Re: Income distribution [and growth]

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Tue, 03 Sep 2002 16:25:00 -0700,
John O'Donnell <jackodonnell@xxxxxxx> wrote:

>John, you must have a very peculiar notion of "feedback." Feedback has
nothing
>whatever to do with concentration of wealth. It has solely to do with
obtaining
>the information needed to determine the next control action to take,
either by
>automatic response like control of room temperature by a thermostat or
manually
>like your control of your car's speed in response to the indication of
speed on
>the speedometer.

John2, this is talking about mechanical systems under
external control.  Self-regulating systems have internal
feedbacks. As per your description, whether the feedback is
internal or external, it involves information generated by a
process that serves to modify the regulation of that process.

Control of self-regulating systems, especially complex
self-regulating systems, is a harder thing than control
of mechanical systems that are entirely under external
control.  Since the economy is the former, and what
you are describing is the latter, I take it that your
response to having a hard problem is to pretend that it
is easy and proceed from there?

Fine as far as it goes, but as long as you are pretending
that the problem is easier than it is, why not go whole
hog and pretend the problem away?  Just assumed that it
is a self-regulating system, and that whatever level that
it happens to end up with under the current institutional
framework is somehow the "right" outcome?  Then you don't
have to do anything at all.

And, yes, financial wealth is an internal positive feedback
... it is information generated as a result of a process
that serves to modify the operation of the process.  At a
certain level of wealth holdings, the holder can live on
the returns and continue to accumulate, which is how an
aristocracy of wealth continues to emerge.

The only clear way to break down the development of an
aristocracy of wealth is to switch death duties from
the estate to the recipient.  Syd Carroll has proposed:

(1) $1m gifts received tax free
(2) 2nd $1m taxed at a 25% gift rate
(3) 3rd $1m taxed at a 50% gift rate
(4) 4th $1m taxed at a 75% gift rate
(5) All additional taxed at a 100% gift rate

That would eliminate the level of wealth holdings that
are self-perpetuating over multiple generations.  And,
after all, it is a voluntary death duty, since as long
as the will of the deceased hands out the funds in $1m
blocks, it would be gift tax free, unless of course
some of the beneficiaries had already received sizable
bequests.


--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah