Re: The Great Divide

From: Jim Blair (jeb_at_wisc.edu)
Date: 08/13/04 

Date: Fri, 13 Aug 2004 12:30:25 -0500

"Mark Monson" <m_monson@ztech.com> wrote in message
news:iUPSc.206$Ji.97@bignews4.bellsouth.net...
>
> > <royls@telus.net> wrote in message
news:41100889.13312455@news.telus.net...

> > > The number of stock and bond holders may be growing, but the fraction
> > > of all the stocks and bonds held by the wealthiest ones is also
> > > growing.

> > > On Mon, 2 Aug 2004 13:42:42 -0500, "Jim Blair" <jeb@wisc.edu> wrote:

> >
> > So I hear. But the issue here (Great Divide) is not what FRACTION of the
> > total wealth do I own? (I really don't care).
> > The question is "how much wealth do I need to retire and live from the
> > interest and dividends that it generates?"

MM:
>
> Everything that is returned to the loan of money is not interest.

Hi,

There is also dividends and capital gains. Some use the term "interest" to
include all of the various returns on investment.
Interest in the broad sense.

MM:

>...An investment in
> rent seeking does nothing to aid in the production of wealth.

I quote this from another post in this thread:

>JEB (of DuPont and their research facility, and how they made money from
their research and the patents that research produced):

> Sometimes. But I think it was common practice to lease or sell our
patents
> to some other company that was in a better position to make and sell the
> product. One that already had the tools and skills needed, or could adapt
> what they had easily.

MM:

The actual goods that came from these ideas are the fruit of the labor that
went
into research and development.

JEB: That sounds like you think patents are GOOD because R&D is a productive
use of labor.
But then I say:

> But some around here claim that patents are a means of "rent-seeking":
the
> government issues a monopoly on some process or product and keeps
> competition out, at least for 20 years.

MM:

Are there any who claim patents are not a means of rent-seeking?

Now THAT sounds like you think patents are BAD because they are a form of
rent-seeking.

So which is it? If DuPont can't patent the results of their research and
then sell or lease those patents, why would they do the research in the
first place?

>...In a free society how
> much will accrue to workers in reward for "saving"? That would depend on
demand
> for deferred consumption. Land price appreciation, rent, monopolies, and
usury
> (defined as interest above principle on an unproductive loan) are
unproductive
> returns. Take away all that and you have investment in real physical
capital:
> machinery, tools, buildings. Interest in the classical sense cannot
exceed the
> increase in wealth caused by use of capital. But the actual return to
capital
> depends not on the capital free margin of production but on the capital
market. In
> a free, prosperous society, how much demand will there be for capital?

I say that depends on many factors. Including how many "good ideas" remain
unfunded. How much promising research is on hold for lack of funding (stem
cells for example)? How much hydrogen fuel cell or hydrogen fusion research
is it likely to take to produce marketable results? How much would a
monorail system cost? etc.

>....As wages
> rise, workers save more.

Do they? Some people save less and spend more as they have more income.

http://www.geocities.com/capitolhill/4834/93.txt

Note that while Americans are twice as "rich" as they were in the 1950's
they don't save twice as much, or maybe even AS much as they did then.

>.....A reduction in demand for present consumption coupled
> with a high percentage of saved wages can only mean a drop in interest
rates. How
> far can interest rates drop? What is the alternative to banked savings?
Cash
> saving? Assuming an inflation rate it is possible that people would bank
their
> savings at zero percent.

Well the Japanese seem to. But Americans seem more inclined to borrow so
they can spend more than their current income.

>...What does that do to the Great Divide concept? How much
> are you going to have to sock away at zero percent interest before you can
retire on
> your savings?
>
> MM
>

If "interest" in the broad sense (including dividends and capital gains) is
zero, they I say people can never be sure of being able to retire unless
they become VERY rich.

                      ,,,,,,,
_______________ooo___(_O O_)___ooo_______________
                       (_)
jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin
USA. This message was brought to you using biodegradable
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call: http://www.geocities.com/capitolhill/4834

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