You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0).
And it's not just that "those that are better at competing will have more property". Every person is free to make a variety of choices for themselves, including how much they prioritize wealth creation. Since each one of us has only one life to live, and only one way to live it (i.e., the way each one of us choose to), and so many choices to make, there's no way we'll all make the same choices. Some will prioritize love, others family, others art, others business, or some mixture of these and other things. And that's just fine. We can't all pour ourselves into our work the way Elon Musk does, and we can't all only pick great ideas to pursue, and we don't all have the same talent or drive.
> Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
If it is too easy to gather wealth so you can gather wealth without actually having to create any value (through corruption, extortion, monopoly, theft, deception, enslavement, etc.) then you will have the bad kind of inequality where most people are not compelled to put hard work to create value for others in order to create wealth for themselves.
Again, GINI does not differentiate between the good and the bad kind of inequality, so two countries with same GDP and same GINI might be very different. One may be on the rise, with a number of enterpreneurs creating huge progress and value and the other might have couple of oligarchs who were able to amass their wealth with corruption.
It's difficult to acquire wealth without creating it. The most obvious way is inheritance / gifts, or else crime (fraud, theft). Most wealth is created though, not inherited. E.g., most notable American billionaires (Gates, Buffet, Bezos, ...) of today created most of their wealth. Down the ranks from billionaires we might find more inheritance / less wealth creation, but I suspect that in general you'll find that in mature, open, liberal market economies, wealth is mostly created, not "acquired".
EDIT: Ah yes, rent-seeking is a problem. That was identified by Adam Smith, and it's a problem that's as yet unsolved.
I think that's terribly, terribly naïve. Most wealth was skimmed from other's work through manipulation of stock, bonuses, grants and other executive-suite routines. There's no longer any amount of skimming that's considered egregious. Its ramping up and up without limit.
Again, naïve. The executive suite takes huge bonuses, while there's been no raise for the rank-and-file for a decade. Bonuses even when there's little profit. All rationality has left the equation.
Lets stop living in the 1960's. Don't take our impression of American business from history. Today its very, very different and very, very predatory.
There's also a number of activities that neither create, destroy or exchange wealth. This is why Mises sought to expand the study to praxeology and not simply economics.
I never said inequality is bad (by itself). Inequality is driving progress.
Historically, people made little progress in circumstances where they could not amass and defend wealth. Property rights and working public institutions is what allows people to stop spending their entire time defending what little they have and instead figure out how to improve what they amassed (in other words progress).
Precisely. Inequality only drives progress when people people believe it can be overcome. That's the basis for the American Dream. When people no longer believe that, as is the case in large parts of the US and EU, it only breeds resentment and drives down productivity and societal progress.
Per capita GDP increased less from the Stone Age to now than you might think. Even if you discount all goods other than food to zero, it’s less than 100x growth in the last ~5-10,000 years. That’s less than 0.1% per year growth over that timeframe.
Though valuing ancient goods at equivalent modern prices is debatable, it seems like a reasonable metric.
> Though valuing ancient goods at equivalent modern prices is debatable, it seems like a reasonable metric.
No, it's not a reasonable metric at all, because it ignores the fact that the vast majority of per capita GDP growth between the Stone Age and now is not that we have improved the quality of items that existed then. It's that we have invented a huge number of new items that Stone Age humans could not have even conceived. The huge growth in productivity and wealth from the Stone Age to now is not because we make stone tools that are that much better. It's because all they had was stone tools, where we have combine harvesters and backhoes and steel skyscrapers and railroads and container ships and airplanes and medical imaging devices and computers and the Internet and...
You’re just describing what makes up that ~100x growth.
We still create beef because beef has value to us. So, sure the basket of goods created back then is less valuable than what we create today. But, that does not somehow mean the value created back then is meaningless.
In the end combine harvesters are more efficient than hand tools, but they both end up harvesting gains.
> You’re just describing what makes up that ~100x growth.
I don't think it's 100x; I think it's a lot more. I was giving reasons why I think that.
> the basket of goods created back then is less valuable than what we create today. But, that does not somehow mean the value created back then is meaningless.
I never said it was.
> combine harvesters are more efficient than hand tools, but they both end up harvesting gains.
Yes, but combine harvesters greatly multiply the productivity of a single human at harvesting grain, which frees up many more other humans to invent so many other things that didn't exist before.
Also, combine harvesters are only one of the things I mentioned.
