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asked ago in General Economics Questions by (330 points)

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answered ago by (930 points)
Institutions and culture.
Economics exists within a social structure and the social structure in developing countries are not very good at increasing net social benefits  from the economy. There is still too much competition. When someone makes money, they tend to hoard it and this does not increase net social economic benefits to society.
The Unites States is also falling into a culture of increasing wealth inequality. It has become institutionalized in government, political parties, and business practices. The recent tax cuts by the republicans, simply increased wealth inequality. This culture of serving the rich exists very strongly in developing countries too.
To put it simply and clearly, economics is having a hard time increasing net social economic benefits to societies due to institutionalized wealth inequality.
commented ago by (330 points)
Thank you for sharing your views. I agree with the identification but the distribution methods adopted are largely dysfunctional (progressive taxation, taxing consumption). Rich because of their wide accessibility either escape these measures (tax havens, too-big-to-fail) or figure out ways so that they ultimately net the middle-class (pensioners, workers) with limited capital. Furthermore, coercive transfer of wealth from rich to poor is not only unfair but also creates disharmony and friction. It is true that people are not equal so forcing equality is somewhat abusive. We should rather look at equal opportunity, which I believe is ignored because it requires an extremely painful process of overcoming inherent biases.
commented ago by (930 points)
Thank you for your reply. I wonder why you see progressive taxation as a dysfunctional method of distribution. The ratio of saving to consumption increases with more wealth and income. It is true that the rich can escape social responsibility in the economy. I also wonder what you see as coercive and abusive, when actions are taken to increase the net social benefits from the economy. When a business or person only thinks of their own gain, this can easily be a loss to society or the world in the case of Brazil's president letting the Amazon forest burn. He said it was a matter for Brazil, and no other country could have a say in the matter. But the world would be worse off if the Amazon forest burned. That would decrease the net social benefits of the economy globally. And I agree with you about equal opportunity. It has cultural problems. As inequality increases in the United States to levels seen in developing countries, there is a big problem with equal opportunity.
commented ago by (330 points)
Progressive taxation induces rich to look for ways to evade taxes and there is whole industry, with grey and legit enterprises, that has mushroomed to help them do that. The extraction of taxes appears to them abusive when they see politicians splurging it on their pet projects to win next election and their tiny fraction of votes do not hold enough power to change anything so they steer the burden of taxation to middle class using financial gimmicks.
The dynastic thinking shown by Brazil is not an isolated example. If you take the university system. That too works on the same principle. One university never interferes with the matters of another university, even if there are social costs involved. The case in point is MIT’s involvement with a pedophile. If anything few scholars from other university stood up to sacked scholar who had to bear the brunt of rudimentary funding process. University has got to survive and the same logic goes for the country.
It is no wonder that politicians with their taste for magnanimity are emulating the system of some of the smartest people. Why should they think themselves less? According to political science, they those who win democratically have the will of people vested in them.
commented ago by (930 points)
It is certain that societies are immature. People seek to protect their own private interests which reduces the net social benefits from the economy. It is a problem worldwide.
As far as elected officials, many people do not understand how to maximize net social benefits from the economy, so they choose a candidate based on religious, moral or cultural beliefs. Then these politicians promote the wrong economics that decrease net social benefits. This too is a worldwide problem.
It takes a mature person to understand how the economic resources of a country can be managed to increase net social benefits.
For me, the primary goal of economics is to increase net social benefits to society in general.
When the rich in Nigeria, for example, hoard the wealth for petroleum and do not pay taxes, the poverty seen in Nigeria is very understandable. The wealth of the nation is not being shared among the people of the nation. It is being hoarded by the fortunate few who control the money.
There is an old Navajo saying. "A rich man is someone who does not share his wealth with his family." The rich need to share their wealth with the people of their nation.
But, people have justified not paying taxes by saying that the taxes are not used properly. On many levels, that is a cop out.
commented ago by (330 points)
It is what I call tragedy of silos and I agree with you on that. Rich choose to chicken out despite of their financial muscle that they can use to influence the politics for the betterment of society. In oppressive political regime, I have seen few “ethical” rich paying millions in taxes and settling for national awards to look the other way.
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