Australian (ASX) Stock Market Forum

Wealth Inequality

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DeepState said:
http://www.economist.com/node/21621908/print

Provides some interesting insights into the bulk causes of global inequality over more than a century.

View attachment 59695
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Hi RY,

Have you read Mandelbrot and his views on bell shapes and income distribution? From "(Mis)behaviour of markets".

He was building on the research of Pareto, who analyzed wealth distribution in various countries at various times. Part of his quote in the book:

"Society was not a "social pyramid" with the proportion of rich to poor sloping gently from one class to the next. Indeed, it was more of a "social error" - very fat at the bottom where the mass of men live, and very thin at the top where sit the wealthy elite. Nor was this by chance, the data did not remotely fit a bell curve, as one would expect if wealth were distributed randomly. It is a social law, he wrote: something "in the nature of man".

Mandelbrot then expands further on why bell curve should not be assumed in many situations where they are currently routinely used.
 
KnowThePast said:
Hi RY,

Have you read Mandelbrot and his views on bell shapes and income distribution? From "(Mis)behaviour of markets".

He was building on the research of Pareto, who analyzed wealth distribution in various countries at various times. Part of his quote in the book:

"Society was not a "social pyramid" with the proportion of rich to poor sloping gently from one class to the next. Indeed, it was more of a "social error" - very fat at the bottom where the mass of men live, and very thin at the top where sit the wealthy elite. Nor was this by chance, the data did not remotely fit a bell curve, as one would expect if wealth were distributed randomly. It is a social law, he wrote: something "in the nature of man".

Mandelbrot then expands further on why bell curve should not be assumed in many situations where they are currently routinely used.
Click to expand...

Thanks very much KTP. Yes, I have read it and it was most interesting. His work served as an input or base for subsequent fields that I think have a lot of merit. Mandelbrot focused on chaos and associated self-similarity, but there is a related field called Complexity Theory which I think is an even more accurate description of interaction. Within that, there is agent-based modeling (you might dig it!), synchronisation (think credit explosion) and network theory (think inter-personal influence, Facebook, maybe Navitas). Taleb based a lot of his thinking on Mandelbrot, of course. Wealth and many other things in human society and nature follow a log-log distribution (same deal with markets). It is a hallmark of highly interactive systems that have the kinds of properties that matter to us. Ebola can be modeled this way, for example, using a combination of network theory and agent-based modeling. I'm quite sure the disease models at CDC would have well tuned versions of this.

Often the gross features come through in the investment world, but the parameter estimation is super-tough/impossible. So, for me, this is useful from the perspective of trying to understand what kind of situation we happen to find ourselves in. If it is tightly nested, particularly with leverage, be especially vigilant and be aware that what you don't know is even more potent than might be imagined - I find it hard to imagine the course to tail events or their magnitude. Ex-post, it's always so easy and so damned obvious as the coin flippers who got it right make the TV rounds.

The simplest composite of all these ideas is by the late Per Bak. It relates to sandcastles. This guy is correct. You can replicate his experiment in a sand box. Add a bit of economics and a sense of people and you have a working model of geopolitics and financial markets. Minsky brings it to life.

Thanks again KTP. The world isn't normal in areas where interaction and adaptation occurs. It's setup makes that impossible. The concept of normality arose in an entirely different setting.
 
DeepState said:
Thanks very much KTP. Yes, I have read it and it was most interesting. His work served as an input or base for subsequent fields that I think have a lot of merit. Mandelbrot focused on chaos and associated self-similarity, but there is a related field called Complexity Theory which I think is an even more accurate description of interaction. Within that, there is agent-based modeling (you might dig it!), synchronisation (think credit explosion) and network theory (think inter-personal influence, Facebook, maybe Navitas). Taleb based a lot of his thinking on Mandelbrot, of course. Wealth and many other things in human society and nature follow a log-log distribution (same deal with markets). It is a hallmark of highly interactive systems that have the kinds of properties that matter to us. Ebola can be modeled this way, for example, using a combination of network theory and agent-based modeling. I'm quite sure the disease models at CDC would have well tuned versions of this.

