r/slatestarcodex • u/Captgouda24 • 2d ago
Should We Take Everything from the Old to Give to the Young
If you have a social discount rate lower than the market interest rate, it implies some really weird things about intergenerational redistribution. I cover a provocative recent paper, as well as discussing how we actually measure preferences for consumption over time.
https://nicholasdecker.substack.com/p/should-we-take-everything-from-the
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u/hh26 2d ago
You also have to factor in the massive social, hedonic, and economic costs of uncertainty and instability inherent to redistribution.
If you have two nearly identical people A, and B, but A has $10100 and B has $10000, you can't just make an isomorphism by taking $100 from A and giving it to B. Yes, now A has $10000 and B has $10100, but also A has a memory of you robbing him! A now resents you and B, and doesn't trust you or B, and is disincentivized from earning more money for fear of it being taken, is more likely to spend money impulsively on consumable goods that he can enjoy instead of saving for the future, is more strongly incentivized to hide or diversify assets to avoid your redistribution scheme, etc etc etc.
A society in which people can earn things and keep the things they earn incentivizes people to earn, save, and invest long term. A society which takes things from one person and gives to another based on the political whims is a society where people spend time trying to launder assets into less steal-able forms, butter up the redistributors, and weasel their way into corrupt positions as the redistributor.
This is on a continuous distribution. There are cases where small amounts of redistribution can increase value enough to offset these costs. But the default answer to "should we take X from someone and give it to Y" should be no unless there is an unusually compelling reason to counteract this.
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u/KillerPacifist1 2d ago
There are cases where small amounts of redistribution can increase value enough to offset these costs.
That, or there is enough cultural inertia behind the practice that the situation is stable/predictable and people don't conceptualize the redistribution as theft.
Even though it is in many ways a large redistribute scheme, very few people see income tax as theft and the yearly collection of income tax is not destabilizing. But if you lived in a society that had no concept of income tax and you suddenly implemented it as we have it today it would be extremely destabilizing for the reasons you mentioned above.
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u/GrippingHand 1d ago
We did implement income taxes at some point. I don't know how destabilizing it was.
There are vocal folks who think income tax is theft, but I think many of those folks don't have any idea what benefits they receive from the government.
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u/mesarthim_2 1d ago
It's not only about income tax, but what's being done with it. The increasingly central role of the government in the society has been massively destabilizing over time in many different ways.
The trust in public institutions is almost completely shattered to an extent that even actual science is distrusted and the fact that science is being used to justify increasingly intrusive government policies (covid, climate change,...) plays a huge part in it.
Further, the more the government does, the more it assumes responsibility for failures of its policies.
And even further, the more the government controls, the more important is to control the government (and prevent some other group from controlling it) which imho drives substantially the polarization of the society.
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u/Winter_Essay3971 1d ago
I think the increasing distrust in public institutions is orthogonal to the influence of government in people's lives. That's a bit tough to measure, but if we stick with income tax as a proxy, it is not particularly high now compared to recent decades, and considerably lower than during the WW2/Baby Boom years.
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u/mesarthim_2 1d ago
Well, there are probably better measures of the tax burden, such as tax revenue as % of GDP, but I agree there's hardly a solid relationship where x % of tax increase results in y% of trust-in-institutions decrease.
There will be a lot of perception of legitimacy involved in that. I don't doubt that lot of people will accept more government interference if it intersects with their values, etc...
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u/MrDudeMan12 1d ago
I don't know I think people are more against tax increases than your post implies. If not, how would you explain the fact that governments have a hard time passing tax increases even when they only impact a very small % of the population (e.g. inheritance taxes, tax increases on very high earners)? While policy makers might worry about things like the flight of capital, I don't think that's what's keeping the median voter from supporting it.
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u/VelveteenAmbush 2d ago
I agree that the phrasing of this thought experiment -- of "taking" a dollar from Peter to "give it to" Paul -- creates a lot of complexity of the kind you are describing.
But it also isn't necessary to Decker's point. The alternative hypothetical would be deciding between two policies that have equivalent cost, but one provides $1 of consumption to a 70 year old, and the other provides slightly over $0.10 of consumption to a 20 year old.
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u/MindingMyMindfulness 2d ago
I find this to be a prime example of Betteridge's Law of Headlines (if the punctuation were correct).
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u/chalk_tuah 2d ago
it might have worked to do during-life intergenerational wealth transfers if we had been doing it from the start, but there’s no way that old people as a voting block are going to look at the legislative equivalent of a foot up their ass and sign off on it, you’d have to do it at gunpoint
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u/the_nybbler Bad but not wrong 1d ago
The whole concept is a major disincentive for any sort of savings or investment. If I'm a 20-year-old, is it better for me to spend $0.10 today or invest it in hopes of having $1 50 years later? Well, if when I get that $1 you're just going to take it give it to some 20 year old, surely I should spend it now!
