Responding to a point about the rise of absolute wealth since 1916, this article makes (not very well) a point about the importance of relative wealth.
Comparing folks of different economic strata across the ages ignores a simple fact: Wealth is relative to your peers, both in time and geography.
I’ve had a short discussion about this earlier, and find it very interesting.
In particular, I sincerely do not care about my relative wealth. I used to think that was universal, then found out I was wrong. But is it typical? To me it has profound implications about what kind of economic world we should strive for—if most folks are like me, the current system is fine. If they are like some people I have met, a flatter real wealth distribution, even at the price of a much, much lower mean, could be preferable.
I’m interested in any thoughts you all might have on the topic :)
I see it as a question of preference so I know by never having felt envy, etc. at someone richer than me just for being richer. I only feel interested in my wealth relative to what I need or want to purchase.
As noted in the comment thread I linked, I could start caring if someone’s relative wealth gave them power over me but I haven’t been in this situation so far (stuff like boarding priority for first-class tickets are a minor example I did experience, but that’s never bothered me).
No. Thanks for making me notice how relevant that could be.
I see that I haven’t even thought through the basics of the problem. “power over” is felt whenever scarcity leads the wealthier to take precedence. Okay, so to try to generalise a little, I’ve never been really hit by the scarcity that exists because my desires are (for one reason or another) adjusted to my means.
I could be a lot wealthier yet have cravings I can’t afford, or be poorer and still content. But if what I wanted kept hitting a wealth ceiling (a specific type, one due to scarcity, such that increasing my wealth and everyone else’s in proportion wouldn’t help), I’d start caring about relative wealth really fast.
Similarly to you, unless the rich people use their money to abuse me, I care more about my absolute than relative wealth. My struggles are not with comparing myself to other people, but with getting what I want. Give me everything I want, and I won’t care if you give other people 10 times more.
To me it has profound implications about what kind of economic world we should strive for—if most folks are like me, the current system is fine.
If you took the wealth existing today and distributed it more flatly, many people would have higher absolute wealth. So I don’t see how caring about absolute wealth makes current system fine.
We do have the data point that a capitalist economy provides higher average wealth than a communist one. But that doesn’t imply that e.g. a capitalist economy with basic income couldn’t provide even more. (Maybe the problem with communism was lack of competition and the micromanagement of everything by political nitwits, not the flatter distribution of wealth per se.)
In capitalist economies scarce resources are effectively auctioned off to the highest bidder. If you’re noticeably poorer than people around you, you will likely be unable to get to these resources. A simple example: buying a house.
But that doesn’t imply that e.g. a capitalist economy with basic income couldn’t provide even more.
At one level, no, it doesn’t. But at the same level it also doesn’t imply that a capitalist economy with X (where X can be anything) couldn’t provide even more as well.
At another level yes, it does, because there are reasons why a capitalist economy works and a command economy doesn’t. These reasons are relevant to evaluating whether a basic income is a good idea.
...there are reasons why a capitalist economy works and a command economy doesn’t. These reasons are relevant to evaluating whether a basic income is a good idea.
Consider incentives. Under capitalism one incentive is the possibility of becoming rich, but another, more basic one, is the desire not to starve. Under a command economy you won’t usually starve (because you’re a useful labour unit), at least in a situation where you can do something about it. You still might starve because of incompetence or a political decision.
A large number of people do not enjoy their jobs and, given the opportunity, would… take early retirement, let’s put it this way. That’s a problem. Command economies solve it by command (recall that being unemployed was a criminal offense in the Soviet Union). Capitalist economies solve it by saying “OK, I’ll wait till you get hungry”.
A livable basic income would make that incentive disappear. Yes, some people would be happy. The consequences for society, though, are debatable :-/
My struggles are not with comparing myself to other people, but with getting what I want. Give me everything I want, and I won’t care if you give other people 10 times more.
Do you think what the people around you have doesn’t effect what you want?
To some degree it does, but often doesn’t. For example, many people around me are obsessed with travelling to exotic countries. I am okay with staying home, or I travel to meet interesting people, but the idea of travelling to the opposite side of planet just to see a beach or a jungle seems completely silly. Some people spend a lot of money on fashion. Many people love to eat and drink in restaurants; I am okay with soylent. I only bought a smartphone because I wanted to develop mobile games. If the mass transit is reliable, I don’t want a car.
Things that I value most are: having free time, and talking with interesting people. Also having a computer with internet connection, but that is relatively cheap today. If I would win a lottery, I would mostly try to achieve the situation where I never have to work for money again. (That doesn’t mean I wouldn’t do anything productive. It just means I would be doing things that I choose to do, and doing them my way.)
I guess the question is, if other people would get a lot of money, what fraction of that would go into competing for resources I care about. (I assume it’s smaller than 10%, but I didn’t think about this too much.) Then I wouldn’t want other people to become so rich that even that fraction of their income would be higher than my whole income.
It’s complicated. It seems clear to me that right now a huge number of people want to increase their absolute wealth more than their relative position. People who move from poor countries to rich countries often wind up in a lower percentile in the new country, but are better off in an absolute sense. Relatively few independently wealthy first-worlders move to poor countries to increase their relative wealth (although a handful of people do, admittedly.) This is complicated somewhat by the fact that recent migrants might still have enough connections to their old country that their higher relative position in the old country is more salient to them than their lower relative position in the new country.
