In capitalism, it is natural for there to be very wealthy individuals at the top, and those who struggle below. From what I have heard the "wealth gap" means that the very rich suppress the poor, but I've also heard that the rich create a standard for the lower classes to look up to, therefore generating more wealth and progress as a motive.
I am genuinely curious about this since I have always wondered why income inequality is necessarily bad. All perspectives welcome.
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in any heathly economy it is okay for super-talented, super-lucky, super-hardworking to have much higher income. Otherwise we would have to say that Bill Gates or Elon Musk would be forced to make as much as an average engineer.
In socialist society the income get equalized to be "fair", but that doesn't promote progress and innovation.
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1- Inequality reduces happiness and happy workers are more productive.
2- Inequality reduces trust as those on the bottom begging to view to top as predators.
3- Inequality results in more speculative type economic growth due to the rich having all the money instead of consumers[3]. Its not a coincidence that the two periods when inequalities was the highest both had large financial crisis.
4- Rich peoples tend to spend money on goods with high mark ups. They want vintage wine made with a hint of diamond and gold flakes.
[1]https://blogs.imf.org/2017/05/11/a-new-twist-in-the-link-between-inequality-and-economic-development/
[2]http://economistsview.typepad.com/economistsview/2015/03/how-inequality-harms-health-and-the-economy.html
[3]http://www.imf.org/external/pubs/ft/fandd/2011/09/Berg.htm
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The only way you could talk about a wage gap as a harmful situation is if there were 2 people working at mcdonalds. One was earning $350 a week doing a 40 hour week, and the other earns $450 a week doing a 36 hour week. Then clearly something is not equal in their wages. But this does not happen, wages ARE equal it is law and it is standard. People are paid based on age+hours worked. It's all in a system that just pays for what you work. The money system and employers could not care less who's doing the job. As long as the job is getting done.
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Right, the state needs to stop forcing people into the mold they think best and let people be free.
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Firstly: From the following link you should walk away knowing this: "Much has been written about the relationship between inequality and economic development, but theory remains inconclusive".
https://blogs.imf.org/2017/05/11/a-new-twist-in-the-link-between-inequality-and-economic-development/
The entirety of this blog post is based upon this solid acknowledgement from the author.
Second: In your second reference below, the author again states clearly that the theories regarding income inequality and economic development are inconclusive as there is uncertainty of how it happens.
http://economistsview.typepad.com/economistsview/2015/03/how-inequality-harms-health-and-the-economy.html
This one did a little better though, offering that there is suggestive evidence to support the relationship.
Lastly, your third reference is pretty good. The end of the article is summarized by the author by stating that while there's evidence to suggest that income inequality is negatively affecting growth...there's no known way to correct it in regards to policy. The author acknowledges further that attempting to correct income inequality through policy has already been attempted in China and resulted in further inequality for the lowest financial class of citizens.
http://www.imf.org/external/pubs/ft/fandd/2011/09/Berg.htm
1. If you're unhappy because someone makes more money than you do in the United States...then you're unhappy about your circumstances, not someone else's.
2. If you're distrustful of those at the upper bracket of finances simply because they make more money than you...that's called "Being petty".
3. Speculating wildly about what rich people want and how they spend their money is entertaining but none-the-less unproductive.
"There's going to be a special place in Hell for people who spread lies through the veil of logical fallacies disguised as rational argument".
"Oh, you don't like my sarcasm? Well I don't much appreciate your stupid".
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Firstly because it often goes against out conception of merit based rewards. As Piketty's Capitalism in the 21st Century shows - which was lauded as being one of the most comprehensive and evidence based analyses yet put together in economics - there is a trend towards stratified inheritance based wealth rather than wealth earned through merit and hard work.
Secondly there is a raft of evidence showing that income inequality in a society is harmful on a variety of levels, from health outcomes to education achievement to teen pregnancy to crime rates. Not only that but even the rich tend to recieve benefits in these areas in more equal societies.
