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Back in the late 19th century an Italian engineer-turned-economist named Vilfredo Pareto was coming up with some interesting notions regarding wealth distribution.  Pareto had noticed that quite a bit of Italy’s wealth seemed to be concentrated in the hands of only a few people.  After some diligent work, he determined that approximately 20% of the population owned about 80% of the land.  It was the beginning of an inquiry into why it is that in every modern human population – every single one – the majority of that population’s wealth concentrates itself in the hands of a very few people.

Vilfredo Pareto

The “Pareto principle” is sometimes referred to as the “80-20 rule,” but that is giving Vilfredo Pareto short shrift.  The precise distribution figures of wealth in any given society do not always match the 80/20 distribution Pareto first observed in Italy; for any given nation at any given time the precise numbers might be “20% of the population controls 90% of the wealth,” or “15% of the population controls 95%” of the wealth,” etc., etc.  As of 2007, for example, 20% of the American population controlled about 93% of the wealth in the United States.  That concentration has almost certainly gone up since then.

No, what is really interesting about Pareto’s study is that regardless of the actual distribution of wealth for any given population at any given time, the manner in which that distribution manifests itself is always the same:  not by a symmetrical “bell-shaped” distribution pattern (the only distribution pattern most of us were taught in school), but – as one gets closer and closer to the wealthy end of the spectrum -- by a power-law distribution.  As Mark Buchanan describes it in Nexus: Small Worlds and the Groundbreaking Science of Networks:

[T]oward the wealthy end of the distribution, each time the value for wealth is doubled, the number of people who have that much [wealth] falls off by a constant factor.  Up-to-date numbers show the same pattern for countries all over the earth.  In Japan, for example, the constant factor turns out to be close to four. (emphasis added).
(Buchanan, p. 189).

Again, what is interesting is not the specific numbers.  The power factor by which wealth is concentrated is different for any given society, just as the actual wealth concentration percentages are different for any given society.  What is interesting is that the manner of distribution is always the same:  a heavy concentration of wealth in the hands of the few, that concentration being easily plotted using some power-law distribution.

It is the universality of the distribution pattern that presents the puzzle.  Pareto’s Law isn’t concerned with differences in creativity or productivity between individuals, and it isn’t concerned with differences in economic systems, it just describes very accurately wealth distribution in a population as a whole.  It can’t tell you why a particular person or family got rich, only that a certain number of people or families will inevitably become rich and by a very definite amount of wealth relative to the society in which they live.

But since the general pattern of distribution is always the same in every society, one is led to believe that no matter how a society’s economy is engineered there is something fundamental to our economic network that leads inexorably to the same type of wealth distribution.  But what?

Jean Phillippe Bouchard and Marc Mezard

One potential answer was suggested by University of Paris physicists Jean Phillippe Bouchard and Marc Mezard in their 2000 paper Wealth Condensation in a Simple Model of Economy. The term “wealth condensation” means exactly what it sounds like.  It describes “a process by which, in certain conditions, newly created wealth tends to become concentrated in the hands of the already wealthy individuals or entities, a form of preferential attachment.”  In other words, it describes the already rich getting even richer over time.

(I’ve read Bouchard and Mezard’s paper – or, at least, I’ve allowed my eyeballs to stare at it – and I have to admit that their math is well beyond me.  Accordingly, there is a link to the actual paper provided above, but I am going to describe their findings by paraphrasing the explanation/translation Mark Buchanan sets forth in Nexus.  The relevant passage in Buchanan’s book can be found in pages 188 – 96.)

Essentially, Bouchard and Mezard created an extremely simplistic model of a “wealth distribution network,” i.e., an economy, that took into account only three basic distribution factors.

The first might be thought of as the “dispersal factor,” and it is the primary means by which wealth spreads itself throughout society.  Essentially, this factor consists of nothing more than trade.  Every time someone purchases a product or a service they transfer money from their own pocket into those of others, and those others then use some of that money to purchase goods and services from others in turn, who then do the same (and so on, and so on, etc.)

This basic -- almost osmotic -- process is what tends to keep wealth flowing from areas of high concentration (the wealthy) to areas of low concentration (the less wealthy).  This is the factor – whether they know it or not – that Conservatives are referencing when they keep telling us to “hold on – trickle down prosperity will happen any minute now.”  And, indeed, if this were the only factor affecting wealth distribution one might expect to eventually reach equilibrium where wealth was distributed uniformly across society and nobody was especially poor or especially rich.  But that obviously is not what happens in the real world.

No, in the real world there is a second factor at play that kind of screws that idea up.  This second factor might be thought of as the “concentration factor,” and it is the primary means by which wealth accumulates in one place.  Essentially, this factor consists of nothing more than investment of money over time.  Every time someone purchases a capital good that may accumulate value, or that same person invests money in a profit making venture, that person is sinking wealth into an operation that might draw even more wealth toward it.  This process isn’t so much osmotic as gravitational, like a black hole where any additional wealth that crosses the event horizon gets sucked in and becomes one with the hole.  [See what I did there?  While not a Buddhist myself, I am a big fan.]

These two factors – the dispersal factor and the concentration factor – obviously operate at cross-purposes.  So one naturally wonders whether they eventually balance each other out or whether one proves to be more powerful than the other.  And this is where the insight of Bouchard and Mezard comes into play.

Prior to 2000, everybody else who had attempted this type of simplistic distributive modeling had also restricted themselves to deriving equations based on the dispersal and concentration factors already identified.  But Bouchard and Mezard did something new:  they posited a third factor.

It seems kind of commonsensical once someone says it out loud, but Bouchard and Mezard pointed out that not every investment scheme succeeds.  Sometimes new money gets plowed into a scheme and the scheme just goes bankrupt; when that happens, all that seed money is lost.  Investment is not risk-free.  And that, of course, means that any given economic actor is not equally as free to engage in investment activity as is any other given economic actor – if you’ve only got $1,000 in the bank you will naturally be leery of sinking $500 into a new, potentially risky venture.  On the other hand, if you’ve got $100 million in the bank, you probably are willing to risk $100,000 on something equally as risky.

It is kind of like what Chris Rock talks about when he argues that prenuptial agreements are more important for poor people than for rich people:

People think you gotta be rich to get a pre-nup.  Oh no.  You got twenty million and your wife wants ten, big deal, you ain’t starving.  But if you make thirty thousand, and your wife wants fifteen, you might have to kill her!
I’ll let Mark Buchanan explain the difference this basic insight made:
With this simple observation, Bouchard and Mezard found that they could turn the network picture into a set of explicit and fundamental equations to follow wealth as it shifts from person to person, and as each person receives random gains or losses from their investments.  With equations in hand for a network of 1,000 people, the two physicists set to work with the computer to see what they might imply.  Not knowing precisely how to link people together into a network of transactions, they tried various patterns.  And unsure of how precisely to set the balance between the importance of interpersonal transactions [read:  trade] versus investment returns, they tried shifting the balance first one way and then the other.  What they discovered is that none of these details alters the basic shape of wealth distribution.

Giving people random amounts of wealth to start out, and letting the economy run for a long time, Bouchard and Mezard found that a small fraction of the people always ended up possessing a large fraction of the entire wealth.  What’s more, the precise mathematical distribution followed Pareto’s law exactly – in excellent correspondence with data from the real world.  This result occurred despite the fact that every person in the model was endowed with identical “money-making” skills, suggesting that difference in talent may have little to do with the basic inequality in the distribution of wealth seen in most societies.  Rather, what appears is akin to a fundamental law of economic life, a law that emerges naturally as an organizational feature of the network. (emphasis in the original)

(Buchanan, pp 191 – 92).

What Do You Mean “It’s Inevitable”?

Pareto, Bouchard and Mezard’s studies all strongly indicate that the economic networks we create will by their very nature lead to inequalities in wealth distribution.  And not because the wealthy are inherently smarter, or more virtuous, or more qualified – on average – than any other random person, but only because someone has to end up on the receiving end of the network’s distribution pattern and – hey! – you just got lucky, big guy!  Without interference by human agency, income inequality seems to be an inevitable result of any free market economy.

Here’s one way to look at it:  suppose you have 100,000 test subjects whose job it is to flip a coin and call the results.  The only object is to stay in the game.  After the first flip, 50,000 people will have washed out . . . but 50,000 people will have called the coin flip correctly.

After the second flip, 25,000 people will wash out, but 25,000 other people will now have correctly called the coin flip twice in a row.  After a third flip, 12,500 people will wash out, but 12,500 people will have correctly called the coin flip three times in a row!  And on and on and on.

After 15 iterations, you will be down to about 4 people who have correctly called the coin result 15 times in a row!  But does this mean these four are precognitive, or especially lucky, or just really, really good at calling coin flips?  No, it just means that these were the 4 people that Fate’s random waiting fist of chance settled on – after all, somebody needed to call all those flips correctly, these four just happened to be the ones to have done so.  It was inevitable that four people would do it, but it was random chance that it would be these four.

Now imagine the same scenario, but with a minimum $1,000 bet being placed on the outcome of each coin flip.  100 participants start the game with $1 million each, and the other 999,900 participants start with only $1,000 each.  Whenever someone runs out of money, they have to leave the game.  The last 5 people left standing get to keep all the money.

Who can afford to play the game longer, do you think?  Who has a greater appetite for risk?  Who can absorb a long period of bad luck and yet still come out on top?  What do you want to bet that at least one of the participants who started with $1 million will end up taking it all?

‘Cause my money’s on the rich guys.

* * *

So let’s be real clear about what the “inevitability” of wealth inequality entails.

It does not reflect any kind of moral determination.  Plagues, earthquakes, hurricanes and a certain percentage of fatal accidents are all inevitable as well – but since we climbed out of the Dark Ages most of us have ceased to believe that it is “God’s Will” we suffer such things.  That is why we enact sanitation codes, take care not to dig the village well too close to the communal privy, and wash our hands.  It is why we invented antibiotics and chemotherapy.  It is why we spend money monitoring earthquakes, invest in a national weather system, and fund the Center for Disease Control.  It is why we put on our seatbelts, wear condoms and – oh, yeah – vaccinate our children against HPV.  Yes, some bad things are inevitable -- that doesn’t mean we don’t do what we can to avoid or lessen their effects.

Nor does the inevitability of wealth inequality necessarily reflect the working of some efficient Social Darwinism (i.e., what Conservatives call “the good Darwinism”).  While it is true that some individuals do acquire great wealth because of their innate ability, talent, intelligence, and hard work, the inevitableness of wealth inequality in society springs from none of that.  The inevitableness of societal inequality as a whole springs out of nothing more than (i) the difference in the amount of money different people bring to the table when they start The Game of Life and, (ii) the brutal laws of probability and risk that apply to us all.

These all may seem like very basic points, but then again so does the case for evolution or getting the HPV vaccine.  Given the state of our political discourse, I am not so sanguine as to just ignore the possibility that if low information voters decide that income inequality is “inevitable” they won’t just treat this news as further evidence of “God’s Will.”  

This is especially true in light of a recent Baylor University study that found:

[a]bout one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and champions the free market as a matter of faith.

“They say the invisible hand of the free market is really God at work,” says sociologist Paul Froese, co-author of the Baylor Religion Survey, released today by Baylor University in Waco, Texas.

“They think the economy works because God wants it to work.  It’s a new religious economic idealism,” with politicians “invoking God while chanting ‘less government,’” he says.

“When Rick Perry or Michele Bachmann say ‘God blesses us, God watches us, God helps us,’ religious conservatives get the shorthand.  They see ‘government’ as a profane object – a word that is used to signal working against God’s plan for the United States.  To argue against this is to argue with their religion.”

Most (81%) political conservatives say there is one “ultimate truth in the world, and new economic information of cost-benefit analysis is not going to change their mind about how the economy should work,” Froese says.

I despair to think that pointing out to these people that the wealthy didn’t get to be rich because they are better, or smarter, or “more productive” just means that these people will then be forced to conclude that the rich must be wealthy because they are “holy.”

Ye Gods.

What’s to be Done?

It's simple.

Unlike the 20% referenced in the Baylor University study, the rest of us can actually learn from and make use of Pareto, Bouchard and Mezard’s work – all we have to do is recognize that the economy is not “God’s Will” or something “divinely ordained” but is instead just a network that we create ourselves, sustain ourselves, and that has value only so long as it works for us . . . and that we can tweak and correct that system as needs be.

(Brief aside . . . I am a religious agnostic, but one of my favorite stories is the story of Jesus and his disciples picking grains of wheat on the Sabbath and eating them because they were hungry.  (Matthew 12:1-45)  The Pharisees berated Jesus for this, because it was against the Law.  And Jesus, essentially, told them to shut the hell up because it was more important that people not starve than that the law be fulfilled.  The Law – like the economy – exists for Us, and not the other way ‘round.)

