Are you part of the Gibson-middle class? - Page 9

zoosermom · 04-22-2008, 06:41 PM

"I guess I'd still ask, since your income seems to have been so much lower in the past, I would think that such a large increase would lead to feeling pretty comfortable, wouldn't it?"

This is our starter house, so 13 years down the road we may feel more secure, but we are a little anxious since we put down a lot of money 3 1/2 years ago and now have negative equity. we don't feel comfortable at all, but as I posted, we do feel grateful. Part of that is that the college thing went smoothly and reasonably for D1, but I don't know what to expect for D2.

StitchInTime · 04-22-2008, 06:52 PM

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(#117) Look, Stitch, maybe that CEO/Bond Trader whatever the heck isn't good so much as lucky. In my business, luck has a whole lot to do with success. I know a lot of good writers (better than me by a long shot) who just never got that great manuscript on the right desk at the right moment and it wasn't for want of effort. There are phenomenons in every business...Tiger Woods and J.K. Rowling come to mind...

Bond traders and such have their place in this world but not everyone aspires to shove numbers around all day. Money brings misery as often as it brings happiness...check out the Curse of the Lottery. There's an awful lot of fabulously rich people out there who have had multiple ugly divorces, never talk to their children, and are unhappy, lonely, arrogant people. Maybe that's the price they pay for their wealth...I'm not willing to trade for it.

What is described are the normal economic choices one would expect to find in a free society. But this still leaves the original question unaddressed:

Are the solutions to the 'ills' described only addressable by government policy (a living wage), or is self-interest, self-sufficiency and initiative a viable alternative? Or put another way, is poster hayden incorrectly attempting to describe a zero-sum game where one person's success comes at the expense of someone else?

UCLAri · 04-22-2008, 09:04 PM

StitchInTime,

Well, to be fair, GDP is zero-sum in the short-run since product is finite. It's in the long-run that we no longer concern ourselves with a constant pie. However, people are, for better or for worse, "stuck" in the short run.

That's why it's troubling that the GINI coefficient in the US is large and growing.

barrons · 04-22-2008, 09:59 PM

it's hard to say GDP is finite even in the short run when people can buy a company for $2 Billion sell of pieces for that much and then sell the core company to offshore investors for the purchase price. That's creating wealth and that's what the guys who made 100's of millions in a year do. Or did--might be tougher this year but i'm sure there are bargains out there.

StitchInTime · 04-22-2008, 10:07 PM

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(#123) Well, to be fair, GDP is zero-sum in the short-run since product is finite. It's in the long-run that we no longer concern ourselves with a constant pie. However, people are, for better or for worse, "stuck" in the short run.

That's why it's troubling that the GINI coefficient in the US is large and growing.

Because so many are predisposed to support redistribution of wealth policies, the following offers a historical perspective:

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Wealth Creation and the Zero-Sum Fallacy

One of the worst ideas that affect public policy around the world is that wealth is somehow zero sum - that it can be stolen or taken or moved or looted but not created. G8 protesters who claim that poor nations are poor because wealthy nations have made them that way; the NY Times, which for years has flogged the idea that the fact of the rich getting richer in this country somehow is a threat to the rest of us; Paul Krugman, who fears that economic advances in China will make the US poorer: All of these positions rest on the notion that wealth is fixed, so that increases in one area must be accompanied by decreases in others. Mercantilism, Marxism, protectionism, and many other destructive -isms have all rested on zero-sum economic thinking.

The (Incorrect) Physics Analogy

My guess is that this zero-sum thinking comes from our training and intuition about the physical world. As we all learned back in high school, nature generally works in zero sums. For example, in any bounded environment, no matter what goes on inside (short of nuclear fission) mass and energy are both conserved, as outlined by the first law of thermodynamics. Energy may change form, like the potential energy from chemical bonds in gasoline being converted to heat and work via combustion, but its all still there somewhere.

