[Graeme]

What's fair?: New theory on income inequality

The increasing inequality in income and wealth in recent years, together with excessive pay packages of CEOs in the U.S. and abroad, is of growing concern, especially to policy makers. Income inequality was identified as the #1 Top 10 Challenging Trends at the 2015 World Economic Forum annual meeting in Davos last January. Columbia Engineering Professor Venkat Venkatasubramanian has led a study that examines income inequality through a new approach: he proposes that the fairest inequality of income is a lognormal distribution (a method of characterizing data patterns in probability and statistics) under ideal conditions, and that an ideal free market can "discover" this in practice.

Venkatasubramanian's analysis found that the Scandinavian countries and, to a lesser extent, Switzerland, Netherlands, and Australia have managed, in practice, to get close to the ideal distribution for the bottom 99% of the population, while the U.S. and U.K. remain less fair at the other extreme. Other European countries such as France and Germany, and Japan and Canada, are in the middle. The paper, "How much inequality in income is fair? A microeconomic game theoretic perspective," was coauthored by Jay Sethuraman, professor of industrial engineering and operations research at Columbia Engineering, and Yu Luo, a chemical engineering PhD student working with Venkatasubramanian, and published online in the April 28th issue of the journal Physica A.

phys.org

[Plantagenet]

What does it matter if one country has a "fair" income distribution sheme when the people in the next country or the next country from that are being shafted with unfair income distribution schemes? Face it----thats not fair.

Its nice that Scandinavia is "fair" but for things to be really fair they should allow unlimited immigration for people from Syria, Libya, Russia, Albania, Nigeria etc. and anyone else who wants to improve their lives---- not just their own citizens. Same deal with Australia and New Zealand---its UNFAIR for them not allow the millions of people from Indonesia to immigrate so they too can enjoy a better life.

TO not let in unlimited immigration is definitely UNFAIR and probably RACIST as well.



tickets now available for "immigration weekend"---a conference sponsored by FACEBOOK in San Francisco in support of unlimited immigration to bring about fairness

[SeaGypsy]

Do you actually agree with that Planty? (Shock if so!)
What is happening in countries like mine is nominal refugee intake effectively on a base percentage of total immigration & overall population increase. Currently Australia's total immigration is near 200,000 pa, 50% are business, investor & skilled sponsorships, 40% are family sponsored & 10% refugee intake. Zero % goes to self declared 'economic migrants'. Roughly 100,000 pa overstay visas with 80,000 of these pa handing themselves in, leaving or being sent home. So the group you are talking about is defined as 'illegal' & equals in numbers the 'refugee' intake, the smallest of legal intakes.

How big is the potential migration if currently defined 'illegal, economic' migrants retained all but their illegal status? What kind of social & market chaos would occur? How fast would standards level out & at what level?

My position is that the unrestricted migration movement always looks at these questions through rose glasses & generally have no real awareness of either macro economics or resource economics & the likely fact that global 'level' actually means the world looks like Bangladesh, not Sweden or Australia.

(BTW while Sandanavia is more generous to its disadvantaged, it taxes hell out of workers, roughly double what we pay, yet we still do pretty well. Leaving someone outside in winter here is not tantamount to murder, as it is in Scandinavia)

[Graeme]

Plant, Thanks for you comment. I wasn't really looking for a discussion on refugee immigration (this is a subset of topic) but rather ways to reduce income inequality in all countries. No easy task!

For completeness, NZ has a refugee quota of only 750 per year. Income inequality is also a problem here particularly since the late 80s.

If you’re 35 or younger, the New Zealand you grew up is in many ways remarkably different to people older than you. One of the most profound differences is in the degree of income inequality.

Over the last three decades New Zealand there has been a step change in inequality — we’ve gone from being one of the most equal to one of the most unequal countries in the developed world.

Our income inequality increased very rapidly in the late 1980s and ’90s — faster in fact than in any other wealthy country. Since then the rest of the world has caught up with us. Over these decades a big gap between rich and poor has opened up.

Over that time we’ve seen:
The top incomes double
The bottom half of incomes barely changed
The current trend shows no sign that this ‘step change’ to inequality will be reversed

How did this happen?

Tax cuts gave big breaks to higher income earners
Welfare benefit cuts of up to 20% reduced incomes for New Zealand’s poorest
Changes to employment law weakened the bargaining power of low-paid workers so they found it harder to win pay increases
Rising unemployment means fewer people earning wages and more people reliant on much lower welfare benefits

Solutions appear to be to reverse the above policies, which is virtually impossible with our present government. The NZ public voted the conservatives into power during the last general election. You get what you vote for!

[SeaGypsy]

Of your top % how many are Lord of the the Rings RE boomers/ both sellers & buyers (cashed up migrant investors)? How many of your middle class have moved to Australia in this time frame ,& how many kiwis have been refused entry here for character reasons? Why is NZ currently the darling of first world economies while kiwis whine poor?

