Understanding the 'distribution of income/wealth': The L curve

[Craig234]

Link to The L Curve

For years, I've been aware of the web site as one of many discussing wealth issues, and did not quite see a need to post it in a thread.

Now, I', feeling it would be helpful, with the current economic problems and the frequent lack of understanding I see in many posters' understanding of wealth.

You see the same sad cries of surprise against the corruption of the government representing the interests of the wealthy, including from the right who focus their anger at the government more than the wealthy, and I think they need to have some understanding of why 'the people', large in number but not in influence or organization, get the pat on the head and the lie so much, while the rich get the cash.

(I'll repeat a favorite saying, 'politicians have to LOOK good to the voters, and DO good for the donors.')

If a picture is worth a thousand words, enjoy the information in the link - the visual says a lot, and the text below adds useful background.

The bottom line is that *moderate* inequality of wealth is the only type that provides for prosperity and democracy, and it's now excessive.

Supreme Court Justice Louis Brandeis was a key leader who led our nation out of narrow laissez-faire economics to the modern system we have today, by challenging some of the 'rights of the wealthy' in how the law was interpreted, based on the good of society. He said:

?We can have a democratic society or we can have great concentrated wealth in the hands of a few. We cannot have both.?

Too much of the so-called discussion here is the same posters throwing the same ideology at one another.

The rare times that ideologies based on falsehoods can improve is when persuasive data is presented contradicting the ideology.

Hopefully the facts in the link can help some posters adjust the imagined facts their ideological views are based on - in this case the right, just as communists had to eventually come to grips with the difference between their idealistic 'brotherhood' of helping one another in the face of mas poverty and political authoritarianism.

 

[JS80]

The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

 

[irwincur]

What some people forget however is that those at the top 10 percent tend to also be wealth generators for those in the lower 90 percent. They are the employers and business owners. They have undertaken a significant amount of personal risk to see to it that they could provide others with work. Risk vs reward is a clear concept. The more risk involved, tyipcally the more you can expect as a reward.

Now, when you take away the wealth in the top 10 percent and just give it away, you reduce the incentives in the reward side of the puzzle. So if risk does not compete with reward, you will eventually have less money at the top, more in the middle and bottom, but much less incentive to get to the top. Without people moving to the top, the middle grows and those that take risk decline - meaning that at some point real wealth also declines because there are not enough new business owners or employers risking their safe middle class lives to supply any more jobs.

Eventually, the cycle stops and almost all of the money has to be managed by a broker who can redistribute. This happens because people without jobs still deserve a decent lifestyle (or so the argument goes). However, with more and more people out of work, because the supply is reduced, more and more people are on the dole. It creates an endless cycle towards higher and higher taxes, a reduction in real wealth, and government distribution to equalize the system.

Which is why Socialism ends up at Communism - because eventually to manage the system, you must take all money and property focefully to meet the needs of everyone. All people are then employed by the government because they become the only entity holding the wealth. And with the wealth, they also hold power over liberty and personal freedoms.

So as bad as free markets are, they insure that the people have more control over money and property than the government does. This in turns buys their rights and liberties - as the people are not beholden to the government - the government requires the wealth of the people to operate.


Pretty sad that we are half way to pure Socialism, which puts us a short skip away from total loss of rights, liberty, and property. Once we move too far down this path it is almost impossible to reverse without a major public upheaval and a refresh of this cycle.

The statement that a free market is done when the majority realize that they can vote themselves gifts from the treasurey rings absolutely true. Within the next 10 years, expect a permanant majority voting block to be completely on the government dole. Within 20 we will have gone too far. Within 40 - 50, the US will be the United Socialist States of America (or a safe name for the new USSR - a pure Communist nation).

 

[palehorse]

What, exactly, are you proposing here? A forced redistribution of what you have deemed "excessive"?

Please tell me that's not what you're suggesting...

 

[OCGuy]

Originally posted by: palehorse
What, exactly, are you proposing here? A forced redistribution of what you have deemed "excessive"?

Please tell me that's not what you're suggesting...

Would it surprise you?

 

[MovingTarget]

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

 

[StageLeft]

There are a lot of lazy people and impulsive spenders who do not take control of their lives and act in ways that can be difficult but ultimately rewarding. And don't pretend we don't ALL know a LOT of people like this.

 

[JS80]

Originally posted by: MovingTarget

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

Labor is already rewarded through wages and benefits. And it is rewarded less so than investments because labor's reward is defined with no downside loss risk. /facepalm right back at you.

