Author Topic: Is it ethical to make money from something you own?  (Read 42432 times)

Dicey

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Re: Is it ethical to make money from something you own?
« Reply #100 on: February 28, 2014, 05:01:35 PM »
If you are buying stocks directly then you are not investing optimally, full stop. What you do after you buy stocks directly is irrelevant, because you've already made a mistake.
Holy shit! You have hit the nail squarely and succinctly on the head. Amazing how many people believe this is the path to success.

Daleth

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Re: Is it ethical to make money from something you own?
« Reply #101 on: March 01, 2014, 08:02:56 AM »
About the alternative - sorry, I haven't come up with one. Believe me, I've tried. :P This is part of the reason I'm asking this here. Because money-through-ownership is the only feasible plan I can see for a financially-stressless life - and yet it somehow seems... wrong. That I'm somehow setting myself above others and denying them the same opportunity that I'm taking. That there's only so much pie and now I'm helping myself to a second serving...

But there is not "only so much pie." There is far more money in the world today than there was, say, 150 years ago. Just look around--how many more people are living decent, middle-class lives now, compared with 100-150 years ago?

Wealth is not a finite set of objects that exists, which some people find and others don't. It's true that some forms of wealth are finite objects that exist (for instance, a gold mine--there is only so much gold in the world), but many other forms of wealth are CREATED by people.

For instance, I have two friends, a couple, who are becoming wealthy through the following approach: they buy houses in the rather poor neighborhood, where you can buy a house that's in bad shape for $20,000-$30,000, and then they put thousands of dollars (probably $10,000 per house, a low price because they do much of the work themselves) and hundreds of hours into fixing the house up. By doing that they are creating wealth; they found a piece of trash, a house that was literally not far from falling down, and transformed it into an attractive, sturdy house, which they can rent for anywhere from $900-$1400 a month. Out of that rent they must pay property taxes and insurance, so the houses net them anywhere from $600-$1100 a month. If you subtract roughly 10% to account for maintenance and vacancies, it's about $560-$990/month.

So they have turned an abandoned house that was worth $20k into a pleasant house that does all this:
- Provides renters with a nice and inexpensive house to live in
- Makes the neighborhood nicer, since an attractive house with tenants in it is far better than a falling-down abandoned house; this increases the value of all the houses around it, as well as increasing the neighborhood's quality of life
- Provides the city, county and local schools with increased property tax revenue to fund schools and other local government programs (property taxes are a huge source of income for most American municipalities), AND
- Provides my friends with an income of $560-$990/month.

Why should my friends not get an income for providing services to tenants and neighbors, providing money to the city, county and schools, and continually spending money to maintain their houses? If you couldn't get an income for doing this, then the only people who would restore houses, improve neighborhoods and provide low-cost rental housing are... wealthy philanthropists who care about housing. Nobody else could afford to do it. And there simply aren't enough wealthy philanthropists interested in providing cheap housing, so it simply wouldn't happen.

In short, making money off things you own is what CAUSES houses to be restored, neighborhoods to be revitalized, etc. And this involves creating wealth, because you start with a piece of trash (a terrible house worth very little money, which makes the neighborhood around it look terrible) and turn it into something good that generates new wealth.


phred

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Re: Is it ethical to make money from something you own?
« Reply #102 on: March 01, 2014, 02:24:10 PM »
Practically everyone who has lots of money has it because of something they own. Some people have real estate, others own shares in some companies, but the basic idea is always the same - you own something that continuously generates income without you needing to lift a single finger.
Of course, such extremes are rare - most early-retired people do something productive simply for the fun of it - but the numbers are still there. If you produce less than you receive, you're a freeloading parasite. Something like that is only possible because someone somewhere receives less than he produces. After all, the sum of all things produced and received is zero (if you produce something but don't give it away, then you can consider that you've received it yourself).

Owning stock - the most common form of "money-generating-ownership" because it's the easiest - has another problem that I can see. It's commonly considered that investing in the stock market is good, because it gives money to the companies who can then use it to grow. But you don't buy shares from a company (not usually, anyway). You buy them from another shareholder. Who then uses your money to buy other shares which he/she considers more valuable. The money never gets to any companies, it just stays in the stock market.

