Keeping also in mind that inheriting wealth is not at all typical, and that someone subsisting on welfare is non-productive pretty much all the time.
Thus most rich people earn their money, invest it, and get an ROI by managing the risk successfully. A minority of rich people inherit their money, invest it (or leave it invested) and get an ROI by managing the risk successfully. Poor people subsisting on welfare earn nothing, invest nothing, manage no risk and get no ROI. So doing the comparison suggested by Mailer shows that rich people are more productive than people who subsist on welfare. So the information to answer the question in the OP’s title is provided. Rich people are more productive than poor people.
That is, as mentioned above, the only way the system could continue to operate. Somebody has to produce, otherwise there isn’t any way to support anybody else.
This is not a judgment of anyone’s worth; it is a practical observation of the necessities of a social welfare system.
I agree that the production has to happen. I just disagree that it’s always reasonable to assign the production to the owner of capital.
Going to the hypothetical once more for a few tweaks:
A: The long-lost uncle, rather than leaving the productive capital to our welfare layabout, instead leaves it in trust, with a trustee making investment decisions. Welfare layabout can now draw income from it and is no longer on welfare.
B: In trust with profits paid to a foundation, to better the lives of individual needy recipients. The foundation randomly selects his nephew to support.
C: In trust with profits paid to the government, to be used to support welfare programs. His nephew (and other welfare recipients) benefit.
In all these cases (the original, and the tweaks), the following people were productive: The uncle, the employees and managers of whatever companies had the capital (and in the tweaks, whoever is running the trust/foundation/government, arguably). But, also, in all three cases, the nephew didn’t do anything. He is just as idle as he ever was.
Does the nephew become equally productive in my tweaks? I imagine that your answer will be no.
It seems unreasonable to me that if someone were observing the actions of the nephew, it would not be possible for them to determine whether or not he was productive, under your definition.
Yes, as the circumstances become increasingly convoluted, level of productivity approaches zero as a limit. The point being that those who subsist on welfare have zero productivity already. So there is no tweaking involved. So if you compare someone on welfare with someone who is rich, the chances are overwhelming that the rich person is more productive than zero.
Therefore this -
is incorrect.
Taken individual by individual, it is overwhelmingly likely that the “economically privileged” is the more productive.
Are my examples convoluted? They seem pretty simple to me. Is being the beneficiary of a trust by name more or less convoluted than being it’s beneficiary by chance?
I’m trying to define what it means to be productive, because you seem to be implying a sort-of handwavy argument that owning things makes you productive by definition.
Obviously, if you think owning things makes you productive, then you’re never going to agree that individual rich people might be less productive than poor people. How could they not be? They’re so rich!
Mailer’s quote doesn’t agree with your definition, either, since he contrasts “productivity” with “idleness”. One can certainly be both wealthy and idle.
JK Rowling, who subsisted on welfare while writing the first Harry Potter book, was me mentioned above. Did she have zero productivity during this time? If so, when did the productivity represented by the finished ms happen?
Seems to me this back and forth basically comes down to one uncontested statement on each side (not effectively contested IMO that is).
-those who ‘subsist on welfare’ are categorically not economically productive at all by definition at that time. All the ifs/buts on that seem to me to pick at the premise rather than effectively contradict that statement: ‘maybe they are officially counted as working poor but get benefits’, ‘maybe it’s a job off the books’ etc. But then they don’t fit the original description. ‘Maybe they are preparing something of eventual value’. But if nobody is willing to pay anything for it now, in economic terms it’s not worth anything, non-economic value judgments aside. But I see much difficulty on that side of the argument actually putting value judgments aside.
-you can construct hypothetical examples of people with a lot of money who do nothing. But in the real world (of US society) that’s pretty rare. Not only is that not reasonable to attach that label to people who earned their own capital and then later in life live from its returns. It’s not technically very accurate for most people who inherit wealth either. Most of them are trying to grow that wealth, or else working full time in some other field. People who inherited wealth and aren’t even trying to participate in the economy in the prime of life are pretty rare. All the ramped up politicized talk of the ‘income inequality crisis’ notwithstanding, it’s just not socially acceptable in American society by and large to do nothing in your prime. People ‘born on third base who think they hit a triple’, sure, but not even in the job/economic game at all? That’s an exception which surely exists but putting it against a whole category of people is a not very convincing balance.
In fairness, the original categorization ‘subsisting on welfare’ as in no other economic activity isn’t necessarily a huge category. But it is a category, not a few exceptions. And again in 's *without value judgments beyond*, you aren't very productive if you can only earn min wage, compared to some 'born on third thinks they hit a triple' type person who is a highly paid professional. Which is common for those people, perhaps in part due to opportunities opened by wealth, but that's back to value judgement. In 's, not human worth, ‘trust fund babies’ are usually more productive than poor people, aside from the capital. Wholly idle aristocratic life in one’s prime is not common in US society.
