What if There Were No Poor Among Us?

[_Droopy]

Do we have any graphs of the amount (not percentage, but amount) of wealth each class has?

Keep in mind that, at least as far as America is concerned, the concept of "class" has been substantially undermined by the level of economic freedom and opportunity made possible by a substantially free market, opportunity society. Stable economic "classes" disappeared long ago. Americans are, for the most part, very economically mobile, rising into and leaving various income quintiles and percentages over their lifetimes.

If I understand the dispute, then if Droopy is right, I would expect to see that as the pie grows, the rich take most of it and the poor get a bit too. If you are right, the rich take all of it, and some of the pie from the poor too.

You don't understand basic economics, at least not free market economics (cattalactics) that studies the actual laws of economics and human behavior in actually existing social/economic settings.

You're statement "as the pie grows, the rich take..." already overlays a prexisting ideological template across the dynamics involved. "The rich" came and "took" something out of the pie? How was the pie created in the first place, and how does it grow, which you have already agreed it can?

[_Droopy]

Didn't Stalin experiment with this type of thing...

Stalin took an already existing system over from Lenin and his ruling class and expanded upon it. Its been recreated in a number of places in the world since then, including the East European countries making up the Soviet dominated Warsaw Pact, China, North Korea, North Vietnam, Cambodia, Cuba, Nicaragua, and a number of countries in Africa during the Cold War era.

[_Droopy]

I have no idea what you're talking about here at all. By what other means is wealth created than by productive economic activity?

Speculation is one method. Monopolization of assets is another.

Speculation doesn't create wealth, it simply invests in a productive activity on the possibility that its price will rise in the future.

How is monopolization of assets wealth creation?

Somewhere in the area of 95% of the North American continent is undeveloped land.

That does not address the point. At issue was the fact that - for a time - land was deeded to anyone simply for the asking. This no longer happens. The rules have changed, but the transfer of and increase in wealth created by that past gifting of land persists.

Perhaps you know of where this opportunity remains in place and where individuals can still simply claim 160 acres of land for free, say, along the coast in California or Oregon. If so, you should probably not wait to move on that opportunity. ; )

In the meantime, acquisition of this property, and the increase in wealth over time that resulted from it, is not necessarily dependent upon 'productive economic activity' by its owner or anyone else. Yet it has nearly universally contributed to 'wealth' nonetheless.

Land, or course, is finite, but so vast that that point of finitude is all but useless to practical or theoretical economic argument save as a hypothetical thought experiment. In any case, no one has gone without a house in the U.S. due to any shortage of land.

Another misdirect. Is the cost of real estate today the equal of what it was when it could be acquired in comparatively massive amounts for free?

Then I'm sure you can provide a practical, real world example of how wealth begets wealth without actual production of goods and commodities.

To repeat - Speculation is one method. Monopolization of assets is another.

Today, there is quite a bit of activity surrounding both, and neither require 'productive economic activity' or 'job creation' to create wealth for some individuals.

At the outset we must first ask a question as to your definition of the term "wealth."

We can pick a source for a definition that we can both agree upon. I'd typically start with a relatively accessible and well agreed-upon definition such as -

wealth
n.
1.
a. An abundance of valuable material possessions or resources; riches.
b. The state of being rich; affluence.
2. All goods and resources having value in terms of exchange or use.
3. A great amount; a profusion: a wealth of advice.

But we can consider any other definition as well.[/quote]

[_Droopy]

I have no idea what you're talking about here at all. By what other means is wealth created than by productive economic activity?

Speculation is one method. Monopolization of assets is another.

Speculation doesn't create wealth, it simply invests in a productive activity on the possibility that its price will rise in the future.

How is monopolization of assets wealth creation?

In the meantime, acquisition of this property, and the increase in wealth over time that resulted from it, is not necessarily dependent upon 'productive economic activity' by its owner or anyone else. Yet it has nearly universally contributed to 'wealth' nonetheless.

