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PaperclipPerfector  1yr ago (text post)   3437 thread views

Small-Scale Question Sunday for July 16, 2023

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

This is your opportunity to ask questions. No question too simple or too silly.

Culture war topics are accepted, and proposals for a better intro post are appreciated.

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I recently read this article, which seems to have awoken some latent bleeding heart in me. As a result, it’s got me thinking about wealth redistribution, whence the following questions:

  • What are some of the best “utilitarian” arguments against greater wealth redistribution in America? (When I say “utilitarian”, I don’t actually mean calculating out the utils involved— but I do mean arguments other than moral ones like “people ought be able to retain the results of their labor” (which argument I am particularly sympathetic to around tax season).) What are estimates of the argmax of the Laffer curve? Is there an inverse relationship between “innovation” and income tax rate that might explain why America is far more of a tech hub than Sweden? That sort of argument is what I would be looking for.
  • Are there any low-overhead charities out there where you can mostly-directly send money to poorer people? Preferably with options to filter by criteria such as number of kids, marital status, etc.

I understand that this post betrays a real naïveté in both economic knowledge and worldly experience— so I’ll admit that I’m a decent bit embarrassed about making it, but I figure that a Small-Scale Question Sunday thread is the best place to ask this.

Are there any low-overhead charities out there where you can mostly-directly send money to poorer people?

https://www.givedirectly.org/

One thing I would encourage you to consider is that for the stated financial situation ($30K for a family of four), they are already eligible for substantial government subsidies in the form of food assistance, cash via EITC, heating and cooling assistance (in many states), Medicaid, and more. Perhaps it would be best to think of this less as a merely directional problem, but to imagine what you think a family with one person working 40 hours/week at $15/hour should be entitled to in the form of subsidies. From there, you can determine whether you think that's met with the current numbers or not.

I would also note that the article includes some pieces that I think are either sloppy or sleight of hand:

This is actually pretty close to the experience. It’s telling that Scott thinks the problem with a lease comes only from credit issues - a pretty bottom-barrel ford leases for 300-400 a month. For a person who makes 30,000-40000k a year, that’s something like 10-15% of their income, before we talk about insurance; couple that with the fact that you can’t squeak by on liability-only insurance in most leases, and we are already into a prohibitively expensive range.

Wait a second! I drive a little Toyota product that I leased new and then financed afterwards, and the expense has consistently been under $300/month. For that price, I'm not driving something unreliable and old, but a Toyota that I got new, have now possessed for 8 years, and will pay off next year. This may seem like I'm quibbling about marginal differences, but when someone consistently makes small exaggerations that I find noticeable, I start to question whether they're really as financially fastidious as their tone implies.

To put a finer point on it, a $10K car financed at 5% for 60 months gives a payment under $200 per month. A quick little search shows me that I can get a low mileage Honda Civic for around that price. I don't see a good reason for someone to be going up to 15% of their income on a car.

But there’s other things - liability insurance, as mentioned above, is often your only option that makes sense - if your car costs $2000, paying an extra $50-100 per month for high-deductible doesn’t add up; you are still $1000 out of pocket to cover the deductible in the event you need to use it.

I know this is going to be one of those "high cost of being poor" things, but these numbers seem bonkers to me. I'm well aware that insurance costs vary, but having that high of a deductible for that kind of cost implies moving violations or major credit issues, not merely, "I don't have much money". I just reupped my insurance the other day and it's about $45/month total for the car mentioned above, with high liability insurance and a $500 deductible. Again, maybe this truly is unavoidable, but I find that I am once again questioning whether the author has baseline financial competence.

I freely confess that I do not feel very charitable to the American poor, precisely because I think they objectively receive large sums of money from governments and tend to piss away what they have on things like lottery tickets or obviously idiotic modifications to cars. I'm aware of the objections from progressives, I'm aware that the model citizen poor person that is truly just unlucky exists, but the current state of affairs does not suggest to me that increasing redistribution will tend to make the world a better place.

Are there any low-overhead charities out there where you can mostly-directly send money to poorer people? Preferably with options to filter by criteria such as number of kids, marital status, etc.

You could try your local St. Vincent de Paul society.

One of the primary problems is that you can't redistribute "wealth", you can only redistribute money, land and status to a limited degree.

The big secondary problem is that most wealth doesn't exist in any real form. It's all valuation and market incentives, which means a lot of people's aggregated opinions about how much something is worth, and it could be worth that, or it could be worth nothing.

