What is the Impact of Income Inequality on Social Problems?

[vertices]

The reason why people miss this point is because they are fixed in a line of reasoning where they believe that the economy is a zero-sum game. If John, Jerry, and Josephine wins, then Alex, Alice, and Adam loses. How possibly could John and Jerry get 'rich' without exploiting Alex and Alice? There is no reason to assume this.

What caused the global recession?

I once had the misfortune of having to attend lectures on Econophysics (a very new field in physics which basically models financial markets using statistical mechanics) a couple of years ago - it was stressed early on in the course that "there is no such thing as a free lunch" - we used time varying stochastic calculus to show this:) I mean, what could be more intuitively obvious?

The "economy" (as you put it) is ultimately a zero-sum game because the worlds resources are finite.

 

[calculusrocks]

What caused the global recession?

I once had the misfortune of having to attend lectures on Econophysics (a very new field in physics which basically models financial markets using statistical mechanics) a couple of years ago - it was stressed early on in the course that "there is no such thing as a free lunch" - we used time varying stochastic calculus to show this:) I mean, what could be more intuitively obvious?

Sure, it's all in this book I'm reading called "The Sellout - How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System". Charles Gasparino gives us the insiders view and writes about what he has seen, and why Wall Street didn't see it. It is intuitively obvious, as you put it, that there is no free lunch, but that didn't stop anyone from making that mistake by building a system that would ensure a boom-and-bust cycle, and it isn't stopping anyone now from making that mistake again. We use the term recession in the past tense, as though doing so somehow re-assures us that it is over. It is not over, in fact. The political class is trying to make sure everything looks good on paper, and they are re-inflating the bubble rather than letting the housing market hit bottom. Ultimately it will need to hit bottom in order to grow again, yet we are doing to opposite prolonging the recession.

http://biggovernment.com/cgasparino/2009/10/29/exclusive-excerpt-fannie-and-freddies-starring-role-in-the-housing-debacle-inflate-housing-bubble/"

The "economy" (as you put it) is ultimately a zero-sum game because the worlds resources are finite.

We haven't even begun to discover how to combine the world's resources, and by the time we get even close to that we won't be bound by the world anyway. Until we hit the ceiling on technology, you are totally wrong on that point. That's intellectual sloth.

 

[Al68]

The problem is that "human liberty" is not afforded to everyone. I have no problem whatsoever with people pursuing wealth, money whatever and I have no interested in holding people back from realising their dreams whatever they maybe. But the current economic system we have in the West (in the US and well as the UK, where I'm from) is sometimes very unfair - it artificially creates inequalities. It is these imbalances that need to be addressed if we want a happier society.

Since I'm not in favor of any "artificially created inequalities", I'll assume we agree on that. But typically, the "inequalities" most often referred to aren't the result of any system whatsoever, but the result of liberty itself.

 

[Al68]

The "economy" (as you put it) is ultimately a zero-sum game because the worlds resources are finite.

This would only be correct if all of the world's resources were currently in use, which is clearly not the case. For practical economic purposes, the most important resources that are anywhere near scarce are human resources.

 

[Al68]

Sure the reward centres of gamblers' brains may get activated if they take risks, but how does this take away from the evident conclusions of the Caltech Study, which show that the brain does indeed respond positively (ie the reward centres get activated) to fairness or equality?

Were the subjects of the study sufficiently brainwashed with Marxist ideology to equate fairness with outcome equality?

How did their brains react to unequal outcomes as a result of fairness and liberty?

 

[TheStatutoryApe]

Sure the reward centres of gamblers' brains may get activated if they take risks, but how does this take away from the evident conclusions of the Caltech Study, which show that the brain does indeed respond positively (ie the reward centres get activated) to fairness or equality?

It is not the risk taking that is of primary interest but prospect of rewards and the sympathetic reward trigger. You must take the results of any given study in context with the results of other similar studies, in this case the triggering of reward centers in the brain. Unfortunately I have looked a bit and have not found studies regarding sympathetic reward triggers for gambling so I will drop it as a point for my argument until such time as I can find a source.

The following observation is particularly interesting:



This isn't a random glitch in the way our brains have evolved - there is a strong biological basis for this sort of altruism.

The primary issue I see is that the conclusion of the study is based on a perceived intention of being "inequality-averse". It would seem to me that it ought to focus on the mechanism and the conditions necessary for the trait to be selected for. Seeing that inequality seems a necessary condition for the trait to evolve and be successful the idea that it is "inequality-averse" is contradictory. While one may speculate that the trait is seeking an equilibrium one can just as easily, and perhaps more logically, speculate the trait suggests that inequality breeds altruism.

