Pooling and Sharing of wealth makes everyone's wealth grow faster(ergodicityeconomics.com)
ergodicityeconomics.com
Pooling and Sharing of wealth makes everyone's wealth grow faster
https://ergodicityeconomics.com/2023/08/29/for-to-withhold-is-to-perish/
277 comments
So … just normal economics. If that school of “science” was more than retconning and trying to see ideologically aligned patterns in the irrational noise and result of complex interwoven incentive systems that would make the complexity of the three body problem look tame, we probably wouldnt have a financial crisis every few years :/
That sentence seems to be fairly ignorant.
For one thing, it's kind of like saying "if scientists really understood the weather, we wouldn't have tornados every few years". Or even better, "if we really understood climate change, we'd stop it". There's a big difference between understanding something and being able to do something about it.
Another thing, it's missing the nuance that financial crises could be handled better or worse, and it seems to me like it's getting better (e.g. compare the great depression to the great recession).
People like to dump on things they don't have much familiarity with, and software engineers and the HN crowd in general seems to think everything besides software is all noise full of uneducated people. (Not saying you specifically are an outsider to economics or a software engineer, but that is the general trend.)
For one thing, it's kind of like saying "if scientists really understood the weather, we wouldn't have tornados every few years". Or even better, "if we really understood climate change, we'd stop it". There's a big difference between understanding something and being able to do something about it.
Another thing, it's missing the nuance that financial crises could be handled better or worse, and it seems to me like it's getting better (e.g. compare the great depression to the great recession).
People like to dump on things they don't have much familiarity with, and software engineers and the HN crowd in general seems to think everything besides software is all noise full of uneducated people. (Not saying you specifically are an outsider to economics or a software engineer, but that is the general trend.)
I don't think economics as such has really any trouble explaining and even seeing potential financial crises.
I would even go so far as to say economics also explains quite well why usually nothing substantial is done to prevent them.
I would even go so far as to say economics also explains quite well why usually nothing substantial is done to prevent them.
If economists knew what was going to happen they'd all be extremely wealthy. They are all academics or work for banks making someone else wealthy.
More information: https://www.youtube.com/watch?v=EwB5ihGu4Jw
More information: https://www.youtube.com/watch?v=EwB5ihGu4Jw
Economics is not a reproducible science, because no system can be properly isolated and initial state can’t be reset. But it’s still a science. It’s in the same category as biology, or even sociology, and it’s way more accurate than the study of brownian systems like meteorology.
“If biologists were so good at their science, they’d all be extremely healthy”?
“If sociologists could predict what humans think, they’d have a job”? In fact competent sociologists do, and generally in marketing departments. Same for economists.
“If biologists were so good at their science, they’d all be extremely healthy”?
“If sociologists could predict what humans think, they’d have a job”? In fact competent sociologists do, and generally in marketing departments. Same for economists.
If a single economist (or anyone) could predict the future, they'd be wealthy because they could bet against the prevailing wisdom. If a lot of people predict the future, and share their guesses, then those predictions are the prevailing wisdom and there's nobody to bet against.
Placing bets successfully needs way more than a general understanding of what might happen (and, of course, capital). Also, you conveniently ignore all the economists that got rich in financial markets over the years.
Name them. Which economists are rich from their theories or is Warren Buffet right about them, because that's who I'm paraphrasing from...
Here's the quote: https://www.cnbc.com/2018/05/18/warren-buffett-explains-why-...
Here's the quote: https://www.cnbc.com/2018/05/18/warren-buffett-explains-why-...
Maybe academic economists don't find it interesting to 'simply' make money and find reward in our endeavours? Plenty of STEM folks could work on Wall Street as quants for way more money, but choose not to.
Paul McCulley (an economist) made certain predictions while working at PIMCO (as did Paul Krugman), and then he left and Bill Gross (PIMCO founder) ignored what he said and made certain financial moves and lost a whole bunch of money:
* https://www.businessinsider.com/this-was-the-bill-gross-blun...
* https://www.nytimes.com/2014/10/03/opinion/paul-krugman-depr...
Gross is way richer than McCulley (or Krugman), and yet the rich guys got it wrong and the poor(er) guys got it right. If only Gross had listened to the economists (that worked for him).
Paul McCulley (an economist) made certain predictions while working at PIMCO (as did Paul Krugman), and then he left and Bill Gross (PIMCO founder) ignored what he said and made certain financial moves and lost a whole bunch of money:
* https://www.businessinsider.com/this-was-the-bill-gross-blun...
* https://www.nytimes.com/2014/10/03/opinion/paul-krugman-depr...
Gross is way richer than McCulley (or Krugman), and yet the rich guys got it wrong and the poor(er) guys got it right. If only Gross had listened to the economists (that worked for him).
Economists that made it in financial markets (examples): Cliff Asness, Barr Rosenberg, John Paul Tudor Jones, Stanley Druckenmiller, Kenneth Griffin , John Paulson (but that's an MBA) - is that enough billionaire economists for you? What exactly made each rich is a bit more tricky, but certainly Asness and Rosenberg got rich based on their research.
This list is rather disingenuous.
> Kenneth Cordele Griffin is an American hedge fund manager, entrepreneur and investor. He is the founder, chief executive officer, co-chief investment officer, and 80% owner of Citadel LLC, a multinational hedge fund. He also owns Citadel Securities, one of the largest market makers in the U.S.
I don’t see economist anywhere in Ken’s Wikipedia.
> Kenneth Cordele Griffin is an American hedge fund manager, entrepreneur and investor. He is the founder, chief executive officer, co-chief investment officer, and 80% owner of Citadel LLC, a multinational hedge fund. He also owns Citadel Securities, one of the largest market makers in the U.S.
I don’t see economist anywhere in Ken’s Wikipedia.
Last sentence under Early Life and Education says he graduated with a degree in economics.
You have a very low bar for classifying someone as an ‘economist’. I see why that’s the case as it does help your narrative but does not really lend much strength to your argument in my view.
What then is an economist or a physicist or a mathematician etc. when graduating with a degree in the respective field isn't it? What additional thing needs to be there?
Just saying it doesn't count is a bit weak because that is saying training in a certain discipline and graduating in it has no meaning or skill transfer of relevance.
Just saying it doesn't count is a bit weak because that is saying training in a certain discipline and graduating in it has no meaning or skill transfer of relevance.
How about holding that title professionally? Or maybe just having him call himself an economist at some point? But your opinions are just that, and my opinion is your arguments are without merit.
Those are not economists by trade nor profession. None of those people had PhDs in Econ. Never once were they called “economists”
Why does Asness' PhD in finance under Farmer not count, for example? Is a financial economist not an economist, i.e., things like the EMH are not part of economics? Why do you think their training in economics was irrelevant?
The same could be said for climate scientists and geologists couldn't it?
I'm betting they will all be replaced by AI in the coming years.
One reason is that we can now better simulate the rational actors in a market.
One reason is that we can now better simulate the rational actors in a market.
What rational actors? Could you share some sources showing that individual economic choices are mostly driven by a cost-benefit analysis to determine whether an option is right for them? As opposed to being driven by habit, emotion, and social customs?
The rational choice for food would not lead to an obesity and diabetes epidemic in the wealthiest country. Something doesn't add up.
The rational choice for food would not lead to an obesity and diabetes epidemic in the wealthiest country. Something doesn't add up.
AI is even better at predicting mood and emotion. See social media.
Ok, so you couldn't give sources for your first claim, so now you're moving the goal posts.
Let's try again. Can you give sources showing that AI effectively models the economic decisions of non-rational actors? Anyone who can predict the economy should be able to quickly become very wealthy.
Let's try again. Can you give sources showing that AI effectively models the economic decisions of non-rational actors? Anyone who can predict the economy should be able to quickly become very wealthy.
Don't you end up having a problem with recursion? The people who use AI to predict the rational actors in the economy are actors themselves, and need to be included in their own model. Then you have others trying to predict what that model will say, etc.
Isn’t predicting what we want out of a science, more so than explaining?
> If that school of “science” was more than retconning and trying to see ideologically aligned patterns in the irrational noise and result of complex interwoven incentive systems
There was a physicist (Feynman?) who once joked that his job would have been much harder if particles had free will.
But there are regular experiments that are run in the realm of economics and various models make different predictions. It turns out that tax cuts don't pay for themselves, as some say:
* https://en.wikipedia.org/wiki/Kansas_experiment
* https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act
Turns out QE wouldn't devalue the currency and cause hyperinflation (as some said it would):
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://manhattan.institute/article/an-open-letter-to-ben-be...
Turns out that austerity is not expansionary (i.e., cutting government demand/spending does not grow the economy; see Chart 2):
* https://www.theguardian.com/business/ng-interactive/2015/apr...
* https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da...
There are certainly areas where things can get complicated and there's room for debate, but in other areas the mechanisms are understood.
Just because some folks choose to go with ideology over accurate models does not mean we don't have accurate models: is it the fault of medicine that some people say vaccines and masks don't work for ideological reasons?
There was a physicist (Feynman?) who once joked that his job would have been much harder if particles had free will.
But there are regular experiments that are run in the realm of economics and various models make different predictions. It turns out that tax cuts don't pay for themselves, as some say:
* https://en.wikipedia.org/wiki/Kansas_experiment
* https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act
Turns out QE wouldn't devalue the currency and cause hyperinflation (as some said it would):
> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
* https://manhattan.institute/article/an-open-letter-to-ben-be...
Turns out that austerity is not expansionary (i.e., cutting government demand/spending does not grow the economy; see Chart 2):
* https://www.theguardian.com/business/ng-interactive/2015/apr...
* https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da...
There are certainly areas where things can get complicated and there's room for debate, but in other areas the mechanisms are understood.
Just because some folks choose to go with ideology over accurate models does not mean we don't have accurate models: is it the fault of medicine that some people say vaccines and masks don't work for ideological reasons?
It’s also common for economic ideas to be taken out of context. In an environment with 99% tax rate it’s beloved that lowering taxes will increase revenue. This is directly applicable when the sudden loss of government subsidies creates an effective 90+% tax rate within an income band resulting in people working less. Yet, politically the idea gets simplified to lowering taxes will always increase revenue which is false.
Austerity to the point of being able to pay down government debt is painful, that’s well known. Unchecked spending and unlimited growth in debt is however unsustainable.
Austerity to the point of being able to pay down government debt is painful, that’s well known. Unchecked spending and unlimited growth in debt is however unsustainable.
>Yet, politically the idea gets simplified to lowering taxes will always increase revenue which is false.
Also this usually works short-term because companies and people still have the infrastructure from previous government spending.
When that infrastructure inevitably crumbles because the taxes don't suffice to support it 10 years down the road, it's too late, the infrastructure needed to create new businesses will be missing, leading to a downward spiral for the economy.
Also this usually works short-term because companies and people still have the infrastructure from previous government spending.
When that infrastructure inevitably crumbles because the taxes don't suffice to support it 10 years down the road, it's too late, the infrastructure needed to create new businesses will be missing, leading to a downward spiral for the economy.
> Yet, politically the idea gets simplified to lowering taxes will always increase revenue which is false.
It's not so much that the idea was simplified to push a political agenda: Arthur Laffer himself, when popularizing the concept (with the eponymous Laffer Curve[1]), used it as an argument against tax raise in the US.
So the big problem with economics is not so much that its results are being hijacked by politicians to push their agenda, it's that most of them (at least most of the prominent ones) are in fact pushing their ideologies through their publications.
[1]: https://en.wikipedia.org/wiki/Laffer_curve
It's not so much that the idea was simplified to push a political agenda: Arthur Laffer himself, when popularizing the concept (with the eponymous Laffer Curve[1]), used it as an argument against tax raise in the US.
So the big problem with economics is not so much that its results are being hijacked by politicians to push their agenda, it's that most of them (at least most of the prominent ones) are in fact pushing their ideologies through their publications.
[1]: https://en.wikipedia.org/wiki/Laffer_curve
But it is the same argument just at different points on the curve. Using the curve to argue against a tax raise just implies you are on the optimal point [for raising revenue] or somewhere to the right and arguing for a tax cut implies you are somewhere to the right. Notice both arguments have similar assumptions and the only difference is the unlikely possibility you are at the optimal point. Of course one of those arguments is stronger because it does include this unlikely possibility but not much stronger. I think the main argument is whether you are to the left or the right of the curve not whether you are at the optimal point.
Also, I’m assuming it’s unlikely the government has set the tax rate at the optimal rate to maximise revenue. But this assumption is probably dubious because even without explicit knowledge of the curve governments are probably pushed towards the optimal rate.
Also, I’m assuming it’s unlikely the government has set the tax rate at the optimal rate to maximise revenue. But this assumption is probably dubious because even without explicit knowledge of the curve governments are probably pushed towards the optimal rate.
Popular/Prominent economists are generally tied to politics.
“The basic concept was not new; Laffer himself notes antecedents in the writings of the 14th-century social philosopher Ibn Khaldun and others.”
IMO, it’s says less about economics than it does democracy. You can find many “think tanks” which are paid to create papers in support various ideologies. This doesn’t guarantee what they are saying is incorrect, but it does many they gloss over any inconvenient caveats.
“The basic concept was not new; Laffer himself notes antecedents in the writings of the 14th-century social philosopher Ibn Khaldun and others.”
IMO, it’s says less about economics than it does democracy. You can find many “think tanks” which are paid to create papers in support various ideologies. This doesn’t guarantee what they are saying is incorrect, but it does many they gloss over any inconvenient caveats.
I don't disagree with you here, but the problem isn't just think tanks at this point, academics have been doing it as well, with university departments having their ideologies of choice for decades, and it's a self-reproducing situation since they select they students/researchers based on their views.
So, first, you're right to be skeptical. The basic claim is this:
"Expected value (a mathematical object belonging to the very rigorous field of probability theory) is often used by economists in a non-rigorous way."
The covert implication is something along the lines of, economists do this deliberately to gain the benefit of rigor that the empirical performance of economic theory hasn't earned. You should definitely interpret that first as a political argument, motivated by a metaphysical argument, motivated by a mathematical argument.
And you're right to hear some alarm bells, because that's certainly a controversial claim.
But it's not an outlandish claim. The field of psycho-economics is basically the study of the many ways that people observably, empirically don't make economic decisions on the basis of EV maximization, so what more need be said?
And there are plenty of other metaphysical arguments that you probably accept in principle. Pascal's Wager, and the converse Pascal's Mugging, clearly show that EV maximization at least has to "break down at high energy levels", to borrow a metaphor.
So, this thought experiment is one of those, but it's actually a pretty elegant one:
In a series of two coin flips you have four outcomes, so your expected value is a quarter of (0.6 x 0.6) + (0.6 x 1.5) + (1.5 x 0.6) + (1.5 x 1.5) = about 4.4 over four = about 110% of your stake. So this is a winning gamble, so EV maximization predicts you will take it.
However: more than half of that EV, (1.5 x 1.5)/4 = 56% out of that 110%, comes from the relatively rare event in which you win two coin flips in a row.
The other three outcomes have to share the remaining 54% EV between them. It should make sense by now that if you lose, and play again, you can expect to lose again, despite still having a positive EV on the toss.
So the essential question the author is asking, the thing that makes this metaphysically controversial but not mathematically so, is this:
Assuming there's no mechanism to actually share the EV, how much should those three out of four parallel-universe versions of you who individually lose, and collectively have to come up with the cash to pay out 2x winnings, care about the one out of four of you who's taking those 2x winnings home?
And the political question is: Does more than 1/4 of you still think EV is a good basis for decision making absent a mechanism to actually share the EV?
"Expected value (a mathematical object belonging to the very rigorous field of probability theory) is often used by economists in a non-rigorous way."
The covert implication is something along the lines of, economists do this deliberately to gain the benefit of rigor that the empirical performance of economic theory hasn't earned. You should definitely interpret that first as a political argument, motivated by a metaphysical argument, motivated by a mathematical argument.