I am not saying you’re being disingenuous, but you listed stuff without context. A 1% slice of a pie looks tiny, you need numbers to judge these things not lists.
The context is farmers and ranchers still make up 1.3% of the labor force in the US, but globally 28% of the population are just farmers. https://data.worldbank.org/indicator/sl.agr.empl.zs Sure, more productive society’s have whither output for everything but agriculture adds up to ~6% global GDP / per capita GDP.
Now, we can argue that today’s food is better, but meat and fish likely made up a significant fraction of the Stone Age diet. So, suggesting it’s more than 6x more expensive using today’s market value seems unlikely. Note, food going bad is irrelevant as the value existed at one point, and food is temporary.
PS: Of course the population is also ~1,000x as large. So total worldwide GDP should be ~100,000x as large by my estimate, if that makes you more comfortable.
Everything you are saying is irrelevant to the argument I was making. My whole point is that the per capita GDP growth from then to now is not just a matter of us being more than 100x better at farming, or other things that we do now that they also did then; it is a matter of us being able to do things that did not event exist and were not even conceivable in the Stone Age.
If more than 6% of current GDP is from farming, which it is, then everything else adds up to less than 20x the value farming provides. That’s just simple math.
So, we can just compare agricultural production and absolutely ignore everything else because it’s already included in the above calculation.
PS: Now you can argue that you care more about the internet or healthcare than a meal. But, I guarantee you would quickly change your mind if you had not eaten in several months. Food is an absolutely required and unlike air and water not naturally available for free in vast quantities.
Where do you get the less than 100X growth from? And if it is less than that, what is the exact amount of growth - since if you know it is less than 100x it seems reasonable to assume that you know exactly what amount it is?
I am not claiming to know any exact value. But previous comparisons I've seen do it by looking at some good or asset which has remained relatively unchanged since ancient time and then using the modern day price of that good to extrapolate the growth of the economy since then.
I guess it seems clever, but also it seems like it wouldn't make any sense. I mean an obvious comparison would be some of the things on this list http://medieval.ucdavis.edu/120D/Money.html
but how does it even work - what things on that list have actually remained unchanged? Is a chicken in medieval times really the same as chicken today, and that's just in the last 800 years, not in the last 5000.
And in what direction do you compare? I suppose the price going up shows the growth of the economy, but what does the price going down show. Let's take aluminum, that price would have gone down a lot since medieval times, because it has been very much changed by increase of technical abilities. So we must not look at that because it is no longer like the aluminum of medieval times, but if you can not look at and measure stuff like that how can you actually measure the growth of the economy where value creation takes place.
I would need to see some arguments on how this works to even begin to get past the sounds clever but also sounds wrong stage of thinking.
for example there might be some theory somewhere that the way to measure the growth of the economy is to take something relatively unchanged since ancient times, like a chicken and then calculate the amount of biomass change taken up by chickens since that time (this is a spur of the moment wrong idea here) but some animals have increased in biomass and then decreased because the demand for them has not continuously risen over time - for example: horses. If one used the biomass idea then it would see the economy increased steadily from ancient times to near modern and then there was a startling depression that wiped out several hundred years of economic progress.
Of course nobody is doing this silly thing, but trying to think about how the way it is being done works seems to be equally as silly to me.
That's a terrible example in the context of economic growth over millenia for the simple reason that anything resembling modern healthcare basically didn't exist as recently as a hundred years ago.
I believe the answer lies somewhere in the middle. Economic output is not entirely static, but it is not completely accurate to say a creative hard-working person who comes along and amasses a lot of wealth has created all of that wealth either.
This should not be a controversial statement. Imagine a simple scenario where Walmart alone, represents the economy and they sell 100 units per year. Then Amazon comes along and starts competing and after a while Walmart is only selling 50 units a year and Amazon is selling 60 units per year. You could now argue that 10 units/year of wealth have been created.
Maybe I am misunderstanding you but it seems you are arguing that 60 units/year of wealth were created in this scenario?
Of course this is only a simple scenario where all the variables are fixed, in the real world there are thousands variables (or more) interacting with each other. Which is why IMO, it's overly simplistic to say that one person's prosperity is zero-sum but also equally simplistic to say that wealth is created independently of the rest of the economy.
I don't think that's what's being argued here at all.
The point is primarily one about productivity growth and that causes the economy to grow. Consider agriculture.
When we were all out in the fields plowing them with oxen the whole time, and grinding flour by hand with stones, we didn't have much time to be doing anything else.
