• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Human irrationality - an incorrectable cause of income disparity?

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
I have asserted that there is nothing “unfair” about progressive taxes under the idea that it is not hard work or education level that gets you an extraordinary salary, but simply a mechanism of the market. If your salary is not entirely a component of something that you do, then the theft argument has no teeth. If the only reason you have it is that you took it from the market, than there’s little against saying that the market can’t take some of it back.

I like to think of it like this. Big box stores mark up their goods above wholesale in order to provide a brick and mortal experience. Most people understand that they are going to pay a few bucks more than they would on amazon, but I think most people understand that the big box store isn’t ripping them off.

The same can be thought of progressive taxes. A tax could simply be looked at as a markup – something the market does to keep the lights on and everything in balance.

So if the going rate is determined by the market, then the market could make a pre-correction before it got into your bank account.

But what if these market anomalies weren’t just anomalies, but were actually caused by human irrationality and nothing more?

I’m currently reading a book called “Predictably Irrational”. In the first chapter, author Dan Ariely describes a problem in human logic and our need for baseline comparison. He presents 3 options from an online/print magazine:
1-online only: $59
2-print only: $129
3-online and print: $129

While this looks like a typo it’s not. The print only version is a “decoy”. The company does expect any body to buy it when they could have gotten “online” for free. But what it does is give the more expensive option an advantage as a person now see it is “better” than something else. Ariely ran many studies and groups that had only two options to choose from heavily favored the cheaper option and groups that had a decoy in the mix favored the more expensive option.

Bring this to ceo salaries. Like I said in 1980 the ceo/worker ratio in pay was about 40:1. Buy the 90s it was 130:1. However, this is where it gets interesting. When a 1993 regulation went into affect requiring executive pay to be published, the ratio skyrockeded to 360:1 as the CEOs now had a way to compare themselves against others. You could certainly use that to make the case of less regulation, but is it the regulation causing it or simply human irrationality? Should human irrationality go unchecked in our market?

https://en.wikipedia.org/wiki/Predictably_Irrational.
 

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
Arguments to get out of the way so I can either head them off or reference them later:

I support highly progressive income taxes for the following reasons.
#1-Growing income disparity will continue to pool wealth at the supply side of our economy and depress the demand side of our economy. Progressive income taxes literally shrinks income disparity.
#2-Income disparity wouldn’t be as large of an issue if MMT was more widely accepted since more deficit spending could also push demand by funding middle class jobs.
#3-Even if MMT is on the table, redistributive taxes could help balance supply (investment) with demand. Over-abundance of supply just causes sectoral inflation.
#4-Our political system is flawed in the way that money grants access to power. While it would be better to take money out of politics, in the mean time we can make sure that power does not accumulate with an oligarchy.
#5 – I could instead trade for a 100% death tax instead of more progressive taxes. We could even allow a capped exempt amount. However, there seems to be some strange resistance to this on the conservative side as they seem to believe that it’s a man’s right to even leave his kids rich (so much for hardwork and fairness?).
#6 – I do not believe that any man is capable neither thru sheer effort or intelligence of “earning” 1000 times more than his average. Sure 10x or maybe 100x, but at some point we have to recognize that the 200 year old (or more) societal advancement is at play and “we” are all responsible for that.
#7 –Everyday that somebody goes unemployed or under educated is wasting American resources
#8 - I support 0% business taxes and no other tax than income tax (all income).
#9 – Way too many Americans do not understand the “marginal” function of our taxes – it is impossible to make more money and take home less with regards to rates.
#10 – Progressive doesn’t mean complicated. If the formula only applied to income and all deductions were eliminated your effective tax rate could be derived from a simply tabular lookup based ONLY on your income.
#11 – The definition of a progressive tax is: A progressive tax is a tax in which the tax rate increases as the taxable amount increases. (Progressive tax - Wikipedia, the free encyclopedia). Some people seem to like to slip in other metrics like %GDP. The rich of today pay more as a %GDP DESPITE LOWER RATES because their income is higher.
#12 – This is not socialism. If I asked for rates to correct ceo salary to 40:1 worker pay it wouldn’t be socialism. It would simply be 1980. Were we socialist in our past? How does returning to a metric of our past make us socialist?
#13 – “So what” is not an answer. This is a problem when you consider everything above.
#14 – This isn’t just about ceo salaries, the same thing could be said for many other careers.
 

Henrin

Banned
DP Veteran
Joined
Mar 3, 2010
Messages
60,458
Reaction score
12,357
Gender
Male
Political Leaning
Libertarian
Did the individual consent to the property transfer?