[Graeme]

SG, I've tried to find some stats for you. This is the best so far though not up to date. Considering what I've said above, this is understandable though I recall that more have recently returned to NZ from Australia.

Table 2 compares the total flows over the last two full migration cycles, 1997-2003 and 2004-2010. Overall, it shows quite similar results with overall net gains over both periods (62,000 and 85,000). It also shows that although the number of New Zealanders departing for Australia was greater over 2004-2010 than 1997-2003, there was a significant decrease (84 percent) in the net number of New Zealanders leaving for countries other than Australia. This points to a significant narrowing and concentration of New Zealand's diaspora to Australia. The net effect is that fewer New Zealanders departed the country between 2004-2010 than over the seven years between 1997-2003.

Our so-called "rock star" economy is all smoke and mirrors.

With our currency effectively at parity with the Australian dollar and house prices booming everything must be great in the "rockstar" New Zealand economy, right?

I'm not so sure. Let's look at the economic growth achieved in 2014.

Headline real GDP growth was a very impressive 3.5 per cent. However, population growth was 1.6 per cent so per capita GDP growth was only about 1.8 per cent.

Commodity prices - in particular dairy - had a big run up in 2014 resulting in a positive impact of around $5 billion to nominal GDP. Working out the contribution to real GDP growth is difficult, but if we assume about half of this fed through directly into GDP, then that accounts for about 0.9 per cent of growth.

Likewise the Christchurch rebuild got into full swing and probably added a further 0.6 per cent. So real GDP growth per capita, excluding the one-off effects of surging commodity prices and the Christchurch rebuild, was about 0.3 per cent.

[Plantagenet]

For completeness, NZ has a refugee quota of only 750 per year.

How fair is that? A wealthy country like New Zealand closing its doors to all the millions of refugees in the world? Sounds downright unfair to me.

...If you’re 35 or younger, the New Zealand you grew up is in many ways remarkably different to people older than you. One of the most profound differences is in the degree of income inequality.

Over the last three decades New Zealand there has been a step change in inequality — we’ve gone from being one of the most equal to one of the most unequal countries in the developed world.

Our income inequality increased very rapidly in the late 1980s and ’90s — faster in fact than in any other wealthy country. Since then the rest of the world has caught up with us. Over these decades a big gap between rich and poor has opened up....

The poorest person in New Zealand is a heck of a lot better off then a poor person in India or Indonesia or Libya or a person in a refugee camp full of Syrians. Why not let them all immigrate to New Zealand? They'd all do much better in New Zealand then in their own third world hell holes.

[Cog]

Why do people get their panties in a bunch over what someone else earns? Is it jealousy?

If you want to make more money get off the computer and get to work.

[Strummer]

Why do people get their panties in a bunch over what someone else earns? Is it jealousy?

No, it's not called "jealousy". It's called "knowledge of history". Do you also wonder why the slaves and serfs throughout the past thousands of years got their panties in a bunch over what their feudal masters were earning? After all, they were just jealous, right?

[ROCKMAN]

Granted this is just a view of my little bit of the world. I volunteer with a group that in general just tries to help the folks on the bottom of the economic pyramid deal with simple matters. From improving reading skills to something that seems so simple...opening a checking account at a bank.

In general the folks I deal with are: nice, honest, ambitious, etc. IOW decent people. And they are typically poor for one simple reason: thru lack of education they are not capable of creating much value with their efforts. If a man can't contribute more than a minimal amount of value in his job how can he be highly compensated? Do you pay someone twice as much as the value of what they add to a business?

I suspect if one adjusts those numbers based on education levels the countries with the lower inequality stats also rate higher on skill levels. The lack of education of the folks I deal with is even worse than just lacking valuable skills. They are very intimidated by life in general. I've had folks scheduled to meet me at the bank just so I could walk them thru setting up a checking account. And some didn't show up because they were embarrassed/intimidated. Very sad to watch these folks struggle with matters that most of us don't give a second thought to. Yes: some drug/alcohol abusers in the mix but most seem to be a symptom of their problems and not a cause. It might sound cruel but the simple fact is that the folks in my little circle aren't capable of earning much of an income. Far too many can't even qualify for a minimum wage job.

IOW perhaps instead focusing of "income inequality" perhaps a better approach would be dealing with "education inequality". And understand that comment comes from a person who was unable to recite the entire alphabet his first year in high school so he knows something about being a dumb sh*t at one point when he was ill-equipped to deal with life. LOL.

[SeaGypsy]

There is such a variable as intellectual disability, among many. Aside from technical training basic workplace values- punctuality, reliability. professionalism, etc are in short supply. If you are hiring in a first world country for jobs requiring a high degree of motivation, chances are you will be hiring migrants more often than not, simply because they will get up at 4 am to go to work consistently. The originals who fail to thrive are left out, having not skills or discipline or connections.

