<story><title>Is Inequality Inevitable?</title><url>https://www.scientificamerican.com/article/is-inequality-inevitable/</url></story><parent_chain><item><author>vannevar</author><text>It&amp;#x27;s not part of the model because, if you&amp;#x27;re studying how wealth gets distributed rather than how it is produced, it doesn&amp;#x27;t matter.&lt;p&gt;I&amp;#x27;m guessing that your disquiet at this notion comes from the possibility that everyone is creating their own wealth, and to some extent that is no doubt true. But if you start with the simplifying assumption that everyone&amp;#x27;s wealth creation ability is equal, and you just look at distribution, and you find that your model pretty accurately reproduces the real-world distribution of wealth, it&amp;#x27;s at least some evidence that wealth-creation ability is not that different from person to person, and what&amp;#x27;s driving inequality is the distribution mechanism.&lt;p&gt;Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This casts some doubt that wealth accumulation is down to individual human ability.&lt;p&gt;Couple that with the micro-economic observation that someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical, and it seems pretty unlikely that wealth creation has much to do with the distribution we see.</text></item><item><author>SiVal</author><text>There is a popular political perspective that rules on campus these days that treats wealth as something that just magically exists and is simply &amp;quot;redistributed&amp;quot; by one means or another like, say, a phase change in physics where no magnetism&amp;#x2F;charge&amp;#x2F;energy&amp;#x2F;etc. is ever created or consumed. I waited for a point in their model where people actually produced wealth and consumed it, made something or ate it, in addition to redistributing it. Not part of the model.&lt;p&gt;And the idea that things have a &amp;quot;true&amp;quot; value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the &amp;quot;redistribution&amp;quot; of bread and shoes, but it was not part of the model.&lt;p&gt;But their model (which they claim &amp;quot;reproduces inequality with unprecedented accuracy&amp;quot;) could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.</text></item></parent_chain><comment><author>username90</author><text>&amp;gt; Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average.&lt;p&gt;This is nonsense. Lets take an easy example, books, people don&amp;#x27;t want to waste their time reading bad books so only the most palatable books gets a good amount of sales. This means that a small difference in skill leads to a large difference in sales, which would recreate the power-law of wealth creation. Similar arguments can be made about engineering skills, management skills etc.</text></comment>
<story><title>Is Inequality Inevitable?</title><url>https://www.scientificamerican.com/article/is-inequality-inevitable/</url></story><parent_chain><item><author>vannevar</author><text>It&amp;#x27;s not part of the model because, if you&amp;#x27;re studying how wealth gets distributed rather than how it is produced, it doesn&amp;#x27;t matter.&lt;p&gt;I&amp;#x27;m guessing that your disquiet at this notion comes from the possibility that everyone is creating their own wealth, and to some extent that is no doubt true. But if you start with the simplifying assumption that everyone&amp;#x27;s wealth creation ability is equal, and you just look at distribution, and you find that your model pretty accurately reproduces the real-world distribution of wealth, it&amp;#x27;s at least some evidence that wealth-creation ability is not that different from person to person, and what&amp;#x27;s driving inequality is the distribution mechanism.&lt;p&gt;Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This casts some doubt that wealth accumulation is down to individual human ability.&lt;p&gt;Couple that with the micro-economic observation that someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical, and it seems pretty unlikely that wealth creation has much to do with the distribution we see.</text></item><item><author>SiVal</author><text>There is a popular political perspective that rules on campus these days that treats wealth as something that just magically exists and is simply &amp;quot;redistributed&amp;quot; by one means or another like, say, a phase change in physics where no magnetism&amp;#x2F;charge&amp;#x2F;energy&amp;#x2F;etc. is ever created or consumed. I waited for a point in their model where people actually produced wealth and consumed it, made something or ate it, in addition to redistributing it. Not part of the model.&lt;p&gt;And the idea that things have a &amp;quot;true&amp;quot; value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the &amp;quot;redistribution&amp;quot; of bread and shoes, but it was not part of the model.&lt;p&gt;But their model (which they claim &amp;quot;reproduces inequality with unprecedented accuracy&amp;quot;) could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.</text></item></parent_chain><comment><author>username90</author><text>&amp;gt; someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical&lt;p&gt;I&amp;#x27;m not sure this is correct, at least not on average. Take two average persons, give one of them a million dollar, then watch what their net income is the next 10 years. I&amp;#x27;d bet that the one you gave a million dollars will have used up a large part of it thus having a huge net loss while the one you didn&amp;#x27;t give anything will still be roughly at zero.&lt;p&gt;Edit: This study shows that people significantly reduce their income after winning the lottery, suggesting that there is a negative correlation between wealth and earnings given that everything else is the same.&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.nber.org&amp;#x2F;papers&amp;#x2F;w21762.pdf&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.nber.org&amp;#x2F;papers&amp;#x2F;w21762.pdf&lt;/a&gt;</text></comment>