You could, of course, be more mindful and only buy stock from small startups, where the original shareholder is the founder and then you know that he will use this money to actually advance his business... But that's high-risk low-return investment; the complete opposite of what MMM advocates.

phred

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Re: Is it ethical to make money from something you own?
« Reply #103 on: March 01, 2014, 02:55:02 PM »
OK, I forgot to add my comments (Blah!)

Should a producer only be paid once?  Shall a songwriter only be paid $100 for his song instead of receiving lifetime royalties?  Should an author who writes an idiotic tale of a junior wizard and his friends fighting evil be satisfied with the $2000 advance as the sum total of her work?  Or, does she deserve royalties?
  So, I can't sing, and I can't write.  Does this mean I am to be poor forever?  Or, can I take that initial payment for toting those barges and invest it so I also can receive a lifetime stream of income?  Now, this is not guaranteed.  If I had invested in Enron, my original work would have been, to me, worth nothing. 
  I bought my first DRIP stocks when I was making not much more than minimum wage.  This was paid directly to the company.  However, you are wondering about stocks in general.  If a company can keep its share prices stable, or with a slight rise, as reflected by the stock market, then it will find it easier to receive the financing it needs to make stuff, grow stuff, make things better down at the mattress factory.  If it can't get financing most of its employees lose their jobs.
  I'm having a slight bit of a problem with your equation: that things produced = things received.  As a producer the very last thing I would agree to is that I've received what I made to myself.  As a producer I want to move that stuff out the door.  It may be in (hopefully) temporary storage - which is just one of the costs of production.  If BMW makes 3,000 cars, it did so to sell them.  While BMW has title to their creation until they do sell them, it can hardly be said BMW has received them.
  Lastly, I get the feeling you believe savings are good, while investments are bad.  Let's see.  You put your money into the bank.  Here in America you are getting less than 1% interest which means your money is becoming worthless as it doesn't pace inflation.  Meanwhile, your bank is making money from something it DOES NOT own.
  Alternatively, you could put this same money into investments so your children won't ignore you in your old age.  This money may grow more than inflation; it may drop to zero.
  Whether a savings passbook or a share certificate-- either represents money you've set aside for later.
  Can a producer become wealthy from what he produces?  That seems to be how most here did it: denial of everyday pleasures to generate a full piggybank, scrimping and saving while others were buying the best & latest, hoping all the while we chose wisely so we don't lose it all.  Gee, we must all be gamblers at heart.
  When you look at Warren Buffet or Bill Gates, you are seeing them as they are now.  View their earlier lives.  One started with a newspaper route, and bought his first share of stock at age eleven.  The other had to drop out of college to follow his dream.
   

Vilx-

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Re: Is it ethical to make money from something you own?
« Reply #104 on: March 08, 2014, 04:28:15 AM »
Should a producer only be paid once?  Shall a songwriter only be paid $100 for his song instead of receiving lifetime royalties?  Should an author who writes an idiotic tale of a junior wizard and his friends fighting evil be satisfied with the $2000 advance as the sum total of her work?  Or, does she deserve royalties?
Oh, boy, copyright. That's a whole can of worms I'd like to leave out of this discussion. I have some rather... extreme views in that area. (In short: yes, I believe they should be paid only once, according to contract. It's a job like any other. Programmers also get paid only once for their code.)

I'm having a slight bit of a problem with your equation: that things produced = things received.  As a producer the very last thing I would agree to is that I've received what I made to myself.  As a producer I want to move that stuff out the door.  It may be in (hopefully) temporary storage - which is just one of the costs of production.  If BMW makes 3,000 cars, it did so to sell them.  While BMW has title to their creation until they do sell them, it can hardly be said BMW has received them.
Until BMW has sold them, they belong to BMW. They're not some kind of limbo where nobody owns them.

Lastly, I get the feeling you believe savings are good, while investments are bad.
I haven't thought about that. I don't see saving in a bank with an interest rate as any different than investing. Just that there's less risk and less returns. Saving without an interest (aka "in a sock" or "in a mattress" - whichever is the appropriate metaphor) would be closer to my original idea of "fairness" (though, as I've already said, this topic did manage to change my views about this).

warfreak2

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Re: Is it ethical to make money from something you own?
« Reply #105 on: March 08, 2014, 04:50:23 AM »
Oh, boy, copyright. That's a whole can of worms I'd like to leave out of this discussion. I have some rather... extreme views in that area. (In short: yes, I believe they should be paid only once, according to contract. It's a job like any other. Programmers also get paid only once for their code.)
That can only apply to "works for hire", for which the artist generally doesn't keep the copyright. I record music myself, not part of a contract; if I should be paid once for doing that, who should pay me?

