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