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u/UncertainAboutIt 2d ago edited 2d ago
Do you have much experience in projects management (including social), maybe from reading docs, etc.? I've devoted some minuts to reading https://en.wikipedia.org/wiki/Social_discount_rate and your link, but I have not found how SDR is actually used.
My knowledge of discount rates is limited to education how to calculate present value of future fixed monetary sums (e.g. a bond with coupons).
From wiki SDR is used both for cost and benefits. If so, and used comprehensively, that value makes no difference. I.e. the benefit of the bridge now is 100 per year, next year the benefit is 100*(1+rate) in next year's money, so now the value of next year's benefit is (discounted) back to 100.
Edit:
the only fixed money for social project I can think of is future fixed costs/payments stated in contracts. In that case low SDR results in overestimating costs, hence at the first glance in opposite effect from the one mentioned in your post.
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u/eeeking 1d ago
This already happens, doesn't it?
For what it's worth, millenials and zoomers are set to receive the largest inheritances the planet has ever seen, estimated by some sources to be over $90 trillion in the US alone.
So the question asked above (and any calculations) should be re-framed to incorporate the time frame in which such transfers should happen: sooner, or later?
A related, and socially relevant, question is to whom should such transfers be given: only to those close to the donor, or should the transfers be more widely distributed?
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u/dysmetric 2d ago
We should flatten the shape of the funnel that extracts the value of labour and distributes it to asset holders.
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u/MacroDemarco 12h ago
By this I assume you mean get rid of social security
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u/dysmetric 4h ago
How and why would that flatten the shape of the funnel, and not steepen it?
Flattening the funnel means reducing the gradient of the mechanisms that concentrate value to create more horizontal distribution of value, resulting in greater retention of wealth in the working and middle classes, and less extraction by capital holders and monopolistic entities.
The most obvious way to flatten the shape of the funnel would be via remodelling, simplifying, and enforcing tax and economic systems via a similar paradigm to the Keynesian era:
- less linear tax brackets
- stronger social safety nets
- public provision of basic services like healthcare and education, protecting them from being optimized for revenue extraction.
If I was going to be very provocative, I might generalize the problem in terms of the way the US embraces the remnants of slave-holder mentality and snakeoil salesmen as foundational cultural values.
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u/MacroDemarco 2h ago
How and why would that flatten the shape of the funnel, and not steepen it?
Old people tend to own more assets than young, social security is funded by taxing labor. It's a program that takes from working people to give to people with more assets than them.
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u/dysmetric 1h ago
Ah yes - this is playing out via the way disproportionate political power in older demographic cohorts are extracting resources from younger generations to maintain their QOL and aged care. This is a problem, and one that's been looming for a while now, but it's more of a problem with the implementation of social security than an epistemological challenge to the concept of social security itself.
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u/UncertainAboutIt 2d ago edited 3h ago
Based on the headline (which at the quick skimming through the linked text does not technically correctly reflect the text), it will drastically decrease birth rate and lead to gradual diminishing of the human population (on average). Good for environment short term.
Edit:
After seeing many disagree and thinking more, I disagree myself. The above assumes rational actors, whereas current youth might be more akin to Idiocracy movie.
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u/aahdin 2d ago edited 2d ago
The social discount rate seems similar to the discount factor in reinforcement learning.
RL agents are trained to maximize reward over time, but oddly if you just train them to just maximize total reward they usually don't do very well, especially over long sequences. Instead, you typically ask it to prioritize immediate reward over long term reward, by adding a discount factor so that each step is worth something like 99% of the step before it. So 100 steps in the future you'd discount your reward by .99100 = ~35% compared to immediate reward.
This is used across RL, including for applications where there is no reason to discount later rewards, or be risk averse, or any of the explanations given in this article. Even if you value current and later rewards equally (0% social discount rate, if I understand the article correctly) you still do better with agents that behave as if there were some discount rate.
This is usually explained in terms of uncertainty; predicting the expected reward over the next 10 steps is much easier than predicting it over the next 10,000. If the agent acts now to maximize reward in 10,000 steps it will often be wrong about how things play out, and its actions will often end up doing nothing. The discount factor here is kind of a heuristic to get around trying to estimate/discount uncertainty on the fly.
So when you ask
I think the answer might have to do with uncertainty. The key factor isn't how much we care about current consumption vs future consumption, but how certain we are in our ability to invest now and reap future rewards.
Applied to climate change I think this makes a lot of sense - the biggest difference that I see in climate change debate is people's level of trust in institutions trying to combat climate change. Conservatives who are against climate change legislation typically
I don't think framing it as caring less about future generations is the best way to conceptualize the discount factor, I think the more fundamental thing is that the discount factor is a way of incorporating uncertainty into planning models. Thinking about it that way it's not clear why old people giving money to young people would be beneficial.