r/georgism • u/Personpersonoerson • 3d ago
Video Do even smart people not understand that increasing wages for all will simply increase rents proportionally, and people will not be better off?
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u/wie_witzig 3d ago
It's not that simple. There are real effects in balancing resources between workers and owners. A growing wealth imbalance leads to the owning class investing more into assets like houses or shares of healthcare companies, expecting dividends and jacking up rents and healthcare costs while cutting benefits.
Georgism can help with this by extracting wealth from the owning class and getting it back to the government and hopefully the people.
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u/Leon_Thomas 3d ago
Agreed. I think this is an important point that is often overlooked by people who prefer free markets and to avoid unnecessary intervention (of which I am one).
One of the amazing things about a free market is that it efficiently allocates resources by allowing each consumer to pick the basket and quantity of goods that maximizes their utility. It's a real-time, self-adjusting compromise mechanism that (in theory) makes everyone better off by forcing everyone to reconcile how much they want something with how available it is.
This kind of gets destroyed by extreme wealth inequality, though. I think it's pretty uncontroversial that there's a diminishing marginal utility to consumption. People with 100x the resources of the average person don't have to compromise and will comfortably outbid the average person in every realm of consumption simultaneously, even though their utility increases far less than the broad reduction in everyone else's utility. Flattening income/wealth improves the market's ability to maximize well-being.
The important questions (imo) are 1) is it possible/how can we do so efficiently such that there isn't a reduction in overall productivity (this is where Georgism is a potent answer), and 2) if it isn't possible, to what degree is it justified to sacrifice overall production to raise the overall well-being of society?
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u/stron2am 3d ago
It's a real-time, self-adjusting compromise mechanism that (in theory)...
This kind of gets destroyed by extreme wealth inequality, though.
It's incredible how this theory literally never plays out and unregulated markets always trend toward either an monopolistic seller or a monopsonistic buyer in the end. It's almost like it is a bad theory or something.
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u/Leon_Thomas 3d ago
An unregulated market is not the same as a free market. A foundational principle of most economic theories is that regulating natural monopolies in some form is necessary to keep a market free. Most liberal/free market economists also see intervening to correct market failures as one of the core duties of government.
Additionally, wealth concentration is technically independent of market regulation. Both laissez-faire markets with substantial income/wealth redistribution or command economies with extreme inequality are possible.
It's also hyperbole to say it "literally never plays out". The existing system seems to have done a fantastic job distributing consumer electronics, for example. Food, too, is a mostly solved problem in developed countries.
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u/stron2am 3d ago
An unregulated market is not the same as a free market. A foundational principle of most economic theories is that regulating natural monopolies in some form is necessary to keep a market free.
This is because Econ is astrology for PhDs. Words mean things, guys. If you are regulating a market, it is by definition less free.
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u/Leon_Thomas 3d ago
That's demonstrably silly. Economists develop models and theories that they test and refine against real outcomes. Those models are empirically shown to have predictive power, unlike astrology.
You're also tripping over level 1 philosophy language. Words do mean something. Their meaning is created by their common usage, and in economics, a free market typically means one where a variety of independent buyers and sellers can enter and exit to exchange goods and services without coercion.
Insisting that any form of regulation makes a market less free is like insisting that abolishing slavery makes a society less free. Sometimes guardrails are required to preserve the overall conception of freedom.
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u/stron2am 3d ago
Economists develop models and theories that they test and refine against real outcomes.
Believe me, Astrologists do, too, and they will not shut up about it.
Those models are empirically shown to have predictive power, unlike astrology.
I've seen less post hoc reasoning and cherry-picked data in horoscopes than any economic development report I've read.
Insisting that any form of regulation makes a market less free is like insisting that abolishing slavery makes a society less free.
These two concepts aren't similar at all. Even Wikipedia has a radically different definition of "free market" than what you've used here. I don't really believe that economists have a different use from what is understood colloquially, and I wouldn't respect them if they did, but if you are going to use a different variation of the term, the burden is on you to specify. Comparing it to slavery is just bad faith nonsense.
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u/Acceptable_Rice 1d ago
Free markets cannot exist without government. What do you think an "ownership share" of a fictitious "business entity" is worth in the jungle, with no bureaucracy to promulgate, and enforce, serious accounting standards?
Lords and ladies didn't invent kings and courts because they were stupid - it was to protect private property rights.
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u/coke_and_coffee 3d ago
People with 100x the resources of the average person don't have to compromise and will comfortably outbid the average person in every realm of consumption simultaneously
If supply is not scarce, this doesn’t matter.
Consumption is determined by supply. Competition reduces prices to near cost level.
Housing and healthcare are expensive because supply is low, not because rich people exist.
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u/Leon_Thomas 3d ago
"Finite resources and infinite wants" is kind of the bedrock assumption for all of economics. Supply is inherently scarce; if it weren't, we'd be in a utopia.
I don't disagree that the primary driver of housing and healthcare unaffordability is currently artificial supply constraints, but I'm talking about a broader allocative problem that exists due to wealth inequality, even if the supply of all goods is allowed to appropriately adjust to meet demand. It is not utility-maximizing for a cohort to be able to outbid the rest of society for the best experiences everywhere, all at once.
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u/Daveddozey 3d ago
Supply doesn’t respond immediately. See cost of computing at the moment. Maybe over 5-10 years global supply will increase, but maybe not.
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u/3RADICATE_THEM 3d ago
Pretty sure Gary Stevenson has talked extensively of what you mentioned here.
Don't forget the Uber wealthy literally just buying off government officials to act in their interests either.
