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Date: Tue, 4 Sep 2007 12:13:04 -0400 (EDT)
To: Kevin Lochner <klochner &AElig eecs.umich.edu>
cc: James W Mickens <jmickens &AElig eecs.umich.edu>, Dave Morris <thecat &AElig umich.edu>,         improvetheworld &AElig umich.edu, reeves-hayos &AElig umich.edu,         reeves-kalkman &AElig umich.edu
From: Daniel Reeves <dreeves &AElig umich.edu>
Subject: Re: mind the gap

> We may be partly confusing money with wealth here.  If a dollar is created, 
> it does directly reduce the wealth of all other dollar holders.

Only the government does that. (warning: oversimplification, but let's not 
get hung up this)

> If a dollar of wealth is created (i turn some air into a dollar's worth 
> of food), it *likely* doesn't have any strongly measurable negative 
> effects on other people.

Way too cautiously put.  A dollar that a rich person makes directly helps 
other people.  Who but Daddy Modelers can deny this?

And I don't think you clarified what James is saying.  He said that more 
real wealth to billionaires does directly hurt poor people.  I'd like to 
hear the chain of causality he has in mind.

Also, I've been meaning to concede that James has answered my original 
challenge to Dave -- take money from rich people, waste some, and give the 
rest to poor people.  That decreases wealth and increases welfare.  I do 
understand about decreasing marginal utility.  That was my fault for 
ignoring that.  But I stand by my claim:
   Public policy should not care about the wealth/welfare distinction. 
Said another way, government should not presume to know how much you like 
your wealth. More specifically, I do not believe that government should 
transfer money from the rich to the poor for the sake of greater equality. 
(In fact, history shows this to be a terrible idea, especially for poor 
people!) I do support a minimal transfer to achieve a social safety net. 
And I certainly agree with Kevin that any transfers should be direct.
   How about we assume that, one way or another, everyone is guaranteed 
education, healthcare, and enough money to eat.
   Is there still disagreement about whether government should transfer 
additional money from the rich to the poor?


> Let me also maybe clarify what james is saying - more real wealth to 
> billionaires doesn't directly decrease the wealth of poor people, but the law 
> of diminishing returns says that giving some of that wealth to poor people 
> would increase net total welfare.
>
> *but*, that's consistent with a capitalist system with transfer payments. The 
> question is whether you want to give the transfer payments to the government 
> to spend on behalf of the less-fortunate, or you want to make those transfer 
> payments directly so that said poor people can decide for themselves what 
> they want.  I would argue that in the majority of cases, the latter will 
> generate higher total welfare.
>
> I've been mulling over the anti-diarrheal/viagra example for a bit now and 
> don't think it's clear what the best policy would be - maybe there are enough 
> people that so obviously need life-saving drugs that it would ultimately 
> provide cost savings to make the decision on their behalf.  My personal 
> belief is that it's better to err on the side of *not* deciding for people 
> what they should spend their money on, both from an economic efficiency 
> standpoint and from a philosophical standpoint.
>
> - kevin
>
>
> On Tue, 4 Sep 2007, Daniel Reeves wrote:
>
>> Oy, either we're terribly miscommunicating or you're falling for the Daddy 
>> Model hook, line, and sinker.  Are you imagining that when a rich person 
>> makes an extra dollar that that's one less dollar for some poor person?
>> 
>> 
>>> I am not in agreement ;-). I believe that skewed wealth distributions can 
>>> be *directly* harmful to poor people. I think that as an individual 
>>> accumulates wealth, the utility accrued from every additional dollar 
>>> decreases. For example, the additional utility that a billionaire gets 
>>> from buying her fifth yacht is much smaller than the additional utility 
>>> that a poor person gets from having medicine to cure malaria. Thus, skewed 
>>> wealth distributions can have a pernicious impact on net utility. As I 
>>> mentioned in my previous post, some amount of skewedness may be necessary 
>>> to encourage the talented or the industrious to work for the benefit us of 
>>> all. However, there reaches a tipping point at which this inequality 
>>> starts to generate negative aggregate utility. This phenomenon is causal, 
>>> not correlational---the accumulation of negative aggregate utility is a 
>>> direct consequence of the diminishing utility return for wealth 
>>> accumulation.
>> 
>> -- 
>> http://ai.eecs.umich.edu/people/dreeves  - -  search://"Daniel Reeves"
>> 
>> You know what they say about dogs dogged by other dogs?
>> The dogged dogs dog the dogging dogs back.
>> Said more clearly:  Dogs dogs dog dog dogs.
>> 
>

-- 
http://ai.eecs.umich.edu/people/dreeves  - -  search://"Daniel Reeves"

Q: What do you get out of a pure sheep function?
A: A lamb, duh!