Posts tagged with communism




There are very few facts I think “everyone should know”. The huge income differences across countries are an exception.

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Everyone should know that income per person in Burundi is about 1% of in the U.S. (yes, even though there’s a recession on).

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And everybody should know a rough quantitative history of the world.

13 minutes by Tyler Cowen & Alex Tabarrok




What is Eastern Europe? How did places like Gepidia, Nitra, Great Moravia, the Avar Khaganate, Habsburgia, Pannonia, Thrace, Dacia, Moesia, nomadic Göktürks under the Rouran Khaganate, Dalmatia, Cimmeria, Anatolia, the Great Seljuq Empire, Corinth, Onoghuria, Scythia, Syrmia, Vojvodina, Bulgaria, Carpathia, Illyria, Hamangia, Bosnia, Budim, Egri, Sigetvar, Temeşvar, Pomorje, Serbia, Arduba, Daorson, Ošanićia, Sarmatia, Čapljina, Ardea, Neretva, and Ossetia, in the middle of a continent that became socially dominated in the later half of the 2nd millennium A.D. by residents of its western islands and peninsulas, come to be seen as a “unified group” so that when an American visits Bratislava he expects something similar to Bucharest?

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Anne Applebaum’s answer is that the present categorisation was essentially shaped by the USSR, a political powerhouse in Eurasia during the 20th century.

 

bonus: from Wikipedia, here are some notable biomes in the middle of the Eurasian supercontinent.

the steppe:

The Pannonian plain is divided into two parts along the Transdanubian Mountains (Hungarian: Dunántúli-középhegység). The northwestern part…and the southeastern part…comprise the following sections:

Note: The Transylvanian Plateau and the Lučenec-Košice Depression (both parts of the Carpathians) and some other lowlands are sometimes also considered part of the Pannonian Plain in non-geomorphological or older divisions.

Regions

Relatively large or distinctive areas of the plain that do not necessarily correspond to national borders include:

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Alans

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Building a railway through “the roof of the world” (Tibet).

  • A clever low-low-tech solution to the problem of ground’s freezing & thawing messing up your hard structure. (Also a clever low-tech, but not low-low-tech solution.)
  • Specific numbers that matter a lot: how many days do you need to stop at what altitudes on your way up to work at 5000 metres (15,000 feet) above sea level?

National Geographic:-Megastructures-Extreme Railway (por Simon Peter)




"600 million Chinese living on $600/year, and they need to get those people to $2000/year"




memeengine recently asked a question which has probably been on a lot of newshounds’ minds, as it has been on mine:

  • The picture we are now getting in “the news media" is of rich economies (US & Europe) that have ground to a halt, are not producing jobs, median wages stagnating and lower class wages possibly worse.

    In short even though the GDP growth is continuing, the gains have not been widely shared. (This has been going on for decades but we just talk about it now, which I think is interesting but a topic for another time. Just bear in mind that [a] any statistics you hear in support of an investment are always based on past performance, and [b] we seem to be discussing the past as if it’s the present.)

    So then you have to wonder, what would a capitalist economy look like with very high wages for a small group (like the people who control the robots who make everything) and very low wages for almost everyone (the people who pay for the robots’ services and change the bedsheets of the botmakers)?

I think I have, if not a definitive answer, a useful pespective to share on the question.

  

But first, a detour into theories of economic growth. The first theory I learnt in school was Robert Solow’s equation

Solow growth model

which interprets growth as an increasing function of savings rate (think China) and says that eventually things will peter out.

Since things weren’t petering out in the 50’s when Solow made the theory (and in fact US growth happens in a  constant corridor), Solow added a “cosmological constant”. (It’s called a technological constant but it serves the same role as Einstein's famous fudge factor).

Solow growth model picture

(Is that what’s happened to the USA now? Its period of Solow growth has finally petered out—just like Einstein’s equation, Solow was right all along and shouldn’t have fudged? I bet some of their intelligentsia are asking themselves that.)

