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Old 05-15-2014, 01:25 PM   #41
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The middle class isn't doubling their income. To a certain extent, our consumption-oriented economy is about doing well or having things relative to your neighbors, the status symbols the keeping up with the Jones mindset.

I don't think however that people would resort to violent revolt in the US or other affluent countries because of inequality.

People have just enough to not want to risk losing what they have. Though if you look at some recent conflicts, you had people living for decades in peaceful coexistence, such as in Bosnia. But then when war broke out, stoked up by nationalist sentiments from a neighboring country, these people who used to live next to each other perpetrated some heinous acts.

Inequality may not be the trigger for violence or unrest but once such a situation occurs, it may be the fuel that makes the situation spiral out of control.

In an atmosphere of instability, you can imagine the biggest most visible targets would be these big compounds or gated communities that the wealthy live in.
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Old 05-15-2014, 01:44 PM   #42
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Quote:
Originally Posted by explanade View Post
In an atmosphere of instability, you can imagine the biggest most visible targets would be these big compounds or gated communities that the wealthy live in.
Town & Country Magazine has run some nice articles with tips on improving one's home security.

New Home Security Protocol - Christopher Falkenberg on Home Security - Town & Country Magazine

1) Confuse the internet
2) Take stock of your staff
3) Replace your alarm system with one connected to the insite control center.
4) Build physical barriers.
5) Install army-grade infrared.
6) Create a panic room.
7) Secure your collections.

Ten Security Tips From an Ex-Secret Service Agent - Town & Country

1) When traveling to jurisdictions with a high corruption index, deplane in the hangar.
2) Confuse the enemy.
3) Stay in small boutique hotels and ask for a room facing the courtyard.
4) You want to telegraph that this will be a very successful kidnapping to reduce risk of death.
5) Quibble over the ransom, so they don’t demand too much.
6) Operational counter surveillance: How are you today? What are you doing here?
7) Worry about medical emergencies.
8) Any safe can be broken into.
9) Have a backup security camera.
10) Just because you have a security program, doesn’t mean your kids are going to be treated like Sasha Obama.

Good advice for us to follow.
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Old 05-15-2014, 01:51 PM   #43
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Certainly any of the anti poverty programs would count as income transfer. Probably most Agriculture subsidies. I am not sure about SSI, but SDI definitely would count and I don't know about Medicare.

These can be quite substantial. For another forum I calculated that Single mother with a young child working full time at the minimum wage $7.25/ hour $1200/month would be eligible for $280/month earned income tax credit, a SNAP (food stamps) of $250-$500/month and WIC payment of another ~100/month in many case boosting her monthly income from $1200 to $2,000+ month.

The $80 billion spent on SNAP distributed to 40 million+ is pretty clearly significant boost to the income of those at the bottom.
Yes, I know I'm being picky, but

- according to this source Eligibility | Food and Nutrition Service :
The maximum SNAP benefit for a two person family is $347/month.
In the simple case you've given, the benefit would be $347 - .3 x ($1,200 - $240 - $152) = $105

- OTOH, I think she would also be eligible for a $1,000 annual child tax credit.
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Old 05-15-2014, 02:19 PM   #44
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> That's the rub, the widening gap

See I just don't get it.

If I double my income I'm much better off.

If the person over there quadruples their income I'm still better off, not worse off.

Isn't the "increasing inequality" issue simply envy?
If you need to compete for scarce goods, the income gap makes a big difference. This is basically what is happening in the sf bay area with housing: people with lower paying jobs are squeezed out of the market even if their income is much higher than it would be in other parts of the country. I imagine admission to elite universities might also fall into this category.



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But let's say we implemented a new plan in our schools, and ten years later did a full evaluation. If every group of students, from the lowest 10% group to the highest 10% group, had significant improvements in their test scores, but the highest 10% had relatively higher levels of improvement, would we call that a 'failure' or a 'success'? Would we be glad that everyone is doing significantly better, or feel bad that the 'gap' widened?
If your goal is to explicitly narrow the gap then it has to be considered a failure (even though on other criteria it's a success). This might be relevant in states where the top X% of students are guaranteed admission to flagship state universities and you want a more "diverse" freshman class.

