Thomas Anderson

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What would happen if no one could make more than 100,000 dollars a year?

My Daughter asked me, "Hey Dad, what would happen if no one could make more than 100,000 dollars a year?"

We talked for a little while, but ultimately, I need more direction. What books should my daughter and I read, to help us answer this question?

Thank you!

(This debate has been up for a little while now, and honestly, I could not word the question correctly. I was hoping that people would assume that 100,000 dollars meant 100,000 dollars today, and people could not make anymore than 100,000 dollars. If you currently make 500,000 dollars a year, and your job now only paid 100,000 dollars per year, would you still do your job?)

Closing Statement from Thomas Anderson

Thank you very much for your comments! I was secretly hoping a millionaire would comment, and explain that he/she would gladly find ways to help with creating equal, fair, opportunities for everyone (and really mean it). My daughter was hoping to see how a millionaire would live if he/she could only earn 100,000 dollars.

Thank you!

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    Dec 16 2011: Hi Thomas,

    Thanks for your question...

    Your daughter is wise indeed... her question goes to the heart of many adult conflicts and the answer to it is probably not understood by the vast majority of people

    I have two kids, 9 and 11. Since they were very young they were exposed to both the privileges that some people have and the not so lucky other people that is usually hidden from view in our daily experience.

    It was deliberate to show them this side, because it was very unlikely that they would get to learn about it in school or watching TV. So in visits to Mexico they got to see little kids selling food on the side of the roads in small towns, and they saw that those kids were not very different from themselves. I think that was an eye opening experience for them.

    They are very aware of this and they developed a sense of what they consider just/fair, based on what they have seen

    It is harder to prep a kid with a bunch of concepts about macro economics and then try to give them a concrete and technical answer to a question like your daughters, but I think that you could ask her what would she think would happen and whether she would consider that desirable or not.

    Sometimes we can learn a lot from our kids if we are willing to listen to them

    cheers!

    P.S. If you are interested, i can share a few videos that I have showed to my kids since they were 4 and 6, we still watch them together frequently, and they have helped me drive home some of these not-so-easy topics
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    Dec 16 2011: i think the first thing would be that CEOs of large corporations as well as doctors, lawyers etc would start going to other countries. its likely we could sink into a depression. entreprenuers would step in and thrive from opportunity. im guessing that the $100k limit would NOT apply towards portfolio or passive income.. if this is the case, entreprenuers would invest more, and our economy would benefit. it could create an opportunity to bring major corporations like monsanto to their knees and allow entreprenuers and DIYers to fill the gap. this change isnt likely, and it would be very risky.. some corporations are so big that their failure would bea national security risk and could launch us into an inflationary depression. understand too that their isnt a shortage of money in the world, their are hundreds of thillions of dollars which are digitalized and havent actually been printed yet their existance weighs heavily of the dillusion of the purchasing power ofthe dollar. so setting the $100k limit will save companies money and alow them to grow faster, and hire more employees but by letting entreprenuers find opportunities and take advantage of them is more ethical in my opinion. i get that your trying to move away from greed and corruption and weed out all the people that do good things for the wrong reason.. just keep in mind, its very likely that if someone has reached their limit, they'll be looking for other ways to compensate their dream lifestyle. basically a law such as this would have the same effect as the prohibition act did, however, today with the internet and technologies. a law like this could be the downfall of America. it would be much easier to make everyone richer, the dollar and every dollar pegged to it is a fiat currency, meaning that if there is a demand for a service then the money supply automatically expands to compensate the purchase value for that service in demand. this means everyone can be rich, its now best to ask "how? "
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      Dec 17 2011: Thank you, I appreciate your time! It seems that there are so many factors involved it would be tough to determine exactly what would happen. Prohibition is the best example for me to talk to my daughter about, she'll be covering that pretty soon!

      I wonder though, if 100,000 dollars stayed 100,000 dollars, would people still want to 80 hours per week? Would Tom Brady still play football? Would anyone still have incentive to work in medicine? I know a lot of people that don't really like their work, but "The money is so good."
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        Dec 17 2011: I never thought of money when I chose to enter medicine.
        Another thing, one of the main reasons why wars are happening is the over valuing of money.
        To guide your daughter to the correct path for success and happiness in life, don't over value money.
        Money must be regarded as 'a side effect' for her work in the field she enjoys.
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        I don't mean to completely ignore ''money'' but it must not be over valued.

        No money = No food = Fight for survival = disaster
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        thanks
  • Dec 16 2011: Thomas,

    I can not think of any books or articles that deal with this subject directly, but there have been several similar discussions on TED that you could read back through to get some opinions.

    I think a general education on economics is an essential starting point. What is money? Is its value stable and fixed, or volatile and floating? How does the firm operate? How does the firm set wages? Who ultimately pays labor costs? These basic ideas need to be understood (at least implicitly) before you might successfully identify the ramifications of a particular monetary policy. I would probably recommend Carroll Quigley's "Tragedy and Hope" because it details macro economic activity within the context of history, which allows the reader to not only be introduced to specific concepts but also illustrates how several phenomena have converged in particular events.

    Personally, I believe one major effect will be deflation in terms of prices. If salaries were capped at 100,000 everybody's wage would ultimately fall. This fall in consumer spending would cause price drops. Ultimately, it would cause the value of money to increase. Your savings would be worth more, as would your debt.

    I think the biggest problem is enforcing this idea as law, for the most assured side effect is the biggest problem - everybody would leave.

    SEP
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      Dec 17 2011: My daughter just said before she went to bed, "Hey Dad, Tragedy and Hope, sounds like you!" ....errr, thanks for the set up!

      I loved the phrase "ramifications of monetary policy", that's the kind of terminology I was hoping to use!
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    Dec 16 2011: i think the question is a good one, but i think a better question would be--- "dad, why cant everyone be rich?" . im guessing she's around 9 or 10, i think "think and grow rich" by napoleon hill, or "rich dad poor dad" by robert kiyosaki would be a great starting point for her. and if you dont get the answers your looking for on here, if you helped her create her our forum , it would set her on the right track and she'll build a solid foundation for success later on.
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      Dec 16 2011: Thank you Mr. Newman, what do 'you' think would happen if the 100,000 limit was actually implemented?
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    Dec 17 2011: Actually, nothing will happen. I am serious.

    If a (current) billionaire had his salary limited to a $100,000, do you expect the average person (lets say this person currently makes $60K) to have the same salary after implementing the law? Never. The rule will affect all, maybe this average person will make $15K after the rule.

    When a rule like this is implemented, it will affect the rich and poor.

    It is simply like changing units ( e.g 1inch = 2.54 cm) or (1 $ = 1605 Tanzanian shilling)

    Will things change? I don't think so, only less paper ($ money $) will be in the arena.

    Unlike now, if the rule was implemented then less dollars will bring more products.
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    Dec 16 2011: In short, it would have the same effect that the prohibition act did.
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      Dec 16 2011: It may be true, but what kinds of books, or forums are there to discuss this?