The Fixed Pie Fallacy

In the political arena, I often hear people complaining about the rich hoarding money, along with various allusions to the “haves” and the “have-nots”. The rich are said to be getting to keep all of this money, while the poor are suffering. The implication being that if you are rich, that you are taking advantage of the poor. People will also talk about overpopulation, and about how we aren’t going to have enough food, water, and resources to go around.

This gets into what is often called “The Fixed Pie Fallacy”. This is the idea that the amount of wealth in the world can be compared to a pie, like what you eat on Thanksgiving. There is a fixed amount of wealth in the world, and wealth is never created or destroyed. As more people are born, our slice of the pie gets thinner and thinner. Those who are “rich” are taking an unfair share of the pie.

Right away, the key fallacy should seem obvious. Three hundred years ago, there were far fewer people in the world than there are today, yet today the vast majority of people are richer than their ancestors were a hundred years ago.

https://medium.com/@greenslugg/the-biggest-economic-fallacy-of-all-money-vs-wealth-c152e8bce49a

This masks the more important issue of increasing income disparity. In the 1960s and before, the top marginal tax rate in the U.S. was often more than 80 percent, and the top earners typically earned 100 times or so as much as the lowest earners.

Income disparity has been linked with higher crime rates and lower reported satisfaction with life from citizens.

The much-heralded golden age of American capitalism, post WWII, was quite different from the post-Reagan era we're in now of slashing taxes on the wealthy and corporations even in the face of growing government debt.

Real income for the average American has hardly increased in this era, while CEOs and hedge fund managers who don't actually make life better for society are far richer than they used to be.

I still remember a Spanish sentence that popped up on Duolingo one time: Somos una cultura, no solo un mercado. "We're a culture, not just a market."

>THE Ben Reilly< wrote:This masks the more  important issue of increasing income disparity. In the 1960s and before, the top marginal tax rate in the U.S. was often more than 80 percent, and the top earners typically earned 100 times or so as much as the lowest earners.

Income disparity has been linked with higher crime rates and lower reported satisfaction with life from citizens.

The much-heralded golden age of American capitalism, post WWII, was quite different from the post-Reagan era we're in now of slashing taxes on the wealthy and corporations even in the face of growing government debt.

Real income for the average American has hardly increased in this era, while CEOs and hedge fund managers who don't actually make life better for society are far richer than they used to be.

I still remember a Spanish sentence that popped up on Duolingo one time: Somos una cultura, no solo un mercado. "We're a culture, not just a market."

But we all have infinitely more stuff, all over this planet. The pie continues to grow.

We have far less poverty on the planet, with far more billionaires.

That's because the pie isn't fixed.

If the amount of money a billionaire has, has no impact on anyone else's wealth, why do people care?

The  O/P  is pure bullshit,  presented by yet another economic illiterate, focussed entirely on money as a measure of "wealth".

So, no wonder that Maddog grabs onto this brand of conservative "voodoo economics" stupidity in his latest attempt to champion his beloved free market capitalist ideals..

Ignoring the fact that many of the world's natural resources (especially with oil, gas, mineral ores..) are finite;  and no matter how much "value adding" is carried out in 'secondary' and 'tertiary' level industries there is still only a limited supply of many primary level inputs..

And still no sign of mankind "reaching for the stars",  when it finally runs out of certain resources..

WhoseYourWolfie wrote:

The  O/P  is pure bullshit,  presented by yet another economic illiterate, focussed entirely on money as a measure of "wealth".

So, no wonder that Maddog grabs onto this brand of conservative "voodoo economics" stupidity in his latest attempt to champion his beloved free market capitalist ideals..

Ignoring the fact that many of the world's natural resources (especially with oil, gas, mineral ores..) are finite;  and no matter how much "value adding" is carried out in 'secondary' and 'tertiary' level industries there is still only a limited supply of many primary level inputs..

And still no sign of mankind "reaching for the stars",  when it finally runs out of certain resources..

Resources are finite, wealth isn't.

And I'm not the author of the fixed pie fallacy. It's part of a science called economics.

the OP misses the SUPER important fact that rich people have while a massively higher number of dollar it is NOT that much more wealth in real terms. (although they are still richer in real terms depending on which period you are referring to)

Dollars are representations of a division of the nations wealth(with out gold standards) each dollar is a smaller portion of the nations economic wealth than it was previously because there are more dollars in circulation.
If you put more dollars into the economy(like has happened) then we reduce the value of each dollar that already existed.
they have more dollars as a portion of dollars in circulation, but it is 'intellectually deceitful' to compare the actual numerical number of dollars for one time period to another as the dollar's real value is variable.

wealth is the capacity to hold, access or trade for resources.