And you're right to hear some alarm bells, because that's certainly a controversial claim.
But it's not an outlandish claim. The field of psycho-economics is basically the study of the many ways that people observably, empirically don't make economic decisions on the basis of EV maximization, so what more need be said?
And there are plenty of other metaphysical arguments that you probably accept in principle. Pascal's Wager, and the converse Pascal's Mugging, clearly show that EV maximization at least has to "break down at high energy levels", to borrow a metaphor.
So, this thought experiment is one of those, but it's actually a pretty elegant one:
In a series of two coin flips you have four outcomes, so your expected value is a quarter of (0.6 x 0.6) + (0.6 x 1.5) + (1.5 x 0.6) + (1.5 x 1.5) = about 4.4 over four = about 110% of your stake. So this is a winning gamble, so EV maximization predicts you will take it.
However: more than half of that EV, (1.5 x 1.5)/4 = 56% out of that 110%, comes from the relatively rare event in which you win two coin flips in a row.
The other three outcomes have to share the remaining 54% EV between them. It should make sense by now that if you lose, and play again, you can expect to lose again, despite still having a positive EV on the toss.
So the essential question the author is asking, the thing that makes this metaphysically controversial but not mathematically so, is this:
Assuming there's no mechanism to actually share the EV, how much should those three out of four parallel-universe versions of you who individually lose, and collectively have to come up with the cash to pay out 2x winnings, care about the one out of four of you who's taking those 2x winnings home?
And the political question is: Does more than 1/4 of you still think EV is a good basis for decision making absent a mechanism to actually share the EV?
> It should make sense by now that if you lose, and play again, you can expect to lose again, despite still having a positive EV on the toss.
Too late to edit but I feel like I should highlight this more, because it looks like the place something would be swept under the rug:
Yes, the individual who wins two flips in a row is still ahead even if they lose the next two flips. If they win the first four, they can afford to lose three more.
And if they win the first five, they can afford to lose… still only three. Five to four no longer breaks even.
That’s the thing that, if it doesn’t seem intuitive, is a meaningful insight. “This +EV dynamics is not ergodic” means:
In the limit, a) the individual who wins every single coin flip can afford to pay the losses of everyone else and profit, and b) no other individual breaks even.
Too late to edit but I feel like I should highlight this more, because it looks like the place something would be swept under the rug:
Yes, the individual who wins two flips in a row is still ahead even if they lose the next two flips. If they win the first four, they can afford to lose three more.
And if they win the first five, they can afford to lose… still only three. Five to four no longer breaks even.
That’s the thing that, if it doesn’t seem intuitive, is a meaningful insight. “This +EV dynamics is not ergodic” means:
In the limit, a) the individual who wins every single coin flip can afford to pay the losses of everyone else and profit, and b) no other individual breaks even.
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The article seems pretty reasonable to me, the theory seems to work. Can you clarify which part of it you find problematic because I don't see it in the article?
Edit: here is also the source code for the cooperative coin, if it helps the discussion https://github.com/lmlhub/ee_web_apps/blob/main/cooperating_...
Edit: here is also the source code for the cooperative coin, if it helps the discussion https://github.com/lmlhub/ee_web_apps/blob/main/cooperating_...
Because for all his grandiose claims to novelty, he's basically created a completely abstract game theoretical model of the concept of insurance, which suffice to say is not something "mainstream economists" are unaware of.
Can you say more about that? I can see the loose analogy to socializing risk, but I’d usually think of the concept of insurance along the lines of “many small winners pay for a few big losers”; this looks to me more like “a few big winners pay for many small losers”.
The example seems to be in between (it's an illustration based around variance in series of dice rolls). But the principle of insurance is pooling risk rather than the distribution of risk: (and a Lloyd's syndicate bailing out a natural disaster looks a lot like a few big winners paying for many small losers)
The principle of a few big winners pay for many small losers is pretty well understood in other areas too: it underpins Sand Hill Road as well as the social insurance of welfare states....
The principle of a few big winners pay for many small losers is pretty well understood in other areas too: it underpins Sand Hill Road as well as the social insurance of welfare states....
Hmm, I’m still not following exactly what you’re pointing out. What’s the model you mentioned about variance in dice rolls? I assumed we were talking about the coin flip model where all individual payoffs go to zero with probability 1, so no one has any expected income to pay an insurance premium out of.
The article is pretty pointedly about wealth redistribution, i.e. pooling of windfalls rather than of risk, but I don’t think that was lost on anyone... are you talking about a different model where there’s some sort of insurable situation?
The article is pretty pointedly about wealth redistribution, i.e. pooling of windfalls rather than of risk, but I don’t think that was lost on anyone... are you talking about a different model where there’s some sort of insurable situation?
I meant coin flips rather than dice rolls!
But no, the payoffs don't go to zero: it's heads you double your wealth, tails you lose 40%. That's insurable risk. (if the payoffs went to zero there would be no benefit to pooling... the only winning move is not to play)
The article pretty pointedly is about social insurance, but it doesn't make a particularly good case for it since it's a completely abstract model which bears no relationship to the actual reasons wealth and income disparities exist and feeding unemployed people might be a good idea. Rich people don't need to gamble 40% of their wealth on each economic interaction (they're perfectly capable of diversifying their own portfolios) and very rarely get bailed out with a share of lots of less rich people's earnings when their investments suck.
The non-straw man version of "mainstream economics" absolutely understands how risks work and literally invented the type of game theoretic model the author is using to show what he thinks "mainstream economics" is missing
But no, the payoffs don't go to zero: it's heads you double your wealth, tails you lose 40%. That's insurable risk. (if the payoffs went to zero there would be no benefit to pooling... the only winning move is not to play)
The article pretty pointedly is about social insurance, but it doesn't make a particularly good case for it since it's a completely abstract model which bears no relationship to the actual reasons wealth and income disparities exist and feeding unemployed people might be a good idea. Rich people don't need to gamble 40% of their wealth on each economic interaction (they're perfectly capable of diversifying their own portfolios) and very rarely get bailed out with a share of lots of less rich people's earnings when their investments suck.
The non-straw man version of "mainstream economics" absolutely understands how risks work and literally invented the type of game theoretic model the author is using to show what he thinks "mainstream economics" is missing
Ah, I believe I understand now. No, I’m afraid this risk is not insurable.
Any insurer would have to guarantee some share of the 1.05x EV per toss, call that share itself X. The insurer would keep the remainder of the EV as premium, call that Y.
X and Y are both positive so it seems at first like you should be able to underwrite this. However, the math will not work out unless you change the dynamics of the model in some way.
The fundamental problem is that this is a model for a sequence of N events, and X (and therefore Y) are exponential functions of N. After some finite N, it’s only the insurer’s most recent guarantee that matters to the total payoffs. No previous events are consequential; the brute force of exponential math says the exponent alone dominates.
So we can just think in terms of x^N. At some point the insurer must pay out x^N in losses from the previous x^(N-1) in gains.
In other words, regardless of the premium charged, or the number of individuals whose risk is pooled, this individual’s status as an insurer doesn’t give them any special exemption from exponential reality that prevents individuals in general from remaining solvent in the limit of this model.
(I haven’t totally worked through the outcome table for the author’s proposed solution— I’d encourage you to do that if you think the solution might be flawed. But this does indeed seem to be a situation where any individual who attempts to capture the EV will fail, and only unconditional sharing can succeed.)
Any insurer would have to guarantee some share of the 1.05x EV per toss, call that share itself X. The insurer would keep the remainder of the EV as premium, call that Y.
X and Y are both positive so it seems at first like you should be able to underwrite this. However, the math will not work out unless you change the dynamics of the model in some way.
The fundamental problem is that this is a model for a sequence of N events, and X (and therefore Y) are exponential functions of N. After some finite N, it’s only the insurer’s most recent guarantee that matters to the total payoffs. No previous events are consequential; the brute force of exponential math says the exponent alone dominates.
So we can just think in terms of x^N. At some point the insurer must pay out x^N in losses from the previous x^(N-1) in gains.
In other words, regardless of the premium charged, or the number of individuals whose risk is pooled, this individual’s status as an insurer doesn’t give them any special exemption from exponential reality that prevents individuals in general from remaining solvent in the limit of this model.
(I haven’t totally worked through the outcome table for the author’s proposed solution— I’d encourage you to do that if you think the solution might be flawed. But this does indeed seem to be a situation where any individual who attempts to capture the EV will fail, and only unconditional sharing can succeed.)
There's nothing magical about the pooling of risk and reward being administered by an entity which is an insurance agent that makes the payoff matrix look different in this model. Yes, this includes the fact that sometimes the syndicate returns a little more to its members than was put in and sometimes a little less depending on who flipped which coin toss.
All of which is moot to my original point which was that the OP's original argument that the mainstream economics profession is focused purely on expected value with no concept of risk is laughably wrong.
They're in fact a few steps ahead of him, because they also assess pooling of earnings in terms of moral hazard and adverse selection, instead of naively assuming that expected return and downside risks are evenly distributed across the population and invariant with respect to wealth pooling. Adverse selection is the actual reason private insurers are unlikely to take on the burden of insuring things like unemployment (people that find it easy to find employment and have lots of savings will rationally avoid participating unless its compulsory, which means more people wanting to claim on it than pay in), but of course introducing variation in likelihood of payoffs to the model leads to potentially very different outcomes...
All of which is moot to my original point which was that the OP's original argument that the mainstream economics profession is focused purely on expected value with no concept of risk is laughably wrong.
They're in fact a few steps ahead of him, because they also assess pooling of earnings in terms of moral hazard and adverse selection, instead of naively assuming that expected return and downside risks are evenly distributed across the population and invariant with respect to wealth pooling. Adverse selection is the actual reason private insurers are unlikely to take on the burden of insuring things like unemployment (people that find it easy to find employment and have lots of savings will rationally avoid participating unless its compulsory, which means more people wanting to claim on it than pay in), but of course introducing variation in likelihood of payoffs to the model leads to potentially very different outcomes...
Ok, I had never seen it simplified like that though, and definitely wasn't aware that from a random coin you can be net positive if you cooperate, that's a surprise to my knowledge and I find that idea very valuable.
Edit: also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.
Edit: also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.
> also I don't see it very similar to insurance, since insurance is withholding wealth in order to distribute it occasionally when needed because it's zero-sum. But if distributing it all the time everywhere is a net positive gain, that's entirely different than the insurance game.
Insurance is zero-sum (negative-sum, actually) when it comes to money. It is not zero-sum overall, because reducing risk is valuable. A 50/50 shot at either 10 million dollars or nothing is significantly less valuable (to anyone who isn't already very rich) than a guaranteed 5 million.
Insurance is zero-sum (negative-sum, actually) when it comes to money. It is not zero-sum overall, because reducing risk is valuable. A 50/50 shot at either 10 million dollars or nothing is significantly less valuable (to anyone who isn't already very rich) than a guaranteed 5 million.
The expected return on both those examples is the same, 5 million.
Yes, but even homo Economicus isn't trying to maximize expected income, they're trying to maximize expected utility. Unless you're completely indifferent to risk, the sure thing is better.
Indifferent to risk, or seeking of risk, or having any other computable utility function on any other measurable that we’d have to accept as equally valid if we want to convince any non-economist that we aren’t just using utility as a weasely word for money :)
That’s not even snark, humans preferring both of higher risk and lower payoff is a canonical psycho-economic result. And even the question of whether the concept of a rational utility maximizer is well-founded is the exact subject of this very fine article!
That’s not even snark, humans preferring both of higher risk and lower payoff is a canonical psycho-economic result. And even the question of whether the concept of a rational utility maximizer is well-founded is the exact subject of this very fine article!
> or seeking of risk
Sure. I very much doubt anyone seeks risk because it's risk. They do it for the thrill, or for social reasons, or because calculating risk is hard, etc.
> having any other computable utility function on any other measurable that we’d have to accept as equally valid if we want to convince any non-economist that we aren’t just using utility as a weasely word for money
Almost anything else will do just as well. If you can buy it (or the means to acquire it) on the market, then there's always some point at which twice as much money buys less than twice as much. Maybe 10 million is not enough to hit that point, or 5 million is too much, but the curve flattens out somewhere. And if you can't, then the money makes no direct difference, but can still buy you food and shelter and free time with which to pursue your other projects.
I suppose in principle you could actively want to not have money (and not want to give it away either), in which case getting rid of 10 million is probably not twice as hard as getting rid of 5, but that hardly seems realistic.
Sure. I very much doubt anyone seeks risk because it's risk. They do it for the thrill, or for social reasons, or because calculating risk is hard, etc.
> having any other computable utility function on any other measurable that we’d have to accept as equally valid if we want to convince any non-economist that we aren’t just using utility as a weasely word for money
Almost anything else will do just as well. If you can buy it (or the means to acquire it) on the market, then there's always some point at which twice as much money buys less than twice as much. Maybe 10 million is not enough to hit that point, or 5 million is too much, but the curve flattens out somewhere. And if you can't, then the money makes no direct difference, but can still buy you food and shelter and free time with which to pursue your other projects.
I suppose in principle you could actively want to not have money (and not want to give it away either), in which case getting rid of 10 million is probably not twice as hard as getting rid of 5, but that hardly seems realistic.
Not after taxes!
Most first world governments "fine" you quite a lot of money if you work on risky things. For example, if you earn $100,000 for ten years, vs $1,000,000 on one of those random years, after taxes you would have $720,000 vs $520,000 if you lived in San Francisco.
Most first world governments "fine" you quite a lot of money if you work on risky things. For example, if you earn $100,000 for ten years, vs $1,000,000 on one of those random years, after taxes you would have $720,000 vs $520,000 if you lived in San Francisco.
I don't think this is right at all? I think it's backwards... If the $1M is a capital gain from an investment you made multiple years ago - which is what windfalls from "work on risky things" actually look like - it will be taxed less than ten years of $100k of income.
I think you're right if you're thinking about lottery winnings or other kinds of non-capital-gain windfalls like a gift from a benefactor, but those aren't the result of valuable "work on risky things".
I think you're right if you're thinking about lottery winnings or other kinds of non-capital-gain windfalls like a gift from a benefactor, but those aren't the result of valuable "work on risky things".
Which is completely meaningless if you only have the potential to exercise the option once.
Yep, which is why it's a really good demonstration of why expected return isn't the only useful concept!
> It makes giant claims, like the headline here which seems intended to be read as “mathematics proves collectivism is best” - and yet offers little empirical evidence beyond saying that an abstract mathematical model can tell us something about the real world. Spherical horses and all that.
True. And I agree it seems like bullshit. Now consider the entirety of economics.
True. And I agree it seems like bullshit. Now consider the entirety of economics.
> True. And I agree it seems like bullshit. Now consider the entirety of economics
Have you studied economics?
Have you studied economics?
Not OP but I have not. As an ignorant, I have a burning question (for real, not being facetious): isn't it bullshit?
Judging by the outcomes of the field and the absurd world we live in today with insane boom/bust cycles every few years, sky-high levels of wealth accumulation, inflation out of control world-wide, one cannot wonder how nobody seems to understand it.
From the outside, it looks like either they are producing incorrect/incomplete theories that simply don't work in the real world, or it's all so theoretical that it never really translates into people's lives.
Or, alternatively, the system is working exactly as intended and the goal was always to maximize for a few individuals and not society in the first place.
Judging by the outcomes of the field and the absurd world we live in today with insane boom/bust cycles every few years, sky-high levels of wealth accumulation, inflation out of control world-wide, one cannot wonder how nobody seems to understand it.
From the outside, it looks like either they are producing incorrect/incomplete theories that simply don't work in the real world, or it's all so theoretical that it never really translates into people's lives.
Or, alternatively, the system is working exactly as intended and the goal was always to maximize for a few individuals and not society in the first place.