One of Bouchard and Mezard’s chief conclusions, unsurprisingly (as they themselves put it), was that taxation by the body politic went a long way toward minimizing the inequitableness of an unfettered market.  In an ideal world, perhaps, a way could be found to force the already wealthy to trade more than they invest, but in the real world this is impracticable.  However, taxation essentially functions as the equivalent of forced trade, and thus fosters the dispersal effect of wealth – which, due to existing inequalities, will otherwise always be seriously outgunned by the concentration effect.

You know . . . there has been a lot of ink spilled over the past few years about why America has seen such a rise in its income inequality.  Paul Krugman laid the facts out back when Ben Bernanke first testified to Congress as Fed Chairman:

So who are the winners from rising inequality?  It’s not the top 20 percent, or even the top 10 percent.  The big gains have gone to a much smaller, much richer group than that.

. . . .  Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year.  So being in the top 10 percent of the income distribution, like being a college graduate, wasn’t a ticket to big income gains.

But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent.  No that’s not a misprint.  (emphasis added).

And about a year ago, in an effort to understand why the already extremely wealthy have been sucking up ever and ever greater slices of the American pie over the past 40 years, Timothy Noah wrote a series of articles at Slate.com titled The United States of Inequality:  the Great Divergence, in which he looked at the income effect of productivity gains, education, globalization, race, gender, immigration, a less powerful labor force, etc., . . .

But maybe that is all just missing the forest for the trees.

Rather than getting into the nitty gritty of economic reform, why not address the problem first using broad strokes, and then refine our solutions as the problem becomes more manageable?

Want to reduce income inequality?  The data suggest that it’s very simple, even if the perfect optimization is a bit foggy:  Raise taxes.  Raise ‘em on upper-level income, raise ‘em on capital gains, raise ‘em on the estates of rich dead people.  Then pump that money back into the economic system.  Forced trade through taxation, dispersal effect strengthened, problem solved.  Just as it has been before by every modern capitalist society.

And, yeah . . . I am advocating wealth redistribution by the government.  That is what taxation is.  And I am doing so not because I like taxes or hate rich people or out of some misguided ideological bent, but simply because the data seem to make it clear that if the government doesn’t start this kind of forced dispersal effect soon – but instead relies on an unfettered free market to allocate wealth – then it is inevitable that America will slide into a third-world, Banana Republic state.

I want to raise taxes and redistribute wealth because I am just too goddamned patriotic to let that happen to the country I love.  I’m not a socialist or a terrorist or a communist or a hippie – I’m an American who wants to do the right thing for my country.  The uber-rich (other than Warren Buffett) might want to start thinking about doing the same.

Cross-posted at Casa Cognito.

Originally posted to swellsman on Sat Sep 24, 2011 at 11:51 AM PDT.

Also republished by Income Inequality Kos, SciTech, ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, Money and Public Purpose, Community Spotlight, and Street Prophets .

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  •  Tip Jar (177+ / 0-)
    Recommended by:
    Azazello, Candide08, phonegery, Nospinicus, palantir, keschen, tofumagoo, Gooserock, Garrett, Terrapin, Lorikeet, basquebob, Roger Fox, Saint Jimmy, Purple Priestess, Bob B, PrahaPartizan, Thutmose V, Kurt Sperry, Badabing, Catte Nappe, pino, WiseFerret, jm214, PBnJ, Egalitare, Shockwave, Nulwee, Whimsical Rapscallion, zerelda, JamieG from Md, bnasley, dmhlt 66, Orinoco, bluebuckaroo, VictorLaszlo, Tanya, be the change you seek, jamess, GeorgeXVIII, MissInformation, WheninRome, Lightbulb, PrometheusUnbound, plankbob, merrylib, Mad Season, vinny67, Hear Our Voices, JimWilson, Hohenzollern, Andrew F Cockburn, paradocs, slathe, concernedamerican, psnyder, mjfgates, Flyfish100, bostonjay, Obama Amabo, Geenius at Wrok, dotsright, Snud, MarketFarces, progdog, frisco, crystalboy, Trotskyrepublican, bigrivergal, arendt, where4art, churchylafemme, greycat, wader, side pocket, fugwb, pengiep, Flying Goat, mskitty, JJG Miami Shores, FG, kurt, Preston S, Roxpert, ItsaMathJoke, fhcec, greengemini, Ruh Roh, tiggers thotful spot, adeodatus, freesia, jimreyn, CarolinW, RJDixon74135, YucatanMan, The Wizard, David PA, Odysseus, fallina7, alizard, petulans, bluesheep, Foreign Devil, qed, evelette, Blueslide, anodnhajo, ask, JScottJ, JanL, poliwrangler, TRPChicago, drewfromct, BYw, Teiresias70, banger, blue jersey mom, emal, jfdunphy, IreGyre, Wolf10, BlueDragon, linh, rkh, caul, BachFan, Lindy, mkor7, Captain Chaos, fixxit, dakinishir, KateCrashes, semiot, Wes Lee, Zydekos, shaharazade, ZedMont, greywolfe359, Kanscott, Kelvin Kean, Old Iowa Liberal, Eric Stetson, Simplify, Chi, Bcre8ve, Ronald Singleterry, zedaker, ceebee7, roadbear, x, jaybomb81, TexasTom, sunny skies, GoGoGoEverton, Renee, BoxNDox, DBunn, DRo, Karl Rover, rimstalker, AspenFern, psyched, vzfk3s, Phl, Alice Marshall, Lily O Lady, RandomNonviolence, seefleur, mookins, Josiah Bartlett, dle2GA, Calamity Jean, kaliope, Bob Duck, Alumbrados, Fireshadow, good grief

    Politics is the neverending story we tell ourselves about who we are as a people.

    by swellsman on Sat Sep 24, 2011 at 11:51:09 AM PDT

  •  And I thought it was because the rich (21+ / 0-)

    rigged the game or tilted the playing field to their advantage.

    "The right to be heard does not automatically include the right to be taken seriously." -- Hubert H. Humphrey

    by Candide08 on Sat Sep 24, 2011 at 12:13:46 PM PDT

    •  Well, I think they do that too . . . (43+ / 0-)

      . . . but the sad thing is that Bouchard and Mezard pretty much showed they don't have to -- they'll end up winning out anyway, unless of course something is done politically to prevent them running away with the ball.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sat Sep 24, 2011 at 12:44:25 PM PDT

      [ Parent ]

      •  Yes, but the money is worthless. n/t (2+ / 0-)
        Recommended by:
        phonegery, shaharazade

        http://www.youtube.com/watch?v=MuzZQ8LTE2c

        by hannah on Sat Sep 24, 2011 at 03:17:59 PM PDT

        [ Parent ]

      •  It may be sad, but the real reason the rich (10+ / 0-)

        "end up winning out anyway,"  is greed.

        Plain and simple.

        2% of the people can have 50% of everything -and it's not enough.
        60% - not enough.
        70%  - not enough.
        80% - not enough.
        90%  - not enough.

        You are right, it is sad - for everyone.

        "The right to be heard does not automatically include the right to be taken seriously." -- Hubert H. Humphrey

        by Candide08 on Sat Sep 24, 2011 at 04:38:32 PM PDT

        [ Parent ]

        •  we're all pretty much hard wired to be greedy (2+ / 0-)
          Recommended by:
          BachFan, Zydekos
          •  No, I completely disagree... (8+ / 0-)

            most,maybe.  All, no.

            "The right to be heard does not automatically include the right to be taken seriously." -- Hubert H. Humphrey

            by Candide08 on Sat Sep 24, 2011 at 07:12:20 PM PDT

            [ Parent ]

          •  That's a moralistic truism (27+ / 0-)

            that seems to completely miss the point of the diary.

            Networks have emergent properties, and the one the diarist has taken the trouble to bring to our attention is too important to reduce to "everyone is greedy."

            It's important precisely because rather than being an overtly moral argument for government regulation of the distribution of wealth, it exposes amoral network properties that, having been laid bare, can be manipulated technically though government.

            This kind of framing is prevalent in contemporary economic debates. The right, in particular, likes to pose as though they are making less a moral case than one based on sound economic theory. In particular they like to claim that government "intervention" in the economy is unsound from a rigorous economic standpoint. The research that the diarist presents, on the other hand, exposes the implicit moralism of the right's perspective, clears the ground of their bogus technocratic claptrap, and highlights the legitimate economic role played by government.

            In short, greed has nothing to do with it.

            "It's called the American Dream because you have to be asleep to believe it." George Carlin

            by psnyder on Sat Sep 24, 2011 at 08:28:23 PM PDT

            [ Parent ]

          •  this is not true (3+ / 0-)
            Recommended by:
            mkor7, Zydekos, RandomNonviolence

            and although this is a great diary, it reinforces this premise:

            It was the beginning of an inquiry into why it is that in every human population – every single one – the majority of that population’s wealth concentrates itself in the hands of a very few people.

            Just not factually true.  Western culture passes on history as if this were true, but is simply is not.

            For the vast majority of the time humans have lived inside culture on this planet, wealth has been quite equally distributed.

            Over the past 100,000 years, the vast majority human groups have been collectives with resources distributed quite well across the group.  

            Why does this meme persist?  Because capitalists have been writing the history for the past 500 years.  

            Archeology and anthropology is TEEMING with examples to the contrary.

            sigh. . . .

            "Until we know how to safely dispose of the radioactive materials generated by nuclear plants, we should postpone these activities so as not to cause further harm to future generations" Dr Shoji Sawada

            by BlueDragon on Sun Sep 25, 2011 at 07:59:21 AM PDT

            [ Parent ]

            •  While it may be true that (2+ / 0-)

              "For the vast majority of the time humans have lived inside culture on this planet, wealth has been quite equally distributed."--

              What the diarist said is true for societies in the last few hundred years, is it not?

              The banks have a stranglehold on the political process. Mike Whitney

              by dfarrah on Sun Sep 25, 2011 at 09:10:44 AM PDT

              [ Parent ]

              •  absolutely!!! (0+ / 0-)

                but certainly not for all times and all places.

                not even the majority of human culture.

                Western knowledge discounts stuff it hasn't enfranchised, like virtually all the knowledge encoded in oral cultures of which quite a few still exist, like all the knowledge of roughly 3,000 years ago which is hard to put your hands on, but not impossible, like the testimony of those who lived and are living inside the cultures which go back that far.

                e.g. Hawaiian culture has a lot of lore which is increasingly being verified even in Western scientific terms

                "Until we know how to safely dispose of the radioactive materials generated by nuclear plants, we should postpone these activities so as not to cause further harm to future generations" Dr Shoji Sawada

                by BlueDragon on Mon Sep 26, 2011 at 03:55:01 PM PDT

                [ Parent ]

          •  Totally disagree!! Children grow up (0+ / 0-)

            dependent on a parent, but as they grow they seek to make others smile and to share their joy. THAT is our nature. Even wild animals in nature raise other species or befriend them. Sharing joy and love is our true nature, as nature reflects it!

            Use this for our causes! "Goodbye American Dream" music: http://tinyurl.com/3hhtuyo lyrics: http://tinyurl.com/3jm7g2k

            by Fireshadow on Mon Sep 26, 2011 at 10:12:17 PM PDT

            [ Parent ]

        •  Greed works... it forces good behavior (6+ / 0-)

          I'm greedy, and it has paid off big for me.

          When I graduated from college I joined a small new office of a large company way out in the middle of nowhere with 8 fresh grad colleagues who all made the same amount as me (it was the late 80s IT boom and this company gave virtually cookie cutter offers to almost any IT grad from a top school).

          Despite the fact that we had the same salaries we lived very differently.

          I had a second hand car and a smaller apartment than any of my colleagues and somehow I couldn't seem to afford the Friday and Saturday night partying that these guys did or the mountain bikes, wind surfing on weekends, etc.

          I couldn't understand where my money was going until it was time for us to sign up for the company's Employee Stock Purchase Plan.

          This was a sweet deal - you bought in ever 6 months at a 15% discount to the cheapest of either the starting price for the period or the ending price for the period.  You could allocate up to 10% of your salary.

          I didn't think twice - I was in for the full 10%.

          My colleagues weren't - they didn't have the money and they were concave from credit card bills, etc.

          So I actually ending up loaning several of them 5% of their salary each month to put into the ESPP, agreeing that we would sell the stock immediately upon the end of the period and split the profit.

          I didn't go out much that first six months... but the return (and the forced savings!) was great.

          I'm still in touch with some of those guys.  Most of them are getting by... but not rich by any means.  I'm pretty sure I've got a lot more put away than they do... but I don't live all that much better.

          On the other hand, I know that unless there is a total financial crash I have enough to put my children through school and college, support myself and my wife until we both die (even without Social Security), and give my children decent inheritances even if I get hit by a car today and never work another day in my life.

          This analysis totally ignores behavior.

