Tuesday, April 24, 2012

Wealth and the Standard of Living

I just read over this article, and I'm particularly interested in the first part. Specifically, this quote
But rage against the 1% is misplaced. Income is not a zero-sum game: The rich aren't getting wealthier at the expense of the poor. Harvard's Lawrence Katz has calculated that even if all the gains of the top 1% were redistributed to the 99%, household incomes would go up by less than half of what they would if everyone had a college degree.
That shit is awful.

Let's leave aside the fact that college isn't right for everybody. This quote is saying that if everyone in the United States had a college degree that our incomes would go up substantially more than by redistributing income from the 1% to the 99%. I certainly understand how Harvard's Lawrence Katz calculated that figure, but it ignores many things.

First of all, if Americans did become substantially more wealthy, where would that money come from? Other countries. The other countries of the world would necessarily become poorer, because with a fixed level of production, wealth is a zero-sum game (or, rather, a fixed-sum game). Consider this, everything that I (and you, and everybody else) consume is produced somewhere else. So by extrapolation, the sum of all consumption equals the sum of all production.

 The standard of living is this figure divided by the world's population. And when I talk production, I mean real, physical goods. When people produce non-physical goods such as entertainment or news they are bartering insight, information, and entertainment for money which they then go and exchange for goods.

There are only two ways to increase the worldwide standard of living. The first is to increase production. This is done by getting more people involved in production or by making production more efficient. The other way is to reduce the population, which is what I like to call "the psychopath option". I think we can all agree that murdering people who don't produce isn't the right way to go here.

So what are some ways we can increase production? Technology is the first that comes to mind. Technology allows you to harvest resources that were previously unharvestable. It allows you to use resources more efficiently, producing more goods from the same amount of material. And it allows you to create goods using fewer people, which allows those people to work on producing goods in other ways.

The other way is to get more people involved in the production of goods. There are tons of places in the world where there aren't good ways/places for people to work or make goods. If you really want to help an impoverished area, find a business that you could start there.

Another way is to recycle more. It let's you get more use out of the same resources. MAGIC!

So even if everyone in America had a college degree, that wouldn't really fix the really problem, it would just toss the problem on somebody else's shoulders. We need to focus on technology and worldwide jobs growth. America will benefit from helping out other nations.

Now, this isn't all to say that education is a bad thing. Education is good. Education allows people to fulfill their maximum potential. It will create more technological innovators whose ideas will allows us to produce more efficiently. It will do so many things. But education isn't the only thing that needs to be done. Jobs aren't the only thing that needs to be done. The income disparity problem, specifically as it relates to taxation, needs to be fixed. That is just the beginning of what needs to be done.

Now let's try and forget about the fact that the world only has limited resources and that eventually our population will grow to a level where poverty and its effects will be absolutely awful. Population growth is something that we need to work on because it's a hell of a lot faster than most people realize it is.