Today I got told that I am the...

[Kuciwalker]

I never said we should tax it at 100%.

[Kuciwalker]

(Very) anecdotally, I observed that elasticity on the work/don't work frontier wrt inheritances was low.

[KrazyHorse]

Kuci, the idea that you can take the AGGREGATE VALUE of some activity like saving is utterly ****ing ridiculous. Why not ask what the aggregate value of farming is? Well, the GDP of the world of course. Same with the aggregate value of manufacturing or any number of other activities. That doesn't mean that a given farmer is worth GDP of the world / number of farmers, or even that all farmers together are worth the GDP of the world.

The discussion at hand is the value of an INDIVIDUAL to society at large. The important values here are all marginal.

Good God.

[KrazyHorse]

3) only savings held as currency allows this

Sorry, I was originally writing a different idea, went back and changed something, and ended up with that (it's obviously incorrect). Savings indefinitely held as any asset should be functionally equivalent to a charitable donation.

No. No, no, no.

This is only true for savings held in assets whose yield is below the discount rate.

Thus, currency and government securities.

[curtis290]

Manufacturing, agriculture etc are mostly low-value activities best accomplished by low-cost workers.

You should look into it.

First off, if you've listened to me at all, you'd know that profit isn't much of a concern of mine. I'm not like you. I have values, and I believe in society. Not just the market and dollars.

Second, maybe in the short term, but we don't know that in the long term. In the event of a financial catastrophe, I'd prefer to be an economy that produces real things as opposed to one entirely based on 'high value' finance. Have you noticed how well Brazil is doing right now compared to Iceland?

Third, you're referring to 'value' only in terms of monetary value. Money has value only as long as we believe it has value. They are pieces of paper that can be used in exchange for goods and services. We have seen times in history when financial crises have caused money to only have value in its ability to serve as fuel. But actual things, such as factories that produce goods or farms and their crops, have inherent value. They provide people with goods they need to survive. I would take this over money. If money becomes worthless, it would be much better to live in an economy that has the means to produce real things, rather than a bunch of empty office buildings and starving white-collar workers.

Explain the fact that US manufacturing output has consistently grown faster than its population since the end of World War II, given your assertion that "we don't make anything anymore".

Is it also true that we don't grow food anymore?

Because of technological advancement and investment in productive capacity (which also is the cause of global overproduction, but that's a different topic).

As a portion of our GDP, manufacturing and agriculture have grown much, much smaller. Finance has grown much, much larger. Fewer people live in the countryside, and fewer people work in factories. More and more Americans push paper in meaningless white-collar office work that only exists because how highly financialized our society has become and our bloated financial sector.

[KrazyHorse]

First off, if you've listened to me at all, you'd know that profit isn't much of a concern of mine. I'm not like you. I have values, and I believe in society. Not just the market and dollars.

The market is what tells us how much OTHER PEOPLE value our services, you moron. When something has value to somebody he should be willing to pay for it. If he's not, then perhaps it's not as valuable to him as he claims.

Second, maybe in the short term, but we don't know that in the long term. In the event of a financial catastrophe, I'd prefer to be an economy that produces real things as opposed to one entirely based on 'high value' finance. Have you noticed how well Brazil is doing right now compared to Iceland?

Spectacularly badly, actually

GDP (PPP) per capita (2009 est):
Iceland: 38000 USD
Brazil: 10500 USD

UN HDI (2007 est):
Iceland: 0.969
Brazil: 0.813

Third, you're referring to 'value' only in terms of monetary value. Money has value only as long as we believe it has value. They are pieces of paper that can be used in exchange for goods and services. We have seen times in history when financial crises have caused money to only have value in its ability to serve as fuel. But actual things, such as factories that produce goods or farms and their crops, have inherent value. They provide people with goods they need to survive. I would take this over money. If money becomes worthless, it would be much better to live in an economy that has the means to produce real things, rather than a bunch of empty office buildings and starving white-collar workers.

You ****ing moron, the money represents the value that people place on services provided. By buying the services of a high-value individual (investment banker) I am saying that I value his services more than I do the services of a number of low-value individuals (agricultural worker). The value of the service exists independently of the unit of account used to denominate it. We could denominate things in sheep if you'd like, and I would provide services relating to promises to exchange various quantities of sheep at various times under various conditions. It would simply be more inconvenient. No matter what numeraire you choose, people who manufacture or farm are generally less valuable than people who do other things because PEOPLE ARE WILLING TO SACRIFICE MORE TO GET THE SERVICES OF PEOPLE DOING OTHER THINGS.

As a portion of our GDP, manufacturing and agriculture have grown much, much smaller. Finance has grown much, much larger. Fewer people live in the countryside, and fewer people work in factories. More and more Americans push paper in meaningless white-collar office work that only exists because how highly financialized our society has become and our bloated financial sector.

If the work is meaningless and valueless then why are PEOPLE WILLING TO PAY FOR IT?

