2 Questions About Income Inequality

[wrs]

Even if ability and intelligence are not highly correlated, is assuming that ability is normally distributed a reasonable assumption? If so, my question is still a sensible one.

Ability would be measured by results. Intelligence can be measured by tests. I think you would need to look at high income people of low intelligence and see if they have high ability in something. I could think of a lot of basketball players or other athletes as examples. But if both ability and intelligence are normally distributed and don't always overlap, then you shouldn't expect income to be normally distributed as a result, right?

Completely WRONG! There have been multiple studies, including the famous one by Dunning and Kruger, that have found that people with little ability are often highly self-confident. Dunning and Kruger found that people with below-average ability tend to over-estimate their ability and people with above-average ability tend to under-estimate their ability. Another well-known study, by Downing, found that the tendency of people to believe that they are exceptionally intelligent is inversely correlated with their IQ.

So are you saying that people of high ability are not self-confident? I can understand the other stuff but the study doesn't contradict my claim about ability leading to self-confidence. I don't see how the study contradicts my claim that ability produces self-confidence even if it's somewhat underestimated in some cases. I also pointed out that ability leads to results too so that should filter out the pretenders. I sure saw plenty of that as well, people claiming what they couldn't deliver. I think in the end, they don't get the high incomes, right?

 

[The Don]

Completely WRONG! There have been multiple studies, including the famous one by Dunning and Kruger, that have found that people with little ability are often highly self-confident. Dunning and Kruger found that people with below-average ability tend to over-estimate their ability and people with above-average ability tend to under-estimate their ability. Another well-known study, by Downing, found that the tendency of people to believe that they are exceptionally intelligent is inversely correlated with their IQ.

IIRC the Dunning-Kruger study showed that while the less able tended to overestimate their ability and the more able to underestimate, the more able still rated themselves more highly than the less able.

So the person who scored 10 reckoned they were a 30
The person who scored 90 reckoned they were a 70
The more able person still rated themselves more highly

 

[TellyKNeasuss]

IIRC the Dunning-Kruger study showed that while the less able tended to overestimate their ability and the more able to underestimate, the more able still rated themselves more highly than the less able.

So the person who scored 10 reckoned they were a 30
The person who scored 90 reckoned they were a 70
The more able person still rated themselves more highly

It varied according to the study. In one study, the people in the 2nd quartile ranked themselves the highest. In another study, people in the 3rd quartile ranked themselves the lowest. But everyone pretty much ranked themselves between the 55th and 70th percentile.

 

[Cain]

The Left approves of income inequality as long as you refer to it as "income diversity."

 

[3point14]

The Left

I hate the moniker 'the left' as much as I hate the moniker 'the right'.

My views are far too complex to be defined as a point in one dimension. Yours are too. Let's stop doing it.

approves of income inequality as long as you refer to it as "income diversity."

I think everyone not a hardline communist approves of income inequality, it's very necessary for capitalism to work.

The real question is how much does one want and how much government inteference will one brook to achieve or maintain the level of inequality one wants.

Some would argue that the market will find that balance. I think that's poppycock.

 

[Manopolus]

In most careers, income (in terms of upward mobility) is based on neither intelligence nor hard work. The primary factors are "likability" (or social skills, if you prefer) and flexibility (again, from a social context). Note that this is only my opinion, based on what I've seen... don't bother asking me to support it. The subjective judgements by management of the qualities mentioned in the OP are also specifically dependent upon these two things unless specific objective measurements are used.

 

[TellyKNeasuss]

I think everyone not a hardline communist approves of income inequality, it's very necessary for capitalism to work.

The real question is how much does one want and how much government inteference will one brook to achieve or maintain the level of inequality one wants.

Some would argue that the market will find that balance. I think that's poppycock.

Hence my reason for starting this thread. It would seem to me that if income inequality followed market forces and that where you fell in the distribution was a function of ability and/or hard work, a rise in income inequality would motivate more people to work harder or to improvement their ability in order to compete for the increased rewards for the most able or hardest workers and thus restore the balance.

My simplistic view of Supply Side Economics is that it claims that as the wealthy become wealthier they will invest more, leading to economic growth and greater incomes among the workers. As the gains flow to the workers, the increase in economic inequality should be dampened.

 

[Newtons Bit]

It isn't just the 1% who are responsible for the income inequality. When I started off in industry back in the 1980s, as a junior engineer I was earning less than the shop floor workers. These days those shop floor workers (many of whom were unskilled or semi-skilled) have been automated out of jobs and/or seen their pay rates driven down.

As a junior engineer I'd now likely be making far more than my shop floor brethren and there are far more of them then there were of the likes of me, hence the increasing wage inequality.

I started in structural engineering in 2006. I made less than the average iron-worker on a job-site. I currently make a bit more than those guys, but still less than very skilled blue-collar workers (high-end welders, crane operators, etc)

A few computer programmers and engineers who have done quite nicely

Some others you could add:
John Carmack
Markus Persson
Andrew Spinks

All three are 1%'ers.

