Do the rich save more?

Yes, not a surprise but here are some details:

We identify a strong negative relationship between the consumption rate and the lifetime net resource. The predicted APC [average propensity to consume] of the highest net resource cohort about 0.03, which is two standard deviations smaller than the lowest resource cohort.

That is from a new paper by Ilin, Ye, and Yu (Yu is on the job market).  Of course this relates to the recent wealth tax debate — almost all of that tax would fall on the investment of the wealthy, not their consumption.  Note, however, that if the wealth tax induced more consumption by the wealthy, consumption inequality could quite easily go up.

Comments

What is saving?
Returning money/purchase power to the real economy in return of some assets in the hope that one day, when need be, those assets will allow to recover, at the very least, the same money/purchase power, or hopefully more.
http://perkurowski.blogspot.com/2018/10/redistributing-wealth-is-not-as.html

Reading your rant reminded me that indeed only the rich can afford to take time out from the vicious circle of hand-to-mouth existence and create something new. If you look at the history of innovation, a lot was done by the 1%, since they could afford to dabble. There are of course poor inventors who invented out of love or desperation (Goodrich, Armstrong) and a few that got rich from government contracts not from their famed inventions (e.g., Eli Whitney).

Bonus trivia: one of the Rockefeller women was a scientist of note.

Payday lenders, subprime second and third mortgage originators, 7-10 year car loan inventors, credit cards for low and no income consumers were

Innovating out of love?

Dabbling because they were rich?

I grew up when such innovations were crimes done only by the mob, banned to the law abiding as Bible thumper old testament usury.

Was ending usary antisemitic? Eg, discarding the Hebrew laws in favor of Jesus something for nothing at the sermon on the mount reinterpreted to eliminate socialism in favor of magic.

Money in the control of citizens helps the economy and employs the middle and lower class. Money in the hands of the government hurts the economy, creates an unneeded elite employee class and crushes the middle and lower class. What we need is lower taxes, perhaps by half across the board AND smaller government, again about half it's current size.

Usury laws died for the same reason Prohibition died: it was unenforceable.

Sure, you could prosecute someone offering credit at more than the approved rate, but the result was Rent-To-Own and slum stores (which offered overpriced goods that could be bought with cheap credit by those who were poor credit risks).

A more constructive path (assuming this is a real problem) would be harm reduction. For example, legal gambling predictably causes some level of social problems as at least some gamblers gamble away the mortgage/rent payment in unsuccessful "double-down" attempts to recover losses. One way to reduce such problems is to prohibit casinos from loaning money, and require a minimum distance between a casino and an ATM.

But so long as significant portions of the population retain a steep discount rate (as many all-too-obviously do), truly outlawing usury will remain impossible as lenders will find convenient ways to comply while still making what amount to usurious loans.

@mulp - Financial engineering is not patentable says the better trend in patent law. I was directing my comments towards real engineering and invention, not financial engineering.

But those assets are increasingly bonds created by packaging or funding payday lending, 7 year loans on formerly leased vehicle now 1-2 years old sold to low income workers desperate for transport to work or for work, second mortgages, or third, on housing owned by low income owners, often too old to work, to repair homes in bad housing markets, ...

The assets in truth are the incomes of marginal workers who are first to see income declines. The savers get only 5%, maybe 10% returns on debt generating usury rents of 35%, 200%, 500%, or 2-4% on loans at 8-15%.

The high interest to consumers is for the high risk and covering high losses in a low unemployment economy which prevents default on bonds, but once unemployment spikes, the bonds default and suffer large losses. The low saver interest is due to too much saving, and too little investing to make capital scarcer to increase rents. Ie not building truck/SUV factories to flood the market with now high profit vehicles to replace the car factories being closed which generate 2% returns when savings generate less than 1%. More truck factories built with savings earning 1% would mean truck factories would earn 2% returns.

"almost all of that tax would fall on the investment of the wealthy, not their consumption"

No prob then, savings glut and all. Buybacks as the best companies can imagine. Etc.

P.S. It's pretty ridiculous that we get the Harbor Freight free flashlight, but we do.

