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What would society be like if we implemented maximum income laws?

Our neo-liberalist economy is driven by consumption, growth of production and wealth accumulation, which is getting harder and harder to support.
While the argument of free market forces creating equal opportunities for all has some theoretical logic, the reality is that the world of industrialised society has now in fact created more debt than there exists wealth in the world. It is hard to argue that this is a good thing.
Since there exists enough money in the world for all to survive, and to eradicate ALL poverty, it must the method of allocation that is at fault.
Therefore, I conceive the idea of a world with not minimum wage limits, but maximum. As John Maynard Keynes predicted, we now have the ability to transcend the 'economic problem', to exist for purposes higher than acquisition of dollars. If we had a maximum we could earn, which would of course allow comfort and dream actualisation, we would be forced (empowered?) to assess our success by other factors.
We would achieve, if anything, greater levels of tertiary education- People would only study the things in which they were interested in, as wages would not be a factor. Lecturers and professors would teach for the pleasure of it. University fees would be non-existent, as wages and costs would be minimised.
People would be motivated by self-upskilling, to the point where they worked for the joy of achievement, or stimulation provided by activity. We would work less and less, having time to pursue societal goals of family living, healthy exercise, charity and development work.
My question to you wise and wonderful people is- What is the downside? I open this question to the world and its infinite knowledge.
One could theoretically answer that accumulating wealth for the sake of having it is an acceptable ambition, but besides that questionable proposition is there any foreseeable drawback? Economic or otherwise?

  • Apr 22 2011: In the UK we had 98% marginal rate of tax until 1979. It was 87% on earned income and a further 15% on top for unearned income. That is close to a maximum income law. On the basis of the UK experience I make the following predictions:
    1) The ordinary citizen would not be able to accumulate savings. Thus capital would be concentrated in the hands of corporations the government and those who have inherited wealth.
    2) With less capital in the hands of individuals it would be harder for small businesses to start up. There would also be less incentive to do so.
    3) Existing businesses would therefore be protected from new entrants to their markets.
    4) Thus producers would be protected at the expense of consumers. This would be good for employees in existing businesses, and the owners of existing businesses, but bad for everyone else.
    5) Life for the ordinary person would become more difficult in many small ways. This would be a gradual and cumulative process.
    6) Few people would recognise this process as it was taking place. The idea that we all benefit from the activity of a small number of egocentric individuals is counter-intuitive.
  • Apr 22 2011: Go Harald.

    I think the best alternative to the system we currently have is more governments that are more favorably regulated for small businesses. Make it easier for more people to start businesses and get rich. They'll employ those who don't want to start businesses. Innovation will accelerate (like it isn't already going a million miles per hour :), basic survival needs will get cheaper and more widely distributed even for those third world countries. The faster the innovation the faster the important inequities disappear. At a certain point income gaps won't matter to us because everyone's survival AND comfort needs/wants will be taken care of. We're already seeing than in advanced countries where the poorest either aren't really that bad off or they're deliberately poor.

    We're right at the beginning of an era where very high quality education is very cheap. I watch lectures from the best professors in the world on almost any subject while I'm in my PJ's at 3am. I started a profitable internet business from my home based on what I learned on the internet. This cheap, actionable education is a great equalizer. (It's only a matter of years before the first free, accredited online school is available.) For anyone with a little bit of drive and an internet connection there is no reason they shouldn't be able to make enough to cover basic needs.

    Random:People in Africa living off of a grid are charging their cell phones with solar chargers and then getting paid via that cell phone. That's awesome.

    Mankind has clearly shown it is most amenable to equality of opportunity rather than equality of outcome. When we strive for equality of opportunity we are less inclined to blame our circumstances, because we have control of them. It also works very well for our fickle natures. Equality of outcome, while it sounds happy and full of rainbows and we have jobs perfectly suited to our interests, is oppressive and destroys the soul.
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    Apr 21 2011: It's absolutely right to seek solutions to poverty / income equality; overwork; political patronage; scarce global resources. And I like this idea, in principle. But a 'maximum wage' would be disastrous.

    First, it relies on a 'lump of wealth' fallacy (like the 'lump of labour' fallacy used misguidedly to justify limiting employment of foreigners). The Earth has limited resources, and therefore limited wealth, right? Wrong. 'Wealth' in its broadest - most relevant - sense, is limitless: it includes the value of knowledge; experiences; services; technologies; of those limitless things such as sunlight (and the energy derived thereof). These all have a value, and are traded: global GDP FAR exceeds the value of 'commodities'. So if each citizen's wealth were limited, we would *massively* limit the wealth available to humankind: certainly not a sure-fire route to eradicate poverty.

    Second, limiting wealth is self-evidently against human nature. Why else would a multi-billionaire keep working, investing, putting her health and sanity on the line? Perhaps its pathological. But more importantly, people need that 'big prize' to shoot for, to work hard and innovate. And not just people - firms too. Would firms' 'wealth' be limited? This would cripple productivity. It would also be unenforcable: corruption would skyrocket.

    Another minor argument: By allowing a wider income distribution you can increase the aggregate tax take (if your taxation is suitably progressive), thus allowing for better public services and greater redistribution.

    Alternative solutions to the initial problems listed. Poverty: "big-bang" development: aid + governance. Overwork: personal choice. Resources: innovation.

    We libertarians can forget how ridiculous it is that 'our' system creates billionaires and indigence side-by-side. It is wrong, and needs to be addressed. But this isn't the way, I'm afraid.

    A correction: I'm sure that global debt cannot possibly exceed global wealth. I may be wrong
  • Jason T

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    Apr 21 2011: I think we have moved pretty far away from the original question Tim posed to us. As for the drawbacks of having an income cap, I think anyone from a western capitalist country can agree, lack of motivation. Yes for something like a lawyer or accountant it would equate to working less and less, which I think would be great, as anyone who has articled on salary knows work can consume your life! But, I am thinking more of entrepreneurs and business owners; what would be their motivation to put in 16 hour days to get a solid company off the ground. There are times when people have to work hard, and they need proper compensation or there will simply be no motivation. If I start a business from the ground up, which sells a product I created, and the company gets valued at 750 million, and I have a salary cap of 1 million a year, what happens to the rest of that value? Does the government get it? You?