There’s two main approaches to economics that aren’t bullshit: empiricism and praxeology. With empiricism, you conduct some sort of experiment (or identify a natural experiment) than can verify falsifiable predictions. With praxeology, you work from first principles regarding rational agents. Both mechanisms result in insights that “work” meaning institutions can use these insights to modify their policies. An easy to understand example is the application of the economics to MMORPG game currencies. But these more generally are applied by finance and government departments everywhere. There is a degree of bullshit that enters when there’s a political dynamic, such as with unemployment rate stats or gdp growth stats.
These systems are something but not really representative human economics.
Empiricism is vulnerable to the changing awareness of the participants: if you discover a reliable principle it will be manipulated until it is learned. Once it is learned it is no longer reliable.
Rational agents are typically poor proxies for human behavior, and the more of them you have the worse the narrative to make it even seem that they could plausible be the way humans behave.
Empiricism is vulnerable to the changing awareness of the participants: if you discover a reliable principle it will be manipulated until it is learned. Once it is learned it is no longer reliable.
Rational agents are typically poor proxies for human behavior, and the more of them you have the worse the narrative to make it even seem that they could plausible be the way humans behave.
I'd recommend Dani Rodrik's Economics Rules that gives you a view of how economists work, what are their limitations and what is their skillset.
I'll try to answer your question through the lens of that book: the models that economists develop work under the models assumptions, and therefore they quite rarely fit well extremely complex phenomena like inflation; in general, economists treat the problems they face on a case per case basis by comparing different models outcomes', looking at the historical data, discussing the merits of the respective arguments for one or the other policy, and obviously depending on the specific goals you find more desirable (equality vs growth for example). The way the economy is ran is not necessarily representative of the economists consensus, or even that of the economists that are employed by the biggest policymakers, as the policies chosen might be the ones deemed more politically feasible, or more desirable for the particular politician's interests, and not the ones that are economically most sound and well-founded.
By the way, a topic I've been always fascinated by but never inquired further is that of social choice, wherein the economists analyse the incentives of classes such as that of policymakers.
I'll try to answer your question through the lens of that book: the models that economists develop work under the models assumptions, and therefore they quite rarely fit well extremely complex phenomena like inflation; in general, economists treat the problems they face on a case per case basis by comparing different models outcomes', looking at the historical data, discussing the merits of the respective arguments for one or the other policy, and obviously depending on the specific goals you find more desirable (equality vs growth for example). The way the economy is ran is not necessarily representative of the economists consensus, or even that of the economists that are employed by the biggest policymakers, as the policies chosen might be the ones deemed more politically feasible, or more desirable for the particular politician's interests, and not the ones that are economically most sound and well-founded.
By the way, a topic I've been always fascinated by but never inquired further is that of social choice, wherein the economists analyse the incentives of classes such as that of policymakers.
Inflation is a really bad example of a failure of economic theory. First, just because the field might understand how to avoid inflation, doesn’t mean that is actually implemented. And secondly, until recently inflation as measured by cpi has been low to zero for the last decade. I think a sense of proportion needs to be exercised here.
Lots of economic theories are actually pretty strong. Your gripe ought to be with the FOMC abusing Keynes right in the very center of our whole system. Please see my recent comments for an explanation.
I have somewhat. It would be inconsistent if I had stayed the full course to get an entire degree that I had realised was bullshit.
Their assumptions don't hold. Assume people make perfect decisions, assume they all act within their own self-interest, assume perfect information, assume effects to the environment don't matter, neither do human lives. Assume acquiring money is the only goal anybody has.
I love how much these horrible assumptions shape the economic policy of the world.
Their assumptions don't hold. Assume people make perfect decisions, assume they all act within their own self-interest, assume perfect information, assume effects to the environment don't matter, neither do human lives. Assume acquiring money is the only goal anybody has.
I love how much these horrible assumptions shape the economic policy of the world.
> Edit: looks like it’s not just me: https://arxiv.org/pdf/2306.03275.pdf
Well, a lone author publishing a 4 page essay on arXiv isn't particularly compelling to say the least. I could take two hours of my afternoon and write “«‘Ergodicity Economics’ is Pseudoscience» is Pseudoscience” and publish it there.
In fact, the author of the said PDF[1] explicitly write down that he doesn't really attempted to understand the point of the guy he's criticizing:
From the second paragraph:
> it is not easy to define what EE is because I am not an expert on this field
> It is not clear what kind of economic questions the author is trying to address
> I interpret that EE prescribes
Dude this isn't how science works, you don't just publish papers to shit on someone else's research without even having attempted to understand what it is about. WTF
Edit: oh I was missing that little gem: “Until EE provides testable implications, we should stay away from it as pseudoscience.” Coming from an economist, this is peek irony (or peek hypocrisy, you decide)
[1]: https://xkcd.com/2304/
Well, a lone author publishing a 4 page essay on arXiv isn't particularly compelling to say the least. I could take two hours of my afternoon and write “«‘Ergodicity Economics’ is Pseudoscience» is Pseudoscience” and publish it there.
In fact, the author of the said PDF[1] explicitly write down that he doesn't really attempted to understand the point of the guy he's criticizing:
From the second paragraph:
> it is not easy to define what EE is because I am not an expert on this field
> It is not clear what kind of economic questions the author is trying to address
> I interpret that EE prescribes
Dude this isn't how science works, you don't just publish papers to shit on someone else's research without even having attempted to understand what it is about. WTF
Edit: oh I was missing that little gem: “Until EE provides testable implications, we should stay away from it as pseudoscience.” Coming from an economist, this is peek irony (or peek hypocrisy, you decide)
[1]: https://xkcd.com/2304/
> and yet offers little empirical evidence
Well, it's not like mainstream econ cares about empirical evidences either… Also the track record of Welfare state vs “supply side economics ” is a good one here.
Well, it's not like mainstream econ cares about empirical evidences either… Also the track record of Welfare state vs “supply side economics ” is a good one here.
> Well, it's not like mainstream econ cares about empirical evidences either...
Mainstream economics is tested against the real world, both through policies that assume certain models and against historical data.
Mainstream economics is tested against the real world, both through policies that assume certain models and against historical data.
And how well does that work, unless you are picking the winning economist opinion in hindsight? For any currently open economical topic you will find diverging or even contradictory opinions by well-established economists. Some of them are bound to have been right, after the fact.
I wish it did. If it did, we would have finally gotten rid of most of the monetarist bullshit after it was steadily proven wrong by 2 decades of QE and zero interest rates in Japan and one decade in the western world…
But it doesn't and now the theories that have been empirically wrong for two decades are still in used to explain the current inflation rate…
That's the biggest issue with how mainstream economics works: it mostly stands on two legs (classical and Keynesian, roughly) which are both proven wrong by the real world on a regular basis but come back in flavor when the other one fails (and the Neoclassical synthesis is the wrong approach to this problem, and is in fact wrong twice as often).
But it doesn't and now the theories that have been empirically wrong for two decades are still in used to explain the current inflation rate…
That's the biggest issue with how mainstream economics works: it mostly stands on two legs (classical and Keynesian, roughly) which are both proven wrong by the real world on a regular basis but come back in flavor when the other one fails (and the Neoclassical synthesis is the wrong approach to this problem, and is in fact wrong twice as often).
To me it seems that it's an issue with the political class rather than with economical theory; at the very least, I've seen these policies denounced from the outset by the economists I follow.
I'm not sure I understand what you're trying to say here: what policies being denounced by economists you follow?
Seems like the good old false Marxist argument, in a sexy new "mathematical" package to appeal to a geeky crowd. I predict it will do extremely well here.
It has nothing to do with Marxism, it's just hyped-up mutual insurance.
You mean the utterly wrong marxist "accumulation of capital" claim? So ridiculous! There is no $problem in our civilization and it certainly isnt made by our economy or ignorance.
Could you instead show me some value which was not produced by labour please?
Aren’t there always three pieces though? There is 1. Coming up with an idea, 2. Organizing the capital and labor to realize the idea, and 3. The labor to build the thing. Sometimes, that is all one person, but all three pieces are necessary.
This question seems to misunderstand the topic. The assumption here is not that there is no labor involves, but rather that it its amount is not what determines the value of something it's been put towards.
You misunderstood my answer. I wanted to show that labour is the foundation of all value.
Weather this labour gets payed equally to the trade value is a follow up question, not tackled by your wikipedia link either but very important to discuss accumulation of capital.
And i was really interested in finding some value independent from labour.
Let me try again: Accumulation of capital?
And i was really interested in finding some value independent from labour.
Let me try again: Accumulation of capital?
You dont need abstract math to research collectivism, in fact you shouldnt since you will consistently fail to factor properly the most important part - human nature. Just look at communism and its utter failures in ie eastern europe when it was enslaved by soviet russia union during cold war.
Nobody wanted willingly to give up their fields and farms, so fathers we re forced to sign contracts at gunpoint. Stories like these are not that rare, I knoe personally few whose granddads lost it all to aparatchiks.
Anyway, it was an utter failure, as communism is. Central planning doesnt work, farmers with intimate knowledge of their fields and crops were much more effective and motivated than then some random workers who tought mainly about themselves and stealing common property rather some common good.
Corruption, selfishness, laziness are things that collapse any similar pipe dream society, or make it at least very ineffective.
Nobody wanted willingly to give up their fields and farms, so fathers we re forced to sign contracts at gunpoint. Stories like these are not that rare, I knoe personally few whose granddads lost it all to aparatchiks.
Anyway, it was an utter failure, as communism is. Central planning doesnt work, farmers with intimate knowledge of their fields and crops were much more effective and motivated than then some random workers who tought mainly about themselves and stealing common property rather some common good.
Corruption, selfishness, laziness are things that collapse any similar pipe dream society, or make it at least very ineffective.
Not disagreeing with the historic view, but oddly enough, when it comes to corporations we see collective pooling and central planning as totally normal (kind of the last bastion of communism).
I am not advocating for anarchy in any way, somebody has to steer the wheel of any big enough corporation, or company is bust within few very bad moves.
The problem comes when power resides in hands which are incompetent (frequent communism issue, people get power for rectal speology and not proven hard skills).
Or even worse they are competent, but incentives are completely misaligned - ceos having tens of millions as yearly base salary, golden parachutes regardless of fubar they create, then they look for additional means of their own profit, regardless of harm to company.
Those highly functioning sociopaths would grok say government-mandated jail terms for really bad stuff (TM) very quickly if it would be on the table, but its not and everybody up there knows it.
The problem comes when power resides in hands which are incompetent (frequent communism issue, people get power for rectal speology and not proven hard skills).
Or even worse they are competent, but incentives are completely misaligned - ceos having tens of millions as yearly base salary, golden parachutes regardless of fubar they create, then they look for additional means of their own profit, regardless of harm to company.
Those highly functioning sociopaths would grok say government-mandated jail terms for really bad stuff (TM) very quickly if it would be on the table, but its not and everybody up there knows it.
>Central planning doesnt work
This is funny because it's the reason so many people are questioning the status quo or what they call 'capitalism' these days. The FOMC is at the center of the US (and to a large extent global) economy. It is a central planning body, arguably responsible for the stagnation in wages. Copied from a comment I wrote some days ago:
It's a little convoluted, but google 'dcf model', 'benchmark rates', and 'open market operations'. It's more than a single post to explain the mechanics, but you can grok it in a few afternoons. I'll attempt anyway: In order to figure out what activities we ought to allocate resources to, we compare their present values as a sum of future cash flows, each period 'discounted' by a rate. The rate is calculated based on the activities risks + a 'benchmark' or 'risk free' rate. Basically "this activity is risky, how much more should it pay than something totally without risk?"
The closest thing we have to that is US debt. US bonds have a set face value and interest rate, but if you buy above/below the face value, the interest will be a higher or lower return on what you paid, 'yield'. US debt is the most active market in the world, so taking the 'yield' shows what rate the global market[0] is accepting 'risk free' investment.
If the market is nervous, more bonds get bought because everyone wants 'safety'. But this drives up the bond price and lowers yield. Lower yields create an incentive to consider 'hey maybe we do something a little risky after all, it pays better.' Vice versa: if the market is buying risky stuff instead of safe bonds, yields go up and people think 'why do something risky if I can get that return with no risk'?
BUT the Fed interferes in this market. They have unlimited power to buy/sell bonds and therefore establish price ceilings and floors[1]. For most of the past 20 years they created a high price floor, which means low yields. This forces society to allocate resources to risky activity with higher returns.
In particular, when rates go down, cash flows in the future relatively contribute more to present value. With higher rates you look harder at the next 20 years. With lower rates, you look more at years 20+[2].
In practice it made any business that can 'promise the future' an attractive investment. Think Big Tech, VC startups, Tesla, Wework, Theranos. Meanwhile, businesses that are less risky and make goods and services now have to compete with those guys for ROI. If you have little hope of growth, and your business is established you have to raise prices or reduce costs somewhere. You can't control what you pay for raw materials/inputs, but you can control what you pay workers.
To further illustrate: Google burns hundreds of billions on projects that never see daylight or get axed after a couple years. How did market forces decide that was a better use of resources than building (relatively) more hospitals and bridges? Fed yield interference.
I'm not saying high rates are good, or low rates are bad. I'm saying rates that don't match market conditions are bad.
[0] Explainer on the bond market for the uninitiated: Big companies can't safely keep a lot of cash as currency because FDIC insurance is meant for individuals and only covers 250k. Instead you buy something 'safe' and very easily tradeable or 'liquid'. In the past, this might have been gold. Now it's US debt, which works better than gold for this purpose (diff maturities, easier settlement, etc.)
[1] These are decided by a committee of 12 individuals, the FOMC.
[2]To see this for yourself, model out a dcf and then add a row where you divide each discounted cash flow by the present value, "contribution to PV". Then, set up a bar chart for this row and play with your discount rate to see how the "time-shape" of PV contributions changes.
This is funny because it's the reason so many people are questioning the status quo or what they call 'capitalism' these days. The FOMC is at the center of the US (and to a large extent global) economy. It is a central planning body, arguably responsible for the stagnation in wages. Copied from a comment I wrote some days ago:
It's a little convoluted, but google 'dcf model', 'benchmark rates', and 'open market operations'. It's more than a single post to explain the mechanics, but you can grok it in a few afternoons. I'll attempt anyway: In order to figure out what activities we ought to allocate resources to, we compare their present values as a sum of future cash flows, each period 'discounted' by a rate. The rate is calculated based on the activities risks + a 'benchmark' or 'risk free' rate. Basically "this activity is risky, how much more should it pay than something totally without risk?"
The closest thing we have to that is US debt. US bonds have a set face value and interest rate, but if you buy above/below the face value, the interest will be a higher or lower return on what you paid, 'yield'. US debt is the most active market in the world, so taking the 'yield' shows what rate the global market[0] is accepting 'risk free' investment.
If the market is nervous, more bonds get bought because everyone wants 'safety'. But this drives up the bond price and lowers yield. Lower yields create an incentive to consider 'hey maybe we do something a little risky after all, it pays better.' Vice versa: if the market is buying risky stuff instead of safe bonds, yields go up and people think 'why do something risky if I can get that return with no risk'?
BUT the Fed interferes in this market. They have unlimited power to buy/sell bonds and therefore establish price ceilings and floors[1]. For most of the past 20 years they created a high price floor, which means low yields. This forces society to allocate resources to risky activity with higher returns.
In particular, when rates go down, cash flows in the future relatively contribute more to present value. With higher rates you look harder at the next 20 years. With lower rates, you look more at years 20+[2].
In practice it made any business that can 'promise the future' an attractive investment. Think Big Tech, VC startups, Tesla, Wework, Theranos. Meanwhile, businesses that are less risky and make goods and services now have to compete with those guys for ROI. If you have little hope of growth, and your business is established you have to raise prices or reduce costs somewhere. You can't control what you pay for raw materials/inputs, but you can control what you pay workers.
To further illustrate: Google burns hundreds of billions on projects that never see daylight or get axed after a couple years. How did market forces decide that was a better use of resources than building (relatively) more hospitals and bridges? Fed yield interference.
