On Thursday, September 5, 2013 4:26:08 PM UTC-4, Ed Huntress wrote


And his other stupid example is Albania, which has 1/8 the per-capita

income of the USA.



Ed Huntress

You assert that Albania is a stupid example, but do not give any reason why other than that their per capita income is much lower than that of the United States. WHy do you think that is relevant? It seems to me that if an uneven distribution of income is good or bad , it would be true regardless of what the per capita income is. Sounds as if you want to cherry pick what is relevant.

Dan

On Thu, 5 Sep 2013 14:41:17 -0700 (PDT), "
wrote:

On Thursday, September 5, 2013 4:26:08 PM UTC-4, Ed Huntress wrote


And his other stupid example is Albania, which has 1/8 the per-capita

income of the USA.



Ed Huntress

You assert that Albania is a stupid example, but do not give any reason why other than that their per capita income is much lower than that of the United States. WHy do you think that is relevant? It seems to me that if an uneven distribution of income is good or bad , it would be true regardless of what the per capita income is. Sounds as if you want to cherry pick what is relevant.

Dan

Over 50% of Albania's employment is in agriculture -- small family
farms. Foreign investment and domestic investment are very low.

The dynamics of Albania's economy have virtually no relationship to
that of the United States.

If you read Birnbaum's blog post, which is what I'm referring to, the
false dichotomy that he made was between living in the USA or living
with a GINI coefficient of 0.27 -- Albania's.

But he made no effort to show any causative relationship. So it's a
silly example.

--
Ed Huntress

On Thursday, September 5, 2013 6:12:32 PM UTC-4, Ed Huntress wrote:


Over 50% of Albania's employment is in agriculture -- small family

farms. Foreign investment and domestic investment are very low.



The dynamics of Albania's economy have virtually no relationship to

that of the United States.



If you read Birnbaum's blog post, which is what I'm referring to, the

false dichotomy that he made was between living in the USA or living

with a GINI coefficient of 0.27 -- Albania's.



But he made no effort to show any causative relationship. So it's a

silly example.



--

Ed Huntress

So I thought the topic was about whether a hgh or low Gini number made a difference. And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.

So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.

Now on to discussing metalworking. Today I welded in some sheet metal to stiffen up the stand for the Drill/Mill. The welds looked really bad. Strong enough,but ugly looking. I was welding some material about .040 thick to the legs which are square tubing with a .250 wall thickness. That was not the problem. The problem is that I could not see where I was welding. So I clamped a strip of aluminium along side where I wanted to weld, and that helped. But it was not enough. So the next step would be to rig a halogen light so it illuminates the weld area and connect it to the MIG welder so it turns on when the wire starts feeding. Or maybe I should skip that and just rig a simple track system and advance along the path using a stepper motor and maybe a second stepper to weave the torch back and forth orthogonal to the first stepper. Which of course ties into the automation of labor and doing work that is not being done. Well sure there are welding robots already, but I am thinking of something in the range of $50. Almost nothing to it except a microcontroler and a couple of stepper motors. It would only do straight welds , although the same parts could rotate a weld positioner for circular welds.

Dan

On 9/5/2013 3:12 PM, Ed Huntress wrote:
On Thu, 5 Sep 2013 14:41:17 -0700 (PDT), "
wrote:

On Thursday, September 5, 2013 4:26:08 PM UTC-4, Ed Huntress wrote


And his other stupid example is Albania, which has 1/8 the per-capita

income of the USA.



Ed Huntress

You assert that Albania is a stupid example, but do not give any reason why other than that their per capita income is much lower than that of the United States. WHy do you think that is relevant? It seems to me that if an uneven distribution of income is good or bad , it would be true regardless of what the per capita income is. Sounds as if you want to cherry pick what is relevant.

Dan

Over 50% of Albania's employment is in agriculture -- small family
farms. Foreign investment and domestic investment are very low.

The dynamics of Albania's economy have virtually no relationship to
that of the United States.

If you read Birnbaum's blog post, which is what I'm referring to, the
false dichotomy that he made was between living in the USA or living
with a GINI coefficient of 0.27 -- Albania's.

But he made no effort to show any causative relationship. So it's a
silly example.