Yuck. We regulate both residential and industrial development into oblivion and then complain that there's a savings glut.

6 million vacant housing units, most with no economy to create demand so the debt that is backed by these housing units become savings redistributed to real estate and debt collector managers.

But those wealth redistribution losses to savers are offset by hyper inflation of housing units fueled by savings funding bidding up prices, but not going to tax bonds to build infrastructure of transport and water and sewer and modern schools to make the plentiful vacant housing and buildable lots part of the hyper inflating real estate market.

The reasons cities are being redeveloped for hyperinflating housing is the taxes were hiked a century ago to build the transportation, water and sewer, and today people have gotten the conservative cost cutting message and decided to not have extremely costly children who are massive burden on society, so the schools built a century ago can be turned into luxury housing for couples who save by not squandering money on kids.

Yes, good call, mulp. The problem is indeed that conservatives have too much influence in big city governments these days. Just a parade of Republican mayors elected year after year in our biggest cities.

I was actually looking for R&D investment, to increase productivity, and total wealth.

There are more places where productivity, and rents, are low than there are with the reverse.

High productivity and high rents are for the lucky few.

https://www.homesnacks.net/rent-in-america-by-state-1225843/

The money goes to the person who sold the stock to the company, and he invests it.

Do fat people eat more?

If you want to reduce obesity, we must get at the root of the problem, which is white people .

https://wearyourvoicemag.com/body-politics/obesity-fatphobia-white-supremacy

Actually, the problem is Snyder's of Hanover Honey Mustard and Onion pretzel pieces.

The interesting answer to that question is often times no. People vary considerably on their ability to extract nutrients from food. Current research is focused on gut bacteria being the issue.

Or fat people are much more efficient, productive.

The odd thing is how people what to work less, ie, door to door transport, labor saving machines, then they pay to do manual labor producing absolutely nothing.

Why would anyone pay for machines to do work humans traditionally did, then pay to be ordered by a "trainer" to do what machines are bought to do. Get driven in an Uber to a health center to then get on a bike to be ordered to peddle faster across a plain, then peddle harder up z mountain, then to cool down by going back to pedally across a plain.

At least when doing the work of going from A to B on a bike, after peddling hard up the hill, you get to coast down the other side.

+1

???

When I read his nonsense I wonder if 'they' need to reverse the ban on straight jackets in nut houses.

Is there any evidence that viable businesses aren't being funded currently? If anything isn't it the opposite?

Have you ridden a scooter yet?

Or even just come out of a restaurant to see two brands of scooter shares and one brand of bicycle waiting?

I don't see it as a sign that innovation is money short. Indeed reports from the valley say the opposite.

Praxeology via anecdote? You being a weird form of Austrian actually makes a lot of sense. Regardless...

Again, I’ll ask you. I’m neither a Trump voter nor supporter. Convince the 99% of readers who don’t comment.

In real concrete terms, things that affect real Americans...

What are the actual Specific downside risks of another 4 years of Trump?

What are the actual Specific downside risks of 4 years of Warren?

Thanks in advance. You can discuss how a wealth tax is actually beneficial due to a surplus of capital.

Rational discussions, no circus please. Measurable, clear, predictions of risks. Specificity and numeracy is always a tax on BS.

I'm getting a kick out of this.

Apparently you think the only way to be a "centrist" is to act like a blind man in a cave and shout out that people should come in and prove things to you.

Sorry buddy, real independents have figured it out.

They don't live in your cave.

More personal attacks. And links that have nothing to to with the question.

So can we infer then that you see no downside risks to four additional years of Trump?

I assume that’s why you reject answering a straightforward question about your favorite topic.

What are the actual Specific downside risks of another 4 years of Trump?

What are the actual Specific downside risks of 4 years of Warren?

Or are you just trolling and have no actual opinions?

Bud, the link.

At this point you are arguing an extremely minority position, among the independents. A short while ago, you were arguing the opposite, that this majority-independent position against Trump was partisan.

You're shredded. Give it up.

"So can we infer then that you see no downside risks to four additional years of Trump?"