Did the state force them to give up their property anyway.

Theft is not about the amount, but about the means.

Furthermore, the government isn't the market.
 

ashurbanipal

DP Veteran
Joined
Dec 8, 2005
Messages
7,849
Reaction score
2,407
Gender
Male
Political Leaning
Private
Henrin said:
Did the individual consent to the property transfer?

Hmmm...did the individual, all by herself, generate the property? Obviously not...
 

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
Why does the owner have to generate the property by themselves? Is there a reason you consider that needed?

Is there a reason the market which provided the property cannot be regulated and controlled?
 

ashurbanipal

DP Veteran
Joined
Dec 8, 2005
Messages
7,849
Reaction score
2,407
Gender
Male
Political Leaning
Private
Henrin said:
Why does the owner have to generate the property by themselves? Is there a reason you consider that needed?

I think what you're asking is why I consider it a significant fact. If so, my answer follows: It seems to be a basic tenet of most classic economic theories that a person owns the product of their labor--that person, and no one else, until a fair exchange happens ("fair" being defined in a number of ways). If I chop down a tree and saw it into lumber using tools I made myself, the lumber is mine absolutely. The problem is that in the real world, no one person generates any particular piece of property. For example, if I borrow the tools I need to chop down the tree and saw it into lumber, the owner of the tools has a claim to some percentage of the lumber.

Pure market economics, at least as conceived by libertarians, proposes that this fact is cleared, so to speak, by voluntary agreements. If, when I borrowed the tools, the person who lent them to me didn't say anything about any of my profits, then she is entitled to none. Similarly, if I agreed to give her half the lumber I produce, then she is due half. Of course, in the actual world, matters are almost never so straightforward.

The problem with this proposal about clearing ownership issues through voluntary agreement is that it does three bad things. First, it assumes that all agreements are clear and intelligible, or if not, that there will be some recourse available to set things aright. In fact, parties to an agreement often understand terms differently, and some less-than-scrupulous individuals take advantage of this fact to acquire unfair advantages. Second, it redefines fairness in terms of voluntary agreements. In fact, the two (fairness, voluntary agreements) have nothing to do with each other. I could volunteer, for example, to serve a sentence for serial murderer, and even agree to be executed in his stead. But that would hardly be fair. Third, it ignores the fact that most such agreements are coerced to some degree.

In fact, societies produce wealth, not individuals. As such, societies are the proper owners of wealth, and individuals have no right to protest something like progressive taxation. This is not an argument for socialism (it would be if I went on to argue that property should not be distributed to individuals). It is an argument for progressive taxation, and some common ownership.
 

Henrin

Banned
DP Veteran
Joined
Mar 3, 2010
Messages
60,458
Reaction score
12,357
Gender
Male
Political Leaning
Libertarian
I think what you're asking is why I consider it a significant fact. If so, my answer follows: It seems to be a basic tenet of most classic economic theories that a person owns the product of their labor--that person, and no one else, until a fair exchange happens ("fair" being defined in a number of ways). If I chop down a tree and saw it into lumber using tools I made myself, the lumber is mine absolutely. The problem is that in the real world, no one person generates any particular piece of property. For example, if I borrow the tools I need to chop down the tree and saw it into lumber, the owner of the tools has a claim to some percentage of the lumber.

No, they really don't. If you borrow someones chainsaw to cut down the trees they wouldn't have claim to the lumber. Now I suppose an agreement towards the lumber could be made when the chainsaw is borrowed, but otherwise, the lumber is the property of the person that provided their labor towards acquiring it.

Pure market economics, at least as conceived by libertarians, proposes that this fact is cleared, so to speak, by voluntary agreements. If, when I borrowed the tools, the person who lent them to me didn't say anything about any of my profits, then she is entitled to none. Similarly, if I agreed to give her half the lumber I produce, then she is due half. Of course, in the actual world, matters are almost never so straightforward.

It is in fact that straight forward in every case I think of. :shrug:

The problem with this proposal about clearing ownership issues through voluntary agreement is that it does three bad things. First, it assumes that all agreements are clear and intelligible, or if not, that there will be some recourse available to set things aright. In fact, parties to an agreement often understand terms differently, and some less-than-scrupulous individuals take advantage of this fact to acquire unfair advantages. Second, it redefines fairness in terms of voluntary agreements. In fact, the two (fairness, voluntary agreements) have nothing to do with each other. I could volunteer, for example, to serve a sentence for serial murderer, and even agree to be executed in his stead. But that would hardly be fair. Third, it ignores the fact that most such agreements are coerced to some degree.