 

[MovingTarget]

Originally posted by: irwincur
What some people forget however is that those at the top 10 percent tend to also be wealth generators for those in the lower 90 percent. They are the employers and business owners. They have undertaken a significant amount of personal risk to see to it that they could provide others with work. Risk vs reward is a clear concept. The more risk involved, tyipcally the more you can expect as a reward.

Now, when you take away the wealth in the top 10 percent and just give it away, you reduce the incentives in the reward side of the puzzle. So if risk does not compete with reward, you will eventually have less money at the top, more in the middle and bottom, but much less incentive to get to the top. Without people moving to the top, the middle grows and those that take risk decline - meaning that at some point real wealth also declines because there are not enough new business owners or employers risking their safe middle class lives to supply any more jobs.

Eventually, the cycle stops and almost all of the money has to be managed by a broker who can redistribute. This happens because people without jobs still deserve a decent lifestyle (or so the argument goes). However, with more and more people out of work, because the supply is reduced, more and more people are on the dole. It creates an endless cycle towards higher and higher taxes, a reduction in real wealth, and government distribution to equalize the system.

Which is why Socialism ends up at Communism - because eventually to manage the system, you must take all money and property focefully to meet the needs of everyone. All people are then employed by the government because they become the only entity holding the wealth. And with the wealth, they also hold power over liberty and personal freedoms.

So as bad as free markets are, they insure that the people have more control over money and property than the government does. This in turns buys their rights and liberties - as the people are not beholden to the government - the government requires the wealth of the people to operate.


Pretty sad that we are half way to pure Socialism, which puts us a short skip away from total loss of rights, liberty, and property. Once we move too far down this path it is almost impossible to reverse without a major public upheaval and a refresh of this cycle.

The statement that a free market is done when the majority realize that they can vote themselves gifts from the treasury rings absolutely true. Within the next 10 years, expect a permanent majority voting block to be completely on the government dole. Within 20 we will have gone too far. Within 40 - 50, the US will be the United Socialist States of America (or a safe name for the new USSR - a pure Communist nation).

Trickle. down. economics. does. not. work. The past decade or so has shown us that although there is a legitimate trickle-down effect, it should not be used as a guide to forming economic policy. Nice job invoking the red boogeyman, too. There is a HUGE difference between a progressive enough tax structure designed to achieve a reasonable wealth distribution and the communal/governmental ownership of the means of production from start to finish. We once had a top income tax rate of 90% and guess what - the incentives to make even more money for those at the top were still as strong as ever. Unless you put a static/fixed cap on how much money you can earn (or tax 100% at some level), then that incentive will still be there. Nobody forgoes a good-faith effort to prosper to spite the tax man once you get into the top brackets. It is like taking a vow of poverty for the tax breaks - it makes no sense. An excessive concentration of wealth in any society is just as dangerous to democracy as actual socialism. Democracy with such a wealth distribution leads to oligarchy, which leads to fascism/tyranny. We have been seeing that happening again before our eyes.

 

[mect]

Originally posted by: JS80

Originally posted by: MovingTarget

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

Labor is already rewarded through wages and benefits. And it is rewarded less so than investments because labor's reward is defined with no downside loss risk. /facepalm right back at you.

In general I would agree with you. The problem is, I'm not really convinced there is risk for the extremely wealthy either. I certainly agree that is the case for small business owners. But when a CEO can drive a company into the ground and still walk away with millions, I don't see where the risk is. If there were really significant risks involved, there would be a lot more movement between classes. For the most part, the risks for the wealthy are very managed. I guess I just don't see it as risk when your options are making 10 million a year or 20 million a year. But maybe someone can convince me I'm wrong in my assumptions. I agree, there are those who take risks and build their way to wealth. I just think they are very much in the minority.

 

[MovingTarget]

Originally posted by: JS80

Originally posted by: MovingTarget

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

Labor is already rewarded through wages and benefits. And it is rewarded less so than investments because labor's reward is defined with no downside loss risk. /facepalm right back at you.

If labor is rewarded less so than risk, then how are those not in the top 5% as you put it, lazy? Working your arse off, no matter how productive you are, will never reward you enough to be in that top percentile bracket.

 

[alchemize]

Let's examine the richest people in America.