The invention of water- and wind-powered mills reduced the amount of time spent milling. Add (in no particular order) the seed drill, the horse-drawn reaper, pesticides, crop rotation, scientific theories of plant breeding, combine harvesters, nitrogen-based fertilizers, insect-resistant bio-engineered crops etc.
Productivity in agriculture in the developed world has DOUBLED since the 1960s.
John Deere invented the self-scouring steel plow and became famous and wealthy as a result. Some of that wealth came as a result of people buying his plow instead of buying someone else's; but the economic growth that resulted from his innovation was in terms of improved efficiency in farming in the plains of the Mid-West.
The creation of wealth extends far beyond the mere sum of natural resources. It's about the knowledge required to make use of it. Finding it, understanding it, combining it. Knowledge expands the range of our reach and of our ability to re-arrange - to create. In my view, wealth creation has its foundation in the expansion of knowledge.
Knowledge does not have the same scarcity properties as physical objects. If there is one harvester, for example, only one farmer can use it. But if there is one new idea for how to harvest crops more efficiently with the harvesters that farmers already have, every farmer that learns of it can use it.
Fossil fuel based energy sources dramatically lowered the cost of food production in terms of how much human effort was dedicated to it. Where the next breakthrough will come from is anyone's guess. That's the nature of capitalism. There isn't a five year plan, and production quotas, but we get there.
Many countries are creating clean water through desalination or reprocessing. Some countries have created land by building islands or reclaiming coastal shelf area. Natural resources available are increased by better tech making more available. So yeah, they’re less fixed than you think.
They really aren’t. We have no way to meaningfully increase the surface area of the earth, it’s fixed. Even if we were to drain the oceans entirely, you’re just kicking the can down the road (ignoring the fact we’d likely all die).
Increasing our effectiveness removing natural resources doesn’t increase the amount on earth, so again, fixed. We will eventually run out.
Desalination assumes that the ocean is clean water. Micro plastics would like to have a word with you.
You're moving the goalposts on land area. We can increase available land area (in your extreme scenario) by 200% without leaving the planet, and we're a lot closer to colonizing Mars than doing this.
We're so far off using anywhere near all of even the easily available natural resources on Earth that considering it as a limited quantity is fatuous. By the time we legitimately run out of materials on Earth we'll be able to colonize other planets or just create whatever we need through fusion and chemical synthesis.
Desalination for potable water includes filtration which removes microplastics along with everything else.
How am I moving the goal posts? I literally started out saying it's a fixed resource and the only way to increase is to colonize space. Your response is "but we can use more of it than we're using today" - sure, but it's STILL a fixed resource. We can move portions of it from one place to another. We can come up with creative solutions to utilize more of it than we are today. NONE of that changes the fact it's a fixed resource, and if/when we happen to use or destroy it all, it isn't magically going to create more on its own.
>We're so far off using anywhere near all of even the easily available natural resources on Earth that considering it as a limited quantity is fatuous.
*In your lifetime. If you look at the rate of development and destruction caused by humans, to claim we'll NEVER do it is RIDICULOUS. We'll never destroy the rainforest. We'll never take down all of the california redwoods. We'll never kill all of the bison roaming the plains of the midwest. We'll never... Sorry that I'm concerned for my great grandkids (if I happen to have any) and the generations beyond those, not to mention the entire human race. My purview of the world doesn't begin and end with me.
>Desalination for potable water includes filtration which removes microplastics along with everything else.
Uhh, no. The current method of removing microplastics from seawater includes using chemicals that are deadly to humans. Potable desalinated drinking water includes our tiny friends.
By the time we legitimately run out of materials on Earth
That's missing the point completely. No one is going to argue that a Helium, or Cadmium, or Carbon shortage will be the death of us all, and reducing this planet's natural resources to just its constituent chemical elements is depressingly naive.
When people talk about natural resources, they mean the functional elements of our planet's ecosystem that keeps this planet habitable for us. They mean forests, that regulate temperature and humidity. They mean insects, that pollinate our crops for us. They mean the glaciers, that create an abundant supply of fresh water.
We're nowhere near the level of engineering that we can replace the natural systems we're destroying with artificial machines. Not at scale, at least.
You have mixed up "fixed" and "limited". Zero-sum game assumes amount of wealth is fixed. What you describe is world that has limit on total wealth that have not yet been reached. But definitely it is not fixed. By your own definition you can always dig up some new natural resources and this would increase total wealth (so no, not fixed).