Why would it not be fair? What makes it unfair for someone to do as you requested they do?

Though yes, ignorance is a problem, but I would never state that all voluntary agreements are informed decisions. Many times people are ignorant and have little idea what they are doing, but that doesn't mean the agreement wasn't made on their own free will. I suppose it would be kind to set them straight before doing as they ask though.

In fact, societies produce wealth, not individuals. As such, societies are the proper owners of wealth, and individuals have no right to protest something like progressive taxation. This is not an argument for socialism (it would be if I went on to argue that property should not be distributed to individuals). It is an argument for progressive taxation, and some common ownership.

You never really established the loaners claim to the lumber. You just stated that he had it without stating exactly why he has that claim. If I loan you a hammer to make a shed I doubt anyone would defend the idea that I have claim to use your shed. Yes, people in a society will benefit each other through their life through all sorts of ways, but merely helping someone doesn't imply ownership.
 

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
No, they really don't. If you borrow someones chainsaw to cut down the trees they wouldn't have claim to the lumber. Now I suppose an agreement towards the lumber could be made when the chainsaw is borrowed, but otherwise, the lumber is the property of the person that provided their labor towards acquiring it.

You've got an oversimplified example of neighborly favor here. If a neighbor saw another clearing a forest with an ax would he be out of line for asking for a percentage of the lumber profits in exchange for the saw? The lumber jack would weigh his time and act accordingly. Now combine in ideas of who should reap the benefits of the invention of the chain saw, two cycle engines, gasoline, trucks to transport the lumber, roads for the trucks to use, computerized lumber cutting etc and you start to lay out how complicated our society is and where it's advancements come from.

But frankly you're highjacking the thread. The discussion here is about how irrational behavior is affecting the market. I get that you don't care if it's irrational or not as long as the nth degree of complexity agreed to the arrangement. But here's the rub - once you dismiss irrationality you loose any credibility of being rational yourself.
 

Henrin

Banned
DP Veteran
Joined
Mar 3, 2010
Messages
60,458
Reaction score
12,357
Gender
Male
Political Leaning
Libertarian
You've got an oversimplified example of neighborly favor here. If a neighbor saw another clearing a forest with an ax would he be out of line for asking for a percentage of the lumber profits in exchange for the saw?

You mean the neighbor decided to borrow out his chainsaw to the guy with the axe in exchange for some profits from the lumber? So the neighbor is selling the lumber or what? Why would he even assume the neighbor is going to make money off the lumber? Regardless, yes, he can decided he wants something in exchange like money or whatever else comes to mind at the time.

The lumber jack would weigh his time and act accordingly.

He would likely consider the offer in areas such as the time saved from the chainsaw and the exchange offered and what that means towards his profits. He might consider it a worthy exchange or he might not.

Now combine in ideas of who should reap the benefits of the invention of the chain saw, two cycle engines, gasoline, trucks to transport the lumber, roads for the trucks to use, computerized lumber cutting etc and you start to lay out how complicated our society is and where it's advancements come from.

So what? That has nothing to do with the transaction.

But frankly you're highjacking the thread. The discussion here is about how irrational behavior is affecting the market. I get that you don't care if it's irrational or not as long as the nth degree of complexity agreed to the arrangement. But here's the rub - once you dismiss irrationality you loose any credibility of being rational yourself.

Of course irrational behavior affects the market. So what?
 

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
You mean the neighbor decided to borrow out his chainsaw to the guy with the axe in exchange for some profits from the lumber? So the neighbor is selling the lumber or what? Why would he even assume the neighbor is going to make money off the lumber? Regardless, yes, he can decided he wants something in exchange like money or whatever else comes to mind at the time.



He would likely consider the offer in areas such as the time saved from the chainsaw and the exchange offered and what that means towards his profits. He might consider it a worthy exchange or he might not.
It's not black and white. There likely exists a rate that is beneficial to both of them, not just a yes no decision. In any case, even your "might" is an admission of your orginal short sighted example.


So what? That has nothing to do with the transaction.
It does.

Of course irrational behavior affects the market. So what?
Because if it's irrational, there is no reason why we can't correct it.
 

