# 'Splain me "Income inequality" **URL:** \ **Category:** In My Humble Opinion\ **Created:** [January 8, 2014, 3:47pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279 "2014-01-08T15:47:50Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [January 8, 2014, 6:35pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/21 "2014-01-08T18:35:20Z")
> [@Little\_Nemo](#): > > The only difference is they all have different sets of goods. Also different demands, and different priorities. The fact that there are rich people who want $100K cars doesn’t price me out of the market for $100K cars - I have no demand for such a car, and therefore we are not in competition, and it doesn’t matter in the slightest how much more the rich guy can pay. Likewise for other goods. Maybe the rich guy can pay $100 for a pound of potatoes, so he could out bid me. But he doesn’t have to pay that much, so he doesn’t. Thus his ability to pay more for potatoes has no effect on me. The only time it would matter is when he is trying to corner the market on potatoes. That he can do, by outbidding me on potato futures. But I just want a starch with dinner, so I switch to rice or bread and let him go bankrupt buying potatoes. Then he goes bankrupt, the price of potatoes drops again, and I can afford French fries again. The rich are not simply bidding against the poor - they are bidding against the middle class and other rich as well. If I understand you correctly, you are making the common mistake of equating a time when someone doesn’t get what he wants at a price he wants to pay as a market failure. That’s not the case, because that’s not the purpose of the market. The purpose of the market is to match, moment by moment, the perceived demand for a given good or service to the perceived supply, thru the medium of price. Regards, Shodan ---
**Author:** ![Machine\_Elf](https://avatars.discourse-cdn.com/v4/letter/m/82dd89/32.png) [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)\ **Post date:** [January 8, 2014, 6:36pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/22 "2014-01-08T18:36:44Z")
> [@Little\_Nemo](#): > > The owner of the wealth is providing nothing to the process but is reaping the majority of the rewards. You appear to be disregarding the enormous pile of cash that the owner has put at risk. I don’t understand why you are calling that “nothing.” ---
**Author:** ![sachertorte](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sachertorte/32/3727_2.png) [@sachertorte](https://boards.straightdope.com/u/sachertorte)\ **Post date:** [January 8, 2014, 6:54pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/23 "2014-01-08T18:54:51Z")
Income inequality or wealth inequality isn’t bad outright. It’s a matter of scale. Too much inequality is where shit breaks down. A few months ago there was a youtube video of some sort that had good graphics illustrating income (maybe it was wealth) distribution in the USA. The top percent didn’t fit on the scale and the bottom had so little they had to represent it with nothing. OKAY. I googled it: [![](https://img.youtube.com/vi/QPKKQnijnsM/maxresdefault.jpg "Wealth Inequality in America") ](https://www.youtube.com/watch?v=QPKKQnijnsM) ---
**Author:** ![Hello\_Again](https://avatars.discourse-cdn.com/v4/letter/h/85e7bf/32.png) [@Hello\_Again](https://boards.straightdope.com/u/Hello_Again)\ **Post date:** [January 8, 2014, 7:01pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/24 "2014-01-08T19:01:50Z")
> [@sachertorte](#): > > Income inequality or wealth inequality isn’t bad outright. It’s a matter of scale. Too much inequality is where shit breaks down. Exactly. Income inequality is a feature, not a bug, of the capitalist system. But extreme income inequality, particularly when paired with a large idle workforce, is associated with a lot of things no one likes, like violent revolutions and the complete breakdown of social-political systems. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 8, 2014, 7:01pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/25 "2014-01-08T19:01:53Z")
> [@sachertorte](#): > > Income inequality or wealth inequality isn’t bad outright. It’s a matter of scale. Too much inequality is where shit breaks down. Please explain the mechanism of “shit breaking down”. If you are varying _just_ the “inequality of wealth” and not any other variables (such as standard of living of the 99%, for example), how does the “shit” break down between the three examples below: 1. Top 1% owns 10% of the wealth in the country. 2. Top 1% owns 90% of the wealth in the country. 3. Top 1% owns 99% of the wealth in the country. If you point out that in example 3, the 99% are much poorer, then it is not the “wealth inequality” that is the problem. It is the “wealth” (of the 99%) period. Basically, the question is: if I am living comfortably, how does it matter to me whether the guy over there, on the other side of town, is worth $10M or $10B? And if I am not living comfortably, how does it help me if the guy over there, on the other side of town, has his wealth reduced from $10B to $10M? ---
