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The perverse incentives around these discontinuities is one of the worst misfeatures of programs intended to help people. Here is a real example. My niece wound up with 3 kids, divorced, with inconsistent child support payments. So she went on food stamps. She was looking for a better job. She found one, interviewed, and they wanted to hire her. But the salary that they offered was $0.50/hour too much for her to stay on food stamps, and was less than her current job. Thanks to union regulations, the person who wanted to hire her couldn't pay her less than the standard salary. The result is that she did not take the job. A common result when Congress takes note of perverse incentives like this is that they introduce a more complex program with specific terms that address specific problems that emerged. The problem is that by creating more brackets and more complex rules you usually create MORE cliffs with perverse incentives (though the perverse incentive at each cliff tends to be less). Another solution is to introduce rules that attempt to identify people who are "abusing the system" and punish them. So, for example, you can only be on welfare for a limited time because people got outraged that single mothers wound up on welfare for a long time. However those single mothers were acting that was in part because they were better off on welfare looking after their own kids than they were in a low end job and paying for daycare. Stereotypically the first type of solution is characteristic of Democrats and the second of Republicans. But the truth is that both parties do a lot of both solutions.
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The leftist solutions are to get rid of of the conditions entirely, and find non-means-tested ways to accomplish goals more universally. The advantage here is significantly reduced administrative costs, freeing up time and energy of those in a tough situation on recovery rather then stress over beurocracy and limitations, and of course, people not viewing the people on the programs as morally deficient. Social security, fire departments, medicare, primary education etc are all available broadly, and are broadly liked by people. People using these government handouts aren't considered lesser for it.
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I dunno, wasn't it Milton Friedman who was promoting UBI during the Nixon administration? I've got this funny feeling that Congress likes legalistic solutions to problems because they are mostly lawyers. (All lawyers when it comes to Democrats) The pain of filling out paperwork for means testing seems less painful to them than it does to the general population. The 'swiss cheese' approach to social services is one of the major reasons why U.S. health care is so FUBAR and so hard to fix. Old people have Medicare and they vote -- they don't see there is a problem. Many people get insurance from their employer and might have no idea what their employer pays or how stressful it is for employers to negotiate benefits every year. Veterans have a program, there is Medicaid for really poor people, Medicaid expansion for somewhat poor people, Obamacare exchanges for people who are almost poor, etc. When you add it all up there is a small pool of people "left behind" and most of those people are transiently uninsured because they'll wind up in some covered category. Balance that against a larger population afraid of losing what they have, and you have gridlock.
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Milton Friedman did have a proposal for elimination of poverty in the 60’s, but it wasn’t UBI. It was a negative income tax for those below the poverty line [1]. To some extent we have that now in the earned income tax credit. |
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Maybe you are good at paperwork, but it’s worth remembering that even Google sometimes biffs a domain name renewal. Why put artificial hurdles in front of people who need help?
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If you want to remove those hurdles you might want to see some more diversity (e.g. not lawyers) in Congress.
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You may not like nuclear engineers designing nuclear power plants, because they are too beholden to the establishment, but is it a good idea to have some other sort of person do it?
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Congress makes laws. It's not a great place for building non-legal solutions.
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I reminds me of that quip that if libraries didn't exist already and did not have a history millennia long, no government would create one today. Instead, they would create a means-tested tax credit for purchasing books.
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Intriguing idea :) I'm not sure if you're speaking approving or not (or neither). It seems like a reasonable thing to do though. Amazon is bigger than any library, it avoids the use of physical space in city centres and the need to manage loan systems/handle stolen books. I think the difference between then and now is that IT happened, so it's much easier to do things like calculate complex per-item tax rates than it would once have been.
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I'm getting strange vibes for how people must be reacting to this. Your idea of a possible better world is so bad that you should feel bad! /s
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Haha yeah -4, that's pretty far out. Lots of people who hate tax credits out there! It's really hard to defend libraries though. They're not just an inefficient use of space. They're bad for the environment too, as people have to travel back and forth all the time to swap books, discover the book they want isn't returned yet, etc. They're often badly maintained. Their books get damaged, lost or stolen. Their selection is really, really limited. Buying a book online is a great replacement except for the buying part. For most people books aren't a big part of their expenditure. For people for whom it is it'd be reasonable to effectively give them the money back instead. Especially now the marginal cost of the "book" is near zero, like with software. If the admin systems were good enough you'd never have to think about it: it could be integrated with the booksellers checkout system so the cost is literally zero. Of course that's not how tax credits really work today, but it could be done that way.
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You're missing the forest for the trees. Libraries are more than just books, they're free spaces for all types of learning, collaboration and production. I work remotely, sometimes from a library. I can request a space to work with others, and even hold large seminars if I wanted. There are dozens of free programs for kids to meet and learn, and there are opportunities for for working adults and the elderly, as well. My local library will even do interview prep for those who want it, which includes mock interviews from people in industry who donate their time. There's also 3D printers there, too. Librarians are more than just people who can find books on shelves. They can help you research, and have access to a multitude of databases that you might not know about. As an example, I wanted to contact the owners of a business and had trouble finding that information. That info existed in a database I didn't know about, and a librarian helped me retrieve it.
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Collaboration and production? I think your local libraries are very different to the sorts of libraries I used to use as a child. What you're describing there sounds more like a community centre of some sort. Libraries are traditionally silent for example. You don't collaborate in them or else you get shushed. You definitely don't run 3D printers in them! But I can see that if that's what you associate with modern libraries then replacing them with book purchase credits would seem a poor trade.
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Your experience with libraries is 20years behind the times. My local library has a 3D printer.
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Maybe so. But is it still a library if its primary cited uses isn't reading books? Why not just rename it to what it really is, some sort of community/maker centre?
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1. Books are still one of the primary uses of libraries. It's just that they no longer are their only use. 2. Why do we call our smartphones phones at all? I mean, sure, they can make phone calls. But most people use them mostly for things that are not phone calls or phone-related at all. That's how language works. Look at the etymology of any word you like. More likely than not, the literal meaning refers to something historical that may or may not apply or exist anymore. For example, software developers are called engineers. Does that mean they are experts when it comes to engines? And not just software. Civil engineers don't know much about engines either. Yet for hundreds of years, they have been called engineers and for thousands to come, they will be. This is not a bug. This is the natural life of words in human languages.
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"Rebranding" would incur costs for very little benefit. Perhaps you could offer to pay for the new signs, logos, etc for your local library. You could donate the work required to submit a proposal, and if your numbers are good maybe they will be interested. In general, I see libraries promoting their services via web sites and Facebook online, and physical bulletin boards in-house and around town. My childhood, ~45 years ago rural Georgia (USA), had a great selection of proto-nerd books, even production facilities for the local-access cable TV channel. Not strictly related to public library, but we also had a great time with after-school and summer maker programs sponsored by the County Extension office. In agriculture, everyone has to be a "maker". (I don't know what urban regions were like. And as this was only about ten years after state-mandated apartheid, no doubt lots of kids were living in medieval conditions.)
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It's very much a library.
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I'm not sure if you're speaking approving or not It’s "not"
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Relatedly, I learned about Universal Credit, an attempt by the UK to merge all their social benefits into one coherent system, and it seems like the cliff problem here is worse. From the BBC description: >Under the old system many faced a "cliff edge", where people on a low income would lose a big chunk of their benefits in one go as soon as they started working more than 16 hours. >In the new system, benefit payments are reduced at a consistent rate as income and earnings increase - for every extra £1 you earn after tax, you will lose 63p in benefits. In other words, after fixing the cliffs of the system, you would "only" face a 63% effective tax rate for working more. So whatever system they have no is even more discouraging. (That understates it because it's phrased post-tax; including a positive income tax, the total effective tax is even more!)
