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Old 06-16-2012, 04:25 PM   #1833207  /  #1
ksen
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Default Why Equality Drives Entrepreneurship and Innovation

http://www.angrybearblog.com/2012/06...8Angry+Bear%29

Quote:
Coming at this question from my typical perspective: a business owner facing a national economy.

You run a mid-sized business selling high-quality furniture. Youíve developed a new chair thatís better than the other chairs on the market. (Think: the Herman Miller Aeron Chair.) Say youíre planning to sell it for $700. (You canít sell it for much less, no matter the volume, without losing money.)

Would you rather be selling into an economy with wide disparities of income and wealth, or one thatís more equal?

Letís build one of each.

Imagine a million-dollar economy with ten people in it.

Economy 1: Each person has an income of $100,000.

Economy 2: Two people earn $300K each, and the other eight earn $50K each.

In which economy can you expect to sell more chairs?

In which economy would you expect to see more innovators and entrepreneurs thriving?

This is not quantum physics.
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Old 06-16-2012, 04:54 PM   #1833236  /  #2
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I could see there being just as much innovation in either economy.

The problem is where that innovation is being directed. In an economy with widely disparate incomes, the innovation will be directed at the rich, and the poor will miss out, leading to a vicious cycle where eventually only the rich can even afford to enter the economy in the first place. In an economy with equal incomes, the innovation will inherently be directed at everyone.

The article seems to be saying that the problems with income disparity are a first-order effect; I think it's closer to a second-order effect.
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Old 06-16-2012, 04:58 PM   #1833239  /  #3
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Originally Posted by uncool View Post
The article seems to be saying that the problems with income disparity are a first-order effect; I think it's closer to a second-order effect.
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I don't know what you mean by first and second order effects.
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Old 06-16-2012, 05:06 PM   #1833243  /  #4
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The article seems to be saying that the problems with income disparity are a first-order effect; I think it's closer to a second-order effect.
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I don't know what you mean by first and second order effects.
So basically a first-order effect means that a small change in income disparity will result in a proportional change in innovation/etc., whereas a second-order effect means that a small change in income disparity will result in a change in innovation that is proportional to the square of the change in income disparity.

First-order effects basically mean a linear approximation, while second-order means the quadratic corrections to the linear approximation.

What I'm basically saying is that while income disparity does lead to a decrease in innovation, it does so more slowly than the article seems to imply. A very small change in income disparity around the "everyone has the same income" situation will not change innovation very much - not even proportional to the change in income disparity, but proportional to the square of the change (depending on how you measure both income disparity and innovation).

However, I should note that the above is just what I think, not something I can demonstrate.
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Old 06-16-2012, 05:20 PM   #1833264  /  #5
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It might even be higher-order than that, but you're missing a point: the number of rich to normal isn't two to one, or even a thousand to one. So even if it's a higher-order effect it's overwhelmed by the much smaller ratio of rich.
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Old 06-16-2012, 05:34 PM   #1833278  /  #6
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well if the distinction is merely the difference between a geometric/exponential progression vs a linear one i think that's pretty irrelevant as far as the point about income equality having a benefit goes. it's just a matter of degree distinction.
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Old 06-16-2012, 05:57 PM   #1833302  /  #7
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Originally Posted by Schneibster View Post
It might even be higher-order than that, but you're missing a point: the number of rich to normal isn't two to one, or even a thousand to one. So even if it's a higher-order effect it's overwhelmed by the much smaller ratio of rich.
Not missing a point; temporarily ignoring it in order to make the point that the point of the article is still valid even though the effect is not as direct as implied, as someone who disagrees with the article might respond.

One funny thing about it is that a second-order effect also means that the effect grows much faster with larger disparity - so the fact that it's a higher-order effect also means that a large disparity leads to an enormous dearth of innovation.
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Old 06-16-2012, 07:22 PM   #1833365  /  #8
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One only has to look at History to understand that income disparity leads to far lower levels of innovation. China had many great inventors, but because the society was so top-down, it changed at a snail's pace.
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Old 06-16-2012, 07:43 PM   #1833376  /  #9
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You are either a socialist or a communist. Which is it ?


Quote:
Originally Posted by ksen View Post
http://www.angrybearblog.com/2012/06...8Angry+Bear%29

Quote:
Coming at this question from my typical perspective: a business owner facing a national economy.

You run a mid-sized business selling high-quality furniture. Youíve developed a new chair thatís better than the other chairs on the market. (Think: the Herman Miller Aeron Chair.) Say youíre planning to sell it for $700. (You canít sell it for much less, no matter the volume, without losing money.)

Would you rather be selling into an economy with wide disparities of income and wealth, or one thatís more equal?

Letís build one of each.

Imagine a million-dollar economy with ten people in it.

Economy 1: Each person has an income of $100,000.

Economy 2: Two people earn $300K each, and the other eight earn $50K each.

In which economy can you expect to sell more chairs?

In which economy would you expect to see more innovators and entrepreneurs thriving?