    Makes you think, I do agree that it is an interesting idea thou.


    • Apr 22 2011: This is exactly what I was hoping for, analysis of a proposed alternative. Would it really reduce competitiveness you think? I was an undergrad major in entrepreneurship and small business, and I would put forward the idea that a large motivation for small business owners would be creating something, contributing to society, industry or a 'cause', stability for family, lifestyle factors. And keep in mind if there was to be a limit, it would still be high. We are talking hundreds of thousands of dollars, so there can definitely still be some economic drive.

      In terms of your example, lets look at the valuation of your company. That value is the ability of the company to earn future profit, through the consumption of some kind of resource. So that money is a promise that your company will consume 750million profit dollars of resources in the future. I suggest that we can no longer afford to be driven by creation of companies that consume 750million profit dollars. We need to find a lifestyle that is based on something other than growth, not because we want to, but because if we dont our world as we know it will fall to pieces.
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    Apr 16 2011: I think it would be interesting that's for sure. I think we would see a lot more groups working together -either family groups or groups of like interest as the money makers colluded to ensure that the added income was passed to someone they approved of. Unfortunately it might also dampen major advancements in some industries.
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      Apr 16 2011: Money is the oil in the machinery of our economy, whether we like it or not. If money stops circulating (and less income means less money circulating), it inevitably will have a negative impact on the economy.
      • Apr 17 2011: You're right, however, when the economy is now does not work to benefit all participants, not equally - there is a need to replace the system - that is salary minimum basic education are important, once such large income differentials between different places in the world (but worse , between different places in that state) levels of thousands of percent, you can never reach the utopian egalitarian society the philosophers dream of for centuries
      • Apr 18 2011: How would this mean money would stop circulating? Instead of having one investment banker earning 300,000€ we would have 6 earning 50 000€ a year working 1/6th as many hours. The difference would be that the distribution of capital would reach much further, and people would be forced to assess lifestyles by more than monetary return.
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          Apr 18 2011: Tim, I disagree. People should be able to work as much as they want and they should be able to make salaries that are merited by the work they do.
          In other words, what I would like to see is a merit based compensation system.
          For example, if a bank CEO runs his bank into the ground and makes millions in salary + bonus, etc., then there most certainly is something wrong in the system and that has to be changed.
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    Apr 16 2011: Why should income be limited ?!?
    The money one makes, usually doesn't sit idle. People circulate the money in the market to buy goods and services or even donate it. Hence, the more money one makes, the more one can circulate in the market and every purchase one makes, directly or indirectly contributes to other people's wealth as well.
    Hence, limiting the income wouldn't help anybody. Poor people would still be poor (and perhaps even poorer because less money circulates to buy their goods). So what's the point ?
    If anything, having minimum incomes, minimum education, minimum health care, etc. makes a lot more sense
    • Apr 18 2011: I see the point. And I see the theoretical logic of the capitalist money system. This is a basic argument for monetary policy.

      But let me question a couple of your key assumptions
      1: The circulation of money is equally accessible to all.
      2: Those who have access are endlessly enriched by it.

      Firtsly, is money circulating evenly throughout the world? Is everyone getting richer? I would argue that there is a net flow from poor nations to rich. Therefore the people that have copious amounts of money are getting more. Do you disagree with this?

      Now if we as individuals had as a goal the accumulation of massive amounts of money (more than is ever useful to us), I can see the reasoning behind the system. I dont agree with it, but I at least see the logic. But to claim that it is a useful system for everyone is ridiculous. The only reason anyone would need money beyond the level which allows a comfortable lifestyle is to a) appear more successful than someone else (competition), or b) to allow massive consumption.
      Our planet can no longer provide for endless consumption, and I propose that the world would be a better place if people didnt compete on how many zeroes there are in their bank account, but rather on a pastime that they found satisfying on a spiritual, physical, religious, or intellectual level.

      Now, assumption number 2- We have economic needs. We need currency to purchase things- food, clothes, healthcare, etc. I dont suggest everyone take up subsistence living. But once we earn that much money, what do we do with the rest? Is our lifestyle enriched by it? Imagine you earn enough to live comfortably and healthily and achieve all your dreams in 15hrs a week, wouldnt you rather spent the rest of the time achieving other goals? You may even spend these hours working, but if so you would be doing so because you wanted to contribute to something.