While I have spent a lot of time on those examples, I don’t dispute that they’re rare.
But there’s a larger argument (that I mostly haven’t made yet, because we’re stuck on prong one) that there is a component of idleness to many wealthy people’s lives.
If we can’t agree that someone who lays around on the couch living off a trust fund isn’t productive, then we’re definitely not going to agree on later steps.
In all I don’t understand the post. First you admit cases of rich people who do nothing (not counting ones those who previously created their own wealth, and I don’t see it as reasonable to count that*) are not very common. Poor people dependent on the govt are pretty common. So while both exist it’s putting an exception up against a sizable category of the population. And again a larger category of working poor are not very productive though not zero: their wages say so, in $'s, no value judgments.
But then ‘component of idleness’ in rich people’s lives. Lost me a bit there. Who doesn’t have such a component, who shouldn’t?
Then ‘if we can’t agree someone who lays around on a couch living off a trust fund isn’t productive’. But I don’t see any post, definitely not mine, that does disagree with that relatively exceptional case. My observation was simply that it is pretty exceptional, as you initially seemed to agree, whereas the original premise relies on it being common. The labor force participation rate of people with inherited wealth is probably if anything higher than that of the population as a whole. Sometimes their jobs have been to one degree or another ‘bought’ with that wealth, at least arguably, but that’s back to value judgments.
I’m guessing ‘component of idleness’ is also going to rife with socio-political judgment. Say somebody just kicks back except spending 10 hrs a week adding adding 1% per annum to their portfolio return (DIY rather than paying a wealth manager) on 25mil. They are producing ~4 times the median income, 16 times a full time $7.5 min wage*. IOW that person is a multiple as productive per year, in $s’ not socio-political value judgments.
*by same token it’s reasonable to consider that some people go from govt dependency to being net ‘makers’ as life goes on.
*if you raise the min wage a lot you have to account for the fact that the govt is forcing employers to pay more than the person’s actual market productivity. You can’t order employers to double wages then celebrate that the affected employees just became twice as productive. This is not arguing for/against any particular min wage policy, just saying you have to factor in that some of the labor income of the working poor is also basically a govt transfer payment since the wages are artificially increased by govt mandate. Not a huge factor at $7.5, but would be more significant with a much higher national min wage.
Shodan disagrees with it quite directly in post #41. And he’s mostly who I’ve been talking to. Do you have different answers to the questions he answered in post #41?
I disagree that “$ of income” is the right way to measure productivity. It’s certainly a useful component, but, going back to the layabout with the inherited investment that generates plenty of income: if that guy isn’t productive, then there’s more to productivity than ownership of income-generating assets.
Using your example: What if that person didn’t even bother with 10 hours a week, and just threw all the money into a 3-index fund? There’s lots of research that shows that his returns will be just as good with passive investment (probably better) than if he spends lots of time picking investments. So, he just saved hundreds of hours of work a year, and he’s no longer making any direct decisions about investments. Did he become much more productive, or less? One the one hand, he’s generating the same income with basically no work, which implies more productivity. On the other, he’s not really doing any work at all, nor is he making active decisions to direct the use of his capital. At some point, he starts to look a lot like the layabout on the couch.
Here, I think, is a fundamental question: Is productivity something that can be observed on an individual level? That is: watching one human live their life, can you tell if they are productive? Or do you have to look at court filings and ownership structures and corporate bylaws?
The “capital ownership = productivity” argument, is, I believe, that it is not possible to determine whether an individual is productive by watching what that individual does. You have to have knowledge of other things. Sort of nebulous ill-defined (or at least, not yet defined in a way I understand them precisely) things.
The layabout who owns capital is productive, but the one who only has access to income from a trust is less-so, and so on down the line.
I disagree with that argument. I think ownership of capital is insufficient proof of productivity. I think productivity is something that is observable on an individual level.
Ultimately I’ll leave that to you and Shodan, but I didn’t read Shodan’s posts as saying one couldn’t construct a case of an idle person with capital who was not productive. I chimed in especially on the point Shodan made I agreed with that the people ‘subsisting on welfare’ are categorically zero productivity by definition, as opposed to ‘idle rich’ where you have to impose additional, unlikely in reality, conditions. I didn’t see it as saying you couldn’t possibly impose those conditions as describing some people. Shodan’s point seemed to me, and mine definitely is, that comparing rare exceptions to a whole category is not a good balance.
Once you abandon income as the measure, it becomes meaninglessly subjective, like the current poll in another sub forum ‘what % of American whites are racist?’, no two people will define ‘racist’ the same way. But in that case there is no accepted standard anywhere. In the study of economics productivity means economic activity and the unit of account is $'s.
This again picks at the premise, like ‘what if the poor person earned lots of money off the books?’ Then they wouldn’t be subsisting on welfare. What if the rich self-asset manager spun his/her wheels and achieved nothing? Then that wouldn’t be my example.