**Author:** ![beowulff](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/beowulff/32/542_2.png) [@beowulff](https://boards.straightdope.com/u/beowulff)\ **Post date:** [January 8, 2014, 7:04pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/26 "2014-01-08T19:04:08Z")
I don’t think that income inequality is the real problem (although it is certainly a symptom). IMHO, the big issue is the fact that there is a huge disconnect between executive performance and executive pay. If a worker does a bad job, he will get fired. If a CEO does a bad job, and the company looses $100,000,000, the same worker gets fired, and the CEO collects a bonus because he claimed that the loss would have been even worse. I wouldn’t have any problem with the outrageous salaries that executives get, if they were tied to reasonable metrics, like profitability. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 8, 2014, 7:13pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/27 "2014-01-08T19:13:43Z")
> [@Little\_Nemo](#): > > No, you’re wrong. That was my entire point - we are all in the same free market. When you stop in a 7/11 to buy a Diet Pepsi you’re participating in the same economy as Warren Buffet buying a corporation - and the two transactions are connected. Warren Buffet could buy the 7/11 with less impact on his net worth than when you buy that Pepsi. The incremental value of a dollar is a bit less at $10 billion than $100 million - but the difference is so small as to not matter unless you are talking 10 million of them. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 8, 2014, 7:18pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/28 "2014-01-08T19:18:04Z")
> [@Sicks\_Ate](#): > > So the rich are indeed richer, the middle class is no worse off, and while the poor aren’t necessarily poorer, they are not progressing well in comparison to the middle- or upper-class. Assuming that you believe we all suffered in the great recession, you should be aware that though the economy has recovered, the top 1% has gotten 95% of the gains. [Cite - pdf.](http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCsQFjAA&url=http%3A%2F%2Felsa.berkeley.edu%2F~saez%2Fsaez-UStopincomes-2012.pdf&ei=kKPNUqWELYXdoASq2ICwAw&usg=AFQjCNH3Mzgge5vqz7P9u2Cs3SdbeQ2vQw&bvm=bv.58187178,d.cGU&cad=rja) That is clearly a big enough percentage to indicate that the middle class has suffered also. I believe that the top 10% have done relatively well, but the middle class is below that. Middle class wages have stagnated also. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 8, 2014, 7:19pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/29 "2014-01-08T19:19:19Z")
> [@Machine\_Elf](#): > > You appear to be disregarding the enormous pile of cash that the owner has put at risk. I don’t understand why you are calling that “nothing.” Define enormous pile. An enormous pile for you and me might be chump change for a truly rich person. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [January 8, 2014, 7:19pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/30 "2014-01-08T19:19:47Z")
> [@Terr](#): > > And if I am not living comfortably, how does it help me if the guy over there, on the other side of town, has his wealth reduced from $10B to $10M? Conceptually that money would not be destroyed, it would simply have been wealth/income for other people, such as yourself. In the past, 40-50-60 years ago, the benefits of business, the earnings and growth, were not as tightly held by the most wealthy. Those benefits went to the working class as well, their incomes increased (in constant dollars) in proportion to increasing worker productivity. This is not the case anymore, real wages are pretty stagnant while productivity increases, those benefits go to the wealthy. A more income equal system would have those benefits being shared equally among the various income groups. The top 1% of earners wouldn’t have a +100% income increase over 30 years while the bottom 10% is at +5%, they would be roughly equal, on a percentage basis. ---