It's not a silly example, you ****wit. It proves the entire point:
*MOST* of the strident shrieking about "income inequality" - for
example, *ALL* of the shrieking about it by the Occutards - has as its
basis a belief that the inequality is "unfair" or "immoral" or in some
other way "bad" in and of itself. And even the more serious scholarship
on the topic has not identified even a *potential* causative link
between income inequality and lowered growth. Only some degree of
correlation has been found, and the direction of causation might just as
plausibly be in the other direction - the lowered growth in an economy
that otherwise would grow is what causes the income inequality. In
fact, this is a much more plausible explanation.

The Occutard shriekers - your side - aren't concerned about growth in
the least. They're just angry and bitchy that they don't have as much
as they think they "ought" to have. They think the inequality is bad
/per se/, and that's the only thing they're saying. They're wrong.

Birnbaum's point, and it's an excellent one because the debate is
dominated by the Occutard shriekers rather than the scholars, is that
simply looking at Gini coefficients - either their absolute levels or
changes in them - tells you nothing meaningful. But the shriekers, and
you, think they do. You're wrong - as usual.

On Thu, 5 Sep 2013 18:19:51 -0700 (PDT), "
wrote:

On Thursday, September 5, 2013 6:12:32 PM UTC-4, Ed Huntress wrote:


Over 50% of Albania's employment is in agriculture -- small family

farms. Foreign investment and domestic investment are very low.



The dynamics of Albania's economy have virtually no relationship to

that of the United States.



If you read Birnbaum's blog post, which is what I'm referring to, the

false dichotomy that he made was between living in the USA or living

with a GINI coefficient of 0.27 -- Albania's.



But he made no effort to show any causative relationship. So it's a

silly example.



--

Ed Huntress

So I thought the topic was about whether a hgh or low Gini number made a difference.

It is. But you can read what he said either way. Here's what he said:

"Albania has a Gini of 0.27, but a per-capita income only one-eighth
of the USA. Would you be willing to sacrifice 87% of your pay in order
to be more equal to everyone else?"

So, is he suggesting that the consequence of having such a low GINI
coefficient is low absolute incomes?

It's ambiguous.

And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.

That's what we were talking about -- the rising income disparities in
the US, and the implications of IMF and other research from other
countries for the US economy.

There isn't much to be applied to the US, from the experience of a
relatively poor economy where over 50% of the workers are involved in
farming.


So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.

I'm not tryint to "restrict" anything. I'm talking about the subject
we were discussing.


Now on to discussing metalworking. Today I welded in some sheet metal to stiffen up the stand for the Drill/Mill. The welds looked really bad. Strong enough,but ugly looking. I was welding some material about .040 thick to the legs which are square tubing with a .250 wall thickness. That was not the problem. The problem is that I could not see where I was welding. So I clamped a strip of aluminium along side where I wanted to weld, and that helped. But it was not enough. So the next step would be to rig a halogen light so it illuminates the weld area and connect it to the MIG welder so it turns on when the wire starts feeding. Or maybe I should skip that and just rig a simple track system and advance along the path using a stepper motor and maybe a second stepper to weave the torch back and forth orthogonal to the first stepper. Which of course ties into the automation of labor and doing work that is not being done. Well sure there are welding robots already, but I am
thinking of something in the range of $50. Almost nothing to it except a microcontroler and a couple of stepper motors. It would only do straight welds , although the same parts could rotate a weld positioner for circular welds.

Dan

On Thu, 05 Sep 2013 18:38:48 -0700, George Plimpton
wrote:

On 9/5/2013 3:12 PM, Ed Huntress wrote:
On Thu, 5 Sep 2013 14:41:17 -0700 (PDT), "
wrote:

On Thursday, September 5, 2013 4:26:08 PM UTC-4, Ed Huntress wrote


And his other stupid example is Albania, which has 1/8 the per-capita

income of the USA.



Ed Huntress

You assert that Albania is a stupid example, but do not give any reason why other than that their per capita income is much lower than that of the United States. WHy do you think that is relevant? It seems to me that if an uneven distribution of income is good or bad , it would be true regardless of what the per capita income is. Sounds as if you want to cherry pick what is relevant.

Dan

Over 50% of Albania's employment is in agriculture -- small family
farms. Foreign investment and domestic investment are very low.

The dynamics of Albania's economy have virtually no relationship to
that of the United States.

If you read Birnbaum's blog post, which is what I'm referring to, the
false dichotomy that he made was between living in the USA or living
with a GINI coefficient of 0.27 -- Albania's.

But he made no effort to show any causative relationship. So it's a
silly example.