There is a bunch of fun mathematics to do with the step functions and plotting K_t versus K_{t+1} but then realising that the K_1955 on the one axis needs to equal the K_1955 on the other axis so the 45° line becomes the stringer board girding the stairs of the step function and … well, you can look up a tutorial on Solow. I’m just sharing that so you have one story of how growth happens in your head, it’s a fairly sensible one, should be valid, and people do think about it.

In summary: savings (sacrifice) creates investment which increases capital which increases productivity which causes growth.

  

Now I’m going to contrast that fable with something I just made up (not to say someone else hasn’t independently also made it up), which I’ll call the Tacking Growth model.

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It’s based on this story I read on the Victorian England webpage, where they observe that:

  • In 1800, hardly a man in England wore socks. But in 1900, hardly a man was without them.

That gave me the following idea of growth. What if economic growth proceeds through reductions in price of some random good—not necessarily something people deeply wanted—but then the substitution and income effects take place. Then growth stops again until the next cost reduction.

Newcomen steam engine

Nobody controls which thing will be innovated on next—whether it will be kevlar, steam, FCOJ, weaving technology, turbine manufacturing efficiency, or putting a metal spiral through the leaves of your notebook.

a turbine (I think at a nuclear power plant)

This fits not only with the story of sox in 19th-century England, but of petrol in Oman, limestone in Indiana, processed food in South Dakota, mp3’s in the post-Napster era — all of the well-studied economic cases where the price of something drops and then its usage increases.

The only difference is I’m relying on the income effects of those price drops in individual goods to cause the broad-based measured economic growth. I think this story has a nice sub-i sub-j feel to it, and it argues that not all growth is equivalent.

If the internet becomes cheap and suddenly everyone spends all day on tumblr, well that’s nice and it may be the optimum within the price regime they’re actually living with, but it’s not what people would have wished for 100 years ago. (They would have wished for “pure income” — to have the wealth of the richies from their own time and have the things that rich people had like hot baths, not necessarily futuristic things like VCR’s. How new goods add utility versus improvements to old goods is another topic for another time.)

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The Tacking Growth story also has an implication for the question I posed at the beginning, which is what does capitalism look like in a rich world with many people making low wages?

I think it looks exactly like this: the poor people have a good standard of living in terms of absolute magnitude, but they have little freedom. With a tight budget constraint (near the origin) obtusely and extremely scalening off in various directions of cheap stuff (sox, packaged food with lots of preservatives, canned food [can o’ corn], modular homes, satellite TV, Budweiser beer, … brand-name oreos, ATV’s and Harleys? Well I didn’t say it makes total sense), the only way to live like a richie is to buy specifically the stuff that is cheap — even if, as measured by eg, your Engel curve, that’s not what you really want.

wildly scalening budget constraint in response to a precipitous price drop in one random good

That undermines the idea of growth-is-good and all-growth-is-the-same because now we’re talking about a “curved” growth path γ through goods space, with consumer responses complicating matters — since their responses change the business environment as Levi’s Jeans suddenly becomes a powerhouse. (Yet another topic for another time could be the transition from custom sewed clothing for everyone to impossible to find pants that fit or get anything repaired because it was all cheaply generated by machine. See my sheaf theory & leontief matrix post.)

what people used to do before the price of internet got so absurdly low

Perhaps consumers smooth a tack-forward-in-this-one-of-1,000,000-possible-dimensions into a more general kind of economic blessing or perhaps they’re just drawn into a weird corner (mixed blessing)—where you have socks coming out your ears, you use socks as rags, socks as lampshades, stitch socks together to make a dress—but what you really want is a bicycle! Or in a more modern context, sub in internet for socks and a trip to Thailand is what you really want.

and, the rich people do much more vacation travelling but still go to Thailand. scalene pricing doesn't matter so much because they have a wide budget, so they're free to do whatever (be closer to their Engel curve).

Now @UnlearningEcon might try to make me eat my shorts because this is so neoclassical and uses a single representative agent and is basically voodoo in many ways. But I just mean it as a sketch, not a full-bodied simulation. It’s also a much easier story to believe in a manufacturing economy than a service economy. Well, let me know if you can do it one better.