Life in the cave, I guess.

What is this mysterious minority position among independents that I have taken? Are you delusional or is this malicious?

You’re making up things out of whole cloth again. Literally inventing positions that I have not taken and compulsively linking to sites to “prove” I am wrong about a position I never took. Strange.

Gaslighting I guess? Or trolling? Misdirection?

Instead of inventing straw men positions to attack, why not answer the question.

What are the actual Specific downside risks of another 4 years of Trump?

What are the actual Specific downside risks of 4 years of Warren?

You’re not a troll, or a weird LARPer, right ?

Either you are psychotic or you are a troll. I point you to a link 3 times, and you refuse to read or digest it. All the charts on that page show one thing. Trump has lost the independents.

Put another way, I am typical of independents.

Your game is to pretend you know nothing,

"What are the actual Specific downside risks of another 4 years of Trump?"

The only way to maintain your "centrism" is to pretend you live in a cave, and know nothing. You need to ignore the 3 years of news those independents have digested.

So, are you really "a centrist?" Are you the kind of guy who deeply needs to say, no matter what "both sides, so I have no responsibility?" Or are you just a fake centrist, the kind of right winger who refuses every critical bit of news on Trump?

Straight to personal attacks, ad hominem, and once again calling me a liar.

Your link is a poll. That has nothing to do with the question. I’m asking for specifics, and your take on the downsides.

Misdirection, gaslighting, ‘psychotic’ is certainly upping the insults to a new tier.

It’s a pretty simple question. I’m asking for nothing more than your actual opinion on the presumable candidates for president. Specific, concrete downside risks on the two candidates.

Extremely bizarre that a question about specifics results in a stream of ad hominem attacks.

What are the actual Specific downside risks of another 4 years of Trump?

What are the actual Specific downside risks of 4 years of Warren?

Thanks

omg, what can you possibly think you are accomplishing?

I tell you what you are accomplishing. You are proving my point that playing dumb is all you got.

"What are the actual Specific downside risks of another 4 years of Trump?"

I’m at a loss here, unless this is just about you trolling the comments section.

Surely you can give us your top 3 for each.

Why the personal attacks and ad hominem? It’s a simple question and right up your alley.

Concrete, specific risks to real Americans.

What are the actual Specific downside risks of another 4 years of Trump?

What are the actual Specific downside risks of 4 years of Warren?

Thanks

@Skeptic: obviously he's trolling

@anonymous: you're aware Trump is getting re-elected, right?

In my industry all the innovation is coming from elsewhere. European or Japanese companies are coming up with the new ideas and buying up existing US companies for their distribution and service networks.

So you think VCs are making bad investments, and therefore there is no need for investment in general? Is that the argument? "Some guys funded a scooter company and I don't like it! Therefore, tax away their wealth so that can't invest it in dumb things!"?

Or, your position is that literally every business asking for a loan is being given one, and no one is constrained by capital at all? Is there some data or literature on that?

Technically, you are asking John, but I think this question is maybe for me.

I believe, like Tyler, that progress is good. I think progress as productivity improvement is fair, or at least part of it. And I think the invisible hand is falling down a bit on that. Sure, Uber seems like it could be a long term win, but these follow on scooter things look like obvious miscalculation. Scooters are getting better, but a better answer for people who love them, is to buy one.

Which all means to me that we need more public effort to complement the private. More public R&D for sure. Better education in less high productivity areas. And maybe better transportation infrastructure.

Here's an eye-popping summary of what the wealth tax would have done if it had been adopted in 1982: https://www.nytimes.com/2019/11/10/business/economy/warren-billionaires-wealth-tax.html As one billionaire quoted in the linked article states, this is much ado about nothing because there isn't going to be a wealth tax. My view, often expressed, is that anything that would shift investors to, you know, invest would be both a change and a benefit. As it is, owners of capital are content to hold onto investment assets (stocks) as their prices go up and up and up, enriching them for doing nothing. We need disruption. Doesn't Cowen like disruption anymore?