      I welcome your thoughts, as I said I am trying to find the weaknesses in this proposal.
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        Apr 18 2011: Well, you know the expression "money attracts money", I suppose. ANd it makes sense. If you have nothing, you are very limited in your economic movements. On the other hands, if you have, as you say copious amounts of money, it's easy to find proper investments that help to increase your wealth.
        We already discussed the issue of money under another topic. Money in itself is worthless. Money only makes sense if you use it purchase something.
        The more money you have, the more you can spend. Spending money means you give work to somebody who produces the goods or services you purchase which in return gives more money to that person as well. They only people that are out of the loop and don't benefit, are people without any income. And here one has to start questioning. Why are people without employment ? Is it a problem of education ? are there simply not enough jobs around ? why ? Is the particular country under industrialized ?, etc. etc. Criticizing salaries is starting at the wrong end.
        About lifestyle and goals: everybody is different and has different goals. You can't tell people where they are supposed to put the limits. Just because you like to live they way you do, doesn't mean everybody shares your way of life. Some people are happy to go to the movies once per month. Others like to travel to exotic countries and others might have the desire to purchase a Ferrari. Can you tell any of them that he is wrong ?
        • Apr 19 2011: Great thoughts!
          I agree absolutely with your comment on the issue of money. We will always have a monetary system, as a method for regulating the exchange of goods and services, and that is something that is beyond reconsideration.
          But if I am right, you disagree on the terms of actual economic mechanics, and also on a principle level? Let me start with the question of mechanics:
          Money flow I encourage. I am not saying we should make anyone have nothing. But I am proposing that there is a point beyond which it is no longer useful, perhaps even harmful, to continue devoting your life to the accumulation of wealth. At that point, if we could find a way to divert that persons energies to activities occupying the top two tiers of Maslows hierarchy, I would like to believe they would be happier. As industry would still have a need for x number of engineer hours etc, they would then theoretically need to train and hire more, so the money flow would continue. Let me make a very important note here, that the person would not have to stop working! They are very welcome to, but they would then be doing that for altruistic purposes. Scientists, artists, athletes, who work for reasons other than wealth, would still work obsessively.
          I do see your point about why the current system is not working, and Im afraid I have no real answer there. I can only propose that the current system, with its ultimate goals of economic competition and individual betterment, is not designed with the goal of success for all, but rather for the few. If you accept that as a pillar of our discussion then the other questions answer themselves.
          Now your last point was exactly the answer I was looking for. Am I wrong in thinking that people are not intrinsically motivated by greed? I like to think that we (as a race) are motivated by success, competition, even dominance if I am being frank, and it is our economic framework that has made the dollar the yardstick to measure this success.
        • Apr 19 2011: And here is my motivation, in answer to your last question. I will always argue for a persons right to live as they wish, provided those wishes do not come at the expense of someone elses liberties. But is it now reaching the point where we must consider limiting the amount of lamborghinis that are being purchased, the amount of exotic countries that are being flown to? Lets be honest, and admit that limits and ceilings have always been present in our economy. Just not for the rich.
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        Apr 20 2011: Hi Tim, I think in principal there is nothing wrong with somebody making less money for the benefit of others making some or more money. However, the key point is, that it should be voluntarily and not forced, as you suggested, by a law.
        It's not even so uncommon. Many people made the decision that there are more important things in life than just work for the sake of money accumulation and simply changed their lifestyle.
        I also believe, that accumulating money is not the main goal of most people. When a Michael Dell or Bill Gates started their businesses, they had a vision and their goal was to make this vision real. I doubt that their plan was to create multi billion dollar empires. That was more a side effect after they became successful. And even then, people like Bill Gates use a lot of the money they earned for philanthropic purposes.
        Let's say Gates spends 1 Billion for his social projects and compare that to 1 Million getting 1000 dollar more in income. What is better ? I'd think that using the 1 Billion for a clear defined purpose (always assuming that the purpose is worthwhile), brings more net benefit than having 1 Million people making 1000 dollar more.
        You say the current system is not designed for the success of all. Perhaps, but not because of poor wealth distribution. Not everybody has the same chance for success for a number of reasons such as lack of access to proper education or an infra structure that doesn't allow any progress (e.g. living in Afghanistan might not be conductive for success).
        Also, not everybody has the mental capacities to become successful.
        I think, the proper way to go would be to provide everybody with the same starting point. Same quality of education, health care, food, security and freedom of expression.
        I think if these pillars of society are being taken care of, many of the social issues we see in the world would be at least alleviated, if not eliminated.
  • Apr 22 2011: Is there anyone in this thread that doesnt think economic growth is the answer to the social and environmental problems that face us currently?
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      Apr 22 2011: Tim: I agree that we need to cut back on our consumption of natural resources and reduce our level of pollution. But to do that we need an economic system which provides incentives to that occurring. So in that sense we need growth in the economy to meet these needs (i.e. - enhanced efficiency with less pollution). And although we will end up consuming less stuff, we will probably need more services (plus since mandolin making has a low carbon footprint, we could also have more mandolins).
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    Apr 22 2011: Harald..........Maybe I am wrong but the tone of yourpost saying that the government should be responsible for all our needs sounds as if you are proposing a welfare state. I don't vote for that (: )
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    Apr 22 2011: Harald How would you fight these ?
    A debt is a gamble that I will be able to continually increase my income, throught the consumption of more resources, to the point that I will one day be able to pay off my debt. THAT!!!!! is the wheel on which the neo-liberalist economics spins, am i wrong? Because why create so much debt, if we dont think we can pay it off??? One day, either we have to catch up, or start writing off debts as useless pieces of paper. The problem is that we dont have the resources on, in, under or around the earth to increase our consumption at the rate we would need to in order to pay off all our debt. There is now more debt in England than there is wealth. The only plan is to increase production so much that prices come down and inflation goes up, and as pre-war liberalists postulated the only way to increase production is to capitalise on a helpless and readily available pool of cheap labour. If I had to encapsulate this, I would say that the wealthy are the holders of these debt slips, and are working frantically to leverage them to produce real production based profit at the cost of billions of others, before the oil party runs out and the wheels fall off the wagon.

    We are talking macro economics here. Step outside the current system, and tell me first if youre happy with it. Im not providing an alternative to the system, but rather raising the concern that an alternative may be needed!
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      Apr 22 2011: Tim, thanks for your reply. Some responses (forgive my edits, hope they're not misplaced):

      "The billionaire [...] cannot possibly 'need' to spent 10million dollars [...], must find RESOURCE CONSUMING, [...] ways to spend [...]"
      - He doesn't 'need' to, but he 'likes' to. We have to build a society that provides - sustainably - for everyone. But we also want a society where we can enjoy the fruits of our work however we choose. Why deny humanity its greatest desire? Wasteful 'conspicuous consumption' angers me. I'd like to think I would be more ethical. But what do impoverished farmers think e.g. of you and I owning computers? My air ticket to Britain to see my parents? 'Drawing lines' is a dangerous path. Better to allow wealth and consumption, then redistribute some of it as social services, aid, and R&D for better resource efficiency. (Btw, the world economy's marginal resource-intesity is falling).

      "[...] would rather they all had an extra dollar, instead of that 10million being locked in a bank."
      - What long-term good is one extra dollar to an indigent farmer? At the extreme: to disburse global GDP ($60tn) equally among 6.5bn people, everyone gets $9,000 a year. What can you do with $9,000? Start a business? Run a public service? Invent smart-grid solar energy? No. But when the rich (and rich firms) a) invest in research; b) hire more workers; and/or c) found benevolent trusts, the poorest improve their lives permanently, the rich enjoy more nice things (incl leisure), and humanity advances. This has actually happened every day for 300 years. You need 'lumps' of capital (WEALTH) to kick-start progress.