Often the gross features come through in the investment world, but the parameter estimation is super-tough/impossible. So, for me, this is useful from the perspective of trying to understand what kind of situation we happen to find ourselves in. If it is tightly nested, particularly with leverage, be especially vigilant and be aware that what you don't know is even more potent than might be imagined - I find it hard to imagine the course to tail events or their magnitude. Ex-post, it's always so easy and so damned obvious as the coin flippers who got it right make the TV rounds.

The simplest composite of all these ideas is by the late Per Bak. It relates to sandcastles. This guy is correct. You can replicate his experiment in a sand box. Add a bit of economics and a sense of people and you have a working model of geopolitics and financial markets. Minsky brings it to life.

Thanks again KTP. The world isn't normal in areas where interaction and adaptation occurs. It's setup makes that impossible. The concept of normality arose in an entirely different setting.
Click to expand...

Thanks for adding to my reading list!

Yes, I don't believe these models have much predictive power, but they help understand where we are and how we got there. So back to the topic of "me wants more money than them".

The world was never equal, from the Roman times to Medieval ages, to industrial revolution, it was a small elite with the rest closer to the bottom. Over the last century, the world got "fairer" than ever before, with more and more people moving to the middle. But is it the new norm? Or a statistical anomoly brought about by a tangled mess of random events?

In other worlds, is the world getting less fair because it is regressing to mean?

And are we making an assumption that a bell shape is the correct model that we are entitled to, despite data showing a different kind of distribution? The initial expectation is the biggest factor of how (un)happy one will be with the changes..
 
KnowThePast said:
"Society was not a "social pyramid" with the proportion of rich to poor sloping gently from one class to the next. Indeed, it was more of a "social error" - very fat at the bottom where the mass of men live, and very thin at the top where sit the wealthy elite. Nor was this by chance, the data did not remotely fit a bell curve, as one would expect if wealth were distributed randomly. It is a social law, he wrote: something "in the nature of man".
Click to expand...

Apologies for the typo - should read "social arrow".
 
I bet in the 1800s all the old people were crapping on about how the youth don't work hard enough and how it is always been this unequal and what not and the rich folk had all sorts of clever justifications for why there immense wealth is just the natural order of things and therefore perfectly normal.

I believe the house price debate in Australia is defining as it is a test of if Australians will accept socially inequality in that one class of people becomes the landed elite, while another in condemned to a life of poverty.
 
Mrmagoo said:
I bet in the 1800s all the old people were crapping on about how the youth don't work hard enough and how it is always been this unequal and what not and the rich folk had all sorts of clever justifications for why there immense wealth is just the natural order of things and therefore perfectly normal.

I believe the house price debate in Australia is defining as it is a test of if Australians will accept socially inequality in that one class of people becomes the landed elite, while another in condemned to a life of poverty.
Click to expand...
you just need a nice real estate crash and the above risk will dissappear
 
qldfrog said:
you just need a nice real estate crash and the above risk will dissappear
Click to expand...

Only a matter of time until they bring back indentureship.

It will be sold as a fantastic alternative to bankruptcy !

The left will vote for it as the left will as now consist of the rich who will be happy to own an indentured worker.

They will quell resistance through the unions, giving pay rises to skilled workers who have organisation, representation and are organised as a cartel (i.e tradesmen, lawyers and doctors) in exchange for selling their lesser skilled brethren into slavery.
 
I read a quote from Churchill a long while back regarding Socialism and Capitalism, it goes something like this:
Any person under 30 that is not a Socialist have no heart; Any person above 30 who is not a Capitalist have no brain.