  

So I described the Solow model which is one of the usual stories of growth. Did that in order to contrast with the Tacking theory which I think sheds a light on the original question. And that was, what does a world with high productivity, low wages to many and high wages to some, look like?

  • Most obvious is envy. You are going to watch Americans go live like kings in Thailand, Brits go live like kings in Argentina, mansions in the Gran Canarias, chalets in Andorra and beach houses in Tahiti. All of this will be technologically possible but out of reach for you. So you will be aware that it’s possible and that somebody’s doing it and loving it, but not you.
  • Next is opportunity. The more money our robo-programmers make, the more they are going to want to free up their time and have every service done for them. Massage therapists, personal trainers, life coaches, psychotherapists, cleaners, cooks, upscale morticians, model organic farms that you can vacation on, drug dealers, hoteliers, sycophantic investment researchers, and personal assistants all have opportunities to form the perfect life for the robo-programmers, tending to their every need and desire, and get paid for it.Edit: This was an idiotic speculation on my part. I shouldn’t have suggested that contracts to serve the rich would be one-to-one. Plenty of the present-day examples of service-economy jobs split the innovation and the service-work itself. For example jobs at franchises. The rich store inventor came up with the idea of what rich people want, and the sandwich fillers just work there for low wages with no union or no idea of how to find a rich person in the world and get the rich person to pay them. My usage of “robo-programmers” was also cheap and narrow-minded. High labour productivity doesn’t necessarily come from doing productive stuff like producing more goods. It could also be from branding or marketing or dealmaking. Anything that raises revenues or cuts costs. Mitt Romney wasn’t a robo-programmer; he put together funding + buy low + sell high — find some capital that’s not being maxed to its full potential, take it away from those people and put it towards a higher-profit purpose. Not a robo-programmer at all but to the extent that money in the form of profits or GDP is good, he did a good thing and got rewarded for it. Now does he pay a lot for personal trainers and coaches and yoga instructors and personal assistants? I have no idea, and I have no idea if he does, how they convinced him to buy their services. The sad thing is I knew this bullet-point was lazy thinking when I first wrote it but posted it anyway. Service economy, ho!
  • Third is low cost of certain things. The robo-programmers only got rich because they figured out how to run half of the society from their mid-April apartment in Rio! Actually they did part of it on the red-eye from Rio to Mauritius — that’s a killer one, man, it’s better to just work through it and then go party when you get off the flight, and finally crash after you’ve had some fun. Anyway the robo-programmers are creating things for you and everyone else for cheaper than you used to get it before. However anything you want that doesn’t come out of the robo machine (like organic peaches) is going to suck up a lot of your income for something that’s just completely standard (like a fruit). So best to stick with the cheap stuff so that you can afford that vacation in Bristol.
  • Last, let’s think about what happened with the owners of factories or factors of production from mid-century to the modern day. Did they enjoy risk-free returns to capital forever? I don’t think so.

    This is something to research into but I believe a lot of the complicated financial instruments derived in some sense from decreased returns on basic resource production, leading to a demand for segmentation of capital, risks, responsibilities, contractual obligations and rewards. You can still observe that oil & gas is 10% of the world economy but a lot of that goes to paying capital bills (depreciation, from the Solow model) rather than just getting paid & getting laid.

As usual, feel free to call me out or react however in the replies/comments.

 

UPDATE: As is typical with “econ-only” explanations of things, I’ve unwittingly left out culture and threats of violence. Some people use the phrase “class warfare” to describe US President Obama talking about raising taxes on the rich. However, an impolite debate about marginal tax rates is nothing like warfare. Obama is no Robespierre, nor are any US Republicans Ríos Montt.

File:Robespierre exécutant le bourreau.jpghttp://upload.wikimedia.org/wikipedia/commons/0/0f/Shot.jpghttp://upload.wikimedia.org/wikipedia/commons/thumb/2/21/Execution_robespierre%2C_saint_just....jpg/1280px-Execution_robespierre%2C_saint_just....jpghttp://laura579.files.wordpress.com/2010/02/robespierre_guillotined_reign_of_terror_1794.pnghttp://espressostalinist.files.wordpress.com/2011/07/guatamala1exhumation-at-comalapa-a-former-army-base.jpg     

No-one is passing out flyers of Christ holding a submachine gun adorned with Biblical quotations about how the disciples gave up their worldly possessions and shared everything.