      "If [...] that bank lends it to me at 10% interest, where is the creation of wealth?"
      - The wealth is created by how you invest it, not the lending itself. And the interest represents the value of the services the bank provides: a) mediation and b) taking on risk.

      I'll resond separately on your points on debt below.
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      Apr 22 2011: My responses below. But first, remember one person's debt is another's asset. So there cannot be more debt than 'net present' wealth. (Also: " more debt in England than there is wealth". UK gross debt is £7.5trn. Could the UK be 'bought' for £7.5trn? All the houses, firms, factories, universities, roads, land, forests, castles, sheep, cars, teabags, everything? Nowhere near!! The top ten FTSE companies are worth £1trn alone.)

      A debt is a gamble that [...] increase my income, throught the consumption of more resources, [...] one day be able to pay off my debt. THAT!!!!! is the wheel on which the neo-liberalist economics spins, am i wrong?
      - You're not wrong. (But can you 'spin' on a wheel?? Maybe.) Unfortunately, debt is another service that panders to the human desire to 'smooth' income. I took on debt to go to uni. I couldn't afford it outright: it was an investment - in myself. And it was a gamble. But it's a pretty tried-and-tested one. I'm now paying it back (slowly, but surely! PS - please let's not get into a tuition fee debate here. Another time...!). Loans for mere consumption are riskier (though I wouldn't stop two consenting parties from agreeing to one).

      "One day, either we have to catch up, or start writing off debts "
      - Wrong. When incomes rise faster than debt, we're good. This hasn't happened since 2009 (nor will it until 2015ish). But the long-term trend is of ever higher global net wealth - both absolute and per-capita.

      The rest felt a bit blindly anticapitalist. I wouldn't shirk the challenge but for space! But take a look at long trends. Decreasing marginal oil dependence. Lower poverty. Longevity. Less war. (Really! All nice things.

      "Step outside the current system, and tell me first if youre happy with it."
      - Very happy with it. This 'system' reduces poverty, and satisfies humankinds needs and wants in a democratic way. 'Market failure' degrades the planet. So let's correct the failure, not scrap the market.

    AB! I have read your post as such complete economic rhetoric that I want to just check with you first that you understand what youre saying. Of course a person with 1 dollar will spend it all, but theyll still only spend 1 dollar. If a person with 1 billion dollars spends 1 cent in every dollar, theyve spent 10million dollars. And what have they spent it on? The person in the first example has probably spent his dollar on locally produced seed, or rice, or medicine to keep his family well. The billionaire who has no economic concerns, and cannot possibly 'need' to spent 10million dollars to survive, must find RESOURCE CONSUMING, ENVIRONMENTALLY DAMAGING ways to spend his money.
    Since there are at least 10million more people like example A in the world than there are example B. I would rather they all had an extra dollar, instead of that 10million being locked in a bank. 10million example As would give a dollar to 10million local farmers, and improve their lives.
    NOW, you mentioned that there was an economic benefit of putting money in the bank. And you also claim that wealth is limitless, which (in theory) is correct. Let me address both of those right now.
    If example b puts his million dollars in a bank, and that bank lends it to me at 10% interest, where is the creation of wealth? What you have created is debt. I then need to increase my income stream to pay my additional debt, as well as my standard costs of living. An ever increasing stream of income must be created, to pay my ever increasing debt. Where does my income come from? It comes from resources, LIMITED resources. If you boil it down, all resources are endowed with the energy from the sun, be it biomass, petrochemical, even wind water or geothermal power. If I am a masseuse, or earn my living as a butler, I consume energy in the process of doing so, so when I am forced to increase my income, I will be forced to consumer more resources.
  • Apr 21 2011: Thank you Jason, for cutting away the fog. This is (like any issues concerning the rights of one to provide for themselves) such a loaded question hat its easy to find ourselves commenting on other comments rather than the question at hand.

    Firstly HARALD. Have you ever truly considered the idea? Have you looked for reasons it might work? Or have you instead decided only to look for reasons why it might fail? I challenge you to judge it NOT WITHIN the context of our current market system, but instead look at the weaknesses of the current market system, and then judge whether the proposal (or a similar one aimed at redirecting the energies of the citizens of the earth) might help create a more positive situation. I have read all your posts, multiple times, and as far as I can tell you have not said anything to indicate that you have any misgivings about our economic system. Is this the case?

    REV. You wont find anyone on this post who disagrees that the economy is increasing in size. there is definitely more wealth in the world now than ever before. But much of this wealth is fictional- it doesnt exist! I will explain this in my response to AB below. In the meantime- The numbers in the bank accounts of the richest people in the world are increasing, and the numbers in the bank accounts of the poorest people are also increasing. But the number that is increasing the fastest is the difference between these two numbers. Moreover, you have a number of factors that are happening, where control of key areas is being gained by wealth holders in the global north, in order to restrict economic independence in the global south:

    Restriction of industrialisation opportunities (control of natural resources)
    Forced debt and structural adjustment policies
    Transnational governmental bribes

    In this regard it is the location of high proportions of the worlds wealth in areas where it is inaccessible to the general population that is allowing such inequal development.
  • Apr 21 2011: One word: slower. But also more homegenous. It's not in the hands of few to judge on what is the right way to proceed though.
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    Sky F

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    Apr 21 2011: We're not quite at the level of technology where robots can do everything and humans can sit back and reap the benefits. People would still have to work. Maybe one day, but by then there will probably be an overpopulation problem any way. We just can't win.
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    Apr 21 2011: Incentives motivate production. People need and want things. The beauty of the capitalist system is that it is a self regulating mechanism which provides incentives to produce the things that people need/want.

    The problem with the capitalist system is that it results in concentrations of wealth. The wealthy then use their power to influence government - for their own benefit. Then we end up with situations like in the US where 400 highest income people pay less then 17% in federal taxes. Or where the federal government bails out Wall Street and the CEOs walk away with record profits. Or wars are fought to protect corporate interests.

    Capitalism has it's good points, but it must be regulated to prevent greater and greater concentrations of wealth.
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      Apr 21 2011: Tim, I agree. As so often, it's not the system that is bad, but the misuse and/or abuse of it that causes problems.
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        Apr 22 2011: Harald:

        I don't consider it so much a matter of abuse, but that there are inherent shortcomings in the system. So it needs to be regulated. The case of pollution is an obvious example. Private enterprise has repeated shown it's capacity to pollute the environment, if not properly regulated.