I thought that was spot on, seeing how I was thinking of getting into finance and business... but the more I see and think about it, the more Churchill is dead wrong on that too. That a person with heart had always has it, capitalism or maturity got nothing to do with hit; that those without heart never has one, and tend to not use much of their brain as well.

I've seen kids from refugee parents who did well at school, then doing well at uni, got a well paid job and almost overnight they disrespect their parents and speak down to blue collar relatives and family friends; I've also seen former refugees whom, the moment they can, set about doing nothing with their income but help their parents, send money back to their relatives... then there are the blue-blooded rich in history who "betray" their class and help the poor (Teddy and Franklin Roosevelt say), then there are little rich people who think their little fortune was all due to their talent, charisma and hard work... not due to luck or opportunities, and those who are poor are lazy or stupid or both.

Most of the rich and their politicians always point to dole bludgers, the unemployed, the welfare cheats as the problem; then point to a handful of once-poor people who had made it big, point to a few more whose parents and teachers made all the sacrifices and with some luck and hard work got into the middle class... point to these and say, see, it's an equal society with equal opportunities for all and those who don't make it are lazy and cheats and want to steal from the rich so they can leach their lazy and unproductive lives on the hardworking, intelligent rich.

There is never a thought that maybe the poor doesn't want to be poor, does not want hand outs; maybe the poor would rather earn enough to feed their family and go on holidays and not be so poor and so underemployed or so underpaid that they have to live on Centrelink and maybe get an "illegal" job wherever they can. Maybe if there are more funding to university so that more than the usual 50 to 55% HS graduates that go to TAFE or flip burgers can get a degree too; maybe those who went to uni and do not know friends in high places could easily find a job once they graduated.

The rich capitalists (as opposed to the rich socialists) are really dumb. They think they're smart by paying their employees as little as they can get away with, smart by lobbying powerful friends to reduce their taxes, control the minimum wage, reduce regulations... With lower tax income, roads and infrastructure are reduced or ill-repaired, social security programs and welfare are cut or reduced, education funding cuts... all leading to crumbling infrastructure, lower demand for goods and services, leading to overworked, under-educated, sick and unmotivated workforce who are increasingly angry and frustrated at the inequality they're experiencing.

Then with these extra cash they extract, most send it to the finance industry and began to speculate and crash the financial market and world economy every now and again.

So Churchill is wrong on this count, and Capitalists are too rich, too pampered and too dumb to realise that it was socialists programs like the US New Deal and Medicaid, Medicare, welfare and unemployment assistance, programs like the minimum living wage... all these socialist programs was the thing that saved capitalism when it was close to collapse and society either goes to Communism or Fascism.
 
luutzu said:
I read a quote from Churchill a long while back regarding Socialism and Capitalism, it goes something like this:
Any person under 30 that is not a Socialist have no heart; Any person above 30 who is not a Capitalist have no brain.

I thought that was spot on, seeing how I was thinking of getting into finance and business... but the more I see and think about it, the more Churchill is dead wrong on that too. That a person with heart had always has it, capitalism or maturity got nothing to do with hit; that those without heart never has one, and tend to not use much of their brain as well.

I've seen kids from refugee parents who did well at school, then doing well at uni, got a well paid job and almost overnight they disrespect their parents and speak down to blue collar relatives and family friends; I've also seen former refugees whom, the moment they can, set about doing nothing with their income but help their parents, send money back to their relatives... then there are the blue-blooded rich in history who "betray" their class and help the poor (Teddy and Franklin Roosevelt say), then there are little rich people who think their little fortune was all due to their talent, charisma and hard work... not due to luck or opportunities, and those who are poor are lazy or stupid or both.

Most of the rich and their politicians always point to dole bludgers, the unemployed, the welfare cheats as the problem; then point to a handful of once-poor people who had made it big, point to a few more whose parents and teachers made all the sacrifices and with some luck and hard work got into the middle class... point to these and say, see, it's an equal society with equal opportunities for all and those who don't make it are lazy and cheats and want to steal from the rich so they can leach their lazy and unproductive lives on the hardworking, intelligent rich.