I think in areas where there is a "winner take all" type of outcome, absolute improvements in income/test scores/etc. don't really help as it is the relative standing that is important.
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Old 05-15-2014, 02:30 PM   #45
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Town & Country Magazine has run some nice articles with tips on improving one's home security.
. . .
4) Build physical barriers.
A cheap idea I saw recently and hadn't heard before: Put one of those "open a bit" locks (like the ones on the inside of hotel room doors) on the inside of your bedroom door. In the unlikely event that there's an intruder in the house while you are asleep and they try to get into the bedroom, this will prevent the individual from entering unnoticed and provide enough time to bring Mr Ruger to the party.
I won't be implementing the idea because our MBR has two doors, and I'm sure unlatching both of these each morning would become a PITA. But for one door--no real extra hassle at at all.
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Old 05-15-2014, 06:56 PM   #46
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Yes, I know I'm being picky, but

- according to this source Eligibility | Food and Nutrition Service :
The maximum SNAP benefit for a two person family is $347/month.
In the simple case you've given, the benefit would be $347 - .3 x ($1,200 - $240 - $152) = $105

- OTOH, I think she would also be eligible for a $1,000 annual child tax credit.
These calculations are so complex that even when people spend a lot of time researching them, they are still open to gotchas. I

Even at 1200/mo - there are payroll taxes and in many states (like CO) a ~4-5% state tax. But don't take my word for it - for all I know there are 10 other things that negate what I'm saying.
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Old 05-15-2014, 11:49 PM   #47
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These calculations are so complex that even when people spend a lot of time researching them, they are still open to gotchas. I

Even at 1200/mo - there are payroll taxes and in many states (like CO) a ~4-5% state tax. But don't take my word for it - for all I know there are 10 other things that negate what I'm saying.
You are right I used a benefit calculator I found online for a state in the Plains South Dakota or Nebraska I think. I added $100, cause I figured the benefit would be greater in a state with higher cost of living. Lots of things factor into the benefit calculation, rent, utilities cost etc. On the other hand I do think vaguely remember seeing a .3 multiplier so I suspect Independent's number is closer to reality than mine.

As far as taxes go at the minimum wage level with 1 or more dependents the only taxes you are likely to pay is FICA. The EITC is designed to more than cancel out the FICA taxes you pay.

Measuring income is so bloody complicated that I may buy the book just to see how the guy figured it out.

I also really think the inequality debate would be well served by measuring consumption. Looking at the waistline of most lower income people, I don't think they are hurting for calories any more than myself.
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Old 05-16-2014, 12:07 AM   #48
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Lower quality foods are fattening, typically processed foods with corn fructose syrup and other fattening ingredients.

Lot cheaper to get a burger at a fast food joint than healthier options.

Also people with higher incomes are able to carve out time for regular exercise (which could also be unaffordable to some) as well as have access to good nutritional and medical info about healthy habits and lifestyles.
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Old 05-16-2014, 05:38 AM   #49
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At least as far as I've gotten in the book, it is about disparities in the distribution of capital ownership, not in income. While they may be related in some ways, capital inequalites become inherited and thus strictly unearned (an accident of birth) while inequalities in income may be personally earned and are only indirectly passed between generations. It is this inherited/unearned characteristic of capital inequality that seems to rankle Pickety so much, I think.

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Old 05-16-2014, 10:15 AM   #50
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You are right I used a benefit calculator I found online for a state in the Plains South Dakota or Nebraska I think. I added $100, cause I figured the benefit would be greater in a state with higher cost of living. Lots of things factor into the benefit calculation, rent, utilities cost etc. On the other hand I do think vaguely remember seeing a .3 multiplier so I suspect Independent's number is closer to reality than mine.
Thanks. Based on your post, I found this calculator for North Dakota: Food Stamp Benefit Calculator

It's nice because it shows the calculation details that match the USDA page that I found.

When I did my example, I assumed no "Excess Shelter" deduction. If the mother in your example spends more than $404/month on rent + utilities, she has excess expenses and gets an additional 30 cents of SNAP benefit for every dollar of excess.

The big deal is that ND has a standard utility cost of $590/month if she pays for her own heat, or $217/month if she just pays for electricity and phone. Of course, someone who is raising a child on $1,200/month gross is probably really squeezing housing expense.

(I'm curious because I've got a BIL who's in bad shape financially. I've wondered if he shouldn't be applying for SNAP benefits. He just assumes he won't qualify because he has a job.)
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Old 05-24-2014, 08:05 AM   #51
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Apparently much of the data supporting this book turn out to be bogus...