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I think you have misread or misunderstood this. Under the old system, it was possible to take a job, and then have less actual income than you did before. Under the new system, _every_ extra hour of work you do causes you to have more money in your pocket, and you are always incentivized to do more work, or start a job that pays less now but might pay more as your experience grows. I'm not sure how else you'd want this to be designed.
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My point was that 63% is still very bad, and if it’s supposed to be an improvement, then the existing system is abysmal from an incentive perspective.
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How else would you see this working, exactly? You've got to make sure people who need the benefits and can't work get supported, you need to not discourage people from working (and most people _do_ want to work), and you also can't just (afford to) unilaterally extend benefits to a whole bunch of people who don't currently get them. So, concrete proposal on how you'd structure this?
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The exact same way as the new system, except instead of 63% it's a much smaller number. Edit: Why are people downvoting this? I don't understand what's so confusing about SilasX's argument. Removing cliffs and changing it to a smooth dropoff is good. But that dropoff doesn't have to be £.63 in benefits per £1 earned. That's a pretty big effective marginal tax rate! Why not £.50 or £.30? It should be extremely easy to understand how this proposal works, right? It would technically bring more people into the system, but they'd be at the top end, and therefore only be receiving a small fraction of the current levels of benefits. It's totally doable.
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> The exact same way as the new system, except instead of 63% it's a much smaller number. If it's less than 63%, you "unilaterally extend benefits to a whole bunch of people who don't currently get them". Let's say benefits for the unemployed are £1,000 a month (chosen to be an easy number to work with). You lose 63p of benefits per extra pound you earn. The government gives you (some) benefits up to the first £1,587 you earn. If you go to 50%, the government gives people earning up to £2,000 a month benefits, and so on, which probably includes a bunch of people who don't currently get any. You can't change 63% without either paying much more in the way of benefits overall, or without reducing the benefits of those who can't do any work. > It would technically bring more people into the system, but they'd be at the top end, and therefore only be receiving a small fraction of the current levels of benefits That's not how the maths works. Assuming an even distribution of people at each wage level, changing this to 30% effectively doubles overall spend.
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The people making between £1,587 and £2,000 are getting £206 or less though. That's not an unsolvable expansion, especially because those people probably do in fact need the help.
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> That's not an unsolvable expansion So your solution is "spend a lot of extra money on social security", which is fine, but it doesn't satisfy the constraints.
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You said you didn't want to "unilaterally extend benefits to a whole bunch of people", not that the cost couldn't increase even the tiniest amount. But even so, smoothing out the curve some might be better overall even if the max amount drops. Also you could extend the curve so that 'benefits' go negative at the high end. Now your budget is fine...
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Your plan both massively increases the number of people on benefits and also increases costs by 20% on your 50% proposal, which in the UK means £15b-ish. Reconciling this with "even the tiniest amount" is impossible. > Also you could extend the curve so that 'benefits' go negative at the high end You've just invented tax, congratulations.
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> massively increases the number of people on benefits You have a very different definition of 'massively' than I do. > You've just invented tax, congratulations. Positive taxes can balance out negative taxes, ~tada~.
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Dylan, just note that the problem as originally posed is not solvable. Your „solution" is one that violates one of the constraints and then says „but it’s minimal". Sure.
But that was exactly the point of the comment above: by the nature of things, any change you make leads to an undesirable consequence. Either people who need the benefits don’t get them, or the „marginal tax rate" is very high, or you extend the benefits to more people (which is costly). You’re stuck on the horns of a trilemma, and that’s the solution the UK has chosen, and any „improvement" you suggest will be worse on at least one of the dimensions.
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> Dylan, just note that the problem as originally posed is not solvable. The original constraint was not a $0 increase. I did not violate the original constraint. And even if you did take it to be $0, it said you can't "just afford to" increase. Proposing a tax to make up the difference meets that critera. But even inside a hard "no more spending" constraint, it's not nearly as unsolvable as you make it out to be. It's quite possible that giving less money to people mildly below the old cliff edge, while giving more money to people mildly above it, is a net positive. That doesn't screw over people at the bottom, and it doesn't increase total cost. Going from a hard cliff to a 90% marginal rate was obviously better, right? And going from 90% marginal rate to 85% was obviously better, right? They decided to stop at 63%. It doesn't mean that going further is a priori wrong. And on top of all of that, smoothing out the curve to 50% very likely motivates more people in the range to work, reducing the amount of benefits they use.
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I totally agree, but I just realised -- there’s another cliff edge here! I surveyed opinions on tax brackets a while back, and it seemed like there was a big psychological barrier at the 50% rate. Most high earners would be willing to pay a 50% marginal tax rate (albeit some very grudgingly) but almost nobody was willing to go over 50%. What’s good enough for the rich should do for the poor as well. The benefit drop off rate (effectively a marginal tax rate) should be 50% at the very most. "For each dollar earned, I get to keep more than I give away in tax/benefits" is a cliff edge, but I think a reasonably justifiable one.
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What does 'willing to pay' mean, exactly? Surely they're not turning down a raise out of stubbornness. And pay of that caliber is not often hourly.
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This was in the context of a political discussion about what the tax bands should be, not about paying the current taxes in reality. Some people want higher taxes and some want lower; what I’m saying is, 50% stood out as an arbitrary threshold that many people seemed possibly willing to agree on. Some complained that rich people shouldn’t be expected to prop up the rest of society, but conceded that progressive tax bands might be okay as long as the top rate was no more than 50%. Others felt that highly progressive taxes were essential; they wanted at least 50% as the top rate.
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Tax rates dont pay for services, they pay for preventing inflation. The government printing money pays for services.
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You are being needlessly contrarian. Fiscal policy comprises both borrowing and taxing; the two are fungible as far as spending is concerned.
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The government can only effectively print money to the extent that they can convince bond purchasers that taxes will be collected in the future.
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Tax rates dont pay for services What are you replying to?
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They might accept the raise and try to work less hours to keep the total similar. Or it works as an incentive to start finding ways to pay less taxes, out of a notion of fairness.
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They're being paid hourly? How many people making six figures are paid hourly, and what kinds of job do they do? To be clear, I easily understand how a high marginal rate is demoralizing and unfair at the low end. I'm not convinced it's a problem if tax brackets at the high end go to some number above 50%.
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Consultants and professionals who serve the public charge hourly.
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In the UK there's already a higher-than-50% marginal tax rate between £100 and £120k because you lose your personal tax allowance.
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Yes! That’s silly and should be fixed (although it’s hard to drum up any sympathy for those poor folks earning only 110K or so). Edit to clarify: if your salary is £100K and you get a £10K raise, you see almost none of it in your payslip. But if you’re on £120K and get the same raise you get to take a good chunk of it home. That’s what seems silly to me.
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It's over 50% at £50k if you have a plan 2 student loan
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The drop off corresponds to the benefit. If you reduce the amount less you make from making more money, you are reducing the benefit people are getting. As an example, you can reword this just as accurately to say that for every dollar less the person makes, they actually only make $0.27 less because benefits kick in for $0.63 of it. You can reduce that 63%, but when phrased that way, do you want to?