If resources are finite so is wealth since no number of dollars can buy a resource that no longer exists

Maddog wrote:

WhoseYourWolfie wrote:

The  O/P  is pure bullshit,  presented by yet another economic illiterate, focussed entirely on money as a measure of "wealth".

So, no wonder that Maddog grabs onto this brand of conservative "voodoo economics" stupidity in his latest attempt to champion his beloved free market capitalist ideals..

Ignoring the fact that many of the world's natural resources (especially with oil, gas, mineral ores..) are finite;  and no matter how much "value adding" is carried out in 'secondary' and 'tertiary' level industries there is still only a limited supply of many primary level inputs..

And still no sign of mankind "reaching for the stars",  when it finally runs out of certain resources..

Resources are finite, wealth isn't.  

And I'm not the author of the fixed pie fallacy. It's part of a science called economics.

Some resources will run short (globally..) before the end of the century :

* Lithium to make batteries with, (bring on the "hydrogen cell" battery systems..);

* "Rare earth" metals for mobile phones and tablets;

* Oil and coal reserves to keep the 'Fossil Fuels' industries rolling along;

* Fresh water, and quality productive farmlands..

Where to, then ?

WhoseYourWolfie wrote:

Maddog wrote:

Resources are finite, wealth isn't.  

And I'm not the author of the fixed pie fallacy. It's part of a science called economics.

Some resources will run short  (globally..) before the end of the century :

* Lithium to make batteries with, (bring on the "hydrogen cell" battery systems..);

* "Rare earth" metals for mobile phones and tablets;

* Oil and coal reserves to keep the 'Fossil Fuels' industries rolling along;

* Fresh water, and quality productive farmlands..

Where to,  then  ?

I dont know.  

We may drive the fixed pie fallacy in the other direction.  Wealth can contract to almost nothing too.  

Again, it's not a fixed pie.

veya_victaous wrote:wealth is the capacity to hold, access or trade for resources.

If resources are finite so is wealth since no number of dollars can buy a resource that no longer exists

That is one form of wealth.  

Also, as resources become more rare, they rise in value.

Maddog wrote:

veya_victaous wrote:wealth is the capacity to hold, access or trade for resources.

If resources are finite so is wealth since no number of dollars can buy a resource that no longer exists

That is one form of wealth.  

Also, as resources become more rare, they rise in value.

that is debatable
their value measured in Dollars rises, but that doesn't mean there is any more food/housing/etc to go round, so there is no value added to society 

to put it simply (in a simplified economy with just you and a neighbor)
if you have 6 apples, then you have 6 apples regardless of if your neighbor has 1 apple or 20
and if you have 6 apples and your neighbor has 1 then there is still only 7 apples between you regardless of how much money he give you for some of yours.

the rise is dollar value does not equate to a real rise in 'consumable' value.
in fact what really happens is the value of the dollar goes down as resources get rarer since you need more of them to trade for the same amount of resources.

veya_victaous wrote:

Maddog wrote:
That is one form of wealth.  

Also, as resources become more rare, they rise in value.

that is debatable
their value measured in Dollars rises, but that doesn't mean there is any more food/housing/etc to go round, so there is no value added to society 

to put it simply (in a simplified economy with just you and a neighbor)
if you have 6 apples, then you have 6 apples regardless of if your neighbor has 1 apple or 20
and if you have 6 apples and your neighbor has 1 then there is still only 7 apples between you regardless of how much money he give you for some of yours.

the rise is dollar value does not equate to a real rise in 'consumable' value.
in fact what really happens is the value of the dollar goes down as resources get rarer since you need more of them to trade for the same amount of resources.

They become more valuable. In any event, resources are just one form of wealth. Wealth is not finite.  If someone gets more wealth, it didnt come at the expense of someone else. It is actually created.  That's why a country, with the right economic model can expand its GNP without stealing money from another.  

If you look at figures for global wealth, it has rapidly expanded. That's because there is no fixed pie.  That's why its ridiculous to blame each other for his wealth is distributed.  

It is a good way to get elected though.