 

[The Don]

Hence my reason for starting this thread. It would seem to me that if income inequality followed market forces and that where you fell in the distribution was a function of ability and/or hard work, a rise in income inequality would motivate more people to work harder or to improvement their ability in order to compete for the increased rewards for the most able or hardest workers and thus restore the balance.

As the links that I and others have posted in this thread show the causes of income inequality are complex and multi-faceted. Ability and hard work may be factors but the single largest factor is the family into which you are born.

A rise in income inequality actually mitigates against working towards a reduction in income inequality because it raises the bar in terms of how much of a change needs to be made (in a more equal society a 50% increase in income may propel the average person into the top 10%, in a less equal society they may have to increase their income several-fold) and in accessing the things which may allow people to be economically upwardly mobile like education and healthcare.

My simplistic view of Supply Side Economics is that it claims that as the wealthy become wealthier they will invest more, leading to economic growth and greater incomes among the workers. As the gains flow to the workers, the increase in economic inequality should be dampened.

That is a simplistic view which tends not to me borne out by evidence at least in a national economy. Economic inequality seems to be accelerating in the US and UK economies thanks in part to less progressive tax regimes.

 

[wrs]

The real question is how much does one want and how much government inteference will one brook to achieve or maintain the level of inequality one wants.

Some would argue that the market will find that balance. I think that's poppycock.

I think you are right but I also think that the first place to focus more govt interference is with corporations, not individuals. Corporations are creations of the state whereas the state is a creation of the individuals. So the limitation should always be on the state and it's creations first, individuals second.

 

[barehl]

A few computer programmers and engineers who have done quite nicely

- Bill Gates
- Paul Allen

You sure missed the mark with these two. The wealth in Microsoft was generated not by being good programmers but by predatory practices much like Standard Oil used to drive competitors out of business. In particular, their success came at the expense of Digital Research, Lotus, Ashton Tate, Quarterdeck, Borland, IBM, and Novell.

Larry Ellison

He had a lot of luck. His company nearly went bankrupt in 1990 but Sybase's stumble allowed Oracle to build back up. Dunkin' Donuts had similar luck with Krispy Kreme's belly flop after 2000. Toys R Us also had luck when Bain bankrupted KB Toys.

- Steve Wozniak
- Steve Jobs

Jobs wasn't a programmer or an engineer. And, here you are overlooking the benefit of VisiCalc which was not written by Apple.

 

[The Don]

You sure missed the mark with these two. The wealth in Microsoft was generated not by being good programmers but by predatory practices much like Standard Oil used to drive competitors out of business. In particular, their success came at the expense of Digital Research, Lotus, Ashton Tate, Quarterdeck, Borland, IBM, and Novell.

The challenge was to find computer programmers who had made money. There was no stipulation about how that money should be made.

He had a lot of luck. His company nearly went bankrupt in 1990 but Sybase's stumble allowed Oracle to build back up. Dunkin' Donuts had similar luck with Krispy Kreme's belly flop after 2000. Toys R Us also had luck when Bain bankrupted KB Toys.

The challenge was to find computer programmers who had made money. There as no stipulation that luck could not be involved.

Jobs wasn't a programmer or an engineer. And, here you are overlooking the benefit of VisiCalc which was not written by Apple.

You are quite correct, I was wrong.

This does not change the fact that some computer programmers and engineers have done financially very nicely

 

[quixotecoyote]

The challenge was to find computer programmers who had made money. There was no stipulation about how that money should be made.



The challenge was to find computer programmers who had made money. There as no stipulation that luck could not be involved.



You are quite correct, I was wrong.

This does not change the fact that some computer programmers and engineers have done financially very nicely

I think it was a fair implication that they should have made money due to their computer programming.

Otherwise we could find a computer programmer who won the lottery, and point to him with the same degree of meaningfulness.

 

[The Don]

I think it was a fair implication that they should have made money due to their computer programming.

Otherwise we could find a computer programmer who won the lottery, and point to him with the same degree of meaningfulness.

Not quite equivalent. It goes back to the line:

How much did the engineers who originally developed the Internet make?

Which doesn't specify that it had to come directly from their engineering efforts but IMO does imply that the money has to come from their development of the internet. Likewise these rich guys, no-one makes billions from programming but I think it's fair that they have to make their money from the IT industry (and not as you suggest the lottery).

As I pointed out, the guys that built the internet probably did OK.

Even if we're just talking about programming, programmers do pretty well.

 

[Mark6]

I think it was a fair implication that they should have made money due to their computer programming.

no-one makes billions from programming

Richard Garriott?

 

[The Don]

Richard Garriott?

Well he is also an entrepreneur and his wealth comes from the ownership of IP (like Bill Gates) rather than being paid £££££££s for each line of code cut but he comes pretty close.

 

[daenku32]

I'm just going to say that just yesterday on the TeeVee a man in a nice suit counting dollars actually worried about "labor costs", when questioned about his prediction on when our wages would actually rise.

So keeping the poor people poor is not just some principle stand on punishing and rewarding "smarts" and "dumbness", but a real class struggle where the bean counters really do want to keep poor people earning as little as possible, so that the masters of the capital can keep more of the pot to themselves.