1. Bill Gates
91,000 employees

2. Warren Buffet
233,000 employees

3. Larry Ellison
87,000 employees

4-7 The Waltons
2,100,000 employees

8. Michael Bloomberg
10,800 employees

9-10 Koch brothers
80,000 employees


Fuckers, hang them all and redistribute their wealth. It's completely UNFAIR!

 

[ElFenix]

don't worry, with impending long-term economic depression, that wealth chart is surely to flatten some.

 

[Throckmorton]

Originally posted by: alchemize
Let's examine the richest people in America.


1. Bill Gates
91,000 employees

2. Warren Buffet
233,000 employees

3. Larry Ellison
87,000 employees

4-7 The Waltons
2,100,000 employees

8. Michael Bloomberg
10,800 employees

9-10 Koch brothers
80,000 employees


Fuckers, hang them all and redistribute their wealth. It's completely UNFAIR!

Silly me, I thought they got rich by hiring those people, not that they hired them as a charity...

 

[Craig234]

Originally posted by: MovingTarget

Originally posted by: JS80

Originally posted by: MovingTarget

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

Labor is already rewarded through wages and benefits. And it is rewarded less so than investments because labor's reward is defined with no downside loss risk. /facepalm right back at you.

If labor is rewarded less so than risk, then how are those not in the top 5% as you put it, lazy? Working your arse off, no matter how productive you are, will never reward you enough to be in that top percentile bracket.

What the lazy arguers on the right do it make up the facts to fit their ideological assumptions, which is too big a phrase to fit how pathetic they are.

If they see a CEO make a hundred thousand times as much as the average worker in his company, rather than do what's 'hard', and deal with the issues of justice, of what's economically effective, what can practically be done, they are lazy and just say that his amazing talent and ability are coincidentally 100,000 times as high as theirs too; they all owe employment to him and should bow and thank him 3 times a day for his generosity.

The reverse - that he owes his wealth to their productivity - they don't consider, it's not in their ideology, did I say that's too big a work for how pathetic their 'ideology' is.

And then they continue to ignore the issue.

That's the issue of 'Maslow's hierarchy of needs' getting in the way of the modern citizen's role in policy - if a man sees his baby dying of sickness because he can't afford medicine while the rick kids are well cared for, he might start toget agitated, but give him a humble home, a car, basic food and a tv, and he's not gonna revolt, in the case of these righties.

To these people, whether the CEO is making a thousand, a hundred thousand or a hundred million times as much as them, they don't understand or care, unaware of the degrading effect the concentration of wealth has on the democratic system, as the few get ever-more control over the government and get their way at the expense of the public, in what could be an irreversible situation (just as the gradually increasing corrupt economic practices on Wall Street could create an irreversible problem causing a crash).

These people are afraid of the *restiction* on the concentration of the wealth as threatening their freedom - it's perverse, when it's the lack of restriction that's a threat.

Some will get informed and be better citizens, but not enough.

 

[JS80]

Originally posted by: MovingTarget

Originally posted by: irwincur
What some people forget however is that those at the top 10 percent tend to also be wealth generators for those in the lower 90 percent. They are the employers and business owners. They have undertaken a significant amount of personal risk to see to it that they could provide others with work. Risk vs reward is a clear concept. The more risk involved, tyipcally the more you can expect as a reward.

Now, when you take away the wealth in the top 10 percent and just give it away, you reduce the incentives in the reward side of the puzzle. So if risk does not compete with reward, you will eventually have less money at the top, more in the middle and bottom, but much less incentive to get to the top. Without people moving to the top, the middle grows and those that take risk decline - meaning that at some point real wealth also declines because there are not enough new business owners or employers risking their safe middle class lives to supply any more jobs.

Eventually, the cycle stops and almost all of the money has to be managed by a broker who can redistribute. This happens because people without jobs still deserve a decent lifestyle (or so the argument goes). However, with more and more people out of work, because the supply is reduced, more and more people are on the dole. It creates an endless cycle towards higher and higher taxes, a reduction in real wealth, and government distribution to equalize the system.

Which is why Socialism ends up at Communism - because eventually to manage the system, you must take all money and property focefully to meet the needs of everyone. All people are then employed by the government because they become the only entity holding the wealth. And with the wealth, they also hold power over liberty and personal freedoms.

So as bad as free markets are, they insure that the people have more control over money and property than the government does. This in turns buys their rights and liberties - as the people are not beholden to the government - the government requires the wealth of the people to operate.