        We need to think of capitalism as a tool. And like every tool it must be used properly and restrictions placed on it's misuse.
    • Apr 22 2011: A fellow TIm must be a reasonable and thoughtful man, let me ask you this:

      Is production still good? Why?

      What do you mean by need? Do we need to keep growing production to provide the things people need?

      Wants will never run out, as we nowadays create them through complicated marketing psychology in order to justify evermore production, but my question is this- Can we afford to provide for all the wants that exist in the world?
      Do you believe that we are now creating wants in people? If so, and if you believe that we can provide for all the wants that currently exist, how long can we keep creating new wants before we run out of resources to satisfy them?
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        Apr 22 2011: clearly production only keeps third world the third world and keeps everyone else on top, if we are going to make it in this world together its going to take something new which doesnt run dry the rest of the world around us. in theory capitalism works, but we have yet to prove that we can keep it from destroying ourselves. when you say " i want a afordable t.v.:" this reqires all these commercial outlets to reduce there price on that tv to compete, forcing whoever tha forgin employee that made that t.v to get a cut in pay.
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        Apr 22 2011: Tim M (sure are lots of Tims around here!):

        Of course wants are infinite and will never be completely satisfied. But it is nice that they can sometimes be met. Right now I want a new mandolin. I've got a cheap one I started learning with, but I'd like to upgrade to a better one. I'm glad there is a capitalist market where, if I'm willing to pay the price, I can decide to buy a new one.

        I agree that as a species we need to adapt to lifestyles with reduced consumption of natural resources. And that will probably occur within an incentive system.

        But, are you willing to repress all your wants and live only according to your basic needs?
        • Apr 22 2011: This is a conversation i can explore!

          I also like being able to purchase things, beyond that which I require for basic survival. Right now I want a pair of headphones, so I can listen to podcasts when im out on the move.

          I would like to have the luxury of being able to buy those headphones, and in the future perhaps buy another pair when those wear out. but if we dont put a cap on the growth of production and consumption we are going to get to a point where we are concerned only with surviving.

          now- due to the ingenuity of science and technology, i believe we can reach a sustainable lifestyle for all, within the limitations of our environment, where we can have mandolins and headphones. however, not ALL of us can have mandolins AND headphones AND 20 pairs of shoes AND a sports car AND 6 tvs AND 14 suits. you see my point im sure.. We must restrict our consumption somewhere, so that we protect our ability to provide comfortable lives for ourselves in the future.

          I hope you can agree with me on that point?
      • Apr 22 2011: (Forgive me for not being named Tim here...)

        Isn't the system self-correcting? If enough people want mandolins, the supply of mandolins will drop, then the price will go up according to basic laws of supply and demand, and so then fewer people will be able to afford mandolins, so the supply will increase again and the price will fall, and so on ad infinitum. I'm not sure this part of the system needs regulating.

        But I certainly agree that "commons" need to be regulated/protected: the air, water tables, the seas, etc. Some of that can be done through private ownership -- people don't usually crap on their own doorstep. But nobody has any incentive to protect those parts that remain common.
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          Apr 22 2011: Revett:

          So how do we resolve the problem of externalities? That is, how do we incorporate the cost of consuming the commons into the equation?
      • Apr 22 2011: Tim (C, that is): We obviously need environmental regulations, and we already have a fair number of them. The Alberta oil sands are a pretty good example. Contrary to what a bunch of uninformed 'environmentalists' keep saying, companies working in the oil sands are subject to a large number of regulations in terms of limits to the despoilation that may occur, how the land must be left after use (as a rule, better than it was before), how much water may be used and what must be done with it afterwards, how tailings ponds must be treated, and so on. Not perfect, and some of the regulations are fairly recent, but definitely the right way to go.

        Many countries have quite rigid air pollution regulations, another good example. The cost, as you question, is included in the price of each new car we buy and many of the goods we purchase.