          The guy with $1,000 who bets it on a flip of the coin does have a chance to get rich... and if he keeps betting long enough (and with coins biased in his favor, like the stock market) then he will get rich.

          The guy who spends the $1,000 on a vacation or a big screen TV will never be rich.

          So yes, I'm greedy.

          And that's why I've always scrimped and saved and put every penny that I did not absolutely NEED to spend into by long term savings stock market account.  I've maxed out 401Ks, contributed to IRAs when I was self employed, and worn old jeans and old shoes instead of buying new stuff, and driven $20,000 cars when my co-workers drove $80,000 cars and gone on back packing vacations instead of to resorts in Acapulco.

          Maybe we need more greed?

          •  your co-workers are greedy for experience (4+ / 0-)
            Recommended by:
            drewfromct, mkor7, BlueDragon, roadbear

            and things, you're frugal when it comes to money and security...

            different value sets.

            if you were really greedy, you'd invent and invest in your ideas, or the ideas of others, not just financial instruments. You'd figure out how to use the money of others to enrich yourself at multiples of what a 401k can provide ...

            frugality is a conservative value. Greedy, not so much.

            "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

            by fhcec on Sat Sep 24, 2011 at 10:49:24 PM PDT

            [ Parent ]

            •  You don't get it... (2+ / 0-)
              Recommended by:
              Zydekos, BoxNDox
              if you were really greedy, you'd invent and invest in your ideas, or the ideas of others, not just financial instruments.

              I have... angel investing in Internet companies.  50K to a startup gets you a fair bit of equity, a 90% chance of a 100% loss, and a 1% chance of a few tens of millions of dollars.

              But what do you think a stock purchase is?  It's just an investment in a later stage company.  But it is the same thing.  

              You'd figure out how to use the money of others to enrich yourself at multiples of what a 401k can provide ...

              401Ks are good - the stock advantage is tremendous.

              In general, there is no free lunch - investments that can provide higher multiples of return are also riskier.  No one but a gambler puts all his savings into start ups.  You have to balance.

              •  Um No (1+ / 0-)
                Recommended by:
                Josiah Bartlett
                But what do you think a stock purchase is?  It's just an investment in a later stage company.  But it is the same thing.
                 

                The vast, vast majority of stock purchases are NOT new investment in a company....no company ever sees a dime of it to invest in new idea, facilities, etc.  It only the tiny fraction of sales each day that are new issues that even have the potential to grow the economy.  The rest of it is just people moving existing shares around. It has some tiny beneficial effect by providing liquidity to the REAL new investment.....but most of it is even past what's needed for that.

                •  You really don't understand (0+ / 0-)

                  Why do you think I made my angel investments?

                  Because I'm a charity?  Because I expect a dividend stream?

                  I made my angel investments in the hope that someone else in the future would buy my stock!

                  Without the public markets my investments would lose most of their potential for an exit and I would not be interested in making them.

                  For example, Google has never paid a dividend.  Without the ability to sell their stock the early investors would have no way to exit.  So why would they make the initial investment at all?

                  The public markets are what make the initial investments that fund those companies worth making.

                  •  You Totally, Totally Missed The Point (0+ / 0-)
                    •  Except you are apparently totally unable to (0+ / 0-)

                      articulate your point.

                      •  I Think It Was Pretty Clear (0+ / 0-)

                        You might try actually reading it. Summary:

                        1.  You said that their was no real difference etween direct investment and stocks.

                        2.  I pointed out one huge difference...namely that roughly 100% of the former is available to the business while way under 1% of the latter is.   (I also parenthetically pointed out that most of the latter at best supported liquidity, which has some indirect effect but still nowhere near 100%)

                        3.  You made a rambling response about how liquidity. While totally ignoring the main point which was the rebuttal of your incorrect original statement equating the two.

                        And with that I'm done....you don't seem capable of or interested in holding a rational discussion on the topic.  Have a nice day.

          •  Behavior is very important . . . (5+ / 0-)

            . . . in increasing wealth for any particular person.  Supposing no incredibly bad or good luck, that person's choices are probably the single most important factor impacting their accumulation or lack thereof of wealth.

            But it doesn't really have anything to do with leveling out wealth inequality in society.  To borrow LBJ's metaphor, if you're involved in a 500 meter race and one runner starts out 300 meters ahead of you, the you probably aren't going to win the race no matter how assiduously you have trained.

            As others have pointed out in the comments, the real value of already having wealth for the purpose of this discussion is that it makes it possible to take advantage of the further wealth concentrating potential of investment.

            Now if someone born to money were to squander it on hyperyachts (a real term, b/t/w) and never invest any of it, that would be an example of behavior overwhelmingly overcoming the much more likely event of wealth condensation - because that person would be cranking up the dispesal factor in their own case, and eliminating the concentration factor.

            But note that it doesn't work the other way 'round.  No matter how assiduously someone making $60,000 (slightly more than the median income in America these days) invests and refuses to spend, a sizeable chunk of that income will nevertheless need to go to things that one has no choice but to spend money on:  food, rent/mortgage, car, utilities.  Even assuming the best investment decisions in the world, the truth is this person will never have the opportunity to plunge money into investments that the already affluent will be able to take advantage of.

            What I'm getting at is that starting conditions matter, that wealth inequality has assymetric affects on the possibility of accruing further wealth, and that a growing inequality within the population is overwhelmingly likely in the absence of human intervention in the system.

            Politics is the neverending story we tell ourselves about who we are as a people.

            by swellsman on Sat Sep 24, 2011 at 11:05:47 PM PDT

            [ Parent ]

            •  Actually, that is not true (0+ / 0-)
              But note that it doesn't work the other way 'round.  No matter how assiduously someone making $60,000 (slightly more than the median income in America these days) invests and refuses to spend, a sizeable chunk of that income will nevertheless need to go to things that one has no choice but to spend money on:  food, rent/mortgage, car, utilities.  Even assuming the best investment decisions in the world, the truth is this person will never have the opportunity to plunge money into investments that the already affluent will be able to take advantage of.

              If you save 10K per year for 40 years and put it in S&P index funds then with the magic of compound interest you will easily be a millionaire.

              •  I think you are missing the point . . . (12+ / 0-)

                . . . which is not about any particular individual accumulating wealth, it is about the fact that initial inequalities between individuals leads to greater inequalities.

                As I mentioned elsewhere, suppose someone does put $10,000 into an index fund; to keep it simple, let's say the fund produces a 10% rate of return.  At the end of the year, that person is $1,000 richer.

                But let's also suppose that this person'a wealthy neighbor puts $100,000 into that same fund; that wealthy neighbor is now $10,000 richer than before.

                And, in this case, the wealth disparity between the two has gone up by $9,000 -- that is, the wealth disparity increases over time despite the fact the two individuals are investing in exactly in the same fund and getting the same rate of return.

                Initial starting conditions affect returns over time; disparities only lead to greater disparities.

                Politics is the neverending story we tell ourselves about who we are as a people.

                by swellsman on Sun Sep 25, 2011 at 01:12:59 AM PDT

                [ Parent ]

                •  From what I have seen, a far bigger issue (1+ / 0-)
                  Recommended by:
                  coffeetalk

                  is that most people aren't saving that 10K / year.

                  We have lost the culture of savings.

                  After all, the fact that some guy is making $1 billion running a hedge fund doesn't hurt us.

                  Failure to save does.

                  •  Congratulations (7+ / 0-)

                    You are one of the lucky ones. Most people are not even presented with the choices you are saying you had to use to your advantage.

                    In order to understand this diary, you have to recognize it's not just about you. We have a system that will never be merit based. It's never happened and it never will happen. If it were merit, all of the wealthy would have superior skill sets over those that are not...they don't.

                    -7.5 -7.28, Democratic Socialism...It's not just for Europeans.

                    by Blueslide on Sun Sep 25, 2011 at 04:37:22 AM PDT

                    [ Parent ]

                    •  Well, you know, I've met a few billionaires in my (0+ / 0-)

                      time and worked with a number of people in the 9 digit range.

                      And they have been uniformly impressive.

                      I'm wondering how you have concluded that the wealthy don't have superior skill sets over those that are not.

                      •  Because I don't rely on my subjective (0+ / 0-)

                        view points alone. The data, such as have been referenced in this diary and elsewhere, tell us that it is as much a factor of chance as skills (including the luck about how one acquires the skills necessary) in becoming a top wealth holder.

                        -7.5 -7.28, I refuse to believe corporations are people until Texas executes one.

                        by Blueslide on Sun Sep 25, 2011 at 08:37:48 AM PDT

                        [ Parent ]

                        •  So where is your evidence that wealthy (0+ / 0-)

                          people are not smarter, harder working, etc. than poorer people?

                          You have a theory that argues that wealth inequality is automatic in today's economy.  But it says nothing about who will become wealth and who will not.

                          The data, such as have been referenced in this diary and elsewhere, tell us that it is as much a factor of chance as skills (including the luck about how one acquires the skills necessary) in becoming a top wealth holder.

                          That is a very specific claim.  Where is your evidence?

                          In addition, can you please clarify your terms?

                          To begin with, how do you measure skills and how do you prove that the 50% of wealth inequality that you say is not caused by differences in skills is not based on skills that the study does not measure?

                      •  Interesting. So have I and I've met people (1+ / 0-)
                        Recommended by:
                        Josiah Bartlett

                        that are teachers and scientists that are likewise as impressive.

                        Like the scientist that studies earthworms. Equally, if not more impressive then the billionaire.

                  •  Um, wham bam? (1+ / 0-)
                    Recommended by:
                    mkor7

                    You're right to champion savings and frugality. But, if everybody saves and invests, and no one buys $1k tv sets, then where will the profits on those investments come from? If everybody buys Sony stock, but nobody buys Sonys, Sony will go under and all that stock will be worthless.

                    There has to be a balance.

                    Al Qeada is a faith-based initiative.

                    by drewfromct on Sun Sep 25, 2011 at 06:06:18 AM PDT

                    [ Parent ]

                    •  Heh... then you buy the Sony TVs while I buy (0+ / 0-)

                      Sony stock.

                      In the end, all money gets spent.  But we spend too much on consumer goods and too little on investment.

                      If people saved more we would have more investment and less consumption and that would be good.

                      •  Good luck with that (7+ / 0-)

                        I already have a tv, and no plans to buy another one for a long, long time.

                        But again, if no one buys consumer goods, sales go down, and investments suffer.

                        A big problem is that when severe wealth inequality exists, there simply isn't enough money in circulation to support demand. Consider the CEO who makes 1,000 times the salary of the average worker. He can afford to buy 1,000 middle class houses, but will he? No. He might buy a dozen mansions, but, expensive as they are, do they add up to the cost of 1,000 middle class houses? It's not just houses, but the furniture and appliances to furnish them. That CEO might buy a dozen tvs for each of his dozen mansions, but that still doesn't come anywhere close to adding up to 1,000. It gets even worse when that CEO takes 1,000 times the pay of an average worker for making decisions that eliminate thousands of jobs. In order to sell things, you need workers who are paid enough to buy them. We've all seen videos of robots on the line building cars. Ever seen a robot roll into a showroom and buy one?

                        Again, without enough buyers who are willing and able to buy consumer goods, your investments are worthless. That was the lesson of 1929, but, sadly, it was a lesson lost on the vast majority.

                        Al Qeada is a faith-based initiative.

                        by drewfromct on Sun Sep 25, 2011 at 06:54:33 AM PDT

                        [ Parent ]

                        •  Excessive wealth inequality suppresses trade (3+ / 0-)
                          Recommended by:
                          drewfromct, swellsman, Calamity Jean

                          In conditions of extreme wealth inequality,  trade will decrease. The wealthy don't buy much because they are few in number and quickly acquire everything they need, and don't sell much because they don't need the money. The poor don't have anything to sell, and don't buy because they don't have the money.

                      •  Precisely backwards (0+ / 0-)

                        It is the exposure of investments to risk that results in vast wealth disparities.  Despite the purported brilliance of those who build successful businesses, luck plays at least an equally strong role in determining the winners and losers in emerging markets.  And because virtually all money in our modern economy has value because it is backed by someone else's promise to repay a debt, nearly all savings literally is investment.

                        On the other hand, if everyone spent and consumed all of their income, there would not be a disparity of wealth at all, because wealth would not be accumulated, only produced and consumed.

                        From such crooked wood as that which man is made of, nothing straight can be fashioned. -Immanuel Kant

                        by Nellebracht on Sun Sep 25, 2011 at 03:37:11 PM PDT

                        [ Parent ]

                  •  I Beg to Differ (3+ / 0-)
                    Recommended by:
                    Kanscott, zedaker, tofumagoo
                    After all, the fact that some guy is making $1 billion running a hedge fund doesn't hurt us."