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I loathe Universal Credit. This 63% thing is the replacement for "working tax credits" -- it's a top-up of wages for people on low paid work. People get their wages, and then on top of that they get extra money. In the past this would have been working tax credits. The advantages are that claimants do not need to ask for permission before starting work. They can just do the work and then declare it. The disadvantages are that the system can't cope well with zero-hour contracts or self-employment, and this is leaving people in severe financial hardship.
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I have a hard time following this argument. It's not a tax, it's a limit to benefits. If the government comes along and says > You need $30,000 / year to live at a minimum in our society. We will make sure everyone that makes less than that gets enough in benefits to make up the difference. That's not a 100% tax rate for any money earned under $30,000 / year. It's reduced benefits because the definitions of the system (the minimum amount needed to survive) indicate the system only needs to make sure everyone is at a specific minimum level. You can argue that working costs money (transportation, child care, clothing, etc), and that's a valid argument against working if the amount you make would mean you wind up with less money available for other things. However, it's still not a tax. It's a limitation in the analysis of cost of living requirements. Calling it a tax is disingenuous.
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Then remove the word "tax" from my point and rephrase it as "only capturing (less than) 37% of the wage", and every relevant point still applies. If you still don’t see the significance, I can only blame underpractice at the skill of abstraction. (I mean, if you don’t like the framing, fine, but you specifically said you have a "hard time following" the argument.)
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> Then remove the word "tax" from my point and rephrase it as "only capturing (less than) 37% of the wage" My problem is that I don't see it as capturing less of the wage, I see it as being granted less of the benefit / social safety net. When you don't make enough money to support yourself, society kicks and and gives you enough so that you're ok (you meet some defined minimum). As you earn more, you need less support from society to be meet that minimum, so you're given less. Eventually, you get to the point where you meet the minimum without assistance from society. At that point, the benefit is no longer needed (by the definition of the program). At no point are the benefits your earnings, and at no point are your earnings being taken away by the less of the benefit. Rather, you're just not being assisted by society anymore because you don't need that assistance. If the recipient of those benefits can't see that and, instead, sees them as "this is mine and you're taking it away", then I argue that's a problem with recipient. They are wrong. They should be happy the benefit was there for them when they did need it... and that it will be there some someone else when they need it. That is the point of social safety nets. Now, I get that there's some "emotional attachment" to getting the money and then not getting because (as the recipient sees it) they're working (which is wrong; as noted, they're getting less because they need less, period). As such, reducing the benefits amount by a percentage less than 100% of earned ways helps mitigate those feelings. But at some point, the benefit must go away; it's not UBI. The rate at which it goes away is not going to make everyone happy, no matter what is done (that's the nature of compromise).
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It behaves the same way from the perspective of the worker. For every hour I work of a minimum wage job, I see an increase to my spending abilities of 35% of minimum wage or whatever. It's only not a tax technically, but it still cuts into your direct benefit from working exactly like a tax.
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> It's only not a tax technically In the same way that any benefit program being cancelled (eg. movies for kids for free every Friday on the town green, etc) are stealing. It's a benefit that had some or all of it taken away.
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If it's part of your pay structure, and then suddenly it's not given to you, that would be stealing.
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It's a benefit provided by the taxes of all. It's not part of your pay structure.
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It's not 63%, it's a reduction of £0.63 in benefits (not in your total income) for each extra dollar you earn in income over the cutoff level. This prevents situations where it's better to stay under a cutoff of X in income until you can jump straight to an income of X income + Y in benefits, while staying on benefits until then.
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Surely if benefits are part of your income, a £0.63 reduction in your benefits is a £0.63 reduction in your total income (up until the benefits are zero)? In other words, an effective tax rate of 63% on earnings while you receive a nonzero amount of benefits?
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"My point was that 63% is still very bad, and if it’s supposed to be an improvement, then the existing system is abysmal from an incentive perspective." This is fascinating. There is an entirely separate debate about tax rates and incentives for high income tax payers wherein it is suggested that marginal income tax rates almost identical to the 63% you are speaking of are fair, equitable, common-sensible and could not possibly deter earners from pursuing extra marginal dollars. I have no comment to make about either debate. I simply find it fascinating that an exactly opposite conclusion is made depending on the subject involved ...
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I think 63% marginal tax rates for high earners are stupid too, and their proponents similarly mistaken. So I haven’t changed my opinion based on the context and am not responsible for such advocates.
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With this system you're guaranteed to never end up with less total money than you started with by getting a better-paying job, which makes it definitionally not a cliff. It's just a gradual reduction in benefits as you earn more.
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It’s not a cliff and sounds like a step in the right direction, but it’s still effectively a 63%+whatever marginal tax rate.
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I can’t remember the exact benefit numbers (they might overlap with National Insurance) but you don’t pay income tax until you’re earning over £11,000 so you shouldn’t pay marginal tax while on benefits.
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Losing benefits as you make more money has the same effect as being taxed on that marginal income.
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I don’t dispute that at all, I’m just saying the marginal tax brackets themselves don’t kick in until later.
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The purpose of universal credit was not to solve any particular problem - it was to give conservative politicians something to say when their voters demanded something must be done [about people on benefits]. The world makes a lot more sense when you realise that laws and regulations are primarily conceived and constructed to keep incumbents in power. Maybe we should vote in our representatives for life then they'd actually have to focus on making things better.
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>The purpose of universal credit was not to solve any particular problem - it was to give conservative politicians something to say when their voters demanded something must be done [about people on benefits]. It's both. The idea of Universal Credit is a good one - it rationalised dozens of benefits into one programme. Unfortunately the implementation is - because Tories - a terrible system that causes more problems than it solves.
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But no one involved in creating universal credit did so for any other reason than as an excuse to cut the number of people who are eligible.
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If the system incentivizes capable people not to work and just live off taxes, that should be corrected.
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That's a bit shortsighted. There are many valuable types of "work" in society that are not rewarded monetarily. Take for example, child rearing, community building, or caring for elderly/disabled/homeless people. Should "the system" really push capable people into valueless jobs at the cost of meaningful jobs that have no monetary value?
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If there is a deliberate policy decision to penalize someone for working on the grounds that "hey you would do better as a stay-at-home mom", that would be one thing; it would at least have some consistent internal logic to it. But I don't think the UK's or US's systems are like that; they just got hobbled together by being pushed in different directions by various groups with conflicting desiderata that combined to produce ridiculous incentives, and those incentives should be corrected. Moreover, to the extent that valueless jobs and valuable non-monetary jobs exist and can be identified, the proper response is to explicitly target them (either with penalties or subsidies), not just allow anti-market-labor incentives to exist because "hey, not every job is worth doing, you know?"
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63% is not necessarily so bad. Income tax rates for the well off went as high as 95% at some points in UK history, and those do not seem to have been disastrous (indeed they seem to be some of the country's finest years). And beyond that you're letting perfect be the enemy of good here. Eliminating the cliffs and capping the marginal tax rate of the poor at 63% is valuable progress. If you want things to get better you should celebrate the small victories, not treat them as an opportunity to complain more.
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As the reduction applies only to the benefits (not to your income), it's just a smooth reduction in benefits as you earn more money, not a tax.
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Money is fungible. If a salary increase of $1 leaves you with 37c in your pocket that's a de facto 63% marginal tax rate, however it happens to be structured for accounting purposes.
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The salary increase of £1 leaves you with £1.37, because you get the £1 wage plus £0.37 benefits.
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No, because in this setting your original take home was £1.00. To lay it out in numbers: BEFORE £1 pay increase: £X earnings, £Y benefits AFTER £1 pay increase: £X + 1 earnings, £Y - 0.63 benefits DIFFERENCE: £0.37 So a pay increase of £1 leaves you with an actual total increase of £0.37. This corresponds to an effective tax rate of £0.63.