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The charges are devastating, and there is plenty to back them up. And again, let’s be abundantly clear: The Financial Times is accusing Thomas Piketty of dishonesty, of making up his arguments, of actively trying to mislead readers and actively trying to mischaracterize inequality trends. This mischaracterization leads to policy prescriptions on Piketty’s part that are both entirely unrealistic in their design and implementation, and, more importantly, are wholly unsupported by the actual data on inequality. The main thrust of Thomas Piketty’s book is entirely undermined, and his arguments and conclusions are annihilated. It is hard to imagine a more comprehensive refutation.
Facts Are Stubborn Things . . . As Thomas Piketty Is Beginning to Find Out - Pejman Yousefzadeh
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Old 05-24-2014, 11:40 AM   #52
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Mr Pejman Yousefzadeh writes for a "Right of Center" website so we know his purpose here. Lipstick
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Old 05-24-2014, 11:59 AM   #53
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Remembering the OP in this thread

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It would easily get political, so please respect the forum rules.
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Old 05-24-2014, 03:55 PM   #54
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Mr Pejman Yousefzadeh writes for a "Right of Center" website so we know his purpose here.
The original investigative article in the Financial Times is at:

Piketty findings undercut by errors - FT.com

but it's behind a paywall. Is the FT considered "right of center" too? I guess. But it's a well respected economics and financial newspaper.

When evaluating Piketty's work, it's certainly worthwhile to be aware of critiques of his work.
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Old 05-24-2014, 04:06 PM   #55
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To clarify my previous post, the discussion on Pickety's book is a valid forum topic and the number of views shows interest. Lets keep it open by focusing on the book and not the political leaning of media and critics.
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Old 05-24-2014, 08:10 PM   #56
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Additional criticism of the accuracy of Picketty's data from a center right think tank.

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Piketty states, “From 1980 to 1990, under the presidents Ronald Reagan and George H.W. Bush, the federal minimum wage remained stuck at $3.25, which led to a significant decrease in purchasing power when inflation is factored in. It then rose to $5.25 under Bill Clinton in the 1990s and was frozen at that level under George W. Bush before being increased several times by Barack Obama after 2008.” (Page 309).
Wrong, Professor Piketty. The federal hourly minimum wage rose twice in the presidency of George H.W. Bush, from $3.35 to $3.80 in 1990 and then to $4.25 in 1991, a 27 percent total increase. Then, under President Clinton, it rose to $4.75 in 1996 and $5.15 (not $5.25, as Piketty states) in 1997, a 21 percent total increase.
The next increase in the minimum wage, from $5.15 to $7.25 over three years, a 41 percent increase, was signed into law in 2007 by President George W. Bush. The federal minimum rose to $5.85 in 2007, to $6.55 in 2008, and to $7.25 in 2009.
I am trying to decide between reading his book or Tim Geitners
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Old 05-24-2014, 08:40 PM   #57
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Additional criticism of the accuracy of Picketty's data from a center right think tank.

I am trying to decide between reading his book or Tim Geitners
They're very different in tone. "Stress Test" is more of a personal story. "Capital in the 21st Century" is very much an acedemic work.

BTW, note the dates in that quote.
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From 1980 to 1990, under the presidents Ronald Reagan and George H.W. Bush, the federal minimum wage remained stuck at $3.25...
From 1980 to 1990. Not through, but to. Words have meaning...

And note the dates in Diana Furchtgott-Roths critique:

Quote:
The federal hourly minimum wage rose twice in the presidency of George H.W. Bush, from $3.35 to $3.80 in 1990 and then to $4.25 in 1991, a 27 percent total increase. Then, under President Clinton, it rose to $4.75 in 1996 and $5.15 (not $5.25, as Piketty states) in 1997, a 21 percent total increase.
Well, that is nice to know, but those dates are outside the bounded interval of 1980 to 1990.

It is generally wise to take care to understand what one has read. Piketty's work is not flawless. There are transcription errors in some of the data, and several methodologies used to correlate data samples over very long periods of time are not well explained. That bothers me, and makes it harder to reproduce his exact data and results.

I do think that his broader points about income inequality having dropped to a minimum by the mid-20th century and rising since then still hold.

Here's a nice graph of the share of national income received by the top 10% by income of households from 1910 to 2010, built from data published in the book:


The top one percent of households haven't done too badly, either:




There's a similar trend across Anglo-Saxon countries for the top 1%:


I've gotten the distinct impression that certain groups of critics would prefer that we believe these curves have all been flat since 1950, and are busily straining at gnats to convince us to ignore that strange man with the objectionable data set.

