Southern Man

Monday, July 18, 2011

Rich Man, Poor Man II

Southern Man is tempted to revisit this topic after a number of discussions on Facebook with people who are just outraged by the idea that one group of people can have more money than another.

This post by Michael Kennedy on Chicago Boyz presents a model of an artificial population that has absolute equity in income - that is, one in which every individual has identical income and savings patterns - and examines the distribution of wealth that emerges. His analysis of this simple model finds that the top 17% of wage earners have five times the income and twenty-five times the savings as the bottom 17%, as well as 45% of the total wealth. Go ahead, check it out; we'll still be here when you get back.

Now this model is even too simple for Southern Man's simple tastes but he too is an Excel wizard so he ran his own. The main difference is that instead of holding subsistence constant at $5000 the Southern Man Model™ increases it by $500 per year to account for inflation and the demands of spouse and children and such. But the results weren't much different; at the end of the day the SMM has about a quarter of the population holding about half the total wealth.

This is not a matter of inequity or unfairness. This is a simple observation that the longer you work and save, the more you have. It's really that simple.
But ask any liberal if a system in which the upper quarter of the population had nearly half the wealth is fair. Then (assuming that they're capable of rational thought and logical analysis, which in Southern Man's experience is not a common trait among liberals) run them through this model and see if their head asplodes.


At Wednesday, July 20, 2011, Anonymous Anonymous said...

You go southernman. You go. Spot on!


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