I'm not saying high rates are good, or low rates are bad. I'm saying rates that don't match market conditions are bad.
[0] Explainer on the bond market for the uninitiated: Big companies can't safely keep a lot of cash as currency because FDIC insurance is meant for individuals and only covers 250k. Instead you buy something 'safe' and very easily tradeable or 'liquid'. In the past, this might have been gold. Now it's US debt, which works better than gold for this purpose (diff maturities, easier settlement, etc.)
[1] These are decided by a committee of 12 individuals, the FOMC.
[2]To see this for yourself, model out a dcf and then add a row where you divide each discounted cash flow by the present value, "contribution to PV". Then, set up a bar chart for this row and play with your discount rate to see how the "time-shape" of PV contributions changes.
Capitalism is objectively a failure too (in certain countries, e.g. the US). And arguably that is also due to human nature.
In Europe there are thriving social democracies in some states. No one is being held at gunpoint because that is one extreme. These are still capitalist nations, just not across the board.
>Capitalism is objectively a failure too (in certain countries, e.g. the US)
For one, no country on earth has ever been Capitalist. The word itself is a Marxist word describing a system that worships capital, it's actually meant to be derogatory and sarcastic. Every western country today is a liberal democracy and follows Liberalism, where any one in particular lies on a spectrum from Capitalist to Communist is variable but only within a fairly small range.
Finally, only a wilful idiot could call the current US a "failure". Is it flawed, far from perfect, miserable for a large part of its population? Yes. But does it also deliver them from starvation, war and natural disaster? Yeah, mostly. Better than nearly all other systems. It could do better, maybe a lot better, but it's so far from "failure" it's quite laughable.
But besides from that, European-style social democracies (note, also liberalist) can only exist because the US exists to guarantee that you can be that way safely. And because advanced, rich nations are more profitable for the US to trade with.
For one, no country on earth has ever been Capitalist. The word itself is a Marxist word describing a system that worships capital, it's actually meant to be derogatory and sarcastic. Every western country today is a liberal democracy and follows Liberalism, where any one in particular lies on a spectrum from Capitalist to Communist is variable but only within a fairly small range.
Finally, only a wilful idiot could call the current US a "failure". Is it flawed, far from perfect, miserable for a large part of its population? Yes. But does it also deliver them from starvation, war and natural disaster? Yeah, mostly. Better than nearly all other systems. It could do better, maybe a lot better, but it's so far from "failure" it's quite laughable.
But besides from that, European-style social democracies (note, also liberalist) can only exist because the US exists to guarantee that you can be that way safely. And because advanced, rich nations are more profitable for the US to trade with.
Marx spent the first half of the first chapter of the Communist Manifesto "worshipping capitalism" and praising capitalism for more extensive advances than ever before. Marx strenuously agreed with your "better than nearly all other systems" to the point where he argued capitalism was a necessity in order for socialism to even become possible, because of the immense economic growth brought by capitalism.
It's not Marxist to hate capitalism, it's Marxist to see capitalism as an incredible advance over what came before, which can still be improved on thanks to capitalism laying the foundation for further advances.
It's not Marxist to hate capitalism, it's Marxist to see capitalism as an incredible advance over what came before, which can still be improved on thanks to capitalism laying the foundation for further advances.
Please see my comment history for my post immediately prior to this one. We agree that the wealthy have a disproportionate slice, at least, but I think I have a more specific and realistically-addressable cause than 'capitalism'..
Ok, let's try it with an analogy:
"Pooling and sharing of computer source code makes everyone's products better"
Is there enough empirical evidence to support that analogy? Why shouldn't the same apply to wealth in a broader sense?
"Pooling and sharing of computer source code makes everyone's products better"
Is there enough empirical evidence to support that analogy? Why shouldn't the same apply to wealth in a broader sense?
Wealth is reduced by consumption. It cannot be endlessly copied at negligible cost.
A closer (but not perfect) analogy is more like "pooling and sharing the computational time of the university's lone supercomputer makes everyone's projects better".
A closer (but not perfect) analogy is more like "pooling and sharing the computational time of the university's lone supercomputer makes everyone's projects better".
Society, at least in the classic European model, works just the same: everyone (yes, I know, there are exceptions, that's not the point) pays their share into health insurance, LTD insurance, unemployment insurance, workplace accident insurance, pension systems and a ton of other social benefit systems. And everyone benefits from this kind of collective solidarity - our societies are far less combative (both in the literal and the proverbial sense) than the US are.
> everyone (yes, I know, there are exceptions, that's not the point) pays their share into health insurance
Everyone pays their fair share based on income from working, but not from their wealth, assets, dividends, interest, etc in many places.
If your "income" comes from those sources, you aren't paying your fair share compared to people who must work to eat.
Everyone pays their fair share based on income from working, but not from their wealth, assets, dividends, interest, etc in many places.
If your "income" comes from those sources, you aren't paying your fair share compared to people who must work to eat.
This is false. Pretty much all personal income is taxed, and definitively dividends. While it might be beneficial for the society to tax assets, any personal income from those assets are taxed in most cases. There are ways to avoid it to a certain extend but if you want a 5 million euros from one of your companies you would pay tax on that. If you want a boat you could set up HireMyBoat Inc and then avoid paying taxes on that 5 mill to pay a boat but still use the boat for vacations (this might be illegal but very rarely enforced).
I didn't say personal income wasn't taxed, and I also put "income" in quotes because capital gains aren't taxed as income, and there are various schemes one can engage in to shield value from, or reduce, taxes like income tax.
Exactly. Which is why a lot of Europe's wealth is inherited and has policies in place to protect that wealth and roll it over across generations (nearly) tax free, so most of the Government taxes are gathered on the backs of the working class, not the asset owning class, making it a serfdom with extra steps.
Ironically, US has way tougher inheritance taxes than most of EU.
Ironically, US has way tougher inheritance taxes than most of EU.
Also Europe has so many literal monarchy and other royal descents that still owns huge capital, banks and so on. GL with auditing royal families, so much hidden information there.
I think the Personal Liability insurance that almost everyone has in Germany is an overlooked societal lubricant. For €10 a month, you get €10 million in coverage for accidental damage.
* No incentive for revenge law suits.
* Damages are well regulated so you can't sue for €1 million just because someone's bicycle ran over your toe.
* Can't sue for exorbitant medical expenses because in most cases there are no personal medical expenses i.e. covered anyway by govt health insurance.
I'm unsure if personal liability insurance is popular elsewhere in Europe.
* No incentive for revenge law suits.
* Damages are well regulated so you can't sue for €1 million just because someone's bicycle ran over your toe.
* Can't sue for exorbitant medical expenses because in most cases there are no personal medical expenses i.e. covered anyway by govt health insurance.
I'm unsure if personal liability insurance is popular elsewhere in Europe.
From what I have heard from someone working at an insurance company, those liability contracts are not cost covering. They have those for customer recruitment.
> Damages are well regulated so you can't sue for €1 million just because someone's bicycle ran over your toe.
Counter-example: a website uses Google Fonts and the owner gets a letter from someone's German lawyer demanding they pay "damages" for the GDPR "violation"
[0] https://www.bitdefender.com/blog/hotforsecurity/german-websi... [1] https://www.spiegel.de/netzwelt/web/razzia-wegen-betrugs-run...
Counter-example: a website uses Google Fonts and the owner gets a letter from someone's German lawyer demanding they pay "damages" for the GDPR "violation"
[0] https://www.bitdefender.com/blog/hotforsecurity/german-websi... [1] https://www.spiegel.de/netzwelt/web/razzia-wegen-betrugs-run...
You notice that the Spiegel article talks about criminal behavior by a lawyer (and the individual sums are tiny, not even clear they would have taken this to court as German courts take upfront fees).
It's more like we pay half our salary in taxes and then we get terrible education and a healthcare system where you can't even get an appointment.
Where? Nonsense as far as I have seen (lived in 4 EU countries and still living in one). Hospital wise I never had to wait (i'm on public healthcare); MRI's, operations, scopes etc are always within a few weeks. I heard far far worse stories from countries without public healthcare and people with private health insurance , including the US. If you are a millionaire or richer, sure; paying cash is faster, but that's not a system and that works everywhere anyway.
We have a bunch of universities in the global top 100 and I have been to one of them which didn't cost me (or my parents) more than a few k euro.
We have a bunch of universities in the global top 100 and I have been to one of them which didn't cost me (or my parents) more than a few k euro.
In London (both before and after Brexit), getting an appointment with the local GP was a pain and could involve waiting weeks. Also, you could only get appointments by calling at certain times of the day and normally all slots would be allocated within minutes of the phone lines opening.
Sure, you could always go to the emergency room at the hospital and wait hours to be seen, but I don’t think that counts.
Sure, you could always go to the emergency room at the hospital and wait hours to be seen, but I don’t think that counts.
I'm in the US and have to make an appointment with my GP 3 months in advance. If I don't call between 10am and noon or 2pm to 4pm, I can't make an appointment. The last time I went to the hospital, I waited 5 hours before I was seen. All they did was puncture a fingernail and wrap it up. That little maneuver cost me over $1000.
How about other GPs?
When I lived in the Bay Area, everyone wanted to go to USCF, which is understandable being a world-class medical system. So it wasn't that easy getting an appointment.
But for routine medical check-ups? I just went to another system and could get a same day appointment no problem. Hell, I even had 5-6 different slots I could pick from the same week.
When I lived in the Bay Area, everyone wanted to go to USCF, which is understandable being a world-class medical system. So it wasn't that easy getting an appointment.
But for routine medical check-ups? I just went to another system and could get a same day appointment no problem. Hell, I even had 5-6 different slots I could pick from the same week.
> How about other GPs?
Depends on how good your insurance is. PPOs, sure - though most of the country does not have as many doctors per capita as SF. Typically an HMO will only let you have one primary care provider.
Depends on how good your insurance is. PPOs, sure - though most of the country does not have as many doctors per capita as SF. Typically an HMO will only let you have one primary care provider.
Do those kind of HMOs even exist anymore? Last time I had an option like that from work was 2009 or something. Everyone switched to offering PPOs and HDHPs.
Shocker, voting for the people who want all their life to privatize NHS would have that results. #leopardslovebrexit
Also UK and rely heavily now on private GP services that have grown since pandemic. Could be in person of video call based. Either way it's same or next day and I can get private specialist referral from them. We use NHS GP only for our kids where they seem to prioritise them.
Waiting a few weeks for a GP appointment is normal everywhere. And it was far better in London before Brexit. The significant factor actually being the defunding of NHS that has happened over the past decade.
My non-emergency care in London is still excellent. It was better ten years ago.
Yes I'd like to get an appointment within a few days but even with my excellent private insurance outside of the UK it's a few weeks wait. GPs aren't sitting around waiting for customers anywhere in the world.
My non-emergency care in London is still excellent. It was better ten years ago.
Yes I'd like to get an appointment within a few days but even with my excellent private insurance outside of the UK it's a few weeks wait. GPs aren't sitting around waiting for customers anywhere in the world.
I cant believe this actually happens.
Here in Mexico you can schedule a private GP for the next 3 pr 4 days if you want to pay.
If it's a very minor thing, you can go to most pharmacies and a most likely recent medical graduate will be giving free consultations same day, with at most 15 min wait. (The last time I went the doctor was a Venezuelan medic with great credentials).
Or if you REALLY want to spoil, go to doctoralia.com and schedule a specialist for maybe $60 usd , with reviews and available schedule (usually within a week).
Here in Mexico you can schedule a private GP for the next 3 pr 4 days if you want to pay.
If it's a very minor thing, you can go to most pharmacies and a most likely recent medical graduate will be giving free consultations same day, with at most 15 min wait. (The last time I went the doctor was a Venezuelan medic with great credentials).
Or if you REALLY want to spoil, go to doctoralia.com and schedule a specialist for maybe $60 usd , with reviews and available schedule (usually within a week).
In the UK we pay less in tax for healthcare than Americans pay.
Despite that we also pay far less towards private healthcare than Americans pay, even though private insurance is far cheaper here (because they rent spare capacity from the NHS and offer their services as "topups" plugging holes where people want more.
Also in London, and never call my GP, it's all in an app, and most appointments are video calls. I've had waits sometimes, but I've also been seen within 10 minutes.
Despite that we also pay far less towards private healthcare than Americans pay, even though private insurance is far cheaper here (because they rent spare capacity from the NHS and offer their services as "topups" plugging holes where people want more.
Also in London, and never call my GP, it's all in an app, and most appointments are video calls. I've had waits sometimes, but I've also been seen within 10 minutes.
Seems the NHS got a lot worse, but I never been there (UK hospital, been in the UK many times) so I don’t know. I know brits coming to the south of the eu are surprised how quick it is here (if you know what to do).
Yeah family visiting Romania had to visit a local hospital for an emergency, and was surprised how quick and efficient they were. I suspect a lot of it boils down to population density.
The UK pays less per capital PPP adjusted towards healthcare than most of Europe. The NHS has become atrociously underfunded. I'd still pick it over the US insurance mess any day, and they are amazing for how low amounts we pay for it, but it does badly need more funding.
In Spain healthcare is managed at regional level. My region is clearly ahead of the average in this regard (despite the amount of elderly people we have) and it's clearly not a breeze.
To the point that I use the private healthcare quite often.
Don't get me wrong, I'm thankful for the public service, Hospitals are superb and it will allways be there in case of an emergency, but this is mostly a site of US readers and I think we're misleading here. Our public systems are not a walk in the park either.
I won't get bankrupt, that's for sure. But I have to pay pocket/insurance if I want to get something done quickly and I'm not like, dying or something.
This is not precisely a good approach for prevention care.
To the point that I use the private healthcare quite often.
Don't get me wrong, I'm thankful for the public service, Hospitals are superb and it will allways be there in case of an emergency, but this is mostly a site of US readers and I think we're misleading here. Our public systems are not a walk in the park either.
I won't get bankrupt, that's for sure. But I have to pay pocket/insurance if I want to get something done quickly and I'm not like, dying or something.
This is not precisely a good approach for prevention care.
It's just a matter of time before those systems look more like the situation in the UK. Eventually they all have to face the same economic realities of costs rising much faster than the tax income. The UK is just faster at internalizing this, which is a good thing imo.
I think we need a much better understanding of why costs are rising so much (not just as a result of the pandemic, even before that) and what can be done to mitigate that.
I think we need a much better understanding of why costs are rising so much (not just as a result of the pandemic, even before that) and what can be done to mitigate that.
Well, most of those public health care systems in EU countries are working at least since WW2. So I am not quite sure why now is the time they suddenly cannot work anymore, in principle. Sure, governments can ruin any public health care system. But eventually voters could notice (or at least one would hope that).
Germany got universal healthcare in the 1800's under Otto von Bismarck.
There's EU and there's EU. Poland has a terrible public health care system, but it's fairly decent if you can afford private. Austria on the other hand is nothing short of amazing.
>lived in 4 EU countries and still living in one ... MRI's, operations, scopes etc are always within a few weeks
Where?
Where?
I’ve lived in Austria and Germany and had the misfortune of needing medical care multiple times in both in the almost 20 years I’ve spent in them so far- I’ve never had to wait long or pay much (most of the time pay nothing). I got good care, even though many doctors and nurses seem to have not hears of the concept of bedside manners.
UK for one from my experience.
Also GP appointments within a few hours - twice in the last fortnight
Also GP appointments within a few hours - twice in the last fortnight
Everyone I know in the UK said they could only get GP appointments days in the future, never on such short notice.
And where is that please?
I couldn't always get an appointment in the US - and this is a common issue with specialists.
At least here in Norway, if I have to wait for something and I'm sick, I get paid time off work. I'll never go bankrupt from medical bills. Taxes plus health insurance premiums was more expensive in the states than payroll taxes here.
There is an actual safety net. I'm unlikely to starve or be homeless for any length of time.