[Aeson]

The great thing about agriculture is the % of the population involved has dropped tremendously, allowing growth of all other sectors of the economy. Of course it should continue to lose ground as % of GDP... as long as population growth doesn't increase dramatically... that's progress!

[Kuciwalker]

Kuci, the idea that you can take the AGGREGATE VALUE of some activity like saving is utterly ****ing ridiculous.

What? I said that the aggregate effect of money people saving money without intent to consume it later is to lower returns on savings.

The discussion at hand is the value of an INDIVIDUAL to society at large. The important values here are all marginal.

The point was to establish that the existence of these people implies that returns on savings are lower than they would be in a world where everyone intended to consume 100% of their income. Which leads to this:

No. No, no, no.

This is only true for savings held in assets whose yield is below the discount rate.

Thus, currency and government securities.

The point being that the discount rate implied by the market is lower than it otherwise would be, which means that even if the savings eventually are consumed, they are being redeemed for deferred consumer goods at rates more favorable than those who only value consumption would demand among themselves.

Essentially, each investor is engaging in a transaction with society, and society accrues some surplus from its side of the transaction. The value provided to society doesn't come from the marginal decrease in the price charged by the investor, but from the marginal additional surplus from the transaction.

The reason that there is an increase in surplus from the transaction is because this hypothetical additional investor who doesn't intend to cash out his investments is an inframarginal participant. It's equivalent to taking the USA and adding an extra illegal immigrant willing to work for low wages - we end up better off.

edit: I wrote that and and then thought "no, that can't be true since and additional inframarginal consumer would still pay the marginal price". I feel like the minute effect on that price, multiplied by all of the other consumers, should end up having the same effect.

[KrazyHorse]

What? I said that the aggregate effect of money people saving money without intent to consume it later is to lower returns on savings.

So what? "Aggregate effects", especially those of an activity as large as "saving without the intent to consume" do not have any meaning. How many trillions of dollars of savings does this represent? What would the world look like if all of this saving disappeared? The answers are both impossible to estimate reasonably AND meaningless for the current discussion, which is of the value of INDIVIDUALS.

[Kuciwalker]

Because of technological advancement and investment in productive capacity

Okay, then you admit you were blatantly lying when you said "we don't make anything anymore"?

As a portion of our GDP, manufacturing and agriculture have grown much, much smaller.

And yet not only do we still make stuff, we make more stuff than ever before. Why, exactly, should we lament the fact that a bunch of people no longer make stuff if the remaining people are picking up all of the slack and more, and are even doing so without having to work longer hours?

[KrazyHorse]

Kuci, your analysis is seriously confused. The question is the following: how much worse off would "society" (not the members of immediate family/heirs) be if this individual didn't exist?

The lowering of the rate of return APPLIED TO THE INDIVIDUAL'S SAVINGS is immeasurably small. This is the transfer he's engaged in with the rest of society.

You can't take "excess savers" in aggregate, ask what would happen if they all disappeared, calculate the transfer from this group to others and divide by the number of excess savers. That's NOT the marginal value of the individual's excess savings.

Go back and start from scratch. The rest of society is a black box, and people live forever. Nobody else can take advantage of the fact that the saver never consumes his savings, because he still has claim on them. He charges for the time value of their use. He moves the market against himself by lending, but this effect is immeasurably small.

[Kuciwalker]

In that case you are introducing a person with a strong preference for a very deferred consumption into a society dominated by people who prefer immediate or moderately deferred consumption. This should produce some marginal benefit to that society, just as much as if you added a risk-averse person to a society dominated by risk-seeking people (or vice versa).

re: the other point: the immeasurably small increase in the price of deferred consumption is multiplied across all people who choose to defer their consumption. This provides benefits to society in the same way that an investor who is good at picking stocks does - by a minute change in the price of a lot of units.

[KrazyHorse]

OMFG, KUCI

NO! NO, NO NO IT IS NOT MULTIPLIED BY ALL THE EXCESS SAVERS. THEY ARE MEMBERS OF THE SOCIETY BLACK BOX TOO!

The individual moves the rate of return by delta R. The amount he transfers to society is s * delta R * D (s is the size of his savings and D is the duration of the perpetuity, i.e. 1/R with constant rates of return).

In ADDITION to the amount he transfers to society, he ALSO creates a transfer of the size S * delta R * D (S is the TOTAL value of other excess savers' savings) from OTHER EXCESS SAVERS. However, this is NOT a transfer from the individual to society \ individual. It is a transfer from one part of society \ individual to another part of society \ individual

[Kuciwalker]

In ADDITION to the amount he transfers to society, he ALSO creates a transfer of the size S * delta R * D (S is the TOTAL value of other excess savers' savings) from OTHER EXCESS SAVERS. However, this is NOT a transfer from the individual to society \ individual. It is a transfer from one part of society \ individual to another part of society \ individual

[KrazyHorse]

Is that you thinking that you said something dumb or that I said something dumb?