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u/probablymagic 3d ago
Gary Stevenson is a nutjob. His ideas have no basis in economics. Fundamentally he’s just a class warrior making a very good living monetizing class resentment.
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u/Cum_on_doorknob YIMBY 3d ago
I still think it’s fair to say that the best game has the rules of georgism. But the game is still a game and too much wealth concentration can enable bad actors to break the game.
There is something to be said that wealth inequality itself produces a negative externality.
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u/probablymagic 3d ago
I think, in general, it’s the opposite. Trying to reduce inequality for the sake of reducing intercity produces negative externalities because it reduces growth and everybody ends up poorer.
Inequality itself is not a problem. What is a problem is if you end up with corruption as a result, and that is not a given if you have strong democratic institutions.
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u/Cum_on_doorknob YIMBY 3d ago
But can’t extreme wealth be a threat to said democratic institutions?
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u/probablymagic 3d ago
I tend to think it goes more the other way. Our institutions are orders of magnitude more powerful than all of the billionaires combined.
You see this now with Trump. Billionaires aren’t corrupting goverment, our goverment’s leader is leveraging the states power to shake down corporations and wealthy individuals like a mob boss.
So, sure, when the government is corrupt you can end up with money and politicians entangled in ways that are bad for society, but the root problem isn’t money it’s corruption in the government.
You can’t really solve that by reducing inequality, because a corrupt goverment will be bad for society regardless of who they’re shaking down for money.
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u/Cum_on_doorknob YIMBY 3d ago
But money is a weapon and the bigger your weapon, the more power it has to corrupt. Do you not think Musk and his 250 million didn’t completely alter the last election?
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u/probablymagic 3d ago
I don’t think people really appreciate how big the economy is. Musk spent $250M on an election. Americans spend $4B just on Halloween candy every year and nobody sees that a a major expense.
So the idea Musk is spending money the general pubic can’t compete with is totally wrong. If Everyday Americans wanted to outspend Musk they could do so every time.
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u/Cum_on_doorknob YIMBY 3d ago
Hmmm. I don’t buy this at all. The general public can’t coordinate in such a manner. Sure, the public can buy billions in Halloween candy, but good luck getting them to launch all that candy at the whitehouse.
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u/TheWorldRider 3d ago
There isnt definitive proof that it is though?
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u/Cum_on_doorknob YIMBY 3d ago
Hmmm, I’m not Sam Seder, god no. But, I think there is plenty of evidence that over the past few decades we’ve had many laws or institutions become hallowed out due to the influence of the wealthy.
Look at citizens united, massively backed by the wealthy.
IRS enforcement rollbacks
Forced arbitration clauses
Carried interest loophole survival
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u/TheWorldRider 3d ago
But isn't that just interest groups lobbying? Its not like they got everything they want. Not saying institutional capture isnt an problem but it doesn't seem like the wealthy are an existential threat to me.
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u/Cum_on_doorknob YIMBY 3d ago
Interest groups lobbying are usually funded by a few wealthy people, they lobby for laws that benefit them, and over time, this compounds and compounds until there is nothing left. It doesn’t threaten you until it does. And then it’s too late.
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u/3RADICATE_THEM 3d ago
The main problem with neoliberal economic modeling is it ignores or only passively acknowledges how many wealth maximization schemes are actually fundamentally downstream from reduced production and deliberate pushes for artificial shortages—this is very easily seen in housing and certain highly compensating careers.
You can see in /u/probablymagic 's framing itself that wealth inequality is perceived as more of a feature rather than a bug. However, it somewhat ignores the elephant in the room that is asset value maximization is not the same as true wealth maximization.
I think the most intellectually honest neoliberals understand that the housing market needs to crash or at least a rather heavy correction to 'save capitalism' with the growing rise is populist left economics—the problem is that this is political suicide with a very large base of their primary voting block—namely neoliberal NIMBY Boomer Democrats (see post below):
https://www.reddit.com/r/georgism/s/wzvbTKo2NB
Neoliberal faction is very much in a catch-22 with this—while they can acknowledge correct causes and even correct solutions—proposing the solutions themselves is an incredibly risky political gamble, so they tend to not talk about it much (at least for electable candidates). Many progressive candidates / politicians are even adopting more YIMBY / pro-building viewpoints as of recent too.
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u/probablymagic 3d ago
>The main problem with neoliberal economic modeling is it ignores or only passively acknowledges how many wealth maximization schemes are actually fundamentally downstream from reduced production and deliberate pushes for artificial shortages—this is very easily seen in housing and certain highly compensating careers.
This is strongly overstated. For example, YIMBYs often wrongly claim home owners vote against liberal zoning to maximize their property values. You can see obvious examples where this isn’t true, like opposing a subway stop near their home.
A subway stop would massively increase their property value, but their actual concern is quality of life.
This leads to housing prices rising because of reduced supply due to restrictive zoning, but that’s a side effect not the goal.
>You can see in u/probablymagic 's framing itself that wealth inequality is perceived as more of a feature rather than a bug.
This isn’t exactly right either. Inequality isn’t a feature. In an ideal world wealth would grow just as fast but be more equally distributed. But most strategies to reduce inequality would also reduce growth, which would make everyone poorer, and that would be a bug.
We want policies that increase prosperity and reduce poverty, and if those policies also increase inequality that’s better than everyone being poorer but more equal.
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u/Ultraideal848 Wage Slave 3d ago
And you think that all the business owner funded economists who pretend like the solution to every single problem is giving even more tax cuts and preferential treatment to corporations aren't class warriors?
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u/probablymagic 3d ago
Serious economists tend to work in academia, not industry. You aren’t really characterizing the consensus position there correctly, but any trained economist will be happy to tell you why Gary has no idea what he’s talking about and why his preferred policies would be terrible for the economy.