Elizabeth Holmes had a company worth 4.5 billion at one point, but the real value was negative. None of that money existed. No one ever drew a dime of that money in wages, or spent it on anything. It was theoretical money, theoretical wealth, just the opinions of some upper-crust shitheels who got conned by a blonde chick. Numbers in a computer. None of this shit exists, the mortgages, the stocks, the bonds, the Nikei, Wall Street, etc. It's all opinion and social convention.

Tertiary problem, if you redistribute money, the elites will just inflate the money supply and all will be for nothing.

Land and status are more promising, but both are zero-sum games and thus require harsh trade-offs. We focus on redistribution of money ("wealth") because it is theoretically boundless, and any elite losses can be inflated away easily.

There is only one way to actually redistribute wealth, and that is for a different elite to take the possessions and positions of the current elite by force. This doesn't help the common people, but it isn't meant to.

What are some of the best “utilitarian” arguments against greater wealth redistribution in America?

I am generally pro-redistribution, but a couple of posts by Bret Deveraux about premodern agriculture made my thoughts about the purpose of inequality coalesce into a much clearer picture:

  • the land is split between subsistence peasants and landowners
  • subsistence peasants have lots that are just large enough to feed their family
  • the rest of the land belongs to the local landowner
  • the peasants work the landowner's land either as sharecroppers or as corvee labor
  • the landowner extracts the surplus from the land and uses it to support the middle class of warriors and craftsmen
  • there's a thin class of people that are supported by the peasants (blacksmith, miller, some traders), but the rest derive their livelihood from the surplus the landowner extracts from his land

Everything here is not circumstantial and explains why the system works:

  • why don't the landowners own all the land?
    • because they need peasants to work it
  • why don't the peasants own all the land?
    • because they would have no surplus to maintain an army to defend themselves
  • why don't the peasants save up and buy bigger plots to create a surplus?
    • because they have to split their wealth between their children. When there's no wealth to share, younger children are encouraged to leave the village, but when there is, the lots are split until the peasants are barely feeding themselves again
  • what proportion of land belongs to the peasants?
    • as little as possible, as long as there's enough hands to work the landowner's land
  • how much land belongs to a single landowner?
    • as much as it is possible to defend by force. When it's easier to defend your wealth, then the number of landowners grows and their latifundia dwindle. When it's easier to take over other landowners' wealth, the number of landowners dwindles and their latifundia grow

If some landowner deviates from the current optimum, they lose against their neighbors: either they don't have enough land to extract the surplus from, or they don't have enough hands to extract the surplus with. And even if we imagine a peaceful future where no one will threaten anyone with violence, the more equal community will lose against less equal communities because they will "waste" their surplus on a more comfortable life or a more numerous community instead of science, technology or even art.

If you squint really hard, this looks like it applies to modern societies as well. I once wrote a post about the direct economic effect of "eating the 1%" and the overall boost is just not worth it.

Now when Jesus was in Bethany, in the house of Simon the leper, There came unto him a woman having an alabaster box of very precious ointment, and poured it on his head, as he sat at meat. But when his disciples saw it, they had indignation, saying, To what purpose is this waste? For this ointment might have been sold for much, and given to the poor. When Jesus understood it, he said unto them, Why trouble ye the woman? for she hath wrought a good work upon me. For ye have the poor always with you; but me ye have not always.

If we are made in Lord's image, why can't we say the same?

but I do mean arguments other than moral ones like “people ought be able to retain the results of their labor”

Because societies where people aren't able to retain the results of their labor soon start to have toilet paper shortages, proceed to one half of the population putting the other half into gulags, and then the society collapses? Of course, the true wealth redistribution have been never tried. But the results of the wrong ones so far are not encouraging. Of course, pointing to taking $10 from Bill Gates and giving it to this hungry kid is easy. But once you try to make a system out of it, it somehow all ends up in no toilet paper and the hungry kid remains as hungry as before.

Are there any low-overhead charities out there where you can mostly-directly send money to poorer people?

All the national orgs I've used to donate over the years recently gone woke and I stopped trusting them. Probably a local charity would be the best bet. Would be happy to be proven wrong (though really no need if the local charity is enough).

In particular, there is an enormous political benefit to moving redistribution "off budget" by doing it via employment law. Minimum wages, the Obamacare employer mandate to provide health insurance, unemployment insurance, etc.

