Comment by jheriko | Hacker News Reader

Comment by jheriko | Hacker News Reader

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"Other than pure envy, it's hard to see how I could somehow be made worse off if Bill Gates' income suddenly doubled, but everything else remained the same."

This statement is enormously naive. Bill's money has to come from somewhere so the "everything else remained the same" is just not possible...

Unfortunately if people are getting much richer than other people it is necessarily at other people's expense - a reasonable approximation is to think of money like energy, which can never be created or destroyed (its not quite true) - Bill doesn't make his pile of money out of nothing leaving everything unchanged, the money he makes comes from other people's piles of money - these need not be poorer people, in fact I bet most of them are big businesses, but then they don't get their money from nothing either, and their budget decisions on how much to spend on MS software will be balanced alongside salaries etc... at any rate, that money moves around and naively, if you made too much you would quite literally be making everyone else poor. I don't have access to huge amounts of data needed to workout how this scales in reality and if Bill is anywhere near the point where he is almost certainly making everyone poorer, but it is a trivial consequence of the nature of money.

This is the nature of capitalism - if every one does what is in their best interest, some talented/lucky/greedy people will end up much better off with zero incentive to improve the situation for anyone else. Thankfully capitalism is merely an ideal and nobody follows it that blindly - Bill at least tries to give some of his money away to good causes lately...

This statement is enormously naive. Bill's money has to come from somewhere so the "everything else remained the same" is just not possible...

Only if you see money as a fixed quantity of dollars. We're really talking about purchasing power here.

Bill Gates invented a way to make anyone who used his products more efficient. (You can do a lot more with Windows than older OSes.)

Since everyone is more efficient, your $1 can buy more. Of course, you will probably choose to give some of your money to Bill Gates, but since the rest is worth more it's a fair trade. (Also, no one can force you to give money to Bill. If you think it's not a fair trade, don't buy Windows; ignoring monopoly power here.)

In formal terms, the economy is not a zero-sum game. Your assertion that "money is like energy, which can never be created or destroyed" is incorrect, if we're talking about the purchasing power of money and not its numerical face value.

You are completely right that what I was trying to talk about was the purchasing power of money - I did try to imply that there are reasons why money can be created and destroyed (this is true for the numerical case as well). It is a valid point that things can depreciate in value with improvement in e.g. manufacturing process, but I think that is quite independent of people making money - Bill Gates is an interesting example because Microsoft have changed the world in that way. A lot of the very rich do not make such contributions so I do not see how their amassing wealth can do anything other than to take away from others.

It seems very fundamental - maybe I miss something, but if you get money (spending power, whatever) it comes from other people. Therefore people can't get richer without making other people poorer.

Is there historical evidence of the deflationary power of operating systems?

Windows has been on the market since 1985. If we're so much more efficient using Windows than not, one would expect a dollar to be worth more today than back in the old, inefficent days of... whatever we had before.

However... in 1985 US$1.00 had the same buying power as US$2.08 does in 2011.

Average annual inflation over this period was 2.86%.

Sure, the measure you're looking for is GDP per capita:

http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#...

Inflation is a separate phenomenon that occurs through time and can be influenced by the money supply. The government encourages inflation to encourage investment (i.e. prevent people from hoarding cash) and for various other reasons.

I'm only looking at a snapshot: imagine you work for a year in 1985 and spend all your money the same year. Can you buy more or less than if you work for the same amount of time (with the same skills etc) in 2011, and spend all your money the same year? Turns out you can buy much more in 2011.

If you really want to look at the "through time" case, calculate what your $1.00 in 1985 would be worth if you invested it and what it could buy in each case.

There is more to this discussion (for and against) than this, but I think you may have missed the point.

Money is not really a resource in and of itself. It's kind of a 'point system' we use to allocate finite resources.

I do think that this is a very important concept that is very difficult for many people to grasp.

If you took 50% of each person's money on the planet and burned it in a fire prices would (eventually) drop by 50% on most products.

If everyone has less money, they buy less things, and so there is a surplus of things. This causes the price of things to drop so that an equilibrium is reached. It will also (ideally) cause a drop in wages, etc so that things are still distributed.

The purchasing power of your money depends on the amount of resources to be allocated and the amount of money the people that want the resource are willing to spend.

So if banks hoard money, it really does not effect your purchasing power negatively until someone tries to spend that money on resources you want.

This is the basic concept, it doesn't mean that there are no consequences to these actions. If you hoard everyone's money (same as burning, but it can come back) you basically get deflation.

Deflation is bad because things like salaries don't scale down easily. People get upset when you dock their pay and most companies would rather just cut hours and lay-off employees rather than upset the entire company.

This is bad because the company is now over-paying (and over-working) workers for their services and there are lots of unemployed that can't find jobs.

So these changes don't happen as easy as the simplified example above, but they are real and very significant effects that need to be taken into account.

This is a good point, supply and demand affects prices, but I /think/ you have made the assumption that the goods bought by the wealthy do not overlap the good bought by the poor.

Housing is the classic example, where the rich have pushed the pricing up so high that even moderately wealthy people can't afford to buy houses outright without multiple years worth of salary. The result is a shift towards renting rather than mortgaging, which mostly gives even more money to those people who drove the prices up to begin with...

He's creating value of course, and if this hadn't been downvoted to the bottom of the page you'd have gotten a lot more 'economics isn't zero-sum' type replies. Politics, that is influence in politics, is zero-sum however, and wealth is a huge factor, perhaps the biggest factor, in determining that influence. So while economics isn't zero-sum, it gives you a somewhat proportional stake in a game that is, which is where the problem with wealth disparity lies.

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