The Death of the Middle-Class Musician

> And why do you care about inequality, and not eg the absolute livings standards of the least well off?

The two are connected. You can either transfer more wealth to the poorer people without taxing the rich (lets say by helicopter money), or transfer it from the rich to the poor. In both cases the rich become less rich in relative terms. It should also make intuitive sense - if the rich (lets say top 5%) hold 95% of wealth it means there is less for everyone else - less wealth that is because the resources like land, apartments and good education are finite and not abundant.

You can of course create wealth in such a way that inequality stays the same. Not all types of wealth are finite for practical purposes.

But, if empirically our current system for net wealth creation tends to also produce wealth concentration, it makes sense to consider ways of modifying the system to mitigate some of the wealth concentration while maintaining as much of the wealth creation as possible.

> You can either transfer more wealth to the poorer people without taxing the rich (lets say by helicopter money), [...]

Helicopter money transfers real wealth from the people who previously held cash.

It creates nominal wealth, but not real wealth.

> It should also make intuitive sense - if the rich (lets say top 5%) hold 95% of wealth it means there is less for everyone else - less wealth that is because the resources like land, apartments and good education are finite and not abundant.

Let's invert that: if I make everyone's lives 10% more miserable, but the lives of the richest 1% a whopping 20% more miserable, that will have decreased inequality. But it's not a good idea.

That's basically just the idea from https://news.ycombinator.com/item?id=44411538 inverted. Many people have a hard time seeing that wealth can increase, but it's pretty easy to see that total wealth can decrease: I can set fire to my piano, and no one else gets any better because of it.

The target you should look for is how much wealth gets created for the least well-off (or for some low percentile representative person). Just don't worry about what the rich people doing at all. No need to punish them.

> Let's invert that: if I make everyone's lives 10% more miserable, but the lives of the richest 1% a whopping 20% more miserable, that will have decreased inequality. But it's not a good idea.

You are conflating two different things, wealth and misery.

Wealth is about material resources not misery or happiness. This is about giving more people access to more material resources by taking away some of the exclusive access to those resource by the rich. Will preventing the uber rich families from buying their seventeenth fleet of housing complexes and their twentieth estate make them "more miserable" sure, probably, but it also secures the independence of the people you make that house available to (rather than make them permanent wage slaves to the landed class that just scoops up homes that they don't materially need need to extract rents etc).

Where is the "wealth created for the least well off" going to come from?

Necessarily, that must be wealth that did' go to the rich instead (it could have!). So, necessarily, you are "punishing" them by doing so.

You mainly seem to be against some kind of hypothetical robinhoodesque style redistribution because you worry it's unfair to the rich. Any solution, though, will have to take this shape, whether it targets the existing wealth or wealth generated going forward. It's all about redistribution of access no matter how you slice

You don't need to be so protective of the rich. They are doing just fine and they have plenty of resource and mechanisms in place to protect themselves. If the world's wealthiest people were made even just a tiny bit less wealth by redistribution of assets they would still be living like absolute kings.

How does taking some ones second mansion away to help feed struggling family decrease happiness? If there is a net decrease, the rich person needs to examine their priorities.

> This is about giving more people access to more material resources by taking away some of the exclusive access to those resource by the rich.

You realize most of this wealth is tied up in stocks and other assets that anyone can purchase, right?

> Will preventing the uber rich families from buying their seventeenth fleet of housing complexes

But ARE the likes of Bezos and Musk actually buying housing complexes in the first place, nevermind ones that anyone who isn’t already rich are able to afford?

> and their twentieth estate

And who but the extremely rich would be able to buy these estates in the first place?

Certain forms of stock are effectively liquid. This means that you can turn around and leverage them to buy material resources quite easily.

It doesn't matter that "anyone can purchase them". If you have N dollars and I have Nx1000I can buy more stock than you. I can also diversify better than you, I simply have more options, more power, etc. Unless I am a total idiot or you get absurdly lucky and effectively win the lotto, my greater amount of initial capital will go further than your small amount.

> But ARE the likes of Bezos and Musk actually buying housing complexes in the first place, nevermind ones that anyone who isn’t already rich are able to afford?

