A question about the Matthew Effect

I first want to share this graph:



Millenials started entering the workforce around 2000 and the oldest are now approaching 40 years old. They suffered a recession under Bush, the Great Recession under 0bama, and now the Greatest Depression and an ongoing 3+ month shutdown over a virus from China.

Now comes the Matthew Effect "For to every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away." - Matthew 25:29
This is the concept of rich get richer and poor get poorer. It is a bad thing for the majority of the population. If we want a society where most of us can be successful and happy, we need to find a way to resist this effect.

Unfortunately this is it for Millenials. Ongoing economic advantage or disadvantage is cumulative. There is no "but your day will come" for the vast majority of Millenials. They're going to be poor and miserable for the remainder of their lives.

Which has me thinking - our ancestors were able to design a form of government that is resistant to cumulative advantage. Instead of suffering a lifelong Monarch who continues to accumulate his advantage at everyone else's expense, the Greeks and Romans came up with the idea of the Republic, a system where people elect someone who is granted power for a short time, and even then there is a separation of power into different branches. For the most part it works, until economics is involved.

For all our modern learning we still only separate economies into command which is heavily centralized and similar to what happens under Communist regimes - which has failed spectacularly every time it has tried. When it comes to Communism I find it easier to just quote Jordan Peterson on the subject:


If anything it concentrates the Matthew Effect. The idea of collective property ownership doesn't work in reality and if anything just makes it easier for those with a social or political advantage to take everything away from the poor.

The other alernative is the market economy which is capitalism. If you ask most Millenials how capitalism is working for us, you're going to get an earful of anger on the subject. For good reason - the American Dream might as well be dead for this generation of people.

That said we do not have free market capitalism in the USA. We have crony capitalism, with a wealth disparity that is even worse than the gilded age. The rich have never before been as rich as they are today, and the wages of the average citizen have never before been as low. The wealth of our country has been siphoned into a small number of plutocrats, and I would argue that of course this was going to happen.

I would argue that free market capitalism is not a stable economy and while it works well on a small scale when you only have small business owners like in the early USA, or on a small town main street, the moment you have someone establish a big business and start building multiple locations that compete with and put small business owners out of business - suddenly it's not a free market anymore. Suddenly it's crony capitalism. Because the next thing that big business owner is going to do is use his immense wealth (cumulative economic advantage) to start purchasing political influence and that's not something small business owners can do. So crony capitalism is inevitable, and with that the Republic becomes a Plutocracy.

And this is what I think is the greatest problem of our age is. We can design a political entity that greatly mitigates authoritarianism but we can't design an economy that doesn't make a handful of people obscenely rich and make everyone else miserably poor.

Also the idea of an "invisible hand" that guides capitalism - it's in my opinion just an excuse for the rich to get away with anything the economy allows them to get away with, no matter how immoral or damaging to the common man that may be. Unless we design a system of reward and punishment that regulates behavior then we are going to end up in an extremely unfair system that follows the ultimate curve of the Matthew Effect.

So the question I have is: what alternatives are there to command and market economies? Something other than communism or capitalism?

In my mind it would need to allow private ownership of property and a great deal of individual liberty, but also resist the Matthew Effect of accumulated advantage and disadvantage. It needs to be something that the common man can understand, and works in reality.

I have some ideas that I think would help resist the Matthew Effect:

1. UBI could prevent people from falling into a rock bottom of poverty and also helps middle class people start small businesses, creating a market with increased competition. This is a good thing.

2. Maybe there should be a maximum amount of wealth a person can have?

3. Should people be allowed to own more than one business? The Trump Organization owns over 500. Before you come to his defense consider this: by simple force of mathematics Trump must spend less than 1 day a year managing each of his businesses. Is that really fair? He's obviously not working very hard. If one person can work less than 1 day a year running a business why can't all of us be granted a billion-dollar business to not work at and reap profits from?

4. While technology continues to improve quality of life and increase access to the necessities of life, why do these necessities still cost money? Is there some point where our civilization can provide food, water, clothing, and shelter to it's citizens as a matter of course? If we were able to do that, then the primary occupation of a human being would be academic learning or leisure rather than drudge labor at a lousy job to provide himself with basic necessities.