Pretty sad that we are half way to pure Socialism, which puts us a short skip away from total loss of rights, liberty, and property. Once we move too far down this path it is almost impossible to reverse without a major public upheaval and a refresh of this cycle.

The statement that a free market is done when the majority realize that they can vote themselves gifts from the treasury rings absolutely true. Within the next 10 years, expect a permanent majority voting block to be completely on the government dole. Within 20 we will have gone too far. Within 40 - 50, the US will be the United Socialist States of America (or a safe name for the new USSR - a pure Communist nation).

Trickle. down. economics. does. not. work. The past decade or so has shown us that although there is a legitimate trickle-down effect, it should not be used as a guide to forming economic policy. Nice job invoking the red boogeyman, too. There is a HUGE difference between a progressive enough tax structure designed to achieve a reasonable wealth distribution and the communal/governmental ownership of the means of production from start to finish. We once had a top income tax rate of 90% and guess what - the incentives to make even more money for those at the top were still as strong as ever. Unless you put a static/fixed cap on how much money you can earn (or tax 100% at some level), then that incentive will still be there. Nobody forgoes a good-faith effort to prosper to spite the tax man once you get into the top brackets. It is like taking a vow of poverty for the tax breaks - it makes no sense. An excessive concentration of wealth in any society is just as dangerous to democracy as actual socialism. Democracy with such a wealth distribution leads to oligarchy, which leads to fascism/tyranny. We have been seeing that happening again before our eyes.

Robin. hood. economics. does. not. work.

Hell, by your logic (bolded above), we should start taxing poor people at 90%, and remove that tax when they get above the poor level. That way there is incentive to make enough money to not be poor anymore!

 

[blackangst1]

Originally posted by: irwincur
What some people forget however is that those at the top 10 percent tend to also be wealth generators for those in the lower 90 percent. They are the employers and business owners. They have undertaken a significant amount of personal risk to see to it that they could provide others with work. Risk vs reward is a clear concept. The more risk involved, tyipcally the more you can expect as a reward.

Now, when you take away the wealth in the top 10 percent and just give it away, you reduce the incentives in the reward side of the puzzle. So if risk does not compete with reward, you will eventually have less money at the top, more in the middle and bottom, but much less incentive to get to the top. Without people moving to the top, the middle grows and those that take risk decline - meaning that at some point real wealth also declines because there are not enough new business owners or employers risking their safe middle class lives to supply any more jobs.

Eventually, the cycle stops and almost all of the money has to be managed by a broker who can redistribute. This happens because people without jobs still deserve a decent lifestyle (or so the argument goes). However, with more and more people out of work, because the supply is reduced, more and more people are on the dole. It creates an endless cycle towards higher and higher taxes, a reduction in real wealth, and government distribution to equalize the system.

Which is why Socialism ends up at Communism - because eventually to manage the system, you must take all money and property focefully to meet the needs of everyone. All people are then employed by the government because they become the only entity holding the wealth. And with the wealth, they also hold power over liberty and personal freedoms.

So as bad as free markets are, they insure that the people have more control over money and property than the government does. This in turns buys their rights and liberties - as the people are not beholden to the government - the government requires the wealth of the people to operate.


Pretty sad that we are half way to pure Socialism, which puts us a short skip away from total loss of rights, liberty, and property. Once we move too far down this path it is almost impossible to reverse without a major public upheaval and a refresh of this cycle.

The statement that a free market is done when the majority realize that they can vote themselves gifts from the treasurey rings absolutely true. Within the next 10 years, expect a permanant majority voting block to be completely on the government dole. Within 20 we will have gone too far. Within 40 - 50, the US will be the United Socialist States of America (or a safe name for the new USSR - a pure Communist nation).

Interesting points and well said. Thanks.

edit: as an afterthought, has there ever been a government system or society where there WASNT a concentration of wealth, whether it be in the public or private's hands? I say not. Sure, by various degrees. The difference is whether or not its possible to get into that wealth slice of the pie, and, at least by my experience and travels to many countries around the world, no where is it easier than here.

 

[ElFenix]

Originally posted by: MovingTarget
We once had a top income tax rate of 90% and guess what - the incentives to make even more money for those at the top were still as strong as ever.

calculate what the actual rate is once all the deductions, credits, loopholes and discounts are applied and i think you'll find a much much lower number. throwing out that or the pre-reagan 70% number is as intellectually dishonest as claiming the US has the highest corporate profit rate in the world.