Moderate Right

DP Veteran
Joined
Oct 21, 2015
Messages
53,813
Reaction score
10,860
Location
Kentucky
Gender
Male
Political Leaning
Slightly Conservative
I have asserted that there is nothing “unfair” about progressive taxes under the idea that it is not hard work or education level that gets you an extraordinary salary, but simply a mechanism of the market. If your salary is not entirely a component of something that you do, then the theft argument has no teeth. If the only reason you have it is that you took it from the market, than there’s little against saying that the market can’t take some of it back.

I like to think of it like this. Big box stores mark up their goods above wholesale in order to provide a brick and mortal experience. Most people understand that they are going to pay a few bucks more than they would on amazon, but I think most people understand that the big box store isn’t ripping them off.

The same can be thought of progressive taxes. A tax could simply be looked at as a markup – something the market does to keep the lights on and everything in balance.

So if the going rate is determined by the market, then the market could make a pre-correction before it got into your bank account.

But what if these market anomalies weren’t just anomalies, but were actually caused by human irrationality and nothing more?

I’m currently reading a book called “Predictably Irrational”. In the first chapter, author Dan Ariely describes a problem in human logic and our need for baseline comparison. He presents 3 options from an online/print magazine:
1-online only: $59
2-print only: $129
3-online and print: $129

While this looks like a typo it’s not. The print only version is a “decoy”. The company does expect any body to buy it when they could have gotten “online” for free. But what it does is give the more expensive option an advantage as a person now see it is “better” than something else. Ariely ran many studies and groups that had only two options to choose from heavily favored the cheaper option and groups that had a decoy in the mix favored the more expensive option.

Bring this to ceo salaries. Like I said in 1980 the ceo/worker ratio in pay was about 40:1. Buy the 90s it was 130:1. However, this is where it gets interesting. When a 1993 regulation went into affect requiring executive pay to be published, the ratio skyrockeded to 360:1 as the CEOs now had a way to compare themselves against others. You could certainly use that to make the case of less regulation, but is it the regulation causing it or simply human irrationality? Should human irrationality go unchecked in our market?

https://en.wikipedia.org/wiki/Predictably_Irrational.

This could also be defined as a liberal policy that backfired and did the opposite of what was intended - a common outcome for liberal policies.
 

Moderate Right

DP Veteran
Joined
Oct 21, 2015
Messages
53,813
Reaction score
10,860
Location
Kentucky
Gender
Male
Political Leaning
Slightly Conservative
As I have said in other threads, liberals are overly obsessed with the one percent. Show me some ideas that effect only the bottom one percent and the top one percent and leave everyone else alone. Liberal ideas often destroy the little guy business owner just because of the top one percent and liberal ideas also often destroy the middle class just because of the bottom one percent. As I said in my last post in this thread, liberal ideas, while often well intended, often backfire and make things worse with unintended consequences.
 

pdog

DP Veteran
Joined
Jul 20, 2011
Messages
1,969
Reaction score
1,226
Location
Searching for answers.
Gender
Male
Political Leaning
Undisclosed
This could also be defined as a liberal policy that backfired and did the opposite of what was intended - a common outcome for liberal policies.

I acknowledged that already. Nonetheless, it is still an example of human irrationality. Did you have anything to contribute?
 

Moderate Right

DP Veteran
Joined
Oct 21, 2015
Messages
53,813
Reaction score
10,860
Location
Kentucky
Gender
Male
Political Leaning
Slightly Conservative
I acknowledged that already. Nonetheless, it is still an example of human irrationality. Did you have anything to contribute?

No. Not really. There are all kinds of human behaviors and I've read books myself on them. Sometimes processes as these overthink things and sometimes they don't. Unfortunately people can make arguments about all kinds of different stuff. Might be right. Might be wrong.
 

Absentglare

DP Veteran
Joined
Jul 7, 2015
Messages
36,073
Reaction score
6,861
Location
Colorado
Gender
Male
Political Leaning
Liberal
As I have said in other threads, liberals are overly obsessed with the one percent. Show me some ideas that effect only the bottom one percent and the top one percent and leave everyone else alone. Liberal ideas often destroy the little guy business owner just because of the top one percent and liberal ideas also often destroy the middle class just because of the bottom one percent. As I said in my last post in this thread, liberal ideas, while often well intended, often backfire and make things worse with unintended consequences.

I agree, those jealous, selfish liberals want to help 99% of Americans while the true patriots, conservatives, want to help the 1% at the expense of everyone else.
 