Responding to a point about the rise of absolute wealth since 1916, this article makes (not very well) a point about the importance of relative wealth.
I’ve had a short discussion about this earlier, and find it very interesting.
In particular, I sincerely do not care about my relative wealth. I used to think that was universal, then found out I was wrong. But is it typical? To me it has profound implications about what kind of economic world we should strive for—if most folks are like me, the current system is fine. If they are like some people I have met, a flatter real wealth distribution, even at the price of a much, much lower mean, could be preferable.
I’m interested in any thoughts you all might have on the topic :)
How do you know?
I see it as a question of preference so I know by never having felt envy, etc. at someone richer than me just for being richer. I only feel interested in my wealth relative to what I need or want to purchase.
As noted in the comment thread I linked, I could start caring if someone’s relative wealth gave them power over me but I haven’t been in this situation so far (stuff like boarding priority for first-class tickets are a minor example I did experience, but that’s never bothered me).
Have you ever been poor?
No. Thanks for making me notice how relevant that could be.
I see that I haven’t even thought through the basics of the problem. “power over” is felt whenever scarcity leads the wealthier to take precedence. Okay, so to try to generalise a little, I’ve never been really hit by the scarcity that exists because my desires are (for one reason or another) adjusted to my means.
I could be a lot wealthier yet have cravings I can’t afford, or be poorer and still content. But if what I wanted kept hitting a wealth ceiling (a specific type, one due to scarcity, such that increasing my wealth and everyone else’s in proportion wouldn’t help), I’d start caring about relative wealth really fast.
Similarly to you, unless the rich people use their money to abuse me, I care more about my absolute than relative wealth. My struggles are not with comparing myself to other people, but with getting what I want. Give me everything I want, and I won’t care if you give other people 10 times more.
If you took the wealth existing today and distributed it more flatly, many people would have higher absolute wealth. So I don’t see how caring about absolute wealth makes current system fine.
We do have the data point that a capitalist economy provides higher average wealth than a communist one. But that doesn’t imply that e.g. a capitalist economy with basic income couldn’t provide even more. (Maybe the problem with communism was lack of competition and the micromanagement of everything by political nitwits, not the flatter distribution of wealth per se.)
In capitalist economies scarce resources are effectively auctioned off to the highest bidder. If you’re noticeably poorer than people around you, you will likely be unable to get to these resources. A simple example: buying a house.
At one level, no, it doesn’t. But at the same level it also doesn’t imply that a capitalist economy with X (where X can be anything) couldn’t provide even more as well.
At another level yes, it does, because there are reasons why a capitalist economy works and a command economy doesn’t. These reasons are relevant to evaluating whether a basic income is a good idea.
Could you expand on this?
Consider incentives. Under capitalism one incentive is the possibility of becoming rich, but another, more basic one, is the desire not to starve. Under a command economy you won’t usually starve (because you’re a useful labour unit), at least in a situation where you can do something about it. You still might starve because of incompetence or a political decision.
A large number of people do not enjoy their jobs and, given the opportunity, would… take early retirement, let’s put it this way. That’s a problem. Command economies solve it by command (recall that being unemployed was a criminal offense in the Soviet Union). Capitalist economies solve it by saying “OK, I’ll wait till you get hungry”.
A livable basic income would make that incentive disappear. Yes, some people would be happy. The consequences for society, though, are debatable :-/
Do you think what the people around you have doesn’t effect what you want?
To some degree it does, but often doesn’t. For example, many people around me are obsessed with travelling to exotic countries. I am okay with staying home, or I travel to meet interesting people, but the idea of travelling to the opposite side of planet just to see a beach or a jungle seems completely silly. Some people spend a lot of money on fashion. Many people love to eat and drink in restaurants; I am okay with soylent. I only bought a smartphone because I wanted to develop mobile games. If the mass transit is reliable, I don’t want a car.
Things that I value most are: having free time, and talking with interesting people. Also having a computer with internet connection, but that is relatively cheap today. If I would win a lottery, I would mostly try to achieve the situation where I never have to work for money again. (That doesn’t mean I wouldn’t do anything productive. It just means I would be doing things that I choose to do, and doing them my way.)
Attending conferences is a way to get to talk with a lot of interesting people. Seats at the TED conference or LeWeb are expensive and limited.
Is that an optimal way of finding interesting people to talk with?
I guess the question is, if other people would get a lot of money, what fraction of that would go into competing for resources I care about. (I assume it’s smaller than 10%, but I didn’t think about this too much.) Then I wouldn’t want other people to become so rich that even that fraction of their income would be higher than my whole income.
Sorry, “fine” was way stronger than what I actually think. It just makes it better than the (possibly straw) alternative I mentioned.
It’s complicated. It seems clear to me that right now a huge number of people want to increase their absolute wealth more than their relative position. People who move from poor countries to rich countries often wind up in a lower percentile in the new country, but are better off in an absolute sense. Relatively few independently wealthy first-worlders move to poor countries to increase their relative wealth (although a handful of people do, admittedly.) This is complicated somewhat by the fact that recent migrants might still have enough connections to their old country that their higher relative position in the old country is more salient to them than their lower relative position in the new country.