westslope wrote:
 

The article is neither about targeting inequality nor about eliminating it. Economic modelling / theorizing is about finding simplified (=modelled) mechanisms, to the extent that they exist, which can help explain and predict human behaviour and subsequent outcomes of commercial / material interactions.

Equilibrium theory, which you might think of as a mathematical version of the famous 'invisible hand', is a common such model. It predicts that a 'free market' will tend reach a stable state (=equilibrium) if an economy is fulfills certain criteria (perfect competition). Under such conditions, inequality is the result of differing capabilities of the agents involved. Or, it is the result of some friction or imperfection in the Competition department. Policy is then about managing those imperfections. But the message is clear, if things were perfect, as the model envisions, then the world would be, at least potentially, a better place. 

This new model (there are many others) now suggests that maybe this hands-off idea of perfection is nonsense. At least it is mathematically perfectly feasible to argue that a system of sequential trades may not be self-equilibrating at all. The important distinction between these two models, as I see it, is that, in the latter, trades takes place sequentially in time. So it makes a difference whether you win or lose the first toss. A x 1.2 x 0.8 =/= A x 0.8 x 1.2. In equilibrium models, all trade takes place in an instant of time, or outside of time, if you like. Changes to the system, and thus a dynamism over time, are introduces by adding 'random shocks' to an otherwise static system. Of Course, both are just models to which one must then add that awful imperfection called reality.

Now, when you say targeting inequality is a bad idea, you have to be aware of what your underlying assumption is. Do you assume that, if, say no redistributive tax is levied, outcomes will reflect the actual virtue of the economic agents involved? In that case you're in line with the equilibrium models mentioned above. Or, do you assume that, without redistribution, outcomes may be pretty much arbitrary and depend a lot on when and where you happend to be born, how much you inherited, and a bunch of other happenstances? In that case, you are more in line with the latter model.

The question is, which model has more predictive power? Which can be made to fit better with reality? And can not redistributing really be qualified as not targeting an outcome? If you see someone struggling in the water, do you intervene or not? That depends on what you think is happening. If the person is in the act of drowning, then non-intervention is the act of targeting death. If, however, you assume that bodies have a natural tendency to stay float and each individual may choose freely whether to S splash about frantically, then, whatever the outcome, non-intervention might be considered an act of granting the swimmer his freedom of expression, the outcome of which is fair by definiton. If he dies, he had it coming... In either case, you are targeting something based on your belief of what's 'actually' going on.

 westslope wrote: 
It is not about targeting inequality. It is about keeping the wheel in balance.

Given that every modern nation has some form of redistribution of wealth I think the historical record is on our side on this one. Moreover, those countries that do it wisely are also among the best performers globally and that is not even factoring in softer factors like social cohesion, quality of life, crime rates, etc.

I would love to see what relative GDP per capita would look like if you stripped off the top percentile of each country's population.
I suspect that those countries with a more socially oriented welfare policy would outperform those countries pursuing more "free market" models. 
 

 NoEnzLefttoSplit wrote:
 

Targeting inequality is a really, really bad idea in my opinion.

 westslope wrote: 
err..  I think that is precisely the point.  ergo redistribution.

Please name me one economy in the world with no "inequality".  

Is Inequality Inevitable?

Wealth naturally trickles up in free-market economies, model suggests

(…)

If you simulate this economy, a variant of the yard sale model, you will get a remarkable result: after a large number of transactions, one agent ends up as an “oligarch” holding practically all the wealth of the economy, and the other 999 end up with virtually nothing. It does not matter how much wealth people started with. It does not matter that all the coin flips were absolutely fair. It does not matter that the poorer agent's expected outcome was positive in each transaction, whereas that of the richer agent was negative. Any single agent in this economy could have become the oligarch—in fact, all had equal odds if they began with equal wealth. In that sense, there was equality of opportunity. But only one of them did become the oligarch, and all the others saw their average wealth decrease toward zero as they conducted more and more transactions. To add insult to injury, the lower someone's wealth ranking, the faster the decrease.


