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Date: Mon, 20 Aug 2007 13:03:14 -0400 (EDT)
To: Kevin Lochner <klochner &AElig eecs.umich.edu>
cc: improvetheworld &AElig umich.edu
From: Yevgeniy Vorobeychik <yvorobey &AElig umich.edu>
Subject: Re: mind the gap
Status: O

Is it coincidental that one of the co-authors on the third referenced 
article is K. Lochner?

I basically agree with Kevin.  It is quite clear that wealth is not the 
only objective.  What we care about is some notion of social utility, 
which includes things like living in a safe, friendly environment.  I 
think that another important element, besides the issues of crime 
involved, is the unfairness that is inherent in income inequality.  Let's 
say I suck at everything, but I am a genius in art.  Unfortunately, in my 
society no one cares much for art.  Thus, in a market economy I basically 
must die of starvation.  Why does this not sound appealing?  Well, for 
one, no person has direct control over his/her talents--only over what he 
does with them.  Thus, it seems somewhat unfair to cruelly punish lack of 
economically useful talents.  A more "fair" approach would be some kind of 
income redistribution.

But we may even say that I am a genius at making money.  Unfortunately, I 
am the only one who knows this.  Now, I made a financial gamble that had 
objective probability 0.95 of making me the richest man on earth and 0.05 
of losing all my money (which wasn't much to begin with).  Cruel fortune 
would have it, however, that dice did not roll in my favor.  Thus, 
everyone still thinks I am dull as a doorknob, and my financial talents 
will not be used efficiently; I am, again, doomed to die of starvation.

There is no question, of course, that there must be incentives in a 
society to make wealth for yourself and others.  But even in Sweden, the 
most socialist 1st world country, there is little question that such 
incentives are quite strong (although, of course, weaker than, say, 
in the US).  I think what's at stake is not a choice of extremes, which 
would imho be pretty silly.  And insofar as we want to choose a social 
optimum that incorporates all these other issues besides wealth, the 
simplistic argument presented by Graham is, I think, not very useful.

Eugene

On Mon, 20 Aug 2007, Kevin Lochner wrote:

> I'm all for capitalism, but the argument is simplistic.  If our only goal is 
> to maximize production, then sure, inequality is terrific.  Below are some 
> research abstracts hinting at an alternate goal that may be important.  I 
> also advocate taxing inheritances to avoid the creation of new "ruling 
> classes," with enough money to both control government and avoid any real 
> work.
>
> - kevin
>
>
> Fajnzylber, P., D. Lederman and N. Loayza, 1998, "What causes violent 
> crime?", The World Bank, Office of the Chief Economist, Latin America and the 
> Caribbean Region, processed.
>  "This cross-country study of the determinants of violence finds that
>   income inequality raises crime rates, deterrence effects are
>   significant, crime tends to be counter-cyclical, and criminal inertia
>   is significant."
>
> Hsieh, C. and M.D. Pugh, 1993, "Poverty, income inequality, and violent 
> crime: a meta-analysis of recent aggregate data studies", Criminal Justice 
> Review, 18(2): 182-202.
>  "This paper reports on 34 aggregate data studies that almost all find a
>   positive correlation between violent crime on one hand and poverty and
>   income inequality on the other."
>
> Kennedy, B.P. and I. Kawachi, D. Prothrow-Stith, K. Lochner and B. Gibbs, 
> 1998, "Social capital, income inequality, and firearm violent crime", Social 
> Science and Medicine, 47(1): 7-17.
>   "This paper finds that income inequality and social capital are highly
>    correlated with firearm violent crime rates."
>
>
>
>
>
>
> On Mon, 20 Aug 2007, Daniel Reeves wrote:
>
>> We've been debating this essay
>>  http://www.paulgraham.com/gap.html
>> and I thought I'd move it to improvetheworld...
>> 
>> I'll start:  Graham is so right!  The income gap between the rich and the 
>> poor is wonderful!
>> 
>> Actually it started more as a debate about the nature of capitalism and 
>> interest ("why should money 'grow'?").  Here was the gist:
>> 
>> * [the economy] is a zero-sum game, isn't it?
>> - no
>> 
>> * those earning money are taking it away, even if only indirectly, from
>>  other people, no?
>> - no, not if you think in terms of wealth (wealth = stuff you want,
>>  money = way to transfer wealth)
>> 
>> * Or am I totally simplifying the haves vs. the have-nots with my pie
>>  metaphor?
>> - yes, that's precisely the Daddy Model of Wealth!
>> 
>> * Is it THEORETICALLY possible for no one to owe any money at all in this
>>  world, i.e., that everyone just has money that "grows"? Or does money
>>  only grow if it is taken away from others?
>> - You're right, not possible, but for the opposite reason of what you seem
>>  to be suggesting.  You grow money by giving it to someone (lending it),
>>  not by taking it away.
>> 
>> It even got a bit heated, along the lines of "Trixie, I don't think it's 
>> right for you to lash out against capitalistic/yootlicious ideas without 
>> grokking the answers to your questions [above]".
>> 
>> Oh, and I offered a yootle to the first person who could answer the 
>> quasiphilosophical question why money *should* grow, with the hint that it 
>> has to do with human mortality.  I believe that's the only reason that 
>> holds in all circumstances.
>> 
>> In any case, Trixie wanted to resume the debate and this is clearly the 
>> place to do it!
>> 
>> DO NOT CHANGE THE SUBJECT LINE WHEN YOU REPLY (so it's easy for those not 
>> interested in this debate to delete the whole thread).
>> 
>> Ok, go!
>> Danny
>> 
>> -- 
>> http://ai.eecs.umich.edu/people/dreeves  - -  search://"Daniel Reeves"
>> 
>> "Everything that can be invented has been invented."
>>   -- Charles H. Duell, Commissioner, U.S. Office of Patents, 1899.
>> 
>
>
>