Why Wealth Inequality is *Actually* Bad

After putting all moralistic ideals to one side for a moment, income/wealth inequality is still fundamentally bad for a society. (I'll come back to ethics later, along with the Occupy movement and much more besides.)

The monetary system is immensely complex these days, so as a thought experiment I like to imagine money away: ignore it altogether as it has no intrinsic utility itself. It merely directs the allocation of man power and resources, as a dictator might. But hopefully our system has more effective priorities: promoting the spread of useful innovations and keeping society healthy.

Moai - 'Easter Island Heads' are misnamed,
 they've been buried to their shoulders by time. 

A conservative/neo-liberal might argue that rich people are no problem because they spend more, putting money back into the economy via the people they pay for products and services. However, I think the real problem is with the specific things they spend their enhanced incomes on.

Someone with 100 times more money than the average Joe doesn't buy 100 reasonably priced cars. Maybe they buy twice as many cars, but each one costs 50 times as much. It's actually quite difficult to spend that much money, so they will tend to purchase luxury items across the board, either impractically expensive versions of everyday goods or totally exclusive items like super-yachts.

Gucci handbags, jewel encrusted gold watches, $200M private yachts, giant mansions, hand made super-cars and fancy soirées are all about as useful at stimulating an increase in societal productivity as were the standing stones of Easter Island. For those unfamiliar: Moai (right) were erected all over the small Island as an expression of ancestor worship by clans. Making the statues took a heavy toll; there was total deforestation and ecosystem collapse. The isolated population of islanders had plunged from 15000 to 3000 by the time Europeans arrived in 1722. A 500% decrease, in under a century, with cannibalism. Shortly thereafter the 900 statues were toppled.

The monolith erecting game is taxing indeed for the people of Nias Island, Indonesia, 1915.

Back to the present day, the other thing wealthy people tend to use much of their money for is gaining *more* wealth. So, in a laissez-faire economy, an ever greater percentage of societal effort tends to be directed towards useless extravagances for an elite. Whether or not the top percent or two *deserve* extravagant pay for their services/resources is irrelevant, left unchecked this wealth concentration will destroy society. And in retrospect we will look every bit as dumb as those who built 10 meter tall maoi when all that was left to eat was each other.

"Adjustment Beauro" Critique

Adjustment Beauro is [SPOILERS!!!] The Matrix with a benevolent Architect who is blatantly THE man upstairs. As a white Obama in the making, Matt Damon gets his own Inception as he dances gracefully through NY city reenacting parts of Eternal Sunshine. At least they cast the beautiful Emily Blunt as the worryingly gullible supporting actress, and the plot does move along at a comfortable lick.

We're supposed to believe earth has been running continuously under watchful eyes since before the Roman empire (at least), so Christianity's wrong. And, as in the Wackowski's masterpiece, us cretinous humans have proved ourselves insufferably reckless when we were previously allowed behind the wheel of our own world.

Yet another K.Dick adaptation, it pisses me off by being so cliche: blame the stereotypically bad events of Western history on human nature, saving God the embarrassment of holocaust responsibility. Also, his children sat around in the 'dark ages' just sucking our thumbs, but were able to discover nuclear fission unaided because *that's* so reckless...

What would be the point of a society perpetually tweaked by some 'God'? Other than as a game for the entertainment of a massively transhuman AI I suppose:

At least they made this God fallible; being unable to see indefinitely far into the exact future of a impossibly complex ensemble system that is human global society, that is something quite probably computationally impossible, even in a completely deterministic simulation one would have to run it in it's entirety to know for sure what the outcome was going to be when it was run...

Kondratieff Waves... Crashed Our Economy!

This article presents a divergent hypothesis from Tyler Cowen's lack of 'low hanging fruit' hypothesis for the current Stagnation (discussed in my previous post).

I was going to make one quick mention of a pure economics based thought that might have contributed to our current depression but it was based on an understanding inversion (see tiny writing below):

The 1970s switch of Government policy away from Keynesian practises towards monetary policies that buffered the economy from depressions and recessions may have precipitated the financial crisis by their very success: economic fluctuations shake the wastage out of the system, forcing inefficient businesses to shut down, reform or lay off unproductive staff. Keeping things steady just allowed more detritus to accumulate on the buckaroo donkey, saving all the pain for one big, inevitable mess... Well, actually that's complete nonsense!; It was *Keynesianism* that involved strong state intervention (like The New Deal). The 70s and 80s saw the rise of neo-liberalist policies promoting deregulated, free markets and privatisation. So, if anything one would have to blame *over* optimisation for the crash. 