The left half of Guatemala’s civil war (16 years of peace, thank heavens, ojalá que siga) handed out pamphlets just like this—and both sides in that war literally did commit warfare—killing families and then killing in retaliation. Setting up patrols and then setting up parapatrols to countermand those patrols. Forcing people to choose sides ("Of course my side is right! if you don’t agree you are with the bad guys and deserve to die!"). And the cause, besides racial tensions between indígena and whites, was an economic gap and lack of economic mobility. O(10^5) deaths ~ 1% of the population.

"Class warfare", like "wage slavery", is a horrible exaggeration that’s offensive to those who have suffered actual war or slavery. But actual war over wage differentials is not unheard of in history. This goes beyond “regular economics-only” analysis into the stories we tell ourselves about ourselves, politics, and game-theoretic moves that people normally forgo.

It may be that such bitter struggles are less common once the poorest are far enough above a meagre subsistence—hungry people have a completely different psychology than non-hungry. Or it may be that the perception <that anyone can move upward in the economic strata through hard work and right action> keeps peace, as those moving forward set their efforts toward non-violent self-advancement: a culture of rising up by work and business, rather than by other means. I don’t know the formula for a peaceful, industrious culture. But, it would be foolish to take that for granted. Rather, peace is something to be grateful for.

I’m not saying that anywhere in the OECD is approaching a brink of civil war—it doesn’t seem like it and let’s hope not—but things in my fictional robo-programmer society could be much worse if “only economic” causes led to “beyond economic” action.




@portereduardo and I were discussing redistributive taxation on twitter the other day.

Mr Porter wrote a piece in the NY Times about hyper-taxing the tippy top margin of American income to reduce the US’ yearly government deficit. Economists Pikkety & Saez (famous for assembling a widely-quoted data set about top incomes) estimate that $400 billion per year could be raised by putting the US’ top marginal rate back to 80%—about ten times as much as I thought could be raised, that’s actually a significant chunk of the yearly (spending − revenue) deficit.

 

Mr Porter used the diminishing-marginal-utility argument for redistribution: poor people value money more than rich people. (It’s been said that exponential increases in money only beget linear improvements in happiness.)

If you believe that rich Americans should give money to poor Americans, surely it follows that Americans in general should give most of their money (at least their earnings above a certain level) to the poorest in the world—people like the Aboubakars. 
The Aboubakar family of Breidjing Camp in Chad.Food expenditure for one week: 685 CFA Francs or $1.23
Nothing speaks to me like this photo series. The families and their food.
This famous photo of the Aboubakars (taken in 2006 I believe) inspired me to eat more legumes and beans over the past few years. I figured&#8212;if 6 of them can get by on ~ $1/week, I can definitely lower my expenses by working what&#8217;s in those bags into my diet &#8212; crowding out the rich, expensive food (meats, pâté, cheese, hummus, butter, pre-made stuff).
Always fighting the hedonic treadmill. Thanks, Aboubakars (and Peter Menzel).
RELATED: Global Rich List, Angus Maddison&#8217;s History of the World Economy, Hans Rosling&#8217;s 2010 TED talk

According to the World Bank, the world’s yearly output is worth $63 trillion, and there are 6.8 billion people on Earth. That means an income per person of about $9250. Let’s pretend that it were possible to just “take that money and put it over there” — let’s imagine that people worked every day just as they do now, got their paychecks, and when they did so the various world governments had shuffled all of everyone’s monies around so that the weekly amount was $177.88. What would the world look like then?