It's not a silly example, you ****wit. It proves the entire point:
*MOST* of the strident shrieking about "income inequality" - for
example, *ALL* of the shrieking about it by the Occutards - has as its
basis a belief that the inequality is "unfair" or "immoral" or in some
other way "bad" in and of itself.

No it doesn't. Birnbaum neither said that, nor supported it in the
least. So it doesn't "prove" anything.

Why are you hanging your hat on some blogger's opinions when you know
there is real research out there? Could it be that the research makes
hash of your position?

--
Ed Huntress

On Friday, September 6, 2013 9:47:00 AM UTC-4, Ed Huntress wrote:


So I thought the topic was about whether a hgh or low Gini number made a difference.



It is. But you can read what he said either way. Here's what he said:


And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.



That's what we were talking about -- the rising income disparities in

the US, and the implications of IMF and other research from other

countries for the US economy.



There isn't much to be applied to the US, from the experience of a

relatively poor economy where over 50% of the workers are involved in

farming.





So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.



I'm not tryint to "restrict" anything. I'm talking about the subject

we were discussing.



Now I am really confused. First you say the subject is about whether a hgh or low Gini number made a difference. And then you say it is only about the U.S. economy related to the Gini number. You need to be less parochial. If the Gini number makes a difference it ought to make a difference regardless of the country. If it is country dependent then there must be other factors involved.

Dan

On Fri, 6 Sep 2013 09:07:50 -0700 (PDT), "
wrote:

On Friday, September 6, 2013 9:47:00 AM UTC-4, Ed Huntress wrote:


So I thought the topic was about whether a hgh or low Gini number made a difference.



It is. But you can read what he said either way. Here's what he said:


And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.



That's what we were talking about -- the rising income disparities in

the US, and the implications of IMF and other research from other

countries for the US economy.



There isn't much to be applied to the US, from the experience of a

relatively poor economy where over 50% of the workers are involved in

farming.





So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.



I'm not tryint to "restrict" anything. I'm talking about the subject

we were discussing.



Now I am really confused. First you say the subject is about whether a hgh or low Gini number made a difference. And then you say it is only about the U.S. economy related to the Gini number. You need to be less parochial. If the Gini number makes a difference it ought to make a difference regardless of the country. If it is country dependent then there must be other factors involved.

Dan

Let's try to clarify it, then. A GINI coefficient, by itself, doesn't
tell you much. I agreed to that point several messages ago in this
thread. As a raw number, divorced from historical trends and the
structure of particular economies, its implications are ambiguous.

But a rising GINI coefficient can be an indicator of an economy's and
a society's decling functionality and potential for growth.

It's a complex and nuanced subject. For the current thinking among
economists and some of the latest research, that Special Report I
linked to tells the broad picture and where the current agreements and
disagreements lie:

http://www.economist.com/node/21564414

If you don't want to go look at that, here's the part that George and
I have been talking about:

=============================================

And in today’s sluggish economies, more inequality often means that
people at the bottom and even in the middle of the income distribution
are falling behind not just in relative but also in absolute terms...

....The mainstream consensus has long been that a growing economy
raises all boats, to much better effect than incentive-dulling
redistribution. Robert Lucas, a Nobel prize-winner, epitomised the
orthodoxy when he wrote in 2003 that “of the tendencies that are
harmful to sound economics, the most seductive and…poisonous is to
focus on questions of distribution.”

But now the economics establishment has become concerned about who
gets what. Research by economists at the IMF suggests that income
inequality slows growth, causes financial crises and weakens demand.
In a recent report the Asian Development Bank argued that if emerging
Asia’s income distribution had not worsened over the past 20 years,
the region’s rapid growth would have lifted an extra 240m people out
of extreme poverty. More controversial studies purport to link
widening income gaps with all manner of ills, from obesity to suicide.

The widening gaps within many countries are beginning to worry even
the plutocrats. A survey for the World Economic Forum meeting at Davos
pointed to inequality as the most pressing problem of the coming
decade (alongside fiscal imbalances). In all sections of society,
there is growing agreement that the world is becoming more unequal,
and that today’s disparities and their likely trajectory are
dangerous.

=============================================

There are a few ways in which a rising GINI can be good. There are
more ways that it can be bad. In our case, it reflects a hollowing out
of the middle class.

Comparing our GINI to that of a country where 50% of the workers are
engaged in farming, like Albania, tells you nothing much, except that
GINI numbers are only useful indicators in terms of trends, and of
comparisons between countries at similar stages of development.