It is possible to create wealth. If I can do something that you can't and you can do something that I can not, then if we exchange services we can create wealth from nothing. I have more than at the start, you have more than at the start and nobody else is affected.
The maximum possible wealth I think is also not limited. There is always potential to take something and create something with more worth. Good, pure example is art. Painter takes resources that are relatively cheap and plentiful (paints, canvas, his time) and can create something of huge value to some people. Intel might take a bunch of sand and other resources and create processors from it.
There is also "intellectual property" which is not tied to any natural resources. Anybody can create something new (derive new chemical formula or write a book) that would be an example of creating wealth from nothing.
How can something be fixed but not have reached its peak? You are saying that there is some theoretical maximum that is fixed but that is not in disagreement with the comment you are responding to.
>You make it sound as though the economic pie is fixed and economics zero-sum. But that's clearly not the case, otherwise we'd still be living with stone age per-capita GDP (i.e., ~0).
The "growing of the pie" is also a fairy tale though to mask the realities...
For one, the "growing pie" still manages to give some people not just most of the pie, but also to live the majority with smaller (in absolute size) slices than before -- stagnant inflation adjusted wages for decades, higher rents and houses, higher education costs, higher health costs, etc.
Second, even if the "larges slices to the average person compared to before" was true, we shouldn't accept a minority to hoard increasingly more of the growing pie. For one, because money is power, so those elites would have increasingly more power over the rest damaging democracy. Second, because people should be compensated (for increased productivity etc) relatively to the size of the pie, not just larger than before.
If an economy was scaled at 10 and now is scaled at 1000 (units of money), then it's not enough that those making 0.0001 now make 0.0002. Doesn't have to be equally distributed to all, but people in such a society should make closer to (1000/10)x not just 2x.
Wealth in society is relative like that, not mere absolute. I don't think those proposing otherwise would be happy to be paid 2x what a peasant made in 1700 (inflation adjusted of course), just because it's "more". They expect their compensation to raise in accordance with the wealth level of their society and relatively to the size of the pie, not merely as a larger slice than some past in absolute terms.
Basically, everybody is mooching off of prior inventors' work due to patent expiration.
The point about higher rents, education, health costs, etc, is a miscalculation of inflation. There's a difference between two things:
(1) the undesirability of a 1000x/2x split due to increased demand for the fixed supply of land and genius doctors, which means the 1000x/2x didn't properly account for inflation, and
(2) the fact that it'd be way cooler to have a properly-inflation-adjusted 990x/12x income split than 1000x/2x, among 50%/50% of the population.
On the other hand, Haiti and the Dominican Republic have equal populations and a 10x income difference, and I'm not shedding a single tear over it.
>The point about higher rents, education, health costs, etc, is a miscalculation of inflation. There's a difference between two things:
Yes. But both things hold, and will (2) is "nice to have", the (1) also actively declines quality of life and prospects for many people. But sure, they have better gadgets than in the 60s, so there's that.
>On the other hand, Haiti and the Dominican Republic have equal populations and a 10x income difference, and I'm not shedding a single tear over it.
And Mexico has a very unequal population (a few huge moguls and tons of poverty) and its quality of public infrastructure, infant mortality, and other metrics, US begins to descend to...
E.g.: "Using a combination of data from Blue Cross Blue Shield, the CDC, and prior health studies, the report predicts millennials will achieve the new triple threat of being sicker, broker, and dying younger than the previous generation, Gen X."
And Switzerland is usually even richer GDP per capita and average wage than the US, and with much better infrastructure, service, and quality of life (e.g. it's much cleaner, less full of homeless people and crazes, rarer to get shot by a cop, and so on).
It's almost as if you can have more equality without Haitian results...
And it's not just that "those that are better at competing will have more property". Every person is free to make a variety of choices for themselves, including how much they prioritize wealth creation. Since each one of us has only one life to live, and only one way to live it (i.e., the way each one of us choose to), and so many choices to make, there's no way we'll all make the same choices. Some will prioritize love, others family, others art, others business, or some mixture of these and other things. And that's just fine. We can't all pour ourselves into our work the way Elon Musk does, and we can't all only pick great ideas to pursue, and we don't all have the same talent or drive.
> Inequality does not mean we need to have people who can't satisfy their most basic things. It is possible for people to be allowed to compete for wealth and at the same time ensure those that don't want or can't compete have their basic needs like food, shelter and medical care satisfied.
Indeed!