 

What follows is my own speculation about what the world would be like at $9000 parity. A lot of this logic actually requires not-quite-parity because no-one would be swayed by a salary offer of $150,000 over $100,000 if they’re going to keep exactly $9,000 of it either way. So in order for market forces to allocate labour to the places where it’s currently going and thus keep production stable, you would need to do something more akin to:

  • taxing every dollar earned over $5,000/year at a 90% rate
  • (After all, if you live in a tent and all you eat is oatmeal, vegetables, legumes, and vitamins/salt, $96/week is far beyond what’s necessary to stay alive. And who are you that you should get foie gras and Mario Kart, when others eat rice gruel?)
  • taxing every dollar earned over $50,000 at a 99% rate,
  • taxing every dollar earned over $500,000 at a 99.9% rate,
  • and so on,
  • with everyone guaranteed at least $1,500/year and those making less than $9,000/yr getting their wages supplemented by a negative earned-income tax.
  • Phew.

Thus a law professor making $250,000 would keep $200,000×1% + $50,000×10%+$5,000 = $11,000, a hefty 22% above the average and a supernal 633% above the lowest earning minimum for non-workers. More than enough to represent status symbols that would motivate him/her to keep teaching the law to young people, right?

Plus, if the world output were fungible, we would have $9000 per person, not per working person. So the usual dynamics of unemployment, childhood, and retirement would take place. The income of working people might be more like $18,000 or more and then split back down depending how many dependents they had — respecting the bar that the same number of people need to keep working the same number of hours at the current jobs in order for world production to stay constant.

 

But, it’s easier to talk about if we said everyone just gets $9,000/year even. Here are my speculations about what that world would be like:

Things that would not exist if everybody’s incomes were equal:

  • High Fashion — The world would be a drabber place.
  • Sotheby’s — No Rothko pieces auctioning for millions.
  • Expensive houses — Obviously, this is where most of rich people’s money goes right now. One could certainly do time-shares on an expensive place, though — or pack a lot of people into one expensive house. The prices of houses would have to drop as well due to falling demand.
  • Disney World — The capital costs can only be sustained by a steady flow of traffic spending between $2,000 and $20,000 per week at Disney World. However you could still go to Knoebels and ride the Red Baron once for a buck (4% of your daily nut). You would have to pay $40 entrance fee ($45 now at Holiday World!) which would mean forgoing two days’ worth of income (though still paying for rent and food on those days). I think we <link> would still have amusement parks and rides, since Americans weren’t so rich when Coney Island was built.
  • Dubai — Obviously.
  • A variety of restaurants — unless prices dropped dramatically due to the redistribution, people couldn’t eat out like contemporary New Yorkers do. A sandwich from Jimmy John’s costs $5.50, $8.83 if you get soda and chips. That’s 34% of your daily nut, not counting rent/utilities. And the San Francisco “yuppie food stamp” ($20 bill gets you lunch) would amount to 79% of your daily costs — surely putting you over the limit for the day once necessities are paid.

