Thread: Marginal Utility

Originally Posted by Disillusioned_1

With 15% capital gains tax rates, it has the highest use because you don't have to risk anything but money to be taxed at the lowest rate.

Which distorts the market, and causes profits to be channeled into capital gains as opposed to ordinary income.

Originally Posted by goober

Wouldn't invested money have the lowest marginal utility of all?
It's money that you give to someone else to use, because you have no use for it.

Goob, it's a truly radical concept which is commonly called a "Win/Win". See, the investor gets the benefit of income potential through extending the use of his assets to someone else who gets the benefit of using assets which they otherwise couldn't afford. Investment actually makes excess capital more utilitarian than less utilitarian.

Originally Posted by goober

Which distorts the market, and causes profits to be channeled into capital gains as opposed to ordinary income.

Baloney. Now, if the IRS would allow all gains which are really nothing more than dollar increases based on inflation, then maybe a 15% or 20% real value increase tax may be fair, but absolutely not a higher %.

Originally Posted by goober

That's easy, there are 0.5% of the population that contribute the majority of the money to political campaigns.
Hedge Fund Managers are a part of this group, and they find it pretty easy to convince congressmen that they need a ax break, that 1/2 of 1% is who congressmen spend 30% to 70% talking to.
So when a congressman believes most people want something, it's the 0.5% that he spends most of the day with that he's referring to.

That % may or may not be a good guess, but you certainly have not supported the validity of your comment.

Originally Posted by goober

Wouldn't invested money have the lowest marginal utility of all?
It's money that you give to someone else to use, because you have no use for it.

Absolutely not!Just the opposite. Not only does the marginal utility of money invested go up for the investor but it also increases the marginal utility of money in the entire economy. I don't know where you are getting these ideas, but they are certainly not coming from a recognized economic theory.

Originally Posted by Disillusioned_1

Yes, the direct analog to someone in retail sales is that a fund manager gets on commission. However, retail sales people are taxed at normal income tax rates and fund managers are taxed at capital gains rates.



For your job (accounting, right?) yes, the risk is extremely low. There are TONS of jobs where the risk is significant, 5-15% on an annual basis:
http://www.bls.gov/iif/oshwc/osh/os/ostb2801.pdf

Unfortunately, its hard to extract career-ending or extended injury incidents from that data.



All of the things you talk about, workman's comp, defined contribution plans, only exist in large numbers because of the efforts of unions and consequently government involvement. It is true that has lowered risk over the years for working, but it seems ridiculous that someone who risks life-and-limb gets taxed at a higher rate than someone who 'only' risks money.

Unions had some good ideas many years ago. As it is now they are an elitist labor force of only 12% of all labor. Most of what unions accomplished is now codified in our labor laws.

Originally Posted by dnsmith

Absolutely not!Just the opposite. Not only does the marginal utility of money invested go up for the investor but it also increases the marginal utility of money in the entire economy. I don't know where you are getting these ideas, but they are certainly not coming from a recognized economic theory.

My personal experience backs you up.
The mere awareness that something can go awry at any moment makes one's investment all the more precious, presuming they are diversified and thus protected.

Originally Posted by goober

Maybe you could give us an example of a situation where the marginal utility of money doesn't vary? If you have one, I don't think you do.....

Sn example of a situation where the marginal utility of money doesn't vary, up or down, would be the situation in which a person who starts to earn more spends at the same rate of income as they did prior to the rise of income. Utility goes up if the extra is invested and utility goes down when put into a lock box such that the money is not spent, it is not earning reasonable interest and it is not invested.

Originally Posted by lutherf

Generally speaking, hedge fund managers do have their money in that fund. They tend to be paid based on the gains that the fund makes ("carried interest") and their direct compensation is usually quite minimal.

As far as risk due to employment, it's minimal...nearly non-existent. If you get injured on the job you are covered by workers comp and if you happen to die on the job, well, additional compensation for that isn't really going to help you.

Right now most employee retirement plans are defined contribution plans and the employer really can't steal that money. In years past when defined benefit plans were all the rage there was a risk of the employer being unable to adequately fund the plan but now those plans are primarily only found in union shops. It should also be noted that the defined benefit plans offered by unions - including government services - are one of the biggest factors in bankruptcies and government budget deficits.

