I wouldn't say it's "fine". The well-documented increasing wealth-inequality is going to be a major problem to solve in the next century. As automation becomes more prevalent, it will only get worse with the money ultimately going to fewer and fewer hands.
It seems like the relevant problems to solve are 1) how to provide enough support to all people so that the "floor" isn't so low as to be despairing and 2) how to help people to be mindful that sometimes, you will not be on top of the pile, and that's OK.
Inequality itself is a function of the uncounted dimensions of comparison amongst humans. Wealth is just a proxy target for this underlying fact. Make wealth equal by the most gentle mechanisms imaginable and the dynamics will just shift to some other dimension. It's like whack-a-mole with abstract concepts we barely understand baked into our monkey brains.
One quote I saw somewhere said something like "if inequality grows too extreme, you will have the choice of redistributing wealth through taxation, or redistributing poverty through revolution".
I had never thought of poverty as something one could distribute, so that quote has stuck with me.
I think that's exactly what that shows. Real median income (2014 dollars) was 51,000 in 1986. Today, it's 53,000[0]. Wealth in the middle hasn't changed much, and all that GDP growth is being gobbled by the very top.
That's definitely not true at all. Entrepreneurs typically take a small fraction of the pie they started.
Show me how much of the pie Bill Gates has kept from the total value Microsoft has created over nearly 40 years, including for public investors, the software industry, hardware industry, all global productivity gains related to Microsoft software, Microsoft employees, and so on (including all salaries paid out over 40 years by Microsoft).
Now let's do the same math for Elon Musk, Larry Page, Steve Jobs / Wozniak, Mark Zuckerberg, Larry Ellison, and so on.
Don't forget to quantify the benefits to consumers, including quality of life gains. What's Google's search engine worth to consumers? How much time does it save them? What kind of quality of life boost - even if small in per capita terms - has it provided to over a billion people?
This is true and false. Software is great for creating value: a few smart people can change the world. But the distribution of that profit is greatly uneven (a "few smart people").
As automation kicks in, we will see more value created by fewer and fewer people, leaving everyone else behind. So even if the middle class doesn't go technically backwards, they still have to compete with Microsoft and Google millionaires for assets like housing. We are seeing that already in markets with lots of high tech employees.
I was a private yacht chef for 6 years. With my skill set, I have a choice to do cooking for a couple people or work as chef in a restaurant where in the same amount of time I can cook for 50 to 100 people. The challenges are different, for example, in a restaurant there is a lot more space to work so the work is much more efficient.
Do I make fantastic food for a very limited amount of people or do I cook for a lot of people? Turns out, that yacht chefs make a lot more money and it's a fun job where the hardest part is having to catch dinner first.
I didn't make the rules and I'm just living in the system. I really enjoy both, it doesn't make much difference to me if I cook for a few or a lot, but whether I do depends on wealth distribution. Most crew on yachts are very talented so an engineer would instead of being engineer for a limited amount of people would be an engineer in a power plant or as one engineer I worked with if he want back to his former engineering job, as a rocket scientist. The captain instead of managing an handful or crew would be managing scores or hundreds of people in upper management somewhere.
There is so much wasted energy and talent serving the wealthiest of the wealthiest. A lot of these people are still miserable with all their wealth because there is always a person with a bigger boat. At the end of the day, Paul Allen is making the wealthiest people on earth miserable.
Something isn't adding up. There is no way $350 million 30 years ago is only worth a little more than x2 30 years later. I've never trusted CPI due to its skewed critera.
$350 mil in 1986 is probably a good x5-x10 in today's money if not more. You also need to take money supply into consideration.
> Something isn't adding up. There is no way $350 million 30 years ago is only worth a little more than x2 30 years later.
Well, for things that people in that range it doesn't, because the way the vastly wealthy have gotten wealthier faster than the median and lower means that the amount of money chasing the thing that segment spends money on has expanded much faster than is the case for the rest of society.
> You also need to take money supply into consideration.
Price inflation indexes already take money supply into consideration, since increases in the supply of money decrease the relative value of money vs. the goods and services it is chasing. So, no, you don't have to take it into account in addition to price inflation. Its simply one of the significant inputs in determining price inflation.
Even that's not right, you need to compare to per capita GDP.
$350 million in 1986 is $750 million in today's dollar, but per capita GDP was just $19.1k in 1986. So $750 million corresponded to 39.2k times the per capita GDP.
Today per capita GDP is $54.6k, so $5 billion is 91.5k times that. Which means that the degree to which the 100th richest person is richer than the average is about 2.3x more than it was 30 years ago.
Taking inflation into account offsets the fact that dollars in 1986 didn't have the same value as dollars today. That allows you to compare, roughly, how rich different people are in different years.
So you can compare the 100th richest person in the US in 1986 to the 100th richest person in the US today in terms of what they could buy. But the interesting thing, which is how this whole sub-thread started, is asking whether or not the rich are getting much richer even beyond economic growth. So the 100th richest person in the US is richer today than the 100th richest person from 1986, but overall, on average, people in the US are richer today than folks were in 1986, so that direct comparison tells you little.
So how do you account for that? The easiest way is to just compare to GDP, but you need to account for the population difference, so you can just use per capita GDP. Basically you're asking: how much is this amount of wealth relative to the average single person slice of the "economic pie" in a given year.