                    The entire point of this diary is to focus on and explore the high degree of income inequality that currently exists in the U.S.  Now, you are correct, this doesn't necessarily seem like a problem unless you think it is a problem but -- here's the thing -- everybody else does.  And when I say "everybody" I mean everybody.

                    Even Alan Greenspan - the man who so loved the unregulated free market that he once told Brooksley Born that if it were up to him the gov't wouldn't even punish people who commit fraud because that is something the market can work out on its own - famously said that income inequality "is where the capitalist system is more vulnerable.  You can't have the capitalist system if an increasing number of people think it is unjust."

                    And the problem presented by income inequality is that it is unjust - not simply that people perceive it to be . . . it is.

                    Remember, what the data show and what this diary is about is not just about how rich people get richer over time - it is about how they accumulate a greater and greater percentage of the nation's wealth at any given time into their own few hands.  This necessarily means the greater accumulation is coming at the expense of others lower down the economic ladder.

                    For example, as of 2007, "the top 1 percent of households [had] seen their incomes go up by 7 percent and the bottom 80 percent [had] seen their income share go down by 7 percent.  In total that is $664 billion in increase in inequality, representing $7,000 for each household in the bottom 80 percent and nearly $600,000 for each household in the top 1 percent."  It seems clear the increase in income share enjoyed by the top 1 percent came directly at the expense of the bottom 80%.

                    Remember, the percentage of national income that is divided between the various economic groups at any given time cannot be more than 100% - no matter how much income you are talking about.  Think of it this way:  suppose you and your 3 friends are going to enjoy a pizza.  Each of you is going to get 3 slices a piece, so each of you gets 25% of the pizza.

                    But now suppose the pizza doubles - there are now suddenly two pizzas - but your friend Rich Guy isn't getting 25%, he's getting 50%, and you and your other two buddies get to divide the remaining 50% between you.  So Rich guy gets one entire pizza to himself, whereas you and your other two friends each get 33.33% of one pizza.

                    Are you better off now than you would have been before?  Sure, you've got more pizza.  You went from having 25% of a single pizza to having 33.33% of a single pizza.  But if the income shares had not changed in Rich Guy's favor, you'd have ended up with 50% of a single pizza.  So, yeah, you got screwed.

                    And that is what's been happening in America these past couple  of decades.  The economic pie has been growing, but the very rich are taking a greater and greater slice of that pie away from everybody else.  And I'm guessing that includes you too, my friend, no matter how prudently you've saved your money or how frugally you've lived your life.  The bottom line is that we've changed a system under which you would have been richer into a system that now provides you - yes, you - with less.  If I were you, I'd be a little bit pissed off about that.

                    Properly understanding that the concentration off economic wealth is a zero-sum game and recognizing that wealth is not distributed evenly is key to making some correct policy decisions.  It is also key to understanding right-wing BS when we hear it spouted on Fox News and talk radio.

                    Here's a favorite:  70% of all income taxes are paid by only 27% of all income tax filers.  Well, yes, and that would be bad if income were distributed evenly, in a nice bell-shaped pattern.  But it isn't.  If 27% of the people are paying 70% of the income taxes that is because those people have all the money.  

                    If one's real concern is that the tax base be "broadened" so that everybody "has some skin in the game" then we've got to do something to flatten out the massive income inequality that we now have and that inevitably appears.

                    On the other hand, if we are convinced that perfect laissez-faire market principles provide the most economic bang for the buck and are the most efficient possible, then maybe we don't do anything about flattening the inequality of income distribution.  But if that is the case, then we will have to enact even further and more progressive income tax schedules - involving increasingly higher rates on increasingly larger sums of money -- in order to pay for all the things that we want to the gov't to do; so we will see pretty much all the taxes being paid by the small number of people who have managed to capture nearly all of the nation's income.  We will also have to use that money to keep the country from devolving into some thousands of uber-rich and some hundreds of millions of poor, in paying for things like food, housing, education and health care that the hundreds of millions of poor will not be able to afford with the McJobs they all work at.

                    Or, we could just keep the current inequitable distribution plan in place, keep the current inadequate tax scheme in place, and keep running up public debt until some new and exciting financial conflagration hits.

                    Or, we could try to find some manner of compromise between all three of these competing visions of a dystopic America that keeps the country from sliding in to Banana Republic territory.  And, fortunately, thanks to Bouchard and Mezard, we have a pretty good idea of how to do that.

                    Politics is the neverending story we tell ourselves about who we are as a people.

                    by swellsman on Sun Sep 25, 2011 at 06:57:14 AM PDT

                    [ Parent ]

                  •  Most people (say, who work at Wal-Mart) don't make (1+ / 0-)
                    Recommended by:
                    Kanscott

                    $10,000 more than they spend on basic necessities such as food, shelter, medical care, insurance, transportation, energy (electricity and heating) and other living expenses.  Your numbers are (as is typical of "investment" advisors) totally unrealistic for most wage-earner Americans.  If $10,000 represents 10% of your post-tax income, you have to be making well into the six figures per year.  That is not a typical wage-earner income.  And investing $1000 per year will not get you to a million dollars after 40 years with any reasonable expectation of return on your investment.

                    Not to mention that for those that have invested in typical 401K plans in the last thirty years, their actual return has not averaged 10% when averaged over 30 years.  In fact, the last ten years has been less than zero (a la "I am more concerned with the return of my money more than the return on my money." -- Mark Twain)

                    •  So much wrong (0+ / 0-)

                      First off, who says you should only save 10% of after tax income?  I've never saved that little... and won't until my kids are in college.

                      Not to mention that for those that have invested in typical 401K plans in the last thirty years, their actual return has not averaged 10% when averaged over 30 years.

                      On Sept 25, 1981 the S&P 500 was 112.77.  On Sept 26, 2011 it closed at 1164.19.  Per Google that is an 8.1% annual return, and it does not take into account reinvestment of dividends.  So, actually, over the past 30 years the average stock market investment did return approximately 10%.

                      (1 164.19 / 112.77)^(1 / 30) = 1.08092197
                      In fact, the last ten years has been less than zero

                      No.  It has been about 20% (before dividends).  Did you even bother to check the numbers before posting this stuff?

                      Now, I'll agree that 20% over 10 years is pretty bad, you are measuring from a peak (2001 right after 9/11) to a trough today.  If you pick the right dates you can always make stock market returns look bad.  The vast majority of 10 year ranges show far better returns.

                  •  Well Savings Only Works For You (1+ / 0-)
                    Recommended by:
                    swellsman

                    and those like you so long as most people DON'T save!  If everyone saved then your savings would be worthless because society as a whole CAN'T save.  

                    Savings are not themselves wealth....but rather they are a CLAIM AGAINST the wealth existing at a point in the future. The more people holding claims against the goods and services produced at some given point in the future,  the less those claims will actually be worth.

                    The rightwingers love to point at the ratio of workers to retirees as a flaw in Social Security, but it's actually a BIGGER flaw with private savings-based system.

                •  You're arguing with someone who (4+ / 0-)
                  Recommended by:
                  JanL, mkor7, Kanscott, zedaker

                  has a record of spouting right-wing talking points.

              •  Go tell that (2+ / 0-)
                Recommended by:
                Kanscott, Calamity Jean
                If you save 10K per year for 40 years and put it in S&P index funds then with the magic of compound interest you will easily be a millionaire.
                to the retirees who need to cash out on the day the market crashes.

                Al Qeada is a faith-based initiative.

                by drewfromct on Sun Sep 25, 2011 at 06:03:20 AM PDT

                [ Parent ]

                •  Why would anyone need to cash out on one day? (0+ / 0-)

                  You cash out during a retirement that you need to plan on lasting 30 years or more.

                  And obviously, over the 10 years before retirement you start moving money into bonds, blue chips, and other less volatile investments.

          •  This is a diary about Macro Economics and your (13+ / 0-)

            example is Micro Economics. You're arguing apples and oranges.  

            Sure, an individual can make careful choices and choose to save a portion of their income, just as you say you have done.

            However, those savings will most likely never approach the massive levels of wealth that accumulate at the top of the income scale. While you're saving $1000 or $3000 a month, that's pennies to them as the millions pour in.

            It is almost like you are making the "personal responsibility" argument so popular with Republicans.  Sure, a person can live frugally, within their means, and accumulate more money than they started with over a lifetime's work.

            However, any number of people who do just that will be devastated by forces beyond their control:  a medical situation, a disaster, long-term unemployment in a decade of poor economy.  And those people were no "irresponsible," they were victims of fate.

            Meanwhile, the fabulously wealthy are making million dollar deals over cigars, cocktails and handshakes at the country club.  One lunch meeting may return more in wealth than three of your lifetimes.

            And as the diary shows, over time, that wealthy only concentrates more and more.  Unless the government forces redistribution through taxation and spending, the wealth piles up at the top.

            Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better. -- Harry S Truman

            by YucatanMan on Sun Sep 25, 2011 at 12:40:07 AM PDT

            [ Parent ]

          •  Good example, but ... (6+ / 0-)

            How many people who made the exact same choices as you but with another company that failed can replicate your story? If, today, you made all of the same choices with a company that didn't offer stock purchase or whose stock bottomed out where would you be? If you went to college today and took the same course path, would you have the same benefits? My point is that you only compared yourself to your immediate surroundings at the exact time that worked for YOU. There are hundreds, thousands of people who also put money into stock purchase and lived in small apartments and saved whatever they could only to have it all fall apart.
            From my own background, I worked for a very large company in one of their smaller divisions and became friends with the president of that division. We were having coffee (after he had retired and I had moved on) and he made the statement that neither he nor I would even be hired by the big company today. The division (which had some special talent requirements) didn't exist today. Both of us were successful and still have all of the attributes that made us successful, but the same opportunity isn't there. This is no reflection on anyone, just DUMB LUCK that our talents were needed at exactly the right time by the right company with the right benefits at exactly the right time when everything went well. Someone doing everything we did would fail today.

            What we observe is not nature itself, but nature exposed to our method of questioning. - Werner Heisenberg

            by fortunate son on Sun Sep 25, 2011 at 06:22:55 AM PDT

            [ Parent ]

            •  I don't follow (0+ / 0-)
              How many people who made the exact same choices as you but with another company that failed can replicate your story?

              Any of them.  I have always stayed diversified and if my company had gone bankrupt during the ESPP period (highly unlikely - this was a 6 month program and bankruptcies rarely come out of nowhere that fast) I would only have been out 10% of my savings and the money I had loaned my friends for that six month period.  

              If, today, you made all of the same choices with a company that didn't offer stock purchase or whose stock bottomed out where would you be?

              Nearly as good.  The foundation of my savings has been taking a big chunk of my income and buying S&P 500 indexes.

              The point of my story about the ESPP was that people with the same income can have radically different savings rates... and that that can mean a huge difference in wealth in 20 or 30 years.

          •  Not GREED as most people know it... (0+ / 0-)
            Greed:
            : a selfish and excessive desire for more of something (as money) than is needed

            By loaning money to your co-workers you were not selfish.
            Were your actions excessive?  Not really.

            Did you get much more than was needed, or were you just looking for your security?

            If you were able to exclude your co-workers, somehow obtain their shares and profit even more - THAT would fit the definition (excessive) of Greed better.

            "The right to be heard does not automatically include the right to be taken seriously." -- Hubert H. Humphrey

            by Candide08 on Sun Sep 25, 2011 at 07:33:57 AM PDT

            [ Parent ]

      •  I have posted this before (6+ / 0-)

        I do so again to suggest that this is a problem in all industrialized countries.  The US is handling it the worse, but similar forces are at work elsewhere.

        Note the share of income going to labor is declining everywhere.

        For a couple of decades after WW2 we seem to figured out how to generate a reasonable and improving standard of living for everyone. The reason why this has proven more difficult is complex: in my view over the last 30 years globalization has been the key driver.  A related reason has been too much capital investment, which has served to make labor more productive, but in a way that has made labor receive less of the value of the work (the distinction to investigate is labor saving versus labor augmenting technology).

        Anyway, very good post on an important topic.
        Photobucket

        The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

        by fladem on Sat Sep 24, 2011 at 09:22:19 PM PDT

        [ Parent ]

        •  extremely important distinction... (0+ / 0-)
          the distinction to investigate is labor saving versus labor augmenting technology

          "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

          by fhcec on Sat Sep 24, 2011 at 10:58:09 PM PDT

          [ Parent ]

        •  it's the same issue, but on a globalized scale. (1+ / 0-)
          Recommended by:
          swellsman

          Wealth distribution from the G-7 to the new players in the game.

          And I think you're misssing the point fo this diary.

          For a couple of decades after WW2 we seem to figured out how to generate a reasonable and improving standard of living for everyone.

          The reason was fair and progressive taxes redistributing wealth combined with organized labor movements.

