Inequality

[mike777]

One of the things, Mike, that you need to consider is what sorts of risks people might turn to who are in unstable and difficult situations. If they can't see any way within the system to overcome their problems they might decide they had nothing much to lose is they did get caught if they bought a gun and robbed a gas station or mugged someone or worse. That's the sort of risk I would prefer we don't push people to take.

 

Going back to the thread topic, I suspect that there is a growing number of people, not just in the States, who are being nudged ever closer to that point.

 

 

 

when I talk about risk takers I mean in the sense of entrepreneurs. Again I said this over and over again but posters seem to have not read that.

 

I grant getting out of bed is taking a risk.

 

--

 

 

Keep in mind my one big suggestion was a day to celebrate and honor them....granted no one agrees with that when I read your posts. I showed how in japan and many other places...failure,failure in business, capital markets, was equal to great shame rather than a noble ...a very noble effort.

 

a way to fight inequality.

 

--

 

 

but my more important point I wanted to share was that seeking stable or my word robustness....leads to ....explosion in a society...not more equality.

 

I grew up on the south side of Chicago...my mom was a union Chicago teacher....I present today's Chicago education system as one example.

 

This is an example of robustness.

 

--

 

example of what I want you to think about is an artist..or taxi drivers.. again for that tiny few but not you, perhaps.

[Winstonm]

Mike,

 

I think what you are doing is taking a complex subject and trying to reduce it to simplicity that does not comport with reality. The world cannot be reduced to simply risk-takers and non-risk takers. However, that simplistic twist on reality does make it easier to argue your point. If the world were as you say, you may have a valid point; unfortunately, the world is more complex.

[mike777]

Mike,

 

I think what you are doing is taking a complex subject and trying to reduce it to simplicity that does not comport with reality. The world cannot be reduced to simply risk-takers and non-risk takers. However, that simplistic twist on reality does make it easier to argue your point. If the world were as you say, you may have a valid point; unfortunately, the world is more complex.

 

 

to be be fair I divided into 3 worlds....but I think we still disagree on my main points...

 

 

Perhaps the big one being that going for a stable world will explode compared to learning to live in an unstable world or at least explode in a much worse way.

 

That trying to take out risk, rather than learn how to win from risk or however you wish to define it...fails more often.

 

 

This an argument for trail and error and to gain from it rather than to think of it as shame. It is also an argument to fiddle rather than giant govt grants/loans...etc.

[mike777]

Side note:

 

In my local paper was a very very interesting discussion with Cruthfield on the issue of too big to fail.

He was a big banker.

 

 

He suggested taking 5% of profits and set them aside.

 

His argument was better to take 5% than 33% of profits in making banks smaller.

If make USA banks smaller than nonUsa, read giant China, take profits.

 

He also noted that no one had any idea how to solve the issue of too big to fail.

 

 

He misses the main point not 5% or 33% but 100%....you lose 100% of your ownership....he missed this point.

 

a perfect example of non risk takers...missing the point.

[Cthulhu D]

I don't quite understand the argument that stock options to CEO make CEOs maximize short term success.

 

If the incentitive was based on crude (sales-expences) then I could understand. But the value of options reflect the market's assessment of the stock value. Surely that must be based on the long-term value of the company?

 

I see a different issue, though. If the CEO can increase the volatility of the stock he will increase the value of the options but (other things being equal) decrease the value of the stock to a risk-adverse investor. I think this is a bad thing. The CEO should be payed in stocks, not in options.

 

It's because of the way stock options work - if you get options today, that's the right to by Stock A at price $X on date Y. If the cost of the stock on date Y is less than X, your stock option is worthless - and it doesn't matter how much under X it is.

 

So say coming up to stock option day your current share price is $X-2, so your stock options are worthless. You can make a 25% bet that will increase the stock price by $10, 50% do nothing and 25% send the company bankrupt. The rational CEO will make that bet every time, because then he has a 25% of cashing it at $8 an option, and if it doesn't work he's not out of pocket.

[mike777]

and if it doesn't work he's not out of pocket.

