[lr4444lr]

I love this part:

The poor spendthrift vagabond says to a rich man:

"I have discovered there is enough money in the world for all of us, if it was equally divided; this must be done, and we shall all be happy together."

"But," was the response, "if everybody was like you, it would be spent in two months, and what would you do then?"

"Oh! divide again; keep dividing, of course!"

[PaulRobinson]

Which is the correct answer.

When you spend money, it doesn't disappear. It's just moved.

[lr4444lr]

Yes, but the goods it can buy on the next round of division still don't come from the spendthrift vagabond, and if his way of life is incentivized while the producers' is disincentivized by this redistribution, then that circulation won't continue so innocuously.

[audi100quattro]

...and if you incentivized the producers (which is also redistribution) while disincentivized the spendthrift you will not be left with much of a population to keep redistributing from. Ultimately this is bad for the producers, I am not sure why they don't realize it. Short-term thinking and greed, maybe?

Increasing inequality does in fact encourage deflation. Redistribution in forms of common services and education (for um.. jobs) is very necessary.

[lr4444lr]

I wouldn't disagree with you, but I think you're reading something into the quote which isn't there. The moral is that redistribution won't bring prosperity - not that it's good in some cases and bad in others. At the risk of adding more complexity to the parable than its pithiness merits for the sake of explanation (as I understand it): the spendthrift wholly consumes whatever he produces, and wants more. The producer generates a surplus. He may well consume an overall greater amount than the spendthrift, but he's still net positive. The "division" however, will only benefit the spendthrift, because producing is chosen for the sake of consumption, but consumption for its own sake.

I know it's still a gross oversimplification, but I think the general truth encoded in the parable should be appreciated for its own sake in general terms.

[marcosdumay]

> The moral is that redistribution won't bring prosperity

Except that it does - up to a certain point.

That's one of the few repeatable, tested, and validated economical principle from the XX century. Counter intuitive as it is, there's just no point denying it.

[StephenConnell]

If prosperity is "having wealth", then redistributing wealth does bring prosperity. But then you could also say that stealing brings prosperity. Could you not?

[iQuercus]

Source?

[pessimizer]

You assume that the rich man was a producer. He actually just plays video games most days, and takes a trip to skydive in Bali twice a year.

[edanm]

As most rich men do? Quite a statement if so.

[naasking]

> and if his way of life is incentivized while the producers' is disincentivized by this redistribution

The idea that producers are only incentivized monetarily is false.

[jjoonathan]

> spendthrift vagabond

An obtuse mischaracterization of the poor; a more typical "sin" would be failure to hop over the ever-rising bar that denotes the ability to secure money by threatening to withhold labor.

Circulation goes both ways and it isn't the ability of producers to secure profits that seems to be most endangered at the moment.

[icebraining]

An obtuse mischaracterization of the poor

Why do you think it's a characterization of the poor at all?

Circulation goes both ways and it isn't the ability of producers to secure profits that seems to be most endangered at the moment.

The working poor are themselves producers.

[jjoonathan]

> Why do you think it's a characterization of the poor at all?

Because they're the ones who the type of policy we are discussing would actually be intended to benefit. Voicing that side of the argument through a "spendthrift vagabond" is disingenuous at best.

> The working poor are themselves producers.

I was using the term with my tongue firmly planted in my cheek, I thought it would be clear enough from context that I was referring to capital-holders.

[kamaal]

>>Because they're the ones who the type of policy we are discussing would actually be intended to benefit.

No. To be a spendthrift is a symptom of many problems. One of which means lack of respect for money or the effort required to earn it. Other wise one wouldn't be throwing it away.

[trophycase]

Value and efficiency can disappear though. I could spend 100 dollars on something that falls apart in a month, or spend 1000 for a functionally equivalently something that will last 3 generations. One of these choices is wasteful and hurts economic efficiency, one isn't.

[alanwatts]

One is based on the broken window fallacy assumption, one isn't.

[themartorana]

Well, if the money was to be spent. Half our problem is the extra cash moving towards the 1% is held, not spent, not circulated.

[alanwatts]

What is the other half?

[themartorana]

Speculative (and unregulated) financial dealings by banks with your cash, leading to ruinous effects on the global economy, ruining much of the middle class in the process?

[lottin]

What disappear is the goods the money was spent on, and money is only worth something as long as there are goods that can be bought with it.

[alwaysdownvoted]

In 1880 there was no Federal Reserve system.

"Money" was backed by commodities of finite quantity.

[carlosnunez]

Don't show that to the Universal Basic Income diehards...

