Imagine full employment around the world. (1 Viewer)

[Simpletruther]

A thought experiment.

Now, in this advanced hypothetical economy all countries have developed to first world status. The poorest have enough to get by and pay bills, though they struggle to get ahead enough to have a nice car and decent vacations etc.

There is massive income inequality ,the richest have even higher percentage of the wealth than now.

Ok, now suppose the world government take 3/4 of the rich wealth and pass it out equally among the rest. Taking the income inequality down to 1970 levels.


Are the masses any better off because of This?

Interested in your takes on the issue. I do not think that people will be better off in any meaningful degree.

 

[Drawdown]

I terms of Global scale, Americans are the richest and our wealth is very much being redistributed around the world. The reason the American poor are getting poorer is because the Chinese are eating their lunches. Congratulations. Robin Hood thinking screwed you.

 

[ataraxia]

A thought experiment.

Now, in this advanced hypothetical economy all countries have developed to first world status. The poorest have enough to get by and pay bills, though they struggle to get ahead enough to have a nice car and decent vacations etc.

There is massive income inequality ,the richest have even higher percentage of the wealth than now.

Ok, now suppose the world government take 3/4 of the rich wealth and pass it out equally among the rest. Taking the income inequality down to 1970 levels.


Are the masses any better off because of This?

Interested in your takes on the issue. I do not think that people will be better off in any meaningful degree.

From what I have read from the work of economists over the last few decades, they all seem to agree that some degree of inequality is good for an economy. It keeps the incentive for people to keep working and provide better goods and services.

But the same economists would probably also all agree that too massive of an inequality is not good either, both economically and socially/politically.

Inequality is a little like salt in food. A little bit is good, but you don’t want to overdo it. But within that range, there’s probably a lot of room for different countries and cultures to choose what to do. You can season to taste.

 

[Simpletruther]

I terms of Global scale, Americans are the richest and our wealth is very much being redistributed around the world. The reason the American poor are getting poorer is because the Chinese are eating their lunches. Congratulations. Robin Hood thinking screwed you.

I do not think the poor are getting poorer here. The Chinese help grow the pie, so are not taking pie from us.

On the whole,China has made us all richer providing us with cheap goods while slaving in sweat shops.

 

[OrphanSlug]

“Full employment” does not mean what you guys think it does. All we are talking about is the absence of cyclical or deficient-demand unemployment, and that does not mean complete removal of all unemployment.

Income inequality is another problem, and in theory can still exist no matter what the condition of employment is domestically or globally.

 

[jotathought]

I terms of Global scale, Americans are the richest and our wealth is very much being redistributed around the world. The reason the American poor are getting poorer is because the Chinese are eating their lunches. Congratulations. Robin Hood thinking screwed you.

What is your definition of poor? Poor in the United States is luxurious compared to poor in some 3rd world countries.

The poor are not advancing because of their over-dependency on government without any incentive to advance themselves. Why would they want to work when they get food, shelter and other subsidies at the expense of others?

 

[Simpletruther]

From what I have read from the work of economists over the last few decades, they all seem to agree that some degree of inequality is good for an economy. It keeps the incentive for people to keep working and provide better goods and services.

But the same economists would probably also all agree that too massive of an inequality is not good either, both economically and socially/politically.

Inequality is a little like salt in food. A little bit is good, but you don’t want to overdo it. But within that range, there’s probably a lot of room for different countries and cultures to choose what to do. You can season to taste.

Ok, but I am trying to reason by using extremes, it often helps to see issues.

In my scenario, I would say we are not much better off at all, because everyone getting x amount of new wealth is offset by x increase in price of everything. Since we are at full employment, we can’t increase production, so the only result will be higher prices. It’s a wash.

 

[jotathought]

A thought experiment.

Now, in this advanced hypothetical economy all countries have developed to first world status. The poorest have enough to get by and pay bills, though they struggle to get ahead enough to have a nice car and decent vacations etc.

There is massive income inequality ,the richest have even higher percentage of the wealth than now.

Ok, now suppose the world government take 3/4 of the rich wealth and pass it out equally among the rest. Taking the income inequality down to 1970 levels.


Are the masses any better off because of This?

Interested in your takes on the issue. I do not think that people will be better off in any meaningful degree.

Why is income inequality a bad thing? Why should wealth be redistributed for those that didn't earn it? Why would you want a world government dictating what the United States must and must not do?

 

[Simpletruther]

“Full employment” does not mean what you guys think it does. All we are talking about is the absence of cyclical or deficient-demand unemployment, and that does not mean complete removal of all unemployment.