 

[vertices]

While one may speculate that the trait is seeking an equilibrium one can just as easily, and perhaps more logically, speculate the trait suggests that inequality breeds altruism.

Yes, what else would you expect? We (our brains) respond to the environment around us. But this doesn't take away from the theory that we are inherently inequality-averse. It doesn't matter if the brain is triggered by inequality (as you say) or if it responds to inequality - the point is that the brain is finely tuned to derive pleasure from fairness, or in other words, to dislike inequality - and that there is something fatalistic about this.

 

[mheslep]

Sure the reward centres of gamblers' brains may get activated if they take risks, but how does this take away from the evident conclusions of the Caltech Study, which show that the brain does indeed respond positively (ie the reward centres get activated) to fairness or equality? ...

Note that the Caltech work doesn't support a flat statement about equality. It's made in this context:

Tell two people working the same job that their salaries are different, and there's going to be trouble [...]

http://media.caltech.edu/press_releases/13327
which is no surprise. In particular they find that well off people get a stronger positive reaction from seeing less fortunate gain than receiving more themselves. From this it is not fair to say that in unequal situations, say if see someone receiving $500k for a McArthur Genius grant, that I would automatically be expected to be unhappy because there is now an inequality between me and the winner.

 

[mheslep]

...the point is that the brain is finely tuned to derive pleasure from fairness, or in other words, to dislike inequality -

As above, The Caltech work doesn't support that statement without further qualification.

 

[TheStatutoryApe]

It doesn't matter if the brain is triggered by inequality (as you say) or if it responds to inequality - the point is that the brain is finely tuned to derive pleasure from fairness, or in other words, to dislike inequality - and that there is something fatalistic about this.

You are still ascribing a rationalized intent. I only read the abstract but I did not see any mention of persons receiving greater pleasure from equity or fairness. What I read was that persons who were disproportionately well off compared to others began to receive greater pleasure from observing disproportionately less well off individuals receive rewards. You, and the researchers, are applying a goal oriented rationalization.


And I did not say that the brain is triggered by inequality. I said that inequality seems to be a necessary condition for the success of the trait as only the persons who were disproportionately well off seemed to derive increased pleasure from seeing others rewarded.

 

[Al68]

It doesn't matter if the brain is triggered by inequality (as you say) or if it responds to inequality - the point is that the brain is finely tuned to derive pleasure from fairness, or in other words, to dislike inequality - and that there is something fatalistic about this.

Are you equating fairness with equality in a scenario in which subjects have a common source of income? Such as two employees doing the same job with different salaries, like that Caltech reference by mheslep?

If so, fairness could be linked with equality, but this is very different from the larger topic of this thread.

It's not like society in general has a common source of income that could theoretically be referred to as fair or unfair.

 

[mheslep]

[...]What I read was that persons who were disproportionately well off compared to others began to receive greater pleasure from observing disproportionately less well off individuals receive rewards. [...]

Agreed, that is very accurate summary of their findings.

You, and the researchers, are applying a goal oriented rationalization.

I don't see where the researchers commit that error. They make no summary blanket or otherwise unqualified statement that inequality makes people unhappy.

 

[vertices]

Okay, granted - the study does not show that humans derive a greater pleasure from equity or fairness - to dislike X isn't the same as liking the opposite of X, and it isn't just wordplay to equate the two (quite obviously)...

And yes, the study shows that brain only responds to extreme inequality - people are happier when they see those who are disproportionatly less well off receive rewards, and are indifferent to richer people getting the rewards (in terms of the pleasure centres of their brains lighting up). So basically, there is a tendency for people to want to close the gap in inequity.

So to repeat the thesis with the important qualifications: the study suggests that we are hardwired to have a desire to close any gaps in situations of inequity (ie. monetary gap if we confine ourselves to the findings of this particular study). The use of the word "hardwired" is justified because the study explicitly tests people's prefrontal cortex brain reaction, which I would guess is oftentimes markedly different to their actual and conscious, political and social views - which are more functions of socially conditioning than anything innate.

 

[Proton Soup]

You are still ascribing a rationalized intent. I only read the abstract but I did not see any mention of persons receiving greater pleasure from equity or fairness. What I read was that persons who were disproportionately well off compared to others began to receive greater pleasure from observing disproportionately less well off individuals receive rewards. You, and the researchers, are applying a goal oriented rationalization.


