Thread in which the world laughs at America

[C0ckney]

My girlfriend, in a country without much of a safety net and with a large part of the population making less than 9000 usd per year (and a minimal apartment is 1000 usd per month), values increases of wealth much more than I.

Jon those numbers don't even add up.

they do if people are living in less than a 'minimal apartment'.

although i must say, i find it hard to believe that you can't find reasonable housing for much less than $1000/month in south africa.

[C0ckney]

also, talking about the economics of redistribution is all well and good, but it is primarily a political question. in order for any redistribution to actually happen, you need a political environment where that is possible. the economics are only of use when deciding the how. a side issue.

[Jon Miller]

they do if people are living in less than a 'minimal apartment'.

although i must say, i find it hard to believe that you can't find reasonable housing for much less than $1000/month in south africa.

Minimal housing = a place where there is some protection against being murdered or having all your stuff stolen and has water/electricity.

Yes, that is Johanessburg, where most of the jobs are.

JM

[C0ckney]

well i don't know exactly how things are in south africa so i'll have to take your word for it.

however, i will say that here in rio de janeiro, you would hear the same kind of thing, that you 'need' the security of an apartment complex etc, you know to protect you from the crime (and of course save you having to interact with the lower classes, although maybe you'll get that through hiring a maid) and to pay a fortune for the privilege. of course it's all bull**** and middle prejudice. i live in one of the slums here and it's about the safest place in the city IMHO. i pay a little under $200/month for my own house with electricity and water included.

[Jon Miller]

I am not getting this from the wealthy, this is from my girlfriend's family who lives in a township and don't make much...

I have doubts that Brazil is as dangerous as South Africa.

So the Indian township, one of the safest places (and not even in Johannesburg but in Durban) still had almost every house with electricity/water have a gate/security/etc and the same Johannesburg (every house I saw in Johannesburg).

I can't imagine of a place in Johannesburg (even a room or something) that would be less than $500 (which would have water/electricity).

JM

[C0ckney]

as i said i don't know your girlfriend's situation or the more general situation in south africa, so i wasn't commenting on them. the thing that surprised me was the high cost in a developing country.

i don't think it's as dangerous here.

[Jon Miller]

The issue is that for a small percentage of the people (the white people), South Africa was a developed nation and had been for decades. These people own the land/etc, and they don't want to sell for too low prices. The rest of the population had nothing and were kept with nothing. Now they are starting to gain wealth and all of them want things (the same things).

Additionally, Zimbabwe is a lot worse, so you have tons of poor/unskilled immigrants.

Add to that bad economic principles held by the government, and things get worse. Included in this is that they think that people should have nice homes, so there are a few nice homes being built and given to people (by the government) but this doesn't bring down 'decent homes' to a price point people can afford.

Despite all this South Africa is improving. A lot more people have electricity and even water now.

Cars are also a lot more expensive in South Africa. A 5 year old used Hyunday will cost ~$14000 usd. A new one of the same model would cost as much in the US! I understand this though, the government wants to tax consumption because it is the wealthy who consume the most and so cars are heavily taxed (I Think).

From a report in 2001 (I don't think it is better unfortunately):

Apartheid's Legacy

Under apartheid, segregation was mandated by law. Blacks could not live in "white" areas but had to live in townships or in impoverished rural areas know as bantustans. Very little housing was built for Africans by the apartheid regime. As a result when the ANC led government came to power there was only 1 formal brick house for every 43 Africans compared to one for every 3.5 whites. The urban backlog alone was estimated as at least 1.3 million units in 1994. To meet population growth, 130,000 houses have to be built every year. In 1993 only about 50,000 houses were built. Between 7.5 and 10 million people lived in informal housing such as shanties in squatter camps and back yards of Black township houses. In the 1980s, as part of the struggle against apartheid, township residents organized rent and services payment boycotts.

Today, millions of people still live in shanties and squatter camps. The government estimates that an additional 2 to 3 million homes are required to meet their needs.