        The oceans are what concern me the most at the moment, far, far more than debatable topics such as climate change. When you have a plastic island the size of Texas floating around in the middle of the Pacific, you don't need a degree in rocket science to figure out that something is out of whack. Last time I visited Hawaii, the beautiful area where I used to go snorkelling had been completely replaced with dull, brown water over dead coral. What to do about it? I wish I knew.
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    Apr 21 2011: Rev........This would not limit wealth. It would just be spread it around ........people would earn what they are actually worth. You must not have read my entire post or else didn't understand what I was getting at. I may be the only one who thinks so, but economists are known to have been wrong before. Peace
    True, Stock values do not distinguish between me and the CEO but he has a heck of a lot more shares than I do. Why, becase he is given more opportunities and I have to buy what I can afford. And if he did not get so much compensation maybe the dividend could be larger too.
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      Apr 21 2011: Helen, you also should ask why a CEO is in the position of a CEO and you are not.
      Did he get different opportunities than you ? Was life just fairer to him than to you ?
      You have to start looking at the roots.
      If 2 people initially have exactly the same opportunities (education, upbringing, etc) and one becomes a CEO of a big company and the other a sales rep, then there is no reason to condemn the CEO for making more out of his life.
      This brings us all the way back to what is really needed in society.
      What society needs is equality when it comes to opportunities. That is what I mentioned in my other post. If good education is only possible if you are able to pay a lot of money for it, then something is wrong with that. The same is true for medical care. Nobody should suffer any health problems because he has no access to proper medical care.
      But given even the same opportunities, you always will have people who make more of their lives than others.
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        Apr 21 2011: Harld .............It is education and opportunity to a degree.........but it's also the system that is in place here. Can you imagine a society of Ceos and nobody to carry out their ideas ? Even if everyone had unlimited acess to education, only one kind of work won't cut it. Who sets the salaries ? Is that a fair deal ? The peon probably expends as much energy (maybe more) than the white collar worker and what does he get for his efforts? I am not advocating putting the ceiling on earnings so low that it would eradicate the desire to do your best. After all we do hang a carrot in front of the rabbit so that it runs faster. Some people have to have carrots because they don't do their best otherwise. This is true of why don't peons have carrots too ?
        • Apr 21 2011: Helen, firstly I was argumenting not against you, so your arguments may be misled as a whole. Secondly, no, I don't want to be in such a position. Please reread my post.
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          Apr 22 2011: Helen, it's most likely a combination of factors. I don't want to imagine a society of only CEOs because that never would or could happen. But the point is exactly that, we need the variety of jobs we have. Compensation to some degree are also reflecting a market of offer and demand. There are relatively few people out there that could successfully lead, let's say GE. However, there are many more how are good pizza cooks.
          So, if I am a company, I just pay whatever it takes to attract the best candidate for the job I'm offering. If a CEO grows his 10 Billion company buy 15 %/yr, then he is probably worth a few Millions of salary- As a side effect, many other people in the company will profit as well, if they contributed to the success (e.g. profit sharing plans, exceeding objectives, etc.) The salaries, as are most prices for goods and services are established by the market (offer and demand).
          Peons have carrots too, they are just different from a CEO. Everybody in principal, has the chance and free choice of standing out of his particular crowd. That's true for the CEO as for the dish washer.
          This doesn't mean the system is infallible and perfect, but I think it works pretty well.
      • Apr 21 2011: Harald, don't let you fóol you on this single thought, that ultimate equality is the key to world relief.
        One truly open minded also has to consider that by treating people not equal, in a sense of devoting disproportinal resources to them, almost exclusivly creates a kind of much needed diversity. Be it by heritage (powerful clans), coincidence (youtube shooting star), luck (lottery winner) etc. etc., you name it.
        Without harsh differences in simply any aspect, we couldn't sustain advancement at this pace.
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          Apr 21 2011: Alex..................I am not advocating equality in wealth distribution. How did you get that idea ? All I am saying is that the gap between upper management and the janitor is way out of line. Would you like to be low man on the totem pole ?
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          Apr 22 2011: Hi Alexander, finally another Austrian. I already thought I'm the only one here !!
          No, I don't advocate any ultimate equality. What I propose is to provide (and this should be the job of the state) an equal platform for everybody, which means, proper education, health care, safety, other words, coverage of the basic needs. Then it's up to each single person to make whatever they want of their life. Some people want to get all the way to the top, others don't care. Some need a Ferrari for their happiness, others are perfectly happy with a great family and a bike for each family member. Important is that everybody has a freedom of choice.
          I agree that we need diversity within a range. We don't need it to the degree that we have people dying of starvation in sub saharan Africa though.
          So, improvements are certainly needed, but in my opinion they must be on the level of basic needs and not on the level of income regulation.
      • Apr 22 2011: Harald!
        Who says that a CEO has done better than a sales rep? Maybe the sales rep is happier in their job, spends more time with their family, feels a greater connection to their community.

        I would suggest the ceo is in the position of ceo because they felt particularly driven to succeed in the business world, as they grew through their formative years.
        Living in a world where we have limited resources and therefore limited space to grow, we need to teach our children to seek something else than maximal wealth accumulation and consumption. Note that Im not saying we cant teach them to be ceo's. I accept and embrace the idea that there is a challenge and thrill in being a ceo that is entirely unrelated to money, and so I want people to be able to experience that. But no ceo is able to choose to work 3 hour days and remain a ceo, as long as the economy we live in is driven by production targets and profit maximisation
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          Apr 22 2011: Hi Tim, I don't disagree with you. Actually that's exactly what I say. However, the decision should be up to every single person.
      • Apr 22 2011: Nice, appreciating the autrian-ness.
        So to draw the line for what you call basic needs should be the hardest thing to agree on. And in fact, in developed countries with welfare systems we have exactly this (unsolvable) problem. Although it should not be hard to agree to put starvation to end and assure some minimum education. But how to achieve this?
        One _can not_ force it from outside into poorer countries, see africa. One has to empower the state as a whole and then hope the best that they are going the road to a minimum of socialism and human rights. Sadly this is not always happening. It would happen more likely if there is good communication and democracy inside a state. But still, this is not always the case in our times. And further, we would be more comfortable if all believes (religious or otherwise) are compatible with ones own. But again, this is not true of today.
        Until that you gotta pick out your collaborations and/or thrive for cultures compatibilty with the same intensity of getting rid of poorness and lack of education.
    • Apr 22 2011: Helen! Thank you for understanding my point! But still, are you looking at it from the point that people are living only to earn money? If that is the case, we are all unfortunately doomed. Beyond providing enough money to live and grow, we have to find other reasons to live, work, and develop..
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        Apr 22 2011: Tim...............By no means am I advocating living only for accumulating wealth or power for their own sake. I would like to see the bottom tier of people (financially) be able to earn a living so that all their NEEDS not wants would be met. Living for the goal to be wealthy and powerful is living a life of idolatry. Heck I don't begrude anyone recreation that costs money but some of this stuff is outrageous. I take vacations but I don't feel I have to go to Dubai to enjoy myself.
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        Apr 22 2011: Tim, forget about money. Money is not the goal of society, but the tool to acquire whatever you want to acquire. You could as well use sea shells, cacao beans or pretzels.
        Money, and 97 % of money isn't money at all but just numbers in cyberspace, in itself without anything to exchange it for is totally useless.
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          Apr 22 2011: Harald .....Ok You are right money is not the problem. It is what money can buy...Status,ego satisfaction.......Do you really think that a Ferrari is a good deal when there are people near starvation on this planet with us ? I agree inflation can make money worthless. Peace

          Alex....Sorry to have misunderstood you. I will do better next time.
        • Apr 22 2011: Can I propose that we clarify the difference between 'money' and 'currency'. money is the system by which we trade for goods and services, and currency is the item we use to do so, would that be agreeable? currency changes from country to country, between races, but all have some kind of monetary system in place. I propose that I can forget about currency, but the system of monetary distribution that we have in place is very much the problem.
          I can agree that accumulation of currency is not the the ultimate goal for everyone in every society, but I feel very strongly that it is the goal of the reigning monetary system within which these societies operate. Therefore those people in those societies who are living within the framework of success by monetary advancement must play by those rules or risk domination. Could you provide me with an alternate goal of our monetary system?

