I will just describe the Experiment that Freeman used .
Let's see if we can translate those "incentive systems" into economic systems...
Gen Seneca you are right the Purple represents the Communist system. Where there is complete equality there is no incentive to increase output. However there have been few such systems. The blue is a competitive Capitalist system where there is some chance for a large section of the population to share in the prize. This incentive leads to increase output. However Freeman claims that the Capitalist system in the the USA is not a competitive model . This is representative by the black where there is too much inequality for most to have an incentive to increase output. According to FREEMAN, "the main thrust of economic reform in most advanced countries post Reagan-Thatcher has been toward policies that benefit people in the top ranges of income distribution. Many goals- lowering marginal tax rates on high incomes, deregulating finance and other industries, lowering welfare state safety nets, privatising state-run businesses and giving tax breaks on capital income were design to create incentives for those at the top to make decisions to improve resource allocation and raise output"
Freeman's claim is based on a false premise, we aren't using the Capitalist system here in the US. Instead we've been using the system you advocate, one that punishes achievement and rewards failure. As I said, that system is perverse, it encourages those at the bottom to remain at the bottom, lest they be punished by upward mobility. Those in the middle are punished for their achievements and watch as their hard earned income goes to those at the bottom. Those at the top take advantage of the fact that government is not barred from interfering in the economy, so while they as a group bear the brunt of the punishment known as Progressive Taxation, a select few are able to use their wealth to foster political connections that result in the Cronyism your perverse system allows.
Tax rates are lower but the rest is nonsense. We have more regulations now than in any time in history, tens of thousands of new regulations are passed every single year, over 44,000 last year alone. Lowering welfare safety nets? Spending on the welfare state has exploded to the point where it consumes nearly 75% of our entire national budget every year, and that percentage is rising annually. And the US government has been busy nationalizing, not privatizing, businesses, such as AIG in the wake of the financial crisis.
Your information is inaccurate:
Again, false...
Had government gotten out of the way, rather than deficit spending for bailouts and stimulus, the recovery would have been swift and strong.
Strawman... Nobody claims that inequality causes efficiency.
Strawman... Nobody has claimed that rewarding only those at the top improves economic performance. In fact, everyone is being "rewarded", not just those at the top. Those at the top do see their incomes increase faster than the rest because they are able to escape the punitive Progressive Taxation system through Capital Gains investments while the overwhelming majority of American cannot. If we abolished the medieval system of Progressive taxation and went to a flat tax rate of, lets say 15%, both economic activity and income gains would skyrocket.
I'm really not interested in reading any more of Mr. Freeman's thoughts on the subject, he isn't here to answer my questions or responds to the points I make, but you are.... So, without referring me to Freeman or offering up some specious statistical claims, I'd appreciate if you could explain your claim that income inequality causes someone to lose their incentive to earn using the following scenario:
Freeman's claim is based on a false premise, we aren't using the Capitalist system here in the US. Instead we've been using the system you advocate, one that punishes achievement and rewards failure. As I said, that system is perverse, it encourages those at the bottom to remain at the bottom, lest they be punished by upward mobility. Those in the middle are punished for their achievements and watch as their hard earned income goes to those at the bottom. Those at the top take advantage of the fact that government is not barred from interfering in the economy, so while they as a group bear the brunt of the punishment known as Progressive Taxation, a select few are able to use their wealth to foster political connections that result in the Cronyism your perverse system allows.
It is the system you advocate that creates a widening gap in wealth and it's the system you advocate that allows Cronyism to flourish.
Tax rates are lower but the rest is nonsense. We have more regulations now than in any time in history, tens of thousands of new regulations are passed every single year, over 44,000 last year alone. Lowering welfare safety nets? Spending on the welfare state has exploded to the point where it consumes nearly 75% of our entire national budget every year, and that percentage is rising annually. And the US government has been busy nationalizing, not privatizing, businesses, such as AIG in the wake of the financial crisis.