**Author:** ![Lobohan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lobohan/32/79_2.png) [@Lobohan](https://boards.straightdope.com/u/Lobohan)\ **Post date:** [January 8, 2014, 7:20pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/31 "2014-01-08T19:20:05Z")
I’d say that ideally a society should function to improve the lives of as many of its citizens as possible. If your economy is such that the increases in wealth accrue disproportionately to a small percentage, you should tweak it. If GDP grows by 2% and the average citizen’s wealth stays flat, that’s a problem. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 8, 2014, 7:22pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/32 "2014-01-08T19:22:37Z")
> [@doorhinge](#): > > Why not a third option - create an environment where there would be a sufficient number of good paying jobs. People would be able to pay for their own benefits and food without relying on a handout from the government? During the bubble there was significant income inequality, but less talk of it since full employment made almost everyone better off. The only way of truly creating new jobs is to increase consumption, which means giving those on the bottom more money. And by giving I mean by wages, not by handouts, though that will do in a pinch. Think of how much worse we’d be if the unemployed had no money to spend. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 8, 2014, 7:23pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/33 "2014-01-08T19:23:22Z")
> [@Cheesesteak](#): > > Conceptually that money would not be destroyed, it would simply have been wealth/income for other people, such as yourself. Then it is not the “inequality” that is the problem, is it? It is the absolute amount of wealth I have, not someone else, that is the problem. Why the harping on “inequality” as the problem? ---
**Author:** ![purplehorseshoe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/purplehorseshoe/32/2996_2.png) [@purplehorseshoe](https://boards.straightdope.com/u/purplehorseshoe)\ **Post date:** [January 8, 2014, 7:27pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/34 "2014-01-08T19:27:15Z")
> [@msmith537](#): > > Actually I take that back. The more wealth you accumulate, the less “smart” you need to be … That explains many CEOs and many of the higher-ups at current and former jobs. > [@beowulff](#): > > I don’t think that income inequality is the real problem (although it is certainly a symptom). > IMHO, the big issue is the fact that there is a huge disconnect between executive performance and executive pay. If a worker does a bad job, he will get fired. If a CEO does a bad job, and the company looses $100,000,000, the same worker gets fired, and the CEO collects a bonus because he claimed that the loss would have been even worse. > > I wouldn’t have any problem with the outrageous salaries that executives get, if they were tied to reasonable metrics, like profitability. Roughly the same problem, just phrased differently. The rich get richer, and the poor get … ---
**Author:** ![artemis](https://avatars.discourse-cdn.com/v4/letter/a/91b2a8/32.png) [@artemis](https://boards.straightdope.com/u/artemis)\ **Post date:** [January 8, 2014, 7:30pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/35 "2014-01-08T19:30:12Z")
> [@Terr](#): > > Basically, the question is: if I am living comfortably, how does it matter to me whether the guy over there, on the other side of town, is worth $10M or $10B? That’s a pretty big “if” you’re assuming there. In societies with great wealth inequality, the masses do not by and large live comfortably. > [@](#): > > And if I am not living comfortably, how does it help me if the guy over there, on the other side of town, has his wealth reduced from $10B to $10M? You have to ask how putting more money into your pockets (at the expense of his) helps you? ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 8, 2014, 7:33pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/36 "2014-01-08T19:33:42Z")
> [@artemis](#): > > That’s a pretty big “if” you’re assuming there. In societies with great wealth inequality, the masses do not by and large live comfortably. Correlation does not equal causation. If you have a problem with “masses” not living comfortably, it is kinda silly to go and harp on “inequality”. Harp on masses not living comfortably. > [@](#): > > You have to ask how putting more money into your pockets (at the expense of his) helps you? Then it is not the “inequality” that is the problem, is it? It is my lack of money. ---