[Paulo1]

Plant,

How about unlimited Asian immigration into Alaska through the north Pacific, every summer? That sounds fair to me.

[Cog]

If you are in the position to complain about income inequality, it simply means you are a failure in life and need to work harder.

Well paid CEO's are paid the big bucks for a very good reason. They generate far more money for the stock holders then Joe Lunch bucket.

[Lore]

If you are in the position to complain about income inequality, it simply means you are a failure in life and need to work harder.

Well paid CEO's are paid the big bucks for a very good reason. They generate far more money for the stock holders then Joe Lunch bucket.

A lot of them have contracts that give them golden parachutes even when they don't return value to the stockholders. That robs everyone as someone has to pay and it's usually the consumer. Case in point, the banking debacle.

There is also something wrong here when people do nothing for it.

Bernie Sanders says Walmart heirs own more wealth than bottom 40 percent of Americans
http://www.politifact.com/truth-o-meter ... h-bottom-/

[Pops]

Of course inequality is the number one concern of those at Davos, keeping the slaves in line was an overriding concern of the planters in the Antebellum South too. The question isn't how much inequality is fair but how much is defendable, in the physical sense —think French Revolution.

At this point in the rich world not many of us are starving, unless it is to support a more insistent habit than eating. But that could change and fairly quickly, depending on when the next bubble pops and how many levers .gov has left in the neutral position that they can pull.

[Sixstrings]

Plant makes a good point about immigration.

The reason that socialism can work so well, in Australia and Scandinavia, is that they restrict immigration. Whereas in the USA we've just been this open doors place for most of our history (which has its benefits, too, I can actually argue both sides of this debate).

But anyhow, you can't have the good wages for the whole working and middle class, if you're letting everybody jump in the boat when we don't have enough jobs to go around as it is.

It's very concerning. We're going to wind up like a Qatar, or a latin american banana republic with a rich elite minority and then vast swaths of poverty.

We really do need to clamp down on unskilled immigration. But Democrats won't ever do this, they've got two oppositional ideas in their head -- (a) being for the working man, yet also (b) for open doors immigration and then on top of that they are (c) global free traders.

Bottom line on it all -- I know we're never going to clamp down on immigration, so the root of the problem can't really be addressed, but what we could do is just raise the damn minimum wage. It's time for that. And at least a few pro working and middle class policies. And that's why I'm voting for bernie.

Sanders is right that "the billionaires want it all." It's not even that I'm against the rich having the vast majority of everything, but they just can't HAVE IT ALL. I care about this country. I do not want it to become a Guatamala or Sri Lanka. I do not want to see us devolve, domestically, in living standards.

I think we have a right to things other people in other top tier economies have. Our rich just need to have *a little bit less*, that's all we are asking for here.

I mean look, I agree with Jeb Bush on so many things, foreign policy stuff -- but yet the man wants to cut old folks' social security, and he won't ever raise wages for the working and middle class, and he will not stop the slide in median income. So how could I vote for that, just because I agree with him on the foreign policy stuff?

And Hillary is the same as Jeb, on global cop stuff. I would need to be convinced by her, too, that she's going to do some real things for the working class and it's not just all for the rich and then foreign policy. Either a Jeb Bush OR a Hillary Clinton have got to start addressing the working and middle class, we cannot have "America" if it's only working for the top minority and things get worse for the bottom 99%

They just need to raise the darn minimum wage, that would solve the problems, it would get money flowing into main street small business too. Raise that working class wage, and then keep hands off social security, improve the ACA, tax the rich a fair amount, and then okay we can go be "America" and sail all the open seas and defend the world. It has to start at home, though, that's my big issue lately and that's why I'm voting bernie even if I do agree with a Jeb or Hillary on foreign policy.

[Sixstrings]

According to Ann Coulter, the US has taken in "one fourth" of the entire population of Mexico:

Although America is admitting more immigrants, they are coming from fewer countries than they did before 1970. On liberals' own terms, the country is becoming less "diverse," but a lot poorer and a lot more Latin.

America has already taken in one-fourth of Mexico's entire population.
http://www.anncoulter.com/columns/2015-05-27.html

That's a stunning number there, one quarter of the entire Mexican nation, because Mexico is actually one of the most populous nations in the world with a current population of 122 million. (they're all catholic, they have a lot of kids, plus the dynamic where lower income groups have more children)

So.. we've already taken in 40 million ish immigrants from Mexico. And then Mexicio just bounces back in population to even higher than they ever were before. Where does it all end? Will we have one billion people one day, 80% being latino, and then Mexico proper will have 300 million pop?

We honestly need to do some common sense immigration planning like Sweden and Australia does, and we shouldn't have to to feel like that makes us racist or not politically correct.