Real wealth is generated through investment, work, and production. The selling and reselling of land is profitable to those who do the buying and then selling at higher prices as subjective factors (like location), restrictive zoning laws, and easy credit push housing prices higher and higher over time, but I don't see wealth being created here (I do see money profits being made for various individuals, but this is not "wealth" per se).

Another misdirect. Is the cost of real estate today the equal of what it was when it could be acquired in comparatively massive amounts for free?

It matters little, as unless more actual net wealth is being created (more houses are being built), no net economic growth is taking place.

Today, there is quite a bit of activity surrounding both, and neither require 'productive economic activity' or 'job creation' to create wealth for some individuals.

You are not speaking here of real wealth, but only of the acquisition of the medium of exchange known as "money" with which real wealth is generated ultimately through productive economic activity.

We can pick a source for a definition that we can both agree upon. I'd typically start with a relatively accessible and well agreed-upon definition such as -

wealth
[i]n.
1.
a. An abundance of valuable material possessions or resources; riches.

This is the only one that matters, for this discussion. Robbing a bank is not wealth creation, no matter how much money is transferred into the hands of the robbers, making them "rich," but representing no economic growth and no expansion of real wealth for the society as a whole.

[_canpakes]

Speculation doesn't create wealth, it simply invests in a productive activity on the possibility that its price will rise in the future.

I see what you're saying... the act of speculation in and of itself, just like the act of 'winning the lottery', does not create wealth in the overall system. It is, rather, a type of wealth transfer. One could lose money or gain it.

Either way, it does not need to rely on 'adding to productivity' nor is it dependent in any way on 'job creation' to achieve either end result. For those individuals who come out on the positive side of the transaction, their personal wealth increases, and that was what I was referring to. Cash in the bank is still an asset, and constitutes an element of 'wealth'. And, regardless of if the item being speculated upon is property, or gold, or Cabbage Patch Dolls, any dramatic upswing in price for an asset already in existence will create, in a relative sense, wealth for the holder of that asset where little or none could be realized before... and with no effort, job creation or productive economic activity as a result.

How is monopolization of assets wealth creation?

As above - cornering a market can create a price spike for that particular commodity. The strategy usually does not succeed because either the person attempting the corner fails to unwind their position in time or in a way that does not deflate the value of his holdings, or the markets change the rules in the midst of the corner. Fisk/Gould in 1869 with gold, and Malaysia with tin in 1989 are two examples. Another excellent example is the Hunt Brothers' corner of silver in 1979, which was going swimmingly until the CBOT and COMEX changed the rules on silver holdings and sales. Had that not been the case, the Hunt Brothers would have used monopolization to drive the price of an existing commodity far higher than it would be under normal market conditions. Their wealth would have increased dramatically, and did for a short time before everything unwound with the change of rules.

Real wealth is generated through investment, work, and production. The selling and reselling of land is profitable to those who do the buying and then selling at higher prices as subjective factors (like location), restrictive zoning laws, and easy credit push housing prices higher and higher over time, but I don't see wealth being created here (I do see money profits being made for various individuals, but this is not "wealth" per se).

Money profits = more cash (an asset) = more wealth. It has worked for plenty of folks from 'The Donald' right on down to anyone who had the 'right' timing in the last housing boom or anytime before that.

In any event, land (an asset) that was free to acquire, yet has now increased in value, will always represent a degree of acquired wealth. Unless, of course, one happens to decide to turn their holdings into a toxic waste dump or worse. : )

It matters little, as unless more actual net wealth is being created (more houses are being built), no net economic growth is taking place.

Land does not need to have anything built on it in order to gain value and increase the wealth of the person who holds or sells it. Additionally, while merely residing in a portfolio, it represents wealth that can be leveraged, as collateral, through other investments. The land once acquired as 'free' can then go on to be used to compound or acquire more assets and therefore begets even greater wealth than is realized by its own value.

You are not speaking here of real wealth, but only of the acquisition of the medium of exchange known as "money" with which real wealth is generated ultimately through productive economic activity.

That's an interesting statement in light of the below -

wealth
n.
1.
a. An abundance of valuable material possessions or resources; riches.