          As I see it, not only is it imperative that we institute a new progressive tax policy, but it is likewise important that we start to institute a new tariff policy as well. China will flip, but we have to take advantage of the limited and dwindling ace up our sleeve - our buying power - to negotiate a stop to the drain on jobs. We must propose and help China build  a better self-sustaining economy based around a growing middle class like we once had. Rather then continuing to rely on simply sucking the jobs and wealth from other nations as their economic model.

      •  you don't need to be crooked to run a casino (4+ / 0-)
        Recommended by:
        dfarrah, mkor7, Zydekos, Calamity Jean

        at a profit.
        The whole system is set up to distill (or condense) wealth for the owners of the casino, whether they add to that by breaking legs (or inventing Credit Default Swaps) or merely running the place is simply an option.
        Great piece, nice simple examples; well done.

        Class war has consequences, and we are living them.

        by kamarvt on Sun Sep 25, 2011 at 06:05:28 AM PDT

        [ Parent ]

      •  They rig it and that just makes it go faster (1+ / 0-)
        Recommended by:
        mkor7

        in their direction... impatient... So their greed just revs up the mathematical process...

        Pogo & Murphy's Law, every time. Also "Trust but verify" - St. Ronnie (hah...)

        by IreGyre on Sun Sep 25, 2011 at 07:25:22 AM PDT

        [ Parent ]

    •  Me too. (25+ / 0-)

      For the U.S., I just can't see it as useful explanation, that there is an natural and inevitable concentration of wealth, unless we do something to counteract it.

      More, that we have a strongly unnatural concentration of wealth here. Government policy has caused it. Not so much, that we have failed to do the right thing in economic policy. But that we have enacted policy that is deeply wrong.

      The graph is national wealth (GDP per capita) versus income inequality (GINI). In the less wealthy nations, concentration of wealth can be any kind, low, middle, or high. In the wealthier nations, concentration of wealth becomes naturally low. Except for those two corrupt nations, where the system is especially rigged to favor the rich.

    •  It Came BACK Because Rich Rigged RECENT Game (22+ / 0-)

      In the mid 70's most of the wealth of the country was in the hands of the general population because the New Deal had come far, far closer to an ideal wealth distribution than is normal for our system or any under regulated economy.

      The game the rich rigged was politics after Nixon, winning a little financial deregulation under Carter and then the real coup de grace under Reagan of ending the protective individual taxation that was preventing concentration of wealth the diarist shows is otherwise natural.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Sep 24, 2011 at 01:33:40 PM PDT

      [ Parent ]

      •  I don't think (4+ / 0-)
        Recommended by:
        Candide08, Ruh Roh, swellsman, BoxNDox

        the politics had much to do with it.  I think it was that the rise of technology allowed for the creation of a global market for labor, which the rich have used ever since to tame unions and reduce wages.

        I understand this is a minority view here: but FWIW I think the biggest problem we face is how to protect worker salaries in the age of globalization.  

        On this issue the debate is no where close to addressing the scale of the problem, and many are in flat denial about the impact.

        The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

        by fladem on Sat Sep 24, 2011 at 09:26:17 PM PDT

        [ Parent ]

        •  health care and other benefit costs (0+ / 0-)

          are probably not included in US wage stats, tho' employers here surely consider them part of labor costs, making US labor disproportionately uncompetitive and less well off.

          Payouts to insurance companies benefit workers not a whit, but are still costs to the firms, making American workers even less competitive wrt cost, compared to other countries where those costs are handled differently (paid indirectly by individuals and firms thru VAT in Europe).

          With the parallel concerted effort to dismantle unions here, workers' wages and job stability are even more at risk, likewise long term community commitment to towns, infrastructure, etc.

          American manufacturers and service industries become footloose and have even more incentives (in addition to tax benefits) to leave, exacerbating the wage and jobs collapse.

          "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

          by fhcec on Sat Sep 24, 2011 at 11:19:36 PM PDT

          [ Parent ]

          •  Speak for yourself (1+ / 0-)
            Recommended by:
            mkor7
            Payouts to insurance companies benefit workers not a whit,
            My wife has a mid-level executive job with fairly decent insurance that just paid out over $100k on a childbirth with minor complications. We just shake our heads in wonder about how people get by with no insurance. Of course, the sad fact is that so many are not getting by at all.

            Al Qeada is a faith-based initiative.

            by drewfromct on Sun Sep 25, 2011 at 06:22:38 AM PDT

            [ Parent ]

          •  To the extent that (0+ / 0-)

            benefits are paid to workers elsewhere are not in the cost of labor but are part of the cost of labor here, it is a disadvantage.  The issue is a bit more complicated - I believe the German Health Care system is partially funded by a payroll tax.

            The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

            by fladem on Sun Sep 25, 2011 at 06:40:14 AM PDT

            [ Parent ]

        •  We need to bring back tariffs (4+ / 0-)
          Recommended by:
          fladem, swellsman, dfarrah, zedaker
          I understand this is a minority view here: but FWIW I think the biggest problem we face is how to protect worker salaries in the age of globalization.  

          Massive, punitive tariffs on all goods and services imported from nations which refuse to match our own standards for the protection of workers, consumers, and the environment. We can't hope to win the Race To The Bottom.

          Global trade should be about raising standards, not lowering them.

          Al Qeada is a faith-based initiative.

          by drewfromct on Sun Sep 25, 2011 at 06:14:48 AM PDT

          [ Parent ]

    •  They definitely do that to keep the (4+ / 0-)
      Recommended by:
      phonegery, Candide08, kurt, YucatanMan

      government from leveling the playing field through tax policy.

      “when Democrats don’t vote, Democrats don’t win.” Alan Grayson

      by ahumbleopinion on Sat Sep 24, 2011 at 03:18:11 PM PDT

      [ Parent ]

    •  Of course they do. That's what (1+ / 0-)
      Recommended by:
      zedaker

      systems of racism and discrimination do: they hurry the inevitability of wealth concentration by targeting whole groups of people who will not make it to the top.

      Chaos. It's not just a theory.

      by PBnJ on Sat Sep 24, 2011 at 05:51:25 PM PDT

      [ Parent ]

  •  If I may, I'd like to post this to SciTech (5+ / 0-)
    Recommended by:
    swellsman, Tanya, psnyder, side pocket, IreGyre

    Thanks

  •  Outstanding! (8+ / 0-)

    Thanks so much.  Clear writing, showcasing good common sense, and an easily understandable theory, backed up by historical facts.  

    We need to break up the huge piles of wealth, before they choke the life out of democracy.  Tax them all, until we are safe.

    Democrats - We represent America!

    by phonegery on Sat Sep 24, 2011 at 12:38:40 PM PDT

  •  Thanks for shedding light on a complex economic (7+ / 0-)

    puzzle. Let me extend your argument that taxation is government's means of income distribution. Because of the undue influence of the wealthy on Congress (another way they keep and extend their wealth), income distribution by taxation has broken down. If taxation is forestalled, economic pressure builds up to an unsustainable degree. If this pressure cannot be reduced by legislative means, is the result revolution in one form or another - hopefully democratic and bloodless, but not necessarily so?

    Was Karl Marx right after all?

    •  Other Way Around. Because Gov't Ended Protective (10+ / 0-)

      individual taxation, wealth accumulated and the rich bought off government to do all the rest. Almost all the degregulation and growth of the rich started with the elimination of protective taxation under Reagan.

      Through the 60's and maybe mid 70's, most of the wealth of the nation was held by the common people upper middle class, and the millionaires needed to throw in to syndicates to afford a yacht to race for the America's Cup.

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Sat Sep 24, 2011 at 01:26:38 PM PDT

      [ Parent ]

  •  It's NOT Redistribution, It's PREVENTION of Wealth (23+ / 0-)

    concentration in the first place.

    When your 10 million dollar raise force you to send 9 million of it to the feds, you don't ask for it and the company doesn't offer it.

    Instead the money is kept available to the company which relieves the pressure to be insanely profitable. Some goes into overhead, some is shared with workers, some invested in the community as charity.

    What's needed as we and other nations proved is protective preventative progressive taxation.

    Both parties now oppose that, but we've done it in the past and by no surprise it was the only 50 year period we had a stable economy free of panics and depressions, the only period we had broadly journalistic media reaching most of the people, the only time we created and sustained a large middle class with leisure and advancement opportunity which included professions, services and labor among its ranks.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Sep 24, 2011 at 01:24:23 PM PDT

    •  Yes. (11+ / 0-)
      What's needed as we and other nations proved is protective preventative progressive taxation.
       
      Wall Street’s plutocrats were aghast! They had long been accustomed to wielding tremendous control over the government’s economic policies, including the use of U.S. forces to protect their precious foreign investments. Because of Butler’s steadfast military role in upholding U.S. business interests abroad, the plotters mistakenly thought they could recruit him to muster a “super-army” of veterans to use as pawns in their plan to subjugate or, if necessary, eliminate FDR.

      FDR's inauguration speech speaks to what is now currently happening.

      Shall we abandon the reasonable support and regulation of banking? Shall we restore the dollar to its former gold content?

      Shall we say to the farmer, "The prices for your products are in part restored. Now go and hoe your own row?"

      Shall we say to the home owners, "We have reduced your rates of interest. We have no further concern with how you keep your home or what you pay for your money. That is your affair?"

      Shall we say to the several millions of unemployed citizens who face the very problem of existence, of getting enough to eat, "We will withdraw from giving you work. We will turn you back to the charity of your communities and those men of selfish power who tell you that perhaps they will employ you if the Government leaves them strictly alone?"

      Shall we say to the needy unemployed, "Your problem is a local one except that perhaps the Federal Government, as an act of mere generosity, will be willing to pay to your city or to your county a few grudging dollars to help maintain your soup kitchens?"

      Shall we say to the children who have worked all day in the factories, "Child labor is a local issue and so are your starvation wages; something to be solved or left unsolved by the jurisdiction of forty-eight States?"

      Shall we say to the laborer, "Your right to organize, your relations with your employer have nothing to do with the public interest; if your employer will not even meet with you to discuss your problems and his, that is none of our affair?"

      Shall we say to the unemployed and the aged, "Social security lies not within the province of the Federal Government; you must seek relief elsewhere?"

      Shall we say to the men and women who live in conditions of squalor in country and in city, "The health and the happiness of you and your children are no concern of ours?"

       

      In the hands of a people’s government this power is wholesome and proper. But in the hands of political puppets of an economic aristocracy, such power would provide shackles for the liberties of the people. Give them their way and they will take the course of every aristocracy of the past – power for themselves, enslavement for the public."
      http://www.janda.org/...
      /1934-1945%20Roosevelt/FDR36.html
       

      Democrats - We represent America!

      by phonegery on Sat Sep 24, 2011 at 04:52:02 PM PDT

      [ Parent ]

  •  Big Gains to MUCH MUCH Smaller Group: (14+ / 0-)

    Here's what the "good" Clinton economy actually accomplished.

    Image Hosted by ImageShack.us
    Notice that the top 1% who everyone thinks walked off with the whole society, barely grew when only 400 of the richest families are set aside.

    It probably means that, percentile wise, almost all the growth in that "good" economy was confined within the top 0.01% to 0.1% and that even most of the top 1% as a percentile was as stalled at dead stop as the bottom 99% was.

    In that GOOD economy.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Sep 24, 2011 at 01:30:22 PM PDT

  •  Not class warfare (6+ / 0-)
    Recommended by:
    ahumbleopinion, Bob B, Tanya, DrFood, kurt, jimreyn

    but a struggle against an inevitable economic black hole. I love Swellsman's imagery and clarity in this post, and I think it allows us to reframe the progressive cause as one against an impersonal economic law rather than against those lucky enough to have benefited from it. Most state sponsored lotteries keep about half the pot for administration and whatever government activity the lottery is sponsoring, so taxes of 50% on the winnings of the larger economic game are not unreasonable. Note that I say winnings not winners because I think it has to be redistributed for the common good before anyone gets the idea "It's mine. I earned it."

  •  Excellent diary and thanks for posting it. n/t (2+ / 0-)
    Recommended by:
    Badabing, jimreyn

    "Capitalism has defeated communism. It is now well on its way to defeating democracy."
- David Korten

    48forEastAfrica - Donate to Oxfam

    by basquebob on Sat Sep 24, 2011 at 02:15:25 PM PDT

  •  Another stunning ass kickin diary (8+ / 0-)

    The final handful of paragraphs really tie it all up in a great concise conclusion.

    Well done.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sat Sep 24, 2011 at 02:41:22 PM PDT

  •  Some people want what they do to have (7+ / 0-)

    meaning.  If accumulating money isn't what God wants, then the only alternative is to conclude that accumulating money is worthless.  Which it is, unless there's a realization that money is merely a token of value that lets people get use out of their labor at a different place and later.  But, the actualization of that use or value depends on the money being spent, sooner or later.  Just hoarding it is what makes it worthless.

