The Matthew Principle in Economics | How Systems Produce Inequality
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- Опубліковано 23 тра 2023
- This video explains the Matthew Principle, which captures “power to the powerful” and “wealth to the wealthy”. It explains how systems devolve toward inequality over time.
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Powerful explanation that really hits home.
Had the same type of realization investigating the popular talking point "1% pays 90% of taxes".
Even if they were taxed at something like 10% (they generally still pay less than the median), they'd still end up paying 90% of taxes.*
*All numbers half-remembered and for illustrative purposes only.
Great content, Thank you :)
this is great! thanks a lot
Thank you!
You're right life is too much like a game of monopoly
Its really interesting 😅
"I tell you, that to every one who has will more be given; but from him who has not, even what he has will be taken away." Oh, I didn't know that was from Mathew. I just thought it was every centre-right party's economic policy.
To bring this exercise closer to the real world instead of luck, talent, hard work let the variable be... for want of a better name "moneypower". How much discounted bulk purchasing can the money do? What percentage of it must be spent on essentials? How many investment opportunities can the money take advantage of? How many money savings services can the money buy? It's clear that moneypower is a factor of the amount of money.
Perhaps the simplest way to factor moneypower into the series is to treat it like dynamic luck. Two players can start off with $100 (in reality of course one starts with $4,200,000 and the other with a student debt) and 50/50 luck. One might win. That win increases money which increases moneypower which we can depict as increasing luck (the player can buy better odds). The next round they might play with 55/45 luck, win again 60/40 luck and so on...
Banks really abide by this.
When you are broke as fuck they just punish you with fees that make you even more broke.
But when you got quite a bit more money they waive their monthly fees and reward you with interest. 😅
The bible has been misinterpreted in the Matthew Principle (please note the correct spelling!). It is not about simple compounding. What Jesus said was that if you invest, that is sacrifice now for a later benefit, you will be blessed with more. If you want benefits now but will only make the sacrifice to pay for them later (eg buying on credit), you will become poorer.
Christ beating down the poor when they are already in the dirt 😂
There are at least three problems with the Matthew Principle.
First, in economics, the relation between happiness and income inequality is disputed (see below). There's some (disputed) evidence that a higher Gini coefficient makes even wealthy people unhappier. As a person who lived at an an American standard of consumption in a country where malnutrition was widespread (East Pakistan, 1959 through 1962), I can tell you that living among millions of destitute people definitely ruins your day, every day. That experience drove me to major in economics.
Second, it doesn't even necessarily work in theology. Consider, what might be called the Luke Principle:
"And indeed, some who are last will be first, and some who are first will be last." -- Luke 13:30. I'm looking at you, Nelson Mandela, and you, Olympic medalist ex-con Marion Jones.
Third, there's the example of Ashley Hodgson. With your luck, hard work, and aptitudes, you could have been a multi-millionaire private equity oligarch or led a fledgling republic, like former Milwaukee schoolteacher Golda Meir. But no, you chose to grind out UA-cam lectures ;-). Best, Wilson
Income Inequality and Happiness: An Inverted U-Shaped Curve
Zonghuo Yu1* Fei Wang2
1School of Psychology, Jiangxi Normal University, Nanchang, China
2Department of Psychology, School of Social Sciences, Tsinghua University, Beijing, China
Numerous studies agree that income inequality, rather than absolute income, is an important predictor of happiness. However, its specific role has been controversial.
We argue that income inequality and happiness should exhibit an inverted U-shaped relationship due to the dynamic competing process between two effects: when income inequality is relatively low, the signal effect will be the dominating factor, in which individuals feel happy because they consider income inequality as a signal of social mobility and expect upward mobility; however, if income inequality level increases beyond a critical point, the jealousy effect will become the dominating factor, in which individuals tend to be unhappy because they are disillusioned about the prospect of upward mobility and jealous of their wealthier peers.
This hypothesis is tested in a longitudinal dataset on the United States and a cross-national dataset on several European countries. In both datasets, the Gini coefficient (a common index of a society’s income inequality) and its quadratic term were significant predictors of personal happiness.
Further examinations of the quadratic relationships showed that the signal effect was only presented in the European data, while the jealousy effect was presented in both datasets. These findings shed new light on our understanding of the relationship between income inequality and personal happiness.
Introduction
“The lord of a state or a family, concerns himself not with scarcity but rather with uneven distribution… For where there is even distribution, there is no poverty.”
- Confucius
The relationship between wealth and subjective well-being is a major issue in social science research. Extant studies have found complex relationships between income and happiness. For example, there is evidence that money does not always buy happiness. After material wealth reaches a certain level, its further increase no longer promotes happiness (Easterlin, 1973, 1974, 1995).
This conclusion, also called the “Easterlin paradox” (i.e., more wealth does not lead to more happiness), may originate from individuals’ satisfaction with their lives being rather affected by their spontaneous comparison between themselves and others.
According to the social comparison theory (Festinger, 1954), there are two types of social comparisons: upward comparison, which involves comparing oneself with those doing better, and downward comparison, which involves comparing oneself with those doing worse. Critically, the proclivity of upward comparison is significantly stronger than for the downward comparison (Ferrer-i-Carbonell, 2005; Boyce et al., 2010). As a result, even if their absolute income increases, individuals would be still more likely to compare themselves to those richer, which may deteriorate their subjective well-being.
Consequently, we can expect the income gap between the rich and poor to be a better predictor of happiness. Indeed, empirical studies have shown a significant association between the income gap (indexed by the Gini coefficient) and happiness (Brockmann et al., 2009; Oishi et al., 2011; Asadullah and Chaudhury, 2012).
However, the shape of the income inequality-happiness function is still controversial, as the empirical results have been mixed. While some studies show income inequality and happiness to have a negative relationship (Alesina et al., 2004; Oishi et al., 2011; Verme, 2011), others suggest a positive association (Clark, 2006; Caporale et al., 2009), and some find them unrelated (Helliwell, 2003).
You're just so beautiful and so clever. Could watch and listen to you all day..., which would make me a slacker worth $0.01, so probably not a good idea :)
Just stop weirdo
What a Simp. 😂
The use of that scripture has NoThing to do with Money. (Context is everything)
lol. This is such a surface level overview of the Matthew Principal. It was meant to describe how people who attempt a challenging task will get rewarded for their effort while everyone else who doesn't attempt any challenge will not remain stagnant, they will actually regress in life
You cannot have everyone given 100$ and bet “half” each round. You have to always bet 50$.
This is on a very pathetic level