    I predict (or should I say, counterfactualdict) that some people would still choose to make a living by serving food to others—they would probably serve the same two or three foods to everyone all day (perhaps varying the amount per person but less choice)—the economy of scale coming through not having to cook several times or manage different ingredients. I used to go to a place in Dublin run by Hari Krishnas, I’m thinking it would be something like that — or like the comedores of Latin America—you can have eggs, beans, and tortilla made any of 5 different ways—con café; pero crema, no tenemos.
  • Universities. Currently, US universities mostly get money from two places: tuition, and research grants. Adults believe so strongly in the value of education that they will postpone consumption for 10-20 years and lump all of that savings into payments to professors and administrators over a 4-year period. But there’s no way somebody earning $177.88/week is going to pay $80,000/year to send anyone to NYU. However professors would ostensibly be willing to share their knowledge for the same money everyone else is making—so what would the total result be?
  • Cars. How are you going to afford insurance and a car on $770/month? Perhaps it could be done but I think people would just bike / walk / take the bus. Horses might even make a comeback as transportation for normal people. (But rich countries already have the pavement infrastructure so I think people would bike there.) Then again, people might still use motors to get around but much cheaper vehicles, maybe smaller motors or old old cars (think Cuba). After all we still have the human and factory capital to make automotive vehicles, and we still have a lot of cars about. Although our V8 technology is much better than the 2-stroke technology.
  • Banks. Well, they would change, wouldn’t they? If all of their customers made $9e3 / year, it seems their business would have to be very different.
  • Orthodontia. Too high of capital costs. Smile, everyone’s teeth are fugly now.
  • Insurance. Once you start accumulating a lot of stuff while continuing to make buckets of income, what does it make sense to do? Protect your stuff. If the top incomes were hacked off, there would be much less demand for property insurance—after all, we wouldn’t be driving expensive cars or living in expensive homes anymore.
  • Pharma research. At least the business model would have to change. I don’t know exactly what medicines / procedures / medical devices are purchased exclusively by the wealthy, but if the customer base was wider and shallower, that has to make a difference.
  • Medical care. Again I don’t know what exactly would change, but medical care would be quite different for the same reasons.
  • Whole Foods. If everyone were living on $9000/year, then here are some of the ways food consumption might change. Out-of-season fruit might be a luxury; pre-packaged food (not frozen peas but like sun-dried tomato hummus) … Right now OECD grocers waste produce that doesn’t look perfect; I predict consumers would buy tomatoes with bruises and such.
  • Jetskis. As fun as these things are, they have to go. They’re rich boy toys. I guess you could trade used jetskis since they’ve already been produced—but I can’t imagine the continuance of demand for such a luxury item. Then again —maybe you could 
  • Overtime. I believe the business world would slow down if the opportunities became less lumpy—if consumers were more homogeneous, business might be more of a “steady flow” — like a factory. Also, the opportunity cost of leisure would go down so people would be less inclined to work overtime.
  • Classical music. Symphonies have been the provenance of the wealthy since Mozart’s time; just look at who’s sponsoring your local lyric opera today, chances are an élite financial firm’s name is among the biggest donors. Not only does the demand depend on wealth, but the supply does as well. Tanglewood and Julliard don’t come cheap, so we don’t get Nina Simone anymore.
  • "I’m so broke; let’s go to a cheap bar." Maybe I’m being a little wishful. 

Things that could still exist if everybody’s incomes were equal:

  • Billion-dollar fighter jets. Don’t forget that after you earn $100,000 and give $91,000 to the government for redistribution to the poorest, the government still gets to take another $3000 for the purposes of running the government! Maybe the size-of-government would be relatively smaller in a world at parity, but wouldn’t the likelihood of war be greater? We needs dem fighter jets to keep de peace.
  • Research grants. Again, the government still gets to take yet more of your earnings after the redistribution. So they could fund cancer research and so on. The cost of labour in the U.S. might go down quite a lot given the post-tax redistribution, meaning the research would be more labour-intensive and less capital-intensive — so maybe more grants for theorists and fewer experimental machines built?
  • Doctors. Cuban doctors already give up most of their earnings because they’re from a communist country. That didn’t stop them from wanting to be doctores. A Cuban doctor saved my life one time.
  • Two-income households. Sure, all the jobs at Subway and Starbucks will have disappeared, but with companies trying to adjust to 3 billion new customers there will be 
  • Plumbing, showers — You can currently get this for fairly cheap.
  • Apartment buildings — Shared housing is the easiest way to make rent go down. I expect extended families would move in together, or there would be a lot more Craigslist ads and living in even more cramped quarters in a big city where mostly yuppies live. Landlords would essentially be f*$ked over by parity, but isn’t it their fault for trying to siphon money out of the wealthiest instead of serving the poorer customers for a business?
  • Colourful clothing. People figured out dyes hundreds and thousands of years ago. It stands to reason that there was enough demand then, when we <link> were so much poorer, for colour, so there would be demand for it now.
  • Computers. Do you know how cheap an old computer is? Very. Forget One Laptop Per Child, you can find enough parts at a charity shop to get yourself running Puppy Linux on $177/week.
  • Trains? I’m not sure how goods would be moved from point to point in a world at parity. Both trains and lorries can be pretty efficient ways of moving goods from point A to point B; in this Uniform Factory Society I’m imagining I’d guess the returns to providing plain goods at lower cost would exceed the returns to imagining more stylish <link substance of style> or imaginative goods. Trains have been around for quite a long time so that’s an argument that they would still be affordable 
  • Sports. Sure, you wouldn’t have athletes making $20 million per contract, but people played sports long before that happened.
  • Beer. People invented beer long ago, when we were much poorer. Thank heavens we don’t have to give that up. 
  • Lumpy pools of wealth. Just because you equalise individual incomes, doesn’t mean that people still can’t choose to combine their savings and earnings together. People could still aggregate their savings in mutual funds and pick an investment manager to decide which of the new factories churning out staples (or the service companies delivering the staples, or the research companies figuring out how to configure the production resources) was going to grow the fastest and generate the most profits. If the capital gains tax were also 90%, people could still increase their wealth by investing in such a mutual fund. From the investment manager’s perspective, the AUM game would no longer be about convincing a few rich-o’s to invest (although I only said I would tax income, not existing wealth…so I’m contradicting myself here) but more like a high street bank’s problem: get tens of millions of people to open a savings account with you.
  • Envy. This is another question I posed on twitter (@leighblue responded). Does the quantity of envy adjust to relative circumstances? If not, then people would be demonstrably happier if incomes were equalised. If envy quantities do adjust, though, then I would feel as much envy about that law professor’s $11,000 after redistribution as I currently do about her $250,000.
  • Careers. What would you do if money didn’t matter? We would find out the answer to this question very quickly. What effect would it have on the macroeconomy, other than fewer corporate litigators?
  • Cabbage. Of course money, but I also mean literal cabbage. I think cabbage, beans, legumes, barley, potatoes, and other cheap-yet-nutritive foods would make a comeback — whether people cooked at home or ate at a comedor. I also predict vegetarianism would rise as the steak-eaters noticed vegetarian families having more of everything else. (Or maybe Americans would return to “meat one day a week”.)