**Author:** ![Hershele\_Ostropoler](https://avatars.discourse-cdn.com/v4/letter/h/e47c2d/32.png) [@Hershele\_Ostropoler](https://boards.straightdope.com/u/Hershele_Ostropoler)\ **Post date:** [January 8, 2014, 7:34pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/37 "2014-01-08T19:34:36Z")
> [@msmith537](#): > > It’s “dangerous” because it is based on a flawed assumption that you can make poor people wealthier by taking money from rich people. > [@Little\_Nemo](#): > > It’s arguably immoral but how is it a flawed assumption? If I take a million dollars from some rich guy and give it to some poor guy, then the poor guy undeniably got wealthier. Only if “rich” and “poor” refer to things like income and wealth. If rich and poor are personality types, and differences in financial status are the results of those differences in personality, then it really doesn’t matter how much money you give to the poor-type person and/or take from the rich-type person. I don’t subscribe to that idea, personally; I don’t know if **msmith537** does. ---
**Author:** ![artemis](https://avatars.discourse-cdn.com/v4/letter/a/91b2a8/32.png) [@artemis](https://boards.straightdope.com/u/artemis)\ **Post date:** [January 8, 2014, 7:37pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/38 "2014-01-08T19:37:33Z")
> [@msmith537](#): > > Not just political, but economic power as well. To a certain extent that’s not necessarily a bad thing. If someone is good at creating wealth, it stands to reason that you would want to incentivize them to create more wealth. Where it becomes a problem is when they can use their wealth to influence legislators to enact self-serving laws. Exactly. The specific situation I had in mind, in fact, was the distortion of food safety laws by Big Agribusiness in order to block out competition by smaller producers. There’s no question we need food safety laws. But it’s one thing to tell me I can’t sell my homemade preserves to the public because the processing techniques I’m using are inadequate and might give them botulism. It’s another to tel me that I can’t sell to the public because, while my canning technique is safe, I didn’t can it using a special required-by-law high-tech machine that coincidentally only a large manufacturer like Smuckers can afford to buy. (Said legislation passed of course by legislatures who just LOOVE Smuckers jelly - and campaign contributions.) High wealth inequality facilitates regulatory capture. That’s a bad thing. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 8, 2014, 7:39pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/39 "2014-01-08T19:39:41Z")
> [@Little\_Nemo](#): > > The basic idea of supply and demand is that there are only so many goods in the world at any given moment and we’re all in competition for them. There are goods you have and goods you want and you’re out there in the free market offering to trade one for the other. And everyone else is in the exact same basic situation doing the same thing at the same time. The only difference is they all have different sets of goods. > > So if somebody else out there has a bigger set of goods they have an advantage over you in the free market. And because everyone is participating in the same free market, the two of you are competing against each other (and everyone else). Nonsense, and here are two examples. I like Starbucks coffee at home, but it is rather expensive. Once in a while it goes on sale for about 40% off. Since I am not living from week to week, I can afford to buy a lot of bags and store them, using them until the next sale comes along. If you think this is too hoity-toity we do the same thing with toilet paper. By having a cushion I can lower my average price for products versus a person without a cushion. For the second, **msmith537** is absolutely right. I have access to a financial planner and investments I would not have if I were scraping together $1,000 to invest. I sometimes make more in a month from my investments than my daughter does in a year, and I assure you it is not the result of using my brains. In fact, since I was employed during he recession, I did not have to sell at the bottom and in fact bought, and it has worked out really well. So the situation of the poor and the rich are not even remotely comparable. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 8, 2014, 7:43pm UTC](https://boards.straightdope.com/t/splain-me-income-inequality/678279/40 "2014-01-08T19:43:58Z")
> [@artemis](#): > > High wealth inequality facilitates regulatory capture. That’s a bad thing. Let’s say we reduce the “wealth inequality”. Now you, the home canner, have $2000 instead of $1000, and Smuckers instead of $10B market cap has $5B. Do you think that will eliminate (or even reduce) the regulatory problem you pointed out? Let’s go even farther, and make Smuckers market cap $1B. That’s a 90% reduction! Huge win for reducing “inequality”. Solves that problem? If you don’t give the government the powers to regulate, you eliminate the problem. No matter what the “income inequality” is. [Previous page](https://boards.straightdope.com/t/splain-me-income-inequality/678279.md?page=1) [Next page](https://boards.straightdope.com/t/splain-me-income-inequality/678279.md?page=3)