Well, what was your point? I started out by saying I wasn’t following you. Can you clarify? In all honesty, I have no idea what you were trying to say.
Uh, no. You took my post as a pot shot at your intentions. It wasn’t. End of story.
You’re talking about growth. Beleive it or not, inflation through bank lending practices is a necessary key component to this, or else, it is as you say, a zero sum game.
For example, let’s say there is only $1,000 and no banks to inflate the money. If I use ten dollars of my money to buy some goods, work on them and create something with them that I turn around and sell for $15, there is still only $1,000 in the economy even though I have added value to it. As other people do the same thing you end up with a small amount of dollars chasing a large number of goods and services. This would be called a “tight” monetary policy, which would stifle growth. The Fed manages this by controlling bank reserve rates which determine how much money can inflate, easing or tightening depending on economic conditions. An easing of bank reserve rates would encourage this growth though it is seldom done this way. The Fed has a finer control on money supply by the interest rates it charges banks to borrow money.
So, as you can see, growth in the economy is tied to the money supply. It’s very hard for it to grow without inflation.
It’s pretty good, but you still only have part of the picture. What should be happening is that if I buy 10 dollars worth of stuff, add value and work on it and sell it for 15 dollars, the monetary supply should acknowledge this buy growing 5 dollars also. This is accomplished through this inflation that I speak (we’re talking about a perfect and limited economy in this example, not reality.)
To answer we’ll need to define our terms a little better. For an economy like the US’s, or most good ones for that matter what makes it stronger is the amount of work being done, the value being added. In order for work to be done and value to be added, somebody has to want these things and be willing to pay for them. So, what you want for a strong economy is somebody or somebodies having a strong demand for goods and services, and the ability to compensate others for delivering these goods and services. In order to provide that compensation they will work and provide goods and services themselves to to other people.
Whether or not they are poor or rich or middle class has nothing to do with it at this level. You simply need supply and demand. We can find historical examples like feudalism where there essentially was no middle class yet prospering economies. Concentration of wealth does not inherently slow down or speed up an economy in the way you seem to be implying.
However, there is something to what you say. As wealth is conentrated there is less competition. For example, you are likely to get a fairer price for a commodity if 20 people are bidding on it, than if just one person is. Those people bidding are likely to get a fairer price if they have 20 other people that they could get that commodity from other than you. Efficiency is a necessity to a strong economy.
You have a much more efficient economy, if you have a strong middle class than you do if you have concentrated wealth because you have less inneficiency.
Not inherently, but we would expect the flatter wider one to grow faster than the taller skinnier one because it would be more efficient.
It’s not the size of the transactions that matter. Ask Walmart, or McDonalds. It’s the total volume.
I hope I’ve answered this and the rest of your post above. If not, let me know.
John, I simply do not believe that my arguments are so intricate and arcane that you cannot grasp them. Your faults are as legion as mine own, but “stupid” ain’t on the list.
The express point of the comparison between Paine and Moon is precisely that Paine’s arguments were excellent, and Moon’s a pile of psuedo-religious garbage. Moon can buy a newspaper, Paine was lucky to be able to buy his own dinner. Economic power enhances political power because it enhances the opportunity to express one’s views, however bankrupt those ideas may be. Witness Henry Ford’s purchase of a newspaper to spread anti-Semitic poison.
Not all injustice involves a removal, in this instance, an enhancement of one citizens rights over another creates an unequal field. Shirley, this is obvious? Not all threats to justice come from the government, some come from each other.
What is to be done? I don’t precisely know, campaign finance reform appears to be a lurching and clumsy step in the right direction. I am as mindful as you of First Amendment protections, I would not have a wealthy man’s rights reduced below an equitable level. I am not certain precisely how to go about this, hence my call for creative and intelligent minds to “brainstorm”. Had you taken it in the spirit offered, you would have seen it as a mild but friendly compliment, but it appears to have been a waste of electrons.
Whatever. If you didn’t see it before, you won’t now.
Hmmm. OK. Let me try to get a deeper understanding of this; I think there are fundamentals here that I don’t get that are necessary to answer the bigger question. Bear with me, if you would.