--
Ed Huntress

On Fri, 6 Sep 2013 09:07:50 -0700 (PDT), "
wrote:

On Friday, September 6, 2013 9:47:00 AM UTC-4, Ed Huntress wrote:


So I thought the topic was about whether a hgh or low Gini number made a difference.



It is. But you can read what he said either way. Here's what he said:


And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.



That's what we were talking about -- the rising income disparities in

the US, and the implications of IMF and other research from other

countries for the US economy.



There isn't much to be applied to the US, from the experience of a

relatively poor economy where over 50% of the workers are involved in

farming.





So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.



I'm not tryint to "restrict" anything. I'm talking about the subject

we were discussing.



Now I am really confused. First you say the subject is about whether a hgh or low Gini number made a difference. And then you say it is only about the U.S. economy related to the Gini number. You need to be less parochial. If the Gini number makes a difference it ought to make a difference regardless of the country. If it is country dependent then there must be other factors involved.

Dan

======================

In something as convoluted and arcane as economics and
society there are always other factors involved. However
across time and a number of countries, where accurate data
is available, high GINI indices highly correlate with low
quality of life metrics. I am including reasonable economic
stability and level as an important QoL metric.

One branch of statistics called multiple regression can
estimate the [relative] size of the effect each independent
variable has on the dependent variable. It can determine
correlation but *NOT* causality, i.e. which is the cause and
which is the effect, or if a third unidentified factor,
which is actually the causal factor, is effecting both.
This is where subject matter expertise, critical analysis
and plausible models are essential.
http://en.wikipedia.org/wiki/Regression_analysis
http://wiki.answers.com/Q/What_is_multiple_regression

As far as not extrapolating from smaller countries, and
implicitly assuming the US is immune from the socio-economic
and fiscal/financial factors that effect others, this is
called exceptionalism, as in "the rules/trends/correlations
don't apply to me and mine," which is a time proven recipe
for disaster at the individual, corporate [e.g. GM, Bear
Sterns, Lehman Brothers] and national [e.g. Rome, Spain,
France, Netherlands, Germany, UK] levels.

The difference between a large and small country, where an
actual socio-economic/fiscal relationship exists
between/among factors is the magnitude of the causal
factor(s) [which may depend on how it is measured/expressed
i.e. absolute v relative/percent] required to trigger an
effect, how quickly an effect becomes apparent, and how
quickly (and if) the country can recover.

FYI
http://www.bea.gov/newsreleases/inte...ewsrelease.htm
snip
In July, the goods deficit increased $4.5 billion from June
to $58.6 billion, and the services
surplus decreased $0.1 billion from June to $19.4 billion.
Exports of goods decreased $1.1 billion
to $132.7 billion, and imports of goods increased $3.4
billion to $191.3 billion. Exports of
services were virtually unchanged at $56.7 billion, and
imports of services increased $0.1 billion
to $37.3 billion.
snip

Do the math and this is an annualized rate of (58.6-19.4)*12
= 39.2*12 or 470.4 BILLION$. This is on top of the national
budget deficit. The cumulative trade deficit [dating back
some 35 years] dwarfs the official national debt. We are
playing with fire, everyone is about to get burned...

On Fri, 06 Sep 2013 13:17:41 -0700, George Plimpton
wrote:

On 9/6/2013 11:51 AM, Ed Huntress wrote:
On Fri, 06 Sep 2013 11:02:24 -0700, George Plimpton
wrote:

On 9/6/2013 9:45 AM, Ed Huntress wrote:
On Fri, 6 Sep 2013 09:07:50 -0700 (PDT), "
wrote:

On Friday, September 6, 2013 9:47:00 AM UTC-4, Ed Huntress wrote:


So I thought the topic was about whether a hgh or low Gini number made a difference.



It is. But you can read what he said either way. Here's what he said:


And yet you seem not to be concerned with the general case, but instead only want to discuss the U.S. economy.



That's what we were talking about -- the rising income disparities in

the US, and the implications of IMF and other research from other

countries for the US economy.



There isn't much to be applied to the US, from the experience of a

relatively poor economy where over 50% of the workers are involved in

farming.





So you are trying to restrict the discussion to a single country instead of discussing the general case. So cherry picking the data.



I'm not tryint to "restrict" anything. I'm talking about the subject

we were discussing.



Now I am really confused. First you say the subject is about whether a hgh or low Gini number made a difference. And then you say it is only about the U.S. economy related to the Gini number. You need to be less parochial. If the Gini number makes a difference it ought to make a difference regardless of the country. If it is country dependent then there must be other factors involved.