    The problem we have is that there's a whole cadre of people who accumulate to hoard or, at best, pass money back and forth within a small circle of friends who don't spend either.  A transaction tax which taps the hoard at each pass might be good because what currency needs to do is circulate. We can, of course, keep issuing more money.  But, if the hoarders keep capturing more, it's a losing proposition in the sense that the economy keeps being distorted.  Money is a measuring stick and if somebody keeps hiding the measuring stick or using it as a bludgeon, the real purpose is undermined.

    http://www.youtube.com/watch?v=MuzZQ8LTE2c

    by hannah on Sat Sep 24, 2011 at 03:17:19 PM PDT

  •  "Statistical Mechanics of Money" is a related (5+ / 0-)
    Recommended by:
    tofumagoo, Catte Nappe, DrFood, fhcec, Zydekos

    topic.

    If you google that term, or one of the main authors, "V.M. Yakovenko", you'll find mathematical treatments of this intersting topic.

    In a nutshell: without some intervening factor, it is inevitable that most wealth ends up in the hands of a few.

    That's why we need taxes: to re-distribute wealth in order to keep the economy from totally freezing up.

    •  Financial Transaction Tax. (11+ / 0-)

      A Financial Transaction Tax is a great way to tax speculators (those folks who feel free to gamble, either because they already have so much money or because they're playing with other people's money) and the high frequency traders who build server farms physically proximate to Wall Street so they can buy and sell multiple times per second.

      I put up a petition on whitehouse.gov:

      http://wh.gov/...

      It won't get "published" on the We The People section until it has 150 signatures, so if you agree, please share this link.  The Obama White House promises to address every petition that gains at least 5000 electronic signatures in 30 days.

      Universal Health Care - it's coming, but not soon enough!

      by DrFood on Sat Sep 24, 2011 at 07:46:41 PM PDT

      [ Parent ]

      •  It would put a cold hard clampdown on shady biz (6+ / 0-)

        I'm all for it, in large part because I'm convinced that those gazillions of "high frequency trades" are really some kind of very shady biz.  I'm guessing that it's some kind of front-running scheme, where the big boys use their supercomputers to probe the market by buying and selling the same stock to figure out when orders are being processed by a slower, "less privileged" trader, and they can somehow rig the market to make a buck off the other people's trades.  

        At times, this high frequency stuff is over half the stock market's volume.  It's obviously not a "real" investment, it's some kind of game run by rich kids with supercomputers, designed to steal money from the pockets of the other investors.  If they instituted even a $0.0001 cost per share bought and sold, it wouldn't make even a hint of a dent in the "real" traders, but it would stop this high frequency stuff cold.

      •  trying to sign (0+ / 0-)

        has only one sig when I tried about 5 minutes ago.

        well written...

        hope the authorization to sign comes thru soon.

        "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

        by fhcec on Sat Sep 24, 2011 at 11:55:10 PM PDT

        [ Parent ]

  •  Over and over and over again...we see the (6+ / 0-)

    same conclusions being reached by studies and reported in diaries like yours. Too bad only one side of the political spectrum gives a sh**!

    I'd rather not know, than have answers that are wrong - R.Feynman

    by jim in IA on Sat Sep 24, 2011 at 04:28:01 PM PDT

  •  Too late for taxes to help. (5+ / 0-)

    Think in terms of cycles. We're in 2011. Tax laws passed now have to travel through this current conservative base "tea party" republican house, and that's not going to happen.

    Next tax laws that can be passed, to raise taxes enough to counteract the trend, won't be until after 2012, after the next election takes hold, in early 2013.

    The 2013 session, at the earliest, will be affecting the taxes paid during the next following tax year. Also known as 2014.

    And, do you recall what was said during the recent debt ceiling step-through? That if the ceiling wasn't passed, that treasury would be running day to day, taking in about 22 billion each day but having more than that each day to pay out?

    Well, in 2014 those tax hikes would only begin trickling in, covering the costs for social rescue programs under the pay-go rule. Unless there were massive cuts in other places. Problem is, that's 2014, and it's only 2011.

    So, there's the lay of the land revenue wise for the next three years.

    And we can't even target wall street or the top 400 richest persons either, the segment that needs to be brought to heel in order to quench this fire soon is the top 1%. And let's take note that 1% of america is Three Million People.

    Too late for taxes to help. In the ensuing time, the current processes will continue to create events like the brother of 'susan from 29' and run people down economically like they run down dogs in the street.

    Brace for impact.

    "I must confess, when I see anyone with an Obama 2012 bumper sticker, I recognize them as a threat to the gene pool." - Republican Congressman Allen West (FL-22) Rawstory Source

    by JayFromPA on Sat Sep 24, 2011 at 05:26:13 PM PDT

  •  Great diary (3+ / 0-)
    Recommended by:
    swellsman, Foreign Devil, mkor7

    I specifically like the Matthew 12:1-45 reference.

    By the way,one reason the Rich Get Richer is that they are aided and abetting by Democrats like Clinton and Obama, both of whom preach a good sermon on economic equality while selling out the working and middle class to corporate and Wall Street interests.

    Nothing is going to change until we fist force change within our party.

  •  Good post my friend, (3+ / 0-)
    Recommended by:
    psnyder, kurt, swellsman

    I'm trying to reconcile in my mind though, how you say that there is not any moral lesson applied to wealth accumulation, that, by chance, it falls to someone, has to fall to someone in the end, like a toss of a coin.

    That may be true, but, it doesn't keep a motivated majority from trying to tilt the playing field so that the coin falls their way more often than not.  

    In that sense, I think the "hands-off" value judgement is too lacking in explanatory power.   Some people are working really, really hard to become wealthy and are doing this successfully.  And, because competition selects for the most polished at this endeavor, they also, inevitably are the most manipulative, cunning and perceptive of the players trying to get super-rich.

    Because they then keep an eye out for potential threats and rivals, it makes the task of knocking them off their thrones incredibly difficult, if not impossible.  The rest of us are toiling as ants, while the mega-rich bring bulldozers and cannons to a day in the field....

    Help new teachers to grow and love their work at www.newteachernetwork.net

    by Mi Corazon on Sat Sep 24, 2011 at 05:39:05 PM PDT

    •  Oh, yes . . . that is certainly true (6+ / 0-)

      There is no question that some wealth inequality does result from the "behavioral inputs" of the participants.  As I mentioned in a reply to another commenter, individual choices regarding spending and investment for a particular individual are probably the single greatest factor determining whether that individual does or does not accumulate wealth over time.

      Similarly, there are a lot of people who, as you say,"are working really, really hard to become wealthy" and are doing everything they can to increase their wealth.  This is another example of individual choices making a difference in personal accumulation.

      But it is important to note that even if all the less affluent people made all the right choices, and the already wealthy just didn't try too hard, the sheer mathematics of the distributive network overwhelmingly favors ever and ever growing levels of inequality.  The bulldozers and cannons that the already wealthy bring to the field are basically the vast gobs of money that they already have lying around, and the mere existence of those gobs of money pretty much renders it impossible for the toiling ants to compete with them.

      And it's easy to see why.  For example, if I invest $10,000 in a steady mutual fund that provides a reliable 5% rate of return.  My income goes up by $500.  But suppose my wealthy neighbor - who doesn't much care about accumulating money, so he doesn't try too hard to do so - also invests money in that same fund.  Except he invests $1,000,000.  His income has now gone up by $50,000.

      Which means, of course, that even though the two of us are investing exactly the same way, and getting the same rate of return, the wealth disparity between us only increases over time.  In this one example, the wealth inequality between me and my neighbor just went up by $45,500 -- and he didn't even have to try.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sat Sep 24, 2011 at 11:23:45 PM PDT

      [ Parent ]

  •  Another, more realistic option... (6+ / 0-)

    Change the fucking system.

    What a revelation!  Capitalism concentrates wealth at the top.  And your taxation/regulation option is hopeless because, in Capitalistic societies, wealth equals political power and you'll never be able to keep taxes high on the wealthy or regulate corporate power effectively.

    Change the fucking system.  Make "wealth" an historical memory.  Let workers control the wealth they produce.  Let communities control the natural wealth they possess.  End this bizarre system that accumulates wealth and power in the hands of the greediest and most immoral/amoral and return it to the people.

    Capitalism, especially in its zombie Late Stage incarnation, is a perversion, a blight, a disease.  Quit treating symptoms and get rid of the disease.

    •  Glad to see a 'more realistic' option. n/t (0+ / 0-)

      -- We are just regular people informed on issues

      by mike101 on Sat Sep 24, 2011 at 09:25:33 PM PDT

      [ Parent ]

    •  Hockey stick graphs predict radical change (1+ / 0-)
      Recommended by:
      zedaker

      Goinsouth, I think you're right about the necessary changes from a capitalistic society.

      It seems to me likely that those changes will come as radical change, because those conditions represented by hockystick graphs (asymptotic, almost straight up, as seen in Malthusian population growth) usually end with major adjustment.

      We see some of those hockey sticks in this diary.

      Bush hijacked the US with lies about 9/11 and crashed it into Iraq, killing over 500,000 human beings. So far, he's avoided arrest and prosecution.

      by Zydekos on Sun Sep 25, 2011 at 10:36:17 AM PDT

      [ Parent ]

  •  Outstanding Diary, thanks. (11+ / 0-)

    I'd point out that, far from ameliorating this effect, our taxation system probably exaggerates it.  The chief culprits are lower tax rates for wealth earned by capital vis a vis that earned by labor (thus tending to concentrate wealth), and also a corrupt system of narrow loopholes available only to corporations and the wealthy.

    •  Glad you liked this, and . . . (7+ / 0-)

      . . . yeah, I'm a big fan of getting rid of the preferential treatment capital gains income receives.  The evidence just isn't there that using the tax code to make investment income preferential to labor income does anything to help the economy.  In fact, because it sharply rewards the choice of wealthy investors to sink money into financial investments - as opposed to economic investments, like new businesses - I think it probably hurts the economy.

      Quite simply, I don't think there is any valid reason for the preferential treatment of investment income, and certainly not for so powerful (15% tax rate) a preference as we currently have.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sat Sep 24, 2011 at 11:29:08 PM PDT

      [ Parent ]

  •  One thing (1+ / 0-)
    Recommended by:
    drewfromct

    I like this diary and rec'd it, but it left out the important part about how the economy is tilted.

    "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

    by gjohnsit on Sat Sep 24, 2011 at 06:07:58 PM PDT

    •  don't understand your comment??? n/t (0+ / 0-)

      "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

      by fhcec on Sun Sep 25, 2011 at 12:05:38 AM PDT

      [ Parent ]

  •  Baylor stud quoted above: (1+ / 0-)
    Recommended by:
    Geenius at Wrok
    They see ‘government’ as a profane object – a word that is used to signal working against God’s plan for the United States.  To argue against this is to argue with their religion.”

    [bolding mine]

    ...

    But...

    So what's the distinction...?

    I mean, how could there be a United States without...

    Oh, never mind.

    "We come on a peace thing. White flag?" "White flag!"

    by VictorLaszlo on Sat Sep 24, 2011 at 06:27:18 PM PDT

  •  Easier when you have money than when you don't (7+ / 0-)

    I remember when having to replace a blown tire was a huge expense.   Day to day expenses are a disproportionate burden - one that grows as your income goes down.

    The cost of owning a car is a large proportion of your income when your income is low.  The cost of the car itself (usually something older that needs repairs more often), car insurance (even if only the state mandated minimum) and gas (an expense that can vary widely depending on the per gallon cost).

    "Basic' living expenses take up a far greater proportion of your income when you are at the lower end of the scale.

    And - conversely' things like bank accounts, interest rates on credit cards and other things cost MORE.  Keep a large enough bank balance and you get free overdraft protection, no fees and credit card rates are lower for good credit ratings.

    And while you can afford to take more risks - and can afford more losses - if your income is higher, the odds are that you will have better advice and better treatment if you are investing larger amounts.

    Truth is that those WITH money are generally better trained on how to handle it and how to invest it - even if they have delegated that task to paid advisors.  

    THAT was the largest revelation that came with finally achieving a measure of security.   We got lucky and do well enough but are hardly 'wealthy' - though we do get regular peeks over the fence into that world.  We can pay our bills on time and put our kids through college - a huge improvement over our earlier life and the lives our parents led.  Still 'wage slaves' but reasonably secure.   But we are still astounded at the differences.  Once you pass a certain level - and I'm not sure what that is - it becomes MUCH easier. If you NEED to borrow money, you usually find it hard to do so.  If you DON'T need to do so, it's easy - and usually cheaper if you do so.  

    Most middle class people really have no idea how to handle money - how to invest savings or how to manage things like 401K's.  They really don;t have many options open to them - unless they are willing to PAY to have options.  Your 401K can usually be invested ONLY in a few options offerred by the plan's administrators )and they are usually not the best performers - just middle of the road typical choices for basic categories).