Not all programmers only get paid once for their code; those working for hire do, but it's also very common for programmers to write software and make their money by continuing to sell copies.

Not to mention, those contracts only exist because the employer gets the exclusive right to continually sell copies.

I also have some pretty extreme views on copyright, we probably agree about a lot of things, but where do you envisage those one-time payments for programmers coming from, if the company paying for it can't receive income from owning the resulting software?

Daleth

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Re: Is it ethical to make money from something you own?
« Reply #106 on: March 08, 2014, 09:11:44 AM »
Oh, boy, copyright. That's a whole can of worms I'd like to leave out of this discussion. I have some rather... extreme views in that area. (In short: yes, I believe they should be paid only once, according to contract. It's a job like any other. Programmers also get paid only once for their code.)
That can only apply to "works for hire", for which the artist generally doesn't keep the copyright. I record music myself, not part of a contract; if I should be paid once for doing that, who should pay me?

Exactly. The "pay once like any other job" scenario only works when the artist/musician/writer/whatever is employed by someone else to create things.

My view on copyright is that if someone created something I'm going to enjoy over and over, I should pay them for it. *I* only pay them once--when I buy their CD or book, download their song, etc. I pay them once and enjoy the thing for anywhere from a few days to the rest of my life.

And then when someone else wants to enjoy that same CD, book, song, whatever, *they* should pay the artist... just once.

And so on and so forth. Everyone who's going to use the thing should pay for the thing--just once. (That said, if people are living together/married and sharing their stuff, I don't think each member of the couple should pay for it; it's not like each member of a couple bought their own copy of an album back when albums were what you bought. So when I say "everyone who uses it should pay for it" I guess I mean "every household.")

And just to put my money where my mouth is, I have 4000+ songs on my MP3 player and every one of them, either I or my husband paid for. We may have bought them online or we may have bought the CD and then digitized it... but we paid for it.

And that seems to me the only ethical way to go. How else are artists supposed to make a living? It's only "a job like any other" if you can scrape together some kind of living from it, which you can't if a song that took you days or weeks or longer to write and record, or a book that took you years to write, only brings you $10. Unless someone here suggests that, say, the government should pay musicians, writers, etc. a living wage in return for their music being available to everyone for free, there is no remotely feasible alternative.


phred

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Re: Is it ethical to make money from something you own?
« Reply #107 on: March 08, 2014, 10:02:23 AM »



"Until BMW has sold them, they belong to BMW. They're not some kind of limbo where nobody owns them."

BMW owns them, but BMW did not receive them.  Received implies some outside agency gave, sold or delivered these cars to BMW.  That did not happen.  BMW created these cars.  The factory workers, acting as part of BMW, manufactured them.
  It is true that inventory was used up, but your equation has left out 'value added' where the product is worth much more than the sum of the parts even though 'value added' in itself can't be measured or examined much.


Vilx-

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Re: Is it ethical to make money from something you own?
« Reply #108 on: March 08, 2014, 02:38:18 PM »
BMW owns them, but BMW did not receive them.  Received implies some outside agency gave, sold or delivered these cars to BMW.
Now you're just nitpicking. But, OK, maybe I chose the wrong words (but at least I have an alibi - I'm not a native English speaker :D)

Let me explain. When I said "After all, the sum of all things produced and received is zero" what I meant was - everything that gets produced, also gets received by someone at the instant it comes off the "production line" (metaphorical production line). When BMW makes a car, someone gets to own if afterwards. It could be a customer right away, or it could be BMW itself.

Alternatively you might consider that while the car sits in BMW's backyard, it's still in "production", and only when it's sold, does it gets "produced for real".