Income inequality is another problem, and in theory can still exist no matter what the condition of employment is domestically or globally.

Of course, I was using he term in its generally accepted way. Which I think is around 2 or 3 % unemployment. This accounts for transitionary movement issues and such.

A true zero unemployment is impossible.

 

[Simpletruther]

Why is income inequality a bad thing? Why should wealth be redistributed for those that didn't earn it? Why would you want a world government dictating what the United States must and must not do?

Excellent questions.

 

[ataraxia]

Ok, but I am trying to reason by using extremes, it often helps to see issues.

In my scenario, I would say we are not much better off at all, because everyone getting x amount of new wealth is offset by x increase in price of everything. Since we are at full employment, we can’t increase production, so the only result will be higher prices. It’s a wash.

Well not really. What you’re talking about is inflation, where there is too much cash chasing too few goods and services. That’s what happens if a government just prints money without the level of goods and services society being there. There’s nothing to buy. In that situation, you just have a lot of worthless paper with nothing to buy.

But the scenario you presented is different. If there are a handful of people with that much money, presumably they have done something to create the goods and services which are worth that much money- or someone there has. So it’s not just too much cash chasing too few goods and services. So that’s a very different situation.

I’m no economist, but it sounds like somewhere in there you are taking a wrong turn in understanding how economics works.

 

[Simpletruther]

Well not really. What you’re talking about is inflation, where there is too much cash chasing too few goods and services. That’s what happens if a government just prints money without the level of goods and services society being there. There’s nothing to buy. In that situation, you just have a lot of worthless paper with nothing to buy.

But the scenario you presented is different. If there are a handful of people with that much money, presumably they have done something to create the goods and services which are worth that much money- or someone there has. So it’s not just too much cash chasing too few goods and services. So that’s a very different situation.

I’m no economist, but it sounds like somewhere in there you are taking a wrong turn in understanding how economics works.

I d not follow. In the scenario, we have the masses given x new wealth. This is “new money” given to them which they will tend to “chase goods” with. The rich were not chasing goods with it. It was just being held.

I have. MA in finance, along the way I took some advanced economics back in the day, (including an assx kicking econometrics class full of calculus), but I certainly am not an economist either,just trying to apply some principals using extremes.

 

[ataraxia]

Why is income inequality a bad thing? Why should wealth be redistributed for those that didn't earn it? Why would you want a world government dictating what the United States must and must not do?

In general, income inequality is not a bad thing per se. Of course there is some evidence that too much inequality tends to slow down overall economic growth and also makes for more social instability and unrest. But there is some controversy over that.

But what does create social stability is when you have peoples back‘s against the wall in a given society: basically facing desperate situations that no human being should have to face. Situations were their basic human rights are being violated, such as the right to food, shelter, clean water, access to healthcare, and a basic education. On those things are being violated in a society, everyone ends up suffering, including the wealthy, and the middle class.

That’s why human rights, as outlined in the Universal declaration of human rights from 1948, it’s such an important document. It is interesting to remember that the United States was one of the countries that spearheaded the document throughout the world. It is just so ironic now that the ideas in it are now so under siege right back here at home where they started.

 

[Drawdown]

I do not think the poor are getting poorer here. The Chinese help grow the pie, so are not taking pie from us.

On the whole,China has made us all richer providing us with cheap goods while slaving in sweat shops.

Every time a US company ships production overseas, our pie gets smaller. You can only "grow" the pie by shortening its height. In this case, the wealth.

 

[ataraxia]

I d not follow. In the scenario, we have the masses given x new wealth. This is “new money” given to them which they will tend to “chase goods” with. The rich were not chasing goods with it. It was just being held.

I have. MA in finance, along the way I took some advanced economics back in the day, (including my an assx kicking econometrics class full of calculus, but I certainly am not an economist.

Money in circulation is always considered a good thing, isn’t it? Better than having the same amount hoarded away. That’s another thing I remember learning in economics somewhere along the line.

But regardless, if the level of goods and services is there in a society, how the money is distributed should not lead to inflation.

 

[Drawdown]

What is your definition of poor? Poor in the United States is luxurious compared to poor in some 3rd world countries.

The poor are not advancing because of their over-dependency on government without any incentive to advance themselves. Why would they want to work when they get food, shelter and other subsidies at the expense of others?

I agree with your first point and disagree with your second. You put the blame on the poor people. The blame belongs with the welfare cliffs and pitfalls the democrats perpetuate and the GOP is fine with. We need smoother transitions off welfare rolls.

 

[ataraxia]

Every time a US company ships production overseas, our pie gets smaller. You can only "grow" the pie by shortening its height. In this case, the wealth.

