"Wealth Inequality Is a Problem...

...but How Do You Even Begin to Solve It?"

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Re: "Wealth Inequality Is a Problem...

#61  Postby Loren Michael » Apr 03, 2013 4:37 am

Excellent article: Trade-offs between inequality, productivity, and employment

http://www.interfluidity.com/v2/3487.html

I think there is a tradeoff between inequality and full employment that becomes exacerbated as technological productivity improves. This is driven by the fact that the marginal benefit humans gain from current consumption declines much more rapidly than the benefit we get from retaining claims against an uncertain future.

Wealth is about insurance much more than it is about consumption. As consumers, our requirements are limited. But the curve balls the universe might throw at us are infinite. If you are very wealthy, there is real value in purchasing yet another apartment in yet another country through yet another hopefully-but-not-certainly-trustworthy native intermediary. There is value in squirreling funds away in yet another undocumented account, and not just from avoiding taxes. Revolutions, expropriations, pogroms, these things do happen. These are real risks. Even putting aside such dramatic events, the greater the level of consumption to which you have grown accustomed, the greater the threat of reversion to the mean, unless you plan and squirrel very carefully. Extreme levels of consumption are either the tip of an iceberg or a transient condition. Most of what it means to be wealthy is having insured yourself well.

An important but sad reason why our requirement for wealth-as-insurance is insatiable is because insurance is often a zero-sum game. Consider a libertarian Titanic, whose insufficient number of lifeboat seats will be auctioned to the highest bidder in the event of a catastrophe. On such a boat, a passenger’s material needs might easily be satisfied — how many fancy meals and full-body spa massages can one endure in a day? But despite that, one could never be “rich enough”. Even if one’s wealth is millions of times more than would be required to satisfy every material whim for a lifetime of cruising, when the iceberg cometh, you must either be in a top wealth quantile or die a cold, salty death. The marginal consumption value of passenger wealth declines rapidly, but the marginal insurance value of an extra dollar remains high, because it represents a material advantage in a fierce zero-sum competition. It is not enough to be wealthy, you must be much wealthier than most of your shipmates in order to rest easy. Some individuals may achieve a safe lead, but, in aggregate, demand for wealth will remain high even if every passenger is so rich their consumption desires are fully sated forever.


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Re: "Wealth Inequality Is a Problem...

#62  Postby Warren Dew » Apr 03, 2013 6:23 am

Nicko wrote:Take the US health "insurance" racket industry. All it would really take is one company to actually provide something somewhat resembling real insurance and they'd wipe the floor with their competition. It doesn't happen because - in the short term - they'd post less profits, their stock price would fall and they'd get taken over by their competition. Catch-22.

To the contrary, the reason it doesn't happen is because of government regulation, specifically tax law. U.S. tax law strongly privileges employer purchase of health insurance over individual purchase of health insurance, by providing tax deductions for the former but not the latter. As a result, the health insurance caters to the needs of the employer rather than to the needs of the individual, for example by favoring solutions that avoid finding long term problems until the employee has moved on to the next employer or retired, over solutions that find and fix the problems early.

Any company providing real insurance would have to sell directly to the individual, and because of tax law would have to price the product at two thirds of the competing products to provide the same effective price after taxes. That's too huge a tax disadvantage to overcome.
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Re: "Wealth Inequality Is a Problem...

#63  Postby FACT-MAN-2 » Jun 21, 2013 4:32 am

Warren Dew wrote:
Nicko wrote:Take the US health "insurance" racket industry. All it would really take is one company to actually provide something somewhat resembling real insurance and they'd wipe the floor with their competition. It doesn't happen because - in the short term - they'd post less profits, their stock price would fall and they'd get taken over by their competition. Catch-22.

To the contrary, the reason it doesn't happen is because of government regulation, specifically tax law. U.S. tax law strongly privileges employer purchase of health insurance over individual purchase of health insurance, by providing tax deductions for the former but not the latter. As a result, the health insurance caters to the needs of the employer rather than to the needs of the individual, for example by favoring solutions that avoid finding long term problems until the employee has moved on to the next employer or retired, over solutions that find and fix the problems early.

Any company providing real insurance would have to sell directly to the individual, and because of tax law would have to price the product at two thirds of the competing products to provide the same effective price after taxes. That's too huge a tax disadvantage to overcome.

Tell ya what, though, living under a singlepayer healthcare system such as we operate in Canada is light years better than having to deal with an endless parade of insurance company ripoffs.

I just had a bronoscopy two days ago in a very modern and up tempo hospital, didn't cost me a dime out of pocket and this procedure runs more than $5,000 in most US medical settings today. The Doc that did this procedure on me was thoroughly experienced as were his two assistants, and totally competent.

Americans have no idea what they're missing, just flat no idea at all. I've lived under both kinds of systems, 30 years in the US and more than 40 in Canada, and I can and do attest there's just no comparison.
Capitalism is obsolete, yet we keep dancing with its corpse.

When will large scale corporate capitalism and government metamorphose to embrace modern thinking and allow us to live sustainably?
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Re: "Wealth Inequality Is a Problem...

#64  Postby Mike_L » Sep 14, 2013 7:17 pm

Richard Wilkinson: How Economic Inequality Harms Societies
TED Video
We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust.
In The Spirit Level, Richard Wilkinson charts data that proves societies that are more equal are healthier, happier societies.

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Re: "Wealth Inequality Is a Problem...

#65  Postby FACT-MAN-2 » Sep 15, 2013 11:08 pm

Mike_L wrote:Richard Wilkinson: How Economic Inequality Harms Societies
TED Video
We feel instinctively that societies with huge income gaps are somehow going wrong. Richard Wilkinson charts the hard data on economic inequality, and shows what gets worse when rich and poor are too far apart: real effects on health, lifespan, even such basic values as trust.
In The Spirit Level, Richard Wilkinson charts data that proves societies that are more equal are healthier, happier societies.


There can be no doubt about the fact that extreme income inequality creates a society deeply split between have's and have nots and the latter will be a very unhappy bunch. All one has to do is take a look at the Robber Baron era in America, circa 1885-1920, which is exactly the kind of situation the whackos in Congress want to recreate and have, by and large, recreated in America. This cannot be rolled back or changed so long as big money dominates the electoral process and the Congress remains in the hands of a bunch of selfish libertarian dinosaurs, short of a revolution in any case.

It will only grow worse as time passes, as it indeed has. We'll have to see just how much of it the American people will tolerate before rising up en masse to make radical change, but it is the stuff that eventually gives rise to revolutionary upheavals and chaos and hence we can predict that America will suffer some sort of enormous reaction that will tear the country asunder.
Capitalism is obsolete, yet we keep dancing with its corpse.

When will large scale corporate capitalism and government metamorphose to embrace modern thinking and allow us to live sustainably?
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Re: "Wealth Inequality Is a Problem...

#66  Postby erikamaeB » Jan 13, 2014 8:58 am

According to Forbes latest list of the 400 richest Americans, the wealth of the super-rich has increased in the last year. Meanwhile, as the rich get richer, the middle class continues to shrink, widening yet more the gap between the wealthy and the poor.
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