    The VERY wealthy have access to other investment options - and can afford the fees that those options often charge.  Hedge Funds may charge you 2% of funds managed and 20% of profits but they can earn you far more than your typical mutual fund (even after deducting expenses).

    While the wealthy can afford losses - and afford high paying RISKS - the reality is that they also can afford top tier advice and advisors.  They also have access to deals that would never be available to the general public.

    •  Yeah, I've never (3+ / 0-)
      Recommended by:
      zedaker, xrepub, Calamity Jean

      understood people who insist that money doesn't buy happiness.  These people obviously have never lived on the edge.  Life is so much easier when you have enough for basics and the typical emergencies that arise.

      The banks have a stranglehold on the political process. Mike Whitney

      by dfarrah on Sun Sep 25, 2011 at 09:31:42 AM PDT

      [ Parent ]

      •  It DOES buy'security' (1+ / 0-)
        Recommended by:
        swellsman

        or at least a fair amount of it - and THAT (mimicking a credit card commercial) is 'priceless'.

        Not having to scrounge for change on a Thursday night to buy food for dinner, not having to pay ridiculous rates to use a check cashing place...... the list goes on.....

        There's a LOT less stress in your life when you can go grocery shopping and not worry about your bank balance.

        And the reality is there's enough wealth in this country that this should be the situation for EVERYBODY.   But the endless pushdown on wages leaves 99% worse off - and the top 1% (actually the top 1/10 of 1% FAR better off).  A friend in Securities law said - "All I do is make rich people richer - they can't spend it as fast as they're making it" - and THAT is the crux of the problem.   When someone says "I won't feel secure until I have $1 BILLION in the bank" (a real quote from a study interviewing the very wealthy) - oblivious to the fact (or simply not caring) that  some people don't have $1000 - or even $100 - in the bank.... something is VERY wrong.

  •  Class war (5+ / 0-)

    There are three ways of making money. 1) Workers get a wage- everyone from the janitor to a brain surgeon. 2) Capitalists use money to employ the first class and produce goods. 3) Rentiers who own something and charge for its use. (Think workers, Main Street, Wall Street.)

    The first two classes are productive and useful to the rest of society (Marx actually admired capitalists). The last group- in Marx's time the remains of the aristocracy- are parasites. Matt Taibi's line about a vampire squid is an apt metaphor.

    The rules in this country have changed to reward the rentiers. We need to tax accumulated wealth. Income taxes are a joke to the rich. Once one gets past a certain level it becomes trivial to keep increasing your wealth.

  •  The Law of Scarcity (18+ / 0-)

    The Pareto Principle is also known as the Law of Scarcity.  That is to say: at any given point of history, there is only so many resources to distribute; and, if a small group has an outsized amount of those resources, many others have to have, by the nature of the math, very little to none of those available resources.

    I am glad that someone is finally mentioning this mathematical principle in the discussion of economics and wealth distribution.  But here is another aspect that has not been discussed enough:

    in order for the national debt to be paid off, and new infrastructure invested in, the taxes must come from those 20% that control the 90%+ of those resources.

    Recently, John Stewart kind of referred to this in a takedown of Republican congressmen talking about taxation of "job creators" vs. taxation of working people (he mentioned how you would have to take all of the middle and lower class' holdings to close the deficit).

    What is also never discussed (from my standpoint as a former bankruptcy attorney) is the aspect that the Republicans, in their assertion that we are "broke" or "bankrupt," never mention how many assets we have as a country.  In bankruptcy, you have to disclose not only all of your debts, but also all of your assets.  Not doing so amounts to bankruptcy fraud.  If we count the amount of wealth (the last I heard was $64 Trillion, of which the richest 20% own 90%+, which is around $57 to 58 Trillion), which means we have the capability to pay off the national debt.  And our not paying the debt is not due to inability to pay the debt as it is unwillingness.  (I am curious what the total amount of financial wealth is now.)  Another note: this total wealth is accounted for purely by millionaires and billionaires alone.

    Another point: most wealthy people see themselves as "savers."  But the flip side of that is that much of that wealth is not invested -- therefore no jobs are "created."

    Yet another point is that much of their wealth is created by the labor of others.  What has been lost in most markets (not just the United States) is the concept of risk as the basis for greater reward.  But the U.S. is virtually alone in security for those who do not take risks (laborers).  But as Jacob Hacker has written in The Great Risk Shift, the wealthy have managed to shift the business risks that they were supposed to take in exchange for a greater reward onto the workers who are neither supposed to take such risks, nor are able to bear such burdens.

    I wish I had more time to expound of this.  I feel like I could write a book!

    •  Yes! (5+ / 0-)
      Recommended by:
      fhcec, jimreyn, Zydekos, zedaker, Calamity Jean
      The wealthy have managed to shift the business risks that they were supposed to take in exchange for a greater reward onto the workers who are neither supposed to take such risks, nor are able to bear such burdens.

      They have shifted the risks, but not the rewards.

    •  Great Point About Listing Assets (11+ / 0-)

      It reminds me of how annoyed I always get when I listen to people like Boehner or Cantor talk about how "the country is broke."  Excuse me?  How can the country be "broke?"

      We still have all the same assets we did before, the same plants, the same farms, the same IT, the same workforce, all the same natural resources.  We didn't suddenly wake up to find out that we'd misplaced Kansas and now we can't make ends meet.

      What we have is a failure of the economic engine to keep chugging, and unfortunately that tends to be a self-reinforcing failure.  The credit crisis and the sudden loss on paper of people's home values dried up demand.  This slowed business, and put people out of work.  That further dried up demand.  Etc.  And, of course, with the economy in the toilet, tax revenues went down.

      But people like Boehner and Cantor want to use the fact the engine has stopped running to argue that the engine must be "broken" and therefore putting any new gas into the car would be a waste of money.

      Oh, and one other thing about "listing assets."  I like your point about how the economic elite basically own all of these assets, but the idea of liquidating them in order to pay for the things we need is not on the table.  Compare and contrast this with a proposal from - I believe - Michigan, that would deny unemployment benefits to people who get laid off unless the value of all their assets is also below a certain threshold.  So if you lose your job but have $5,000 in savings, you will be forced to blow through your savings before you can apply for job assistance.

      When it comes to further impoverishing the already luckless, America seems to be A-OK with that; when it comes to demanding the people who have accumulated all the country's assets kick something in, that's class warfare.

      Oy.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sat Sep 24, 2011 at 11:42:44 PM PDT

      [ Parent ]

      •  Regarding the ending of unemployment benefits... (1+ / 0-)
        Recommended by:
        Kanscott

        They are arguing we should end unemployment benefits under the theory of "moral hazard."  However, under the Pareto Principle, the moral hazard of underwriting the costs and risks of business is an even greater moral hazard, by a scale of several degrees.

        This is another example of how the risks of loss are shifting from the owners of capital to the workers who make those businesses what they are.  Combine this with student loans (which impede competitiveness on new and innovative intellectual capital -- something I call a "barrier to entry"), along with the shifting of retirement and health care costs (under the mantra of "responsibility") to those who are less capable of monitoring them until it is too late and they are paid far too little to be able to adequately save for these costs when they come due (which is why in the past owners of industry were charged with doing this for them because they had the expertise -- or could hire it -- to look out for them).

        Therefore, the worker, the innovator and the human capital that potentially could drive the country as a whole forward becomes dependent on the goodwill of their employers (which, we are finding, does not really exist).  In the end, a lot of talent goes wasted because people never reach their potential because they can neither move to the job that most suits them, nor start their own business "building the better mousetrap" because they are not able to get access to the capital they need to start a truly small business (as opposed to the definition of "small business" in the law).

        Like I said, I feel like I could write a book on this!

    •  Also known as "The Paradox of Thrift" (1+ / 0-)
      Recommended by:
      drewfromct
      ...most wealthy people see themselves as "savers."  But the flip side of that is that much of that wealth is not invested -- therefore no jobs are "created."

      "If the young are not initiated into the village, they will burn it down just to feel its warmth." African Proverb (-6.00,-7.03)

      by Foreign Devil on Sun Sep 25, 2011 at 03:56:13 AM PDT

      [ Parent ]

  •  Promote the general welfare... (2+ / 0-)
    Recommended by:
    fhcec, drewfromct

    by taxing wealth and promoting the general welfare by improving schools and housing and infrastructure and... rinse & repeat.

    “Corporate rights are driving out human rights.” - Pericles

    by MarketFarces on Sat Sep 24, 2011 at 08:17:37 PM PDT

  •  Inflation condenses wealth (1+ / 0-)
    Recommended by:
    kurt

    as assets rise in price while the value of money falls.

    The wealthy own capital, money not as important.  

    And it is actually only a subclass of the wealthy that get more wealthy with inflation.  This subclass is for the most part the Wall Street bankers closest to the money creation.

  •  I remember (3+ / 0-)
    Recommended by:
    jimreyn, drewfromct, Zydekos

    playing Monopoloy years and years ago with my brothers and sisters.  We learned early on that you buy things in order to control the game.  Oh what a great feeling it was when you had Board Walk and Park Place and some of the other high dollar properties. And how it sucked when you didn't and had to slowly bleed away to the more fortunate ones.

    That's the way the US and the world is now - a big Monopoly game that never ends and nobody gets to start over..........

    "If fighting for a more equal and equitable distribution of the wealth of this country is socialistic, I stand guilty of being a socialist." Walter Reuther

    by fugwb on Sat Sep 24, 2011 at 09:24:42 PM PDT

    •  lots of people going to prison, tho', (0+ / 0-)

      both real prison, and near prisons, with no money, no resources, and lots of risk.

      "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires." - President Obama

      by fhcec on Sun Sep 25, 2011 at 12:17:31 AM PDT

      [ Parent ]

    •  Beat me to it. (1+ / 0-)
      Recommended by:
      fugwb

      My comment to this diary is basically, Why do these researchers bother working with computers and intricate programs and models, when all they really need to do is sit down for a few rounds of Monopoly.

      Al Qeada is a faith-based initiative.

      by drewfromct on Sun Sep 25, 2011 at 06:37:55 AM PDT

      [ Parent ]

  •  This is why (4+ / 0-)
    Recommended by:
    swellsman, fhcec, jimreyn, mkor7

    I read stuff on  this site.  Every now and then I find a gem like this article. Excellent analysis.

  •  If only all diaries on the Rec List were this well (1+ / 0-)
    Recommended by:
    swellsman

    written, I might start coming back to read dkos regularly again.

  •  There's an old saying among the rich... (7+ / 0-)

    It's that the "first million I made was the hardest million.  It got easier after that."

    Think about that statement, and the old bromide that "it takes money to make money."  Both are true because human beings have a fixed cost element to their lives, and discretionary income (after fixed cost of living necessities are paid) is the only path to accumulating early wealth.

    At first, in the wealth accumulation process. discretionary income is gathered through wage income, i.e. trading your labor time and effort for money.  After a level of savings has been accumulated this way, it can be invested and reinvested to gather more wealth.  At some point, people transition from the labor class to the "investor class" where most of their wealth is obtained through investments in various assets.....businesses, real estate, stocks and bonds, and other alternative investments.

    The reason wealth really gets built up and concentrated in relatively few households is the miracle of "compounding".  It's the reason that the first million is always the toughest million.  Using your money to make more money is a privelege that relatively few people have the time and opportunity to do.  Plus, most people don't manage their own money very well and tend to increase their cost-of-living budgets to the level their assets support.  This prevents wealth maximization for the sake of instant gratification.

    It's no surprise that a Warren Buffett got wealthy and also lives simply in Omaha, driving a Buick.  He's a frugal man and plows all his assets into wealth-creating investments.

    It does take money to make money, and by definition, only a handful of families in any society are very good at it, either by skill or inheritance.  This is why wealth is naturally concentrated among the relative few.  Government definitely has to play a role to even things out a bit, at least, for the masses through taxation.  The enlightened wealthy like Buffett and the Gates family understands this because they know their wealth is ultimatetly empty if they live in a broken society.

    Good diary, but I thought I'd share a few of my views on the subject as well.

  •  The smart (1+ / 0-)
    Recommended by:
    swellsman

    will get rich the stupid poor. The job the society is to make it that the smart get rich by helping everyone as a whole.

    The problem right now is the rich get rich by simply abusing the system. You really dont need to put in a lot into the system to get a lot out.

  •  the L-curve (1+ / 0-)
    Recommended by:
    drewfromct
  •  The Chris Rock quote (0+ / 0-)

    is appalling. I'd love to say I can't believe someone on dK would use that one without including a disclaimer about domestic violence... but, then again, I can believe it, and I will probably get a few comments from men telling me to "lighten up" or something similar.