[mc808]

UBI just lifts the wealth distribution curve up a bit so the long tail approaches something above zero. You could also call it a "tax prebate" as in the FairTax proposal if that's more palatable. The poorest poor are going to get their basic necessities somehow, whether it's by participating in the economy or by digging through your garbage or your garage.

[danieltillett]

Or even worse engaging in activies that degrade your lifestyle ;)

I live in a society that has in effect a basic income (not very efficiently run, but that is another topic) and it allows the ultra rich and famous to walk around without fear. I have on more than one occasion met billionaires on the street who were wandering around without bodyguards or security. Once you have everything money can buy this is priceless.

[dangero]

I'm very interested in the concept of basic income, but I don't see any issue with this commentary from PT Barnum. It seems to be more of a statement of fact that some people spend their money more wisely than others. Basic income could be viewed as inline with this statement because you would get an income stipend at some small interval, like once a month, so even if you spent it all last month, this month arrives and you get that basic income again.

[angersock]

Even a cursory reading of the story should suggest to a reader a difference between the proposed action (divide equally riches amongst all), and UBI (fund a fixed-amount per citizen per annum).

Least of all, if one believes in the ability of capital to be reinvested to create more capital, it is obvious that the second case need hardly injure an economy while still helping the people who are broke.

The former case, of continual wealth division, of course may fail--luckily, that's not how UBI works.

[jjoonathan]

> it is obvious that the second case need hardly injure an economy

I think an even stronger statement holds true: if you don't actively redistribute then you're effectively making an open-loop amplifier which will amplify noise (who happened to be in the right place at the right time) in preference to signal (effort input) -- which is just as harmful to the cultivation of a beneficial incentive landscape (i.e. one that promotes effort input, since that's tautologically all anyone ever gets to decide) as a failure to reward success would be.

Alternatively: it's often better to reduce the transition-state energy than to improve the final reward, which is exactly the opposite of what happens when decisions are made by people who have 1 metric shitton of money to invest in building a moat with the aim of returning 2 metric shittons of money.

[refurb]

Except that many wealthy people are newly wealthy. It's not a feedback loop.

[SwellJoe]

Surely the straw in that man has dried up and blown away during the past 156 years?

[wildmusings]

Reminds me of one of my favorite Maggie Thatcher quotes: "The problem with socialism is that you eventually run out of other people's money."

[cname]

I don't know why so many people think Socialism is about welfare. Socialism is about who owns and controls the means of production.

Read about it here: https://en.wikipedia.org/wiki/Socialism

[wildmusings]

Socialism in the traditional sense of the word refers to what people today would more likely call communism. Socialism these days refers to social-democratic movements that want redistribution within an at least somewhat capitalist system. She was taking a swipe at the British Labour Party and their counterparts on the continent, all of whom used the label 'socialist' but were really social democrats. Words mean whatever people think they mean.

There's a similar phenomenon with the word liberal. Liberal once referred to, and in some contexts still does, politics that advocates for human freedom from all kinds of government coercion. At least in the US, it has taken on a different meaning over the last hundred years. Now it refers to social-democracy.

[coliveira]

The reason these ideas changed names is because of the political coercion inflicted on socialists. People advocating socialism had to look for other labels that were not tainted with diret connection to oppressive communist regimes.

[merpnderp]

Socialism is commonly used today to mean a large welfare state. See Bernie Sanders describing the kind of socialists he is, and you'll realize he isn't actually a socialist in the strict sense of the word.

[jfaucett]

"I don't know why so many people think Socialism is about welfare."

Its one of the meanings that the word socialism has come to denote through quotidian usage in media and within Amercian society. Democratic Socialism would likely be a more precise term for these common usage scenarios.

see Usage Discussion of socialism at: http://www.merriam-webster.com/dictionary/socialism

[dalke]

Here's a recent essay in The Atlantic, by Anu Partanen, concerning the difference between the two - http://www.theatlantic.com/politics/archive/2016/03/bernie-s... :

> Americans are not wrong to abhor the specters of socialism and big government. In fact, as a proud Finn, I often like to remind my American friends that my countrymen in Finland fought two brutal wars against the Soviet Union to preserve Finland’s freedom and independence against socialism. No one wants to live in a society that doesn’t support individual liberty, entrepreneurship, and open markets. But the truth is that free-market capitalism and universal social policies go well together—this isn’t about big government, it’s about smart government.

[jwdunne]

And yet incorrect. Democratic socialism is the idea that socialism can be achieved through reform rather than revolution. In some respects, it has been less successful than revolutionary socialism: the UK Labour Party, until recently, reformed itself away from democratic socialism.

In the UK, welfare as we know it here originated from the Liberal Party, in fairness. Nationalisation (attempted socialism by reform) was the hallmark of the Labour Party, not heavy welfare spending.