The idea that I wanted to tell is this: let's abstract life. Imagine that instead of producing concrete things we all produce one and the same Good. And then we exchange it for someone else's Good. Every person can only produce 1 Good per day (because a human can only do so much work per day). Trading normally would involve trading 1 Good for 1 Good. But if you trick the system and exchange your 1 Good for 2 Goods from other people (or maybe you don't produce 1 Good, but receive 1 Good from someone else anyway), that would mean that at the end of the day someone somewhere would be left without a Good. Because every day only as many Goods get produced as there are people. 1 Person = 1 Good/day.

warfreak2

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Re: Is it ethical to make money from something you own?
« Reply #109 on: March 08, 2014, 02:45:39 PM »
Imagine that instead of producing concrete things we all produce one and the same Good. And then we exchange it for someone else's Good. Every person can only produce 1 Good per day (because a human can only do so much work per day). Trading normally would involve trading 1 Good for 1 Good. But if you trick the system and exchange your 1 Good for 2 Goods from other people (or maybe you don't produce 1 Good, but receive 1 Good from someone else anyway), that would mean that at the end of the day someone somewhere would be left without a Good. Because every day only as many Goods get produced as there are people. 1 Person = 1 Good/day.
This simple abstract game you invented is zero sum, sure. But in the real world, you can focus your effort into building machines which produce more Goods per day, increasing your productivity.

The fact that BMW can turn a pile of metal into a car is already a glaring counterexample to the zero sum hypothesis; a car is worth more than a pile of metal. But BMW went one step further: they turned a pile of metal into a car factory, which turns piles of metal into cars more efficiently than any human can.

Vilx-

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Re: Is it ethical to make money from something you own?
« Reply #110 on: March 08, 2014, 02:56:56 PM »
Hm, but my idea doesn't change even with technology. OK, let's suppose people produce different amounts of Goods every day. Some people produce 1 Good, some produce 5 Goods, some produce 10. Sometimes people upgrade (or downgrade) and start producing more or less Goods per day.

Anyways, what matters is the exchange at the end of the day. If you produced 5 Goods and exchanged them for 5 different Goods, all is fine. But if you exchange your 5 Goods for 6 other Goods, then somewhere there will be a person who will have produced 5 Goods and traded them for 4 (or, to speak with mathematical precision, produced X goods and traded them for X-1 Goods).

Which seems kinda unfair.

warfreak2

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Re: Is it ethical to make money from something you own?
« Reply #111 on: March 08, 2014, 03:06:21 PM »
How does your model account for a Goods machine which costs 25 Goods to build, and thereafter autonomously produces 1 Good per day? I'm a 1-Goods-per-day producer, but if I save up my Goods for 25 days, I can build my machine, and from then on I produce 2 Goods per day. After 26 days I'll be better off than I would be without the machine. I can make more machines and sell them for 30 Goods, and someone else who makes 5 Goods per day can save up for six days, buy my machine and thereafter produce 6 Goods per day; after 31 days he'll be better off than he would have been without buying the machine. Nobody is getting tricked out of their Goods.

Vilx-

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Re: Is it ethical to make money from something you own?
« Reply #112 on: March 08, 2014, 03:25:42 PM »
Again - in this case more goods are produced. If you build your machine, you move from producing 1 Good per day (gpd), to 2 gpd. All is nice and dandy.

What I object to is the exchange at the end of the day. When all the goods are produced and all the people come to market to exchange them, then some people trick the system and sell 1 Good and buy 2 Goods instead. Without producing the extra Good themselves.

warfreak2

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Re: Is it ethical to make money from something you own?
« Reply #113 on: March 08, 2014, 03:29:21 PM »
But both of us tricked the system. I spent 25 Goods building a machine and sold it for 30 Goods; I'm 5 Goods up. But the other guy spent 30 Goods on a machine which produces 35 Goods over the next 35 days, so he'll also be up 5 Goods. Neither of us deceived the other, and neither of us is out of pocket.

If Goods can only be exchanged for Goods then the exchange rate is obviously 1 Good per Good. But why can't Goods be exchanged for Goods-producing machines, seeing as that exchange benefits both parties?
« Last Edit: March 08, 2014, 03:32:36 PM by warfreak2 »

arebelspy

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Re: Is it ethical to make money from something you own?
« Reply #114 on: March 08, 2014, 03:29:50 PM »
What I object to is the exchange at the end of the day. When all the goods are produced and all the people come to market to exchange them, then some people trick the system and sell 1 Good and buy 2 Goods instead. Without producing the extra Good themselves.

