14 votes

Why the super rich are inevitable?

17 comments

  1. [3]
    skybrian
    Link
    This particular toy model hasn't much to do with the real world, but it's true in general that people with lots of money can make money by making bigger bets. The insurance industry is a more...

    This particular toy model hasn't much to do with the real world, but it's true in general that people with lots of money can make money by making bigger bets.

    The insurance industry is a more realistic example. Most of us need to buy insurance even though, on average, it's a losing bet. We can't afford to eat the loss if something bad happens.

    Meanwhile, Berkshire Hathaway can sell insurance and make money off of it. That's partially being good at judging risks, partially because they're making lots of hopefully-uncorrelated bets, but also because they have so much money and can afford occasional large losses.

    8 votes
    1. [2]
      nothis
      Link Parent
      Isn't this, in essence, what a progressive tax system tries to prevent?

      it's true in general that people with lots of money can make money by making bigger bets.

      Isn't this, in essence, what a progressive tax system tries to prevent?

      2 votes
      1. skybrian
        Link Parent
        Well, I don't know about prevent. It's more like keeping inequality from getting too far out of hand. Also, there are a lot of things we wouldn't have if there weren't people or organizations with...

        Well, I don't know about prevent. It's more like keeping inequality from getting too far out of hand.

        Also, there are a lot of things we wouldn't have if there weren't people or organizations with large pots of money that are controlled by a small number of decision-makers. There are big, important, and risky projects that wouldn't happen without big budgets. And insurance is very useful. The enormous payouts for something like a major hurricane have to come from somewhere.

        (Some people may think that only governments should have the means to do these things. They do fund many big and important projects, but I don't think our actually-existing governments would fund all the things that need funding, due to political constraints. Having a diverse set of organizations with different priorities and constraints seems useful.)

        3 votes
  2. Kremor
    Link

    Many of us assume it's because some people make better financial decisions. But what if this isn't true? What if the economy – our economy – is designed to create a few super rich people?

    That's what mathematicians argue in something called the Yard-sale model.

    7 votes
  3. stu2b50
    Link
    It seems pretty intuitive that power and resources accumulate to a subset of a population regardless of economic model. Throughout history, there isn't really any attempted model of society where...

    It seems pretty intuitive that power and resources accumulate to a subset of a population regardless of economic model. Throughout history, there isn't really any attempted model of society where the end state wasn't wealth and/or power being concentrated in a small number of entities. Wealth and power are compounding forces - when you have more wealth and power, by definition that allows you more opportunities to gain more wealth and power.

    5 votes
  4. [12]
    rosco
    Link
    I'd say they are only inevitable in a system in which we allow them to write the rules. This period feels like a reply of the 1920s. Hopefully we can skip the misery/crash of the 30s and skip...

    I'd say they are only inevitable in a system in which we allow them to write the rules. This period feels like a reply of the 1920s. Hopefully we can skip the misery/crash of the 30s and skip right to the heavy regulation and taxation of the rich.

    4 votes
    1. [11]
      moocow1452
      Link Parent
      What happens if the people who write the tax law are also "the rich?"

      What happens if the people who write the tax law are also "the rich?"

      3 votes
      1. [6]
        vord
        Link Parent
        Historically the guillotine was a quite effective check and balance.

        Historically the guillotine was a quite effective check and balance.

        7 votes
        1. [5]
          stu2b50
          Link Parent
          I keep hearing people say this, but did everyone read the same history of the French Revolution or am I going crazy? After the execution of Bourbon lineage, a political vacuum was formed and a...

          I keep hearing people say this, but did everyone read the same history of the French Revolution or am I going crazy? After the execution of Bourbon lineage, a political vacuum was formed and a struggle for power started. Eventually, Robespierre and the Committee of Public Safety were granted ultimate power, the newly written constitution was suspended, and Robespierre went on a massive political purge, executing hundreds of thousands of political enemies and innocents. This is practically fascist, and the means of enforcement was... the guillotine.

          So it was now a tool for those in power to control the people with fear. Check and balance for whom?

          And of course after that France was ruled dictatorially by an Emperor, Napoleon, and then after his defeat the monarchy was restored.

          Like, the French Revolution was not exactly a rousing success. The ideas espoused were important, but important for later ages as reference material by less extreme, and more successful, political reformations.

          14 votes
          1. rosco
            Link Parent
            I think it becomes a fun, flippant answer. "Off with their heads" rolls off the tongue better than "I have a nuanced plan to break up institutions that have an oversized hand of their...