This outcome is especially surprising because it holds even if all the agents started off with identical wealth and were treated symmetrically. Physicists describe phenomena of this kind as “symmetry breaking” <see The Physics of Inequality below>. The very first coin flip transfers money from one agent to another, setting up an imbalance between the two. And once we have some variance in wealth, however minute, succeeding transactions will systematically move a “trickle” of wealth upward from poorer agents to richer ones, amplifying inequality until the system reaches a state of oligarchy.

(...)

We find it noteworthy that the best-fitting model for empirical wealth distribution discovered so far is one that would be completely unstable without redistribution rather than one based on a supposed equilibrium of market forces. In fact, these mathematical models demonstrate that far from wealth trickling down to the poor, the natural inclination of wealth is to flow upward, so that the “natural” wealth distribution in a free-market economy is one of complete oligarchy. It is only redistribution that sets limits on inequality.

The mathematical models also call attention to the enormous extent to which wealth distribution is caused by symmetry breaking, chance and early advantage (from, for example, inheritance). And the presence of symmetry breaking puts paid to arguments for the justness of wealth inequality that appeal to “voluntariness”—the notion that individuals bear all responsibility for their economic outcomes simply because they enter into transactions voluntarily—or to the idea that wealth accumulation must be the result of cleverness and industriousness. It is true that an individual's location on the wealth spectrum correlates to some extent with such attributes, but the overall shape of that spectrum can be explained to better than 0.33 percent by a statistical model that completely ignores them. Luck plays a much more important role than it is usually accorded, so that the virtue commonly attributed to wealth in modern society—and, likewise, the stigma attributed to poverty—is completely unjustified.

"We should abandon the WTO and work with free nations to build a new international system that actually puts American workers first"

---

U.S. finalizing federal contract ban for companies that use Huawei, others

The Jobs We Need

Over the past four decades, American workers have suffered a devastating loss of economic power, manifest in their wages, benefits and working conditions. The annual economic output of the United States has almost tripled, but, with the help of policymakers from both political parties, the wealthy hoarded the fruits.

In the nation’s slaughterhouses, the average worker in 1982 made $24 an hour in inflation-adjusted dollars, or $50,000 a year. Today the average meatpacker processes significantly more meat — and makes less than $14 an hour.

The hundreds of thousands of home health care aides, often female, often minorities, who care for a nation of aging baby boomers rarely receive paid time to care for their own families.

Even in the high-flying technology sector, companies have found ways to leave their workers behind. More than half of the people who work for Google do not actually work for Google. They are classified as contractors, which means they do not need to be treated as employees. (...)

U.S. Ranked Worst for Workers’ Rights Among Major Economies

Human capital stock

 miamizsun wrote:
 

I've come to think that the fundamental problem is that the wealth has been concentrated to the point that a few people end up with so much more money than they have investment opportunities. The amount of money is so far beyond what they need, that the risk vs reward calculations are fubared. Why not pour venture capital into dodgy tech startups that are unlikely to turn a profit? You might get lucky and they might look good enough later for you to sell at a profit. If not, write it off and no big deal. Why not bet on 00?

 black321 wrote: 

so this isn't a free market?

i'm gobsmacked!

 rgio wrote:
 

I'm not saying the system's rigged, but the dice are loaded

 black321 wrote:
 
No small business competition....no office space....fewer employees...all good. 

Come October....with 20 Million out of work and still no safe way to hug your grandparents...."the greatest recovery in the history of the world".

Quote on CNBC today:
"I can't think of a more dystopic end to 2020 then new record S&P 500, and unemployment of 10-25%"

 R_P wrote: 
Just wondering.

 black321 wrote:

 kurtster wrote:
 
And?

 R_P wrote: 
Hmmm.  Something bugging you ?  You posted this yesterday in the CV 19 thread.

The Communist party will survive Covid-19