There is never a thought that maybe the poor doesn't want to be poor, does not want hand outs; maybe the poor would rather earn enough to feed their family and go on holidays and not be so poor and so underemployed or so underpaid that they have to live on Centrelink and maybe get an "illegal" job wherever they can. Maybe if there are more funding to university so that more than the usual 50 to 55% HS graduates that go to TAFE or flip burgers can get a degree too; maybe those who went to uni and do not know friends in high places could easily find a job once they graduated.

The rich capitalists (as opposed to the rich socialists) are really dumb. They think they're smart by paying their employees as little as they can get away with, smart by lobbying powerful friends to reduce their taxes, control the minimum wage, reduce regulations... With lower tax income, roads and infrastructure are reduced or ill-repaired, social security programs and welfare are cut or reduced, education funding cuts... all leading to crumbling infrastructure, lower demand for goods and services, leading to overworked, under-educated, sick and unmotivated workforce who are increasingly angry and frustrated at the inequality they're experiencing.

Then with these extra cash they extract, most send it to the finance industry and began to speculate and crash the financial market and world economy every now and again.

So Churchill is wrong on this count, and Capitalists are too rich, too pampered and too dumb to realise that it was socialists programs like the US New Deal and Medicaid, Medicare, welfare and unemployment assistance, programs like the minimum living wage... all these socialist programs was the thing that saved capitalism when it was close to collapse and society either goes to Communism or Fascism.
Click to expand...

So, if you don't have capitalists and people who work hard to earn extra money.

Who do you tax, to pay for those who can't afford to pay for the education?

Who pays the taxes, to pay the welfare cheques?

Who pays the taxes, to pay for the free healthcare?

Who pays the taxes, for the cheap public transport?

Who pays the taxes, for the subsidised housing, subsidised rates, subsidised power?

Who pays for disabilty pensions?

Who pays for people in gaol?

Who pays for single mothers pensions?

Who pays for vetran affairs pensions?

Who pays for public servants pensions?

I guess, those who are working, or anyone else who saved money, to pay their own way.
 
sptrawler said:
So, if you don't have capitalists and people who work hard to earn extra money.

Who do you tax,
Who pays the taxes,

Who pays the
Who

Who
Who.............
Click to expand...

Thomas Piketty puts a couple of possibles out there, But your not going to like them(chapter 15). But consider the situation we are at. Business is programmed for growth, the dynamic that has now existed for the last forty years as Piketty explains(577pgs), is concentrating wealth in fewer and fewer hands. So the Capitalists market, the consumer, is less and less able to acquire capital. The Capitalists imperative is to grow profit, 'he' lowers his inputs, squeezing labour where ever possible, mechanisation. Which has the over all effect of lowering the buying power of the consumer, 'his' market.

So we have a situation where on a global view you can half fill a country town hall with Eighty people and they have the combined wealth of half the people on the planet. If you extrapolate that inequality, into and as it applies to societies/nations across the world; You ask your self Who would you tax.

In the meantime, go long on unemployment. And remember the whole 'Thing' is a human construct an we know how infallible they are.

As Steven Colbert commented at the end of his interview with Piketty 'We don't have to worry too much, at $75 to buy the book, the poor can't afford it any way'
 
sptrawler said:
So, if you don't have capitalists and people who work hard to earn extra money.

Who do you tax, to pay for those who can't afford to pay for the education?

Who pays the taxes, to pay the welfare cheques?

Who pays the taxes, to pay for the free healthcare?

Who pays the taxes, for the cheap public transport?

Who pays the taxes, for the subsidised housing, subsidised rates, subsidised power?

Who pays for disabilty pensions?

Who pays for people in gaol?

Who pays for single mothers pensions?

Who pays for vetran affairs pensions?

Who pays for public servants pensions?