5. Should psychopaths be allowed into positions of authority? Should a blood test be required when running for office?

6. Should our government officials be required to disclose all of their sources of income and wealth while in office? Have their bank accounts monitored?

7. Maybe our country should manufacture the majority of its goods at home, so our technology is never controlled by potential rival?

8. Maybe we should carefully choose who we trade with because the wages of our own citizens are more important than cheap imports?

9. Should businesses be encouraged or even required to implement a profit sharing system with its employees?

10. Maybe we should have laws that punish outsourcing?

What type of economy would hit all of these points? It's obviously heavily regulated. It would somehow need to be held accountable to the people, rather than to our politicians because we cannot trust a corrupt entity to implement anti-corruption laws which would punish itself.

Do you have any ideas?

You need to re-figure based on the fact that we are not in a depression. So far we're not even in a recession, time will tell on that though.

The company I work for told us their first quarter numbers were outstanding, it's the second & third quarters we need to worry about. But since the stock market is climbing again (according to other ATS posters, I haven't checked) and businesses are re-opening it's going to affect the projected numbers on your chart.

ETA. I stopped reading after you said "depression". The list you made has some questions that made me laugh out loud.

I'll address those in a bit.

a reply to: peskyhumans

Rich get richer because they do things that make them rich. Poor get poorer because they do things that make them poor.

originally posted by: Edumakated
a reply to: peskyhumans

Rich get richer because they do things that make them rich. Poor get poorer because they do things that make them poor.

Blaming the victim certainly seems to cause less cognitive dissonance doesn't it?

1. UBI could prevent people from falling into a rock bottom of poverty and also helps middle class people start small businesses, creating a market with increased competition. This is a good thing.

Where are you going to get the money for that? The government can't continue to print money with nothing to back it up with, we've already gone past the point that the debt is even sustainable. Bad idea.

2. Maybe there should be a maximum amount of wealth a person can have?

Why, to penalize them for being successful? You sound like a socialist.

3. Should people be allowed to own more than one business?

Why not? Are you trying to say owning more than one business is greedy? Again, that's socialist talk.

The Trump Organization owns over 500. Before you come to his defense consider this: by simple force of mathematics Trump must spend less than 1 day a year managing each of his businesses. Is that really fair? He's obviously not working very hard. If one person can work less than 1 day a year running a business why can't all of us be granted a billion-dollar business to not work at and reap profits from?

Spoken like someone that has never managed anyone. So stop right there, you obviously have no idea how business works. You don't run everything by yourself, you hire qualified people to do that for you. That makes you AND them successful. The more you do that, the more people you hire, the more people are working. He spent years building his businesses. Despite getting a good start from his father, he still had to do the rest on his own. Your argument is pathetic and there was no reason to bring Trump into it. Bill Gates either stole, bought or "borrowed" everything that made him the 2nd richest man in the world. Are you going to say he's greedy too? How can he manage all of the businesses he has? See how stupid that sounds?

4. While technology continues to improve quality of life and increase access to the necessities of life, why do these necessities still cost money? Is there some point where our civilization can provide food, water, clothing, and shelter to it's citizens as a matter of course? If we were able to do that, then the primary occupation of a human being would be academic learning or leisure rather than drudge labor at a lousy job to provide himself with basic necessities.

Ok now you're starting to worry me. This is Bernie-level talk. You can't be serious.

5. Should psychopaths be allowed into positions of authority? Should a blood test be required when running for office?

(loud buzzer sound)

Prove the first, justify both. You can't.

6. Should our government officials be required to disclose all of their sources of income and wealth while in office? Have their bank accounts monitored?

No. Otherwise there would be no one in congress, they'd all be arrested and the government would shut down. Next.

7. Maybe our country should manufacture the majority of its goods at home, so our technology is never controlled by potential rival?

Hell yes. Bring it all home.

8. Maybe we should carefully choose who we trade with because the wages of our own citizens are more important than cheap imports?

You think? The supply chain would be less likely to be cut in times of emergency as well.

9. Should businesses be encouraged or even required to implement a profit sharing system with its employees?

Encouraged? Why not? Required? No, take your socialist recommendation out of here.