I didn't mention either of these people. There are plenty of people not in the limelight that do precisely the things I'm talking about, often through banks and companies that they run—I can have my investment firm buy property and increase my salary off the extracted rents and it achieves the same thing.

> And who but the extremely rich would be able to buy these estates in the first place?

Exactly. You just restated the problem with inequality. It gives a small class of people exclusive access to important material resources. Further they can they use this exclusivity to further entrench their positions.

> But ARE the likes of Bezos and Musk actually buying housing complexes in the first place, nevermind ones that anyone who isn’t already rich are able to afford?...

One of the bigger ways this plays out as opposed to your example is: Tons of property is locked up as short term vacation rentals that are only used a tiny percent of the time and only by the rich. There's a spectrum of how rich but we know the bottom 50% almost never use them for example

Similarly the amount of resources locked up in industries that 99% of the time only cater to the very rich is quite a lot and more importantly the trajectory is going more and more that direction.

You could have a world where the work is done mostly by robots and a few million rich people use the world as their playground and then what happens to everyone else?

See https://en.wikipedia.org/wiki/Deadweight_loss

> Similarly the amount of resources locked up in industries that 99% of the time only cater to the very rich is quite a lot and more importantly the trajectory is going more and more that direction.

Sources?

In any case, what you say seems to suggest that consumption taxes would be the way to go.

> Where is the "wealth created for the least well off" going to come from?

Well, mostly where everyone's wealth is coming from: from the fruits of their own labour.

> You mainly seem to be against some kind of hypothetical robinhoodesque style redistribution because you worry it's unfair to the rich.

No, I haven't started worrying about fairness, yet. No, I'm afraid that a tax system designed by what sounds good instead of what works will leave the poor even worse off.

Check out https://en.wikipedia.org/wiki/Tax_incidence for an example: who you officially levy the taxes on isn't necessarily the person shouldering the economic burden.

> Tons of property is locked up as short term vacation rentals

You might not want to dig too closely into who exactly owns all these short term vacation rentals. There's a non-trivial number of people who aren't conventionally what we picture as being "wealthy" who own a lot of them. It was a very popular Covid-era life hack to buy a house at an absurdly low interest rate and rent it out. And that's not getting into people who just managed to buy a house at the right time. For example, I'm just a software engineer in a MCOL area but I bought my first house in the early 2000s and paid it off a little under 20 years later. I sold to fund the next house, but I could've easily bought something more modest and rented the old one out. This is not an uncommon occurrence.

> that are only used a tiny percent of the time and only by the rich. There's a spectrum of how rich but we know the bottom 50% almost never use them for example

Are you under the impression that you have to be fabulously wealthy to rent an AirBNB for the weekend?

> If you have N dollars and I have Nx1000I can buy more stock than you. I can also diversify better than you, I simply have more options, more power, etc. Unless I am a total idiot or you get absurdly lucky and effectively win the lotto, my greater amount of initial capital will go further than your small amount.

And, so what? This just sounds like whining that people in this world who have more money than you exist. I'm sure there's a lot of people in this world who would hold this exactly same argument against you ("you have N dollars, but I have N/1000"). You're not denied the opportunity to build wealth with what money you DO have just because Bezos and Musk et al exist.

> Certain forms of stock are effectively liquid. This means that you can turn around and leverage them to buy material resources quite easily.

Sure, but this isn't the infinite money glitch people seem to think it is. The loan and its interest have to get repaid with... money! That's first taxed! And anything purchased is... subject to taxation!

> It gives a small class of people exclusive access to important material resources.

Look, no matter how little income inequality is, you're gonna have to be rich to say, buy a building in Manhattan or a house in some similarly coveted area.

You clearly believe you're very objective and applying very "rational" thinking to the problem. It's about the dollar value of the income of the least well-off, so what are these stupid people even talking about inequality? Don't they realise making a poor person 10% worse off and Bezos 11% worse off reduces inequality but lowers the floor (the pedestrian argument you've made several times in this thread)?

But please consider that the problem is slightly (i.e. a lot) more complicated than you think. Economics is a very very hard discipline and perhaps more closely related to philosophy than the natural sciences. There have been countless books written on the topic of inequality by people smarter than you or me, so it's highly it's all so simple as your dismissive "just do X" line imagines it to be.