And I did not say that the brain is triggered by inequality. I said that inequality seems to be a necessary condition for the success of the trait as only the persons who were disproportionately well off seemed to derive increased pleasure from seeing others rewarded.

you can certainly read different things into it. just for another POV, humans have a great capacity for imagining themselves in the position of another person. one interpretation/use of this is empathy, something that we might think of as morally "good". another use might be predicting the behavior of another person, and while this could be seen as a defensive mechanism, other less positive things like distrust or treachery become involved.

so, I'm not sure that sounds very clear, but what i think is that the rich person see a poor person getting what for them is a very large reward, and they are internally imagining themselves getting a very large reward, and in that sense they "share" in the experience. but, if you just took out your wallet and handed the rich man a Benjamin, it is a very small amount for him and he gets very little reward. and he can't imagine it as a large reward unless he were to also imagine himself as poor.

what does this say about altruism of the rich? not much, i think, otherwise they wouldn't be so rich. if they got more reward for giving away their money than keeping it, then it reasons they'd keep less.

 

[TheStatutoryApe]

I don't see where the researchers commit that error. They make no summary blanket or otherwise unqualified statement that inequality makes people unhappy.

That is what I think of what I read yet in the Nature article abstract it is described as "inequality-averse".

So to repeat the thesis with the important qualifications: the study suggests that we are hardwired to have a desire to close any gaps in situations of inequity (ie. monetary gap if we confine ourselves to the findings of this particular study). The use of the word "hardwired" is justified because the study explicitly tests people's prefrontal cortex brain reaction, which I would guess is oftentimes markedly different to their actual and conscious, political and social views - which are more functions of socially conditioning than anything innate.

The idea that "closing gaps in inequality" is the point is a contextual rationalization. The studys data seems to suggest that there is a mechanism which promotes "altruistic" acts under the conditions of inequality. The article authors suggest an aim to this which is not necessary apparent. See below.

you can certainly read different things into it. just for another POV, humans have a great capacity for imagining themselves in the position of another person. one interpretation/use of this is empathy, something that we might think of as morally "good". another use might be predicting the behavior of another person, and while this could be seen as a defensive mechanism, other less positive things like distrust or treachery become involved.

so, I'm not sure that sounds very clear, but what i think is that the rich person see a poor person getting what for them is a very large reward, and they are internally imagining themselves getting a very large reward, and in that sense they "share" in the experience. but, if you just took out your wallet and handed the rich man a Benjamin, it is a very small amount for him and he gets very little reward. and he can't imagine it as a large reward unless he were to also imagine himself as poor.

what does this say about altruism of the rich? not much, i think, otherwise they wouldn't be so rich. if they got more reward for giving away their money than keeping it, then it reasons they'd keep less.

This is my [unqualified] interpretation as well. It is evidence of an empathic mechanism that would seem well suited to a social animal and the survival of its pack. "Altruistic" acts from more successful members aiding in the survival and wellbeing of their pack mates reinforced by reward triggers.

In older literature we can see a concept of certain people being superior to others and demanding respect and deference by nature for their success and superiority necessarily uplifts those that are inferior. Then we have more contemporary examples of the thought that all people should be [more or less] equal and it is the duty of more capable members of society to uplift their fellows. These though are just cultural/ideological rationalizations of the apparent instinct which we see evidence of in the study. The idea that this instinct is "inequality-averse" seems another cultural rationalization.

 

[Al68]

Okay, granted - the study does not show that humans derive a greater pleasure from equity or fairness - to dislike X isn't the same as liking the opposite of X, and it isn't just wordplay to equate the two (quite obviously)...

And yes, the study shows that brain only responds to extreme inequality - people are happier when they see those who are disproportionatly less well off receive rewards, and are indifferent to richer people getting the rewards (in terms of the pleasure centres of their brains lighting up). So basically, there is a tendency for people to want to close the gap in inequity.

That doesn't follow at all. In fact, being indifferent to richer people getting rewards clearly shows that it's the improvement to the poor person that is important, not the inequality itself.

Furthermore, an indifference to the well being of rich people is logically equivalent to an indifference to inequality itself.

 

[Zantra]

One dyanmic that comes to mind: the background of the wealthy person has to figure into their propensity to be generous. Somone who was born into wealth would likely be inheirently more generous. He has been given a gift and would more easily share that gift, providing it doesn't impact his own well being significantly. Somone who became wealthy throug their own efforts is more likely to see the value of what they have achieved, and feel that bootstrapping is the best method to cure poverty, not philanthropy.

 

[edpell]

Some rich people are kind and generous. Some rich people are mean and petty. Some poor people are kind and generous. Some poor people are mean and petty. I am not aware of any peer review journal articles that give the rate of generosity versus (pick the independent variable of your choice). If you have some references I would be interested. Even better if you can just summarize them with the reference that would be best.