+ Introducing Kondratieff waves:

To say that (inter)national economies are complex things is a blatant understatement. Many factors can effect a short term change in GDP growth rate; changes in: money supply, taxation, national interest rate, financial/business regulations (or removal of), public sector redundancies, etcetera. These have each caused quick and apparently large fluctuations in the past, but ultimately such disturbances only manifest for a couple of years at most before return to equilibrium. No amount of fiddling with these factors can stimulate sustained economic growth. Period. Yet on aggregate, since records began, the world GDP has *always* grown, year on year, even during the great depression, world wars and right now.

US GDP per person - "The Singularity is Near"

This continual rise in per-person wealth, standard of living and productivity has come from a succession of  technological innovations that have permeated society. Although, from an historical distance, the long term growth trend of a country looks pretty smooth, innovation uptake by members of a society tends to following a wave of adoption. Very gradual at first, rapid as it gains widespread popularity, but then perhaps never quite reaching *everyone*.

Wikipedia - Diffusion of innovations

There are only a discrete few innovations that are such majorly influential improvements to life as to have become ubiquitous (for example: mains electricity, automobiles, the internet), so they are spaced along our past. Each major innovation stimulated frenzied economic activity, indeed much employment was necessary to build, from nothing, massive infrastructure or industry (e.g. the railway/motorway network, industrial revolution). Lulls occur after each wave of innovation (because science takes time and) because the start of a wave is dependant on the new environment created by the previous one. So one should expect GDP growth history to be a little lumpy; a series of economic revolutions.

Nikolai Kondratieff wrote of his observation of a long wave economic cycle, back in 1925. It earned him Soviet Gulag, death by Stalin, and title to this theory (respectively). He estimated a fixed period of 50-60 years per cycle of: expansion, stagnation, recession. Since then it has been more commonly split into 4 seasons or irruption, frenzy, synergy, maturity (or such like).

The Great Stagnation(?) by Tyler Cowen:

This mini-book appeals to me because it talks about economic progress/stagnation/crisis as primarily attributable to innovations. However, his surprisingly compelling idea, to account for our global economic finance bubble, seems to clash directly with Kurzweil's portrayal of miraculously smooth technological advance. (Although Ray does talk about an overall exponential composed from S-curves through successive paradigms.)

I came upon this (£2 Kindle app special) book via a link to this blog post considering stagnation vs relocation (of the world's economic centre to China).

* The Book's Central Thesis in A Nutshell Painted by Me:

The natural course of technological innovation, following the tree of scientific discovery, yielded many 'low hanging fruit' from 1870-1970 that greatly benefited the whole of western society. Transport, communications, home conveniences, mass production, free fertile land for US settlers and perhaps cheap fossil fuels. These rapidly raised the standard of living for just about everyone (in America), doubling it ~ every 25 years, also creating universal employment.

However, in the the last 40 years there have been no innovations with the same level of wide ranging public utility. We, in the developed world reached a plateau of of technological productivity gains in the 1970s. Advances since then have been *marginal improvements* that have mostly benefited private consumers (to an extent dependant on wealth). The lack true economic growth was hidden by the uncertain value of growing government expenditure. [Perhaps outright "Pollyanna Creep" too (my thought, or rather Douglas Rushcoff's from "Life Inc.").] Markets and individuals, caught up in the endemic false expectation of continuously strong growth (from the previous period of reaping 'low hanging fruit') all simultaneously overstretched to the point of buckling.

The Internet is a sole exception of innovation, in that it has had a great qualitative benefit to peoples lives, for that part of society sufficiently educated to enjoy it's many wonders. However, it has not yet raised standards of living as ubiquitously as did electricity in homes. Furthermore, it contributes very scantly to employment and GDP. Computers do almost all the hard work, so massive companies (Google, Facebook) have few employees, hence (in part) the 'jobless recoveries' of the last 2 decades. Also, it's very difficult (or just plain unnecessary), to monetise most internet content. Time well spent on-line, for the individual, may well decrease spending elsewhere, hence reduce GDP and government tax income. The net is just too damn efficient!