And ‘Vanguard 3 fund’ is the whole story under limited conditions, albeit which apply to most people. But it doesn’t necessarily apply when most of the assets are in taxable accounts, there’s estate planning ramifications and so forth. Moreover the reason ‘studies show’ it’s the way to go for ordinary people is because ordinary people tend to otherwise blow themselves up with their combination of ignorance, over confidence when things are going well, and bad emotional trading habits when things turn against them. That doesn’t apply to everyone, and again my example was if it did not, which it commonly does not say if the rich person originally gained the capital in the financial profession or tutelage or a parent who did, etc. The point is that the ‘operating leverage’ (not borrowing money type leverage) that capital gives you to produce more with less effort is arguably ‘unfair’, but if you define it as ‘not productivity’ you also have to discount the output of average American compared to third world workers because there’s a lot more capital per worker in the US. The economic concept of productivity does not grade on a curve depending how much capital you deploy.
Yes, as income. If you reject that, then no, but as in 3, if you reject that on an individual basis, you’d have to reject it on a national basis, and conclude that rich country workers are no more productive than poor country workers. The latter get up early and try hard too, right? But that tells you’ve left the original (stupid) premise of Mailer and are arguing about people’s worth, not their productivity.
No such principal. Again if somebody is literally doing nothing, they are doing nothing. If they are doing a bit of relative value addition with a huge amount of capital behind them, that’s a lot of production relatively, which is the ‘sad’ fact if the ‘right’ answer we want to arrive at is saying nice things about poor people and not as nice about rich people. Because in this case it sounds nice/not nice to say ‘X is more/less productive’.
Shodan can come clarify his point if I’m wrong about how I read it. I agree it’s not that interesting for the two of us to discuss what he thinks. But what are your answers? Guy who lives a 100% idle lifestyle inherits capital. Is he now more productive?
I disagree. It certainly becomes harder to quantify, but not impossibly so. But the world is messy. The fact that income is a nice easily quantifiable thing doesn’t mean it’s the only useful measure. It’s one (relatively strong) signal among many.
It seems like there’s a fundamental disconnect in communication here. Yes, a poor person who earned money off the books wouldn’t be subsisting on welfare, so they wouldn’t be part of a class of people who depends on welfare. But I never disputed that there exist people who depend on welfare. Or subsist on welfare. Or whatever terminology. I’m not splitting hairs here. I’m conceding that point. There are unproductive poor people.
But what I’m trying to get you and Shodan to agree with is that there also exist people who depend and subsist on capital that they had no hand in producing.
Yet no matter how many examples I give, you both seem unwilling to admit that such a person could even possibly exist. Yeah, your guy who does useful work on his investments is doing something productive, and it may or may not be interesting to talk about how productive.
What about my guy? Is he productive?
I disagree that productivity is indistinguishable from income.
I really don’t. I’ll again go back to my claim that productivity of an individual can be observed. It’s trivial to differentiate rich country workers from poor country workers by watching them. Someone driving a tractor is more productive than someone plowing a field with a donkey. Someone using Excel is more productive than someone doing math with a pencil and paper.
I absolutely agree that capital magnifies productivity.
So, let’s consider the farmer who’s driving a tractor rather than a mule. The former is more productive. How much of his productivity do we assign to him, vs. the owner of the tractor? I disagree that that question is indistinguishable from “how much income does each make?” and it’s fairly trivial to point to people who make different amounts of income for reasons totally unrelated to their productivity. How much income they make is a great first approximation in most cases, because markets are usually pretty efficient, and so on. But it’s not the final answer.
As an aside, the mods strongly frown on modifying text within quote boxes, even to do something helpful like add #s to some of my points.
That’s just bizarre.
Strictly speaking the economic definition of productivity:
(source - Googling definition economic productivity) means that a discussion of the productivity of people on welfare or investors has nothing to do with productivity.
So we’re using an informal definition here.
So some other people who are not productive:
Those working at a startup that fails before the product is released.
Those working on a computer or chip that gets cancelled.
Terry Gilliam making his Don Quixote movie
So, could you rigorously define productivity for us? Right now it seems that people you like are productive, and people you don’t aren’t.
Not a response remarkable for its cogency, nor its coherence.
At what point did Ms. Rowling begin to produce revenue on her book, while she was on welfare, or when she was published? Or if you prefer to measure by inventory, at what point were inventories of her book beginning to be built up, while she was on welfare, or after?
No, like vs. dislike has nothing to do with it, and I am not sure where you got that notion apart from the thin air.
Why not try responding to my other examples of work that most would call productive not producing immediate revenue?
If a writer gets an advance, is she then productive, or not then either? A writer does not get the kind of input specified in the economic definition in either case.
By this new definition of yours, there is no difference between a person earning investment income from inheritance and from money invested after being earned from work.
Some executives and sports people get deferred compensation. Are they 100% productive the year they perform, or 80% productive then and 20% productive later?
Maybe instead of bizarre I should have said that your definition is incoherent.