In fact, given the second law of thermodynamics, the only change that will occur is that elements will end in a more disorganized, less useful form than when they started. This notion of entropic decay also has a strong effect on economic thinking, as you will hear many of the same zero sum economics folks using the language of decay on human society...

Wealth Is Demonstrably Not Zero-Sum

So are they wrong? Are economics and society driven by something similar to the first and second laws of thermodynamics? I will answer this in a couple of ways.

First, lets ask the related question: Is wealth zero sum and is society, or at least the material portions of society, always in decline? The answer is so obviously no to both that it is hard to believe that these concepts are still believed by anyone, much less by a large number of people. However, since so many people do cling to these false notions, we will spend a moment or two with it.

The following analysis relies on data gathered by Julian Simon and Stephen Moore in Its Getting Better all the Time: 100 Greatest Trends of the Last 100 Years...

...Lets compare the life of an average American in 1900 and today. On every dimension you can think of, we all are orders of magnitude wealthier today (by wealth, I mean the term broadly. I mean not just cash, like Scrooge McDuck's big vault, but also lifespan, healthiness, leisure time, quality of life, etc).

Life expectancy has increase from 47 to 77 years
Infant mortality rates have fallen from one in ten to one in 150.
Average income - in real dollars - has risen from $4,748 to $32,444

In 1900, the average person started their working life at 13, worked 10 hours a day, six days a week with no real vacation right up to the day they died in their mid-forties. Today, the average person works 8 hours a day for five days a week and gets 2-3 weeks of vacation. They work from the age of 18, and sometimes start work as late as 25, and typically take at least 10 years of retirement before they die.

But what about the poor? Well, the poor are certainly wealthier today than the poor were in 1900. But in many ways, the poor are wealthier even than the "robber barons" of the 19th century: Just check out this comparison! Today, even people below the poverty line have a good chance to live past 70. 99% of those below the poverty line in the US have electricity, running water, flush toilets, and a refrigerator. 95% have a TV, 88% have a phone, 71% have a car, and 70% have air conditioning. Cornelius Vanderbilt had none of these, and his children only got running water and electricity later in life...

Mr Payne · 04-22-2008, 11:51 PM

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That's why it's troubling that the GINI coefficient in the US is large and growing.

How much of that effect is due to importing low skilled immigrants?

StitchInTime · 04-23-2008, 09:28 AM

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That's why it's troubling that the GINI coefficient in the US is large and growing.

Referenced as a link above, but emphasized here to specifically address the misplaced concern.

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Why Income Distribution Doesn't Matter in This Country

The NY Times has somehow decided that one of America's real problems is widening income distribution, or more specifically, the exponentially increasing wealth of the top tenth of one percent of US earners. The series seems to be running to about 47 episodes (actually 10), but a key article is here, entitled “Richest Are Leaving Even the Rich Far Behind,” There are a number of ways to attack this article. One is to fisk their really abused and misused numbers, which George Reisman does here on the Mises Economics Blog.

Lets accept that the very very rich are getting richer. So lets move from there to the question of...

"so what?"

The Times is a little weak on the "so what". I presume that in their intellectual-statist readership, it is an axiom that rich people suck and rich people getting richer sucks more. However, it is possible to pull out four things the Times extended editorial-masquerading-as-a-news-story finds bad about increasing income inequality:

As the rich get richer, there is less money left for the rest of us
The process of the rich getting richer reduces opportunities for the rest of us
Having very rich people around make the rest of us feel bad
The rich are only getting richer because the rest of us are subsidizing them through tax policy...

Read the whole thing to see how the analysis debunks each myth.

StitchInTime · 05-07-2008, 09:21 PM

YouTube Video: The Coming Collapse of the Middle Class

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Distinguished law scholar Elizabeth Warren teaches contract law, bankruptcy, and commercial law at Harvard Law School. She is an outspoken critic of America's credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class. Series: "UC Berkeley Graduate Council Lectures" [6/2007]

bandit_TX · 05-08-2008, 10:18 AM

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Originally Posted by emeraldkity4

In my experience- areas that are more expensive to live also are more desirable. More places for recreation, better selection of shopping/medical care, better funding for parks, libraries and schools.
Areas that are cheaper to live, look it. They might not even have a public school in the area, the library is a bookmobile & high malpractice ins medical specialities are 60 miles away.

Now if you want to live off the grid, are prepared to dig your own well, are paranoid about having computer records so pay cash for every thing & are going to grow your own food, you probably don't care if there are no ob/gyns in the area, and you can't get service for your Travelall.

What I have left over after paying our living expenses and what someone who lives in Oroville- may be the same, but there are a whole host of reasons why I live in the city instead- just as there are reasons why those people who are paying $2,000 a month to rent a studio in SF are doing that, instead of paying that much for a 5 bedroom in Redlands

I never knew Dallas was "off grid"

BCEagle91 · 05-08-2008, 12:57 PM

[I must be out of touch but where are all these people with a family income of $40 K? I have a fairly wide range of friends, siblings, etc. that make up my experience. They are not all doctors or lawyers -- included are high-school teachers, electricians, nurses, federal employees, policemen, and auto workers. They are all way above the $40k figure.]

I have a residence in a town where the median household income is about $80K and another residence in a city where the median household income is less than $40K. Differences are night and day. Levels of crime in the city are off the scale compared to the town. Building are drab, vehicles much older and smaller and families struggle.

I imagine browsing city statistics on Wikipedia for random places will find you cities and towns where median household is low.

vicariousparent · 05-08-2008, 01:07 PM

My definition of middle-class: Anyone whose income is plus or minus 20% of mine. I think a lot of people have the same definition. How many among us dare to admit that we are "rich"? Here is a convenient list:

Homeless poor.
Unemployed poor.
Working poor.
Lower middle class.
Me.
Upper middle class.
Rich.
Affluent.
Wealthy.
Super-rich.
Unimaginably rich.

I think all government programs and tax breaks should be targetted to the middle class, especially the people between upper middle class and lower middle class.

BCEagle91 · 05-08-2008, 01:14 PM

In Silicon Valley, Millionaires Who Don’t Feel Rich

MENLO PARK, Calif. — By almost any definition — except his own and perhaps those of his neighbors here in Silicon Valley — Hal Steger has made it.

Mr. Steger, 51, a self-described geek, has banked more than $2 million. The $1.3 million house he and his wife own on a bluff overlooking the Pacific Ocean is paid off. The couple’s net worth of roughly $3.5 million places them in the top 2 percent of families in the United States.

Yet each day Mr. Steger continues to toil in what a colleague calls “the Silicon Valley salt mines,” working as a marketing executive for a technology start-up company, still striving for his big strike. Most mornings, he can be found at his desk by 7. He typically works 12 hours a day and logs an extra 10 hours over the weekend.

“I know people looking in from the outside will ask why someone like me keeps working so hard,” Mr. Steger says. “But a few million doesn’t go as far as it used to. Maybe in the ’70s, a few million bucks meant ‘Lifestyles of the Rich and Famous,’ or Richie Rich living in a big house with a butler. But not anymore.”

Silicon Valley is thick with those who might be called working-class millionaires — nose-to-the-grindstone people like Mr. Steger who, much to their surprise, are still working as hard as ever even as they find themselves among the fortunate few. Their lives are rich with opportunity; they generally enjoy their jobs. They are amply cushioned against the anxieties and jolts that worry most people living paycheck to paycheck.

Where would you place working-class millionaires that don't feel rich?

bandit_TX · 05-09-2008, 07:20 AM

You're breaking my heart .....

kelsmom · 05-09-2008, 07:24 AM

A few million would go REAL far for ME!!!

garland · 05-09-2008, 07:39 AM

People can re-define and re-frame anyway they want; that doesn't mean their definitions have any connection to reality.

As I see it, the man could quit right now, enjoy his paid for dream home overlooking the ocean, and live off the interest on his 2M. What's not rich in that scenario?