That’s not really true, because cheaper manufacturing costs means consumers here back at home end up being able to buy cheaper goods. A penny saved is a penny earned.

The way the free market would work is that you would delegate the manufacturing to the lowest bidder, in this case abroad. And then you can invest the money in developing human capital in terms of education and training for more skilled labor right here at home. That way those workers here at home can earn higher income as well.

That’s why the governments of all developed nations in the world today or investing heavily in educating their citizens. That is how they are going to get ahead. If you try to cling to the 1950s “all manufacturing done at home” model here in the US, the US economy will never grow beyond what it was in the 1950s. Will absolutely be left in the dust in the rapidly growing world economy.

 

[Simpletruther]

No that is incorrect.

The proof is in our standards of living increasing. How is that possible if the pie is Shrinking?

and how is the price of goods going down for us shrinking our pie?
When those jobs go overseas, we replace them with different jobs. And if the masses are smart enough and get educated enough etc, the jobs are good jobs.high tech jobs.

It’s true that the unskilled in advanced economies hsve a disadvantage, but I would still rather be unskilled in America than skilled in China.

Every time a US company ships production overseas, our pie gets smaller. You can only "grow" the pie by shortening its height. In this case, the wealth.

 

[Drawdown]

No that is incorrect.

The proof is in our standards of living increasing. How is that possible if the pie is Shrinking?

and how is the price of goods going down for us shrinking our pie?
When those jobs go overseas, we replace them with different jobs. And if the masses are smart enough and get educated enough etc, the jobs are good jobs.high tech jobs.

It’s true that the unskilled in advanced economies hsve a disadvantage, but I would still rather be unskilled in America than skilled in China.

TV's used to cost $1K and computers $3K, now TV's cost 100 bucks and you can pick up a computer for $500. That is how the standard of living increases while the pie is getting thinner. The economies of scale.

 

[Simpletruther]

Money in circulation is always considered a good thing, isn’t it? Better than having the same amount hoarded away. That’s another thing I remember learning in economics somewhere along the line.

But regardless, if the level of goods and services is there in a society, how the money is distributed should not lead to inflation.

It will lead to inflation if taken from savers and given to spenders. Which is my scenario.
The amount of goods and services remains constant, but an influx of money happens through this wealth transfer.

 

[Drawdown]

That’s not really true, because cheaper manufacturing costs means consumers here back at home end up being able to buy cheaper goods. A penny saved is a penny earned.

The way the free market would work is that you would delegate the manufacturing to the lowest bidder, in this case abroad. And then you can invest the money in developing human capital in terms of education and training for more skilled labor right here at home. That way those workers here at home can earn higher income as well.

That’s why the governments of all developed nations in the world today or investing heavily in educating their citizens. That is how they are going to get ahead. If you try to cling to the 1950s “all manufacturing done at home” model here in the US, the US economy will never grow beyond what it was in the 1950s. Will absolutely be left in the dust in the rapidly growing world economy.

At any given time, there is a fixed amount of money. If one person gets more, another has less. That is just reality.

 

[Simpletruther]

TV's used to cost $1K and computers $3K, now TV's cost 100 bucks and you can pick up a computer for $500. That is how the standard of living increases while the pie is getting thinner. The economies of scale.

how is the pie getting thinner if prices are gong down and we are better off?

Being better off and affording more is the defintion of pie.

 

[ataraxia]

At any given time, there is a fixed amount of money. If one person gets more, another has less. That is just reality.

No, I remember learning in economics that if money is changing hands it is always better than the same amount not in circulation.

Trade is not a zero-sum came. It is a win-win.

 

[ataraxia]

It will lead to inflation if taken from savers and given to spenders. Which is my scenario.
The amount of goods and services remains constant, but an influx of money happens through this wealth transfer.

I don’t know, I may be out of my depth here. If you have a masters in finance, then you probably know a lot more about this than I. But somehow this doesn’t sound right to me. Income redistribution in a society has its pluses and minuses, to be sure. But I would not have guessed that inflation would’ve been one of the minuses.

 

[Simpletruther]

I don’t know, I may be out of my depth here. If you have a masters in finance, then you probably know a lot more about this than I. But somehow this doesn’t sound right to me. Income redistribution in a society has its pluses and minuses, to be sure. But I would not have guessed that inflation would’ve been one of the minuses.

Inflation isn’t just about money supply, but also money velocity (how fast it moves through the economy)

Thenultra rich tend to let s lot of it sit, and not move. The masses would take that money and spend (move iit) but it would be chasing the same amount of goods.