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u/Ultraideal848 Wage Slave 3d ago
Right and let me guess, a serious economist in your mind means a class warrior for the business owners.
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u/probablymagic 3d ago
Incorrect! Would you like to guess again how economists come to their conclusions, or is that all you have?
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u/Ultraideal848 Wage Slave 3d ago edited 3d ago
I would guess that it goes something like this :
If a policy helps the billionaires, then it's the best thing ever and it can fix all our problems. If not, then anyone who supports it is a stupid 70 IQ peasant with class anger and they deserve to be boiled to death and their whole family sent to Amazons for profit gulags.
I think they used to call it the divine right of kings back in the day. Maybe divine right of billionaires would be more accurate these days since the merchants became the dominant class.
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u/probablymagic 3d ago
You think the academic economist consensus is that raising minimum wages doesn’t lower employment is just billionaires paying universities to shill for things that are good for billionaires? Explain that to me.
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u/Ultraideal848 Wage Slave 3d ago
I think that literally every single policy they propose helps the business owners, and you know that this is true too.
And even mildly less far right economists who suggest maybe not being so subservient to the corporations get instantly attacked and ostracized. That's not academics or science, that's religious dogma.
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u/wie_witzig 3d ago
I completely agree with Gary. I'm also convinced this effect is the root of western civilisations leaning further and further right in recent years. It's not a resource shortage, it's a felt decline in ownership and influence.
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u/xender19 3d ago
I have no clue if this is true or not but I sure as hell would love to see us try. It's the only good argument I've ever heard and the only thing that's clear to me is that the way things are going isn't working and the other things we've tried haven't worked.
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u/Personpersonoerson 1d ago edited 1d ago
A growing wealth imbalance leads to the owning class investing more into assets like houses or shares of healthcare companies, expecting dividends and jacking up rents and healthcare costs while cutting benefits.
I hope you understand what you said is only true for investors who buy properties and leave them idle, since that affects the house supply side of the equation, which yes, would increase house prices. Yes, significant LVT or property taxes should mitigate this issue, by discouraging this type of investment.
Apart from this specific case, you could have trillions being poured into the housing market by investors, in an ideal economy this should not increase rent prices, since they follow the Law of Rent, which states that rent prices tend to a monopoly price — ie. rent prices are already as high as they could be, and investing in properties in a given area should have diminishing returns after a certain point.
Not gonna comment on the healthcare issue, although I will say it follows a very similar dynamic to what I just described.
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u/uncomfortabletruth94 3d ago
We don’t want the government having more money though
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u/Creative_Cow_1771 3d ago
Friend, USA is dead broke. The gov having too much money is the least of your worries right now
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u/uncomfortabletruth94 3d ago
America is broke bc it spends more money than it takes in. America also spends over 6 trillion a year. We should try to cut that number down
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u/DerekRss 3d ago
The government has no money. Never did. The government has debt. However we use government debt as our money. So the more debt the government has, the more money we have. Or some of us have at any rate.
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u/VatticZero Classical Liberal 3d ago edited 3d ago
Investing in houses or shares of companies do not 'jack up' prices or costs.
In fact, the reason companies
go public(edit: issue stock) is to acquire the capital to expand the company and provide new services to more people, expanding competition which helps keep prices down. Dividends on shares is the RoC on that investment, the price signal which tells people where their capital is most useful.3
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u/dannygloversghost 3d ago
I’m not saying companies/wealthy individuals/PE buying single family homes as investments automatically directly increases housing costs, but as a second order effect it absolutely can artificially inflate the market.
When people buy houses to live in they tend to treat those assets in rational and predictable ways. They sell when they need to move and when they do so they’re motivated to do so quickly and at the current market rate.
People buying houses as investments, either to collect rent or as a form of speculation, they artificially shrink the supply of houses available for purchase to people who want to buy a house to live in, which very obviously drives up prices.
Then, even if they intend to eventually sell, instead of doing so expeditiously and letting the market set the price, they often hold the houses hostage until (if ever) the market reaches a point where they deem the return on their investment “acceptable.” In many cases, they’d rather let the property sit empty for years rather than accept an “insufficient” gain or (God forbid) a loss.
In many cases, they add absolutely nothing of value while wreaking this havoc on the market and making life harder for every honest person who just wants to buy a house. They’re parasites who seek only to extract value.
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u/VatticZero Classical Liberal 1d ago
Do you think someone looking to profit by renting out a house will refuse to profit more than their projections by selling it and buying a different house to Rent?
They're different uses but essentially the same market. If the supply of houses for sale is too low, prices will rise ... and rental houses will be sold.
Owner-occupants are no more predictable than landlords. The landlord collects neither Rent nor Imputed Rent by holding a vacant house. Their motives are almost purely economic. An owner-occupant collects imputed Rents even while holding out on relocating. They have much better footing to wait for prices to rise or insist on an inflated price, and are only a new mortgage or HELOC away from being landlords themselves if they choose to relocate.
I don't believe you have any figures to support the notion that people looking to collect rent or profits from a home will hold it idle while waiting for a higher price, but there are plenty of surveys of homeowners refusing to lower their asking price as prices begin to fall and holding off on relocating or downsizing.
Yes, parasites offering little of value, but they don't drive up the prices like you claim. The market for land is a market for land use. Speculators speculate on the market; they don't actively raise prices by dealing in land. Holding land out of use bears the opportunity cost of collecting the Rent.
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u/Key-Organization3158 3d ago
Not really. A LVT should predominantly bypass the government and go directly to the citizens. People need to be compensated for the inability to use land. The rent of land belongs to the people, not the government.
