[unrev-II] Breaking the Vicious Economic Cycle

From: John \ (johnwerneken@netzero.net)
Date: Thu Jun 22 2000 - 23:00:05 PDT

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    My experience has been that I make short term financial choices and that
    perhaps I ought not to address the topic at all.

    Nonetheless I notice a lot of people not only buy houses but manage to
    either pay them off, or keep trading up to bigger houses, and either way end
    up with some equity upon retirement. I'd be one of them if I didn't get
    divorced so much (<grin> - my ex-wives were all good house-keepers).

    For the big chunk of the population living that way, the house and land
    inflation is actually a good deal: the house is easier to pay off, as the
    mortgage costs become smaller in reality as most other prices (& wages) rise
    over time, and because the cash value of the equity upon sale is made larger
    by the house/land price rises.

    Lets suppose these retiring sellers are very cautious and put their money in
    the savings and loan. The S & L can then loan some younger couple the
    purchase price of a house. The younger couple gets a place to live, in
    return for payments totaling maybe 2.5 to 3.0 times the house value. The
    older couple gets a return on their nest egg.

    Some of the price rise isn't inflation of course. For one thing, a
    "standard" house gets larger and fancier all the time, hence more expensive.
    For another, increasing wealth, changing technology, and increasing
    population combine to make places desirable that never were before, and to
    make some of the old-time desirable places even more so. In order to decide
    who gets the desirable places, the prices have to rise.

    So I think this system works rather well for those who can and do
    participate in it. Those who choose not to should not complain about lacking
    the benefits of those that do (which of course includes the largest single
    economic subsidy of the US Government, bigger even than social security).

    Those who can not participate mostly can not due to lack of income. A lot of
    things work that way, including many I find more significant (and more
    worthy of public intervention) than housing, such as food, medical care, and
    education. Why pick on housing?

    Income inequality is inevitable. People covet; every system has rules; those
    capable under those rules will get more of the goodies than the rest. There
    are only two cures I know of to help us in the "rest": (1) there comes to be
    enough total wealth that those who have the wealth are willing to pay more
    to obtain our services; (2) there is enough wealth that those who have more
    are willing to see society's taxes (which they largely pay) used to raise
    the minimum standards that the society attempts to guarantee.

    Neither "help" by its nature is likely to do anything about the inequality
    though - only the minimum levels would raise, not the relative levels.

    As Hirohide wrote, I can easily foresee a time when aspirations don't center
    on any of the traditional material goods. But I bet entertainment, travel,
    and other services that perhaps can not yet be imagined will remain
    attractive. And of course there is always the old standby: using wealth to
    hire other people as attendants of one kind or another. So I see no reason
    for the desire for inequality to flag. As long as the desire remains, so
    will the fact.

    At least in this system, in contrast to all of the others tried so far, a
    Bill Gates can arise, two or three generations off the immigrant boat. And
    even better, not only is the avenue to wealth comparatively open, but wealth
    is somewhat accountable to the mass of the people. The mass may have little
    of the wealth, but they have the bulk of the income, which forces wealth to
    in some ways cater to those without wealth.

    How else would you distribute goodies? By a lottery or a vote? And what
    would such a system do to individual freedom, or to the partial obligation
    the rich now bear towards the rest of us?

    Finally, if human nature would indeed respond to "voluntary simplicity" as
    preferable to the pursuit of wealth and income, then time would be on your
    side, and no drastic intervention would be required.

    Or is your point that human nature ought to be forcibly molded to be more in
    accord with your views?

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