[alephx]

Totally agree, the problem with that kind of thinking is that it ignores the creation of wealth. A world without superyachts would probably be a world where they did not exist i.e. two hundred years ago (guess). Wealth is always distributed unequally due to nature, it is a random and chaotic world. The difference from two hundred years ago is that the accumulated wealth of the world now enables superyachts to exist. From the factory and the machines that make a screw, to the metal panes, the engine etc... All that machinery ends up indirectly benefiting most of the population who are now able to buy other goods which were produced thanks to the accumulated wealth (machinery, technology, resources, knowledge) that made superyachts possible. It is a symbol of conspicuous consumption, but also a symbol of everything that made it possible and in the process raised the standards of living of a whole lot of people.

[jonnycomputer]

"Wealth is always distributed unequally due to nature"

No. Wealth is a social fact, not a natural fact. It is the consequence of policy choices.

And most of the stuff you go on about is really just unsubstantiated nonsense. You are actually claiming that the existence of ultra-billionaires as consumers of luxury goods leads to technological innovation.

[kbutler]

I'd like to mention SpaceX, Blue Origin, and Tesla.

Regarding the policy choices:

Joe and I have equal income. Joe spends his full income every year. I invest 50% of my income. After 40 years of average stock market returns, I have accumulated 1000 times my annual income as wealth.

What policy choices created this wealth disparity?

Joe and I both retire. How much of my wealth do I need to give to Joe?

[notacoward]

> After 40 years of average stock market returns, I have accumulated 1000

Your math is as far off as your reasoning. The long-term average return is 7%, so after 40 years your first years' investments would only have multiplied by only 15x - subsequent years' even less, and that's not adjusting for inflation. If your income exactly kept pace with inflation, you'd end up with 151x your income in original dollars or 43x in inflation-adjusted ones. I'm sure you think you'd get bigger raises than that, and you're probably right, but then again 50% savings (especially after tax) is pretty unsustainable, so you're off by between one and two orders of magnitude.

> What policy choices created this wealth disparity?

That's almost a non sequitur, since even if policy choices didn't create that wealth disparity they could well have created others. But, as it turns out, they even contribute to that one. How is it that those investments of yours return 7% on average, year after year after year. How is it that capital grows at ~2x the rate of wages? The answer has a lot to do with property (especially intellectual property) law, liability law, tax law, subsidies, tariffs, free infrastructure, etc. That's a lot of policy choices favoring your choices over Joe's. Maybe those are even the right policy choices, but to pretend that they didn't have any effect at all is ridiculous.

> How much of my wealth do I need to give to Joe?

None, but that's the (deliberately) wrong question. The real question is how much you should give to the society that sustains both of you, or how much you should never have had at all. There's a lot of room for debate on that, but first we have to get the facts and figures right - something you have so far seemed loth to do. Care to join a real debate?

[kbutler]

Sorry, switched calculators partway through and got monthly contributions. Originally had it 100x and edited it to 1000x (blush).

Capital returns more than labor growth rate because of many factors. The most obvious is that capital is a productivity multiplier, so it adds value and should be compensated, and the growth rate is naturally a multiple of the labor growth rate. (Capital investment allowed Model T production to go from 12 man hours to 3 man hours - 4X productivity.)

Time value of money/discount rate: Would you pay more for $1000 today, or for $1000 inflation-adjusted in 30 years? If capital doesn't grow at least as fast as inflation, may as well just spend it on consumption now, leaving no money for those capital investments and that 4X productivity gain.

You'd expect labor growth rate to only match inflation (you make one Model T, you get one Model T). Wage growth has also been depressed for the last several decades by additional workers entering the market (e.g., rise of two-income households) and supply vs demand - 50% more people willing to make Model T's at wage X.

Let's start the debate with real numbers at a lower bound: Assume 0 capital gains (I stick it in a mattress and only get out what I put in), saving 25% of my income for 40 years, I'd still end up w/ 10 years of my average income as wealth.

Joe has 0.

> how much you should give to the society that sustains both of you, or how much you should never have had at all.

Should I give Joe or society any of that money? Is any of it money I should never have had at all? That money was already taxed, so society already took what it considered its fair piece of that pie (and the hidden tax of inflation took its share, too!)

The fact of wealth disparity does not imply unfairness.

How about if instead of sticking it in a mattress, I let Henry Ford use that money to build a factory, and it lets him build 4X the cars so that people who want cars can buy them, should I not get some of that added value as well?

Now, maybe Henry should get a part of that money, for his great ideas (say, 33% of the increase). And maybe we should make sure that the workers get a bigger piece than they would have (if labor costs were 50% of the cost of the car, say they get a 50% wage increase?) and we should drop the price to the customer as well (25% discount?) and assume lots of other costs are fixed per car. 4X cars, 25% discount gives 3X revenue. Labor costs went to .75X. Henry gets 1X. Return on capital is 1.25X. Uncle Sam gets his piece in various ways - sales tax on the cars, income tax on the company, on the workers, on Henry, on the capital gains.