  •  It's only inevitable because of the hierarchal (0+ / 0-)

    nature of domination based societies.  Otherwise, such concentration of wealth would be inconceivable.  You get wealth concentrating simply because society has been setup that way.  The sooner we realize this, the sooner we can take measures to structure our value system in a different way.

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Sun Sep 25, 2011 at 03:57:23 AM PDT

  •  fantastic read (2+ / 0-)
    Recommended by:
    Blueslide, swellsman

    kudos for a great article. truly very informative and enlightening. i wish everyone who voted understood these ideas - it seems there is such of a fog of ignorance and disinformation out there that we Americans inflict huge economic pain on ourselves by voting into office a bunch of simpletons and greedy salespeople offering nothing but snake oil. the level of intellectual discourse offered by many of our representatives in Congress particularly on the right is so pitifully low these days it's difficult to have much hope for a better future. but articles like this are very important - we need to get the word out.

  •  my simplest explanation is (0+ / 0-)

    the wealthy understand money and how to properly use it. The poor think it's used to pay for life's necessities and silly entertainments.

    •  The poor have little choice (0+ / 0-)

      If you don't have a lot of money you HAVE to spend most of it on necessities. The wealthy are no less frivolous they can just afford it more. If you're poor "Silly" entertainments are usually a lot cheaper than non-silly entertainments

  •  The economic impact of just (0+ / 0-)

    one inventor, say one like Thomas Edison, is tremendous. Somehow a theory that doesn't seem to explain quantum jumps in the improvement of quality of life for all people leaves me unsatisfied. Pareto's studies seem like observations in search of an explanatory theory. Although it is amusing to see wealthy people wasting their money on Senatorial or other campaigns, if wealth is only explained by a random distribution of people in the right place at the right time.  A penny for NYC mayor Mike Bloomberg's thoughts on the subject of Pareto theory.

    •  It isn't random . . . (3+ / 0-)
      Recommended by:
      mkor7, tofumagoo, jfdunphy

      . . . it's the fact that the distributive power of economies - any economy - is inherently a positive feedback loop.  So discrepancies in the starting positions of market participants get magnified over time, leading to greater and greater disparities of wealth.

      Donald  Trump famousely refuses to do anything that might cause him to release information about his financial holdings (this is why so many people were absolutely positive that he would never actually run for president) and a lot of people think he isn't worth anywhere near what he claims.

      But I read an amusing consideration of that question over at, IIRC, Kevin Drum's place, in which Drum accepted at face value the lowest estimated fortune Trump's daddy handed him back in 1975 and the highest claim Trump has made about his net worth.  Drum pointed out that had Trump simply dumped the money his daddy gave him into an S&P index fund, he'd be about $2 billion richer than he now claims to be.  In other words,  Trump's managerial "skills" ended up earning him about $2 billion less than he would have if he hadn't been so gung-ho "to do deals."

      The point is that the easiest way to become rich is to start well-off, and that the easiest way to become uber-rich is to start rich.  Slight disparities in wealth reverberate and magnify over time - there is nothing random about it.

      Also, Pareto's Law isn't a "theory of everything" - it's just an examination of the distribution pattern of wealth.  Massive jumps in technology that improve the lives of all people are great, but what Pareto's Law accurately predicts is that the material advantages that result from these technological changes - just as with the material advantages that result from any shift - overwhelming end up in the hands of the few.  Bouchard and Mezard just provide a mathematical model explaining why that is.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sun Sep 25, 2011 at 07:34:23 AM PDT

      [ Parent ]

  •  If money was an aquifer (0+ / 0-)

    the water keeps being pumped preferentially to irrigating palm springs so to speak.... diverted to the preserves and holding areas of the already wealthy...  and less and less available for others

    and even like the wealthy who live upstream diverting water from river courses that others use so that by the time it reaches the bulk of the population it is depleted... with less and less available for them...

    Pogo & Murphy's Law, every time. Also "Trust but verify" - St. Ronnie (hah...)

    by IreGyre on Sun Sep 25, 2011 at 07:29:04 AM PDT

  •  Best Explanation I've Heard (1+ / 0-)
    Recommended by:
    swellsman

    And this makes sense.  We were convinced by media shills for the-ultra rich, that "trickle-down"would make everyone prosperous.

    It didn't happen.  The author points out that when the very rich have more money available, they can afford to make more bets in the big game of capitalism.  They take some painless losses and emerge with a bigger prize.  

    Taxes and redistribution of wealth through investment in education, research and infrastructure (green!) would be best for the American people and the world too.  

    Bush hijacked the US with lies about 9/11 and crashed it into Iraq, killing over 500,000 human beings. So far, he's avoided arrest and prosecution.

    by Zydekos on Sun Sep 25, 2011 at 10:03:55 AM PDT

  •  Recommend x1000 (2+ / 0-)
    Recommended by:
    swellsman, Calamity Jean

    Great diary.  Very well researched and written and thorough.  Now if you can just boil it down to a two-word phrase like "job creators" or "regulation strangulation" we might be on to something!

    "What is essential is invisible to the eye." www.thefoxfoot.com

    by greywolfe359 on Sun Sep 25, 2011 at 10:04:53 AM PDT

  •  Excellent article! Explains a lot. (1+ / 0-)
    Recommended by:
    Catte Nappe

    The power of compound interest may also have a lot to do with it. The richer you are, the quicker you can get even richer, simply because of exponential growth of one's money -- even in the most conservative possible investments such as bonds. It's not just about being able to take bigger risks, although I'm sure that plays a part in it too.

    Love the black hole analogy, btw. Spot on!

    Eric Stetson -- Author, Speaker, Visionary. www.ericstetson.com

    by Eric Stetson on Sun Sep 25, 2011 at 10:34:51 AM PDT

  •  Nice diary, and nice thread. (0+ / 0-)

    While America was ostensibly founded as a "classless" society (unlike any previous state or society) -- not subject to the perpetuation of power by blood (royalty) or "the church" -- all we wound up establishing was another class society, with the plutocracy now defined by wealth, instead of blood lines or religion.  IOW, wealth is the new royalty... and has and will incorporate the same systems of perpetuation that former ruling classes have always successfully used.

    Kick apart the structures - Seth

    by ceebee7 on Sun Sep 25, 2011 at 11:30:53 AM PDT

  •  I (1+ / 0-)
    Recommended by:
    swellsman

    know a slumlord who made over 8 million off of a very small rental building over 25 years he bought for $30,000. It allowed him to buy many other slum buildings and do the same making him a multi millionaire who found it "hard" to provide heat and hot water for the tenets who paid outrageous rents to him.

    EAT THE CRIMINAL RICH!!!!!!!!!!!!!!!!!!

  •  another route to wealth redistribution (1+ / 0-)
    Recommended by:
    Bob Duck

    The Potlatch.

    Those with great wealth maintain status and prestige only by giving a lot of it away.

    Pretty good social engineering!

  •  It's all luck (2+ / 0-)
    Recommended by:
    tofumagoo, swellsman

    That's the conclusion I've come to over the last few years. I don't know where it started but I think Derren Browns excellent "Tricks of the mind" was the thing that opened my eyes. By the way, I'm referring to his book not the TV series. The TV series was a magic show, the book was a primer on things like anti-science, bad thinking and probability

    Books like Malcolm Gladwells Outliers provided more evidence. The more I thought about it the more obvious it seemed. People who are successful, not just economically but in many fields, sport for example, often rewrite their own past, often unwittingly, to create an explanation that suggests their own actions lead to their success rather than luck. Other people buy into the myth that successful people are more talented, cleverer or superior in one way or another because they only see the results. I used to think Donald Trump was a smiley business tycoon but admittedly he was successful. Of course I didn't know he'd inherited most of it from his dad! That information changes the whole story.

    Recently I've read The Black Swan and The Drunkards Walk (which is far more accessible), both are useful illustrations of randomness and how it shapes our lives. Tricks of the mind is the most apt book though, after all magic is essentially one person witnessing a miracle but only because they don't see the whole picture.

  •  Nice analysis (2+ / 0-)
    Recommended by:
    swellsman, Calamity Jean

    My own concept has always been simply that "it takes money to make money," and therefore those who control disposable income will make more money than those who don't.

    What you've written is a bit more sophisticated than that, so could be useful someday for dealing with people who need detailed proofs.

    None of this makes a bit of difference if they don't count your vote.

    by Toddlerbob on Sun Sep 25, 2011 at 04:00:17 PM PDT

  •  I've been trying to make this point for a while (2+ / 0-)
    Recommended by:
    swellsman, Calamity Jean

    The purpose of government should be to identify where free market principles fail, then step in and fix them.  Examples include monopoly formation, safety and environmental regulations, and wealth distribution.

  •  This is great! Great diary. I don't have time to (0+ / 0-)

    read the comments right now, but T&R'd and bookmarked for community edu!

    •  Banana Republicans! (0+ / 0-)

      Finally got it clear what the Tea Party/anti-taxers are onto:

      . . .  the data seem to make it clear that if the government doesn’t start this kind of forced dispersal effect soon – but instead relies on an unfettered free market to allocate wealth – then it is inevitable that America will slide into a third-world, Banana Republic state.

      They're Banana Republicans!

  •  It's the game of Monopoly (0+ / 0-)

    Where the game ends with someone having it all, after being lucky and capitalizing  on that luck.

    The only way to keep the game going is to spread the money and property out amongst all the players again, a sort of do-over.

Alumbrados, PrahaPartizan, Chi, Odysseus, jotter, samizdat, Geenius at Wrok, dfarrah, Gooserock, paradocs, emal, wytcld, bosdcla14, Shockwave, Pescadero Bill, x, frisco, gjohnsit, Foreign Devil, bostonjay, concernedamerican, EricS, fugwb, wonkydonkey, SoCalJayhawk, Minerva, PBnJ, Geonomist, JJG Miami Shores, splashy, Roxpert, wader, Redfire, recontext, psnyder, ManhattanMan, Sinan, BBigJ, alivingston, chriscol, JimWilson, churchylafemme, hoplite9, Catte Nappe, Mi Corazon, alizard, KateCrashes, ybruti, side pocket, CanYouBeAngryAndStillDream, poemworld, Emmy, eve, Josiah Bartlett, Armand451, BDA in VA, TexasTom, greycat, Ckntfld, jfdunphy, rimstalker, caul, Alice Marshall, DrFood, keschen, kamarvt, mike101, Simplify, Bcre8ve, basquebob, drewfromct, YucatanMan, teresab, ratzo, fixxit, jimreyn, where4art, blue jersey mom, kaliope, Bob B, Lindy, JanL, mightymouse, Snud, pino, Eloi Scientist, fhcec, bently, CJnyc, BachFan, Kingsmeg, ej25, dopper0189, Hear Our Voices, mskitty, Terrapin, The Wizard, VictorLaszlo, pengiep, Tanya, Preston S, bumbi, democracy is coming, kurt, zedaker, Nulwee, Babylon, DBunn, phonegery, dotsright, merrylib, oklacoma dem, Positronicus, noofsh, bnasley, GeorgeXVIII, Zydekos, Badabing, seriously70, Roger Fox, Mr SeeMore, chakadog, FG, Kuntawpwnsyou, jamess, Calamity Jean, tofumagoo, RandomNonviolence, Wek, banger, petulans, BYw, Blueslide, JamieG from Md, Mad Season, slathe, palantir, watercarrier4diogenes, Purple Priestess, greywolfe359, plumbobb, arendt, Old Iowa Liberal, ceebee7, greengemini, be the change you seek, WiseFerret, Partisan Progressive, mkor7, CamillesDad1, Leslie in KY, Thutmose V, David PA, roadbear, Johnnythebandit, The Free Agent, Ronald Singleterry, plankbob, sunny skies, womankind, BoxNDox, Egalitare, DeanObama, progdog, nosleep4u, ZedMont, Kelvin Kean, dot farmer, bluebuckaroo, Bob Duck, vinny67, nicethugbert, jm214, freesia, sisyphusrocks, robizio, kiwiheart, Teiresias70, armd, good grief, Wolf10, dle2GA, Joost van der Lugt, Coastrange, dakinishir, phiddle, poliwrangler, Andrew F Cockburn, jaybomb81, Eric Stetson, just another vortex, DRo, Kanscott, SouthernLiberalinMD, PrometheusUnbound, Azazello, BlueDragon, KiB, Whimsical Rapscallion, anodnhajo, Flying Goat, qed, ahumbleopinion, MistaBling, Trotskyrepublican, Letsgetitdone, pot, AspenFern, Ruh Roh, adeodatus, MartyM, aznavy, Happy Rockefeller, lollol, ItsaMathJoke, bigrivergal, Kurt Sperry, Phl, Candide08, Stills, sponge jim, Captain Chaos, GoGoGoEverton, Lightbulb, Prospect Park, Wes Lee, Lily O Lady, JScottJ, dangreenberg

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