You want disruption? You can't handle disruption counselor. Disruption means strengthening patent laws so worthy inventions cost more, and inventors make a lot more than today. It means no more Piratebay, no more cheap Chinese knockoffs, no more cheap tech. It means more monopolistic behavior. Most people can't handle that, since they're not producers, but they are consumers of the 'dumb growth' kind (more people = more GNP due to economies of scale). A true radical today is in favor of strong IP. In a way, Trump's advisors were on the right track (though they traded their trump card, pun intended, for short term gains).

Hey, Cowen's the disruption guy, not me. I am a conservative, which means I place a high value on order and stability. Reliance on rising asset prices for prosperity is not the path to prosperity, it's the path of DISRUPTION. As for the wealth tax, as I indicated in my comment, it's much ado about nothing.

That crazy "reliance" causality again. (Some) rising asset prices often exist within a thriving economy. They don't exist because we rely on rising asset prices for prosperity.

Curious - and a real question - just what non-stock investments by the rich to you have in mind? Bezos investing in space flight? Gates or Bezos in merchant computer processing capability? Nuclear power? Cargo ships? Steel mills? Shopping malls?

In general there seems to be a sufficiency of capital sloshing around (see private equity) to fund pretty much anything with a coherent business plan, and a lot of things (see WeWork) without one.

https://www.washingtonpost.com/opinions/why-new-trump-tax-cuts-would-be-bad-economic-policy/2019/11/03/44b94d92-fcd0-11e9-ac8c-8eced29ca6ef_story.html

Interesting WP article on Cobin:

https://www.washingtonpost.com/nation/2019/11/11/john-cobin-chile-shooting-protesters-video/

10% background information, 10% information about his arrest, 80% character assassination, 0 percent digging into whether the shooting possibly was self defense.

It's expensive to be poor. Shocker!

+1 synopsis

Am currently reading: "The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay" by Emmanuel Saez and Gabriel Zuchman. Table 1.4 Us Billionaires Now Pay Lower Tax Rates than Working Class: In 1960 400 Richests had an average tax rate around 58% and average rate of bottom 50% was 22%.. In 2018 the top 400 had an average rate of 25% which is BELOW the average rate of the bottom 50%. The tax on capital income was responsible for most of the change. The graphics on growth of income by segment are just surprising.

Have you been living under a rock over the past month? Those numbers from S & Z have been criticized every which way. E.g.: http://www.davidsplinter.com/Splinter-TaxesAreProgressive.pdf

Actually, I have looked at them as well as the responses, but apparently you have not. https://www.vox.com/policy-and-politics/2019/11/4/20938229/zucman-saez-tax-rates-top-400 Don't just get your news from AEI.

Vox is one of the least valid sources, especially on eocnomics. Please tell me you base your thoughts on more than Vox?

It is summarizing other academic's statements.

Vox, If you had bothered referring to the materials summarized in Vox you would have found this presentation summarizing the differences between Saez and Auten-Splinter. Here is a link which you may have difficulty understanding, so go back to Vox if you want an explanation: http://www.columbia.edu/~wk2110/bin/ColumbiaZucman.pdf

I hope you are aware the book has been debunked?

No it hasn't. Do some further reading on the responses. Even the critics concede the disparity has increased, but not as much.

Fools! You do not know silence like a cancer grows.
Hear my words that I might teach you. Take my arms that I might reach you.

Why do the rich save more? The answer obviously is they enjoy spending money less. A homeless person may enjoy spending $10 more than a billionaire enjoys spending $100,000.

In the interests of fairness, I suggest we shift money away from those who enjoy spending it the most to those who enjoy spending it the least in order to balance out enjoyment.

Replacing capital and income taxes with a flat consumption tax should suffice. If it turns out more money needs to be taken from the poor in the interests of fairness and spending joy equality, that can be done at a later date. After all, we don't want to let the perfect be the enemy of the good.

This site being what it is, we will never know if it is a Modest Proposal-like satire or a real plan.

The amazing thing is how it manages to be both at the same time.

I guess it takes talent -- of a sort.

A true progressive would propose a progressive consumption tax with perhaps partial tax credits for savings by lower income people.

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