I guess, those who are working, or anyone else who saved money, to pay their own way.
Click to expand...

We the people pay. Big business profits off the economic activity of the people. If the people have no money, there is no economy and that state has no tax revenue. The USA is currently finding out how very true this is.

I've been reading a lot about the Romans and in the late 300 AD period they suffered a similar problem. The elite had split up society amongst their own and had spent their time devising laws to make themselves richer at the expense of the workers. Pushing small farmers and business owners from their business and homes to boost their own wealth. The result was that areas entered incredible economic decline and the empire ended up with no money.

In a sense this is happening in Australia. In days gone by if you worked you more or less had a right to a plot of land where you could usually build a home. The big builders and investors have already taken most of the land. In most cases you can no longer build a home because they're all standard kit homes if you could afford one.

(Literally, look it up, they buy most of the land well in advance of the public and then drip feed it onto the market)

You need a good social fabric for an economy to function efficiently. Part of that is the desire of individuals to contribute and benefit from the economy so that they remain loyal to the system. Vast wealth inequality disenfranchises the masses and leaves us unable to contribute to the economy. Causing a huge economic loss that cannot be recovered by letting the rich get richer.
 
Mrmagoo said:
To the guy who was earlier insulting me and mis interpreting poor statistics it seems that the media has caught on rapidly to the inter generational wealth inequality in Australia.


One of many articles published in recent weeks.


http://www.news.com.au/finance/is-i...eneration-to-pay/story-e6frfm1i-1227153878535
Click to expand...

Did this guy say that wealth was equal across generations or that the inequality across generations was shrinking with time or that transfers were not occurring between generations as the population hump ages? Or was it more along the lines that, it is possible to breach some/most of the gap if you got off your butt and did something more useful and created value for the society that you malign.

Just curious. If you could supply direct extracts from the insulting posts to the effect of the above, that would be helpful.
 
sptrawler said:
So, if you don't have capitalists and people who work hard to earn extra money.

Who do you tax, to pay for those who can't afford to pay for the education?

Who pays the taxes, to pay the welfare cheques?

Who pays the taxes, to pay for the free healthcare?

Who pays the taxes, for the cheap public transport?

Who pays the taxes, for the subsidised housing, subsidised rates, subsidised power?

Who pays for disabilty pensions?

Who pays for people in gaol?

Who pays for single mothers pensions?

Who pays for vetran affairs pensions?

Who pays for public servants pensions?

I guess, those who are working, or anyone else who saved money, to pay their own way.
Click to expand...


In a more equal society, people don't need to earn "extra" money... the normal money they earn for their work ought to be enough.

Most working-class people are so underpaid that it's not possible to live on one income anymore so the second spouse have to either find childcare or the grandparents and to then do some menial work. Then if they bought a house, it's not just two normal jobs they'd need, it's extra work on the sides and weekends to give them a bit of breathing space.

But we're all spinned to believe that work is great, and more work is more great.

It's a bit like a Communist slogan our dad used to repeat when he tell us to mow the lawn, clean the gutter and help fix the fence (all in one afternoon): "hard work is glorious".

------

The main point you're making, I think, is like ones I heard before from an American "captain of industry" (i think he's the son and current CEO of Forbes). He said that the gov't doesn't earn or make anything except taxation. That it is capitalists and corporations like his that create wealth and build the country and its economy.

From that, it follows:

1. Gov't are not only lazy and incompetent, they're just leeches and red-tape makers hindering progress.

2. That often, as the great Reagan said, gov't is not the solution but is the problem. And so gov't should get out of the way of entrepreneurs and wealth creating enterprises and its great captains.

3. By getting out of the way - ie. deregulation, lower tariffs and taxation, let the market do their thing etc. - the genius capitalists will innovate and create wealth and then not only will the country be enriched by their innovations and products, it's further enriched by lower (yet higher) tax revenues; the environment may be screwed but the products will brighten the days etc. etc.