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I don't understand how this got downvoted, because it's literally what happens. Universal credit replaces a wide range of legacy benefits. One of the legacy benefits it replaces is "working tax credits". These were payments made to people who were working and on a low income. This part of Universal Credit "tops up" your earnings from work. They are in addition to your earnings.
is. When someone on UC starts working they get their pay from work, and on top of that they get their their universal credit minus 63 pence per pound that they earn from work. In the past if you did more than 16 hours of work in a week all your benefit would stop, but under UC you can work over 16 hours in a week and keep the money. |
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Bringing up the marginal tax rates of the rich is a pretty weak defense of a >50% marginal rate for someone on welfare. Yes, it's 'valuable progress'. That doesn't mean complaints are invalid, or "letting perfect be the enemy of good". What a rubbish accusation. You're only letting perfect be the enemy of good when you use a problem as a reason to impede the weaker solution. This is a comment hoping for better. Don't shame that!
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> You're only letting perfect be the enemy of good when you use a problem as a reason to impede the weaker solution. If your response to the weak solution is to talk about how bad it is, you're setting the wrong incentives.
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The universal credits in the uk where setup by a conservative government thats obsessed with austerity. The intent was to cut the funding to benefits disguised as a new system.
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> The perverse incentives around these discontinuities is one of the worst misfeatures of programs intended to help people. This is a key motivation for replacing many of those programs with UBI funded by progressive taxes.
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A Negative Income Tax which phases out would work too (though I think a UBI would be more popular and thus resilient to budget cuts, as Alaska has shown). The wonderful thing about cash (UBI, NIT, EITC) is that it's easy to divide up and low-cost to distribute.
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I think one problem with NIT is it would likely pay out annually, when income taxes are filed. That's not very helpful if you're living paycheck to paycheck. UBI can more easily dish out money on a more frequent basis. Additionally, this was already mentioned elsewhere, but, a major argument for UBI is that not having any sort of means-testing will drastically streamline the process, reducing costs and increasing efficiency. NIT still involves means-testing.
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Looked into NIT a little, and as I understand it, it could basically be a linear function where Y=0 when X (income) is, for the sake of example, $40,000 yearly. Then anyone over that pays increasing income tax while anyone below receives increasing amount of money from the government instead? Apart from whether linear actually makes sense or not in the real world.
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It doesn't have to be linear, that's just the easiest model to visualize and understand it just should be smooth enough in a way that ensures no discontinuity.
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Either that or a more progressive stance on socialist policies that provide basics to everyone. At least with socialist style policies there isn't the possibility of those spending their UBI on junk food or wine our whatever, but I really would prefer either to the current state of affairs.
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Regarding the "basics to everyone" for programs, they're typically labeled "universal", and there are a number of advantages to universal programs: 1. They tend to be more resilient to budget cuts since everyone is bought in. 2. They don't have the discontinuities mentioned in the article. |
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I disagree strongly with your idea of "poor people would just spend on drugs" but there's a nugget of reason in it - there's a high risk that UBI without rent control would just be subsidizing the landlords, without actually helping the people.
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For the most part people know best where there money needs to go; most of the financial advice people see from "experts" really is oriented toward people who have money left over after paying for necessities. As for housing, I think that this would be standard econ, really. More money means more demand, which in the absence of more supply, means higher prices. Things like housing are harder to increase the supply of than say, TVs, so yeah, they'd probably go up more than the rest. But I suspect that everyone would still be better off. I don't think rent-controls are a good idea. On the other hand, I do think that in the long run rich people gobbling up finite land is a problem;
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One thing worth noting is that UBI actually has an impact on supply,. What people want to purchase is not simply housing - it's housing in their preferred location. I think a big part of what makes housing desirable, for the bulk of the population, is ability to earn enough of an income nearby. If that's the case, UBI might actually directly create desirable housing (out of almost desirable housing) and increase supply. I don't expect this effect would be large enough that UBI would put downward pressure on housing prices overall, but I don't really know.
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I don't get it, what is the mechanism by which you're proposing this would happen?
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Imagine a unit of housing, presently empty because it's undesirable, because there are no good job available nearby. There are some pretty good jobs, but none available that pay quite enough that competing for housing elsewhere isn't more attractive to the marginal consumer. A UBI makes the pay matter a little less, and so makes places like that more attractive. It doesn't, first order, cause more units to be built. But that is not the only way to increase supply. Longer term, that kind of calculation about potential units, in places where it's easy to build, might lead to more units built. But that gets more complicated.
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If this is true, it would also be futile to raise the minimum wage (which I, and most leftists I know would support), because landlords would just capture the extra wage. I don't think this is supported by data from places where the minimum wage was raised.
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Government paternalism is terrifying. People are going to screw up, and make bad choices, but having choices is better than being treated like a child your entire life.
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As Andrew Yang rightly said "nobody has ever wondered if shareholders would screw up, make bad choices, when receiving their dividends".
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And this is the right way to look at it. In addition to being a free agent, every citizen should be treated as a shareholder in the nation.
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no company that has costs well above revenue for decades is paying out dividends.
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But many companies have debt that they just roll over. Not many companies aim to be debt free, because it is not necessarily a good goal. You need capital, and optimise its mix. At current rates, issuing debt is attractive.
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I have friends who didn't pay for their house. They were lucky enough that their parents just gave it to them. So bad to be treated like a child for their entire life. They're really suffering not having a mortgage to pay every month. Instead they're saving up for their kids college.
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Providing free healthcare, free education and free food to those who need it is quite different from being treated like a child.
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Especially if they end up in a higher tax bracket. It's not government paternalism that's terrifying, but cultural demonisation and paternalistic contempt for the poor, combined with unthinking adulation of the extremely rich.
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Doubly so when a large fraction of the people receiving free healthcare, free education, and free food are, in fact, children.
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Means testing is paternalism. Just giving the poor straight cash and leaving it up to them to use that to get back on their feet is probably the least paternalistic strategy I can think of that isn't just cruel and results in systemically and permanently disenfranchising large parts of the population for bad luck.
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Giving people public access to healthcare, education, and food gives them more choices in life- not less.
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Speaking of children, that’s who’s gonna starve if you decide to let them suffer the consequences of their parents’ poor choices. I would have personally starved to death dozens of times over if not for food stamps.
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Food stamps don't prevent children from suffering the consequences of their parents poor choices; people can and do trade those benefits for other things. Children also get to suffer for policymakers poor choices of what the stamps should be spent on, and taxpayers get to suffer the cost of every benefit program duplicating income verification functions and other eligibility functions rather than having universal programs where the tax system takes care of the better off not getting unfair share of benefit.
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I’m telling you that in my lived experience, food stamps filled my belly and prevented me from dying.
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You might have been more hungry, but death by starvation in the USA is nearly unheard of. I personally have never heard of anyone - homeless or otherwise - dying of starvation in the USA. The only people I've heard of dying of starvation were stranded on a mountain or on the ocean or something.
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You won't see death by starvation. You'll see something like death by flu after malnutrition weakens immunity, or death by overdose after malnutrition weakens decisionmaking.
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Oh sure, I suppose my family could have lived digging through landfills like the wretchedly poor do in Ethiopia and Indonesia and elsewhere. And perhaps I wouldn’t have died, just been left permanently physically and mentally stunted by malnutrition, certainly not coming out of the ordeal in any state to perform the fairly high-level job that I have today. The income taxes that I pay with the large-ish salary that I was able to get because my brain was not stunted by malnutrition as a child have already paid for the food stamps that the government invested in my well-being many times over, by the way. That is what welfare does: it works, and in the long run it pays off in spades.