And everybody in the picture is better off - customers, labor, company, capital investor, and unrelated parties that benefit from tax revenue, all because I chose not to "spend" that money.

Now, society has taken its piece of the pie in all the ways above (and society chose to set the size of its piece in advance), and you're coming back and saying society needs another piece, just because I didn't spend my money like Joe?

[notacoward]

> If capital doesn't grow at least as fast as inflation, may as well just spend it on consumption now

Nobody said anything about capital returning less than inflation. The question is why should it - no, why does it - return more than labor? You're spinning all over the place trying not to address that.

> That money was already taxed

The principal was taxed, not the appreciation. Or, to put it in even clearer perspective, the labor was taxed but not the capital gains. Why? No matter how you slice it, that's a pretty serious policy decision. Why shouldn't capital gains be taxed at least as much as labor? If capital is so amazingly effective, it would still be advantageous to accumulate it.

> The fact of wealth disparity does not imply unfairness.

It implies fairness even less.

[kbutler]

> You're spinning all over the place trying not to address that.

Except where I addressed it above:

"capital is a productivity multiplier, so...the growth rate is naturally a multiple of the labor growth rate...at least as fast as inflation...You'd expect labor growth rate to only match inflation..."

So labor only grows as fast as inflation (unless it's getting a larger piece of the pie) and capital investment is a multiple of that, and returns at least as much as inflation, or it doesn't exist. Sorry if that wasn't clear.

The "already taxed" comment followed a "savings in a mattress" example, so no appreciation, no capital gains. I saved 10 years of income over 40 years. I have wealth. It's already been taxed. Do I owe society another part of my unequal wealth?

> Why shouldn't capital gains be taxed at least as much as labor?

Maybe they should not be taxed as much as labor. Maybe more. Maybe less. It's not immediately obvious that either should be taxed more. Thus the reason for the wealth inequality even with zero capital gains example (capital loss after inflation).

Reasons to tax capital gains less would be to promote investing, because we want to encourage people to save for and invest in the future, and because that is the mechanism to create wealth & jobs for the country.

Reasons to tax capital gains more are mostly that the rich can afford it more (taxing luxury spending rather than necessities). Also if seeking tax revenue, it's like Willie Sutton's career choice of robbing banks - that's where the money is.

What I'd like to know is, what's the best tax strategy to increase the overall standard of living in, say, 100 years?

Unfortunately, economists differ strongly in answering that questions - but most people just say "more! less!" but have no "the ideal is X".

> > The fact of wealth disparity does not imply unfairness.

> It implies fairness even less

I can agree with that - wealth disparity implies neither fairness nor unfairness.

[alephx]

Oooh, those companies will build the superyachts of the future!

Or alternatively we create a policy that:

1) no superspacecrafts are allowed. Not one

2) no individual owners are allowed? Oh no what if the Walton's bought their own? Now that would be UNFAIR

3) No fun is allowed aboard the spacecraft, it must only be used for the common good in a strictly utilitarian sense.

4) Joe gets half

Cheers,

[gamblor956]

For starters, the policy of favorably taxing rent-seeking capital gains rather than actual valuable labor or resource generation. Joe's spending was valuable to the economy. Your rent seeking behavior was not.

[kbutler]

Rent-seeking has a specific meaning, and that's not it. https://www.investopedia.com/terms/r/rentseeking.asp

Capital gains represent increase in wealth in the economy, whether taxed preferentially or not.

The example remains the same even with 0 capital gains: After 40 years, at 0 gain, I've saved 20 times my annual income to support my family through retirement. Joe has saved 0.

How much of of my wealth do I need to give him?

Equal opportunity + freedom of choice = unequal outcomes

[alephx]

Wealth IS the accumulation of resources and it is naturally unequally distributed. From Oxford's Dictionary: "1 An abundance of valuable possessions or money." "1.1 The state of being rich; material prosperity."

Only considering raw, natural resources, are they not distributed unequally around the world? Some regions have naturally more forests than iron deposits, for example.

If you dissolved society (perhaps a la hunter-gatherers) would not there still be differences? Perhaps one is faster and would collect more berries than his brother, etc, etc...

You are correct in that there might policies that might lead to increased wealth and others that will reduce it. However how would you propose to "police" superyachts?

Furthermore, what makes you think that consumption and the fulfilling of human needs (including superyachts; billionaires must need them otherwise nobody would build them) is not behind technological innovation? I was going to say Economics might substantiate this claim, but I think it is self-apparent. Otherwise what would be the driver of innovation?

[jonnycomputer]

Hunter-gatherers usually share what with each other whether they want to or not; not sharing, especially with kin, is the kind of anti-social activity that will get you kicked out of the group and having to fend for yourself on your own in the wild.

It is a social fact because ownership is a social fact, not a natural fact.