You might want to change part of that. Any commission or salary paid to the hedge fund manager is taxes as regular income. Profits paid as current dividends are taxes as regular income. Profits made from selling shares held for a specific long term period are taxed as capital gains.

Originally Posted by goober

The Nobel prize winning work of John Nash showed that cooperation is a superior strategy to pure self interest. That the group can do better as individuals by cooperative behavior than by pure self interest.
Governing Dynamics: Ignore the Blond - A Beautiful Mind (3/11) Movie CLIP (2001) HD - YouTube
That is what government is, the cooperative effort of our society, I don't see government as irrational, and of course marginal utility applies to government spending.
We get precious little utility out of our marginal defense spending, and Hyman Rickover pointed out that we have about twice as many submarines as we would actually need.
But overall, the cooperative effort at defense yields a better result than "every man for himself" ever could.

Our government is not a cooperative, that is an ideological point of view. It is simply a mechanism of governing by law that unfortunately has taken a back seat to political ideology and self interests. Besides, (and this is something you have yet to answer to) there is little if anything in our constitution or laws that says "cooperative effort" trumps self determination. Where is that written? And yes, government acts with a good deal of irrational behavior. With all of your complaints about Republicans it would be void of truth to then turn around and suggest government is rational at this size, this divided, this ideological over true interests of the people, with this debt, adding north of a Trillion per year, running without being fiscally efficient at all, etc.

It is also not "cooperation" when you put forth a hidden agenda covered up with the economic theory that because marginal utility of money exists, you should be able to take more wealth for expanding government function. That is not cooperation, it is fraud as it is based on government in determination of utility for the individual instead of themselves. It is trying to hide political objective with economic theory only when it suits. You cannot even have a mixed economic model that way as government will always end up deciding wealth, movement, utility, velocity, etc. In the end it places government ahead of the individual (well at least those of your political opposition which you frequently suggest) to support even more redistribution efforts while ignoring government's Marginal Utility.

Marginal Utility of money is an important economic principle, what it should not be is an weapon to use against wealth for political gain.

Originally Posted by Sluggo

Our government is not a cooperative, that is an ideological point of view. It is simply a mechanism of governing by law that unfortunately has taken a back seat to political ideology and self interests. Besides, (and this is something you have yet to answer to) there is little if anything in our constitution or laws that says "cooperative effort" trumps self determination. Where is that written? And yes, government acts with a good deal of irrational behavior. With all of your complaints about Republicans it would be void of truth to then turn around and suggest government is rational at this size, this divided, this ideological over true interest in the people, with this debt, adding north of a Trillion per year, running without being fiscally efficient at all, etc.

It is also not "cooperation" when you put forth a hidden agenda covered up with the economic theory that because marginal utility of money exists, you should be able to take more wealth for expanding government function. That is not cooperation, it is fraud as it is based on government in determination of utility for the individual instead of themselves. It is trying to hide political objective with economic theory only when it suits. You cannot even have a mixed economic model that way as government will always end up deciding wealth, movement, utility, velocity, etc. In the end it places government ahead of the individual (well at least those of your political opposition which you frequently suggest) to support even more redistribution efforts while ignoring government's Marginal Utility.

We seem to be devoid of mechanisms by to correct this situation.

Originally Posted by goober

Wouldn't invested money have the lowest marginal utility of all?
It's money that you give to someone else to use, because you have no use for it.

Even more evidence that you would ignore government's marginal utility with all of the "investments" they tend make. But more to the point, also to cover up that Marginal Utility of Money should only be used as a weapon to remove wealth from the individual for transfer to a government aristocracy.

Originally Posted by USCitizen

We seem to be devoid of mechanisms by to correct this situation.

Because to an economist that leans left there is a prerequisite that economic principles are more that just explanations for economic conditions looking for improvements, but really a mechanism to enforce protections of the government over the individual. Goober himself has said this time and time again when it comes to a "wealth based aristocracy." The solution offered, usually hidden in politically convenient application of economic principles, is a government aristocracy fed by high tax on wealth where the individual has no say in utility.