Archive for the ‘Capitalism’ Category
Interesting video. I love infographics. However, there are a few notable problems with this video:
1. The difference between earned income and net worth
I think the common man has a hard time understanding when the narrator speaks of wealth – he means net worth. There is a big difference between net worth and earned income.
Many of those folks in the top 10% of that video earned a janitors wage during their lifetime, but they lived well below their means, delayed gratification and invested wisely. We would not want to dis-incentivize saving or demonize such people.
If we want to speak of inequality, I don’t think that net worth is a good econometric. Once one has amassed a significant amount of wealth, it becomes significantly easier to multiply that wealth. Somewhere along the way there is a tipping point. This is why Universities seek to be endowed and why Harvard is a glorified Hedge Fund (read here). The most basic tenet of capitalism is compounding money likes to compound more. Further, some of those top 1% folks have had money compounding for generations – think Vanderbilt’s, Carnegie’s, and Walton’s. Most of this wealth is from investment income which has nothing to do with differentials in wage.
We’ve got at least 237 years of capitalism (if we date its age by Adam Smith’s, The Wealth of Nations). That is a lot of time for wealthy families to grow their net worth’s through investment – so this serves to muddy the waters on “economic inequality.”
2. The law of diminishing returns – Michael Jordan vs. Kurt Rambis
I would posit that one is not paid for “time.” We often measure our pay by the unit of time, but the reality is we are not paying people for “time.” What we really pay people is for “value.” Consider Michael Jordan and Kurt Rambis:
When we consider the law of diminishing returns – say Michael Jordan (30.1ppg, 6.2 rpg, 5.3 apg, 2.4 spg, .8 bpg) and Kurt Rambis (10.2 ppg, 11 rpg, 2.1 apg, 1.7 spg, 1 bpg). Rambis had more blocks and rebounds per game than Jordan, but Jordan had 3x the points and more steals and assists. At best, we can say from a “time” standpoint that Michael Jordan (1985-1998; 2001-2003) was 3x as valuable per unit of “time” than Kurt Rambis (1985-1994).
Kurt Rambis made $5,300,000 in his career – an average of $662,500/yr. Michael Jordan made $90,235,000 – an average of $6,941,154/yr. At Rambis’ height he earned $1.1 million/yr and Jordan $33.1 million/yr. I don’t think anyone would have questioned the value that Jordan added and that he “earned” every bit of his 30x multiplier of Rambis’ salary. Consider that Jerry Reinsdorf (and the rest of a syndicate) purchased the Chicago Bulls in 1985 for $16 million. The franchise today is valued between $500 and 800 million.
Now Michael Jordan’s net worth is estimated between $500-650 million because of his other income from endorsements and investments. I don’t think anyone would argue that Michael Jordan earned every bit of his half billion net worth and justified his wage differential and his net worth differential versus Kurt Rambis. Three times the production over the same time period is significant – significant enough to justify substantial wage increases.
3. Every field has its Michael Jordan’s
The late Steve Jobs was brilliant to say the least. His ideas, attention to detail, simplicity and intuitive design have enriched millions of people’s lives. His track record at Pixar and Apple are legendary. We can go on down the line – Warren Buffett, Dale Carnegie, Sam Walton…
All of these people took risks, substantial risks, to become business owners. For better or for worse the world runs on incentive. For these folks they took the risk of business ownership onto their own shoulders and built something great. Why would we want to turn their success stories into an example of injustice. Many of these folks have made huge philanthropic contributions to humanity and society – arguably having a far greater impact per dollar than the government programs that would have redistributed said wealth.
4. We all need a market that rewards risk taking… especially all us little people (janitors, laborers… etc.)
There must be enough incentive in a system for people with business ideas to take on the risk of business ownership. If the potential for upside is not there, people will not take entrepreneurial risk. Not everyone is wired to take on this kind of risk. That said, all of us wage earners owe a bit of gratitude that someone took on the risk of starting the company you work for.
I would posit that a worker’s wage is worth whatever an employer will pay. Wage is subject to scarcity in the same way that precious metals, spices, real estate or many other categories. In the workforce not everyone has the same skills and not everyone adds the same value. Some people add exponentially more value and have far greater scarcity in their skill set. The market tends to reflect this in wage’s within a business or organization.
5. The (potential) myth of the middle ground
I can’t support with graphs and hard data the claims of this point. I would posit that there is precious little middle ground between socialism and capitalism. I presume that the narrator’s solution is wealth redistribution through taxation in order to create a more robust middle and lower class. Cutting half the upside of the top 20% would have a devastating effect on employment. The effect would almost assuredly be monotonic – ie. cut the upside by half and half as many entrepreneurs attempt to start their business ideas. The narrator is talking about taking a much larger cut out of top 20% and huge upside out of the top 1%.
Why would we want to take money out of the hands of people who have a proven track record of creating jobs and multiplying wealth?
I just am not sure if the ideal or even perceptive views are even logically possible in reality. I am not sure there is enough upside for the top 20% to cause them to take their risks in the U.S. markets. They would move into other markets that have a much better risk/reward quotient.
I think I get the sentiment of something like this video: Why such huge differences in net worth? It offends people’s sense of fairness. I get the whole objections of people that add little value, do bad/evil things and get rewarded handsomely for behaving badly. The abuses of Wall Street, large banks and other institutions that have put our financial system at serious risk.
Let’s not throw the baby out with the bath water. It’s good to know that tremendous upside exists at all. It makes me want to acquire new skills, more scarce skills and to keep thinking about new entrepreneurial ideas. It also makes me want to help the lower 40% grow in their skills, how they see themselves, and develop the value that they can add in a business.