I'm not understanding this.

Sure, someone scamming someone else is bad, but if it was a free and open exchange and we are both satisfied, who was tricked?  What does it matter if you got two sheep and I got 1 cow? 

Are you saying we should regulate the price of everything?

I just don't get why you're saying anyone is "cheating the system" (not even sure what that means) if they trade 1 good for 2, or vice versa.
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iamlindoro

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Re: Is it ethical to make money from something you own?
« Reply #115 on: March 08, 2014, 03:45:53 PM »
OP, do you not have another thread seeking to be hired to work for an American company (at American wages, you quoted a sum of $100K/yar) from your low cost of living locale in Latvia?  Personally I don't see any ethical dilemma to this if you could manage it.  It confounds me that you have such an issue with investing, yet you are also not troubled by seeking a job that by all rights should be taken by someone who must pay the higher cost of living.

As I said, I don't see any moral issue with investing *or* working from a low cost of living for high wages-- but it seems a double standard to me that one should bother you and the other should be just fine.

Vilx-

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Re: Is it ethical to make money from something you own?
« Reply #116 on: March 08, 2014, 03:57:03 PM »
(Side note: this topic already changed my point of view a few pages back. Right now I'm just continuing the argument "in the old mindset", because people still seem to want to argue it. Also, a discussion helps to consider the issue more deeply)

OK, I guess I see the flaw now. In my model, everything has a fixed "intrinsic value", which is inherent to the Good itself, and doesn't depend on anything else. But in real life things don't have any value. A thing is as valuable as someone values it. A pair of shoes might be worthless for one person, while another person could be ready to pay $100 for it. So an exchange of "1 for 2" could still be quite fair, because both people value what they get.

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Re: Is it ethical to make money from something you own?
« Reply #117 on: March 08, 2014, 04:11:16 PM »
(Side note: this topic already changed my point of view a few pages back. Right now I'm just continuing the argument "in the old mindset", because people still seem to want to argue it. Also, a discussion helps to consider the issue more deeply)

OK, I guess I see the flaw now. In my model, everything has a fixed "intrinsic value", which is inherent to the Good itself, and doesn't depend on anything else. But in real life things don't have any value. A thing is as valuable as someone values it. A pair of shoes might be worthless for one person, while another person could be ready to pay $100 for it. So an exchange of "1 for 2" could still be quite fair, because both people value what they get.

Bingo!

Scams should be stopped, and obviously there's often an asymmetric information problem, but free and open trade/exchange done should be win-win for both.

You can produce Widget X more efficiently and I can do widget Y, we trade.  If I decide I really want X, and end up trading 2 Y for it next time, but willingly do so, that's okay.  If I'm happy at the end of the exchange, and felt it was worth the 2 Y, that's fine.
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phred

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Re: Is it ethical to make money from something you own?
« Reply #118 on: March 09, 2014, 08:51:55 AM »
Your income grows exponentionally, without you needing to do anything. OK, so at some point you will die, but if you've done your part correctly your children will continue where you left off. There is no upper limit.

I'm talking about the case where the investor doesn't sell the house to his customer but rents it. In this case, the customer just keeps on paying and paying. Eventually he will have covered all your expenses, but it won't stop there. He will continue paying and paying until you die of old age. And then he will continue paying your children. Again - no upper limit. And the loser in this case is the customer. It's basically like a deal - "I make you a house, and then you support me for the rest of my life".
   OK, so in real life there will probably be multiple tenants, and the house has some continuous maintenance expenses, but that doesn't change anything. The investor doesn't need to do any work anymore - he can just survive on the continuous income from that little piece work that he did once, 10 years ago.
There is an old saying of "shirtsleeves to shirtsleeves  in three generations".  You may leaves untold wealth to your children, and they will spend it down to nothing while living a life of ease.  If your estate is really huge, then depending on where you live, the government also steps in for its cut whether defined as death duties or inheritance taxes.  Your unspoken assumption here is that none of these investments will fail and dwindle away to nothingness -- look up Enron.
  Real estate is not always a bed of roses.  The house may stand empty between tenants even though property tax is still owed.  Previous tenants may have done severe damage far beyond the price of normal maintenance. At some time major infrastructure such as roofs or furnaces will need to be replaced.  There may be major damage from falling trees or fire.  Neighborhoods may decline such that no-one wants to live there.  Lastly, even if you've done everything right, another "Russian Revolution" may take all your buildings from you.
  Now I will agree that the price of housing - whether owned or rented - is high.  In a truly free society anyone should be able to throw up some plywood & cardboard for a hut to live in if that is all they desire.  If this hut is right next to your place it should not matter.  Outhouses never plug up in the winter, don't use costly water, and are just there when you need them.