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"Well, at least there aren't a lot of people literally starving to death" isn't exactly a glowing endorsement of the system.
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Especially in the UK, where there literally are people starving to death now. People in the US who live in a comfortable six-figure-middle-class bubble really have no idea how precarious their position is. All it takes is one expensive long-lasting serious illness and they'll be out on the street with the other people who "made poor choices."
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> All it takes is one expensive long-lasting serious illness and they'll be out on the street with the other people who "made poor choices." You declare bankruptcy, your assets are divided up among your creditors and you start over again. That's why bankruptcy exists. Several (most?) states even let one keep one's home. Maybe we need a law to prevent landlords from refusing to let based on prior bankruptcy — would have to think that through. Bankruptcy is not (or at least should not be) the end of the world.
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It's hard to start over out of a box.
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Starvation isn't literal in this context. One can intellectually starve a child. One can have a child be stagnant in their growth, for example by not having them play.
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>the salary that they offered was $0.50/hour too much for her to stay on food stamps, and was less than her current job I don't understand. How was she eligible for food stamps, if she already had a job that paid more?
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She probably didn't. I took "current job" to mean the job this person has at the time of the telling of this story - i.e. they have since found a greener pasture.
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I meant that her total compensation was more with her current job that paid less and did not use her qualifications. The equation was worse job + food stamps > better job without food stamps. The better job in the long run might have lead to better still. But she couldn't afford it in the short run.
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Higher hourly pay, but less hours per week, maybe.
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probably under table, waitressing tips etc
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A lot of welfare and food stamp recipients are the working poor. This was a single mom with three children. She needs to arrange for child care while she's working and it's a good idea to set aside money for medical emergencies. I'm going to guess this job probably pays a few dollars above minimum wage. Someone in this situation is absolutely eligible for food stamps. But if we get another four years of MAGA, then who knows, maybe not.
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Right, that's not the point. The point is that taking a pay cut, with apparently no other change in circumstance, somehow rendered her ineligible for a social service she was already receiving. I want to know what rule made that possible, as it appears to be critical to this discussion of perverse discontinuities.
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Yeah, we're missing some details here. Could be tips or hours worked as sibling comments suggested. Life is messy.
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Does the food stamp program look at hourly wage as your income determinant, instead of weekly income?
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This is one reason behind universal basic income as a welfare program. There are no hoops, no cutoffs, no distortion of incentives.
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Yes there are. Money if fungible, so UBI can become a tent subsidy for landlords by driving rents up, instead of paying for food and medicine while leaving rents at current equilibrium
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>But the salary that they offered was $0.50/hour too much for her to stay on food stamps, and was less than her current job The salary was lower but would somehow remove her eligibility for food stamps?
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The number of hours scheduled to work matter here.
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I agree, and I have my own stories to tell (like my foodstamps admin telling me to spend my tax return as quickly as possible or I'd lose foodstamps; which is doubly perverse). A for tax brackets, why do they exist. I think our mathematics is advanced enough that things like tax brackets could be replaced by continuous functions. So its either by design or by lack of imagination that these discontinuities exist. I've a friend from Finland who is vehemently opposed to any sort of means testing for any social program or aid. I see his point. Means testing creates all of the problems mentioned above ... and encourages those not eligible for them to view them as some burden that other people get but they pay for--fostering resentment.
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at least in the US, income tax brackets are done in a mostly reasonable way. if the tax bracket is at $30,000 and you make $35,000, then you’d pay a low percentage of the first $30k and a higher percentage of the last $5k. so you can’t lose money by earning an extra dollar, at least only considering income tax. it’s other benefits, tax credits, social programs, etc. that sometimes end up being designed with perverse incentives.
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Making them continuous means requiring everyone to use a computer to calculate simple things like income taxes. Brackets aren't even a case of perverse discontinuities because the higher tax rate only applies to the money made in that bracket. Looking at just income taxes you never take home less money from getting paid more, it's a quite reasonable balance between computational simplicity and a rational progressive tax structure.
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> A for tax brackets, why do they exist. I think our mathematics is advanced enough that things like tax brackets could be replaced by continuous functions. So its either by design or by lack of imagination that these discontinuities exist. Progressive tax brackets do not have discontinuities such that your income net of income tax becomes lower as a result of moving up a bracket.
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good point. its actually not as bad as I thought.
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I'm not an expert on the system in Australia but how I think it works from what I have heard is there isn't a cut off point where if you make x you are eligible and if you make x+1 you aren't. Instead its a slope where if you make x+1 you lose a certain % of the payments until you eventually make enough to lose them all. But at all times its still better to take the job.
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I'm afraid it's not that simple. The key is the Effective Marginal Tax Rate, which is the compounded effect of withdrawal of benefits and moving up to a different tax bracket. Depending on the prevailing settings it's not uncommon to find points at which the EMTR is more than 100%. I ran for the Federal Parliament for a libertarian party in 2007 largely because I supported their policy plan to reform taxation and welfare jointly. The concept was called "30/30": a 30% flat income tax, with negative income tax at 30% below $30,000 income. Capital gains and company tax would also be set at a flat 30%. The gist was to remove all distortions from different tax and welfare settings, so that any taxpayer was always facing the same deal: each additional dollar earned is taxed at 30%. There were a lot of policies I didn't agree with, and naturally, those were the ones I got the most questions about. Running for a microparty that grabs anyone who puts their hand up is an ... interesting ... experience. (I came second last with a whopping 0.7% of the primary vote, for those who were wondering)
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Most things here are arranged that way and it works pretty well for the most part. There are a few things that still have cliffs, though. One of my friends is on a disability pension but is still able to work part time. If he works too many hours then he's disqualified from the pension so he's had to cap his work hours. Another thing is the childcare subsidy for working households - the subsidy itself scales in a reasonable manner but there's also a hard cap on annual payments which applies above a given household income threshold. If you go slightly over the cap you can end up out of pocket by $10k or more.
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I guess like the artical mentions she could have bought put options.
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Sounds like the business should be paying their employees enough to feed their families.
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What is a "family"? Should a business adjust the salary based on how many members you have in your family? If one person has 10 kids and another has 2 they have drastically different requirements. An only child with a well-off family might only be taking care of themselves whereas another child might need to also be taking care of their parents and grandparents who also need to pay for medicines in addition to taking care of their younger sibling who isn't old enough to work yet. The variety and complexity of "enough to feed their families" is crazy.
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Business should pay enough to feed a family of say 4. I don't care what family you specifically have.
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OKCupid has a graph of reported height for men[0]. It's both shifted 2 inches to the right of average, but also slightly flattened at the normal peak of 5'10". It's not nearly as pronounced as the graphs in this post, but it's still notable. |
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I really miss the more technical blog posts that OKCupid used to do like this... then after selling out to Match Inc, they wen't through that weird woke period... and radio silent for over a year... The technical insights were far more informative in terms of dating trends.
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The technincal insights were great but man I loved the writing, too: > Apparently, an online dater’s imagination is the best performing mutual fund of the last 10 years.
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If you liked OkTrends, one of the founders of OkCupid, Christian Rudder, wrote an entire book full of fascinating social phenomena using data from social media and dating sites. It's called Dataclysm and it's great.
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Slightly off-topic but this reminded me of what is perhaps their most depressing pair of graphs. |
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In his excellent book, "The Truthful Art", Alberto Cairo presents a great analysis and discussion of those graphs. The short version is that the way they are designed masks a lot of details of the analysis such that they are fundamentally misleading... |
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"look best" is open ended. Why should my "looks best" evaluation alter as I age? Just because I think a young woman looks good doesn't mean I want to marry her
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Why is it depressing? Biologically this must be tuned to the best age for having kids, and men's age hardly matters.
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Both have a minimum in the early 30s, a decade off from these numbers. Granted, there's likely some confounding due to poverty rates vs age of pregnancy, but the data simply does not support the conclusion that 20 is the best, healthiest age for a woman to bear a child. There's still some development and biological maturation going on into the 20s.
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Men are biased because of the discrepancy in risk between men and women. Men prefer younger women because male reproductive capacity is not at stake if something goes wrong. I think the empirical situation you're noting should be inferrable from theoretical consideration of evolutionary psychology and knowing that peoples' assumptions tend to be based on male prejudices.
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This is depressing to people who expect the dating and sexual marketplace to be some sort of meritocracy, or equality to be exhibited. It's more of a free market than some care to admit. The gritty truth is: people are depreciating assets, and some lose their value (perceived or actual) faster than others. One of the founders of Okcupid (a data scientist) wrote a book, Dataclysm [1], using data from Okcupid's platform; I highly recommend it (this is where the above comment's [2] graphs are sourced from). You get other "interesting" observations, such that most people don't describe themselves as racist, but a surprisingly high number of people are [3]. |
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who expect the dating and sexual marketplace to be some sort of meritocracy, or equality to be exhibited Why/how would people come to think that way? As the parent comment says, this is fundamentally a biological thing.
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I will leave detailed explanations to domain experts. An example I'd hold up would be when Leonardo DiCaprio catches flak, loudly and publicly, for consistently dating women only in their early to mid 20s [1] [2] [3]. Is it biological? Yes. Is it legal? Absolutely. Do people still vocally decry it? Very much so. |
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When does he catch flak? Leo is one guy, you could list a whole bunch of ceos and famous people's private lives as counter-examples. Bill gates has been married to Melinda forever. That story is an advertisement for Leonardo, not a fundamental truth about human sex lives.
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There is an equality narrative out there and nobody is willing to state the truth because it may paint one group as superficial and another less so.
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> As the parent comment says, this is fundamentally a biological thing. Disagree. Wikipedia quote "in the old indigenous religions, women married between 12 and 15 years of age". The most generous read of this (and the one I'm inclined to agree with) is that men genuinely factor emotional maturity and morality and so on into their sexual selection and preferences, where the least generous read is that men hide their ephebophilia when answering surveys.
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Something can be completely expected and explainable while still being depressing. I don't see how that's surprising.
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Quality of sperm decays with age. Just not in the same curve as egg reserves.
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And resources (especially of single men) increase more than linearly with age, to make up for it.
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Does the quality of sperm have any negative effect on the child or mother?
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Older fathers are associated with all kinds of negative childbirth outcomes. Just not as much as older mothers.
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This wouldnt matter in a natural environment, but our biology hasnt caught up with us not living in such environments anymore.
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So if it were purely biological, we'd expect to see some sort of negative gradient for men's preferred ages, though not as exaggerated as the one for women's preferred ages? I'm also unclear as to what the question was which prompted the answers from men and women, or what the motivations were. There is much more to a relationship than sex for procreation, and almost everyone seems to realize this fact. So the conclusion is that men simply find young women attractive (and the "reproductive age" evo-psych just-so story cannot justify it), or men no matter how old they are continue to want children, at the expense of a relationship with a fully developed adult.
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IMO the dataset that those OKC analyses were on are highly skewed to the kind of people who would use OKC then. I wonder of OKC users are representative of the dating population, especially since of course dating dynamics on OKC are likely very different from other ways to date.
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Given that magazines and movies are full of young women pretending to be old (skin care products especially) is this any surprise?
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Do you have a link to the study? I'd love to check the study design
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Average height changes significantly depending upon your age cohort. If few older people sign up to OKCupid, that would be a sample bias and the average height would be noticeable higher. Edit: "Adjusting for age, adults ages 18-74 years with an annual income of $15,000 and over were observed to be 1.2 inches taller than those with an annual income under $4,000", amongst other serious biases (whiteness, education) that affect average height the would be expected to be in OKCupid sample. https://www.cdc.gov/nchs/data/series/sr_11/sr11_224.pdf
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The difference in height for US age cohorts (among adults, obviously) is driven by ethnicity- and younger cohorts are shorter on average.
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Where did you see that? From the link I gave it looks like the average 25 year old is about 2" taller than the average 55 year old. Even anecdotally, the height difference is noticeable (although I am in NZ, the variation between cohorts depends strongly upon what country you are in).
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The dataset you linked is from 1971. The older cohorts were born near the turn of the century when nutrition wasn't exactly the greatest for large segments of the population. It's most likely that the skew is due to environmental factors rather than ethnic ones there. See [1]. Age related height declines don't even start until age 40 and are quite small for some time, so it's unlikely to be a factor in dating-related data sets. See [2]. |
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Over 60's are about 1" shorter. Hispanics are a lot shorter. I am pointing out that the sampling biases are important when looking for cause and effect when comparing against a population average.
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Noticed that they've removed data from that page. You can see a version from 2017 here: Always found their blog posts an interesting look at the underlying data and user behavior. But now they're scrubbing them?
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If memory serves, it was shortly after they got acquired (in 2011 by Match.com owners?) they started scrubbing their blog. The most noticeable was old posts with criticisms of their new owners and the poor incentives around subscription dating websites.
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Anecdotally I saw that skew in real life before online dating. Women and men would all tell me I looked "About" 5'10", which I decoded as shorthand for "You're definitely not 6 foot"
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Can confirm. I'm 5'9" but listed myself as 5'10" on dating sites. Adding that extra digit really seems to matter, and when I'm wearing shoes I am that tall anyway. Because of heels women often come off as much taller than they actually are. Rounding up to 6' definitely would've been stretching the truth too much though.
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I'm also 5'9". After I listed 6'0" on my Tinder profile, I immediately got more matches AND those matches were much more responsive and willing to meet. Many wanted to come over immediately (without meeting up at a bar beforehand).
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It would be interesting to see if the discontinuity was 6ft in the imperial units countries vs 180cm in SI countries.
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I did not know that people actually added 2 inches to their actual height in dating profiles, a practice I discovered later when actually meeting the people. Nevertheless, I always use real height (5’3") in dating profiles, thankfully my current wife didn’t care (we met on OkCupid). Given that me and her only put exactly 1 or 2 profile pictures and zero description and we still able to meet, should be considered anomaly.
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Both men and women showed height above the national average. As a result I am more inclined to believe that there is selection bias in OKCupid audience (more white people, less minorities) than that there is such widespread deception going on.
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Or it’s self reported and on average people fibbed up their height a smidge
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Exactly. Not to mention short people may have opted out of dating because they lack a perceived fitness for dating.
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Or tall people opt out of OKCupid because they can date offline.
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Or since it's so easy for tall people to date offline, they choose OKCupid because it's even easier due to the asynchronous model and network effect. They get more out of the algorithms than shorter people since more people are attracted to them.
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At least to me, the discontinuities in things like TANF, Medicaid, CHIP, etc. are some of the greatest signs of political dysfunction. There's nothing remotely partisan about these being a bad thing. _Everyone_ should agree that these make no sense and mis-incentivize behavior. Yet these flaws remain for decades despite being known and discussed for approximately the entirety of their existence.
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Not to belittle the lives that depend on this stuff, but these issues go back to flippin Rome. The Grain Dole was a huge part of Roman politics and it's history is fascinating reading: These issues are not very complicated: give people free stuff and they support you, let the next consuls/emperor worry about the revolts in Sicily (or whatever) that the Dole causes. We keep saying that these problems will come back to haunt us, but that's all history has ever been.
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The problem he is pointing to isn’t the free stuff, it is the discontinuity from hard cutoffs instead of gradually fading out.
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It always seems like these programs being attackable is a benefit because it lets you continuously rally passionate donors to always fight for the programs and fund campaigns. Conversely, stable universal programs don't draw as much attention and fundraising.
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It’s the stated goal of the party in power to throw as many kids off food assistance as possible. If the program has quirks that is by design.
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Both parties have had multiple turns at the wheel since many of these policies have existed. Whichever party isn't in power blasts the other party for not fixing it. In essence, both parties use social benefits like political bargaining chips for buying votes because they know people will show up for those issues. This issue is eerily similar to the 'border crisis' we've been facing. The issues surrounding the treatment of immigrants that have been decried as inhumane and unethical were fully in force long before 2016. Of course, it wasn't an issue for the Democratic party until we got closer to the census and the other team was at the helm. I don't think there's any real evidence that either party has the best interests of the people at heart, or that they have any genuine intent to fix the issues at all.
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Exactly, anyone deriding a single party is in fact a pawn. Zoom out, and you realize you're trapped in a matrix of control by all parties.
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What is "the party in power"? Democrats control the House and Republicans control the Senate. No laws can be passed right now without bipartisan support.
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Moreover, these discontinuities and the perverse incentives that they lead to on the cusps have been elements of these programs for longer than I've been alive.
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Depending on how long you’ve been here, you may have been living under a Reagan-esque conservative regime the whole time. Over my entire life I’ve seen only actual republican policies, or policies of weak-minded Democrats easily baited into acting like Republicans. There hasn’t been a sincere and effective advocate for the poor in America since LBJ.
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You're being downvoted but you're correct. A glance at some of the potential Democratic presidential nominees tells the whole story: Biden (classic case of "weak-minded Democrats easily baited into acting like Republicans"), Warren (actually was a Republican, during the Reagan years no less!), Buttigieg (previously a firm supporter of M4A then was somehow persuaded to water it down to "Medicare for all...who want it") ... Bloomberg!
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There's a possibility that a discontinuity in data analysis might have an impact on fundamental physics. Many dark matter detection experiments rely on detecting an annual modulation, i.e. an excess of detection events later in the year, when the Earth would be going into the 'dark matter wind'. This helps one distinguish the desired signal from backgrounds that don't change throughout the year, like cosmic rays or ambient radioactivity. One particular experiment has been claiming a positive detection for two decades, leading to a lot of confusion in the field. It was recently argued [0] that this is due to a discontinuity in their data analysis. The team might be analyzing their annual modulation by subtracting out the average rate in each year, leading to a discontinuity at each year boundary. So if their detection rate is slowly going up, e.g. due to detector aging, it would look like an annual modulation, where the rate is lower in the beginning of the year and higher at the end! |
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I have firsthand experience of the frustration that these sort of discontinuities can cause. I lost all financial aid and nearly all "scholarship" money my senior year of undergrad after my 6 month coop at Intel put me over some income limits (probably around $33k per year). All told, I was probably ~$5k ahead compared to where I would have been with the scholarships and without the income. Still, it would have been nice to do something more productive than spend six months at Intel for ~5k after taxes.
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Presumably the experience itself helped you get other jobs that would’ve been unattainable had you not had a prestigious internship at intel.
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Intel is not prestigious in the US software job market. Literally nobody I have interviewed with has ever asked me about my time at Intel.
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Sure, but the person would have been in the same boat no matter what specific logo was hanging over the door.
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> One reason people were looking for ways to lose money was that, in the U.S., there's a hard income cutoff for a health insurance subsidy at $48,560 for individuals (higher for larger households; $100,400 for a family of four). There are a number of factors that can cause the details to vary (age, location, household size, type of plan), but across all circumstances, it wouldn't have been uncommon for an individual going from one side of the cut-off to the other to have their health insurance cost increase by roughly $7200/yr. That means if an individual buying ACA insurance was going to earn $55k, they'd be better off reducing their income by $6440 and getting under the $48,560 subsidy ceiling than they are earning $55k. This is an incredibly dumb way to structure things.
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...and if you do qualify for a subsidy, you aren't out of the woods yet as far as year to year surprises go. There was a nasty one in my county for people getting subsidies. There were only two insurers available through the ACA exchange in my county in 2019. They were Kaiser and Premera. The cheapest plans from Kaiser were a pair of bronze level plans (one with an HSA, one without) for about $770/month. The cheapest Premera were bronze plans at something like $1000/month. An individual in their late 50s just under the subsidy cutoff would get a subsidy of around $660/month, so if they went with a Kaiser bronze plan would be paying around $110/month. Not too bad at all. For 2020, the same Kaiser and Premera plans are available at about the same cost (actually, they may even have come down a few percent). But there are also two new providers. One of those has a couple plans slightly cheaper than Kaiser, but comparing side by side the Kaiser bronze plans are better in most ways, and Kaiser also has more locations. That other company's plans, though, are silver plans, not bronze. The subsidies are keyed to the cost of the second cheapest available silver plan and so these "no better than bronze but for some reason silver" plans greatly lowered the subsidies. What would have been a $660/month subsidy in 2019 is now only about $400/month in 2020, meaning you'd pay this year around $370/month for the cheapest plans in my county. Going from $110/month to $370/month in a year when the cost of plans went down slightly and the number of insurers on the exchange doubled is pretty damned annoying.
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The cynic in me wouldn't be surprised if these new plans were offered by subsidiaries of Kaiser or Premera. I certainly hope that isn't the case. (edit: deleted parent quotation)
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It literally makes no difference to Kaiser, because they get the same amount of money either way, only thing that changes is how that cost is split between the plan beneficiary and the other taxpayers subsidizing him.
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Immediately, yes, but over the long term this could sway public opinion.
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Was it necessary to full quote the entire parent?
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What's eye-opening is the author's point about _how_ many people go about ditching some income at the last minute -- by buying a particular type of financial product whose value is likely to go to zero. Which has the effect of transferring their wealth to someone else (the vendor of the financial product) who just sold something that was effectively worth nothing, for a great deal of money. It's the most bizarre sort of wealth redistribution I've ever heard of.
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> (the vendor of the financial product) who just sold something that was effectively worth nothing It's not necessarily worth nothing. It has a very high chance of going to $0, but it could also have a very small chance of going to $1 million so that the other party in this trade is not necessarily raking in a lot of profit (or any) by making this trade many times over.
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It effectively creates "potholes" in the distribution --- anyone in that net-negative zone tries to move out of it. The function looks like "y = x <= 48560 ? x : x - 7200" and means that, at the other end, someone who makes $55760 would end up with the same as someone who makes $48560.
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You can't necessarily do it last minute. You have to realize the loss by the end of the tax year (Dec 31), which may be months away from the day you file taxes. On the other hand, if you can deduct traditional IRA contributions, you can make prior-year contributions up until the tax filing deadline, and keep your money. If you're eligible for an HSA or solo 401k, you can also use those to similar effect.
