Wealth Distribution in the USA

[InvisibleJim]

It should be noted that if one were to redistribute the wealth as advertised the results would add no extra beef stew to the dinner plates of Americans. Say you half the inequality whilst completely and perfectly preserving the value of the US economy. It would be roughly true that the price of beef stew would double because twice the amount of cash would be chasing the same supply and demand problem.

There is an argument that you could actually force the price up above double because stripping the money out of investments in beef farms would cause many of them to shut down; also leading to wider unemployment; which is likely countermanded by people targeting investment in beef - if they believe the profits won't be stolen which is rather more difficult to convince them off once you've just used the government to asset strip the previous investors...

The primary reason that the wealth in the US has been growing wider is the mixed impact of globalisation and minaturisation. In the 70s you could buy a pocket calculator for about $100 in todays money. For that money today you can have a mobile phone much more powerful than the rocket which took men to the moon. As the pocket calculator was made locally the cost was much higher for labour because other americans had to be employed. Now China makes everything at a fraction of the cost and the US/Japanese whoever company pumps the profits out to pay for the equity that whatever pension fund or investment house gave it as finance. The return on invesment just floats above the base rate by a risk factor and enough return to get chumps in the US to put their money into the bank.

The great thing about the free market is that it's great at generating shit that people want as quickly as possible. Gas to heat old folks homes and computers to talk about the free market on. 80/20 to 90/10 is just consequence of the requirement that investment money has to sit somewhere. It's important to remember that the richest men in the world are self made - Slim, Buffet and Gates. So the capital is just floating to the people who deliver institutional growth.

[FDG]

It should be noted that if one were to redistribute the wealth as advertised the results would add no extra beef stew to the dinner plates of Americans. Say you half the inequality whilst completely and perfectly preserving the value of the US economy. It would be roughly true that the price of beef stew would double because twice the amount of cash would be chasing the same supply and demand problem.

It would be roughly my ass. Sorry Jim but this is laughable, you are assuming that the supply of beef stew is completely inelastic with respect to price, and its demand completely elastic with respect to income, which is completely absurd. I really hope you're joking.

There is an argument that you could actually force the price up above double because stripping the money out of investments in beef farms would cause many of them to shut down; also leading to wider unemployment; which is likely countermanded by people targeting investment in beef - if they believe the profits won't be stolen which is rather more difficult to convince them off once you've just used the government to asset strip the previous investors...

Hello? Why exactly would people who receive "stocks in beef farms" want to close the farm and cash everything? More importantly, they would have to sell the farm to someone else, which would likely go on with the business, especially if we suppose that prices are doubling...

Jim, just...no.

[InvisibleJim]

It would be roughly my ass. Sorry Jim but this is laughable, you are assuming that the supply of beef stew is completely inelastic with respect to price, and its demand completely elastic with respect to income, which is completely absurd. I really hope you're joking.

It takes years to make a functioning efficient farm and farmland is a difficult to acquire commodity, especially in the developed world. Perfect efficiency only exists in textbooks and only an academic economist would forget that

[FDG]

It takes years to make a functioning efficient farm and farmland is a difficult to acquire commodity, especially in the developed world. Perfect efficiency only exists in textbooks and only an academic economist would forget that

And you are assuming there is zero scalability in current "farmland" and no substitude products to "beef stew". (you're not lucky - I come from a very rural region) Just as a very down to earth example: milk and cheese cows will be converted, etc. etc. it's you that are assuming an unrealistic textbook scenario, tbh.

Really, the only thing that will happen is an increase in prices of variable entity, talking about "doubling" is absurd and it shows you're just arguing to be right. (and let's not even forget that you're assuming that people will use their wealth to consume more food, namely you're confusing "wealth" with "income"...)

[InvisibleJim]

And you are assuming there is zero scalability in current "farmland" and no substitude products to "beef stew". (you're not lucky - I come from a very rural region) Just as a very down to earth example: milk and cheese cows will be converted, etc. etc. it's you that are assuming an unrealistic textbook scenario, tbh.

Really, the only thing that will happen is an increase in prices of variable entity, talking about "doubling" is absurd and it shows you're just arguing to be right. (and let's not even forget that you're assuming that people will use their wealth to consume more food, namely you're confusing "wealth" with "income"...)

Then replace food with anything. You assuming that by doubling the value of money in circulation that you will actually change what people buy. This will only occur in the short term.

[FDG]

Then replace food with anything. You assuming that by doubling the value of money in circulation that you will actually change what people buy. This will only occur in the short term.

IJ, nothing says that redistribuiting the wealth in a completely homogeneous way will double the value of money in circulation. If that's your assumption, then surely everything you say makes (more) sense. But I don't see why it should hold, since it would imply 1) that all the wealth would be used for consumption; 2) that the propensity to consume of the bottom 50% in the "excess wealth" they would receive is fourfold the propensity to consume of those who currently hold that wealth.

FDG, have you ever considered changing your user title to 'Non-inflatory economist'?

I never claimed there would be no inflation, I simply argued against your assertion hat the price of everything will instantaneously double. Even if the state where to give a stipend of 100% their income to the bottom 50% bracket of the income distrubtion, prices would likely not double for standard goods, since people would not consume all their income.

[FDG]

I interpreted Jim's statement to be talking about the money supply. I didn't believe he is assuming anything related to the supply and demand, but rather simply the price increases if more money would be thrown into the system.

Your interpretation is then fancy, because Jim, in his post: http://www.the16types.info/vbulletin...l=1#post947540 specifically talks about redistribuiting the existing wealth, not injecting exogenous money in the system.

You also may not believe he is assuming anything, but his conclusions do, so there isn't a lot to talk about. If we talk about "throwing money into the system" then in most cases prices would increase, but then we're not really arguing any interesting point, and we especially are not talking about the argument I was debating in my post.

It wouldn't change consumption. But prices would double. Increasing the money supply for those who demand beef would increase the price, FDG. And it would be close to double.

The first part is obvious. The second: it would only double if all the additional exogenous income was used in the same proportion as the pre-existing part to buy additional beef. If you think so, then yes. May I instead think that there exists a satiation point for beef?

suppliers would recognize the increase in the money supply

How? Do they all personally know Ben Bernanke and Mario Draghi?

and increase prices to obtain more profit.

How do they know they would obtain more profit by DOUBLING the price.

Basically both demand and supply would stay the same. We're simply talking about changing price levels. Have you ever played Monopoly with hundreds instead of thousands (and corresponding rents/prices of properties change proportionate to the level you play)? Or ever played with tens of thousands as opposed to simply thousands? The amount of money in supply does not change demand for certain items, but it would change the price of items. In a dynamic economy where suppliers control their prices, trying to maximize the amount they can earn, you could expect them to increase prices if people are able and willing to pay more.

Doesn't work like that, Monopoly does not allow "savings" to exist after the game has ended. It's a one-shot game.

William, I don't need any explanation from you on the matter. If you want to debate, bring your arguments (as Invisible Jim does), and don't just state them as facts.