 

 

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[Cyberyeti]

It's because of the way stock options work - if you get options today, that's the right to by Stock A at price $X on date Y. If the cost of the stock on date Y is less than X, your stock option is worthless - and it doesn't matter how much under X it is.

 

So say coming up to stock option day your current share price is $X-2, so your stock options are worthless. You can make a 25% bet that will increase the stock price by $10, 50% do nothing and 25% send the company bankrupt. The rational CEO will make that bet every time, because then he has a 25% of cashing it at $8 an option, and if it doesn't work he's not out of pocket.

Government can fix this.

 

Change the tax rules so that stock options are not as worthwhile if you sell the shares within 3 years.

 

Now sending the company bankrupt within 3 years is a very bad idea.

[Winstonm]

Side note:

 

In my local paper was a very very interesting discussion with Cruthfield on the issue of too big to fail.

He was a big banker.

 

 

He suggested taking 5% of profits and set them aside.

 

His argument was better to take 5% than 33% of profits in making banks smaller.

If make USA banks smaller than nonUsa, read giant China, take profits.

 

He also noted that no one had any idea how to solve the issue of too big to fail.

 

 

He misses the main point not 5% or 33% but 100%....you lose 100% of your ownership....he missed this point.

 

a perfect example of non risk takers...missing the point.

 

Mike,

 

The guiding hand of capitalism is local competition - Adam Smith defined this notion in Wealth of Nations. The only way to reduce competition to the local level is to regulate mergers. Too big to fail banks are the direct result of Reagan's policies. Totally free markets do not work when a few mega-institutions control supply.

[Cthulhu D]

Government can fix this.

 

Change the tax rules so that stock options are not as worthwhile if you sell the shares within 3 years.

 

Now sending the company bankrupt within 3 years is a very bad idea.

 

Sure - I think you should have to hold them for a 10 year minimum period and have some exposure to downside risk. Similarly, I think politicians wages and pensions should be linked to average incomes. But that's not where we are with 'Captains of Industry' at the present time.

[Winstonm]

As an aside, it is not government debt that is the problem - the problem is unemployment.

[mike777]

guys can we agree that taxes on others will not solve ineq?

 

if so how do you solve?

 

 

You may hate my suggestions but how do you solve? at the very least I see few agree.

[hrothgar]

guys can we agree that taxes on others will not solve ineq?

 

No

[Cyberyeti]

Taxes and government intervention in general will not solve inequality, they can mitigate it a bit, but not necessarily how government would like them to.

 

Two examples from my life.

 

I was a well paid consultant in the IT industry, but doing that meant travelling away for a week at a time which I didn't really enjoy (I very much enjoyed the work but not the travel), but I put up with it because of the money I was making. The tax regs were changed, I decided it was no longer worth the hit to the quality of life for the reduced remuneration, so I downsized and got a much lower paid job near my home, costing the government a substantial amount of tax, and the general economy a lot of money.

 

So I'm in my low paid job (earning less in a day than I was in an hour) and the government puts up the minimum wage (which I wasn't on but most of the department was). Within 6 months the project I was on was being done in India.

[hrothgar]

 

I was a well paid consultant in the IT industry, but doing that meant travelling away for a week at a time which I didn't really enjoy (I very much enjoyed the work but not the travel), but I put up with it because of the money I was making. The tax regs were changed, I decided it was no longer worth the hit to the quality of life for the reduced remuneration, so I downsized and got a much lower paid job near my home, costing the government a substantial amount of tax, and the general economy a lot of money.

 

Somehow I suspect that the company was able to fill the position in your absence which, of course, means that the government didn't loose any tax and the general economy didn't lose much in the way of money.

 

As for the outsourcing claim: I'd be surprised if a small increase in minimum wage had much impact at the margin...

[Cyberyeti]

Somehow I suspect that the company was able to fill the position in your absence which, of course, means that the government didn't loose any tax and the general economy didn't lose much in the way of money.

 

As for the outsourcing claim: I'd be surprised if a small increase in minimum wage had much impact at the margin...