Dan

Let's try to clarify it, then. A GINI coefficient, by itself, doesn't
tell you much. I agreed to that point several messages ago in this
thread. As a raw number, divorced from historical trends and the
structure of particular economies, its implications are ambiguous.

But a rising GINI coefficient can be an indicator of an economy's and
a society's decling functionality and potential for growth.

It might be. Then again, it might not be. That's the whole problem.


It's a complex and nuanced subject. For the current thinking among
economists and some of the latest research, that Special Report I
linked to tells the broad picture and where the current agreements and
disagreements lie:

http://www.economist.com/node/21564414

If you don't want to go look at that, here's the part that George and
I have been talking about:

=============================================

And in today’s sluggish economies, more inequality often means that
people at the bottom and even in the middle of the income distribution
are falling behind not just in relative but also in absolute terms...

...The mainstream consensus has long been that a growing economy
raises all boats, to much better effect than incentive-dulling
redistribution. Robert Lucas, a Nobel prize-winner, epitomised the
orthodoxy when he wrote in 2003 that “of the tendencies that are
harmful to sound economics, the most seductive and…poisonous is to
focus on questions of distribution.”

But now the economics establishment has become concerned about who
gets what. Research by economists at the IMF suggests that income
inequality slows growth, causes financial crises and weakens demand.
In a recent report the Asian Development Bank argued that if emerging
Asia’s income distribution had not worsened over the past 20 years,
the region’s rapid growth would have lifted an extra 240m people out
of extreme poverty. More controversial studies purport to link
widening income gaps with all manner of ills, from obesity to suicide.

The widening gaps within many countries are beginning to worry even
the plutocrats. A survey for the World Economic Forum meeting at Davos
pointed to inequality as the most pressing problem of the coming
decade (alongside fiscal imbalances). In all sections of society,
there is growing agreement that the world is becoming more unequal,
and that today’s disparities and their likely trajectory are
dangerous.

=============================================

There are a few ways in which a rising GINI can be good. There are
more ways that it can be bad. In our case, it reflects a hollowing out
of the middle class.

No, there is no consensus *AT ALL* that it reflects a "hollowing out" of
the middle class.

No consensus, but there are statistics. If you measure it by income:

"The Disappearing Middle"

"By most measures, the middle class is in decline. The U.S. Census
Bureau's report on income, poverty and health insurance coverage
released in September 2009 reported that real median income fell by
3.6% between 2007 and 2008 to $50,303. The lowest quintiles
experienced earnings declines, the third quintile was flat, and only
the top quintile showed a slight gain. The top 5% enjoyed the largest
gain. The official poverty rate came in at 13.2%, accounting for some
39.8 million people in 2008." [Investopedia]

http://www.investopedia.com/articles/06/middleclass.asp

Your innumeracy is just appalling.

Suppose everything stays exactly the same for the entire existing US
population, but 20 million unskilled Hispanics infiltrate the country,
and they all earn incomes in the bottom quintile. What's going to
happen to median income? It's going to decline, obviously. But what
does this mean for *everyone* else? Nothing. Everyone who was in the
middle is still there, enjoying exactly the same standard of living as
previously.

Your innumeracy is just appalling. g If they're all earning incomes
in the "bottom quintile," it's no longer the same bottom quintile.
They've pushed some of the people who *formerly* were in the bottom
quintile into a higher quintile, without changing their incomes, and
that next higher quintile now has a lower-income lower bound. And that
results in the mean and lower-bound incomes in the second and each
quintile above, dropping.

But I'm just tweaking your nose. I get your point. However, your
hypothetical invasion will have consequences for the middle class when
we get to the question of whether the middle class is being hollowed
out. Those new, hypothetical invaders with low incomes have
consequences for the rest of the economy. That's one key point. The
whole system interacts. You can't wall them off from the rest of the
economy.


Now suppose, instead, that some change - offshoring, new technology,
whatever - displaces 20 million people who were at the top of the fourth
quintile - right around $100,000 as given in the Investopedia article -
and they move way down to about $60,000. As part of the same change,
stockholders and top managers in the companies affected by the changes
see a huge gain in their wealth, and they all move farther up in the top
quintile. What happens to the median income? Nothing: everyone
earning above the median is still there, and everyone who was earning
below the median still is.

Ok for the overall median. But we aren't done yet.