            I think it becomes a fun, flippant answer. "Off with their heads" rolls off the tongue better than "I have a nuanced plan to break up institutions that have an oversized hand of their industry/economy at large and redistribute wealth so there is a higher degree of equity". Also the latter is very difficult to actual develop.

            I agree the revolution wasn't a success, but I do think there is an interesting contrast between modern day Spain and modern day France. In France heads rolled and power structures were reformed, in Spain they came to a treaty in which the fighting stopped but power and capital largely remained in the same hands. Today, Spain remains pretty conservative while France leans more liberal. I think there are some cultural remains from the French revolution that people there believe that change is possible and it is their right and responsibility to advocate (sometimes read "riot") for their rights. So even if the revolution ultimately failed, I think it's had a long lasting effect on French politics and their dynamics between rich and poor.

            7 votes
          2. [2]
            SheepWolf
            Link Parent
            I imagine it has to do with simplification of history. Assuming I know nothing about the French Revolution and French history, I can at least make some broad assumptions based on what you've...

            I imagine it has to do with simplification of history. Assuming I know nothing about the French Revolution and French history, I can at least make some broad assumptions based on what you've written:

            1. Things are bad in France. France is lead by the monarchy, aristocrats, the rich and powerful, whoever. The common people are angry and blame the ones in charge. They use the guillotine to get rid of those they think are the reason why they are poor and suffering.
            2. A political vacuum is formed. Other people take power (Robespierre and the Committee of Public Safety). Are things as bad as they were in 1.? For many the answer is yes, for some maybe the answer is no.
            3. More stuff happens. Maybe we can assume what happened in 1. also happened to Robespierre and the Committee of Public Safety. At some point Napoleon takes charge. Presumably things are better now for a different set of people, and things are bad for other people. Maybe or maybe not they are better than they were in 1. and 2.
            4. Eventually Napoleon becomes emperor, but also eventually he is defeated. Are things better than 1., 2. and 3. now?
            5. Knowing nothing about French history, we jump to present day France. Assuming this long chain of events lead from one thing to another, can we assume that (most?) modern French people are in a better position than they were in 1. when they were starving and angry enough to guillotine their rulers? Maybe we can safely assume so because none of the current rulers are currently being executed.

            Another simplification that might be made is that, Americans are familiar with the American Revolution. The American Revolution is similar in our/their minds in that the common people overthrew the unfair ruler-ship of the monarchy minus the use of guillotines.

            2 votes
            1. vord
              Link Parent
              These things can be broadly true at the same time. It's obvious beheadings/coups/revolutions are hardly an ideal path for massive political change. However, it is generally the most common. Was...

              These things can be broadly true at the same time. It's obvious beheadings/coups/revolutions are hardly an ideal path for massive political change. However, it is generally the most common.

              Was the American Revolution led by the commoners? No. But without the support of the commoners the revolutionaries likely would have had their own heads on the block in short order.

              Doesn't help that any constitution that forms that vaguely smells like communism catches the eye of the CIA pretty quickly. It's hard to presuppose that 'rule by rich' is inevitable if we've never really gotten past a roadblock of 'rich will suppress any other mechanism by force'.

              For shorthand, I'll say "Capitalist" and "Socialist."

              It may be uncouth, but violently suppressing capitalist political opposition might almost be a neccessity in order to build a socialist government. We've seen how Capitalist governments are more than happy to perform coups for dictators if there's a whiff of Socialism in the air.

              5 votes
      2. [2]
        Bonooru
        Link Parent
        Then it depends if they act selflessly or not. Or rather how selflessly they act, it isn't a binary choice. The more selfish they act, the less things meaningfully change.

        Then it depends if they act selflessly or not. Or rather how selflessly they act, it isn't a binary choice. The more selfish they act, the less things meaningfully change.

        3 votes
        1. LukeZaz
          Link Parent
          I think history has shown us by this point that virtually none of the wealthy classes can be expected to act selflessly or in the general interest of the people. A few of them show up here and...

          I think history has shown us by this point that virtually none of the wealthy classes can be expected to act selflessly or in the general interest of the people. A few of them show up here and there, but by and large, they only enact positive change for the populace if the populace forces them to, usually by protest or riot.

          1 vote
      3. NoblePath
        Link Parent
        FDR was quite wealthy, iirc.

        FDR was quite wealthy, iirc.

        3 votes
      4. rosco
        Link Parent
        I think there has to be enough popular demand/fear of reprisal for real changes to law and regulation. It feels like in the last 5 years it's started to simmer, the next 5 might take us to a boil.

        I think there has to be enough popular demand/fear of reprisal for real changes to law and regulation. It feels like in the last 5 years it's started to simmer, the next 5 might take us to a boil.

        3 votes