Category Archives: wealth

Economics: your marginal utility

Brad De Long is hearing voices, and they are talking about the distribution of wealth.

Agathon: “That means that the market system, in weighting utilities and adding them up, gives you a much lower utility than it gives Richard Cheney. In fact, if marginal utility of wealth is inversely proportional to the square of lifetime wealth, the market system gives Richard Cheney about 400 times as big a weight as it gives you.”

Glaukon: “That’s sick.”

Agathon: “And it gives Bill Gates a weight about 400,000,000 times as big a weight as it gives you.”

Glaukon: “That’s sicker.”

Agathon: “But it gives you about 40,000 times the weight it gives your average Bengali peasant, who thus has about 1/16,000,000,000,000 the amount of the market system’s concern as Bill Gates has. Will you teach that?”

There are 10E14 cells in the human body. You shed more cells every few moments than 1/1.6E13th. Good thing those cells can’t hijack a plane.

Vancouver

I am in Vancouver this week. The plane from Boston to Montreal smelled of forests burning. Vancouver is an amazingly beautiful city. There is extremely good food. My first night I ate at a highly rated French resturant. The appetizer – a lite broth of wild mushrooms and fava beans – is wonderful.

The resturant was in a very elegant hotel. They put me back in a corner of the room. The young man who seated me offered me a paper. Forty minutes later he reappeared. He’d forgotten there was a newspaper strike. So he’d gone out to get a paper, he apologized for the delay.

Two young Hispanic men sat along the back wall near me. They were having a quiet conversation in Spanish. It’s tone seemed a little sober.

After the soup a tall muscular very young black man dressed in ill fitting jeans, basket ball shoes, gold chains, and a huge basket ball jersey was shown to a seat along the same back wall two tables from the other two. All three immediately launched into a more animated conversation still in Spanish.

Ten minutes later a handsome Japanese looking man in his late 20s is shown to a table on the other side of the Hispanic men. He is dressed in a very nice suit. He has a camera, with a large lens, hanging from his neck. He nods at the two gentlemen. Everything is quiet for a while.

Then the conversation continues with all four now chatting. The conversation is slow, quiet. After a period they switch to English. I assume the Japanese gentlemen’s Spanish is poor.

The elder of the two Hispanic gentlemen enquires of the Japanese man “what do you do?” “I am a butler” he replies. This confounds the other three. He explains that he works on “that floor” in the hotel where every guest gets his own butler.

They are all guest workers, all from different countries Central America, the Philippines, etc. They discuss what they are paid. Less than the American minimum wage. They disucss various jobs they have had. Cruise ships off the coast of South America; 50$ a week plus tips – very hard for women. Europe, the Middle East.

The elder Hispanic man is going home, vacation. Others are jelous. They discuss of where to buy gifts, and how short 2 weeks is. How hard it is to be away from one’s family.

I eat a peice of salmon. It rests on small pastries filled with a very spicy curry of some kind, the plate is decorated with excellent relishes and mustards. The wine, from Chile, is nice. The meal is $40 dollars. I am on expense account.

Who is rewarded? Today and yesterday.

This chart shows the incomes of various segments of the American population for the eighteen years from 1979 thru 1997. The top 1% is the top line. They saw a increase of 220% in their incomes. The bottom line is the income of households in the bottom 20%. They saw a 4% decline during this period. The bottom five lines display income trends for each 20% of the population; only the top 20% saw their income increase.

income_trend.gif

This data is taken from a report of the congressional budget office
Effective Federal Tax Rates, 1979-1997 see page page 147. Of course these are all adjusted for inflation, and are reported in 1997 dollars.

There are about 100 million households in the US, so there are about 1 Million households in the top 1%. I suspect the comparative advantage of the top tenth of a percent is better yet again, etc. etc.

How to get Rich

Five ways to get rich:

  • pick the right parents (inheritance),
  • pick the right spouse (marry well),
  • pick the right pocket (theft & conquest),
  • pick the right card (luck,serendipity, gambling), or
  • pick the right trade (craft, profession, industy).

This list was triggered by an essay by Brad DeLong on how the standards around inheritance have evolved thru time. I’d love to know which of these techniques explains what percentage of a given dollar of wealth.

Assuming wealth floats your boat…
Continue reading