In both cases, income inequality has worsened. In one case, in which
the median income fell, no one in the economy before the change
(immigration) saw any change in standard of living. In the other, in
which median income was unchanged, 20 million people saw a serious
decline in their standard of living.

The task you have that is obviously far beyond you is to show that
income inequality *caused* any change - in particular, any change in
growth. Observing a decline in median income doesn't tell you anything
- you have no idea why it declined.

Well, we know in the case of your hypotheticals because you told us
how you made them up.

You've made the point that there are hypothetical ways to make big
changes in a Gini coefficient which may, or may not, influence the
incomes of the different quintiles. But your first example ignores the
consequences of suddenly having a large increase in the number of
low-income workers. And your second one tells us that, without
changing the overall median income (but causing a large increase in
the Gini coefficient) you can have a large decline in consumption,
which would slow the economy down.

I'll submit that BOTH of your hypotheticals result in a slowing of the
economy, but I won't try to prove it. I'll leave that to the research,
some of which I cite below.


Your biggest problem is you have no possible explanation for *why* a
change in inequality would *cause* a change in growth. You're saying
that increases in inequality *cause* a decline in growth.

Actually, I'm citing others who say that, including the IMF, the
Federal Reserve, and _The Economist_. There are many others. This
subject has been beaten like an old plow horse, and there is a
substantial amount of research supporting the points that George and I
have made.

Why would
they? Isn't it more plausible to say that what *caused* the change in
inequality also *causes* the change in growth? I can certainly see that
in the case of the massive influx of illegals. We now have
(hypothetically) 20 million new low-income people demanding food,
medical care, schooling and more, but they're a big drag on the economy
because they don't produce much of anything (being unskilled, you know.)

I think you've just made my point above, which I'll pass off to the
research to support.

We may not be that far apart. I agree that whatever causes a change in
inequality probably causes the change in growth -- again, not on the
basis of my own deductions, but based on the evidence presented in the
research. But it's also a reasonable thing to conclude, because the
economy as a whole winds up supporting the whole population, and a
drag at the bottom has consequences for those well up the ladder, if
not very much for those at the very top.

But does the actual causation matter? Because the Gini coefficient is,
first and foremost, an indicator. If an increase in inequality
corresponds to a decline in growth, why would it matter for us
non-researchers exactly what the causative relationship may be? I'm
not trying to cure the economy's ills. I'm just looking for smoke
signals indicating trouble ahead.

Most of what's been discussed here is the *correspondence*: rising
inequality corresponds to a decline in growth (see the research
below). That makes a rising Gini coefficient -- increasing income
inequality -- worrisome, as _The Economist_ articles that I linked to
say.


Let's look at another hypothetical example. Ten guys at the top - call
them the 0.0001% - start a firm that sells something bought only by
people in the bottom two quintiles. It costs $10, and 25,000,000 people
buy it. They pay for it by not buying something they used to buy from
other people in the bottom two quintiles. There obviously has been an
increase in income inequality - those 10 guys at the top are now all
making $25 million more each, while some number of people near the
bottom are all together $250 million poorer (lost sales). The
25,000,000 people who bought the product are all better off: the new
product they're buying must be assumed to increase their satisfaction
more than the old product they used to buy, or else they wouldn't have
changed their purchases. Does this increase in income inequality
somehow slow growth? How would it? Maybe it would - maybe the $250
million in lost income experienced by those other people in the bottom
two quintiles would lower the total growth of the economy from what it
otherwise would have been.

I don't think there's much question that it would slow growth, because
the velocity of that $250 million going to people at the bottom is
going to be some multiple of the rate it would be if the $250 million
went to the people at the top. Their money doesn't churn like poor
people's money churns.

But how are you going to stop that? You
could simply tax away the $250 million from the 10 guys and redistribute
it to the people who lost income at the bottom, but then why would
anyone bother with innovation? Now the new product doesn't get made,
and the 25,000,000 who bought it and were better off than before are
made worse off. Maybe we only permit innovation if it's done by people
near the bottom in their spare time. Good luck with that.

You're getting 'way ahead of anything I've proposed or suggested. I
don't know of any reasonable way to stop it, and I don't think there's
any direct way you *should* stop it. But there is strong reason to
believe we're all better off, in terms of demand, consumption,
velocity of money, and so on, if there are more people who can afford
to buy things beyond the bare essentials.

And that's the middle class. We'll get to that.


The problem is you ****tards

Knock that off.

... don't really have a case, and you know it.