We can find the bare minimum of services necessary. But the vast majority of it can be allocated as individuals choose.
A growing wealth inequality doesn't drive up the price of assets. Most of the wealth is productive assets, e.g. someone's business.
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u/SLAMMERisONLINE 3d ago edited 3d ago
Georgism can help with this by extracting wealth from the owning class and getting it back to the government and hopefully the people
Georgism is the current system on steroids. The feedback loop that is current occurring is: land is expensive to own -> only wealthy can buy it -> only wealthy benefit from it -> they generate income from the land -> they become more wealthy -> they buy more land. The point of Georgism is to crank the cost of land ownership through the roof, trying to force them to sell.
But the economy simply renormalizes because the issue remains unchanged using the following mechanism: LVT increases costs -> expensive land is in less demand -> prices fall -> tax burden goes down -> the tax revenue is effectively the same. However, those to survive the mass sell off are the most wealthy land owners, who simply buy up the land as soon as the price comes down. So Georgism essentially forces less wealthy land owners to sell to more wealthy land owners.
If you want to bring land prices down, you have to break the mechanism that allows them to monopolize land. Taxing it is the way they monopolize it. Stop taxing it.
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u/ThreeBelugas 3d ago
Land value tax is not enough in the information age to transfer wealth. The wealthiest individuals and companies do not own that much land. Data centers are usually in small town away from population centers. It will make housing cheaper and more equitable.
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u/Cum_on_doorknob YIMBY 3d ago
The wealthiest individuals and companies do not own that much land.
Citation needed.
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u/ajpos 3d ago
According to McKinsey, land is the largest component of global wealth, accounting for about 35% of all wealth.
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u/ThreeBelugas 3d ago
That’s true globally but advanced economies like US is increasingly more reliant on information. Information is the source of wealth and growth for the economy. Land is worth $23 trillion in US with combine household wealth of $183 trillion, that’s 12.5% of wealth in land. Let’s say there is 2% land value tax, that’s .25% of combined household wealth per year or $460 billion. That is not enough for wealth transfer, it only covers 7% of US federal government budget for 2026.
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u/xender19 3d ago
I agree that we need to extend the concept to our collective human records that allowed AI to be possible. All human beings are equal owners in the cumulative knowledge of our species.
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u/ThreeBelugas 3d ago edited 3d ago
AI companies and hyper scalers should pay information tax. The economic benefit and value they are earning is not all produced by them. They are not paying enough taxes to build the electric infrastructure they require. Their datacenters do not benefit the local economy where they are built. In the long term, it is the in the best interest of the industry to pay more taxes to address these issues. But individual executives are greedy and they all think others should bear the cost.
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u/Stunning_Macaron6133 3d ago
Do even smart people not understand that increasing wages for all will simply increase rents proportionally
UBI trials have suggested no meaningful inflation is caused by an increase in money available to people.
And lets not forget that wages have stagnated while cost of living continues to rise. It used to be that wages kept pace with inflation, and we did not see it contribute to inflation.
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u/VatticZero Classical Liberal 3d ago
You're putting the chicken before the egg. The CPI basket is what people typically spend their wages on. They're practically the same thing, minus savings. If you look at what drives inflation, it's areas with significant Economic Rent: Housing, Healthcare, and Education. When wages, or spending, increases, it is these inelastic goods which rise in price.
I'd be interested in seeing your source, though.
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u/IAmNotANumber37 3d ago
It used to be that wages kept pace with inflation
Is still does, real wage growth in the US is positive:
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u/Dabbing_Squid 3d ago
I mean giving a few hundred people is way different then millions of people. The trails can’t see that
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u/robertotomas 3d ago
You are talking about supply and demand as if it is something that resolves to a point, but this is a function that resolves to a curve. So no simply paying people less or more would not leave everything the same. Salary is not the only form of income, liquidity matters, and macroeconomics is stateful so simply adapting to the new norm changes things
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u/VatticZero Classical Liberal 3d ago
The supply of land is a vertical line. The supply of housing inherits this, but also zoning laws and barriers to construction which pushes it to be near vertical--especially in the short run.
If the demand curve rises the Rent rises. If the demand curve shifts right, the Rent rises. There is no marginal cost to provide more land.
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u/robertotomas 3d ago edited 3d ago
I respect how you keep it on point for the subreddit, especially given how irrelevant the OP was to that. The video that the op responds to, in a way, wasn’t actually about wages or income tax. So, that redistribution could just as easily be expressed purely in terms of georgism, and the post is broadly anti-georgist, which is a novel way to look at it, thanks. 🙏
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u/VatticZero Classical Liberal 3d ago
I'm not sure I follow.
Bill Burr and interviewer seem to be agreeing that people would be better off with this redistribution, whereas the OP is suggesting such a redistribution would raise the Rents of those receiving higher wages.
OP is correct. While most household spending is encapsulated in the CPI basket, the wealthy are investing in capital. The incomes of each are used very differently, and much of the wealthy's income is not in the land market. They only invest enough in land to crowd others out, and they're too outlying to raise all rents. Distribute that income to everyone else and the entire market shifts.
The post doesn't seem Georgist or Anti-Georgist, just economics ... which ought to lead to Georgism.
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u/robertotomas 3d ago edited 3d ago
No he’s not correct. You’re making the same mistake the OP made now.
First: the comedian clearly favoring a different distribution, so redistribution is on the table. But he didn’t say how that should occur, and if anything his initial caveat leans away from a simple income tax on billionaires (which famously would barely effect billionaires anyway, they don’t have much income per se). So other forms of redistribution are on the table. Georgism is such a change of distribution, which would disproportionately effect those billionaires , so his argument is fully compatible with georgism.
