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19 December 2023

Incentives

Too many people in our society have nothing to lose and few prospects of great progress. Perhaps half of adults who own perhaps 2.5% of our society's wealth.

Too much of our society's wealth is owned by people so wealthy that neither absurd failure, or extreme success, will change their material condition. Perhaps, the top 1-3% who own more than a third of our society's wealth.

Too few people in our society have to behave because they have something to lose, and have realistic prospects of great improvements in their material condition is they do something right. Maybe 10%-25% of people are really in that sweet spot.

The rest of the people are blends of these extremes.

4 comments:

  1. I feel like you're saying something potentially noteworthy but it's hard to make out what it is. Let me try to figure it out...

    I'll assume that all the percentages are percentages of adults. Then the claims are

    50% are poor and have little prospect of escaping poverty

    1-3% are so rich that that they will remain rich no matter what they do

    10-25% are in a position where they might rise or fall depending on how they live

    The remaining 22-39% are in between - i.e. poor but might rise, rich but might fall?

    And the idea seems to be that only the people in the middle have an incentive to be - responsible, prosocial, enterprising?

    The estimate of 50% at the bottom reminds me of Romney's 47%.

    The irresponsibility of the bottom 50% and of the top 1-3% should manifest differently - the 50% matter by virtue of being half the population, the 1-3% matter by virtue of controlling almost half the wealth.

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  2. Hum...
    Doesn't match my experience when I was working minimum wage and my wife's and daughter's experiences working and managing retail. Some folks, mainly due to decisions they make, never get past entry level jobs. Others work harder and come to work when scheduled and move up out welfare level sustenance. Maybe even get married, buy a house and have kids. You can note they'll never have a million dollars in their 401K so they can have a comfortable retirement, but they get by and have pleasures from day-to-day.
    Here in Houston there are lot's of 2nd generation American-Hispanics who have moved into the lower middle and middle class. The parents worked hard doing yard work and roofing so that their kid would have the foundation to do better. Perhaps American-Europeans have lost the societal value of hard work and don't see their slacker kids (two of mine) being successful and that colors their perception of the overall American experience.
    When I hear Americans of any persuasion bitching I think "Check your privilege". Seeing some of those parts of the world that are not on the tourist routes makes you realize how lucky all Americans are.

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  3. @Mitchell

    "And the idea seems to be that only the people in the middle have an incentive to be - responsible, prosocial, enterprising?"

    Yes, you have correctly understood the idea.

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  4. @Guy

    I'm not really saying that all poor people have no social mobility, or that all affluent people have no chance of declining social status (although the State of Texas has one of the lowest levels of social mobility in the United States).

    Instead, I'm really thinking more about what policy tools are necessary to influence behavior.

    For example, the main remedy for failing to behave by not keeping promises or by being careless with dangerous stuff, is to bring a lawsuit. But, a lawsuit is almost worthless against someone with a modest income and no significant assets that aren't exempt from creditors claims, and the money judgment obtained in a lawsuit's ability to claim someone's income can be purged with a bankruptcy diverting at most a few years of the portion of one's income that isn't exempt from creditors.

    But, if someone is rich enough, they can ignore losing results in lots of lawsuits.

    In the case of negligent conduct causing harm to others, insurance can also insulate careless people who have assets and significant income from the consequences of their actions.

    So, incentive-wise, lawsuits only indirectly provide a meaningful incentive to be careful (e.g., by impacting your ability to get insurance in the future at a reasonable cost).

    Likewise, lawsuits over broken promises can't be collected from a large share of people, but can indirectly influence future conduct by limiting their access to credit, or their ability to get future contracts based upon their reputation for breaching them.



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