bikebum

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Re: Is it ethical to make money from something you own?
« Reply #119 on: March 09, 2014, 06:18:41 PM »
I would like to add that most people suck at saving money or don't want to do it. So a renter could complain that their landlord is making money off of them, but they have no interest in saving their money and buying a place to live. IMO, most people are not willing to do the work necessary to become an investor. That makes it worth more to the people who are willing to do it.

One could argue that we don't all get a fair start. But in the US, the great majority of millionaires are self-made. I do think there are some super-rich who probably don't deserve it though. But I don't know what to do about them, and I think they are a small percentage of all the investors. Some of them may be lucky, but how would we impose a "lucky tax"? Haha, that's a funny idea.

A lot of people think early retirement is taking an easy way out, but when you mention you have to save up at least half your income they say "impossible!" and they wouldn't want to do it even though they could.

zolotiyeruki

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Re: Is it ethical to make money from something you own?
« Reply #120 on: March 09, 2014, 09:27:03 PM »
Wow, what a great discussion.  I'll add my endorsement for Economics in a Single Lesson.  Beyond that, I want to address the "infinite income for finite investment" question.  I spent a while typing up a more robust reply (included further down for bored people), but it really came down to this question:

If you limit how long a given sum of money can earn more money, then What is the alternative use for that money?, after the defined time has expired?  And further, what is the BEST use of that money?, and further yet, who gets to determine that? The further you go down that rabbit hole, the more it becomes clear that the original question is one of economic systems, i.e. how the distribution of goods and services is determined.

(In a capitalist system, the answers to those above questions, in reverse order, are "the people who own the money decide what the best use is", "the best use is whatever the owners of that money decide", and "moot, because there is no defined expiration date")

Here is the much longer reply I had typed out before I came up with the above response:

Here's one way to look at it:  Let's create a simple hypothetical situation.  I buy a house for $100,000 and rent it out for one year.  For simplicity's sake, let's assume my profit (after maintenance, etc) is $1000/mo.  At the end of one year, I sell the house for the same price I bought it for.  I now have $110,000 on hand.  Have I done anything immoral?  I think most of us would agree that I have not. 

Now, I go out and buy a different house, again for $100,000, and rent it at a $1000/mo profit.  At the end of year 2, I sell the house for $100k, and now I have $120k in cash.  Have I done anything immoral?  Again, probably not.  Let's say I do the same thing in years 3 and 4.  And then for another five years.  And then another 10.  And so forth.  At no point have I done anything unethical or immoral, right?  Things don't change when, instead of selling one property and buying another, you simply hold on to one property.

As I follow the reasoning of the original question, it leads to the following idea:  "After a certain number of years, I should lose that initial $100,000.  It has earned enough for me, and I should no longer receive benefit from having that $100k."

I have three ways of rebutting that argument:
1) I decided to live frugally in order to accumulate that $100k.  That means I chose not to buy things earlier in life.  A tradeoff.  Compare it to, say, going to school and getting a degree.  You can't go to someone 20 years out of college and say "you've earned enough money from your degree.  Now you can't work in your field any more--you have to go back to unskilled labor."  An education is a big investment of your time and money, and it can pay off (in increased salary) for the rest of your working career.  Similarly, buying a rental property can pay off (in rental income) for the remainder of the property's life.
2) Let's assume that after 20 years, you're no longer allowed to get returns from that $100k.  What do you do with it now?  Are you forced to spend it? If so, that means you're forced to buy things that weren't worth $100k to you before. Give it away, to charity, or to the government? They have no claim to it (in my opinion), although you can certainly choose to give it to them if you wish. Burn it? Gee, what a waste of all those hours you worked and scrimped and saved.  Stuff it in a matress never to be seen again?  Might as well burn it.
3) As others have very eloquently explained, your investment (whether in stocks, bonds, or real estate) provides the capital necessary for economic expansion.  Your purchase of stocks/bonds provides capital for a company to expand, or to research a new wonder drug, or develop a robot that will make widgets easier for everyone to afford. (or, in a more likely scenario, your stock/bond purchase frees *other* people's capital to invest in expansion/development/etc).