          Harald! Fantastic that we have reached some common ground :) I agree with every part of the statement you made above this one. People should have the option! I just fear that they are not truly given the option now, when to choose to focus on other things than wealth in life in our economy will leave you so disadvantaged.
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        Apr 22 2011: Helen, If somebody has earned his money honestly and decides that he wants a Ferrari, then the choice is his. That's what freedom of choice is about.
        One wants a Ferrari the other wants a 55" LED TV. Both items aren't necessary for survival. So, why would you tell the guy with the Ferrari to give up his dream and not the guy with the new TV ?
        Btw, no, neither money nor the items money can buy are the problems.
        The problems are corruption, lack of education, abuse of human rights and violence, rampant diseases without proper health care system, etc, etc.
        Those are the real problems that must be fought.
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          Apr 22 2011: Harald Absolutely................I am saying that putting REASONABLE Boundaries on income is the only thing I can see that will stop these greedy Americans. Say you limit salaries to 10,000.000 dollars per year........won't that provide enough luxury to satisfy ?It seems to me that the government will not plug "holes" where people can steal legally. So what's left ? If there are laws to make criminal s using guns to steal say 10,000.00 dollars then why not make commodities brokers, etc. liable for manipulating prices ?I really think that most of our lawmakers, etc. in our government are either very stupid or very corrupt. Who needs lobbyists ? Why are we (the USA) in the shape we are now except for peoples greed and insensitivity to other peoples' needs. Oh Yea There are two of my threads that got lost. ! I am Austrian My father immigrated here from Czarne, Austria, in 1913. And the other was my would you fight for equal opportuny 'cause it does not exist now ?
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    Apr 20 2011: Harald..............I'm guessing that if you have a party association, it is probably Republican because the "trickle down" theory does work to some extent. However, laws have to reign in human greed.
    I cannot say how much money is enough because at present I don't know how to figure that. But what I do know is that $400,000,000.00 is too much. In this day and age money=power. Do I want to see power concentrated in a small pecenrtage of the population ? Nope !!!What assures me that they will use their money for the benefit of society ? Knowing myself I know what temptation is and how hard it is to resist
    So if a wealthy man uses his money to build grand castles for himself adorned with all sorts of precious metals and rocks, he may give a relatively few builders some employment. How about the rest ? Does anyone need to luxuriate in this fashion ? I say no,,,,,if you are going t build ib a grand style (spacewise) then build it for everyones use. I am not a communist in any way but I say that the ratio between the rich and the average Joe is way too far apart. And sometimes the gains are ill gotten.(.legally of course) Theft is done by stepping on the backs of those who do not have the power to legislate. OK so now I shall stop ranting............
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      Apr 20 2011: Hahahaha, Helen, you got that a matter of fact, I was already many times accused here to be a liberal. Truth is, I don't belong to any party, but if I would have to decide for one, the Reps would be the least likely.
      That said, although I don't follow any part ideology, I'm a strong believer in individual freedom, which also includes making as much money as one wants as long as the money is earned honestly.
      Unfortunately, not all rich people made their money in an ethical fashion, however, there are many or maybe even most that did. So why shouldn't they reap the fruits for what they sow with their work and commitment ?
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        Apr 21 2011: H..............I still say that Millions of dollars paid to one person CEO CFO ETC is unethical. I believe in freedom for the individual But freedom from, not freedom to. Big difference !!!! Does the person who cleans his office barely eke out a living.? If you want peace then you better work for justice. So I take it that you don't mind having power concentrated in a small percentage of society.? I happen to be a shareholder in various stocks. How do you think I feel when the CEO makes millions and the dividend I receive is paltry. In addition to salary these people get ESOPs and know when to sell and buy. Wall Street is great for the man with lots of money..........not so hot for the little guy. These moves are legal but I doubt their legitimacy. Call me jealous if you wish but I am not advocating just for myself.. There is very little opportunity for the little guy. Commodity markets make artificial shortages and thereby control prices and on and on. Do you mean to tell me you are okay with that ? There are laws that protect our person and our property from intruders but there is no law that says you can't steal legally. Why is that.?
        • Apr 21 2011: Helen: Think outside the box for just a minute. Imagine the possibility that if someone is paid $50 million a year, the net effect on the economy as a whole is positive -- that is, all or at least many of those who earn more normal incomes actually have a small net gain. OK, OK, you don't think this is the case, but just imagine IF it were. Would you still be against the idea of some people earning massive salaries just on principle, even though lower income earners gain?

          Because a significant number of economists believe that is actually the case.

          Personally, I don't know. And yes, I am wildly jealous of anybody who makes more in an hour than I make in a year. But nobody has yet managed to show me how one person making a lot of money causes others to make less. A lot of high earners CREATE WEALTH which makes everybody better off. Otherwise you have to believe that there is a finite, fixed amount of wealth available, making combined incomes a zero sum game.

          You say the dividends on stocks you own are paltry. What about the value of the stock? Almost all high-paid executives make a significant portion of their income from stock options. Those options are only worth millions if the stock goes up in price. If their stock goes up, so does yours. By exactly the same amount.
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          Apr 21 2011: Helen, I think we can't make such general statements as "millions of dollars paid to a CEO is unethical".
          It really depends and without looking at it case by case, I can't say whether it's unethical or not.
          In any case, I'm a proponent of merit based compensation. So somebody polishing shoes will make less money than a CEO of a Fortune 500 company.
          And I'm perfectly ok with that and believe that this is how it should be.
          About power: It depends what you mean with power. Are you talking about political power ? In this case, the people who are in power are there because people like you elected them to their post.
          Other people have power, because they are "movers" in society. They define society in one way or the other. Mark Zuckerberg, the CEO of facebook, probably has a lot of power. Not so much because of his money (which is a lot), but because he contributes significantly to shaping society.
          About dividends: It depends how many shares of your stock you hold. If you hold let's say 1.000.000 Starbucks shared, you'd make about 1/2 million US$/year in dividends, let alone the gain you get from the evaluation of the stock.
          Now, if you only own 1 share, then your gains are indeed paltry.
          I disagree that Wall street is only for people with a lot of money. Today, almost everybody can buy into funds even with very limited financial resources.
          As for being jealous. I'm not jealous of anyone making more money as long as it is earned honestly. Many "big guys" started as "little guys". Take again Bill Gates, Michael Dell, or Mark Zuckerman as examples. None of them had huge initial funding to put their dreams into reality.
          About laws: Laws are not perfect because they are made by people. However, the people who eventually make the laws are people, you and millions of others voted for and elected to public office. That's how democracy works. We don't live and most likely never will live in a world where everything is perfect.
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          Apr 21 2011: Revett is right to imply that incomes are not a 'zero-sum' game: one person earning an extra million has not pinched a dollar from the pockets of a million other people.