Some more caveats. It’s arguable that economic growth could be faster in a world of parity. After all, there would be another 3 billion customers to serve—and those people would no longer be wasting their time walking firewood from the hilltop down to the stove.

It’s also arguable that economic output would be cut into 1/10th or worse. Perhaps the great economic efficiency we experience in the world today is directly dependent on the prices of labour being able to vary from $1/day to $100,000/day. You can see in a few of my examples above (e.g., the university) that very radical changes would have to take place — perhaps so radical that people wouldn’t continue doing their current jobs. And where would we be without corporate litigation firms that charge $800/hour?

Firms would all be competing to serve a more uniform group of customers, so production that otherwise went into expensive goods (real estate development in Aspen) would just go into continuing to improve the lives of everyone—like engineering a super-cost-efficient factory and distribution system that has a thousand times the scale advantages that the biggest past monopoly ever had.

Anything else you think I’m missing? A gross, lumpy price deflation as the world adjusts to parity? Massive unemployment or entrepreneurship or single-firm dominance as firms that produce staples suddenly have a lot more orders and firms that produce finery are shuttered? Would typical corporate profits go up or down? Operating costs?

The idea of redistribution is not a new one, if you know of some excellent scholarly discussions of the issue please link to them in the comments and excerpt a quote or two.

One last caveat: I’ve always lived in a capitalist country, so I don’t any personal experience with government-equalised incomes. Anybody who grew up or lived and worked in a communist country, I’d love to get your 2p.




Communism vs capitalism, quantified in one table.

Obviously there are different communisms and different capitalisms, different histories and different cultures, and many variations in individual experience (monetary and non-monetary). So information is lost in projecting all that down to just one number. But there’s definitely something to this capitalism thing.

A factor of 10-20 difference in money necessitates a very strong counterargument.

  • Not just “Money isn’t everything”,
  • not just “Selfishness is bad because it is”,
  • not just “But the Great Recession”,
  • not just “Banksters”,
  • not just “Economic theories neglect stuff”.

Something about the disorderly price system is working; we think we have some vague sketches of why; that’s not an argument for predatory, parasitic, dog-eat-dog, regulatory-capture free markets; but it does suggest that ≥some aspects of capitalism are worth using.

via @delong