I am not sure if it makes sense, but some of the people in SA including those in the real estate business say that a lot of the real estate is bought up by people outside of SA taking advantage of SA's huge housing market. The housing boom in SA is really large, if you buy a house it will be worth a lot more a year later (at least this has been the situation).

"In 10 years, South Africa has achieved many successes, including greater political stability and greater economic freedom. Research Worldwide.com has just published results of its annual survey which showed that property investments in South Africa showed an actual total return of 15,1% last year. South African commercial real estate outperformed sixteen other major countries. The real estate boom in South Africa and low interest rates continues to encourage homeowners to feel confident and spend buying those houses for sale, farms for sale and commercial property for sale."

JM

[Zevico]

There are some places where compulsory savings programs are the extent of government interference in the retirement arena. However, that would not allow SS to serve its other purposes (which may be a good thing). In particular, the tie between the money you put in and the money you take out would break the ponzi and redistributionary aspects of the program, and a market rate of return would break the stealth taxation aspects of the program.

Australia has compulsory superannuation (9% of your income must be invested with a super fund, private or not) with a means tested age pension. The current government wants to increase the 9% to 12%.
One possible obstacle to this approach at the federal level in the US is constitutionality. If Obamacare goes down, then there's hardly reason to expect that forcing people to buy super will go any better. Implementing it at the state level sounds more practical for that reason.

[Zevico]

Holy ****, jon. What the **** is this other than a desert or fairness argument?

Instead of contenting yourself with platitudes how about you apply some analytic thought once in a while?

What are the goals of government? I would say that they should be twofold:

1) The provision of public goods (e.g. police, defence, enforcements of private agreements, etc)
2) The redistribution of income from those whose marginal utility of income is high to those whose marginal utility of income is low in order to maximize overall well-being

In deciding how best government should go about its job, the primary consideration is the harm that government does through its interventions versus the good it does. In order to understand that, the most important thing is the understanding of the mechanisms by which its actions impact the private decisions of its citizens and quantitative information on the importance of these mechanisms. In other words, we need to understand economics. Arguments based on any sort of claim about fairness or justice or desert are mere distractions.

I said much the same thing earlier. Now why hasn't half the board called you the devil in disguise yet?

[Dauphin]

If their capital was obtained in the form of loans then under any rational measure their risk-adjusted rate of return was the same as the interest rate they paid on the loan (ex ante, not ex post, of course).
..

Isn't the ex post point quite important? You only pay tax if your gamble to be an entrepreneur pays off. I am not sure what perspective you are coming from. The impact on decision making and distortions?

Taxman only cares about actual returns. Say "risk adjusted return" and you will get a blank look. You only pay tax on actual gains. But you never paid tax on the up front capital as you stated.

[Dauphin]

I said much the same thing earlier. Now why hasn't half the board called you the devil in disguise yet?

Many already have.

[Aeson]

I don't recall anything about a "disguise" in such conversations...

[KrazyHorse]

Isn't the ex post point quite important? You only pay tax if your gamble to be an entrepreneur pays off. I am not sure what perspective you are coming from. The impact on decision making and distortions?

Taxman only cares about actual returns. Say "risk adjusted return" and you will get a blank look. You only pay tax on actual gains. But you never paid tax on the up front capital as you stated.

I don't understand this. I am talking about a rational view on taxes and "income", not what we have now.

BTW, the ex post point to taxation of unearned income is yet another distortion which I didn't bother to cover here (but have previously; it is a tax on risk).

The end point is that capital cannot form spontaneously. It is either the result of previously acquired capital or labor. Pushing through an intermediary doesn't change this fact. Chasing back the daisy, chain, at some point all capital was either subjected to labor income tax (or managed to escape it through the partnership exemption or by predating labor income tax). The latter exceptions re relatively minor in today's developed world, but I am not averse to a special one-time surcharge on capital such as would be caused by moving to a consumption tax....

[Dauphin]

I was considering it from the point of view of an individual. i.e. who is it that suffers the tax burden when you borrow to invest.

[DaShi]

Government should abolish all other taxes, but take all your assets when you pass away.