Correct. Particularly concerning employer-provided healthcare insurance, it's a convenient way to bypass democracy and de facto raise taxes (Given the wild inequities in healthcare consumption, insurance premiums are as much a payroll tax as Social Security for the average employee.) on corporations and the upper-middle class without Congress taking a beating in the midterms (Sure it happened in 2010, but premium increases since have been a non-punished exercise in boiling the frog.). I seriously doubt that the US would be willing to sustain its present level of healthcare spending if it weren't obscured by employer-provided health insurance.

Yeah, that was strongly worded on my part. We did democratically agree (whether we realized it at the time or not) to essentially give health insurers the power to levy something like a tax in the form of premiums, be it from policyholders, their employers, or government subsidies. Amusingly, nationalizing student loans was supposed to help pay for those subsidies, but that's turned into a debacle all its own.

"Increase housing stock? I'm afraid not. Best we can do is subsidize lower income renting. Too bad greedy landlords keep increasing rent."

The greedy landlords are the ones that are stopping more housing from being built.

Data collected by the Internal Revenue Service (IRS) showed that around 10.6 million Americans had declared rental income when filing taxes. In other words, around 7.1% of tax filers could be landlords.

The other non-landlord 93%+ of the population could vote in more housing. But they don't.

Fair point! They’re being convinced though.

Local politics may vary, but where I live, every zoning commission or planning board argument includes some housing developer trying to build things and alders coming up with increasingly tone-deaf reasons why that's actually bad for people that want housing. Bootlegger and Baptist coalitions may well exist that unite the landlord oligopoly with busybodies that are very concerned about knocking down a building that Al Capone once took a shit in, but I tend to think the primary problem is the presumption that the baseline is that governments should not allow building unless the builder can prove that it's a net positive. Invert the assumption and the problem goes away.

The underlying assumption in so many suburban towns is

"When I bought my house, I was buying the whole community: the farmland I drive by on my way to work, the historic buildings housing businesses I don't actually visit because I shop online, the churches I'm not a member of, the scrap land that houses deer I like to look at. The owners of all those tracts have to submit their projects to my right to have everything exactly how it was when I bought my house."

When I bought my house, I was buying the whole community

Yes.

Except as a town of only around ~4000 we don't have many tracts, and the duplexs that were built are selling for $670k.

The surrounding farmland and greenspace contribute significantly to the rural character, the historic buildings, church and common provides a canvas for the town events and a gathering space for the residents. That town leadership is responsive to residents in protecting the character is an example of democracy in action.

Perhaps if you joined us at church service or patronized our local businesses you'd have a more charitable view of the stewardship many feel for their communities.

"...contribute significantly to the rural character..."

"...the stewardship many feel for their communities."

This reads like the preamble to some hardcore NIMBY organizations' charter. Amorphous phrases that point to "character", "community" and (unelected) "stewardship" don't trump personal property rights. They're not even in the same neighborhood.

And when is the "character" of a place set in stone? This is straight up No True Scotsman 101. This is such a literal trope the Simpson have a hallmark episode about it. The only constant is change and no person or group gets to self-appoint as "arbiter of the good character of a place and community." That's a well paved road to localized authoritarianism.

I definitely code traditionalist conservative, but trampling on individual and property rights "to make sure we keep the Main Street Habdashery up for another 100 years" is the same as when progressives want to outlaw parental choice in schools so that "we can end bigotry forever by forcing Ibram X. Kendi book reports."

And when is the "character" of a place set in stone? This is straight up No True Scotsman 101. This is such a literal trope the Simpson have a hallmark episode about it. The only constant is change and no person or group gets to self-appoint as "arbiter of the good character of a place and community." That's a well paved road to localized authoritarianism.

You mean 'bylaws'?

When you move to a place with a law saying 'no lots smaller than X acres', it seems reasonable to expect that neither you nor anybody else will be able to subdivide your lot -- and to go to town council meetings to argue against Slippery Dick's variance application.

"to make sure we keep the Main Street Habdashery up for another 100 years"

This sounds like a strawman no one is arguing for. The reality is typically agricultural land abutting protected conservation land or SFR that a developer wants a change in use to support multi-family, mixed use, or SFR McMansions.

person or group gets to self-appoint

Not sure who's arguing for this. I argued for responsive local elected officials as an example of democracy in action.

Your personal property rights aren't being trumped because you can't develop a highrise mixed use development on a surplus paddock. You can sell it as agricultural land.

The surrounding farmland and greenspace contribute significantly to the rural character

So when someone buys a duplex for $670k, they have a vote in how the landowner gets to use or develop their "greenspace?" If enough people move into the area who want to see my land stay undeveloped, I lose the right to develop it, despite receiving exactly zero benefit from those sales to myself?