10. Maybe we should have laws that punish outsourcing?

A fairer tax system would help keep those jobs at home. No one likes foreign help desks, taking it overseas was a huge mistake.

What type of economy would hit all of these points? It's obviously heavily regulated. It would somehow need to be held accountable to the people, rather than to our politicians because we cannot trust a corrupt entity to implement anti-corruption laws which would punish itself.

Good luck with that. People have been corrupt since the beginning. There isn't one country in the world without corruption at some level.

I think you're either trolling or baiting with this thread but I'm going to answer your questions anyway just because.

originally posted by: peskyhumans

originally posted by: Edumakated
a reply to: peskyhumans

Rich get richer because they do things that make them rich. Poor get poorer because they do things that make them poor.

Blaming the victim certainly seems to cause less cognitive dissonance doesn't it?

"Victim" blaming? So every person who is poor has been forcibly made poor and isn't that way at least in large part because they made a series of bad decisions in life?

Thinking of the poor members of my family and their track record, I can say with certainty that the poster in question has pretty well nailed it. No one has victimized them. They just make bad choices.

a reply to: HalWesten

So far we're not even in a recession, time will tell on that though. 

The economic downturn in the US triggered by the pandemic has been officially declared a recession

source

a reply to: peskyhumans

How you going to pay for any of this? Do you really think 1% can support 99%?

originally posted by: peskyhumans

Unfortunately this is it for Millenials. Ongoing economic advantage or disadvantage is cumulative. There is no "but your day will come" for the vast majority of Millenials. They're going to be poor and miserable for the remainder of their lives.

Millennials will benefit from one of the largest wealth transfers in human history. Much of Americas wealth is held by senior citizens and will be transferred to their heirs upon their death. At that point they will reject your ideas as soon as they see they will be the ones harmed.

originally posted by: Jason79

originally posted by: peskyhumans

Unfortunately this is it for Millenials. Ongoing economic advantage or disadvantage is cumulative. There is no "but your day will come" for the vast majority of Millenials. They're going to be poor and miserable for the remainder of their lives.

Millennials will benefit from one of the largest wealth transfers in human history. Much of Americas wealth is held by senior citizens and will be transferred to their heirs upon their death. At that point they will reject your ideas as soon as they see they will be the ones harmed.

Assuming that inheritance isn't spent first.

Your Boomer Parents Are Spending Their Inheritance – And Yours

a reply to: peskyhumans

Well written post peskyhumans; thanks for the read.


How about Automated Luxury Communism?

Are We Headed For 'Automated Luxury Communism'?

While improvements in machine learning, artificial intelligence, big data, and robot automation could mean huge advances in medicine, science, commerce and human understanding, it’s also undeniable that there will be consequences as well...

...But what if the prognosis weren’t all doom and gloom?  What if all this automation were instead to provide so much luxury that we enter a post-work era, when humans are required to do very little labor and machines provide everything we need?

The catch of course is like with all forms of communism, it kills innovation, entrepreneurship, and breeds stagnation.

Without profits — or some other strong inherent incentive — what motivation is there to innovate, to adapt, to improve? Many historians agree that communism in Western Europe failed due to stagnation and a failure to adapt, because its constituents were not motivated to produce more than the status quo in any area.

But what if an "incentive" plan where built into this technology driven luxury communismitc system? Instead of everyone being made equal in outcome; have tiered access to the luxury created by the new world economy. The more you contribute to the collective the more luxury you have access to.

Sure that kinda sounds like capitalism; but today our capitalistic system isn't nearly perfect. Those who contribute the most dont always get the highest compansation. Example; I like a good movie as much as the next guy; but it can't be argued that a movie star makes a disproportionate income compared to their contribution.

What if big data where used to really figure out the proper access to luxury as a function of ones true contribution to society as compared to everyone else?

True such a big data set isnt currently available to make such an incentive system possible and fair; but so to does the technology to automate everything not yet exist.... but if these things did exist would the luxury communismitc system work and would it be everything the communists always wanted?

a reply to: DanDanDat

Who decides how capital is allocated?

originally posted by: MRinder
a reply to: DanDanDat

Who decides how capital is allocated?