If they'd actually stop the immigration for at least a little while, then wages would rise by natural market forces -- that would help Mexican Americans, too.

(I'm not against the "melting pot," but my point is just that it's supposed to be a stew. There needs to be a chef in charge cooking that stew, you can't just throw in all peas or all carrots or all potatoes, it doesn't make a good stew.)

[Graeme]

This might be regarded as my most important post. I urge all the view the following video (hour and half) called the Four Horsemen.

FOUR HORSEMEN is an award winning independent feature documentary which lifts the lid on how the world really works.

As we will never return to 'business as usual' 23 international thinkers, government advisors and Wall Street money-men break their silence and explain how to establish a moral and just society.

FOUR HORSEMEN is free from mainstream media propaganda -- the film doesn't bash bankers, criticise politicians or get involved in conspiracy theories. It ignites the debate about how to usher a new economic paradigm into the world which would dramatically improve the quality of life for billions

I've just finishing viewing this and I will list the key resolution points, which you can see for yourself: localization, enhance relationships, reduce income differences, use classical economics, gold standard, eliminate debt (write it off), and introduce consumption tax.

[SeaGypsy]

Can you please summarise Graeme? I can't watch a 90 min documentary w/o blowing my data limit.

This issue is where I lost it with the green left. As 6 mentions, the fundamental condradiction of unlimited unskilled migration & supposedly being on the side of ordinary workers is utter doublespeak & has hypnotised much of the environment & union movements into pushing a position favouring the ultra rich (I don't use '1%' because it is a skewed movement caught in the same bullcrap).

I thoroughly believe we are already well past tipping point in global population terms & we are already in lifeboat mode. We western &:non western developed countries, are the lifeboats. The metaphor is apt in that there are obviously whole countries sinking with non metaphorical lifeboats pouring out, sinking as their desperate occupants reach for the metaphor. The metaphorical lifeboats can definitely sink themselves, there are enough or very soon will be enough people to get global Bangladesh happening real quick. The push factors are definitely on the increase, pull factors will only dissipate on collapse of the lifeboat in question.

A popular idea in the modern social system environment & workplaces in general is the concept of 'continuous improvement'. People actually believe that garbage. The same philosophy which forces OH&S updates & PPE down most industries throats on a regular basis believes we can save the world by being nicer & safer, then even nicer & even safer ad infinitum.

The concept of limits has yet to bite into most people's minds, certainly not governments in general, least of all on the left, if at all on the right mostly dishonestly. How green parties globally can advocate simultaneously for the environment & for open borders is utterly confounding.

[Graeme]

Basically, it is a message of hope insofar as the information the 23 presenters provide can empower the rest of us to make changes that are required by governments and these changes are essential if we are going to avoid disaster. Here is a summary I've found:

Over the centuries systems have been subtly modified, manipulated and even corrupted often to serve the interests of the few. We've continually accepted these changes and because man can adjust to living under virtually any conditions, the trait that's enabled us to survive is the very trait that's suppressed us. For centuries gatekeepers have manipulated our cognitive map. But in 1989 a computer scientist by the name of Tim Berners-Lee implemented the first successful communication between an HTTP client and server.

The World Wide Web was born. It is since unleashed a tsunami of instantly accessible, freely available information. Just as Gutenberg's printing press wrestled control of the cognitive map away from ecclesiastical and royal elite, today the Internet is beginning to change Governments, finance and the media. We are on the brink of change, but to enact it we must first understand the things that have been left unsaid for so long. To do that we need context from people who speak the truth in the face of collective delusion, because to understand something is to be liberated from it.

Empires do not begin or end on a certain date, but they do end and the West has not yet come to terms with its fading supremacy. At the end of every empire under the guise of renewal, tribes, armies and organizations appear and devour the heritage of the former superpower often from within. In his essay, The Fate of Empires, the soldier, diplomat and traveler, Lieutenant-General Sir John John Glubb analyzed the lifecycle of empires. He found remarkable similarities between them all. An empire lasts about 250 years, or 10 generations, from the early pioneers to the final conspicuous consumers who become a burden on the state.

Six ages define the lifespan of an empire: the age of pioneers, the age of conquests, the age of commerce, the age of affluence, the age of intellect, ending with bread and circuses in the age of decadence. There are common features to every age of decadence: an undisciplined and over extended military, the conspicuous display of wealth, a massive disparity between rich and poor, a desire to live off a bloated state, and an obsession with sex. But perhaps the most notorious trait of all is the debasement of the currency. The United States and Great Britain both begun on a gold or silver standard, long since abandoned. Rome was no different.

Great empire wealth always dazzles, but beneath the surface the unbridle desire for money, power and material possessions means that duty and public service are replaced by leaders and citizens who scramble for the spoils.