A “dollar” is simply a symbolic unit, which could be “clams”, “samoleans”, “beans”, or whatever; we (or the market) attach some notion of worth (a synonym for value here) per unit. Let’s say that the number of dollars available is fixed (i.e., no additional currency is introduced into the economy). Wouldn’t wealth creation due to added labor find some way to be reflected in the value of a dollar (that is, a single dollar gains “buying power” over time)? Another possibility might be that dollars end up being used sparingly and barter becomes much more common. Maybe not; ignoring the impossibility of actually doing it, does the idea of increasing the currency supply to match the wealth created through labor make any sense?
So this raises some questions for me. Exactly what does “money supply” mean? Is it really only tied to the bank rates (where “rates” includes both interest rate and reserve rate, which is money they’re allowed to lend)? If inflation is a lower “bang for the buck”, it’s not clear to me why inflation makes for an easier to grow economy.
So, would I be correct if I said that the rate of inflation has a rough correspondence to wealth created through labor? I’m sure that’s only part of it, if it’s accurate at all, hence my question. And again, if that’s not it, it’s not clear to me why inflation helps an economy grow. That is, if inflation does not correspond to the value added via labor, then it does no work in the system (particularly because “value” is simply an abstract that we attach to the currency unit).
Something seems off with this explanation to me. Assume a society (of an arbitrarily large number of people) where there are only two manufacturers, Spacely Sprockets and Cogswell Cogs. Assume robotics has advanced to the point where all goods and services can be automated. Posit further that both Spacely and Cogswell, in their infinitely benevolent naivete, would never think of collusion or any other means of rigging the system: they’re in perfect competition. We have supply, we have demand, we have value being added (via machine labor). In case it’s not clear, the robots are simply an extreme analogue to serfs (slaves, actually); everyone in the society is a feudal lord. Do we have a prospering economy? If not, why not? Furthermore, can the scenario be tweaked to accomodate any objection you might raise?
But I’m not sure that gets at the ideas of “wealth concentration” and an “efficient economy”. In particular, the two statements: (1) Concentration of wealth does not inherently slow down or speed up an economy in the way you seem to be implying. and (2) You have a much more efficient economy, if you have a strong middle class than you do if you have concentrated wealth because you have less inneficiency. seem to be unsupported.
Since (1) forms the basis of my original question, it strikes me as begging the question. At least it would be without the “in the way you seem to be implying” clause, which may be exactly what’s tripping me up. (2) seems to be in opposition to (1); if a strong middle class (less concentration of wealth) implies less economic inefficiency, then the result would be a stronger economy. Part of “stronger” would be higher economic “speed”. Clarification would be appreciated.
Yes. Although I believe we’re using “volume” in a different way. I think it’s the same difference I was expressing with Shodan; I think posts #90 and #74 explain how I’m using the the term. And it’s not clear to me why, if used as I have, the conclusion doesn’t hold.
At this point I’m just going to agree to disagree with you since you seem to want to make this argument personal. Once more I’ll state that I’m not lying, trying to trick you, or trying to insult you personally. If you choose not to believe that, then so be it. Enjoy the rest of your weekend.
Well, that’s a pity, John, I was so looking forward to your graceful concession speech.
Lets say that I am running for office. My new tax law will exempt almost every person in my country from taxes. I will generate a list of the richest people in the land and liquidate the top number that I need to run my government. This benefits %99 of the people, so I should win the elction.
That is class warfare.
What is the outcome of my hypothetical situation? I didn’t say that I was giving any money back. I get the power and decide how the money should be spent. I win, everyone else loses.
This is why we do not have a democracy in this country, and why the word domocracy isn’t in the US constitution. The US is not a mob rule society. It came very close to being governed by the educated, but that lost out to our current system. If the US was a democracy we could all vote Bill Gates out and take his stuff.
Present day political scene seems to me to be this sort of power grab, and in the process it erodes personal rights. Today we don’t have the right to take (all) of anyones money, and in the past we didn’t “take” anything at al.
An article I just came across that may be of interest: The Upside of Income Inequality. I’d never come across the site before, but looking over some of their articles they lean (precipitously?) right.
Perhaps also of interest, although not directly relevant to this thread: John Lott, Loaded, an economist attempting to take on Leavitt and Dubner’s Freakonomics.