The data

originally posted by: peskyhumans

originally posted by: Edumakated
a reply to: peskyhumans

Rich get richer because they do things that make them rich. Poor get poorer because they do things that make them poor.

Blaming the victim certainly seems to cause less cognitive dissonance doesn't it?

Life is a series of choices. Most people who struggle financially have made a series of bad choices. It just is what it is.

Life also isn't fair. There are people who are born with a silver spoon or on third base. Again, it just is what it is.

However, once you learn how the game is played it isn't that difficult to earn a good living in America. The problem with poor folks is that many never learn the rules of the game.

For example, almost no one who does the following three things winds up poverty:

1) Avoid having a child out of wedlock
2) Graduate from high school
3) Avoid criminal justice system

If you do those three things, it is virtually guaranteed you will not be poor. Sure, you may not become a millionaire but you most certainly can earn a middle class life.

So again, rich people do things that make them rich while poor people do things that make them poor.

Billionaires and people worth tens and hundreds of millions of dollars are unicorns. However, it really isn't that difficult to become a millionaire. The problem is most people don't have the patience and discipline. They don't start investing early and spend money on wasteful things - cars, big houses, etc. If you save a dollar a day you'd have more than $500k saved over 50 years assuming relatively modest return of 10%.

originally posted by: Edumakated

originally posted by: peskyhumans

originally posted by: Edumakated
a reply to: peskyhumans

Rich get richer because they do things that make them rich. Poor get poorer because they do things that make them poor.

Blaming the victim certainly seems to cause less cognitive dissonance doesn't it?

Life is a series of choices. Most people who struggle financially have made a series of bad choices. It just is what it is.

Life also isn't fair. There are people who are born with a silver spoon or on third base. Again, it just is what it is.

However, once you learn how the game is played it isn't that difficult to earn a good living in America. The problem with poor folks is that many never learn the rules of the game.

For example, almost no one who does the following three things winds up poverty:

1) Avoid having a child out of wedlock
2) Graduate from high school
3) Avoid criminal justice system

If you do those three things, it is virtually guaranteed you will not be poor. Sure, you may not become a millionaire but you most certainly can earn a middle class life.

So again, rich people do things that make them rich while poor people do things that make them poor.

Billionaires and people worth tens and hundreds of millions of dollars are unicorns. However, it really isn't that difficult to become a millionaire. The problem is most people don't have the patience and discipline. They don't start investing early and spend money on wasteful things - cars, big houses, etc. If you save a dollar a day you'd have more than $500k saved over 50 years assuming relatively modest return of 10%.

I could add

4. Get a college education
5. Work hard at a full-time job in a professional field

and I have done all 5 and I'm still poor. My wages do not provide enough wealth for me to achieve a middle-class standard of living.

Inheritance? My boomer parents spent all their money. They live in a trailer park and drive a 10 year old car. I'm not getting squat when they die.

I'm not alone either.

Trying to pass our wealth disparity off as "the rich worked hard and the poor made mistakes" is 100% pure bull#. It's just word vomit that makes you sleep better at night. There are many millions of people in this country who have made the right choices and are treated like human garbage by our economic system.

The rich never know because the first thing you do when you make your first million dollars is start separating yourself from the poor and their suffering. After you are in a more advantageous position, you start networking with other rich people and your worldview changes. Suddenly the USA isn't a miserable #hole filled with suffering and misery because you and everyone you know are all successful and happy.

But that's just a box of illusions you've built up around yourself. The suffering masses are still there, and they hate you very much personally for keeping your head in the clouds and doing nothing to solve the problems in the system even though you're in a position to do something about it.

It's like walking into the throne room of Augustis Caesar and proclaiming that from now on he cannot hold absolute power and that government shall be divided into three branches and all officials must be voted upon by the people, and only serve 4 years. Of course Caesar would have him thrown in a dungeon.

Telling the plutocrats that the system is brutal, oppressive, and broken, and that we need to design a new economy that addresses the wealth disparity, of course they laugh in your face and talk about the audacity of the plebeian who understands nothing.

Revolutions are unexpected by those rebelled against, and always increasingly obvious by those doing the rebelling. It's a shame that we have to shed mass amounts of blood to gain every ounce of freedom we have, but that's the reality we live in when our "leaders" refuse to acknowledge reality.