Cash is still considered an asset, and contributes to one's personal 'wealth'.

This is the only (definition) that matters, for this discussion. Robbing a bank is not wealth creation, no matter how much money is transferred into the hands of the robbers, making them "rich," but representing no economic growth and no expansion of real wealth for the society as a whole.

True, and the downside of such an activity tends to outweigh the upside. Interesting that you mentioned this, though, considering that we are looking at land acquisition as a form of wealth and the fact that land was once deeded, often for free and out of thin air, to a first 'legal' owner at some point. As the former British Prime Minister David Lloyd George once remarked, "To prove a legal title to land one must trace it back to the man who stole it."

[_Gadianton]

I agree with canpakes that "wealth" can be created without a hammer and nail. While economics is open to examining a situation from several angles, it is difficult to talk about macroeconomics without linking wealth to money. You should think about wealth as GDP in real terms, which is calculated by money.

While it may seem counter-intuitive to consider a speculator equally contributing to "wealth" as a home builder, we should be agnostic here and let the market determine what is wealth and what isn't, otherwise we'll head ourselves down the road to central planning. Consider that if a construction company builds 10,000 more homes than the market demands, it is difficult to say it has created wealth. This might be hard to imagine considering we all want homes, so instead, consider the millions of Atari game cartridges burried in El Paso texas. Do they represent a store of wealth for America?

A house that rises in real dollars does in fact "increase in wealth." And as bizarre as it may seem, a speculator can in fact create "wealth" as surely as he can create real dollar income. One might protest that to the extent the wealth created by speculation is zero-sum, it doesn't count in the big picture. But such a criticism is superficial. Consider the market for foreign currency exchange. It is zero sum. It is speculation driven. Yet, the free-market argument for FOREX is that it creates arbitrage opportunities that keep currency values honest. If a country wants to print money, FOREX traders have the incentive to sell the currency, thereby correcting exchange value. To say that this enterprise does not contribute real wealth to the world would be incredibly naïve.

[_Corpsegrinder]

Droopy, what’s your definition of “poor”?

I ask because the title of your OP is, of course, a Biblical reference. Poverty as described in the Bible is very different from poverty as it exists in contemporary society. Using Biblical poverty as a baseline, you could probably argue that there already are no poor among us, at least not in many developed countries.

[_Droopy]

Droopy, what’s your definition of “poor”?

I ask because the title of your OP is, of course, a Biblical reference. Poverty as described in the Bible is very different from poverty as it exists in contemporary society. Using Biblical poverty as a baseline, you could probably argue that there already are no poor among us, at least not in many developed countries.

Well, you've hit on something there, something I've been trying to beat into a number of heads here for more years than I care to remember. To be "poor" in American is not to be "poor" even in the most relatively prosperous (sic) socialist democracies of Western Europe, and certainly not of the Third World.

There are poor among us here, of course; people who, intermittently for the most part, but sometimes chronically, do not have enough to "make ends meet" (pay rent/mortgage, basic monthly bills, repair the family car etc.). They should be helped, but it is the manner in which this is achieved, and what motives are behind such help, that are of concern, not whether or not it should be done.

[_Droopy]

I agree with canpakes that "wealth" can be created without a hammer and nail. While economics is open to examining a situation from several angles, it is difficult to talk about macroeconomics without linking wealth to money. You should think about wealth as GDP in real terms, which is calculated by money.

Then let's not talk about the abstract theoretical mathematical modeling of macroeconomics. Let's talk about real economics, i.e. microeconomics, praxology, and cattalactics, which describe what actually happens in an actually existing market economy at the individual level, which is the basis of all phenomena at the macro level, and which describes the actual motives, incentives, and perceptions of real, acting human beings.

While it may seem counter-intuitive to consider a speculator equally contributing to "wealth" as a home builder, we should be agnostic here and let the market determine what is wealth and what isn't, otherwise we'll head ourselves down the road to central planning.