The VAT isn't nearly as bad since it is generally an upfront cost, included in price. Some exceptions apply with online shopping. ¨
Oh, and I'll mention that I can always get an appointment with my GP if I'm sick: They keep some time slots open for urgent things. I might wait a few weeks when it isn't urgent. And I won't lose my job for having appointments.
At least here in Norway, if I have to wait for something and I'm sick, I get paid time off work. I'll never go bankrupt from medical bills. Taxes plus health insurance premiums was more expensive in the states than payroll taxes here.
There is an actual safety net. I'm unlikely to starve or be homeless for any length of time.
The VAT isn't nearly as bad since it is generally an upfront cost, included in price. Some exceptions apply with online shopping. ¨
Oh, and I'll mention that I can always get an appointment with my GP if I'm sick: They keep some time slots open for urgent things. I might wait a few weeks when it isn't urgent. And I won't lose my job for having appointments.
> At least here in Norway
Norway has an enormous amount of wealth from oil and therefore it is not a good example to show any benefits from pooling wealth. Norway won the lottery, that is all.
https://www.reuters.com/markets/europe/norways-wealth-fund-p...
Norway has an enormous amount of wealth from oil and therefore it is not a good example to show any benefits from pooling wealth. Norway won the lottery, that is all.
https://www.reuters.com/markets/europe/norways-wealth-fund-p...
They... they are still pooling wealth. Their wealth will simply be from other things than another country.
The US has oil they could pool wealth from. They have resources they could pool wealth from. Things they could invest in. But. They. Don't. They aren't even adequately taxing the folks that can withstand the tax the most: The wealthy. They used to, but it isn't like that now.
There are little things the US simply doesn't do either - just in healthcare. For example, the Norwegian system will send a home health nurse to you up to 6 times a day for short visits. This is because it is cheaper to do this than to house you in a nursing home, overall. Even if you are living on an island. The US expects you to have family take care of you: Poor people won't get home health visits, in no small part because when you don't pool your money together, things like home health care aren't affordable.
(sidenote: The home health visits aren't always adequate, but better than nothing).
Pooling money to increase everyone's wellbeing doesn't take winning a lottery.
The US has oil they could pool wealth from. They have resources they could pool wealth from. Things they could invest in. But. They. Don't. They aren't even adequately taxing the folks that can withstand the tax the most: The wealthy. They used to, but it isn't like that now.
There are little things the US simply doesn't do either - just in healthcare. For example, the Norwegian system will send a home health nurse to you up to 6 times a day for short visits. This is because it is cheaper to do this than to house you in a nursing home, overall. Even if you are living on an island. The US expects you to have family take care of you: Poor people won't get home health visits, in no small part because when you don't pool your money together, things like home health care aren't affordable.
(sidenote: The home health visits aren't always adequate, but better than nothing).
Pooling money to increase everyone's wellbeing doesn't take winning a lottery.
It is the same in Denmark (and most other Scandinavian countries).
Also, Norways oil money, as you write yourself, go into their sovereign fund and does not directly fund wellfare.
There are many theories why the Scandinavian model works on Scandinavia but does not seem to work other places, but to my best knowledge, natural resources are not any of these explanations.
Also, Norways oil money, as you write yourself, go into their sovereign fund and does not directly fund wellfare.
There are many theories why the Scandinavian model works on Scandinavia but does not seem to work other places, but to my best knowledge, natural resources are not any of these explanations.
>Also, Norways oil money, as you write yourself, go into their sovereign fund and does not directly fund wellfare.
That's orthogonal. Having a massive sovereign fund as your rainy day fund goes a long way in your strategic long term thinking and budget planning compared to countries without that rainy day fund.
>There are many theories why the Scandinavian model works on Scandinavia but does not seem to work other places, but to my best knowledge, natural resources are not any of these explanations.
Because lack of corruption, government transparency and regulations plus a high trust society are also needed, not just pooling all our tax money for welfare.
And those qualities don't exist in many other countries. Scandinavian countries are the global exception, not the norm.
The norm everywhere else is "everyone for himself, fuck you I got mine, you go get yours, if you're poor it's your fault for being lazy", despite implementing various welfare programs similar to Scandinavian ones.
That's orthogonal. Having a massive sovereign fund as your rainy day fund goes a long way in your strategic long term thinking and budget planning compared to countries without that rainy day fund.
>There are many theories why the Scandinavian model works on Scandinavia but does not seem to work other places, but to my best knowledge, natural resources are not any of these explanations.
Because lack of corruption, government transparency and regulations plus a high trust society are also needed, not just pooling all our tax money for welfare.
And those qualities don't exist in many other countries. Scandinavian countries are the global exception, not the norm.
The norm everywhere else is "everyone for himself, fuck you I got mine, you go get yours, if you're poor it's your fault for being lazy", despite implementing various welfare programs similar to Scandinavian ones.
> despite implementing various welfare programs similar to Scandinavian ones.
There are many countries with welfare regimes similar in size to those of Scandinavia. They are qualitatively quite different. A rough categorization:
- Liberal regimes (means tested but with relatively equal benefits between participants, market oriented) are typical of the Anglosphere. Food stamps in the United States are an archetypical liberal program.
- Corporatist (aka conservative, Christian-democratic) regimes (many recipients with highly unequal benefits, often tied to family status or employment) are typical of continental Europe, especially. Unemployment insurance is an archetypical corporatist program.
- Social-democratic regimes (extensive universal benefits, direct provision of public services, full employment as an explicit policy goal) are typical of Scandinavia. The Finnish national pension system is an archetypical social-democratic program.
Of course no currently existing states are purely one of these ideal types, but they do cluster. Social-democratic welfare states (Sweden, Norway, Finland, Denmark, and to some extent the Netherlands) significantly outperform conservative ones with comparable or higher levels of public spending (e.g. France, Austria, Germany).
There are many countries with welfare regimes similar in size to those of Scandinavia. They are qualitatively quite different. A rough categorization:
- Liberal regimes (means tested but with relatively equal benefits between participants, market oriented) are typical of the Anglosphere. Food stamps in the United States are an archetypical liberal program.
- Corporatist (aka conservative, Christian-democratic) regimes (many recipients with highly unequal benefits, often tied to family status or employment) are typical of continental Europe, especially. Unemployment insurance is an archetypical corporatist program.
- Social-democratic regimes (extensive universal benefits, direct provision of public services, full employment as an explicit policy goal) are typical of Scandinavia. The Finnish national pension system is an archetypical social-democratic program.
Of course no currently existing states are purely one of these ideal types, but they do cluster. Social-democratic welfare states (Sweden, Norway, Finland, Denmark, and to some extent the Netherlands) significantly outperform conservative ones with comparable or higher levels of public spending (e.g. France, Austria, Germany).
What they’ve described in Norway is extremely representative of my experiences in the UK. Which is currently doing its level best to achieve the poorest economic outcomes in European area.
So don’t think calling Norway a bad example is justified at all.
So don’t think calling Norway a bad example is justified at all.
Finland has a higher quality of state provided services, and they have no oil. Norway definitely has made a speedrun towards a welfare state, but Finland is the opposite example: not an old European power with generations of wealth, no single easily exploitable resource other than forests.
The vast majority of people in Europe pays nowhere near half our salary in taxes. Only a few countries have total tax wedges (including employer payroll taxes) that reach that level for more than small minorities of the population.
I live in Austria. I pay 48% on everything above 60k € and 50% above 90k. Our VAT is 20%. Most people who can afford it pay for private doctors because it‘s almost impossible to get an appointment with one that‘s covered by normal health care.
So I guess at least for my country the statement above is somewhat true.
So I guess at least for my country the statement above is somewhat true.
> I pay 48% on everything above 60k € and 50% above 90k.
Those are marginal rates, not your effective rate which is what matter overall.
Austria has one of the higher tax rates of OECD countries, reaching 38.3% effective rate for a single person earning 167% of the average wage (source: OECD Taxing Wages)
Again the 20% when counted towards your income is marginal in that you only pay 20% on the price of covered products and services you buy. For starters you only spend of your net income, and only then after mortgages or rent and exempt products. When I last added that up for myself, VAT added up to around 4% of my gross salary.
So I stand by what I said. Most people in Europe pay nothing like 50%.
With respect to healthcare spending, Austrians do spend a lot, but your total healthcare spend, including private payments is far below what Americans pay in tax towards healthcare (source: OECD Health). PPP adjusted you spend an average of around $7.3k vs. around $12.5k in the US. About 2/3's of your $7.3k is taxes.
Those are marginal rates, not your effective rate which is what matter overall.
Austria has one of the higher tax rates of OECD countries, reaching 38.3% effective rate for a single person earning 167% of the average wage (source: OECD Taxing Wages)
Again the 20% when counted towards your income is marginal in that you only pay 20% on the price of covered products and services you buy. For starters you only spend of your net income, and only then after mortgages or rent and exempt products. When I last added that up for myself, VAT added up to around 4% of my gross salary.
So I stand by what I said. Most people in Europe pay nothing like 50%.
With respect to healthcare spending, Austrians do spend a lot, but your total healthcare spend, including private payments is far below what Americans pay in tax towards healthcare (source: OECD Health). PPP adjusted you spend an average of around $7.3k vs. around $12.5k in the US. About 2/3's of your $7.3k is taxes.
>I live in Austria. I pay 48% on everything above 60k € and 50% above 90k.
While I agree that some taxes are a bit too high and opportunities of building wealth without tax evasion are inexistent in Austria, but your tax percentages don't scan for me.
If I use the online calculator of the chamber of labor, on a 70k/year gross salary, you take home 45k/year NET, so you pay 25k/year in total combined taxes, meaning approx. 36% of your gross income is the tax load on 70k salary. That's not that terrible, seems in line with most developed EU countries more ore less.
The only thing missing is the taxes paid by the employer which also add up and increase the tax load, but are not listed on your payslip, which IMHO is a fault with the system due to this lack of transparency.
However, contrary to the title of this topic, it doesn't make "everyone's wealth go faster" it just supports the lower classes from falling into poverty and crime.
[1] https://bruttonetto.arbeiterkammer.at/
While I agree that some taxes are a bit too high and opportunities of building wealth without tax evasion are inexistent in Austria, but your tax percentages don't scan for me.
If I use the online calculator of the chamber of labor, on a 70k/year gross salary, you take home 45k/year NET, so you pay 25k/year in total combined taxes, meaning approx. 36% of your gross income is the tax load on 70k salary. That's not that terrible, seems in line with most developed EU countries more ore less.
The only thing missing is the taxes paid by the employer which also add up and increase the tax load, but are not listed on your payslip, which IMHO is a fault with the system due to this lack of transparency.
However, contrary to the title of this topic, it doesn't make "everyone's wealth go faster" it just supports the lower classes from falling into poverty and crime.
[1] https://bruttonetto.arbeiterkammer.at/
> but your tax percentages don't scan for me.
They quoted marginal rates, not effective rates, which is usually the case when people start talking about these high numbers.
They quoted marginal rates, not effective rates, which is usually the case when people start talking about these high numbers.
>They quoted marginal rates, not effective rates, which is usually the case when people start talking about these high numbers.
I'm confused. What's the difference?
I'm confused. What's the difference?
To take a simple example:
Let's say a country has only a single 20% tax band that kicks in at 20k.
If you earn 40k, your marginal tax is 20%, but only 20k of your earning is above 20k, so you pay 20% * 30k = 4k in tax for an effective rate of 10% (4k of 40k).
Most countries will multiple tax bands plus deductions which complicates this, and most places very few people have enough of their income taxed at their marginal rate for their effective rate to approach their marginal rate.
Let's say a country has only a single 20% tax band that kicks in at 20k.
If you earn 40k, your marginal tax is 20%, but only 20k of your earning is above 20k, so you pay 20% * 30k = 4k in tax for an effective rate of 10% (4k of 40k).
Most countries will multiple tax bands plus deductions which complicates this, and most places very few people have enough of their income taxed at their marginal rate for their effective rate to approach their marginal rate.
Marginal rate is a rate for a band of income. Your effective rate is what you actually pay as a percentage of your total income.
So if you have a marginal rate of 50% but it only kicks in when you earn over a certain amount, you will be paying less than 50% overall (your effective rate).
So if you have a marginal rate of 50% but it only kicks in when you earn over a certain amount, you will be paying less than 50% overall (your effective rate).
Your effective rate is the overall average, while the marginal rate is the amount you paid on the last (or next) dollar.
If you made $100k, paid $25K in income taxes, and were in a 33% bracket, your effective rate was 25% and your marginal rate was 33%.
If you made $100k, paid $25K in income taxes, and were in a 33% bracket, your effective rate was 25% and your marginal rate was 33%.
> your tax percentages don't scan for me
What do you mean? I gave you the exact percentages. You can see them on the homepage of the Austrian finance ministry as well:
https://www.bmf.gv.at/themen/steuern/arbeitnehmerinnenveranl...
What do you mean? I gave you the exact percentages. You can see them on the homepage of the Austrian finance ministry as well:
https://www.bmf.gv.at/themen/steuern/arbeitnehmerinnenveranl...
Another interesting clue about this might be when the tax freedom day is each year. In Austria that's 5th of August. The interpretation is that people work until 5th of August for the state.
[1] https://worldtaxpayers.org/2019/10/austria-tax-freedom-day-w...
[1] https://worldtaxpayers.org/2019/10/austria-tax-freedom-day-w...
Sweden:
24% payroll tax, >30% income tax = 47% tax. Then there's a 25% VAT on most non-food goods, and an extra 20% income tax on any income above $56k.
To be fair, 17% of the payroll and income tax are pension contributions (up to earning around thr $56k, after that it's just a tax).
To be fair, 17% of the payroll and income tax are pension contributions (up to earning around thr $56k, after that it's just a tax).
Marginal rates.
Sweden reaches 50.3% for a single person earning 167% of average salary in total tax wedge (including employer payroll taxes) with no substantial deducations. An average earner has a total tax wedge of 42.4%. Sweden is one of the highest in Europe.
The average earner pays 24.3% in income tax and employee social service contributions.
The VAT adds up to less than you'd think, because for starters you won't buy anything VAT rates with the money you've already paid to tax, nor what you pay on housing, or food. Last time I added up what I actually paid in tax it was around 4%, both in Norway with similar tax levels to Sweden, and in the UK.
Sweden reaches 50.3% for a single person earning 167% of average salary in total tax wedge (including employer payroll taxes) with no substantial deducations. An average earner has a total tax wedge of 42.4%. Sweden is one of the highest in Europe.
The average earner pays 24.3% in income tax and employee social service contributions.
The VAT adds up to less than you'd think, because for starters you won't buy anything VAT rates with the money you've already paid to tax, nor what you pay on housing, or food. Last time I added up what I actually paid in tax it was around 4%, both in Norway with similar tax levels to Sweden, and in the UK.
> Most people who can afford it pay for private doctors because it‘s almost impossible to get an appointment with one that‘s covered by normal health care.
I cannot confirm this (I live in Vienna, Austria) but I've never had a serious health issue. I go to different doctors every year for checkups. What kind of doctors are you talking about?
I cannot confirm this (I live in Vienna, Austria) but I've never had a serious health issue. I go to different doctors every year for checkups. What kind of doctors are you talking about?
I can add another anecdote to the crowd sourced judgement..
Wife used to live in Vienna, Austria, and always had private doctor insurance. Her fears came true as she had a serious medical situation and was asked to wait for weeks (with pain managed by painkillers) until the surgery she needed could be done. Her private insurance stepped in, and like magic she was treated in 3 days.
Now, I believe that healthcare should never be considered optional/treated like a business, and must be equally available to all without pre-conditions on their financial well wing, but inefficiencies in the system are not to be wish washed away.
Wife used to live in Vienna, Austria, and always had private doctor insurance. Her fears came true as she had a serious medical situation and was asked to wait for weeks (with pain managed by painkillers) until the surgery she needed could be done. Her private insurance stepped in, and like magic she was treated in 3 days.