Worse, in my area, the farmers who hang on for an extra decade have to live with the loss of the "greenspace" on all the neighboring farms that develop; then when they decide to cash out themselves (often because of the changing neighborhood, traffic, inconveniences caused by development and population growth) those same move-ins show up to meetings to prevent them from developing their land. My family dates back in this town 130 years, I don't appreciate Johny-Come-Lately who just bought a townhouse telling me what I can and can't do on my property.

I attend mass better than weekly, at my church. The rest of the churches aren't my problem, even if I wanted to attend multiple churches for some bizarre reason it wouldn't be exactly helpful. If people aren't attending the mainline protestant churches, they will fail. Restricting their redevelopment won't bring people back to the pews for lukewarm Presbyterianism, it will just create a long-running sore as the church becomes dilapidated.

So when someone buys a duplex for $670k, they have a vote in how the landowner gets to use or develop their "greenspace?

No. They're entitled to vote in town elections and attend and vote at town meetings. They, other abutters and residents may object to the proposed change of use. There are rules to ensure proposed changes in use are not detrimental to the town and residents.

Are there any low-overhead charities out there where you can mostly-directly send money to poorer people? Preferably with options to filter by criteria such as number of kids, marital status, etc.

The St. Vincent de Paul society is a Catholic charity run entirely by volunteers and generally using borrowed facilities at the local level which mostly helps poor people with cases sympathetic to Catholics, so that seems like a relatively close match.

I donate to a "resource center" in my neighborhood that provides food, toiletries, clothes, and other necessities to local people in need. After I donated a couple times they offered to give me a tour, to see with my own eyes that it's legit.

It's not direct money but it's not far removed. Idk about national-level orgs that do that; I feel good about it being local, really.

I’ve become much more sympathetic towards the issues that poor people face recently. The pandemic and inflation have had huge impacts on the economy that resulted in a large wealth distribution effect in favor of people that already had accumulated wealth (such as owning houses or stocks). Houses are much more unaffordable today than they were before the pandemic due to the mortgage rates increasing so much. For many people expenses (rent, food, etc.) have risen much faster than incomes. Many employers kept raises under inflation partly because they know most people won’t go through the hassle of looking for a new job.

The result for renters is that it is now much harder to save for a downpayment for a house that costs 100k+ more than it did 3.5 years ago and has a higher monthly payment due to mortgage rates. Many poor people are in a worse situation today through no fault of their own. It is because the pandemic policies created so much fraud/waste/inflation that made rent and housing less affordable. Poor people can’t just work harder when the government stacks the system against them further.

Anyway, to answer your question about the utilitarian arguments against wealth distribution imagine a world where there are no billionaires or double digit millionaires. It becomes much harder/impossible for someone to start an innovative business that may go bankrupt or take many years to become profitable. In today’s world there is a venture capital model where the rich can bet on many of these visionary businesses and they only need a small percentage to succeed to make money. They know some will go bankrupt but that is just a cost of their investment strategy. The banks don’t have an incentive to fund these businesses so private investors must fund them. If there are no ultra-rich investors it becomes much harder to get funding.

Additionally, accumulated wealth earned allows people to influence policy (such as through political donations and advertising). In theory if accumulated wealth is the result of merit then it gives those people more influence in public policy. If they are smarter than average than it may result in better policy overall. In practice the people with accumulated wealth often influence policy to enrich themselves/their friends instead of shaping policy in what is best from a utilitarian perspective.

Why would banks not be interested if venture capital has a positive return?

Banks can't take risks like that because if they fail they lose depositors money, not just their own. Without FDIC insurance that would mean a bunch of people losing their life savings even though they didn't personally make risky investments. There are regulations to prevent banks from making risky investments.

If venture capital takes that risk and fails it doesn't create wider problems to the financial system. Only the firm and possibly a few individuals go bankrupt.

The lack of very wealthy people implies that venture capital does not have large positive return.

There are no good utilitarian argument (IMO) against SOME wealth redistribution. History, science, and economics all support it; at least until basic needs are filled and everyone reaches a consumption equilibrium/ inequality falls bellow the level that historically causes social unrest.

People like me who want way more than some have a tough row to hoe, given how it's gone in this past BUT THIS TIME IT WILL BE DIFFERENT! This time we'll keep the market, come on, it'll be fun!