 

[Craig234]

Originally posted by: ElFenix
don't worry, with impending long-term economic depression, that wealth chart is surely to flatten some.

No, it's not - it's all relative. Whether it's 10 billion vs. 10 thousand, or 1 billion vs, 1 thousand, the chart's the same.

What's needed is a 'real' reduction in the curve - to, say, the levels it was at in the 1940's-1960's. It will create wealth, and create it for a lot more people.

 

[Craig234]

Originally posted by: ElFenix

Originally posted by: MovingTarget
We once had a top income tax rate of 90% and guess what - the incentives to make even more money for those at the top were still as strong as ever.

calculate what the actual rate is once all the deductions, credits, loopholes and discounts are applied and i think you'll find a much much lower number. throwing out that or the pre-reagan 70% number is as intellectually dishonest as claiming the US has the highest corporate profit rate in the world.

Part of JFK's reducing the top rate from 91% to 70% was closing a lot of loopholes, too. Calling that 'intellectually dishonest' is way too strong.

Especially given the massive tax evasion that goes on today, increasing since the 70's, for those at the top so that *today's* lower rates are artifically inflated.

 

[JS80]

Originally posted by: MovingTarget

Originally posted by: JS80

Originally posted by: MovingTarget

Originally posted by: JS80
The amalgamation of one's wealth does correlate very well with how productive one is in society, and considering 95% of the population is stupid and lazy and are leeches of the other 5%, the distribution looks very fair.

/facepalm

Maybe I should check my sarcasm meter, but I don' think that this is accurate. This kind of thinking is no different than a modern day divine right of kings. The wealthy are all wealthy because the rest of us are lazy and therefore don't deserve more than a pittance. The only way to measure one's productivity is their net worth. :roll:

The L curve may be misleading and blow things a bit out of proportion as far as wealth distribution goes, but I cannot accept that things as they are now are sustainable and correct. Labor should be rewarded, but not less so than investments.

Labor is already rewarded through wages and benefits. And it is rewarded less so than investments because labor's reward is defined with no downside loss risk. /facepalm right back at you.

If labor is rewarded less so than risk, then how are those not in the top 5% as you put it, lazy? Working your arse off, no matter how productive you are, will never reward you enough to be in that top percentile bracket.

Working your ass off and being productive will get you to a high enough part of the bracket to make six figures and live comfortably. If you want to join the top 5%, you have to take investment risk. How hard is that to understand? Who is keeping laborers from saving their money and risking the capital to hit it big?

The distribution of wealth merely is a reflection of what percent of society are risk takers and what percent are laborers.

 

[alchemize]

Originally posted by: Throckmorton

Originally posted by: alchemize
Let's examine the richest people in America.


1. Bill Gates
91,000 employees

2. Warren Buffet
233,000 employees

3. Larry Ellison
87,000 employees

4-7 The Waltons
2,100,000 employees

8. Michael Bloomberg
10,800 employees

9-10 Koch brothers
80,000 employees


Fuckers, hang them all and redistribute their wealth. It's completely UNFAIR!

Silly me, I thought they got rich by hiring those people, not that they hired them as a charity...

Silly me, I didn't realize they were indentured servants and none of them have shared in the success of those companies. Clearly, we need to divide all their wealth equally and give it to all the employees. No that won't work, cause there's folks poorer than them...if any money is left, then we'll give it to the employees.

 

[Craig234]

Originally posted by: JS80
Hell, by your logic

Error: Unauthozed use of the word "logic" by unqualified user

 

[ElFenix]

Originally posted by: Craig234

Originally posted by: ElFenix

Originally posted by: MovingTarget
We once had a top income tax rate of 90% and guess what - the incentives to make even more money for those at the top were still as strong as ever.

calculate what the actual rate is once all the deductions, credits, loopholes and discounts are applied and i think you'll find a much much lower number. throwing out that or the pre-reagan 70% number is as intellectually dishonest as claiming the US has the highest corporate profit rate in the world.

Part of JFK's reducing the top rate from 91% to 70% was closing a lot of loopholes, too. Calling that 'intellectually dishonest' is way too strong.

Especially given the massive tax evasion that goes on today, increasing since the 70's, for those at the top so that *today's* lower rates are artifically inflated.

i'm not really sure what you're trying to say.

 

[JS80]

Originally posted by: Craig234

Originally posted by: JS80
Hell, by your logic

Error: Unauthozed use of the word "logic" by unqualified user

Irony: a liberal claiming to use "logic"