Now, I believe that healthcare should never be considered optional/treated like a business, and must be equally available to all without pre-conditions on their financial well wing, but inefficiencies in the system are not to be wish washed away.
>I cannot confirm this (I live in Vienna, Austria)
I think because Vienna is not as underfunded as other states. In Styria I had to go private for quite a few things If I didn't want to wait 3 months to see a public specialist.
I think because Vienna is not as underfunded as other states. In Styria I had to go private for quite a few things If I didn't want to wait 3 months to see a public specialist.
even if your top tax rate is >50% it is difficult for you to actually pay 50% in tax.
For example, in Malmö, Sweden the top tax rate is 52% and starts at 45k, but even at 70k your actual tax load is something like 36%
Not counting VAT of course.
For example, in Malmö, Sweden the top tax rate is 52% and starts at 45k, but even at 70k your actual tax load is something like 36%
Not counting VAT of course.
It's typical for these discussions that people assume marginal rates and never check the effective rates.
In the UK once you reach over ~120k GBP the total tax wedge is above 50% [1].
At 90k GBP you are paying 45%. I guess it depends on what “nowhere near half” means. 45% is close imo. Especially with VAT added in on purchases. Yes the average London wage is more like 50k GBP, but from that perspective it’s also only double the average wage before you hit 45%+ tax take.
The top UK tax rate (including employers NI etc) is ~59%.
1. https://listentotaxman.com/?year=2022&taxregion=uk&age=0&tim...
At 90k GBP you are paying 45%. I guess it depends on what “nowhere near half” means. 45% is close imo. Especially with VAT added in on purchases. Yes the average London wage is more like 50k GBP, but from that perspective it’s also only double the average wage before you hit 45%+ tax take.
The top UK tax rate (including employers NI etc) is ~59%.
1. https://listentotaxman.com/?year=2022&taxregion=uk&age=0&tim...
>At 90k GBP you are paying 45%.
This is so misleading.
At £90K you get a £12,579 tax free allowance leaving £77,421 taxable. You will pay £7,540 from the 20% band, £15,888.40 from the 40% band and nothing from the 45% band for a total of £23,428.40. National Insurance will be £5,318.60 making the total deduction £28,747.
So approx 32%.
This is so misleading.
At £90K you get a £12,579 tax free allowance leaving £77,421 taxable. You will pay £7,540 from the 20% band, £15,888.40 from the 40% band and nothing from the 45% band for a total of £23,428.40. National Insurance will be £5,318.60 making the total deduction £28,747.
So approx 32%.
You forgot the additional 13% in employers NI.
Edit: which yes takes it to 43% not the 45% I originally wrote.
Now enjoy paying another 20% VAT on any goods and services
Edit: which yes takes it to 43% not the 45% I originally wrote.
Now enjoy paying another 20% VAT on any goods and services
> You forgot the additional 13% in employers NI.
Only the part of that that would actually be passed through to you as salary in the absence of the tax could reasonably be considered part of your tax burden. Hard to say how much that is without any information about your field or employer, but I guarantee it's less than 100%.
Only the part of that that would actually be passed through to you as salary in the absence of the tax could reasonably be considered part of your tax burden. Hard to say how much that is without any information about your field or employer, but I guarantee it's less than 100%.
Even when considering total tax wedge, which is not what most people consider "their" tax (note total deductions from your contracted salary is 38% at 120k salary; the total cost to your employer is ~136k because of the employer contributions), only a tiny minority pays that much. E.g. 120k places you in top 2% or thereabout.
The average UK salary is <35k GBP. At that level total deductions are 20%, and your employer pays 10% employer NI.
The average UK salary is <35k GBP. At that level total deductions are 20%, and your employer pays 10% employer NI.
Less than 1% of the UK population earns above £120k. It think GPs qualifier:
> for more than small minorities of the population.
covers that situation. Simply put, only a small minority of people in the UK pay that much tax.
Not to mention the classic error you’ve made
> hit 45%+ tax take.
that tax take only applies to persons income that’s above 120k. The actual total tax burden across their income is substantially lower, given everything below £120k is taxed at a much lower rate.
> for more than small minorities of the population.
covers that situation. Simply put, only a small minority of people in the UK pay that much tax.
Not to mention the classic error you’ve made
> hit 45%+ tax take.
that tax take only applies to persons income that’s above 120k. The actual total tax burden across their income is substantially lower, given everything below £120k is taxed at a much lower rate.
> Not to mention the classic error you’ve made
Actually I didn’t error. This is the total tax paid expressed as a percentage. It is not the marginal tax rate. See the link I provided as evidence (add total deductions + employers NI together).
Actually I didn’t error. This is the total tax paid expressed as a percentage. It is not the marginal tax rate. See the link I provided as evidence (add total deductions + employers NI together).
> add total deductions + employers NI together
Why would anyone do this? Employers NI is a business tax, why would consider that a tax paid by individuals?
If you’re gonna start attributing employer taxes to individuals, then why not start including business rates and other random taxes, then you can gin up any level tax burden you want.
Why would anyone do this? Employers NI is a business tax, why would consider that a tax paid by individuals?
If you’re gonna start attributing employer taxes to individuals, then why not start including business rates and other random taxes, then you can gin up any level tax burden you want.
It’s value that you created for your employer by your work and that you didn’t receive after taxation.
The fact that it was taxed above some line rather than below it doesn’t matter. (Of course that means it needs to be added to both the numerator and denominator when calculating the total tax burden, something that is often skipped.)
The fact that it was taxed above some line rather than below it doesn’t matter. (Of course that means it needs to be added to both the numerator and denominator when calculating the total tax burden, something that is often skipped.)
By that argument you might as well add VAT paid by your employers customer as well. It's a specious argument, because these amounts are not part of what you negotiate or put in your contract, and when these rates change your employer is on the hook for them, not you.
It further only tend to be included when complaining about high tax countries, and conveniently forgotten when people compare w/e.g. US taxation.
Nevertheless, even with them included, only a few European countries have total tax wedges above 50% for more than small portions of the population.
It further only tend to be included when complaining about high tax countries, and conveniently forgotten when people compare w/e.g. US taxation.
Nevertheless, even with them included, only a few European countries have total tax wedges above 50% for more than small portions of the population.
> By that argument you might as well add VAT paid by your employers customer as well.
If you make money by your labor hours directly being billed and the buyer of those hours pays VAT on that labor, then I agree.
So long as there’s a direct and 100% link between your labor and the taxed amount, it’s value you created and was taxed away, without regard to who stroked the check to the tax authorities.
If you make money by your labor hours directly being billed and the buyer of those hours pays VAT on that labor, then I agree.
So long as there’s a direct and 100% link between your labor and the taxed amount, it’s value you created and was taxed away, without regard to who stroked the check to the tax authorities.
Why caveat it like that? Why not include other taxes paid by the employer, all of which affect what they can afford to pay you.
It's irrelevant to me, because it's not a tax on your contracted income.
You can make an argument that it is tax.on the value you created, sure, but not on your income because for most employees there is no direct link between value created and income.
It's irrelevant to me, because it's not a tax on your contracted income.
You can make an argument that it is tax.on the value you created, sure, but not on your income because for most employees there is no direct link between value created and income.
You’re looking at it as tax on contracted income. Which is a consistent lens to use.
I’m looking at it as a tax on direct labor. Which is also a consistent lens to use.
I’m looking at it as a tax on direct labor. Which is also a consistent lens to use.
It’s a direct tax on your employment, and if you are self employed then you also have to pay it.
Likewise if you have options/shares as part of remuneration it is often specified that the employee pays the employers NI for it.
Honestly it’s just a cheeky way for the govt to hide income taxes.
Why not include business rates? Because it’s not linked to the employees salary. It doesn’t change based on the employees salary.
Likewise if you have options/shares as part of remuneration it is often specified that the employee pays the employers NI for it.
Honestly it’s just a cheeky way for the govt to hide income taxes.
Why not include business rates? Because it’s not linked to the employees salary. It doesn’t change based on the employees salary.
Not sure why you get downvoted; most taxes are scales and the highest is around 50%. That doesn't mean you pay 50%. Or even close to it.
In sweden we also have social insurance fee (which is a tax according to all def even if it is called a fee) and VAT. 50% is just one of many taxes. You should count all the taxes an individual pays.
So then you would need, in other countries, count all the unemployment insurance, pension, school premiums and healthcare insurance also towards their tax. Then yes.
When people outside more socialist countries say they pay far less tax, they never include any of this, so I don’t either.
When people outside more socialist countries say they pay far less tax, they never include any of this, so I don’t either.
The average earner in Sweden pays <25% combined in tax + social insurance fee according to OECD Taxing Wages.
Taxes on your salary, + VAT, + rest of taxes you pay for owning a car, a house, + taxes on petrol, etc amounts to at least half your salary in most European countries.
In most European countries you'd have to earn far above average to approach that. Have a look at the tables in OECD's Taxing Wages publications. Having earned far above average in several European countries, I've never paid more than half, despite for part of the time earning 5x+ the national average.
That's not to say you can't. Some certainly do. And some countries are much higher. Belgium in the very significant outlier, with Germany not far behind.
That's not to say you can't. Some certainly do. And some countries are much higher. Belgium in the very significant outlier, with Germany not far behind.
Belgium and Germany are the worst, at about 70% total in taxes and dues.
> total tax wedges (including employer payroll taxes)
Those "employer payroll taxes" are still part of your salary. It's just an accounting trick to fool you.
Those "employer payroll taxes" are still part of your salary. It's just an accounting trick to fool you.
They are not part of what you negotiate, and if the rates change your take home pay doesn't change, but it was exactly in anticipation of arguments like this I pointed out that my claim holds even for total tax wedge.
Maybe for you its not a part of what you negotiate, but it surely is for your employer. In my country it is a typical to work based on self-employment and you can see it quite clearly even in advertised salary ranges: the amount you can get when self employed is equal to the sum of salary offered for employees and payroll taxes.
What do you consider "typical"? In Europe, Greece is by far a massive outlier with about 30% self employed". No other European country comes close (I think Italy is second, about 10 percentage points lower, but not sure). In other words, in no European country is it anywhere close to being more typical to be self employed than being employed. The vast majority of people negotiate a salary, not a self-employed rate.
That it is part of the calculation for the employer is irrelevant - so is office costs, admin overheads, software licenses, equipment, yet we don't consider those costs deductions from an employees salary and bump the "real" salary up accordingly.
That it is part of the calculation for the employer is irrelevant - so is office costs, admin overheads, software licenses, equipment, yet we don't consider those costs deductions from an employees salary and bump the "real" salary up accordingly.
Are you sure? I mean, most European countries (there are exception) have a marginal rates of >30% at middle class incomes.
Then add on top VAT rates of >20%.
It wouldn't surprise me it hits 50% of income for an awful lot of Europeans.
Then add on top VAT rates of >20%.
It wouldn't surprise me it hits 50% of income for an awful lot of Europeans.
Yes, I'm sure, and you can't add up percentages like that.
Effective rate is far lower, and you can't spend money you've paid in tax on VAT, nor money you've spent on housing, or the multitude of zero rated goods which usually includes food, so the proportion of your money you pay VAT on is usually small.
Last time I actually did the math, I paid about 4% of my gross pay in VAT, and despite being in the top 1-2% or so in the UK my effective rate including VAT is still only just approaching the 50% mark.
Effective rate is far lower, and you can't spend money you've paid in tax on VAT, nor money you've spent on housing, or the multitude of zero rated goods which usually includes food, so the proportion of your money you pay VAT on is usually small.
Last time I actually did the math, I paid about 4% of my gross pay in VAT, and despite being in the top 1-2% or so in the UK my effective rate including VAT is still only just approaching the 50% mark.
I never implied you just "add up percentages like that".
The point is, if your effective income tax rate is 35%, you also need to add up all the taxes that aren't income tax, like the 20% VAT, gasoline taxes, alcohol taxes, property taxes, stamp duties, etc, etc.
Add all that up and I wouldn't be surprised if many people had an effective tax rate >50%
The point is, if your effective income tax rate is 35%, you also need to add up all the taxes that aren't income tax, like the 20% VAT, gasoline taxes, alcohol taxes, property taxes, stamp duties, etc, etc.
Add all that up and I wouldn't be surprised if many people had an effective tax rate >50%
I would be surprised if many people had an effective rate >50% that way.
I've done the calculations in the past - the effective rate of VAT as a proportion of gross income added up to around 4% for me, because most of my money does not go towards VAT rated products.
Nor does it for anyone.
Because before you spend on VAT-rated products (or alcohol, gasoline etc.), you first pay income taxes, then you pay for housing, and food which most places is zero rated or at a discounted VAT rate, and debts. The higher you earn, the lower proportion of your income tends to go towards spending, partially because you tend to put aside a larger proportion for pensions, partly because you pay a higher rate of tax, so VAT contributes less to your overall tax burden - it's a deeply regressive tax.
Most people don't have enough money to spend on highly taxed items for it to be possible for them to get to an effective tax rate of 50%+, and most of those of us who might be able to spends our money otherwise - bigger house, bigger pensions, more investments.
I earn many times the UK national average, and so pay income tax and national insurance far closer to the 50% mark than the vast majority of the UK population. Despite that I still don't cross it when other taxes are added on. Including VAT, property taxes/council tax and similar. I'm in the top 1-2% income earners in the UK - people earning less than me are certainly getting nowhere near 50%.
Even when I lived in Norway, which has wealth taxes, some of the highest gasoline and alcohol taxes in the world, and higher income tax, and high VAT (25%), did I reach 50%.
In some of the highest tax countries in Europe, like Belgium (an extreme outlier) and Germany, higher proportions will cross the 50% line, but overall for Europe this applies to a vanishingly small proportion of people. UK is "low tax" for Europe, but closer to the average than e.g. Belgium and Germany.
Which is why the "half goes to taxes" crowd almost always ends up forced to start bringing up the total tax wedge instead of other taxes. Even then most people will never hit 50%, though more do.
I've done the calculations in the past - the effective rate of VAT as a proportion of gross income added up to around 4% for me, because most of my money does not go towards VAT rated products.
Nor does it for anyone.
Because before you spend on VAT-rated products (or alcohol, gasoline etc.), you first pay income taxes, then you pay for housing, and food which most places is zero rated or at a discounted VAT rate, and debts. The higher you earn, the lower proportion of your income tends to go towards spending, partially because you tend to put aside a larger proportion for pensions, partly because you pay a higher rate of tax, so VAT contributes less to your overall tax burden - it's a deeply regressive tax.
Most people don't have enough money to spend on highly taxed items for it to be possible for them to get to an effective tax rate of 50%+, and most of those of us who might be able to spends our money otherwise - bigger house, bigger pensions, more investments.
I earn many times the UK national average, and so pay income tax and national insurance far closer to the 50% mark than the vast majority of the UK population. Despite that I still don't cross it when other taxes are added on. Including VAT, property taxes/council tax and similar. I'm in the top 1-2% income earners in the UK - people earning less than me are certainly getting nowhere near 50%.
Even when I lived in Norway, which has wealth taxes, some of the highest gasoline and alcohol taxes in the world, and higher income tax, and high VAT (25%), did I reach 50%.
In some of the highest tax countries in Europe, like Belgium (an extreme outlier) and Germany, higher proportions will cross the 50% line, but overall for Europe this applies to a vanishingly small proportion of people. UK is "low tax" for Europe, but closer to the average than e.g. Belgium and Germany.
Which is why the "half goes to taxes" crowd almost always ends up forced to start bringing up the total tax wedge instead of other taxes. Even then most people will never hit 50%, though more do.
ekianjo(1)
Might be true but I've never heard of any European who was bankrupt because of student loans or doctors invoices.
Also, it doesn’t seem like Europeans are much more uneducated or unhealthy than people in the US.
Also, it doesn’t seem like Europeans are much more uneducated or unhealthy than people in the US.