In other words, gov't will go broke without capitalists to tax from; nations will be poor without capitalists to create wealth. ie. Who do you tax if capitalists are broke?


That premise is a big pile of horse manure. But a lot of people, including the working poor, believe it.

First, it's wrong because capitalists cannot have their capital without the gov't.

It is the gov't that first gave the capitalists their capital.

Done at first by knocking some foreigners heads and grabbing their land, or fund explorers who got lost and "discover" some new land then declare the land terra nullius and send in the troops when some savages somehow make claim to uninhabited land the Crown clearly see as vacant.

Once these new land and its resources are given or sold cheaply... wealth was then transferred.

After its founding, gov't made possible capitalism by funding infrastructure, by providing security and national defense, by funding education and training, by providing hospitals and roads and water and power etc.etc... all so that property of the rich are not taken by the poor, property are not annexed by foreign powers etc. etc.

In other words, gov't not only give and protect capital and wealth of capitalists, it create and maintain the infrastructure and skilled workforce necessary for exploitation/employment by capitalists.

For that, the gov't want a cut...

So it is not capitalists that are benign and benevolent and wealth creators... it is the gov't and the people.

But most politicians do not see it this way. They believe what they're told, and why not? Why fight it when if you go along with it you will get re-elected, and when you finished you get cushy jobs.

So we have corporations and capitalists playing one gov't against another... seeing which one would give them the most benefits for them to create jobs in that jurisdiction. Like Tesla screwing Arizona out of $1.4B to get the honour of having its battery plant there - paying Tesla some $200k per citizen for a plant that may or may not get lift off the ground for decades, and paying mostly upfront too.


Don't know why gov't never really asks these capitalists how they'd sell their goods if the gov't doesn't set up trade agreements; or how they'd collect their money if the gov't doesn't have the armed forces and will send it to collect if necessary.

But yea, the host become the guest and the guest becomes the master of the house.
 
a quick read but rather intresting

http://qz.com/314720/heres-the-surprising-social-trait-that-the-english-and-chinese-have-in-common/

Blaming this persistence of the same families in the elite on capitalism would be jumping to conclusions too rashly. For that, we should have a comparator country in a period in which it has not been capitalist. It happens to exist, and the two authors of the recently published paper (along with several other co-authors), have documented it. In fact, the paper mentioned above summarizes two chapters of a book they published earlier this year, The Son Also Rises: Surnames and the History of Social Mobility, Princeton University Press, 2014, available in Kindle. They studied the elite’s surnames’ behavior for eight countries and several centuries and found that in all of them the persistence of the elites was similar to modern England (which was similar to that of medieval England.)
Click to expand...
 
luutzu said:
Maybe if there are more funding to university so that more than the usual 50 to 55% HS graduates that go to TAFE or flip burgers can get a degree too; maybe those who went to uni and do not know friends in high places could easily find a job once they graduated.
Click to expand...

If we send everyone to uni then we're completely and absolutely stuffed as a society. Well, we are unless we're going to have degrees in plumbing, bus driving and so on which would make a mockery of the entire concept of universities.

If we don't have truck drivers, builders and so on then we don't have a functioning society. Those and many other jobs that don't require a university education are absolutely essential. :2twocents
 
not at all::(
you end up with unemployed legions of 5y university degrees owners having part time job at mc donald each with a quarter million debt (HECS or other)
and a few millions of underpaid immigrants doing the jobs the (Australian/American/European replace as per need) do not "want' to do;
welcome to 2014...
But eh, university are now "self funded" and IQ is not required for a degree...the great socialist dream merged with the capitalism one
Cynical but in that " OP results" time of a year, a bit sickenned by the Unis current wave of misleading adds, not to mention our government campaign about "higher education"

Link to the wealth inequality?
Well, I truly believe that today, education (as expressed by a degree) is not a way out of lower economic class anymore in the western world.(It used to be until the beginning of this century)
 

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