In 1986 that figure was roughly forty thousand "pie slices" for the 100th richest person, today that figure is ninety thousand "pie slices".
GDP per capita isn't per capita wealth (or even PR capita personal income), so your conclusion doesn't follow from the statistics you offer to support it.
Per capita GDP is a population scaled measurement of the size of the economy. Scaling wealth relative to that gives an indication of relative wealth, though it's by no means a perfect measure (but better than merely scaling relative to inflation).
"...a programmer who received nearly $200,000 plans to use it to expand his working hours by hiring a housekeeper"
I was consulting with MSFT in 1990. During the break, several softies were discussing the intricacies of their stock tracking code. I guess that is one way to fill up those extra working hours.
30 comments
[ 2.9 ms ] story [ 66.1 ms ] threadStill seems like the rate of wealth of the richest 100 has exceeded inflation by 8X... Which is fine, just interesting.
"Plutocrats: The Rise of the New Global Super-Rich by Chrystia Freeland – review
A necessary and at times depressing book about the staggeringly wealthy"
Inequality itself is a function of the uncounted dimensions of comparison amongst humans. Wealth is just a proxy target for this underlying fact. Make wealth equal by the most gentle mechanisms imaginable and the dynamics will just shift to some other dimension. It's like whack-a-mole with abstract concepts we barely understand baked into our monkey brains.
I had never thought of poverty as something one could distribute, so that quote has stuck with me.
Still quite a bit less than $5 billion.
[0] http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=350.00&year1=19...
[0] https://research.stlouisfed.org/fred2/series/MEHOINUSA672N
It's not like all that Microsoft stock would be evenly distributed among the middle class if he had never come along.
Show me how much of the pie Bill Gates has kept from the total value Microsoft has created over nearly 40 years, including for public investors, the software industry, hardware industry, all global productivity gains related to Microsoft software, Microsoft employees, and so on (including all salaries paid out over 40 years by Microsoft).
Now let's do the same math for Elon Musk, Larry Page, Steve Jobs / Wozniak, Mark Zuckerberg, Larry Ellison, and so on.
Don't forget to quantify the benefits to consumers, including quality of life gains. What's Google's search engine worth to consumers? How much time does it save them? What kind of quality of life boost - even if small in per capita terms - has it provided to over a billion people?
As automation kicks in, we will see more value created by fewer and fewer people, leaving everyone else behind. So even if the middle class doesn't go technically backwards, they still have to compete with Microsoft and Google millionaires for assets like housing. We are seeing that already in markets with lots of high tech employees.
Do I make fantastic food for a very limited amount of people or do I cook for a lot of people? Turns out, that yacht chefs make a lot more money and it's a fun job where the hardest part is having to catch dinner first.
I didn't make the rules and I'm just living in the system. I really enjoy both, it doesn't make much difference to me if I cook for a few or a lot, but whether I do depends on wealth distribution. Most crew on yachts are very talented so an engineer would instead of being engineer for a limited amount of people would be an engineer in a power plant or as one engineer I worked with if he want back to his former engineering job, as a rocket scientist. The captain instead of managing an handful or crew would be managing scores or hundreds of people in upper management somewhere.
There is so much wasted energy and talent serving the wealthiest of the wealthiest. A lot of these people are still miserable with all their wealth because there is always a person with a bigger boat. At the end of the day, Paul Allen is making the wealthiest people on earth miserable.
$350 mil in 1986 is probably a good x5-x10 in today's money if not more. You also need to take money supply into consideration.
Well, for things that people in that range it doesn't, because the way the vastly wealthy have gotten wealthier faster than the median and lower means that the amount of money chasing the thing that segment spends money on has expanded much faster than is the case for the rest of society.
> You also need to take money supply into consideration.
Price inflation indexes already take money supply into consideration, since increases in the supply of money decrease the relative value of money vs. the goods and services it is chasing. So, no, you don't have to take it into account in addition to price inflation. Its simply one of the significant inputs in determining price inflation.
$350 million in 1986 is $750 million in today's dollar, but per capita GDP was just $19.1k in 1986. So $750 million corresponded to 39.2k times the per capita GDP.
Today per capita GDP is $54.6k, so $5 billion is 91.5k times that. Which means that the degree to which the 100th richest person is richer than the average is about 2.3x more than it was 30 years ago.
So you can compare the 100th richest person in the US in 1986 to the 100th richest person in the US today in terms of what they could buy. But the interesting thing, which is how this whole sub-thread started, is asking whether or not the rich are getting much richer even beyond economic growth. So the 100th richest person in the US is richer today than the 100th richest person from 1986, but overall, on average, people in the US are richer today than folks were in 1986, so that direct comparison tells you little.
So how do you account for that? The easiest way is to just compare to GDP, but you need to account for the population difference, so you can just use per capita GDP. Basically you're asking: how much is this amount of wealth relative to the average single person slice of the "economic pie" in a given year.
In 1986 that figure was roughly forty thousand "pie slices" for the 100th richest person, today that figure is ninety thousand "pie slices".
It is still a fair comparison.
I was consulting with MSFT in 1990. During the break, several softies were discussing the intricacies of their stock tracking code. I guess that is one way to fill up those extra working hours.