Dunno why everybody is using this thread to compare the EU to the US, as if I cared about how it is in the US.
I'm telling you I pay over half my salary in taxes and get little in return. Whatever happens in the US is not my problem.
I'm telling you I pay over half my salary in taxes and get little in return. Whatever happens in the US is not my problem.
> Dunno why everybody is using this thread to compare the EU to the US, as if I cared about how it is in the US.
Because the comment that you replied to was comparing the EU to the US: "And everyone benefits from this kind of collective solidarity - our societies are far less combative (both in the literal and the proverbial sense) than the US are."
Because the comment that you replied to was comparing the EU to the US: "And everyone benefits from this kind of collective solidarity - our societies are far less combative (both in the literal and the proverbial sense) than the US are."
Really? Nobody has gone bankrupt due to health issues?
Because in Canada, which has universal health insurance, medical bankruptcies are 25% of all bankruptcies for those over 55.
Why? Because if you're sick enough, you can't work. You can go on unemployment, but it's capped and doesn't replace 100% of your income. So if you're living paycheck to paycheck, it's not that hard to go bankrupt if you don't have the income to pay your mortgage, car loan, etc.
Because in Canada, which has universal health insurance, medical bankruptcies are 25% of all bankruptcies for those over 55.
Why? Because if you're sick enough, you can't work. You can go on unemployment, but it's capped and doesn't replace 100% of your income. So if you're living paycheck to paycheck, it's not that hard to go bankrupt if you don't have the income to pay your mortgage, car loan, etc.
You dont have student loans in the EU because the universities are subsidized...
There are student loans in the EU, because subsidizing universities doesn't extend to providing free food and housing for students. E.g. student loans offered by a German state-owned bank: https://www.kfw.de/inlandsfoerderung/Privatpersonen/Studiere...
(Though I don't think many people need it, because most can just get a part-time job and finish in double the time, debt-free.)
(Though I don't think many people need it, because most can just get a part-time job and finish in double the time, debt-free.)
Tuition is subsidized. But I don't know about you, but living expenses for 1 year are often as much or more than public college tuition in the US.
and it creates all the wrong incentives since they're overdoing it by quite a bit. it also forces people to less optimal decisions because they need to avoid taxes. at the end of the day, this makes them less resilient, since governments won't be fast enough to react to new developments and incentivized to actually solve problems.
edit: just to add to this: I don't think pooling / sharing is bad, there are many cases where this makes sense (investments, insurance), especially when it's voluntary, but it's easy to overdo it in a forced model. European living abroad btw, familiar with many different ways people live.
edit: just to add to this: I don't think pooling / sharing is bad, there are many cases where this makes sense (investments, insurance), especially when it's voluntary, but it's easy to overdo it in a forced model. European living abroad btw, familiar with many different ways people live.
Optimal decision making = poor people don't buy health insurance, rich people buy health insurance
> It's more like we pay half our salary in taxes and then we get terrible education and a healthcare system where you can't even get an appointment.
You're talking about the US, right?
I and people I know in different states have often had to wait months to get an appointment with a doctor.
The quality of education you get in the US varies drastically depending on your location, and typically the wealth of your parents.
You're talking about the US, right?
I and people I know in different states have often had to wait months to get an appointment with a doctor.
The quality of education you get in the US varies drastically depending on your location, and typically the wealth of your parents.
All we need is more doctors and nurses and that is not the fault of any kind of insurance. 8000 doctors graduate from medical school in the US each year and fail to match with a residency because there simply aren’t enough spots. That can be fixed.
I'm in one of the largest metro areas of the US and there are 6+ month long waiting lists to see some common specialists, even if you have great health insurance and even if you want to pay up front in cash. People will die on those lists.
Sounds like it's the same pretty much anywhere then
on the flip side, would you rather the bribe your dr for an appointment and "donate" to the school?
well you need to in a public system that's overloaded, so you lose both when paying in and again when you need to get treatment.
Americans pay more in tax towards public healthcare than we do in some European countries. Then they pay again.
E.g. the UK NHS costs less per capita than Medicare + Medicaid costs per capita (not per user), despite the former providing universal service. Partly explained by artificial restrictions on Medicare limiting their ability to negotiate price - the "free" market is intentionally prevented from functioning. It's pretty much corporate welfare paid for by regular tax payers. I never understand why Americans tolerate this.
The proportion who pays twice in the UK is around 10% who opt for private insurance on top. The proportion who pays twice in the US is every tax payer.
Total healthcare spend per capita (public + private) tells a pretty clear picture, where costs of healthcare in the US is totally out of control.
E.g. the UK NHS costs less per capita than Medicare + Medicaid costs per capita (not per user), despite the former providing universal service. Partly explained by artificial restrictions on Medicare limiting their ability to negotiate price - the "free" market is intentionally prevented from functioning. It's pretty much corporate welfare paid for by regular tax payers. I never understand why Americans tolerate this.
The proportion who pays twice in the UK is around 10% who opt for private insurance on top. The proportion who pays twice in the US is every tax payer.
Total healthcare spend per capita (public + private) tells a pretty clear picture, where costs of healthcare in the US is totally out of control.
>Americans pay more in tax towards public healthcare than we do in some European countries. Then they pay again.
The US system is designed to be profitable for those running it, not offer good value for those using it.
The US system is designed to be profitable for those running it, not offer good value for those using it.
When I meet someone with two PhDs in Europe I started to evaluate if they're contributing massive brain-blasts to civilization or if they just wanted to delay the next chapter of adulthood and use free education as a camouflage.
A Ph.d is mostly cheap labour for the relevant research institution. I wouldn't count that as a cost to society unless the work done is not useful, in which case it is not the Ph.d graduate but the research institution that funded the project that is to blame. Get a Ph.d position is quite competitive and the ones which are less "useful" from an immediate economic perspective are paid much worse.
PhDs are apprentices doing skilled labor, not students in the usual sense. An unfunded PhD offer, even in the US, is a polite rejection.
> Society, at least in the classic European model, works just the same (..) everyone benefits from this kind of collective solidarity
There appear to be a growing number of voters who disagree.
https://www.theguardian.com/world/2023/jun/30/far-right-on-t...
There appear to be a growing number of voters who disagree.
https://www.theguardian.com/world/2023/jun/30/far-right-on-t...
Populist parties in Europe do not necessarily oppose taxation for social programs and collective solidarity. This is the case with the Perussuomalaiset party in Finland, for example, which supports a welfare state in spite of the anti-immigrant rhetoric that gets it categorized as far-right.
In fact, historically, few right wing parties in Europe in general have opposed welfare programs outright. A large portion of European welfare programs came from the centre right or right, partially on the basis of a Christian morality argument (e.g. Bismarcks original German healthcare and pension insurance reforms, backed by Zentrum, a party who went on to support Hitlers candidacy for Chancellor, and whose spiritual successor is the CDU), partially as a realisation it was either forging compromises or risk revolution (e.g. Bismarks reforms were at least in part outright "stolen" from demands from left wing parties he banned and imprisoned leading members of, as part of a two-prong strategy of appeasement and an iron fist.
That free market and right libertarian parties have gained some traction again is a relatively "new" (few decades) phenomenon, after many of them were squeezed hard by the rapid growth of socialist parties to their left a century ago.
EDIT: Worth adding that classically liberal parties in Europe have largely leaned socially liberally, e.g. "low overhead welfare" rather than no welfare. A lot of the universal basic income talk comes from classical liberals as a counter to social democratic "big government welfare" not by removing the welfare but by trying to minimise government involvement in the equation.
That free market and right libertarian parties have gained some traction again is a relatively "new" (few decades) phenomenon, after many of them were squeezed hard by the rapid growth of socialist parties to their left a century ago.
EDIT: Worth adding that classically liberal parties in Europe have largely leaned socially liberally, e.g. "low overhead welfare" rather than no welfare. A lot of the universal basic income talk comes from classical liberals as a counter to social democratic "big government welfare" not by removing the welfare but by trying to minimise government involvement in the equation.
Yes, this model works well when people are mostly surrounded by people "like them". Populists tell such people they'd be better off if it weren't for all the people with different coloured skin, wearing funny clothes, speaking weird languages. And so while everyone probably is better off, they fester that resentment, creating a cultural feeling that we're not, and it's all _their_ fault.
Then why is real gdp per capita in many Western European countries mostly stagnant since 2008? If what you’re saying was true, Europe should be growing faster than USA and even faster than countries like China that have much worse social safety nets.
Because these benefits don’t necessary result in growth of real gdp per capita, but increase the stability and livability of a city.
A PhD student in many places in Europe can afford to have their own apartment and have kids. Where is that possible in usa?
A PhD student in many places in Europe can afford to have their own apartment and have kids. Where is that possible in usa?
In which European cities PhD can afford to buy apartment (Paris? London? Berlin?).
Or you are speaking about smaller cities in which you can also make the same argument for US.
Sorry didn’t mean buy, I meant rent your own one bedroom apartment, rather than have roommates which is the norm in usa.
In terms of cities it would be all except maybe London and Paris.
Also in most European countries renting is just as good as buying because of favourable tenant laws
In terms of cities it would be all except maybe London and Paris.
Also in most European countries renting is just as good as buying because of favourable tenant laws
I do not think these two facts are linked. I don't think the US economy is growing faster because they have a less regulated healthcare system.
If anything one would intuitively think the opposite should be true. That with a better safety net, entrepreneurship should be more common in Europe, while Americans should be more risk-averse. But I think in this case there is a HUGE cultural (and maybe even partly epigenetic) component that is always ignored.
If anything one would intuitively think the opposite should be true. That with a better safety net, entrepreneurship should be more common in Europe, while Americans should be more risk-averse. But I think in this case there is a HUGE cultural (and maybe even partly epigenetic) component that is always ignored.
I don't know, but as someone pointes out, we EUropeans are less combative and maybe need less to satisfy our needs, so we don't run for more GDP? maybe it's enough?
I'm not saying it's good, but maybe it's just less pressure -> less force -> less progress.
I'm not saying it's good, but maybe it's just less pressure -> less force -> less progress.
There’s more to life than GDP. Economic growth is poor measure of collective happiness or quality of life. Are you going to argue that average quality of life in china is substantially better than Europe because their GDP growth is higher?
Going back to the original article, the subject is regarding ergodicity and economic benefits of cooperation. The commenter I’m replying to extended an analogy to claim that this research extends to certain countries social welfare system. My position is that this extension is outright false, that just because cooperation can create benefits under the conditions of the research, it doesn’t demonstrate economic growth results from social welfare policies.
Tbh there is a price for that, our taxation is one of the highest in the world with stagnation for past 15 years (even with enormous "immigration" flow).
Also people who are in top of their fields almost never stay in Europe (especially if they are young) as potential tax burden for top brackets (which aren't that high its mostly middle class in US wealth scale) are enormous and total taxation can be as high as 60-65% (with VAT and local laws [homes, car, fuel]) for 1.5-3x less money then in US or even in some Asian based corporations which directly makes EU stagnant in most of the R&D fields (even in IT i can make like triple the money in US or 1.5x in China corporations).
EU system is good if you are making money not from work but from wealth (rent, stocks etc.) which is only for folks who already make a lot of investments in younger days or just inherit a lot of cash/properties/stocks.
I know US folks love to be angry about their country, but they are in best position for making decent living in the whole world, except possibly some small asian/european states like Switzerland/Singapore etc.
Also people who are in top of their fields almost never stay in Europe (especially if they are young) as potential tax burden for top brackets (which aren't that high its mostly middle class in US wealth scale) are enormous and total taxation can be as high as 60-65% (with VAT and local laws [homes, car, fuel]) for 1.5-3x less money then in US or even in some Asian based corporations which directly makes EU stagnant in most of the R&D fields (even in IT i can make like triple the money in US or 1.5x in China corporations).
EU system is good if you are making money not from work but from wealth (rent, stocks etc.) which is only for folks who already make a lot of investments in younger days or just inherit a lot of cash/properties/stocks.
I know US folks love to be angry about their country, but they are in best position for making decent living in the whole world, except possibly some small asian/european states like Switzerland/Singapore etc.
> people who are in top of their fields almost never stay in Europe (especially if they are young)
> I know US folks love to be angry about their country, but they are in best position for making decent living
These are two different things. The disparity of wealth between the top and the bottom, indeed between the top and everyone else, is greater than in the other wealthy countries.
For decades, income in the US has been stagnant except at the top. And when the salaries of the masses finally start to rise due to demand for labor, the Federal Reserve decides that is the Worst Thing Ever and intentionally provokes a recession.
> EU system is good if you are making money not from work but from wealth
Every system is good if you are making money not from work but from wealth.
> I know US folks love to be angry about their country, but they are in best position for making decent living
These are two different things. The disparity of wealth between the top and the bottom, indeed between the top and everyone else, is greater than in the other wealthy countries.
For decades, income in the US has been stagnant except at the top. And when the salaries of the masses finally start to rise due to demand for labor, the Federal Reserve decides that is the Worst Thing Ever and intentionally provokes a recession.
> EU system is good if you are making money not from work but from wealth
Every system is good if you are making money not from work but from wealth.
> Every system is good if you are making money not from work but from wealth.
But not every system is taxing you 65% from work and 0-20% from wealth. Indeed US wealth disparity is enormous but this is also a country with highest number of billionaire, gigant corporations and biggest stock exchange. And all of that didn't change the fact that US middle class is wealthiest middle class in the world (except some small countries that cant be compared Norway/Qatar etc.)
But not every system is taxing you 65% from work and 0-20% from wealth. Indeed US wealth disparity is enormous but this is also a country with highest number of billionaire, gigant corporations and biggest stock exchange. And all of that didn't change the fact that US middle class is wealthiest middle class in the world (except some small countries that cant be compared Norway/Qatar etc.)
> US middle class is wealthiest middle class in the world
This is not true.
https://www.investopedia.com/ask/answers/040615/what-country...
https://www.nytimes.com/2014/04/23/upshot/the-american-middl...
This is not true.
https://www.investopedia.com/ask/answers/040615/what-country...
https://www.nytimes.com/2014/04/23/upshot/the-american-middl...
> and total taxation can be as high as 60-65% (with VAT and local laws [homes, car, fuel])
If you earn enough for this to be even a possible scenario, you either live somewhere where it's easy to move across a border to change it (Belgium and Germany are massive outliers; especially Belgium) while staying in Europe, and/or earn enough that you can easily plan your way out of paying that much. (3rd alternative: you confuse marginal and effective tax rates, which is scarily common)
It's a problem for the top ~1%-2%.
If you earn enough for this to be even a possible scenario, you either live somewhere where it's easy to move across a border to change it (Belgium and Germany are massive outliers; especially Belgium) while staying in Europe, and/or earn enough that you can easily plan your way out of paying that much. (3rd alternative: you confuse marginal and effective tax rates, which is scarily common)
It's a problem for the top ~1%-2%.
Hard disagree on that - I would be much better of with a US health insurance were there weren't months of waiting time for treatment.
Sure if I am unemployed I would be better of with the version we have in Denmark, but I won't be unemployed for long. And if I get a disability, I have private insurance for that too, because the public one isn't good enough.
The unemployment insurance portion I pay will pay out something like 1/2 my salary, but because everyone pays the same in I am subsidising those who are much more likely to be unemployed (bricklayers in winter, to make a simple example). Oh and many of those are going to get most of their salary paid out because they are not over the cap.
So to sum up: by having a single system everone pays into you are going to be put together with people who have an entirely different risk profile and you will be better of in a system were you could choose your own insurances.
Then of course I am also subsidicing all the drug users and alcoholics, but thats also an issue in the US, because society has decided that we must.
Sure if I am unemployed I would be better of with the version we have in Denmark, but I won't be unemployed for long. And if I get a disability, I have private insurance for that too, because the public one isn't good enough.