 

1. No, they shut the project down. Although if they had wanted somebody else for my position, it would be most likely somebody already earning similar money, effectively what would have happened is a shuffle that meant me coming out at the top end, and somebody else entering elsewhere on half the money.

 

2. It was not a small increase, that was the problem.

[hrothgar]

1. No, they shut the project down. Although if they had wanted somebody else for my position, it would be most likely somebody already earning similar money, effectively what would have happened is a shuffle that meant me coming out at the top end, and somebody else entering elsewhere on half the money.

 

I don't mean to sound snarky, but:

 

If your company decided to shut the project down, this just means that one of your competitors enjoyed a windfall.

If you could have been replaced by someone making half your pay, this doesn't say much for your long term job security.

 

A single person voluntarily changing jobs to something that they enjoy more but pays less really isn't going to matter than much...

[Cyberyeti]

I don't mean to sound snarky, but:

 

If your company decided to shut the project down, this just means that one of your competitors enjoyed a windfall.

If you could have been replaced by someone making half your pay, this doesn't say much for your long term job security.

 

A single person voluntarily changing jobs to something that they enjoy more but pays less really isn't going to matter than much...

You don't understand what I was saying.

 

My company would have replaced me with another consultant making a similar salary. He would have been replaced in his job by somebody making a similar salary. Someone 200 jobs down the line in another company would have left a vacancy filled by somebody on half my salary.

[barmar]

So I'm in my low paid job (earning less in a day than I was in an hour) and the government puts up the minimum wage (which I wasn't on but most of the department was). Within 6 months the project I was on was being done in India.

What kind of work in the IT industry is done by minimum-wage workers?

[Cyberyeti]

What kind of work in the IT industry is done by minimum-wage workers?

It wasn't in the IT industry, except as a user of IT.

[Winstonm]

guys can we agree that taxes on others will not solve ineq?

 

if so how do you solve?

 

 

You may hate my suggestions but how do you solve? at the very least I see few agree.

 

 

Mike,

 

I don't think the goal has ever been to eliminate inequality but to reduce the size of the gap. No one is saying that an uneducated minimum skill worker should get the same annual payment as an owner of a business but that person should be able to receive health benefits and basic needs by way of taxing the upper ends progressively.

[hrothgar]

Mike,

 

I don't think the goal has ever been to eliminate inequality but to reduce the size of the gap. No one is saying that an uneducated minimum skill worker should get the same annual payment as an owner of a business but that person should be able to receive health benefits and basic needs by way of taxing the upper ends progressively.

 

More importantly, his kids should have access to the same quality education...

[kenberg]

More importantly, his kids should have access to the same quality education...

 

you won't be surprised to hear that this certainly matches my view. The exact same quality education may be an unreachable ideal but the gap now is, imo, absolutely beyond acceptability. that does not mean I have the total solution but surely a great deal more can be done if we make the decision to do so.

[Winstonm]

I certainly agree that equality or near equality of educational opportunities is high on the list of "needs fixed". The Reagan ideology that social programs should be paid for and managed by private charities and churches is at least equal in its fanciful, unrealistic idealism as belief in a perfect socialistic society. There needs to be adult discussion by adults about how to correct these problem - unfortunately, an emphasis on adult discourse would rule out about 98% of current Senate and Congressional seat holders.

[blackshoe]

Want everybody to be a millionaire? Easy. There's about 300 million people in the US, so print up 300 trillion dollars, and dole it out. Shazam! Everybody's a millionaire! Of course, their million bucks will buy maybe a loaf of bread, but what the heck. :huh: :blink: :o :lol:

[Winstonm]

Want everybody to be a millionaire? Easy. There's about 300 million people in the US, so print up 300 trillion dollars, and dole it out. Shazam! Everybody's a millionaire! Of course, their million bucks will buy maybe a loaf of bread, but what the heck. :huh: :blink: :o :lol:

 

Let me once again point out...

 

(emphasis added)

I don't think the goal has ever been to eliminate inequality but to reduce the size of the gap. No one is saying that an uneducated minimum skill worker should get the same annual payment as an owner of a business but that person should be able to receive health benefits and basic needs by way of taxing the upper ends progressively