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And how does my having more money than you cause you to fornicate?
These fool’s are incapable of critical thought.
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Having no "income inequality" is harmful. Why? It would promote no one working hard. Why would I do anything if I get the same without working hard? The entire system would collapse.
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To illustrate why inequality in itself is not problematic, consider the following example. Let us measure the amount of goods owned by people in "pips". Let us take an imaginary country Wonderia. In 2200, in this country bottom 90% population own 1,000 pips per person, and top 10% population own 1,000,000 pips per person. But in 2300, bottom 90% population now owns 10,000,000 pips per person, while top 10% population now owns 1,000,000,000,000,000 pips per person. The relative inequality between top 10% and bottom 90% increased from 1,000-to-1 to 100,000,000-to-1, and yet the poorest person is now richer than the richest person was 100 years ago - clearly the economy is doing far-far better than before, even despite the inequality increasing by 5 orders of magnitude.
However, this is not what tends to happen in real countries with high inequality. In real countries, what tends to happen is the Zimbabwean scenario: the ruling regime seizes all the resources and redistributes them in a way that leaves almost everyone dirt-poor, except for the narrow elite. Or a softer scenario such as pre-communist Cuba, where the majority of the population enjoyed a pretty luxurious life, but the regular workers were hardly better off than serfs - human rights did not apply to everyone, and that eventually killed that country off and resurrected an abomination in its place.
To summarize, inequality itself is hardly important, and both a country with extremely high inequality and a country with perfect inequality can be doing well or poorly. But extremes tend to coincide with other critical economical problems.
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Life isn't fair, but does that mean we shouldn't be?
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The playing field is even, since the inheritance rules apply to everyone equally. The initial conditions are not even, however; nor should they be.
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You know what would not get me to where I am? Complaining about the privileges of the people born in rich families in prosperous countries.
That people with a better setup somehow owe to people with a worse setup - is a very poisonous notion. Every individual owes to exactly two categories of people: those they made a consensual contract with, and themselves. It is the individual's duty to find a way to get to where the rich and successful are, and not the other way around. This is how the world has always worked, and will always work. Your success is defined by your ability to adapt to the environment; the environment is not supposed to adapt to you.
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that would be great corruption was non existent
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How about we tax the poor at 90% instead?
No, let us do it more fairly: everybody is taxed at how much they want to tax others. For example, you want to tax the rich at 90% - so you are taxed at 90%. I want to tax everyone at 0%, so I am taxed at 0%.
Something tells me that, as soon as the consequences of the tax proposals are put on those making them, their narrative will quickly change. Is it not so? It is so easy to divide the loot between the fellow highwaymen - and so much harder to give away your own loot for dividing.
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The point of capitalism is to give everyone the freedom to make consensual contracts, and to protect everyone from being forced into the contract they do not want to sign. It has nothing to do with the outcome; it is based on the principles of individual freedom and liberty. Freedom and liberty are not the means to some end; they are the end.
It does not matter how hard you work, what matters is how well you work. Bashing your head into a wall for hours is a hard work, but it is pretty low in terms of its market value. On the other hand, uploading cat videos on Youtube is an easy work and can set you for life, if you are really smart and skillful about it - this easy work may have a high market value, if properly done.
This is just one thing (among thousands) the income equality principle fails to account for: that how hard you work, or how much you work, in itself has nothing to do with the value of your work. Paying people based solely on the amount of hours they have worked, or on the field they are working in, or on their experience prior to work - is irrational and absurd.
The only way to properly reward people for their work - is to let the contract behind their work decide how much they get paid. Any other system is going to be inherently unfair, unjust, abusing and economically poor and inefficient. Socialism in particular goes against every bit of common sense and assumes that all people are inherently just clones of each other, and all the work they can do has some inherent similarity. It is much like saying, "The lion and the rabbit are the same", and putting them in the same cage, hoping that the "fairness" works out.
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