The unemployment insurance portion I pay will pay out something like 1/2 my salary, but because everyone pays the same in I am subsidising those who are much more likely to be unemployed (bricklayers in winter, to make a simple example). Oh and many of those are going to get most of their salary paid out because they are not over the cap.
So to sum up: by having a single system everone pays into you are going to be put together with people who have an entirely different risk profile and you will be better of in a system were you could choose your own insurances.
Then of course I am also subsidicing all the drug users and alcoholics, but thats also an issue in the US, because society has decided that we must.
The only problem with this model is that it doesn't seem to be working long term. Economically, Europe has been stagnating for a long time, and recently its been in a decline.
So it's a nice model as long as you can maintain it, which doesn't seem to be very long.
https://archive.ph/5eZjb
https://archive.ph/5eZjb
The linked article shows that Europeans are only becoming poorer since 2018, so the last 5 years.
The reasons offered are demographics, valuing free time, the pandemic and the Ukraine war.
This hardly suggests that the problem is the pooling of wealth or that it is not sustainable long term.
The reasons offered are demographics, valuing free time, the pandemic and the Ukraine war.
This hardly suggests that the problem is the pooling of wealth or that it is not sustainable long term.
Their economy was stagnating for at least a decade before 2018. They've gone from near-zero growth to negative.
It doesn't matter what the reasons are, really. The pandemic hit everywhere, and their choice to "value free time" is the problem here. Turns out you can't sustain a high quality of life without enough people working hard to produce the products and services that create this high quality of life.
Where’s the evidence Europe is failing to maintain it quality of life?
You’ve implicitly supposed that quality of life can’t be maintained without economic growth, but have provided no evidence or rationale for such a claim. Quality of life measures seem to indicate things are getting better not worse in Europe, and is leagues ahead of the U.S.
You’ve implicitly supposed that quality of life can’t be maintained without economic growth, but have provided no evidence or rationale for such a claim. Quality of life measures seem to indicate things are getting better not worse in Europe, and is leagues ahead of the U.S.
Yet if you look across the EU it's the richest countries that work the least hours. The people working long hours don't seem to be getting much benefit from it at all.
You seem very confident that the economic problems are entirely due to valuing free time.
Do you have any evidence to back up this assertion, or is it just instinct?
Do you have any evidence to back up this assertion, or is it just instinct?
It depends on what you value, right? There are hard limits on the number of people any plot of land can handle and feed. Stagnation is probably a good thing. Always “doing more” isn’t always a good thing. It’s not a zero-sum game where there is some kind of competition.
Stagnation isn't "a good thing" when you're comparing to societies that are progressing. And it may be a zero sum game, when stagnating nations are drained of talent and brains, so this model is even less sustainable, as anyone who can do better leaves, and the rest are left to support those who don't do particularly well.
Yes, but what is “progress” right now? Move to a country where you can make infinite money (a gamble) but lose it all as soon as you get sick? Or move to another one where every move is monitored and watched? Or where you need a phone to do the most basic things, where you are stranded with no way to eat until you charge your phone?
Progress may not always be good, at least in today’s times it basically means “more efficient extraction of wealth from the middle class”.
Progress may not always be good, at least in today’s times it basically means “more efficient extraction of wealth from the middle class”.
Let’s assume what you’re saying was true: doing less is better. Well just mechanically, a “evil” society that does more will attract more labor and capital than one that doesn’t. Any area of competition except “goodness” will be won by the evil country, such as space races, weapons development, and new technologies. That means the society which chooses to do less will be culturally, technologically, and militarily at the whims of the evil society. So the power dynamic will definitionally belong to the doing more society at the expense of the doing less one, and in the final state the goal of goodness by doing less has failed. This is a contradiction disproving the assumption .
Does a society “doing more” actually attract talent? I left one of those countries and essentially being called a 100x dev (not my words, I’m not convinced). I have many friends also leaving that country to come to the EU… so, I’m not sure that part of your premise is valid.
Sure if you can find a geography where your benefits are greater than your costs compared to a different, by definition that is doing more - efficiency is great. Reducing costs doesn’t always mean a net reduction in output; if I can work 1 hour a day and earn enough to fill my remaining hours with happy activities, that’s clearly less productive than working 8 hours a day and not having time to do what I want. Of course usually what happens for many people is they work less, get less, and don’t find a way to happily use the free time. That’s why people are constantly trying to migrate to countries with relatively higher productivity. Obviously not your case.
> Economically, Europe has been stagnating
thats since 2008, when ECB and most of european governments have decided to go full Aysterity and cut all kinds of investments. Prior to this idiocy EU economy was actually larger than US economy.
These ecents are notbrelevant to the taxation model, which predates them by decades
thats since 2008, when ECB and most of european governments have decided to go full Aysterity and cut all kinds of investments. Prior to this idiocy EU economy was actually larger than US economy.
These ecents are notbrelevant to the taxation model, which predates them by decades
The EU economy fell way below the US (after being roughly equal) because they were never able to compete in the new digital economy.
All the big tech companies are American.
You also have to ask yourself why the ECB and European governments had to cut spending. Perhaps because the levels before weren't sustainable? Perhaps because you can't just keep living beyond your means, as eventually you'll run out of other people's money?
It is now pretty much accepted that the European reaction to the financial crisis was massively worse than the American. A big and expensive error can have long lasting effects - perhaps no need for beyond means, digital etc. but that is rather a result not a cause.
The big and bad error that caused European bad reaction to the financial crisis was the introduction of common currency. Eurozone does not form Optimum Currency Area, under Mundell's definition (https://en.wikipedia.org/wiki/Optimum_currency_area), so any significant crisis is made worse by "asymmetric shocks".
I disagree with that, the policy errors where far more direct (and well analyzed). For example: poor bank recapitalisation, wrong incentives about balance optimization, ECB even raising rates in the beginning of the GFC
"Full austerity" is wildly hyperbolic. Here's EU government spending as share of GDP: https://tradingeconomics.com/european-union/government-spend...
Try to click on MAX and spot when governments went "full austerity".
Try to click on MAX and spot when governments went "full austerity".
What austerity? In Spain’s case, both debt to GDP and tax revenue to GDP ratios has been increasing since a decade ago. That’s the contrary of austerity.
tax revenue to GDO? how is that relevant to government cutting spending? I never said they've cut taxes.
If economy collapses, state recenues drop, ofcourse debt will grow
If economy collapses, state recenues drop, ofcourse debt will grow
> it doesn't seem to be working long term
Define "Long term", it's been working pretty well for over a century.
Define "Long term", it's been working pretty well for over a century.
This model works well in countries that already have the wealth to support it, usually from spending centuries colonizing other countries and sucking them dry. It doesn't work quite as well in the countries that had been colonized.
Depends. A lot of the former colonies attempted more collectivist policies but were prevented from doing so by their former colonizers (or other rich countries).
https://en.wikipedia.org/wiki/1973_Chilean_coup_d%27%C3%A9ta...
https://en.wikipedia.org/wiki/Fran%C3%A7afrique
https://en.wikipedia.org/wiki/1973_Chilean_coup_d%27%C3%A9ta...
https://en.wikipedia.org/wiki/Fran%C3%A7afrique
Sorry to break your bubble but most European countries did not colonise other countries. The most successful ones, Scandinavian countries, did not colonise other countries (well they did internally but not the same way as England and France for example). If you look to Norway we had a social democratic system before we gained the majority of wealth (aka oil).
https://en.wikipedia.org/wiki/Swedish_overseas_colonies
https://en.wikipedia.org/wiki/List_of_possessions_of_Norway
https://en.wikipedia.org/wiki/Danish_overseas_colonies
https://en.wikipedia.org/wiki/List_of_possessions_of_Norway
https://en.wikipedia.org/wiki/Danish_overseas_colonies
Scandinavian countries did not establish successful profitable colonies (except perhaps Iceland, if you want to count that). It's ambiguous enough whether the average Briton really benefited from their colonial adventures: the Scandinavian peasantry clearly did not. Finland in particular was an impoverished backwater until the early 20th century.
Why? From a cash flow perspective, the monthly insurance premiums should cover the expenses.
But the US taxpayer also pays into health insurance (for retirees, low income and subsidies for everyone else), long-term disability, unemployment insurance, workers compensation, social security pension.
So what's the difference again?
So what's the difference again?
It works as long as overall wealth is increasing, businesses and population are growing. We'll see how it goes on from here..
It’s not fair to compare any country to the US since they get to export their inflation.
thats one way of seeing things. If you never left Europe that is
I left the EU and lived in many places, travelled to more. Always happy to be back; it's not perfect, but it's worse elsewhere.
The more I see of the world the more I agree with OP, what's your point?
What’s your way of seeing things?
I have an amateur theory on a similar idea and could use some feedback on it. I’m sure this isn’t an original idea, but I’m not an economist.
The argument goes like this: the wealthy members of society have a higher quality of life when income inequality is not extreme. Not because of diminished social ostracism, but because the luxury products they want to consume would not exist without the markets and broad consumer base to fund them.
In other words, the average wealthy person today has access to technology, exotic food, plumbing, fast cars, etc. that even kings didn’t have a few centuries ago. These things only exist because wealth was sufficiently distributed to incentivize their development. Many or most of them would not exist in a world of extreme inequality, if only from lack of interest (e.g., a wealthy 17th century aristocrat isn’t going to start a plumbing business, but the son of a tradesman will.) All the money in the world won’t help the King of France build a private jet in 1770.
The conclusion of this is that from a purely selfish point of view, the wealthy have a vested interest in not centralizing all wealth.
Edit: it's so bizarre when people don't reply and just downvote a comment that is purely speculating.
The argument goes like this: the wealthy members of society have a higher quality of life when income inequality is not extreme. Not because of diminished social ostracism, but because the luxury products they want to consume would not exist without the markets and broad consumer base to fund them.
In other words, the average wealthy person today has access to technology, exotic food, plumbing, fast cars, etc. that even kings didn’t have a few centuries ago. These things only exist because wealth was sufficiently distributed to incentivize their development. Many or most of them would not exist in a world of extreme inequality, if only from lack of interest (e.g., a wealthy 17th century aristocrat isn’t going to start a plumbing business, but the son of a tradesman will.) All the money in the world won’t help the King of France build a private jet in 1770.
The conclusion of this is that from a purely selfish point of view, the wealthy have a vested interest in not centralizing all wealth.
Edit: it's so bizarre when people don't reply and just downvote a comment that is purely speculating.
Seems reasonable to me, go with it. I mean, it also makes sense even at a societal level, would you rather people around you when you walk in the street be content/satisfied or looking out for a victim to steal from? I'd rather all people have sufficient access to life's needs so that selfishly i'm not scared that I'll be robbed. Your theory makes sense in many levels.
Good points. If one looks at military technology, it often tries to be ahead of mainstream off the shelf solutions.
It ends up extremely expensive and slow to develop. After the development is finished, it might be that many of the commercial solutions could be better.
In a field where the mainstream is making rapid progress, it often doesn't make sense to create your own bespoke solution.
It ends up extremely expensive and slow to develop. After the development is finished, it might be that many of the commercial solutions could be better.
In a field where the mainstream is making rapid progress, it often doesn't make sense to create your own bespoke solution.
Some time ago I asked myself: why did gambling become so addictive? You always loose, but it’s so powerfully addictive the behaviour must be beneficial in some way. It occurred to me that you always loose when doing “artificial gambling” (casinos, horse races etc) but “natural gambling” is different. Should we explore this coastline, should we try and cultivate this plant, should we run this scientific experiment? These bets may not pay off individually, but for the overall population over time they always pay off. The natural world has ergodicity.
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Often the overall notion of something being good or bad is extremely dependent on the specific details of how it's applied, and their dynamics. While pooling capital or wealth and sharing it among a voluntary, mutually interested group may work for making that wealth grow (after all it's the basis of market exchange and so much built prosperity), this shouldn't be used as a justification for defending forced collectivization and collectivism. These latter tactics might work sometimes in very specific contexts, but their dynamics make them very different and much more plausibly destructive than useful, or even moral.
> spontaneous altruism
> The cooperating gamblers
This article mistakes "altruism" with "cooperation". With cooperation there are no free gifts, everything comes with strings attached. And defection and breaking rules is punished!
> The cooperating gamblers
This article mistakes "altruism" with "cooperation". With cooperation there are no free gifts, everything comes with strings attached. And defection and breaking rules is punished!
As an individual participant you can optimize your outcomes further by hiding some gains and claiming them as losses. In this way, you can extract more from the system. You have an added cost of determining whether to hide a particular win and an added cost of hiding the win itself. But in exchange you can juice your returns.
Therefore, just like so many old economic puzzles rely on ergodicity, this one relies either on full cooperation: either through honesty or through cheap verification (either through transparency or something else).
With that assumption visible, we can see why such an obviously positive result still doesn’t result in that action among informed participants when that precondition is not met.
Therefore, just like so many old economic puzzles rely on ergodicity, this one relies either on full cooperation: either through honesty or through cheap verification (either through transparency or something else).
With that assumption visible, we can see why such an obviously positive result still doesn’t result in that action among informed participants when that precondition is not met.
I like being on the receiving end of people sharing their money. I worked so hard for so long and got nothing out of it so whenever someone gives me free money, I feel like I earned it. I only look for easy money these days and free money is the easiest of all.
Most wealthy people these days received their wealth for free if you think about it... They got it through talking BS. It's all about manipulating people to choose them, to keep them on as a supplier, to give them extra big contracts with friendly terms, to direct traffics to their websites... Anyone earned serious money through hard intelligent work?
Most wealthy people these days received their wealth for free if you think about it... They got it through talking BS. It's all about manipulating people to choose them, to keep them on as a supplier, to give them extra big contracts with friendly terms, to direct traffics to their websites... Anyone earned serious money through hard intelligent work?
It’s interesting because most Ponzi schemes present themselves as a way to pool and share wealth.
too many words just to say concave utility rewards risk sharing
This is shown time and time again (see all the studies about unconditional giving or basic income), and yet those with the most hoard their wealth keeping it out of the useful economy.
The mathematics of this seem sound. The ideological overhead ("cooperation is good"), however, seems wrong. The same outcome that the author achieves with pooling in a group can be achieved by an individual just splitting their wealth into N pools, and then playing the coin-toss individually with each of those N pools.
Also, I suspect an even better outcome for an individual would be achieved by essentially using the Kelly criterion, which means that you wager a certain fraction of year wealth on every coin-toss. The optimal fraction that should be wagered on each toss can be calculated with pretty basic math.
For the lefties: this doesn't mean that cooperation is bad, of course. It just means that the argument in the article can not be used in support of your ideology.
Also, I suspect an even better outcome for an individual would be achieved by essentially using the Kelly criterion, which means that you wager a certain fraction of year wealth on every coin-toss. The optimal fraction that should be wagered on each toss can be calculated with pretty basic math.
For the lefties: this doesn't mean that cooperation is bad, of course. It just means that the argument in the article can not be used in support of your ideology.
The classic Prisoner's Dilemma demonstrates "cooperation is good". Perhaps this is an extension of that.
I don't think the ideological overhead of "cooperation is good" is a leftist one. Quite the opposite, if we qualify it down to "voluntary cooperation is good" it forms the heart of capitalism. The problem with leftism is that often it is also fine with "forced cooperation is good", and that's where it goes bad.
It seems largely pushed by one guy - Ole Peters. It seems he created the Wikipedia page on this subject. His research is done under the umbrella of the authoritative sounding “London Mathematical Laboratory”, which he founded.
It makes giant claims, like the headline here which seems intended to be read as “mathematics proves collectivism is best” - and yet offers little empirical evidence beyond saying that an abstract mathematical model can tell us something about the real world. Spherical horses and all that.
It even pulls the classic pseudoscience manoeuvre of positioning itself against “mainstream economics”.
Crank until proven otherwise IMHO.
Edit: looks like it’s not just me: https://arxiv.org/pdf/2306.03275.pdf
Edit 2: he has a Twitter account where he rails against mainstream economics. He’s a physicist.