Since Thatcher, the Tories have a knack for presenting themselves as the thrifty party - in effect, living within our means. Except household budgets are not so analogous to government budgets. It just so happens that this line resonates with the everyday voter in times of economic woe and it's all too easy to paint the social democrat as a boundless spender.

An example: in 2007 the Tory Party's shadow chancellor, George Osborne, said he would match Labour's spending plans. Recession hits, tax revenues drop and they harped a very different tune.

It's honestly just politics.

[dave_sullivan]

Aren't the means of production pretty much people's minds at this point? I'd like to own and control mine.

[jdietrich]

A semiconductor fab costs several billion dollars. Rollout of a national communications network still costs even more. The world is still full of big lumps of capital that aren't going away any time soon.

[dave_sullivan]

Agreed, and I'd be in favor of those being financed at least partly by the government and offered "at cost" because it lowers barriers to entry for new participants. I'd also include drug research, roads, housing in areas without a housing shortage (IE, not SF or Manhattan), and more. I even think the idea of a living wage makes sense and in fact will be necessary, I just haven't figured out how to pay for it (and frankly, the naive implementation of "just give everyone $X" would be so hugely expensive that it strikes me as infeasible. A working implementation is going to need to be significantly more... creative.)

And yet, the big stories of the last decade or two have noted a trend: more value being generated by fewer people with fewer capital expenditures (prime example being MSFT > Google > Facebook > Instagram/Whatsapp/Minecraft). The majority of "capital" in those cases (VC money, if applicable) is spent on engineering salaries.

Meanwhile, oil companies are dying, communication networks are barely profitable (cisco?), and "hard industry" is an industry no one optimizing for profitability wants to get into unless it's to break it up and sell it off. Of course you can point to the recently ended energy bonanza during which Exxon became the most valuable company in the world; explaining the drivers of that is beyond the scope of this comment but it's not about energy being a fundamentally awesome business to be in (but briefly, BRIC growth + monopolistic practices to really juice income).

So the interplay between brain capital, industrial equipment, and various other types of capital is more complex than "the public should own the means of production". Some of it yes, most of it no. And I'd argue the brain capital trend is going to continue while heavy industry jobs are going to keep disappearing, forcing us to resolve the "interplay between capital" question in a way that doesn't collapse our entire economy, doesn't cause a civil war (and/or avoids one), and doesn't end up with the public (or a small group calling themselves "the public") being able to shake down any success story simply because they figured out how to make more money than the next guy.

[CPLX]

I wouldn't trade for most minds if I had a producing oil well.

[theoh]

Apart from the fact that material production is still the real source of material goods, that sounds like an individualist fantasy. The idea of controlling one's own mind is a tautology, and as for the body, who can say where it starts or ends? We are interdependent. Combine those two assertions and I don't think you can draw any lines around individual persons any more.

There is some particularly crazy thinking in philosophy on self-ownership, which may interest you:

Cécile Fabre, Whose body is it anyway? Justice and the integrity of the person

http://www.palgrave-journals.com/cpt/journal/v9/n3/full/cpt2...

[coliveira]

Please let me know how you started producing oil using only your mind.

[grkvlt]

Presumably by studying geology, then thinking a lot about the oil formation process, and working out where to find some before anyone else. Then, you can negotiate to obtain value for your knowledge of the location...

[SturgeonsLaw]

That's a bit of a stretch dude. In our world it's easy to think in terms of intellectual capital, but look around you - every object you see was manufactured somewhere.

The knowledge economy wouldn't exist without physical objects to express it through, and they all have to be produced.

[coliveira]

LOL, oil prospection is, among all industries, not a business that you can do using only your mind power...

[Spooky23]

Usually the first two socialist priorities are healthcare and housing. Together those things probably account for 35% of GDP.

Consider a trivial example -- the affect that the post ww2 public housing boom did to the US construction industry. Government procurement rules transformed and forced consolidation of the brick industry. On the east coast it went from hundreds of geographically diverse companies to 4-6, all in the south.

[tigershark]

The world is full of people that think that they can do better than everyone else and they are temporarily disgraced because all the other people are just simpletons that cannot understand their mighty genius. Mental institutions are full of people that think in a freakingly similar way.

[arethuza]

A bit ironic then that the overall tax burden was rather higher than the previous Labour government for most of her time as PM:

"The tax burden (measured by the Institute for Fiscal Studies in the form of total government receipts as a share of national income) started at just above 40 per cent in 1979, peaked at 45.4 per cent in 1982, then fell below 40 per cent in 1990."

http://www.independent.co.uk/news/uk/politics/10-things-you-...

What she did do was reduce the silly taxes on higher level of income - but those taxes were just imposed on poorer people.