I can think of a few reasons. I think there are values of wealth redistribution low enough to prevent more charity than they accomplish. If the government donates $1 billion to charity/welfare, that won't accomplish all that much, but it will potentially make a lot of people feel that their obligation to be charitable has been fulfilled, preventing much more money than that from being donated.

More relevant--I think culture trumps all in the long run. If we have the option to implement policy X, which will prevent people from donating on average $1 to charity, but will also create $2 per person of value out of thin air, in the long run I wouldn't be surprised to hear that policy X does more harm than good. People donating to charity (and otherwise helping their fellow man) is a virtuous cycle that leads to more charity, less crime, and closer communities. No idea whether this is actually correct but it seems to be at least a relevant factor.

Charity is not about "helping your fellow man", if this was the case someone would notice it is ineffective for this purpose at best, counterproductive at worst, it would not take thousands of years to invent idea of effective altruism. It was always about impressing your fellow rich and showing how compassionate you are.

"Wealth redistribution" is not about helping your fellow man either, it is about avoiding situation where desperate starving masses have nothing to lose than their chains, it is investment in keeping your head affixed to your shoulder. Feudals like Bismarck, who always held longer term view than capitalists could understand it.

It is no accident that after some events that happened in 1917 labor regulations and social policies grew all around the world, that things like eight hour working day that were long said to be impossible suddely became possible. All the charity in the world somehow failed to provide it before.

https://twitter.com/RasmussenMagnus/status/1601925288736313344

We find that measures of revolutionary fear, the radicalization of worker parties and the formation of worker and soldier councils, substantially drove social policy expansion around the world. Importantly, the shock persists until today (even if its importance has sig. subsided)

https://www.cambridge.org/core/elements/abs/reforming-to-survive/8513341F3D95D3392917AFC4CC211A31

This Element details how elites provide policy concessions when they face credible threats of revolution. Specifically, the authors discuss how the Bolshevik Revolution of 1917 and the subsequent formation of Comintern enhanced elites' perceptions of revolutionary threat by affecting the capacity and motivation of labor movements as well as the elites' interpretation of information signals. These developments incentivized elites to provide policy concessions to urban workers, notably reduced working hours and expanded social transfer programs.

The authors assess their argument by using original qualitative and quantitative data. First, they document changes in perceptions of revolutionary threat and strategic policy concessions in early inter-war Norway by using archival and other sources. Second, they code, for example, representatives at the 1919 Comintern meeting to proxy for credibility of domestic revolutionary threat in cross-national analysis. States facing greater threats expanded various social policies to a larger extent than other countries, and some of these differences persisted for decades.

Charity is not about "helping your fellow man", if this was the case someone would notice it is ineffective for this purpose at best, counterproductive at worst, it would not take thousands of years to invent idea of effective altruism.

Effective altruism has always been around. Charities for thousands of years have been concerned with their own efficacy and how to improve it. Effective altruism just takes that a step further. I can't find it, but there's a great essay about how effective altruism is mostly "more things should be quantifiable." Previously things like life and death were so sacred that we as people hesitated to even definitively state that saving two lives is better than saving one.

It is no accident that after some events that happened in 1917 labor regulations and social policies grew all around the world, that things like eight hour working day that were long said to be impossible suddely became possible. All the charity in the world somehow failed to provide it before.

I mean, worldwide productivity increased drastically right around that time. That made the social change possible. We got machines to do our work for us. Also, I'm not convinced that people before then were actually working more than eight hour days. There was a period during the industrial revolution where everybody was working their butts off, but before then it seems that most people had a somewhat more sedate lifestyle.

Wealth distribution largely doesn’t matter. Consumption distribution does.

Honestly to deal with your question in some areas would basically be to tell you to read 50-100k of econ text then we can talk.

But for wealth and I’m too lazy to find the better origional posts this applies

https://crookedtimber.org/2021/09/25/the-scrooge-mcduck-theory-of-billionaires/

If you found a person with no desire to spend. They are perfectly happy playing video games in their mothers basement and let’s say ordering $50 of Ubereats a day. There is nothing they would rather do or think about. If Joe Biden printed $20 trillion dollar coin and gave it to this guy then wealth inequality would drastically increase. He would put the coin in his drawer. No other economic variables would be effected.

Of course this perfect example doesn’t entirely exists. Buffet wouldn’t change his consumption but he would control more assets and change a bunch of prices that way. But you still need to understand this model to realize that wealth distribution is less important and people care a lot more about their consumption than their bank account.

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