the EU countryside sometime. A place like Tuscany or a place like the idilic farm of the General in the movie Gladiator. Are those farm lives in Spain, France or Italy really poor? The EU economies on paper are weak. The people seem relatively poor ON PAPER.

As a person in government beware the multiplier trick. I didnt buy it in school, I never will. Counter cyclical macro stabilization on the other hand is real.

How fast/frequently wealth cycles in a economic system is, IMO, not as important as the total percentage that does turn over. It will vary depending on sector.

I will repeat that I am uncomfortable with the idea that government acts as the major redistributor of wealth... thats part of whats wrong with the current system.

In ecosystems, there are real constraints on maximum sizes of organisms that accumulate vast stores of resources within them (hello... banks/sidelined money) and on the number of parasites that can exist (hello banks/service industries that essentially consult with little demonstrable value).

Government is a huge beast and if not efficient in what it decides to do, can really behave more like a parasite rather than a recycler of wealth

[Mr. Bigglesworth]

Agree. Although you have to explain what you mean by % of wealth turning over. I get your examples, think about mine. In the EU farm, the vinyard may have been handed down for generations. That family has true wealth. If you force it to turn over everyone has to start fresh with nothing. Is it really beneficial to force that? If the parents are worried about the kids being lazy slob druggies isn't it up to the parents to decide they dont get the farm?

[LongBlade]

Capital gains are taxed at a lower rate because they're taxed twice: once when you earn it and once when you invest it.

Not so.  Dividends are taxed twice (corporate level and individual level), capital gains are not.

Capital gains taxes are lower to encourage longer run investing and building businesses instead of fast trading.

I wish I lived down south still. I could use a tune up to my business courses :)

[Windigo]

Agree. Although you have to explain what you mean by % of wealth turning over. I get your examples, think about mine. In the EU farm, the vinyard may have been handed down for generations. That family has true wealth. If you force it to turn over everyone has to start fresh with nothing. Is it really beneficial to force that? If the parents are worried about the kids being lazy slob druggies isn't it up to the parents to decide they dont get the farm?

You bring up a good point. Real versus 'virtual' assets/capital. Real assets like land (physical) IMO are the primary producers of wealth (think plants). Everything thereafter is dependent on the primary producers. No food/no water/no mines or quarries(primary production) = no economy/ecosystem.

Landownership is oneof those peculiarities that I have no firm philosophy regarding (despite my best efforts). No one owns the sea, yet we own land. No one owns the sky/atmosphere yet we own land. They are all resources yet we settled on land ownership.

My own thinking is that land ownership is more like lifetime leasing... land will outlast us all until the sun goes nova and burns it to cinders so why think of landownership in permanent terms?
Some think in terms of god given rights to own property... but really, pragmaticly, its about a right to use resources in a way that doesn't fuck up other's right to use resources.

Thats why we fight wars... to prevent being fucked over (or fuck others over) the right to use resources.

Ever here the term interference competion? Its an ecological term that refers to the immutable fact that your existence and activities in some way interferes with another's free access to resources. It is a really limiting factor for many things. (we all cant be farmers because their is a finite amount of land, and there is a land size that is too small to support a family).

Oops I digressed. If landowner generates wealth off of land and accumulates wealth as a result .... go after the excess when the oldman dies (profits, non land investments)

[Mr. Bigglesworth]

Agree. Although you have to explain what you mean by % of wealth turning over. I get your examples, think about mine. In the EU farm, the vinyard may have been handed down for generations. That family has true wealth. If you force it to turn over everyone has to start fresh with nothing. Is it really beneficial to force that? If the parents are worried about the kids being lazy slob druggies isn't it up to the parents to decide they dont get the farm?

You bring up a good point. Real versus 'virtual' assets/capital. Real assets like land (physical) IMO are the primary producers of wealth (think plants). Everything thereafter is dependent on the primary producers. No food/no water/no mines or quarries(primary production) = no economy/ecosystem.

Landownership is oneof those peculiarities that I have no firm philosophy regarding (despite my best efforts). No one owns the sea, yet we own land. No one owns the sky/atmosphere yet we own land. They are all resources yet we settled on land ownership.

My own thinking is that land ownership is more like lifetime leasing... land will outlast us all until the sun goes nova and burns it to cinders so why think of landownership in permanent terms?
Some think in terms of god given rights to own property... but really, pragmaticly, its about a right to use resources in a way that doesn't fuck up other's right to use resources.

Thats why we fight wars... to prevent being fucked over (or fuck others over) the right to use resources.

Ever here the term interference competion? Its an ecological term that refers to the immutable fact that your existence and activities in some way interferes with another's free access to resources. It is a really limiting factor for many things. (we all cant be farmers because their is a finite amount of land, and there is a land size that is too small to support a family).

Oops I digressed. If landowner generates wealth off of land and accumulates wealth as a result .... go after the excess when the oldman dies (profits, non land investments)

4 paras make sense, the last 2 start falling apart. What happens when everyone wants far more resources than they need? What happens to the wolf that goes mad attacking all the sheep in the field? It just ended an entire lifetime's worth of food supply. Such systems are guaranteed collapse.

The real limit on farms is most people don't want that much work. They would rather have a lifestyle of sitting in a cubicle all their life. Conserve energy. Get diabetes. Get heart attack.

You already tax the excess at 40% per year. It's amazing Governments will actually kill their cash cow in a mad desire to have more money now to decide what to do with.

[Mr. Bigglesworth]

So obviously the proper ecological model for government is a parasite or virus. It gets it's maximum stable nutrients by infecting as many other creatures as possible, then slowly feeding off them while not killing them.

[Mr. Bigglesworth]

Perfect example, North Korea. In Kim's desire to avoid copying Chinese market reforms, thereby keeping all despotic power/ wealth Kim is killing the people he lives off.

http://www.bbc.co.uk/news/world-asia-25380168