Thorough article analyzing “Why the Arabic World Turned Away from Science” (HT: Nancy Pearcey)
Scathing anecdotal piece of UCC minister complaining about all the conversations with people who are “spiritual but not religious”
Thank you for sharing, spiritual but not religious sunset person. You are now comfortably in the norm for self-centered American culture, right smack in the bland majority of people who find ancient religions dull but find themselves uniquely fascinating.
Sad but true comic: “The Evolution of Intellectual Freedom” (HT: BL)
I always look forward to 9Marks eJournals, this one entitled, “How Much Should You Pay Your Pastors?” was particularly good.
NYTimes article, “One Size Fits Nobody” on the crazy world of (women’s) clothing sizes
Thrice new single, “Promises”
ps. Sorry it has been forever since posting… for the handful of you that find these posts interesting
Forbes, of all places, has a really interesting piece entitled, “The Seminary Bubble,” which points out some real weaknesses to the seminary model of ministerial preparation.
Cold War era abandoned monuments in Yugoslavia – some pretty incredible photos of some fascinating pieces
Trevin Wax deconstructs a good number of widely promulgated but fictitious/dubious sermon illustrations/factoids – of note: Gehenna as a burning trash dump outside of Jerusalem, the high priest rope around the ankle bit, NASA accounting for the missing day
Kevin DeYoung has a real nice piece on Business (Profit, Product, People, Principles)
D. Martyn Lloyd-Jones weighs in on video preaching (in a way) – there is a certain metaphysics of presence that I think Lloyd-Jones is onto here – it may be empirically difficult to state what is lost, but there is certainly an opportunity cost worth weighing
California has over 100,000 illegal immigrants in it’s prison system at a cost of $34,000 per year per person (Texas spends an average of $12,000 per inmate)
Waiting times at a three year high in England for healthcare – still want a government 14 trillion in debt becoming your health insurance company and provider? Diseconomy of scale!
Some beginning to call for Uncle Sam to raid your Roth IRAs for more tax revenue
David Brooks has a nice op-ed in NYT entitled “Creed or Chaos” giving some nice analysis to Africa
William Buckley interview of Hugh Heffner on Judeo-Christian Sexual Ethics (1966):
(HT: 22 Words)
Pretty intense video of Tuscaloosa tornado as it goes over University Mall:
Recent test at CERN shows some evidence of new atomic/subatomic element(s). The data is statistically significant at 3 standard deviations so far, however, the gold standard in particle physics and astrophysics is five standard deviations. Hence, some have remained cautious about the findings thus far. In a similar vein, here is an interesting piece on neutrinos.
Two shot in British nuclear submarine. Reminds me of Capt. Rameus’ classic line, “Be careful what you shoot at in here… some things don’t react to kindly to bullets”
Stephen Moore writes in WSJ, “We’ve Become a Nation of Takers, Not Makers”
Fascinating case of a baby born at 21 weeks, 9.5 inches long, and less than 10 ounces… and still going strong.
Interesting book review from Ed Stetzer- “5 Ministry Killers and How to Defeat Them”
Bernard Lewis has a nice piece in the WSJ entitled, “The Tyrannies are Doomed”
Infographic: Failing schools across America
“Unreasonable Doubt” – Examines the roots of atheism
John Piper gives a few thoughts regarding what Koran burning is analogous to and what it is not analogous to.
Scott Walker explains in WSJ Why I’m Fighting in Wisconsin
There Aren’t Enough Millionaires… (to cover our fiscal/deficit woes)
Hedge Funds had large plays against Japanese economy before earthquake/tsunami
Alan Greenspan says Obama Administration is “Too Active” in Economy.
Possible use of Large Hadron Collider as a time machine?
Kevin DeYoung has a thorough review of Rob Bell’s “Love Wins”
Devastating article examining the essay grading industry
Journalist grills Rob Bell:
Salon.com founder Laura Miller has a scathing, yet sadly true, piece on the status of the Bible amongst evangelicals: “The Rise and Fall of the Bible”
American Christians buy millions of Bibles they seldom read and don’t understand.
Mubarak evidently fell into a coma after leaving Cairo. Does this mark anyone else as strange?
2010 Income Statement for the U.S. Government (58% of budget for entitlement programs [SS, Medicare/Medicaid/Unemployoment; 20% defense spending]).
Radio program claims they have revealed Coco-Cola’s secret formula. Apparently, the secret ingredient “Merchandise 7x” consists of alcohol, orange oil, lemon oil, nutmeg oil, coriander, neroli and cinnamon.
Doug Wilson has a nice piece on collective bargaining.
“So You are Thinking of Going to Seminary?” A brief and well-written piece by Kevin DeYoung weighing in on those considering seminary. Certainly some golden advice here that could help you from wasting a lot of time, money, and energy OR help you maximize the most of your opportunity.
Interesting piece on Sarah Palin and feminism.
Bernie Madoff accuses federal government of being a Ponzi Scheme (and I can’t say I really disagree with him).
Fannie Mae and Freddie Mac are going away and the PIMCO CEO wants to raise rates on 30 year mortgages by 3% across the board.
Denny Burk points out some interesting inconsistencies between fetal abortion and fetal surgery. It does become a bit absurd that doctors will both fight to save and fight to end babies in the same stage of pregnancy.
Every now and then I read a really interesting Wikipedia article, this is one such article: “Voynich Manuscript”
Some really fascinating art: The Book Surgeon
Anyone who surfs knows this is unbelievable – Surfing Kickflip: