This is the wrong way to compare Europe/US. Europe's bottom third are maybe 10-20% poorer than the US'. Europe's middle third are about the same. Europe's top third are about 20-40% poorer than the US.https://twitter.com/a_r_schein/status/1055178495045853184 …
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Which means your odds of being "worse off" are about the same in both places if you don't know your skill level ex ante. But crucially, the payoffs to the US top third are a lot bigger than the costs to the US bottom third.
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I show the expected value calculations below with some simple numbers. EVEN IF you are EXTREMELY risk averse and weight bottom-third outcomes THREE TIMES AS HEAVILY as middle or top third, the US is STILL a higher expected value.pic.twitter.com/n3wN4HdnTl
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Lyman Expand the House of Representatives Stone Retweeted Antonio García Martínez
This tweet is correct: there is diminishing marginal utility of income. But the cutoff for the top third of consumers isn't some huge number. It's, like, $75,000 or something. I assure you marginal utility of $1 at $75k is not zero, or even close.https://twitter.com/antoniogm/status/1055251445568524289 …
Lyman Expand the House of Representatives Stone added,
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Replying to @lymanstoneky
Right. But the tax trade-off the US has been making is between the marginal tax rate of the 1% (or even less) vs. everyone else, and cutoff is way, way higher than $75k.
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Replying to @lymanstoneky @antoniogm
Surely the relevance comes from funding a higher tax credit for the bottom third funded by higher taxes on the rich ?
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Replying to @k1ug3 @antoniogm
Zero relevance to this discussion. We aren't debating policy here, we are discussing whether or not America is richer than the Nordics.
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Replying to @lymanstoneky @antoniogm
But how rich the bottom 30% are is affected by this, no ?
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Replying to @k1ug3 @antoniogm
I don't care what it's affected by; I care about comparing the outcomes. And the outcome is simple: America's poor are poorer and our top thrid are a lot richer and for most people w/ normal risk preferences that would outweigh the risk.
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That I agree with.
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Replying to @antoniogm @k1ug3
That's literally what the entire thread is about, if you read it.
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