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Author Topic: Why we should not strive for complete economic equality  (Read 305 times)
Elestan
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Re: Why we should not strive for complete economic equality
« Reply #15 on: June 02, 2018, 04:20:32 pm »

Some of these graphs are made to convince people that extreme wealth inequality is a bad thing, even if they have enough money for themselves.

I get that that's their purpose, but I think the grounding of their argument doesn't really hold up.  The graph shows that if you transfer wealth from (BCD)->(A), A gets richer while the others get poorer...but that's a trivial conclusion.  You haven't shown any data that establishes how this graph accurately captures some aspect of the real world in a way that would allow drawing conclusions from it.

And the logarithmic plot of wealth utility is interesting, but the shape of this curve isn't something that you can just assert; it's also something that you need to build from empirical data.  You could hypothesize that the curve has that shape, but you can't base a policy argument on an unproven hypothesis.

Just to poke at one possible hole, it seems like your decreasing utility function assumes that wealth is only expended on the owner's own personal assets - a second yacht is less useful than the first, etc.  But this ignores reinvestment of that capital on ventures.  Take, for example, Elon Musk's wealth from PayPal, which he used to found Tesla and SpaceX, creating a bunch of jobs, and considerably advancing solar panel, battery, and spaceflight technology.  Would this money actually have generated more societal value if it had been redistributed by a more progressive tax system?  I don't assert an answer to this, but I do assert that the answer is not so obvious that one can handwave away the need for supporting data.
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Zanthius
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Re: Why we should not strive for complete economic equality
« Reply #16 on: June 02, 2018, 10:48:57 pm »

I get that that's their purpose, but I think the grounding of their argument doesn't really hold up.  The graph shows that if you transfer wealth from (BCD)->(A), A gets richer while the others get poorer...but that's a trivial conclusion.  You haven't shown any data that establishes how this graph accurately captures some aspect of the real world in a way that would allow drawing conclusions from it.

This is a proof of identity, based upon logic and mathematics. I am not denying that we have more advanced technology today than in the past, or that we might have more efficient ways of doing things today than in the past. But that doesn't affect this proof of identity.....



From this proof, you should be able to see that there is an equally valid way to see the world, where the richest person in the world has a balance of 0, while everybody else have different amounts of debt.

And the logarithmic plot of wealth utility is interesting, but the shape of this curve isn't something that you can just assert; it's also something that you need to build from empirical data.  You could hypothesize that the curve has that shape, but you can't base a policy argument on an unproven hypothesis.

I agree. I should definately try to find emprical ways of proving that the utility function has that shape...

Just to poke at one possible hole, it seems like your decreasing utility function assumes that wealth is only expended on the owner's own personal assets - a second yacht is less useful than the first, etc.  But this ignores reinvestment of that capital on ventures.  Take, for example, Elon Musk's wealth from PayPal, which he used to found Tesla and SpaceX, creating a bunch of jobs, and considerably advancing solar panel, battery, and spaceflight technology.  Would this money actually have generated more societal value if it had been redistributed by a more progressive tax system?  I don't assert an answer to this, but I do assert that the answer is not so obvious that one can handwave away the need for supporting data.

Well... I am certainly not denying that private companies can generate innovations that are beneficial to mankind, and I am not advocating for communism (the absolishment of private enterprise). However, I doubt that most of the billionaires in the world are as good as Elon Musk at utilizing their money to benefit mankind. That some billionaires are good at this, is just what we might expect from pure randomness. And it is not like governments are completely incapable of innovation. China, Russia, and USA all have their space programs, whice are funded by governments.

Anyhow, I am advocating for a system where rich people might need to pay a bit more taxes, but where they also have more freedom to choose what their taxes are used for. In the system I am advocating for, Elon Musk might have had a position as a leader for a project at NASA. But everybody paying taxes could choose to earmark some of their taxes to his project, kinda like crowdfunding Elon Musk with your taxes.

 



« Last Edit: June 03, 2018, 12:36:40 am by Zanthius » Logged
Elestan
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Re: Why we should not strive for complete economic equality
« Reply #17 on: June 03, 2018, 06:58:24 am »

This is a proof of identity, based upon logic and mathematics. I am not denying that we have more advanced technology today than in the past, or that we might have more efficient ways of doing things today than in the past. But that doesn't affect this proof of identity.....

From this proof, you should be able to see that there is an equally valid way to see the world, where the richest person in the world has a balance of 0, while everybody else have different amounts of debt.