[zouhair]

At least the witch is dead, we won't have to suffer her stupidity.

She managed alone to prove that women can be as hateful and live destroyers as any men.

[johnloeber]

This is nonsense. Spending money isn't bad at the macro/societal level. Spending is a cornerstone of economic growth.

[kamaal]

The fact that socialists feel entitled to free cash is hardly a surprise. In India which went though decades of socialist rule, its quite common among people to expect others to provide for them all their life.

I know a lot of people from my circles, especially older people in the late 50's and 60's who have spent their lives in the socialist era endlessly expect elder brothers/relatives to provide for them. Any refusal to do so is taken to amount to some extremely bad kind of selfishness and greed. Keep alone the fact that they've barely done any work all their lives, or are any way serious even now with their spending habits. The basic idea is that they are entitled to be provided no questions asked and someone is supposed to make up for them. Refusing to comply is evil.

[zouhair]

Socialists feel entitled to free money? Do you have some sources on this?

[SturgeonsLaw]

foxnews.com

[hjhgjtyhgdf]

I couldn't find it. Give me a direct foxnews.com link that claims that.

[rorykoehler]

From where I am standing it seems capitalists feel entitled to free cash. They take their capital, dump it in the stock market and hey presto free cash! This free cash mostly arises due to some accounting trick and is not productivity backed at all.

[meric]

People who see the stock market that way are merely gamblers and will have their chips taken away in the next financial crisis.

During 2014-2015 I've participated in a lot of share issues to provide cash for gold mining companies requiring capital to move into or expand production.

These are companies with a few hundred shareholders or so.

The profits I've made in the past few months from gold mining companies, I think is perfectly justified. I've done my research and invested in these companies when everyone else has shunned gold and gold related investments. These were companies whose market capitalisation were less than their projected cash flows for the next year. I've invested in these companies when few other people would.

These gains I've made, are completely backed by productivity. Without these latest round of share issues, many of the companies would have gone under, and there would be no gold coming out of the ground.

(You could argue gold has no value beyond being a good material and I'd respond, neither do paint or flowers. With gold, people can use it as an asset without counter party, and provides zero interest, guaranteeing capital during times of negative interest.)

[rorykoehler]

I don't resent anyone who chooses to play the game and wins. We just make the best of the system we exist in however I do believe in being honest about the system too.

Gold has a value purely due to it being vital in many technologies. That said I can't imagine the price we pay for mined material, gold or otherwise, even comes close to reflecting the cost of what it will take to repair the damage we are doing to our environment during the extraction of these materials.

Regarding productivity there are many instances of financial products which are not even remotely linked to any kind of productivity. If the stock market was strongly linked to productivity the down cycles it experiences would be minor in comparison to what they are.

[meric]

Yes, I only invest in gold mines in my own country, where there are more strict protocols with regards to the environment, where a 'environment cleanup' bond must be lodged with the government before mining begins. The area is rehabilitated when mining completes.

The down cycles and bubbles are pumped up by central banks. When the stock market isn't doing well central banks lower interest rates, encouraging people to take out loans, to buy houses and stocks, and if they didn't, the central bank would lower the interest rate until they did.

It is market intervention that is exacerbating the phenomenon you're talking about. A small down cycle is a healthy event that cleans up all the almost productive companies and reallocates their capital through liquidation. It is zombie companies propped up by government subsidies and central bank intervention that is causing the rot in America's economy. It is akin to a forest fire burning all the weeds so the forest can rejuvenate.

[tomp]

Which accounting trick?

[rorykoehler]

There are many. To name a few: synthetic CDOs (the 2008 mortgage crisis), insider trading (Martha Stewart), rate rigging (LIBOR scandal), Ponzi schemes (Madoff) and straight up cooking the books (Enron).

I hope that's enough to refresh your memory? It's irrelevant to my original point though as capitalism is by definition hoping to get something from doing nothing (or making money work as the propagandists like to dress it up as).

[tomp]

Apart from Enron, the rest have little to do with capitalism but mostly to do with markets (or, more precisely, our fucked-up financial institutions and deficient financial regulations).

> It's irrelevant to my original point though as capitalism is by definition hoping to get something from doing nothing

You have to be really stupid to think that, and deny all the benefits to our society that capitalism enables. Or, could you please explain how you would e.g. start an airline, or build a hospital, or your house's sewage system, without utilizing capital?

[rorykoehler]

>You have to be really stupid to think that, and deny all the benefits to our society that capitalism enables.

I never did that. I'm well aware of the benefits capitalism has brought society, just as I am aware of the damage it has also caused. I can guarantee you the majority of capital pumped into businesses does not come from the people who will do the work.