"Wealth" has little relation to the actual quantity of money "circulating" or being held, invested, and utilized in an economy. That is to say, the quantity of money in an economy has little relation to its actual living standards and level of prosperity. Market forces will determine, ultimately, the "right" level of money production in a free market context.

Consider that if a construction company builds 10,000 more homes than the market demands, it is difficult to say it has created wealth. This might be hard to imagine considering we all want homes, so instead, consider the millions of Atari game cartridges burried in El Paso texas. Do they represent a store of wealth for America?

No, it wouldn't. Homes are wealth proper, they are stuff; actually existing things that, under normal conditions, are the actual measure of a society's living standards. If home builders build many thousands more homes than the market demands, then what has happened is that private capital has been diverted and misallocated (wasted, squandered) by the introduction of corrupt, perverse incentives into the marketplace by government policy (we are right smack dab in the middle of a deep economic crisis partly precipitated by exactly those kinds of government intervention). Its wealth, and so long as it was generated in the private sector by private investment, it is net, "created" wealth. The fact that it cannot be sold, and the original investment capital has been lost only hurts those who misallocated it, not the economy as a whole (as when that capital has been first extracted from taxpayers or created out of thin air).

A house that rises in real dollars does in fact "increase in wealth." And as bizarre as it may seem, a speculator can in fact create "wealth" as surely as he can create real dollar income.

A house rises in price, and this does not create "wealth" for the house owner unless the concept of wealth is conflated with the concept of money, and the holding of money is conflated with "wealth" per se. Its the same house, only it will sell later at a higher money price. This creates further cash holdings for the fortuitous house seller, but not new wealth, in a strict sense.

One might protest that to the extent the wealth created by speculation is zero-sum, it doesn't count in the big picture. But such a criticism is superficial. Consider the market for foreign currency exchange. It is zero sum. It is speculation driven. Yet, the free-market argument for FOREX is that it creates arbitrage opportunities that keep currency values honest. If a country wants to print money, FOREX traders have the incentive to sell the currency, thereby correcting exchange value. To say that this enterprise does not contribute real wealth to the world would be incredibly naïve.

Is the printing of money the creation of wealth?

[_Droopy]

Getting back to the original point of this thread:

Just to clarify what we are talking about, Let's say that "elimination of poverty" is defined in America as every houselhold taking in at least, say, $12,000 a year.

So what are we talking about? The Droopy system where everybody works and everybody earns at least $12,000 a year, vs. the Bokovy system where everybody gets a check for $12,000 regardless of how much they do or don't work?

Well, partially this is what we are talking about. You are sniffing it out, Analytics, or at least giving it a try.

Which system would be theoretically (in the social, moral, ethical, and economic realms) preferable, a system in which everybody works and maintains themselves comfortably above the poverty line through work, investment, and savings, and is economically independent, or Bokovoy's system, in which everybody is interconnectedly dependent upon everybody else for their sustenance (all "recieve a check" from some central governmental authority (secular or Bishop's storehouse) and has an absolute preemptive claim upon the time, talent, labor, and property of all others)?

If that's the case, it's clear the Droopy system is a huge Pareto improvement over the Bokovy system.

I think so too.

Let me restate, yet agian, the core question, taken from this very post above:


"...if we can eliminate poverty in either way, what price are we willing to pay for that elimination? What are the secondary effects of eliminating it in one way or the other way, and would it be worth that price?"

I agree that either system has a number of effects upon society. But does either system actually eliminate poverty in the first place?

It doesn't really matter, for our purposes, because this thought experiment is intended to get at the moral and philosophical undertow behind socialist/communitarian views of the proper means of alleviating poverty as over against classical liberal/free market/church oriented (see Providing the Lord's Way and other numerous GA commentary on the subject) means.

It is not important whether or not poverty could, in fact, be utterly eliminated in either way (and indeed, we know as a matter of both theory and historical reality that socialism's primary effect is to institutionalize and embed poverty or, in democratic socialist systems, economic mediocrity, within a society as its core, salient economic feature), but only if either could eliminate poverty, which would be preferable, on other moral, ethical, and philosophical grounds, considering the side effects/consequences of either approach?