I think there are still two problems with this graph.  First, as I mentioned earlier, in the bottom left of that graph, person A should be at 9, to represent the value of the debt owned to them by the others.  Otherwise the graph is showing debts owed, but not debts receivable, and that would present a misleading picture.  Second, it's ignoring the value of whatever was received by B, C, and D.  Is there any particular reason that you're restricting this to services, and excluding goods?  If A sells cars, then B, C, and D are now each richer by a car, the value of which is now less than they paid due to depreciation, but the utility of which presumably equals or exceeds the price, or they would not have purchased it.

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Just to poke at one possible hole, it seems like your decreasing utility function [...] ignores reinvestment of that capital on ventures.  Take, for example, Elon Musk's wealth from PayPal, which he used to found Tesla and SpaceX, creating a bunch of jobs, and considerably advancing solar panel, battery, and spaceflight technology.  Would this money actually have generated more societal value if it had been redistributed by a more progressive tax system?  I don't assert an answer to this, but I do assert that the answer is not so obvious that one can handwave away the need for supporting data.

I doubt that most of the billionaires in the world are as good as Elon Musk at utilizing their money to benefit mankind. That some billionaires are good at this, is just what we might expect from pure randomness. And it is not like governments are completely incapable of innovation. China, Russia, and USA all have their space programs, whice are funded by governments.

The problem is that you're trying to handwave away a major counterpoint  to your argument by essentially saying "I doubt that's true".  You need to back your doubts up with data, and I think what you'll find if you go through the literature is that the question of the relative efficiency of private vs. public endeavors is an immensely complex topic, the analysis of which has spanned many Ph.D. dissertations.

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Anyhow, I am advocating for a system where rich people might need to pay a bit more taxes, but where they also have more freedom to choose what their taxes are used for. In the system I am advocating for, Elon Musk might have had a position as a leader for a project at NASA. But everybody paying taxes could choose to earmark some of their taxes to his project, kinda like crowdfunding Elon Musk with your taxes.

I get that you're trying to make this argument, but I also get the strong sense that you're approaching the question with some pretty strong preconceptions, and are trying to find arguments to reach your desired conclusion, rather than looking at the data, and letting it drive the analysis where it will.  I'd encourage you to try deliberately seeking out sources contrary to where you're trying to go - perhaps someone like Friedman - and read those sources until you feel you understand how their arguments interplay with your own.
« Last Edit: June 04, 2018, 05:41:32 am by Elestan » Logged
Zanthius
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Re: Why we should not strive for complete economic equality
« Reply #18 on: June 03, 2018, 01:42:15 pm »

I think there are still two problems with this graph.  First, as I mentioned earlier, in the bottom left of that graph, person A should be at 9, to represent the value of the debt owned to them by the others.  Otherwise the graph is showing debts owed, but not debts receivable, and that would present a misleading picture.

I think your proposal also would be confusing, since it might imply that Person A had received 9 USD, and that the other individuals also owed him 3 USD each. In any case, that scenario is supposed to be in a world where they haven't invented money, but for some reason are exremely good at keeping track of debt.

Actually. That sounds like a nice idea for a new star control species. One that doesn't have money, but is extremely good at keeping track of debt.

Second, it's ignoring the value of whatever was received by B, C, and D.  Is there any particular reason that you're restricting this to services, and exclusing goods?  If A sells cars, then B, C, and D are now each richer by a car, the value of which is now less than they paid due to depreciation, but the utility of which presumably equals or exceeds the price, or they would not have purchased it.

Yes, there is a specific reason why I write it like that, which is to keep it simple. To include goods would just make it unnecessarily more complex, for no good reason. The point of the diagram is not to show how wealth inequality is generated, but rather to show that the bottom left graph/state is equal to the bottom right graph/state.

You don't necessarily need to know anything about how a state was formed, in order to prove that it is equivalent to another state. For example. 1 liter of water is more or less equivalent to 1 kilogram of water at room temperature, which is also more or less equivalent to 3.34*10^25 water molecules. This is true no matter how you collected 1 liter of water. It wouldn't seem like a valid criticism, if somebody claimed that this is true only because you collected the water in a specific way.

We have a lot wealth inequality today. That is a fact. This diagram is not trying to explain how we got there. It is just showing one possible route to wealth inequality, to prove that the bottom right graph/state with lots of wealth inequality is equivalent to the bottom left graph/state with lots of debt.