Your information is inaccurate:
In 2009, this top 0.1 percent filed 137,982 tax returns, reporting 7.8 percent of all adjusted gross income earned and paying approximately 17.1 percent of the nation's federal individual income taxes. - TaxFoundation
Again, false...
Additionally, these groups are not static. There is a great deal of income mobility between quintiles, large numbers of people move to adjacent brackets in both directions while a relatively small number rocket to the top or plummet to the bottom.
Had government gotten out of the way, rather than deficit spending for bailouts and stimulus, the recovery would have been swift and strong.
Strawman... Nobody claims that inequality causes efficiency.
Strawman... Nobody has claimed that rewarding only those at the top improves economic performance. In fact, everyone is being "rewarded", not just those at the top. Those at the top do see their incomes increase faster than the rest because they are able to escape the punitive Progressive Taxation system through Capital Gains investments while the overwhelming majority of American cannot. If we abolished the medieval system of Progressive taxation and went to a flat tax rate of, lets say 15%, both economic activity and income gains would skyrocket.
I'm really not interested in reading any more of Mr. Freeman's thoughts on the subject, he isn't here to answer my questions or responds to the points I make, but you are.... So, without referring me to Freeman or offering up some specious statistical claims, I'd appreciate if you could explain your claim that income inequality causes someone to lose their incentive to earn using the following scenario:
You make X amount of income per year and it goes up by a small % per year.
Your neighbor currently also earns X but his income is increasing at a higher % rate.
At what percentage rate does your neighbor's increased income cause you lose your incentive to work?25%? 50%? 150%? 300%?
Why does this income inequality with your neighbor cause you to lose your incentive to work?
No research is necessary. I am asking you, as an individual, at what point would an income gap between you and your neighbor cause you to lose your incentive to work? I can answer that question easily, Never. At no point would I ever stop trying to improve my lot in life, at no point would I stop going to work and earning a living, as best I can, in hopes of having a better life as a result. There simply is no rational reason why an income gap with my neighbor would cause me to stop acting in my own self interest.
I agree with Dog, linking his "research" to the OCC's discredits Freeman's work, it not objective, it is propaganda. Furthermore, the OCC's do not represent the 99%, they are the socialists, communists, and anarchists of our society. Even a cursory look at who organizes and funds these groups proves that.
Yes, it does and I make no attempt to hide this fact. What you are totally ignoring is the fact that these groups are not static, that is a fact that people like you and Mr. Freeman have to ignore because it obliterates your argument.
The incentive is to improve your own life. If "some say" wages have fallen or are stagnant, then you need to recognize that they are lying or are being lied to, I posted empirical evidence that shows wages have risen for every group. Until you understand that income quintiles are not static groups of people, none of the facts I present will mean anything to you.
I have seen zero evidence to support this assertion. If my neighbor suddenly starts making a million dollars a year, that doesn't increase the cost of anything I use or buy. If anything, rich people cause the cost of goods and services to come down. Some real world examples of this are Big Screen TV's and Computers. At one time, only rich people could afford them. Thanks to them buying these goods, the industry got the funding they needed to refine their products and begin mass production, making LCDTV's and Computers affordable for working class people like myself.
Statements like that show that you're the one who has no idea how economics works, it is not a zero sum game. The economy is not one big poker game where everyone has a certain amount of chips and any gains made by one person come at the expense of someone else. If economics worked the way you seem to think it does, the way you've been led to believe it does, the global GDP would never change - ever. There would be one static number for global GDP if what you believe were actually true but one simple look at an historical graph of global GDP shows that this is not the case:
If "they" choose to stop trying, if "they" choose NOT to advance themselves financially, who do you believe is responsible for their poor decision?
Do you have any idea what the main factors are in determining the cost of living?
If you are working for a boss in an unequal economy than the blame lies with those who prevent you advancing. It is not always your fault you do not get a rise in pay or a better job.