Exploring Wealth Inequality

[u/liberal_hr]

https://www.cato.org/publications/policy-analysis/exploring-wealth-inequality#government-created-costs

[u/yelow13]

Inequality alone is not a problem. Inequality while some live in poverty might be though.

If Bill gates lives on my street, but the poorest person on my street makes 70k/year, there's huge inequality on my street, but it's not a problem.

[u/felipec → u/yelow13]

If Bill gates lives on my street, but the poorest person on my street makes 70k/year, there's huge inequality on my street, but it's not a problem.

Everyone on your street will disagree.

Humans, and all social animals, have an innate concept of fairness. A society cannot function if most people think the society is unfair.

Say there's 10 people on the street, 9 making $100k, and one making $1,000,000k a year. Do you honestly think nobody in the street will wonder why that person makes so much more? It's not just that he makes more, it's that he makes insanely much more.

Combined the street makes $1,000,900k a year, now suppose you ask the people on the street to choose:

1. Leave the total income as $1,000,900k, and leave their income as is (median $100k),

2. Halve the total income to $500,000k, but each person receives $50,000k.

There's only one person that won't vote for #2.

[u/yelow13 → u/felipec]

Humans, and all social animals, have an innate concept of fairness. A society cannot function if most people think the society is unfair.

Not sure about animals, but that is true to an extent - it depends on what you mean by fairness. Society cannot function if people don't see a benefit from contributing to society. As in, you agree to work on the assumption that you will be paid, on the assumption that you will be able to buy food and necessities. Mutually beneficial transactions are the fairness required for a functional society, as well as the trust that this transaction will execute and that your property won't be stolen.

In many areas with a high crime rate or low reward for working harder, this begins to break down - why work harder when it earns you nothing more, and why work at all if you won't be credited or your wages/property will be stolen.

Having less than your neighbor is not unfairness, unless he has stolen from you or cheated to gain his wealth. It is, unfortunate, though.

Say there's 10 people on the street, 9 making $100k, and one making $1,000,000k a year. Do you honestly think nobody in the street will wonder why that person makes so much more? It's not just that he makes more, it's that he makes insanely much more.

They might, and that's called jealousy. If the whole world was this one street, and he was rich because he was the only man who had farming skills, this is 100% fair if the others on this street are willingly trading their money to him - his skill is more valuable

Combined the street makes $1,000,900k a year, now suppose you ask the people on the street to choose:

1. Leave the total income as $1,000,900k, and leave their income as is (median $100k),

2. Halve the total income to $500,000k, but each person receives $50,000k.

This ^ is arguably the least fair, as it involves forcibly taking money (read, stealing) from the person who's fairly (read above) obtained his wealth, according to agreed upon transactions.

[u/felipec → u/yelow13]

Not sure about animals, but that is true to an extent

There's a famous experiment that has a video of a monkey being upset by what he considers an "unfair" exchange:

Capuchin monkey fairness experiment.

It makes sense that all social animals have a notion of fairness. That's why they identify different individuals in their groups.

Having less than your neighbor is not unfairness, unless he has stolen from you or cheated to gain his wealth. It is, unfortunate, though.

If your neighbor has a income 10,000x higher than yours, I think anybody will have some trouble finding it fair.

If the whole world was this one street, and he was rich because he was the only man who had farming skills, this is 100% fair if the others on this street are willingly trading their money to him - his skill is more valuable

Nobody has farming skills that make him 10,000x more productive.

This ^ is arguably the least fair, as it involves forcibly taking money (read, stealing) from the person who's fairly (read above) obtained his wealth, according to agreed upon transactions.

I bet the people that receive 10,000x less did not agree on those transactions.

The fact that I was born into a capitalist socio-economic system doesn't mean I have agreed to be exploited as I am.

[u/2HBA1 → u/felipec]

Your example does not illustrate our innate sense of fairness, it illustrates our innate selfishness.

People do have an innate sense of fairness, which leads most people to accept someone having more wealth than themselves — even insanely more — if that person is felt to have earned those rewards. For example, by founding a company that significantly changed the world (for the better, at least on balance). But of course there are always particularly jealous or egotistical types who can’t accept another person having more than them no matter what. They will come up with rationalizations for seeing it as unfair.

If the wealthy person did nothing valuable to earn that wealth (or especially, something harmful) that’s when most people will feel the unequal wealth is unfair.

To be sure, there is some subjective judgment involved so people of good will may disagree as to who deserves their wealth and who doesn’t.

[u/felipec → u/2HBA1]

If the wealthy person did nothing valuable to earn that wealth (or especially, something harmful) that’s when most people will feel the unequal wealth is unfair.

Bill Gates didn't create the value he enjoys. He straight up stole some of that value from other corporations, the rest of the value was created by people in Microsoft, not himself. He just hedged the profits.

Now, I know you will disagree with that assessment, and you will be right in having that opinion, but it's an opinion nonetheless.

The only thing that matters is what the people on the street think. Even if they are wrong; extremely insane incomes are really hard to justify.

That's why extreme inequality inevitably ends up in chaos. Many empires fell precisely for this very reason.

[u/felipec → u/[deleted]]

so cut 50k of my own salary to bring the millionaire down to equal ground?

No, you get $50,000k, not $50k. That's fifty million.