Let's talk economics, it's not a pie people

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I've read a few different things that's made me want to post about this before but it was just a little too off topic. In the past here, I've read some who think they're communists talking about the gap between the wealthy and the rich. More recently, I've read here about that same gap and how the newly controlled republican senate will increase the gap the clear implication being that there will be stealing from the poor to feed the rich. In short, I don't think people know what they're talking about.

First, the amount of wealth in this world is not a zero-sum game - someone else being more wealthy does not make you or me less wealthy. In fact, if you are less wealthy it's probably going to make me less wealthy, as well. Bill Gates being less wealthy would not make the starving people in China more so. It's not just one set of pie to go around, with everyone grabbing the biggest slice they can - and Bill Gates getting a mondo-big slice doesn't mean that the rest of us gets a smaller one. Bill Gates being tremendously wealthy makes the whole damn pie bigger for all of us due to the multiplier effect (total new money in the system = deposit / reserve requirement of banks.)

Second, "wealth" isn't something that sits there stagnant, not doing anything, only being able to be used by one person at a time. If I have $100,000 in the bank, I am wealthy. But this doesn't mean that nobody else is able to use that $100,000 at the same time. It's being loaned out to people for oodles and oodles of different purposes, such as buying houses, sending their kids to college, or whatever. So if I didn't have that $100,000, and it had never existed, that doesn't just mean that I'm worse off - everyone else who'd be buying a house or sending their kid to college with it would be worse of, too. Plus then all the carpenters and sheetrockers who would have built the house that isn't bought are less wealthy. Then the baker and the farmer who would have made food that the carpenters and sheetrockers would have bought are less wealthy. Then.... well, you get the idea.

 

What's your point Laches? That's basic economics. I would hope we all understand that...

 

Well not really basic, perhaps in a theoretic sense but the multiplies theory is just that, a theory and it is still very debatable and not really proven.

 

People being wealthy in general does not mean that others can't be, thats true.

But...How do you think most of the real wealthy today got their wealth? By using other of cource, by exploitate others. And this stops people from getting wealthy.

 

I agree in part with Turandil.
Although only a few wealthy people exploited others to get where they are.
IMO most people work really hard to succeed in what they do, either working a 9 till 5 well paying job. Or entertaining through music, movies and sport.
Others invest, which is probably the easiest way to make it. As long as you research what you will be investing in.
There is no such thing as an instant gain.
You've probably heard this cliche a million times,it takes money to make money, unfortunately that is a common misconception which creates a barrier preventing people from succeeding.

 

What do you mean by "exploitate others"? If you mean selling a product to them, well that's not exploitation. If you make money because you sold something to someone else, you're not exploiting them. You have given them something in return for their money.

Remember wealth doesn't just include money. You have to consider assets to, and what they are worth.

Now sure people get ripped-off sometimes, but not everyone that is wealthy "exploitated" somebody else at one time.

 

Along the lines of what Big B said, very few did. Exploiting people to get money is generally considered to be fraud, and the defrauded person would have a right to sue to get their money back.

Generally, the way most of the people nowadays do make most of their money is through investments and using the money they have to make more. Note, this will mean that you have significantly much less money to spend in the short term. It all depends on what you're willing to live with.

 

This is really a continuation on my previous reply to Laches according the multiplier theory. It hasnt really anything to do with the someone getting more money one way or another and then they multiplie, you could probably adapt and perhaps see some signs that it works there but it isnt 'made' for that.
Keynes the author of the multiplier theory and other theories wrote that a state should invest and spend lots of money during economic recess, build up the public sector, give out grants and aids so that more money is released in the circle of economics. This is where the multiplier effect truly comes into play and where it is alot more proven than saying that everyone gets it better because the top ten percent gets it. The only drawback with Keynes theory is that the state needs money to spend and according to him the state should save up during economic perks so it has all those money to spend during recess. Thats not easy to justify to a populace and as far as I know it is only Norway that has both the will and the ability to fully implement Keynes theories and his multiplier effect.

 

Norway is only in this position due to a fluke called the North Sea and the oil that's in it.

True enough that Norway have now got far more reserves abroad than they could spend without destroying the Norwegian economy, so they can indeed apply the Kaynesian model since the money is available to do so.

Back to the earlier stuff:
How exactly does the multiplier effect mean that everyone is better off? All it is is a mechanism to pump the economy from the supply side. That certainly doesn't tally up with American economic policy, where the current tax cuts are aimed at the more well off, not the less well off.

Does that matter in economic terms, there is an increase in the amount of money in the economy, so this should drive it on. Wrong. It does matter, because giving more to the rich(er) generates a lot less than giving it to the poorer people in a population. Poor people have a much high propensity to spend the extra Dollar than someone who has already got enough. Take the example of Bill Gates. Give him an extra $10, he will not spend it. He has all the money he needs, so anything additional will simply be left on the side. Give it to someone who needs it, and it will go back into the economy generating growth.

Since I'm not really sure where Latches wanted to go with this, we can all debate economic theory here till we're bored with it, but with more guidance perhaps we could discuss it towards a point?

 

Ah, Viking, but you forget that if he does not spend it he is not then putting it into a mattress. He is putting it into a bank, which can loan it out to people who are starting a business, buying a house, etc. And -- presto chango -- it's improving the economy!

People who don't want to work hard or are just naturally jealous love to play the blame-the-rich game. It's easier than working hard, coming up with a new idea, or taking a gamble with our current safe, secure positions. Sure, there are people who are rich through no virute other than lucky bloodlines, but rather than getting jealous it makes more sense to just work hard to try to become rich yourself. So long as you do so honestly, no one should criticize you for doing so -- in fact, they should praise and admire you.

 

I'm mainly respnding to a lot of things I've read in other threads indicating people think that it is essentially unfair that the rich are so rich. There has also been the implication that the wealth gap is in some way keeping the poorer sectors of society or of the world from having a better standard of living. The implication by some is that if Bill Gate's didn't have as much wealth there would be more for everyone else. I'm not making a political argument. That said, I see nothing wrong with the debate changing throughout the thread. Here is what I was getting at though, I'm afraid I'm repeating myself.

Talking about "spreading out the wealth" says that Mr Gates' wealth reduction = other person's wealth increase, which it is not. Wealth is not a finite resource you spread like peanut butter.

Think of it like.... oh, I dunno.... "happiness," however you want to define that. Take the propositions: "There are a lot of people without much hapiness in the world. This sucks. Shralp, on the other hand, is rolling in hapiness. He seems to be giddy and ecstatic most of the time. This is blatantly unfair. He has millions of times more happiness in a world where there are people who are clinically depressed. Wouldn't it be better if Shralp's happiness were spread out to all the unhappy people in the world?"

Yes, it's true, there are a lot of unhappy people in the world. Yes, it's true, it should be a strong goal to make all these unhappy people happier. Yes, it's true, Shralp may be millions of times more happy than other people. But you don't make other people happier by reducing Shralp's happiness. His happiness is not the direct cause (hopefully) of other people's sorrow. The cause of all the unhappy people's undesirable state is their lack of happiness due to whatever circumstances are causing it, not Shralp's possession of it. Happiness is not a finite resource where there's only a certain amount in the world and you have to grab a big of a slice of the pie as you can.

And Shralp's being happy in and of itself will create happiness in others around him, whether he wants it to or not. His being happy creates a total happiness in the system greater than his own individual increase in happiness.

See? Maybe sorta?