American

Beer Lover Extraordinaire
Supporting Member
DP Veteran
Monthly Donator
Joined
Mar 11, 2006
Messages
91,331
Reaction score
29,872
Location
SE Virginia
Gender
Male
Political Leaning
Conservative
Arguments to get out of the way so I can either head them off or reference them later:

I support highly progressive income taxes for the following reasons.
#1-Growing income disparity will continue to pool wealth at the supply side of our economy and depress the demand side of our economy. Progressive income taxes literally shrinks income disparity.
#2-Income disparity wouldn’t be as large of an issue if MMT was more widely accepted since more deficit spending could also push demand by funding middle class jobs.
#3-Even if MMT is on the table, redistributive taxes could help balance supply (investment) with demand. Over-abundance of supply just causes sectoral inflation.
#4-Our political system is flawed in the way that money grants access to power. While it would be better to take money out of politics, in the mean time we can make sure that power does not accumulate with an oligarchy.
#5 – I could instead trade for a 100% death tax instead of more progressive taxes. We could even allow a capped exempt amount. However, there seems to be some strange resistance to this on the conservative side as they seem to believe that it’s a man’s right to even leave his kids rich (so much for hardwork and fairness?).
#6 – I do not believe that any man is capable neither thru sheer effort or intelligence of “earning” 1000 times more than his average. Sure 10x or maybe 100x, but at some point we have to recognize that the 200 year old (or more) societal advancement is at play and “we” are all responsible for that.
#7 –Everyday that somebody goes unemployed or under educated is wasting American resources
#8 - I support 0% business taxes and no other tax than income tax (all income).
#9 – Way too many Americans do not understand the “marginal” function of our taxes – it is impossible to make more money and take home less with regards to rates.
#10 – Progressive doesn’t mean complicated. If the formula only applied to income and all deductions were eliminated your effective tax rate could be derived from a simply tabular lookup based ONLY on your income.
#11 – The definition of a progressive tax is: A progressive tax is a tax in which the tax rate increases as the taxable amount increases. (Progressive tax - Wikipedia, the free encyclopedia). Some people seem to like to slip in other metrics like %GDP. The rich of today pay more as a %GDP DESPITE LOWER RATES because their income is higher.
#12 – This is not socialism. If I asked for rates to correct ceo salary to 40:1 worker pay it wouldn’t be socialism. It would simply be 1980. Were we socialist in our past? How does returning to a metric of our past make us socialist?
#13 – “So what” is not an answer. This is a problem when you consider everything above.
#14 – This isn’t just about ceo salaries, the same thing could be said for many other careers.

Even the rich have been paying higher income tax rates without much complaint, but the Left wants to get stupid with it and make it confiscatory. That's when higher income people get tired of the redistribution schemes.
 

Moderate Right

DP Veteran
Joined
Oct 21, 2015
Messages
53,813
Reaction score
10,860
Location
Kentucky
Gender
Male
Political Leaning
Slightly Conservative
I agree, those jealous, selfish liberals want to help 99% of Americans while the true patriots, conservatives, want to help the 1% at the expense of everyone else.

But you want to punish all businesses for the misdeeds of the one percent. If you want to go after the one percent then go after the one percent but leave the other 99% of businesses alone.
 

Absentglare

DP Veteran
Joined
Jul 7, 2015
Messages
36,073
Reaction score
6,861
Location
Colorado
Gender
Male
Political Leaning
Liberal
Even the rich have been paying higher income tax rates without much complaint, but the Left wants to get stupid with it and make it confiscatory. That's when higher income people get tired of the redistribution schemes.

Taxes are compulsory, not confiscatory.

Where does the "stupid" line begin ? When millions of Americans suffer in poverty for no real reason, stagnating our economy and putting us at a long term global disadvantage ?
 

Absentglare

DP Veteran
Joined
Jul 7, 2015
Messages
36,073
Reaction score
6,861
Location
Colorado
Gender
Male
Political Leaning
Liberal
But you want to punish all businesses for the misdeeds of the one percent. If you want to go after the one percent then go after the one percent but leave the other 99% of businesses alone.

No i don't. I don't want to punish anyone, i want to welcome the rising tide, it raises all ships.

The mention of businesses is a strawman. I want to reduce or eliminate corporate income tax and unburden employers of the need to provide healthcare. That's a far more pro-business position than your ridiculous rebuttal accuses me of maintaining.
 

Absentglare

DP Veteran
Joined
Jul 7, 2015
Messages
36,073
Reaction score
6,861
Location
Colorado
Gender
Male
Political Leaning
Liberal
No it isn't.

The rich have absolutely been paying lower income tax rates.

53affb5919c1b68d3d99c0c0345ec013.jpg
 
Top Bottom