A simple, almost trivial observation: very high inequality of wealth also means very high inequality of power, meaning the rich elite can and will influence the political process to enrich themselves further at the expense of the "low percentile" less well-off, which will be denied political power. This is one example of why you should care about inequality.

Only tiny fraction of a billionaire's wealth tends to be the fruit of their personal labor. It's the labor of their employees and machines that create the wealth. To my understanding, this is broadly accepted.

Now, billionaires do supply a different key ingredient to the wealth creation - risk. Without investment and risk, wealth cannot be created. In terms of $ investment, billionaires take on the vast majority of the risk and deserve the bulk of the rewards, the argument goes. Workers take on far less risk with their guaranteed* paycheck .

But which is the bigger risk? A billionaire's $100,000,000? Or your home, your health, and your retirement savings were you to lose your job in a bad market?

I'm interested in company structures that incentivize distributing risk, profit, and power across a larger group than we tend to see in modern companies.

I broadly agree with everything you say.

> Sure, but this isn't the infinite money glitch people seem to think it is. The loan and its interest have to get repaid with... money! That's first taxed! And anything purchased is... subject to taxation!

Interestingly, my broker lets me just pile up the interest and doesn't expect me to pay anything back, but only as long as my overall portfolio is worth comfortably more than my debt.

Of course, if I ever want to actually get at all my money, I'll need to pay the debt off.

Btw, leveraging your stock portfolio isn't all that different from a mortgage on your house. But people seem to be much more confused about the effects of the former than the latter. It seems to be easier for people to understand that a mortgage ain't an infinite money machine.

> I'm interested in company structures that incentivize distributing risk, profit, and power across a larger group than we tend to see in modern companies.

Please feel free to start your own company or cooperative.

> But please consider that the problem is slightly (i.e. a lot) more complicated than you think. Economics is a very very hard discipline [...]

Yes, and that's why I am saying that it's far from an obvious conclusion that making rich people worse off is a good thing for poor people.

And once you admit that this ain't trivial, you can look at topics like deadweight losses or tax incidence.

Different tax and redistribution system have different effects. It's not just 'more tax = more revenue to redistribute'.

For example, I actually think you can drive overall tax rates (eg as percentage of GDP) a lot higher than they are today in most countries without harming the economy, _if_ you switch to something as efficient as land value taxes for the vast majority of your government revenue (and lower other taxes). Property taxes are a second best approximation.

In contrast, capital gains taxes and income taxes are less efficient. Tariffs are even worse (by a large margin!), even if they could theoretically raise some revenue. Stamp duties or other taxes on transactions are also pretty bad. And silly things like price controls just hurt the economy without raising any revenue at all.

But that's all vastly simplified. As you suggest, there's lots of theory and practice you can investigate for the actual effects. They might also differ in different times and places.

> There have been countless books written on the topic of inequality by people smarter than you or me, so it's highly it's all so simple as your dismissive "just do X" line imagines it to be.

That's why I'm saying exactly the opposite: I'm arguing against the naive 'just tax the rich'.

> But which is the bigger risk? A billionaire's $100,000,000? Or your home, your health, and your retirement savings were you to lose your job in a bad market?

This parallels the diminishing marginal utility of wealth, which states that with extreme wealth, you can't buy any more to get more utility or happiness.

In a way, the risk phenomenon picks up where that phenomenon leaves off, where the need for normal "utility" gives way to the desire for amassing power over society at large.

The mistake they make is not realizing how much of their wealth and welfare relies on the welfare of the masses.

> I'm interested in company structures that incentivize distributing risk, profit, and power across a larger group than we tend to see in modern companies.

Ironically this is a tiny bit of what we saw with employee stock options in the early days of the internet industry, reflected in the historically outsized power and voice of workers. Arguably, that is a part of the rationale behind the big tech layoffs - to put labor back in its place.

> Tons of property is locked up as short term vacation rentals that are only used a tiny percent of the time and only by the rich.

Im guessing you don’t know how much property this is. It’s probably under 5% and so has very little effect on the market.

I'm guessing neither knows. So 5% is just another WAG.

Here in my college town, the new townhouses in prestigious locations are dominated by football-game-day occupation by the rich. So there's that.