Your problem, Plumper, is that you assume what "our" case may be. And
despite your delusions of insight into the minds of others, you're
usually wrong. You're especially wrong in this case. You're generally
wrong because you do too much generalizing and too much dogmatic
polarizing.

You're not *really* concerned with any putative effect of increasing
income inequality on growth; that's just your smokescreen.

....here we go again...

The real
issue for you is you consider the income inequality to be a bad thing
/per se/, for concealed and untenable moral reasons.

I must have concealed them from everyone, including myself, because
I've never thought or proposed such a thing. You're thinking of
someone else. You don't have X-ray vision into my mind. You only
imagine that you do. It's a bad habit that you ought to fix.

The reason we know
you left-wing ****tards aren't really concerned with growth is all the
other growth-destroying bull**** you impose.

Are you done now? Good. Now, about the middle class and the rest of
this.

Your snide remark about "innumeracy" was a case of going off
half-cocked. When you went off on a tangent with your hypotheticals,
what I actually had said, and the research I said would take me a
couple of hours, concerned the hollowing of the middle class. This has
been widely measured and reported, but I prefer to do my own when it's
practical. And it's practical to do here.

Without going into detail, a simplified version is just to take the
absolute value of variance from the top and bottom bounds of a central
quintile, compared to the mean of that quintile. Or take the
percentage of difference between the upper and lower bounds. Or, if
you want to work with medians instead of means, take two adjacent
quintiles and use their dividing point as the median -- because it
*is* the median of two adjacent quintiles.

Do that for, say, 2012, and compare it to 1970. Do it adjusted for
inflation, or do it with PPP values, if you want to get fancy and can
find them. But it doesn't matter much. You're working with relative
proportions here, not absolute values. Pick your favorite values for
"middle class" and work with that.

If it's higher now, it means that the middle class (in terms of
income) is declining. I'll leave it to you to work out the details and
explanation or I'll lay them out for you if needs be. This is an
indirect way to simplify what would be a complex bunch of Excel work
if you did it the obvious way, which is to calculate a range of values
you define as "middle class," as a percentage (again, of
inflation-corrected values or PPP) and calculate the width of a
quintile that represents -- in other words, the percentage of the
working population -- and then compare recent figures with those of
several decades ago. My simplified way will give you the same relative
values with much less arithmetic.

The idea, well-supported in economics literature for decades, is that
the middle class is the key to growth in our economy and in similar
ones, and it's declining as a percentage of the population. This is
more consequential than the median income because it's the middle
class that consumes non-essentials and does the mid-level productive
work. Much of the success of the US economy is attributed to building
a relatively large middle class. The inverse appears to be true, also:
a decline in the middle class will slow our economy.

I've already posted links to resepectable sources that confirm those
points.

Now, about the "proof" of the point you assume I was making, but which
I was only reporting: here are a few examples of where it comes from:

"Income Inequality's Impact on Community Development" -- Fed. Reserve
Bank of San Francisco:

http://www.frbsf.org/community-devel..._FullIssue.pdf

"Income Inequality and Current Account Imbalances" -- International
Monetary Fund working paper:

http://www.imf.org/external/pubs/ft/wp/2012/wp1208.pdf

"Aspects of Inequality in the Recent Business Cycle" -- Speech,
published by the Fed. Reserve System Board of Governors:

http://www.federalreserve.gov/newsev...n20130418a.htm

Here's one you'll really like g:

"U.S. Income Inequality: It's Not So Bad" -- published by the Fed.
Reserve Bank of St. Louis

http://www.stlouisfed.org/publicatio...ticles/?id=986

Like most academic papers, you can read the intro and the conclusions,
and you've got it -- unless you want to argue about methodology with
teams of PhD. economists.

Speaking of conclusions, here's where you've seriously misjudged my
position on all of this: I'm a skeptic about the problems with
inequality. But I pay attention to top economists and institutions all
over the world that *formerly* thought it was no big deal, but now
commonly, if not uniformly, say it is, after all.

Your hypotheticals are useful in a narrow way, but what matters is
real economies -- especially ours -- and normal distributions: the
stuff of our actual lives. It appears, from many angles, that rising
income inequalities are doing more harm than good.

I can't argue the point itself, only produce the research that's been
done. But then, you can't really argue it, either.

--
Ed Huntress

On Sat, 07 Sep 2013 08:20:09 -0700, George Plimpton
wrote:


The central point is, the change in income inequality is not what caused
anything. That's merely a symptom of something else.