          Equally, we have to consider how various people disperse their income. Wealthy people have (excuse my inexcusable nerdiness here...) a "lower marginal propensity to consume". You give a poor person a dollar more, they'll spend 99c more. A rich person will probably only spend a fraction of it.

          They'll save it instead. They deposit it in a bank, which lends it on to businesses to invest. This grows the nation's capital stock and thus a) its wealth and b) its ability to create more income and wealth. Or it is lent to consumers who spend it and keep the economy ticking over. The more money saved, the more banks need to lend, so the lower the interest rate and the better for investment (and home-buyers, etc...).
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    Apr 17 2011: At first, I'd absolutely agree with you. Financial goals shouldn't be the ones keeping our lives going. We must make money to live, not live to make money.

    However, Harald seems to have a good point. I actually have zero knowledge in economics, but his argument sounds reasonable. Less money circulating would increase the advantages of the money who have more.

    A good viable alternative, for me, would be the massive taxing of rich people, something like 70,80 or even 90%, depending on their income. The money, then, could be used by the State to provide social services such as food supply, health, education and culture.

    That would have the same advantages of the maximum wage, and in addition would garantee essencial services to the entire population.

    "Hey you high baller, gimme my money!"
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      Apr 17 2011: below, i proposed to set the "richness line" at 200% of world average income. do you agree to that? or how would you define "rich"?
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        Apr 17 2011: No Krisztian, Even I think that's too low. We need to allow gifted people to run with their efforts to a much greater extent to allow the markets to move forward. It would need to be at least 100X the world average or we would end up with the communist block mentality of 'what's the use?' or risk having them spending too much time on circumventing the law.
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          Apr 17 2011: honestly, i just wanted to provoke thoughts. talking in general is always dangerous, we often overlook some detail that later proves to be vital. that's why i proposed this mental exercise. i hoped that if someone carefully tries to establish this limit, will see that you can not find any absolute logical reasons to work with. probably most people will set it somewhat higher than his own income. it would be interesting to test this hypothesis.

          for me, the only logical conclusion can be either abandon this concept, or be democratic about it, and use the world's opinion as a basis. hence, it is either no limit, or somewhat above the world average.
        • Apr 18 2011: Youre absolutely right Debra, we have to reward excellence. Someone who is highly trained and educated, or putting themselves in danger in the line of work (fireman, coastguard, etc) should get a wage equivalent to this. But what if we set the maximum income, and then let the variable be how long people needed to work to achieve that.
          An emergency room doctor for example, might only need to work one shift a week to reach their maximum, then they would have 6 days to enjoy life. One result would be that there would be a lot more people training to be doctors!
    • Apr 18 2011: Martim I welcome your ideas. But tell me how this would disadvantage those with money? I propose to you that it would only disadvantage those who TRULY live to accumulate dollars, and I would be surprised if that was more than a small minority.
      I am in favour of heavy taxation for higher wage earners, as you suggest. But the issue I see with that is that they are still trapped into the rat-race of 60hr weeks. The system I propose would allow specialised workers who normally have higher salaries, earning the maximum in a shorter space of time. i.e. a lecturer might reach their maximum in 20hrs instead of 40, a fireman reaches theirs in 15 instead of 40. You then create a massive amount of jobs, and upturn the system from working to enable our lifestyles as you eloquently put it, to being able to live our lives according to other standards.

      Sound any more plausible?
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    Apr 16 2011: i recommend to set this maximum income at the 200% of the world average.

    what is your recommendation?
    • Apr 18 2011: My recommendation is that we democratically decide what the cost of living is, for an average person in a developed country, and times that by a factor of 10. This would spark drastic redistribution of wealth in the world, while allowing EVERYONE to achieve a healthy, happy and satisfying lifestyle.
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        Apr 18 2011: why on country basis? USA is big, hungary is small, india is HUGE. why not on education or profession basis? should we maximize managers, engineers, brain surgeons, mcdonalds workers at the same level? what is behind the number 10? why not 2 or 100?

        and even more questions: why only salary? what about exchange rate gains? stock dividends? how would you annualize these? what if someone hits the jackpot every 5 or so years?

        hey, we didn't count the number of children! and old grandma living in the household! we must also incorporate the cost of living, there are expensive places and cheap places.
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          Apr 18 2011: I agree. And not only that, Tim, how would you handle entrepreneurs who risk a lot in building their business ? Why should they be measured to the same standard as a McDonalds worker (to stick with Krisztian's example) ?
          Setting a maximum to incomes has no place in a free society. In any case, the higher your income, the more taxes you pay. So, in some way, there is already some sort of "punishment" for making more money.
        • Apr 19 2011: Good questions Krisztian! And ones which require a lot more contemplation than I am capable of. However the point was not to implement a system within this economy, but adjust the direction that this economy faces. If someone wins the lottery, outstanding. It is not the possession of money that I am arguing against. I am therefore also not suggesting we remove saving accounts, pension schemes, interest rates, even the stock market. But I am saying lets find a way to make life about something other than making money. Because even if some people do find that to be their true purpose in life, and I believe this to be the minority, it is reality that the majority of people are forced to live with this as their goal.

          Harald I have no desire to punish people for making money. And do you think entrepreneurs build businesses only for the money? And do you think they would not build it if the return was limited? They could still achieve a healthy lifestyle, absolute financial security, plus the intangible rewards of success and creation.