This is not quantum physics.
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Old 06-16-2012, 07:51 PM   #1833384  /  #10
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Neither.
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Old 06-16-2012, 08:56 PM   #1833405  /  #11
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he's a blueskyist
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Old 06-16-2012, 09:52 PM   #1833424  /  #12
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He's a homosexual but I would like to know his economic politics.
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Old 06-16-2012, 10:06 PM   #1833429  /  #13
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If you are selling the chair for that much you are probably better off with economy two. You might sell two.

Is that this guys point?
In economy one, you would probably make more money by innovating a chair more people would buy.

I think equality drive entrepreneurship and innovation because you have more people that are able to have an active role.
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Old 06-16-2012, 10:14 PM   #1833435  /  #14
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The answer is, it depends. It's making a huge assumption that to achieve scenerio 2 that there are no changes to make it that way. The price structure for scenerio 2 would be different than 1, taxes and regulations would be different. and last if you needed funding to make your chairs, then scenerio 1 may be much better for you.
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Old 06-17-2012, 02:42 AM   #1833619  /  #15
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He's a homosexual


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but I would like to know his economic politics.
closest label would probably be social democrat.
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Old 06-17-2012, 02:59 AM   #1833634  /  #16
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About what I said above: I finally figured out how I was thinking about it wrong.

What I meant to say was that the change is second-order in time. That is to say, income disparity leads to innovation disparity (that is, disparity in innovation of things designed for the rich and things designed for everyone), which leads to lower innovation eventually. As income disparity increases, innovation disparity increases; as innovation disparity increases, innovation lowers.
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Old 06-17-2012, 03:25 AM   #1833652  /  #17
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He's a homosexual but I would like to know his economic politics.
Are you sure you are a liberal, Yukon? I think you might have joined the wrong party.
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Old 06-17-2012, 03:29 AM   #1833654  /  #18
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Quote:
Originally Posted by coloradoatheist View Post
The answer is, it depends. It's making a huge assumption that to achieve scenerio 2 that there are no changes to make it that way. The price structure for scenerio 2 would be different than 1, taxes and regulations would be different. and last if you needed funding to make your chairs, then scenerio 1 may be much better for you.
No, sorry, thousands of sources of angel capital is better than the oligarchic alternative. A democratic economy ensures that that the number of decision makers stays high and diverse.
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Old 06-17-2012, 03:36 AM   #1833657  /  #19
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Quote:
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The answer is, it depends. It's making a huge assumption that to achieve scenerio 2 that there are no changes to make it that way. The price structure for scenerio 2 would be different than 1, taxes and regulations would be different. and last if you needed funding to make your chairs, then scenerio 1 may be much better for you.
No, sorry, thousands of sources of angel capital is better than the oligarchic alternative. A democratic economy ensures that that the number of decision makers stays high and diverse.
The reason why have the high inequality is because of the strength of our investing community. The only way to get scerio one is to prevent investment. No investment, no entrepeneurs.
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Old 06-17-2012, 04:35 AM   #1833676  /  #20
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The reason we have high inequality is due the corporations taking over the political system. During the 50s, 60s, and 70s there was high innovation, but the corporations did not have as much power, but there was much less inequality! Why is that? Oh yeah, a democratic economy provides a more diverse and greater number of investors.
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Old 06-17-2012, 07:51 AM   #1833777  /  #21
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Quote:
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Quote:
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The article seems to be saying that the problems with income disparity are a first-order effect; I think it's closer to a second-order effect.
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I don't know what you mean by first and second order effects.
it's math/physics talk. his comprehensive explanation was of course right, but in case you fell asleep before you finished reading it, here's a more plain-english answer:

1st-order effects are direct and immediate. higher-order effects are weak or nonexistent at first, but can* become bigger than 1st-order effects in the long-run.

for example, taking a bunch of shots in rapid succession might make you look cool, as a 1st-order effect. but a few minutes later, when you get really drunk, and start hitting on ugly chicks or trying to have "deep" conversations with your friends... that could be considered a higher-order effect that negates and overwhelms the first-order one.

*each specific higher-order term necessarily does dominate any lower-order terms in the long-run. however the sum of all higher-order terms could very well converge at large x to something smaller than the 1st-order term. see for example the taylor series for the sine function.
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Old 06-17-2012, 02:05 PM   #1833948  /  #22
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equality is for losers who can't win the game

"oooh no!! i'm a losers!!! you are going to checkmate me!! plz accept a draw! because with a draw everyone is a winners!!!"

there is a reason why europeans love soccer and american don't

because soccer is full of draws,and draws are for socialist losers

compare soccer,when you can draw 0-0 after 90 minutes of nothing,with basketball or baseball,all the time action and high score

Last edited by SmartLibertarian; 06-17-2012 at 02:07 PM.
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Old 06-17-2012, 02:46 PM   #1833972  /  #23
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well i agree that soccer is boring as fuck
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Old 06-22-2012, 10:54 PM   #1838441  /  #24
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Quote:
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He's a homosexual but I would like to know his economic politics.
Are you sure you are a liberal, Yukon? I think you might have joined the wrong party.
I despise homosexuals.
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Old 06-22-2012, 11:24 PM   #1838475  /  #25
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Quote:
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I despise homosexuals.
We have very different definitions of "liberal."

Kinda like the US Libertarian Party and the libertarians. Pretty much opposites.
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