The IMF and others have shown connections between income inequality
and declines in growth rates, and they present some evidence that it's
a direct causative relationship.

I've linked to some IMF reports. And *my* central point, that income
inequality is a sign of danger for an economy, is well supported by
the IMF, Federal Reserve, and other authoritative sources I've linked
to in this discussion.

The correlation and the role of income inequality as a leading
indicator of trouble is the central point. You and your source of
documentation -- Phil the blogger, who begins with "I think" and who
uses baseball analogies -- can argue with those sources over
causation.

--
Ed Huntress

On Sunday, September 8, 2013 1:47:58 PM UTC-4, Ed Huntress wrote:



The IMF and others have shown connections between income inequality

and declines in growth rates, and they present some evidence that it's

a direct causative relationship.



Ed Huntress

I believe the Gini numbers are only a measure, not a cause. You can " improve " the Gini number by confiscating all the property of everyone in the top 10 % of income. But that will play hell with the economy.

In countries where the Gini number is low, it is probably the number of good middle class jobs that causes it to be low. In other words a good economy causes the Gini number to be low. Reducing the income of those with high income is not likely to help the economy, but would " improve " the Gini number.

If there is a direct causative relationship, then you ought to be able to produce the reasons that the Gini numbers causes economies to flourish or decline. But those words " some evidence " indicate there is no obvious cause.

So Ed, what sort of recreational metalworking have you been doing? I am off to the garage to see how hard it would be to add a circuit for turning on lights when the trigger is pressed on my mig welder.

Dan

On Sun, 8 Sep 2013 11:20:43 -0700 (PDT), "
wrote:

On Sunday, September 8, 2013 1:47:58 PM UTC-4, Ed Huntress wrote:



The IMF and others have shown connections between income inequality

and declines in growth rates, and they present some evidence that it's

a direct causative relationship.



Ed Huntress

I believe the Gini numbers are only a measure, not a cause. You can " improve " the Gini number by confiscating all the property of everyone in the top 10 % of income. But that will play hell with the economy.

In countries where the Gini number is low, it is probably the number of good middle class jobs that causes it to be low. In other words a good economy causes the Gini number to be low. Reducing the income of those with high income is not likely to help the economy, but would " improve " the Gini number.

If there is a direct causative relationship, then you ought to be able to produce the reasons that the Gini numbers causes economies to flourish or decline. But those words " some evidence " indicate there is no obvious cause.

So Ed, what sort of recreational metalworking have you been doing? I am off to the garage to see how hard it would be to add a circuit for turning on lights when the trigger is pressed on my mig welder.

Dan


I don't where you're going with this. Of course the Gini number is
just an indicator. Indicators don't cause things in themselves.

We've discussed that extensively in this thread, Dan. Maybe you'll
want to look at it.

Recreational anything is off the table at the moment. I'm scrambling
to get my October issue out before a business trip to Europe.

--
Ed Huntress

On Sun, 08 Sep 2013 13:47:58 -0400, Ed Huntress
wrote:

snip
The correlation and the role of income inequality as a leading
indicator of trouble is the central point.
snip

BINGO!!!!!

As an analogy consider an individual with a high fever.

While a fever is indeed a symptom, it must be controlled to
avoid permanent brain damage or even death. However after
the fever is controlled, the cause(s) must be determined and
treated. The treatment to reduce the fever should not
introduce other complications. Blood letting was a popular
medical practice in the past because it does in fact reduce
a fever, but it frequently killed the patient because it
weakened their resistance and did nothing to treat the
underlying problem(s).

In many ways confiscatory taxation including capital levies
on total wealth, including that held off-shore or in trust
accounts, on the top 1 to 10% would be like blood letting,
in that it would indeed reduce the GINI, but it would
introduce other serious conditions, while doing nothing to
treat the underlying causes. It is also an easy and obvious
solution.

Before any action, an in-depth critical study/analysis
should be made and data driven policies established rather
than relying on what "everybody knows" and "they say."

While possibly falling into a post hoc ergo propter hoc
fallacy, it would appear that a prime suspect is
"globalization" which has resulted in de-industrialization,
the rise of the supranational corporations with their genius
for tax/regulation avoidance if not evasion, and a far too
large financial services sector, compounded with an
increasingly opaque, arcane and convoluted tax code.

What seems clear is that over the last 30 years of
implementation of globalization, "the Washington Consensus,"
and the "Brave New World Order" 99% of Americans have taken
it in the shorts, while the 1% never had it so good.