Also. Since I know how many water molecules there are in 1 liter of water, I can also figure out how many water molecules there are on Earth, if I know how many liters of water there is on Earth. Similarly, if I know that my example with 4 individuals is true, it must also be possible to make a similar debt based graph for all the individuals on Earth.
« Last Edit: June 03, 2018, 03:57:41 pm by Zanthius » Logged
Elestan
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Re: Why we should not strive for complete economic equality
« Reply #19 on: June 04, 2018, 05:58:43 am »

I think there are still two problems with this graph.  First, as I mentioned earlier, in the bottom left of that graph, person A should be at 9, to represent the value of the debt owned to them by the others.  Otherwise the graph is showing debts owed, but not debts receivable, and that would present a misleading picture.

I think your proposal also would be confusing, since it might imply that Person A had received 9 USD, and that the other individuals also owed him 3 USD each. In any case, that scenario is supposed to be in a world where they haven't invented money, but for some reason are exremely good at keeping track of debt.

So, two points here:

First, they appear to only be good at tracking the (negative-value) debts they owe to other people, but not the (positive-value) debts that other people owe to them.  That seems...implausible.

Second, what are their debts denominated in, if they don't have the concept of money?
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Zanthius
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Re: Why we should not strive for complete economic equality
« Reply #20 on: June 04, 2018, 10:04:08 am »

First, they appear to only be good at tracking the (negative-value) debts they owe to other people, but not the (positive-value) debts that other people owe to them.  That seems...implausible.

This doesn't need to be the case. They could all be keeping track of debt:



Where UD is an abbreviation for Unit of Debt.

Second, what are their debts denominated in, if they don't have the concept of money?

It seems plausible that we could have made generalized units of debt before we invented money. Coins weren't invented before the 7th century BC, while writing seems to have been invented around the 6th millennium BC.

Coins have the weakness that somebody might find a way to manufacture them illegally. If debt was personalized between 2 individuals, they would both have the memory of the agreement, and possibly written notes to aid memory. So it wouldn't necessarily be as easy to cheat somebody in a system with personalized debt.

I found this book which seems to claim that money originated from debt: https://www.amazon.com/Debt-First-5-000-Years/dp/1612191290
« Last Edit: June 04, 2018, 02:16:49 pm by Zanthius » Logged
Elestan
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Re: Why we should not strive for complete economic equality
« Reply #21 on: June 05, 2018, 07:24:58 am »

First, they appear to only be good at tracking the (negative-value) debts they owe to other people, but not the (positive-value) debts that other people owe to them.  That seems...implausible.

This doesn't need to be the case. They could all be keeping track of debt:  [image]

I was referring to the previous graph, which included (negative value) debts owed, but omitted (positive value) debts payable.  It's your graph, so you can make it as you like, but I think that anyone with an accounting/finance/business/economics background is likely to consider the graph pretty nonsensical if you don't treat debt consistently.  And if you do, the two graphs become so alike that the point you're trying to make becomes obvious - which seems like something you'd want to do.

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Second, what are their debts denominated in, if they don't have the concept of money?
It seems plausible that we could have made generalized units of debt before we invented money. Coins weren't invented before the 7th century BC, while writing seems to have been invented around the 6th millennium BC.

It's possible...but once you've got a "generalized unit of debt", you've essentially already invented ledger money.  All you need to do is introduce a tradeable token worth "UD$1", and you've got currency.

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I found this book which seems to claim that money originated from debt: https://www.amazon.com/Debt-First-5-000-Years/dp/1612191290

I'm aware of it, but haven't read it.  It sounds like it needs to be read with a critical eye, because the author is an anarchist with an anti-capitalist political agenda, but the reviews I perused indicated that there are some thought-provoking points there.
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Zanthius
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Re: Why we should not strive for complete economic equality
« Reply #22 on: June 05, 2018, 09:27:51 am »

I was referring to the previous graph, which included (negative value) debts owed, but omitted (positive value) debts payable.  It's your graph, so you can make it as you like, but I think that anyone with an accounting/finance/business/economics background is likely to consider the graph pretty nonsensical if you don't treat debt consistently.  And if you do, the two graphs become so alike that the point you're trying to make becomes obvious - which seems like something you'd want to do.

Maybe you are right. I have changed it now, but I also changed the titles of the y-axises, to emphasize that the graphs on the left side are talking about debt ,while the graphs on the right side are talking about coins.
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