> And, so what? This just sounds like whining that people in this world who have more money than you exist. I'm sure there's a lot of people in this world who would hold this exactly same argument against you ("you have N dollars, but I have N/1000"). You're not denied the opportunity to build wealth with what money you DO have just because Bezos and Musk et al exist.

I don't have a problem with differences in wealth. My problem is with (a) differences so extreme that they border on the inhumane (we arguably have enough resources amassed to end world hunger, yet people still starve. Why?) (b) People are fed the lie that this system is purely meritocratic. That is plainly untrue. That was my point about the relative "distance" your money can go. If you are born into a wealthy family, you can basically live a zero-labor life and continue to reap rewards, generate more income, gather more resources for yourself, concentrate capital. When your origin is the greatest determining factor in wealth, it's a gross lie to suggest to day laborers that if they just "work hard" they too can strike it rich.

Sure, I would agree that under the current system manhattan remains unaffordable. But this is not an essential property of manhattan, as you seem to think. It is a side effect of the current economic structure we have. Alternative structures would lead to significantly more affordable living in the city. In fact the NYC dems just voted for a mayoral candidate who wants to establish such an alternative. People who think like you are increasingly becoming the minority, and it's because it's glaringly and exceedingly obvious that there are massive problems of wealth distribution in the current system. You can honestly identify that there are issues and ask for solutions without being anti capitalist.

People get so caught up in morality when it comes to wealth, which is absurd. As if somehow wanting some of Bezos money to be redistributed so that it can feed people instead of paying for 500mil dollar yatchs is a moral affront. How about we instead focus on the moral affront of underpaying workers, having them the piss in bottles in warehouses, gaming the system by incorporating offshore, the list is endless. It's hilarious that anyone would defend the rights of these robber barons. You've got to be either seriously brainwashed or an extreme ideologue to think that there are no issues with inequality today. Even staunch capitalists are starting to admit there are problems. Its simple systems dynamics. Any system that maximizes singular variables is necessarily unstable and heading toward collapse.

It seems pretty straightforward to me.

Wealth redistribution has this positive effect: If you take $1000 from a billionaire and give it to a very poor person, total happiness increases.

It also has a negative effect, high level of redistribution can inhibit production.

The optimal level of redistribution depends on what you're optimizing, it's usually a mix of societal happiness and some notion of fairness. (I personally would want to optimize happiness and prosperity.)

Working on it ;)

The bigger relative risk is precisely why the billionaire is so rich - their surplus wealth may be wagered against longer odds when it would be suicidally reckless to yolo your life's savings into a start-up. Those sorts of bets are the Venture Capital strategy.

The relative value of money being lower is what enables riskier investments and essentially what 'justifies' inequality in a bloodless utilitarian sort of way. You know how in economics trades may be net positives due to different valuations between individuals? The same applies in current certain money vs future risky unbound returns. That taking such bets is consistently a successful strategy breeds inequity even without any winner-takes-all effects or high barriers to entry.

Hypothetically if the VCs kept on 'gambling' on failed start-ups and always losing without any offsetting huge wins, not quitting because they think a win is just around the corner, it would be a trend that reduces inequity. As it puts money into the pockets of employees and smaller suppliers of neccessary capital production goods.

I am afraid you would find it harder to get larger groups of people to agree to the high growth potential, high risk enterprises because they tend to lack the spare capital to be able to afford to risk it. I think ironically the most probable tolerable risk profile for larger groups (who are presumably more precarious) is something big and secure being sold out of by larger players. (Small traders panic buying and selling and doing worse is its own separate problem.)

One form of company structure that technically does paying labor well better are partnetships typically used by law firms. It works for them because they have no real capital requirements and have high per hour productivity and labor expenses as the lion’s share of profits go to the lawyers whose names are in the company name.

> This parallels the diminishing marginal utility of wealth, which states that with extreme wealth, you can't buy any more to get more utility or happiness.

You can buy more. The utility just diminishes, but doesn't go to zero.

> Ironically this is a tiny bit of what we saw with employee stock options in the early days of the internet industry, reflected in the historically outsized power and voice of workers. Arguably, that is a part of the rationale behind the big tech layoffs - to put labor back in its place.

Compare and contrast https://slatestarcodex.com/2014/09/14/does-class-warfare-hav...