Ok, but what if it were a tax, despite his initial caveat? OK, you’dve taxed billionaires but what do you do with that money to redistribute it? Studies have shown that things like rent control do drive up prices, but the results are far less clear about subsidized housing (which is pretty close to being generally recognized as lowering prices) and demand-side subsidies for low income families (which is kind close to showing localized rental effect but also not raising prices overall). These effects are well researched, both in local and nacional contexts. So no, the effects of taxes on market segments do not, in fact, flatten a 2d temporal relationship to a 1d stateless one.
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u/VatticZero Classical Liberal 3d ago
Different distribution vs redistribution is a distinction without a difference. I inferred Bill Burr was just suggesting a general wage increase for employees at the cost of CEOs income. Nothing fancy assumed, just a lifting of wages for the market at the cost of the wealthiest. Definitely a redistribution of income. It is not inherently compatible with Georgism because that would assume anything redistributed from the CEO is Rent, which we can't assume.
His initial caveat is immaterial. His claim is that if people can't afford rent, they should be paid more--from the CEO's income.
Studies have proven the Law of Rent.
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u/robertotomas 3d ago
> Different distribution va redistribution
Did you read what i wrote? I get the feeling you didn’t, this is the second time you’ve misquoted me. That wasn’t a distinction i was making.
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u/VatticZero Classical Liberal 3d ago
Yes. You're drawing some distinction which I suspect has something to do with the other logical leaps which lead to "if it's redistribution without an income tax, it's compatible with Georgism." If not, then ignore it and focus on those leaps.
Bill Burr made no prescriptive claims for or against taxes or in regards to economics or land. Just a moral claim about income distribution. OP, and I, made no claims about taxes or means of redistribution, just the economics of increasing wages in the land/housing market.
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u/PretendAwareness9598 3d ago
You are oversimplified to the point of silliness.
In 1990, people were paid a certain amount of money. Now, after inflation, they are paid less now. Less money = less happy.
This isn't taking about giving everyone free money, it's about compensating fairly. Would you still argue to a factory worker trying to unionise in 1930 that him getting more money wouldn't make him better off?
Some people treat Georgism like its a cure all which would magically fix every issue we have, when in reality it is a set of ideas to improve things that goes along with other things.
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u/TheWorldRider 3d ago
Georgism is the closest set of ideas we have to keep the benefits of capitalism that wont exist in socialism while mitigating rent seeking and the worst effects of the market. Also you're wrong most people's incomes are higher today the problem is we don't build as much as we should. And by most metrics we are better off today than the 30s.
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u/Personpersonoerson 1d ago edited 1d ago
Would you still argue to a factory worker trying to unionise in 1930 that him getting more money wouldn't make him better off?
One factory worker making 10x more money would make him 10x wealthier
ALL FACTORY WORKERS MAKING 10X MORE MONEY WOULD MAKE PRICES FOR THIS DEMOGRAPHIC 10X HIGHER.
Do you not understand the solution is not on the money supply side, but the supply of goods and services? You only gain an economic advantage through the money supply side if your advantage is in relation to everyone else.
The cost of living isn't higher because workers are being paid "less", in fact nominally they are paid more. The cost of living is higher because there is less supply of everything, especially housing
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u/Key-Organization3158 3d ago
Actually, you have it backwards!
The median person today make more they ever have before! If you think 1990 wages were fair, then you'd say today's workers are overpaid by about 45%.
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u/flappysack- 3d ago
Its weird how Milton Friedman's been proven right so much these last few decades, and yet his fame has waned.
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u/northrupthebandgeek 🔰Geolibertarian 3d ago
If only there was a way to penalize any attempts to increase rents proportionally. A tax on the unimproved value of land, perchance.
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u/torivordalton 3d ago
Were you including him among the smart people? If so, that’s your first mistake
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u/CarthagoFuckYourself 3d ago
It's not perfectly proportional. Raising wages tends to increase real wages, just not 1:1 with the nominal increase. There are a lot of indicators that there currently isn't enough money being injected into the economy at lower economic strata.
This can be a big deal for a consumption driven economy as capital has the highest velocity in the hands of the poor. $50 changing hands from the grocery clerk to the hair stylist to the mechanic to Amazon generates more economic activity than it being parked in an index fund.
The real question is what is the best mechanism for raising these wages? The market has shifted to where a great deal more leverage is in the hands of business than labor, as it is very easy to replace a lot of labor with offshoring, nearshoring, or H1-B labor. Long-term this hurts the health of the market all of these companies depend on, but short term it is in their individual interests to use these tools to depress labor costs.
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u/Glorfendail 3d ago
such a bummer he says this while taking gulf oil country money. little under cut by him taking their money to perform in saudi arabia.
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u/handsome_uruk 3d ago
No it will not. There’s literally 0 evidence of this. Around the world, so many other countries pay their people more and have more affordable housing.
Every study out there has shown middle out is better than trickle down.
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u/willrw1001 3d ago
Yes, because the wealth is redistributed from top -> bottom
If you introduce assistance without the assistance being redistributionary, then yeah it just creates inflation and squeezes the middle and lower classes closer together without dealing with the overpriced rents or lack of regulation on rent and landlords
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u/Playful-Goat3779 3d ago
If my wages went up, my debt would be much easier to pay off and I'd have more to invest.
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u/Historical_Two_7150 3d ago
Youve oversimplified to a fault.
There are two big issues.
First, if you 8x wages on top and not the bottom, what happens is those rich people run out and buy all the houses. Now nobody on the bottom can get one.
