Queries – the place where I ask questions and ask for answers.
Go watch this video.
Okay, even I don’t watch a video just because someone told me to. If you’ve noticed, I rarely post links to videos, preferring to send people to data sources, even if it is only wikipedia. But this video about wealth disparity in America by politzane is well produced and made me think about our economy in a new way. Nothing said is new but, as a follower of trends and someone who has studied large, complex systems professionally, this video inspired a thought about what comes next.
Large, complex systems tend to be stable because of inertia, but can be driven to extremes at which point they either self-correct or collapse. They rarely safely stabilize at or near a boundary. Pop stars lose their popularity. Forests recover after volcanoes knock down all the trees. The extreme values of CO2 emissions are one of the worries about global climate change. The way this video presented the wealth distribution in America brought to mind those other extreme scenarios.
Polls show the majority of Americans believe there is wealth inequality in America. A return to a more generally acceptable distribution would take years or decades, but a timely reversal would probably be enough to stabilize public opinion. The data show that the trend is for increasing wealth inequality. There are limits to such increases. According to the video, the 1% of the population with the highest net worth have 40% of the nation’s wealth and have increased their income from 9% of the nation’s income in 1976 to 24% in 2012. Extrapolation is abhorrent, and two data points are a poor set, yet I work with what I’ve got. Even if they didn’t increase their net worth percentage, that would suggest they’d make 39% of the income in 2048.
Of course such a simplistic analysis is ridiculous. Then I realized that simplistic was actually conservative. The likely extrapolated rate is greater than what I assumed, otherwise the top 1% would’ve been making -6% in 1940. The constant net worth assumption is easy to challenge too because it is easy to imagine most of that wealth is invested in something that does about or better than inflation. Otherwise the richest 1% is hiring the wrong money managers.
But, what is unsustainable? The absolute limits are 100%, and that’s really only true on a global scale. At some point before 100% there are too few people living well enough to sustain the system, which is a clinical way of describing a human calamity.
That’s why this post is a query. Has anyone already performed such an analysis? It seems like a logical thing for some economics dissertation, or the product of a think tank, or the result of someone who isn’t just pondering this on a Sunday night (that I was supposed to be taking off – having worked myself to uselessness as I struggle to defend against a pending foreclosure.) Do the other analyses show self-correcting mechanisms? Is there a positive path that leads us through to – what?
If you know of any such studies, either supportive, contrary, or from a different perspective, please post them in the comments so we can take this conversation beyond on video.