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The devil is in the details. (When isn't it?) For example, regarding health insurance subsidies (mentioned in the article), deductible IRA contributions must be added back when calculating your income. As are other sources of income. E.g. tax-exempt municipal bond income doesn't count for Federal taxes but it does count for income limits for the health care subsidy. Offhand, I'm not familiar with income limits for an HSA. It's quite likely that allowed income sources and deductions vary for these various programs.
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> deductible IRA contributions must be added back when calculating your income Not true. IRA/401k/HSA reduce MAGI for healthcare purposes. Do not confuse MAGI for the healthcare marketplace with MAGI on your tax return; those are two different figures. |
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Ha. You're right about IRA deductions with respect to healthcare. But I knew that I saw IRA being added back somewhere! It turns out I was thinking of FAFSA. IRA deductions are added back for computing income for financial aid purposes. Tax exempt interest is added back for both healthcare and FAFSA. That's why tax programs and tax accountants are essential. It's difficult for people who don't do this for a living to remember all of this.
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There are 0 Congresspeople that are near the threshold, which could be related.. Congress seems to focus on ensuring wealthy citizens and corporations gain more wealth, and not making things fair for everyone else.
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Too many smart people in the US are working to invent things like the 'Double Irish with a Dutch Sandwich'[1] rather than fixings these massive equity and fairness problems at the bottom end. |
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Some country interpolate insurance between different tires instead. So, if $0 at $20000 income, and $5000 at $40000 income. A person with $21000 income will need to pay $0 + ($21000 - $20000) / ($40000 - $20000) * $5000, a.k.a $250
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This is a lovely post and good general demonstration on this phenomenon. The drug charging graph is particularly stark. I think the most interesting graph is the final one, for marathon finishing times. The idea that people will fudge numbers to meet (or avoid) official definitions is commonly believed (and shown repeatedly here). It's more interesting to observe that it's not just people using motivated reasoning, but also that people will alter their performance to hit highly visible targets.
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I think another factor for the marathon finishing time discontinuities is the use of pacers --- people who run carrying signs at a pre-defined speed (usually targeting a specific finishing time, e.g. 3:15). Lots of people who have finishing goals will run in a pack with this person so they know they're going fast enough, then will all finish just under the target time.
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The youth sports discontinuity was a problem for me when I became old enough to play little league, but was exploited by me when I should have moved on to Teener League. I was born on the cut-off date for Little League, so I was the youngest player on the team my first year (and the youngest for my grade the other years.) Do to ambiguity in how the cut-off date wording was written, I ended up (legally) playing a fourth year when I was 13. I was never a big kid but at this point I was certainly bigger than all the 10 year-olds and more importantly had gained coordination and experience. It was my favorite year playing baseball. (As an aside, I paid karma for it the next year ... I spent eighth grade in a city Teener League where I was once again the smallest, least experienced kid. And the city league was way more cut-throat than what I'd experienced in the suburban setting my previous four years.)
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I was always small until about age 16, and I always sucked at sports and never really got into them - partly as a result. I wonder if we shouldn't group kids by size for sporting activities instead of by age. There's a famous statistic in Canada that NHL players are much more likely to be born in January and February than September-December. The reason being is they were nearly a year older than other kids they were paired with, so they did better at the sport and thus kept it up as they grew. Seems silly.
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>I wonder if we shouldn't group kids by size for sporting activities instead of by age. Depending on how small your buckets are, you may end up with a scarcity problem (players and admins/coaches). Also, age matters a lot in regards to coordination. A 13 year old who is roughly the size as a ten year old will, on average, have a large advantage. Some people just aren't cut out for athletics genetically. Some grow later on and may or may not be interested. Age seems like a fair sorting criteria and general enough to not introduce too much complexity.
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> Some people just aren't cut out for athletics genetically. Some grow later on and may or may not be interested. Age seems like a fair sorting criteria and general enough to not introduce too much complexity. Age isn't particularly fair but it isn't the worst either. As a kid, being around kids younger than you can be really displeasing. When you're a kid, the only thing you want is to be treated like you're older/better than you are. If you keep getting put on teams for people who are small - it's likely you're being put on teams for people who are smaller than you. I had to play baseball with 7-yr olds for about 3 years. It wore me down as a kid. I gave up on baseball at that point and said I wasn't doing it anymore. The reason I had to play with them is because no coach wanted me on their team because they saw me as too small. (Small town, they didn't group by age as much as they did by size) I'd see kids go up to bigger-kid teams and get bigger but I stayed the same size. As a kid - it was super disheartening to be stuck with the same 7 to 8 year olds for all that time and seeing people you used to play with in the bigger kid league. It sucked. That said - baseball is probably the ONLY sport I can imagine being where you could move kids up by age and not by size as much. Football, soccer, basketball, etc. all involve a serious size component to them whereas baseball is less so - in my mind. For reference - I grew up to be a normal sized adult. I was just super late on the curve compared to my peers.
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When I was a kid, our club soccer travel team of 4th graders beat an intramural team of 6th graders by 3 goals. Our coach lost $100, because he'd bet we'd win by at least 4. I think soccer and basketball much moreso involve a coordination and fitness component than size. In youth soccer, you have to outrun the other kids and handle the ball well. Messi is 5'7". In basketball, of course, height does help a lot there, but amongst local kids, better to be able to make shots, dribble, and get around the court. Football was the only sport that segregated by size in my school system's leagues, in middle school. Well, besides wrestling, of course. They're contact sports.
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> A 13 year old who is roughly the size as a ten year old will, on average, have a large advantage. This is an interesting claim. How much is a large advantage? Do you mean in hockey specifically? Or in athletics? Or any given task?
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> I wonder if we shouldn't group kids by size for sporting activities instead of by age. This is how it's done in rugby in New Zealand and maybe a few other countries, but not most. It's much more important in rugby than in baseball!
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> The reason being is they were nearly a year older than other kids they were paired with. I’m amused that the kids who did worse are absolutely necessary for the kids who do better. They end up getting wasted by the process, demotivated, but they are a necessary brick to step upon. It’s the same consideration when talking about male suicide. Are they necessary for others to feel good? We could solve a good part of it as a society, but at the expense of providing an environment where males fail less, have a better social net, receive more love, and are less pushed to succeed in their career to be recognized. So we could solve it, but it may cost our economic growth. Is that why male suicide isn’t getting solved? It’s getting less funding than even dog shelters, and less attention than much smaller problems.
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It’s the same consideration when talking about male suicide. Are they necessary for others to feel good? No. There's no evidence at all to support this view. In fact there is evidence to support the view that people who feel good when others feel bad are more likely to have suicidal tendencies.
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Then... why don’t we act against it? Isn’t it, then, more urgent than other topics? It doesn’t seem like we care, given we always treat male complaints as crybabies.
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I had the exact same experience. I was one of the youngest people in my year and one of the worst players on my team. Until my age 13 season, when they wouldn't let me move up into the teenager league because of a one=month difference in age. So I was pitching to kids who had just turned 10 ... I threw a lot of strikeouts that year and hit my only home run ever haha.
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The Swedish system solves much of this, at a price. In Sweden, the principle is that everyone pay into the system, and everyone gets benefits from it. So everyone, rich or poor, gets a $130/month payment per child under 18. There are many other examples. The price is that while the US has a very progressive tax system, where high income earners pay a lot of tax, while the low & middle pay very little, in Sweden everyone pays a lot of tax. It (kinda) works because everyone also get a lot back from the system. So Sweden has very high taxes, but most people get similar value back. You can think of it as a forced savings system in some ways.
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