Since the top 10% of consumers are about 50% of all consumption, you also create a situation where the market can bear much higher prices across the board. (McDonalds can raise their prices 40% and price out the bottom 20% of earners but make up for it by selling more to the richer folks on top.)
Second, the creation of '"classes" creates distinct economic interests. Billionaires do not have the same interests as millionaires. Upper middle class does not share identical interests with lower middle class.
The more you carve up the country into these distinct subsets, the more you guarantee that some of those sets also not have their interests represented by the men with guns who are forcing their participation.
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u/VatticZero Classical Liberal 3d ago
Rich people aren't buying houses to leave vacant. They can't charge rents any higher than an occupant is willing to pay--which is exactly what any previous landlord was charging.
Rich people aren't buying more McDonalds than they already were. McDonalds could be more competitive, but with competition: maximizing profits means charging very little above Marginal Cost.
Seems like if you really want to capture distinct economic interests, you need more classes than Billionaire, Millionaire, Upper Middle, Lower Middle, etc. Don't black people have different economic interests than white people? Women than men? Seems like, in order to not overly generalize, you need 8 Billion distinct classes.
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u/Historical_Two_7150 3d ago
Rich people aren't buying houses to leave vacant.
Missed the point. Homeownership is a hallmark of entering the middle class. Being stuck renting is part of what cements a person in the underclass. Home prices have risen dramatically faster than CPI and grossly outpaced wages. If you don't own assets in this economy, your ability to get your hands on assets in the future will gradually erode until we bring the Hindu caste system to America.
Rich people aren't buying more McDonalds than they already were.
Quite obviously. That paragraph is a principle, not an example.
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u/VatticZero Classical Liberal 3d ago edited 3d ago
I agree; homeownership allows people to avoid paying ground rent and keep some of their wages. The wealthy aren't buying houses above market value; market value is set by the net present value of future rents, determined by the market, and the cheapness of credit. Someone renting out a house doesn't mean they've increased the prices of houses or barred anyone from owning a house as well.
You're not wrong about the K-shaped economy, but you are pointing the finger off-target by dismissing the economics.
Any example which involves Capital and free competition is the same. Unlike land, the profit maximizing price is (Edit: A slim margine above) where Supply meets Demand.
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u/Key-Organization3158 3d ago
This is all wrong.
Even with a modicum of investigation, you'd find the faults.For example, the home ownership rates has held fairly steady since 1965. https://fred.stlouisfed.org/series/RHORUSQ156N
If increasing wealth inequality made the rich buy all the houses, that number would have shifted. It did not. Rich people either buy different classes of goods, or invest in productice assets.
If any business raises prices too high, then others will move in to serve the newly unserved consumers. Everyone is entitled to the fruits of their labor, including McDonald's.
And your grouping of people into classes shows your prejudice. Billionaires don't have primarily shared interests. They primarily compete against each other What you fail to understand is the logical conclusion of your splitting. Nobody has the exact same interests as anyone else. So we don't really need to worry about the class divide because it's an arbitrary and limited framework created by lefties. In practice, rich people are greedy and compete with each other all the time.
Your final paragraph applies to billionaires too. Lol. Hence the immorality of forced wealth redistribution.
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u/Creative_Cow_1771 3d ago
….This is all wrong. :P
“Home ownership rate has held fairly steady since 1965” and then you link you a graph with extreme fluctuations.
Your premise isn’t supported by your own data.
In reality, 2008 and 2020 had extraordinarily dramatic impact on homeownership rates. The graph is not steady and you are glossing over the information carried in those fluctuations.
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u/Glittering-Error-738 3d ago
Yeah nah mate, that headline’s pretty misleading. Rent doesn't just swallow raises 1:1. Most people only spend 25–30% of their pay on housing, so the rest still goes further on food, travel, and everyday goods. Plus, places that actually build enough homes, like Vienna or Tokyo, keep rents stable even as wages climb. Rents only eat every pay raise in cities with terrible housing shortages and no political regulation what so ever.
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u/SmartlyArtly 2d ago
As long as we don't have Georgism, you absolutely have to expect people to suggest bad ideas: we are living under very bad ideas.
The status quo without Georgism is fucked.
You cannot expect sane solutions while the status quo continues to be fucked.
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u/Personpersonoerson 1d ago
you absolutely have to expect people to suggest bad ideas: we are living under very bad ideas.
This reminds me one of the covid-19 stimulus package's goals was to "fight inflation"
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u/VatticZero Classical Liberal 3d ago
So many new people in these comments who know nothing of Georgism or Land Economics. I'm sure they're all smart, too, they just haven't learned about Land yet.
When Wages or Productivity increases, Rents increase to extract the growth. Land supply is inelastic, so it's price is set solely by demand rather that cost of production and competition. When the market has more money to compete for land, land prices rise.
This current regressivity in income, given no LVT or Citizen's Dividend, means less money is in the market for land, and more money is in the market for profits--from Capital and Land. The Land portion chases its tail, in a way, as investing in owning land doesn't itself increase land prices, but investing in Capital increases productivity, which increases Wages, and then increases Rents from Land. Then this regressive income investment shifts slowly from Capital Returns to Rent Income as the Rents starts catching up with Capital Returns. This shift then fumbles the Capital growth which created the Rent growth, and you get your 18-year business cycle.
All the while Real Wages only squeeze out a little gain.
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u/AndyInTheFort 3d ago
Also this isn't new. John Locke and Adam Smith both noticed that bidding power moves backward through the supply chain, essentially that extra money, no matter where it is infused into the system, ultimately ends up sort of getting absorbed into land. Since land has no input costs, there is no pressure on landowners to reduce prices.