Bear in mind that the central thesis of the book is that inequality is not an accident bur a feature of capitalism that requires regulation of some form to inhibit or reverse. Even Adam Smith recognized that some intervention was necessary to establish ground rules for laissez-faire practices to prevent collapse into a mercantilist oligarchy (one of the stable end-states for an economic game).

It is certainly in the best interest of some of us to convince the masses to ignore this data. During the long, slow process of restoring our society to a more stable social structure, we want to avoid upsetting the multitudes destined to reside at the base of our social pyramid. The maintenance of a well-off middle class that actually outnumbers the poor can lead to serious stability problems for families intent on maintaining proper control!

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Old 05-24-2014, 08:54 PM   #58
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What is the economic argument for reducing inequality?

There's almost universal agreement that morally it would be better to have more equitable societies.

But is here a claim to be made that less inequality would produce greater growth, less probability of boom- bust cycles, etc?

Or can the opposite be argued that by concentrating wealth to a very small slice of the population, economic growth is greater than it otherwise would be?

If Piketty is just making a moral argument, then all the data he cites would be besides the point.
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Old 05-24-2014, 09:15 PM   #59
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Additional criticism of the accuracy of Picketty's data from a center right think tank.
Hmmmm, according to the "horse's mouth", the critique looks correct.

http://www.dol.gov/whd/minwage/chart.htm

Pretty sloppy to misstate basic factual information that is readily available. Could just be a slip-up though, that happens. A little suspicious though, when you look at the picture it paints.

And of course, some sloppiness in some facts doesn't necessarily invalidate the main point. But it certainly should raise some flags. It's one of the reasons I didn't bother to watch much of the earlier posted video of Paul Krugman. I just had no faith that he would question that which he wants to believe.

Another quote from the article clifp linked:

Quote:
Piketty suggests that America copy France, where the minimum wage in 2013 was 9.43 euros ($13 dollars) an hour. But the consequences of the minimum wage can be seen in the differences in youth unemployment rates in the two countries. In 2013, young people aged 15 to 24 had an unemployment rate of 24 percent in France and 16 percent in the United States, according to OECD statistics. Germany has no minimum wage: its youth unemployment rate was 8 percent last year.

Another reason we might not want to copy France: OECD data also show that in 2012 France’s per person GDP was 70 percent of per person GDP in the United States. France might have less inequality, but it is poorer.
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Old 05-24-2014, 09:40 PM   #60
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...

BTW, note the dates in that quote.
From 1980 to 1990. Not through, but to. Words have meaning...

Well, that is nice to know, but those dates are outside the bounded interval of 1980 to 1990.

It is generally wise to take care to understand what one has read. .....
I agree regarding "to 1990", but why not mention a rise just 4 months later under the same president that he said it was 'stuck at'? And, assuming the quote from page 309 is correct and in its entirety, the author seems to have skipped over two rises under GH Bush (" It then rose to $5.25 under Bill Clinton"), and skipped over two rises under GW Bush ("and was frozen at that level under George W. Bush"), and then attributes 'several' to Obama (one in 2009).

Yes, words have meanings, and Piketty sure got a lot of them wrong there. It's a little hard to give the benefit of the doubt as unintended errors/omissions, when they all lean one way.


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It is certainly in the best interest of some of us to convince the masses to ignore this data.
I dunno, like the song says, "I'm stuck here in the middle with you!"

I don't want to ignore any data, but the question on the table is - is the bulk of this data accurate and does it really tell a (an unbiased) story?



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What is the economic argument for reducing inequality?

There's almost universal agreement that morally it would be better to have more equitable societies.

But is here a claim to be made that less inequality would produce greater growth, less probability of boom- bust cycles, etc?

Or can the opposite be argued that by concentrating wealth to a very small slice of the population, economic growth is greater than it otherwise would be?

If Piketty is just making a moral argument, then all the data he cites would be besides the point
I guess I'm fairly ambivalent regarding 'inequality' (however the heck you measure it). I know some people with far more than I have, and it just isn't an issue for me - I wish them well. What I want to see is that we have opportunity for all, so that the lowest classes have a decent standard of living. That's also a tricky thing to measure. But I'm not sure that redistribution (Piketty's solution) is really an answer. Maybe, but how much and to what degree?

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