Inequality
Rich is now defined as having 30 million dollars
The bottom 60 percent has negative net worth.
At the bottom money can buy happiness
Happiness by survey vs. GDP per capita
from Page Model Thinking Course
Life is a series of financial shocks.
Illness
Disability
Death of a spouse
A child
College
Unemployment
Retirement
Liability
Insurance is the pooling of risks to limit random gratuitous
inequality
Health insurance
Disability insurance
Life insurance
Unemployment insurance
Social security
Liability and homeowners
Workers Compensation
Bankruptcy was an improvement of the ancient Greek method of
becoming a slave for 3 years to ones creditor for non-repayment. Student debt is now not dischargeable by
bankruptcy
The utility of money is an S curve. This means at the bottom there is little
utility to getting a few dollars.
Incentives at the bottom are different.
So a Starbucks treat is a rational choice to saving.
In the US food, shelter, healthcare, and
insurance are considered options.
Government plays the major role in covering risk through tax
and welfare and education
(Government is essentially an insurance company with an Army - Krugman )
Charity fills some of the gap
Robert Owen coined the term socialism to pool risk.
He tried creating New Harmony, Ind. Where everything
was shared and it didn’t work.
Piketty Model
if R >g inequality will increase.
Economics of Inequality
Thomas Piketty
Deng Xiaoping - “we
are all going to get rich but some will get rich first.”
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