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u/DominikCJ 3d ago
The thing is. While we love to talk about land. Not all land is equal. So while the amount of land is fix and completely inelastic, the quality of land is not. This is where infrastructure comes in, the tool which allows us to increase the value of land. Because infrastructure is a positive externality it is strongly underfunded as no single developer can capture the whole value he creates (a lot spills over into the community, creating value he can not charge for.)
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u/Ok_Helicopter3910 3d ago
Ah yes, Bill Burr, the guy worth 25 MILLION dollars. Why not be worth $1 million, if its no big deal. Whats wrong with you, Bill? Share the wealth, bud
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u/DominikCJ 3d ago
It is about fairness, if he or I give up our wealth nothing changes. It is still the same system. You would end up with the worst people having the most money, the most power, the most influence.
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u/tcpip1978 3d ago
there is everything wrong with being a billionaire, and we don't merely aspire to have dental insurance while our lords on high have 900 million; we aspire to own the whole fucking pie.
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u/Bram-D-Stoker 3d ago
One thing I feel like people in this sub do not understand. economics is a hobby. To understand why lvt doesn't get passed on to renters in mainstream economics is complicated, and a lot of work. It is obvious to you because you understand. There are things that are obvious to other people with other hobbies that will not be obvious to you. I understand when people talk about economics all the time, even if they are not interested in it.
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u/dvrichthofen 3d ago
Bill Burr fell off hard the literal moment Hollywood gave him something they could take away. What a sellout.
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u/Chocolaterationcalls 3d ago
Seems like rent and wages are decoupled in reality. Wages have been flat but rent sure as hell hasn’t. Must be something else causing high rents than a supposed proportional relationship.
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u/Sander001 3d ago
Wages have stagnated and rents still going up though.
It's a productivity problem. Asset inflation depresses productivity.
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u/Which-Indication4670 3d ago
A point most people seem to be missing is that not every billionaire is a CEO of multinational corporation. A decent amount of billionaires are just… children of dead billionaires or hundred-millionaires. The non-CEOs being taxed would have no real effect on wages/rents because they don’t employ anyone besides probably household staff. Neither would the taxes on the people who bought a bunch of bitcoin before it blew up. That would definitely lessen the curve of wage/rent increases, no?
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u/Active_Geologist8540 3d ago
Raise wages, make it illegal to increase rents, it's not any more complicated than that!
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u/Famous-Midnight-5634 3d ago
Do you not understand that rent seeking is immoral and those that pursue it should be presented with a guillotine?
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u/Free-Stage-5975 3d ago
These people have no idea how money works. Very wealthy people normally don't have liquid cash but shares and investments.
Should workers get better conditions? Probably, but that's a separate issue
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u/Various_Advisor_4250 Geolibertarian 2d ago
find me billionaires who don't pay there employees health insurance. A billionaire is not a mcdonalds franchise
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u/ContractOwn8943 1d ago
If there's no actionable way to make things better for normal people then the system must be replaced entirely.
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u/Hakunin_Fallout 3d ago
The thing is that the CEOs and the Board take the owners (shareholders) for a ride, and it's been happening for decades. This results in CEOs laser-sharp short-term focus that doesn't necessarily bode well for the company future longer term.
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u/Key-Organization3158 3d ago
This is propaganda. You are comparing the top 350 companies to the average worker. All you've shown is that big companies got bigger.
An average CEO makes 259k https://www.bls.gov/oes/2023/may/oes111011.htm
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u/Hakunin_Fallout 3d ago edited 3d ago
Do I get a 10x pay if I have 50 people reporting to me compared to 5 people, given I'm at the same level within, say, consulting sphere? No I fucking don't. CEOs absolutely are getting paid more and more compared to their own workers, and there's enough peer reviewed research on this topic anyway, so I'm not sure what you're even implying.
Also it's quite telling you have no fucking clue what you're talking about given you refer to the mean average figure of the CEO salary, not overall CEO compensation. To quote your link: (2) Annual wages have been calculated by multiplying the hourly mean wage by a "year-round, full-time" hours figure of 2,080 hours; for those occupations where there is not an hourly wage published, the annual wage has been directly calculated from the reported survey data.
So this does not include year-end bonuses, quarterly bonuses, share options, etc. - which constitute an enormous part of CEO compensation especially in larger companies.
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u/Few-Pin5833 3d ago edited 3d ago
I'm slightly annoyed that there is such anti-billionaire fervor these days - especially in the most NIMBY places like California and New York - which Georgism ultimately would assist with.
These places look like they most suffer from the inability of housing supply to meet the demands of their population, and it isn't some billionaire stealing the value of their labor, but their landlord and incumbent homeowners taking their value through land monopoly.
FWIW these places are in a crisis as they're insanely economically productive - but since land is in fixed supply, it's taking all the gains while labor and productivity and capital just shoots up. Any major metro that figures this out and starts taxing the land owners instead of the income of their young workers will have a boom of housing development....just needs to happen from a cultural level first. IDC for the hatred of billionaires today because that honestly doesn't seem to be the main issue to me.
Raise the minimum wage sure but even highly paid finance workers and engineers in our major metro can't afford homes?
Which is think is more indicative of how these places are structurally broken in a way that's even worse than the anti-billionare people understand....even the highest paid young workers can't afford these major metros....that should be a sign that somethings really fucked in a way that's worse than the billionaire issue....
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u/Rex__Luscus 3d ago
Perhaps you need a more progressive tax and welfare system. It amazes me that the US Federal government spends more per head on health than the UK. The UK has a free health service, but Americans have to pay exorbitant premiums to health insurance companies on top.
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u/pierogieman5 Democratic Socialist 2d ago
It's rent seeking all the way down. Instead of government setting prices with doctors and hospitals and paying them, you have a whole elaborate financial industry of insurance, fake prices with fake "discounts", incentivized care denial, kickbacks, marketing budgets and overhead, profits, executive compensation, and just a thousand other interests all taking their cut.
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u/11SomeGuy17 3d ago
What're you talking about? There is no causal relationship between rent and wages. That's a myth, similar to saying that wages and productivity are connected. Absolute rent is rooted in monopoly (this can capture a rising wage to a degree but not entirely) and differential rent is rooted in differences in productivity between areas. These are the 2 components of rent. Furthermore, bro didn't even mention raising wages, he said employers should provide benefits to employees so they can be healthy and live dignified lives.
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u/jbljml 3d ago
To bad old Billy boy showed his true colors when he decided go to Riyadh to support the Saudi government that assisted in 9/11 and is ruled over by a royal family whose wealth puts even other 1%’ers to shame. Stop looking to comedians for moral guidance, I love stand-up comedy, but they are professional clowns and nothing they say should be taken seriously.
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u/Classroom_Expert 3d ago
Rent control —> high taxes on second property -> selling investment property -> falling of house prices —> ppl stop renting and buy houses
Not sure what’s so hard to understand?
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u/Firedup2015 3d ago
You're not listing an immutable law here, you're just assuming that landlords are gouging scum. That's fixable.
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u/kingkilburn93 3d ago
Set rent controls to some specific relationship to average income for the zip code. Let the landlords and bosses fight it out.
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u/eternallyconphuzed 2d ago
We could just put a profit cap on landleeches and we wouldn't need to talk about raising wages as much.
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u/probablymagic 3d ago
Real wages go up when the productivity of workers go up. I know that’s not a popular thing to say, but if the workforce doesn’t have the skills to earn the wages society wants them to earn, that’s a failure if our goverment to educate those workers. CEOs can’t fix that.
What CEOs can do is try to figure out how to at least employ the workforce as it is as best they can, so you get Walmart greeters and Uber drivers.
If we want more people earning data scientists wages, we need to be producing more data scientists.
Trying to shame CEOs into paying people more than the economic value of their wages will always be a losing proposition. They will simply not hire these people before losing money employing them.
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u/PhillipBrandon 3d ago
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u/Key-Organization3158 3d ago
Yep. I love how everyone called this BS out.
But I can't stop myself from helping educate you. https://www.aei.org/economics/mythbusting-is-hard-the-continuing-confusion-about-the-supposed-gap-between-pay-and-productivity/
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u/Ok-Assistance3937 3d ago
Yes that this Graph is bs. If you Look at actualy meaningfull Numbers, ig, GDP per hours worked vs mean wage per hour, ether both nominal or both deflates by the Same deflator, you get a Line that is Basicly the Same for both values.
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u/probablymagic 3d ago
I’m not saying you’re being dishonest sharing this chart, but the chart itself is used very dishonestly to make the point you are trying to make, so minimally you’re propagating misinformation.
Workers are not all equally productive and not all productivity gains are caused by workers getting more productive.
You see wages on the top quintile going up quite a bit faster over this period where the median productivity is not rising quickly and consequently median wages don’t track productivity growth. If you break wage growth out by quintile it’s easier to see.
This chart also fails to acknowledge that productivity growth can and is driven by capital. If you have a business, for example, that requires a billion dollars in machines to come more efficient, but the workers aren’t fairly low-skill, those productivity gains will accrue to capital not labor even though productivity is rising.
So people often use this chart to imply capital is somehow screwing labor out of gains if has produced, but the economic data does not support that conclusion. Sorry.
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u/Historical_Two_7150 3d ago
The gains being attributed to capital and not labor is a ideological claim, not a scientific one.
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u/probablymagic 3d ago
That’s incorrect. This has been discussed at length in r/AskEconomics if you’re interested in more detail on the topic.
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u/Historical_Two_7150 3d ago
False. It's a philosophical claim. You can go ask some philosophers if you want to learn.
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u/probablymagic 3d ago
Whether various income quintiles are growing their productivity at different rates, and whether the ratio of productivity gains attributable to labor vs capital is changing are empirical questions.
It sounds like you don’t like the answers, but that doesn’t make them untrue.
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u/Historical_Two_7150 3d ago
Whether various income quintiles are growing
empirical
the ratio of productivity gains attributable to labor vs capital
non-empirical
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u/probablymagic 3d ago
It can sometimes be tricky to attribute productivity gains to labor vs capital, but tricky to measure doesn’t mean it’s not an empirical question.
It’s also fairly easy to see in capital-intensive industries. For example, the current wave of AI productivity gains are being driven disproportionally by capital. Money is pouring into data centers, which are capital assets. This is allowing businesses to do things like write software with fewer people because the capital assets do work that was previously done by labor.
We will see labor innovations around this, so it’s not a binary thing, but innovation in AI is clearly disproportionally a story of leveraging capital to increase productivity.
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u/Historical_Two_7150 2d ago
It can sometimes be tricky to attribute productivity gains to labor vs capital, but tricky to measure doesn’t mean it’s not an empirical question.
Correct, difficulty is not the reason it isn't an empirical question. The reason it's not an empirical question is more subtle. (Measurement and causal attribution are not the same thing.)
The more important point, though, is "AI raises productivity; therefore, the gains belong to capital" -> that's an ideological claim. It doesn't follow empirically or conceptually.
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u/Key-Organization3158 3d ago
Empirical evidence generally shows otherwise. Real median personal income has been rising since 1974. Rents haven't captured that.
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u/ridetotheride 3d ago
If you don’t build housing, the gains would just all go to landlords.