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Re: Is it ethical to make money from something you own?
« Reply #121 on: March 09, 2014, 10:21:30 PM »
12k annually, not 10k.  But great point.  Essentially if you don't want money making more money, what economic system DO you want?
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Re: Is it ethical to make money from something you own?
« Reply #122 on: March 09, 2014, 10:23:02 PM »
1) I decided to live frugally in order to accumulate that $100k.  That means I chose not to buy things earlier in life.  A tradeoff.  Compare it to, say, going to school and getting a degree.  You can't go to someone 20 years out of college and say "you've earned enough money from your degree.  Now you can't work in your field any more--you have to go back to unskilled labor."  An education is a big investment of your time and money, and it can pay off (in increased salary) for the rest of your working career.  Similarly, buying a rental property can pay off (in rental income) for the remainder of the property's life.

Nice comparison; I like it!

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Re: Is it ethical to make money from something you own?
« Reply #123 on: March 10, 2014, 03:10:53 AM »
My confusion originally came from the observation that by doing this investment/rental thing, it seems at first glance that you're not creating anything of value, while are still getting paid for it. As in, you don't do physical work for your income. You just sit there while your property gives you money, for as long as you like. So that kinda looks like you're freeloading.

However this topic made me realize that your property does create value to other people, even though you might not need to physically work for it (or, in the case of rentals, you actually do need to work for it).

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Re: Is it ethical to make money from something you own?
« Reply #124 on: March 10, 2014, 05:25:00 AM »
Essentially if you don't want money making more money, what economic system DO you want?
I think it's possible to constructively criticise an economic system without proposing that a particular alternative is better. We can debate whether it's a good idea to reward people for owning things more than we reward them for doing things; concluding that a system has problems isn't the same as concluding that there is a better system. I think it's useful to discuss what the problems are, even if we aren't offering solutions.

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Re: Is it ethical to make money from something you own?
« Reply #125 on: March 10, 2014, 05:29:08 AM »
However this topic made me realize that your property does create value to other people, even though you might not need to physically work for it (or, in the case of rentals, you actually do need to work for it).
That's a subtle point, honestly. You can't really see what landlording or VTSAX makes, and if it's a black box to you then the gains can seem suspicious.

I think it's possible to constructively criticise an economic system without proposing that a particular alternative is better. We can debate whether it's a good idea to reward people for owning things more than we reward them for doing things; concluding that a system has problems isn't the same as concluding that there is a better system. I think it's useful to discuss what the problems are, even if we aren't offering solutions.
But it's not useful in any way. If I say "allergies suck" without proposing an improvement to or replacement of the immune system, what have I really accomplished? It's kinda like that Churchill quote: "Democracy is the worst form of government, except for all those other forms that have been tried from time to time." Yes, Capitalism has its ugly spots, but nobody really has viable alternatives and there aren't even many feasible solutions to any one problem.

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Re: Is it ethical to make money from something you own?
« Reply #126 on: March 10, 2014, 06:05:54 AM »
But it's not useful in any way.
Imagine saying to your boss, "our customers have a few problems with our service" and getting the response "well, why don't you go work somewhere else where the customers are happier, then?".

Imagine saying to your wife, "we don't do enough things together" and her saying "well, why don't you find someone else to do things with, then?".

Hopefully you can see how the debate could have been constructive but was shut down by the reply.

Quote
Yes, Capitalism has its ugly spots,
But people often don't agree about what they are. For some people, inequality is an ugly spot, and for others it's a feature. It's no use suggesting solutions without first having a discussion about what the problems are.
« Last Edit: March 10, 2014, 06:11:29 AM by warfreak2 »

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Re: Is it ethical to make money from something you own?
« Reply #127 on: March 10, 2014, 07:28:36 AM »

In my mind I had this picture, that in the Utopian world everybody would get paid according to their effort. Whether you're a CEO or a janitor, if you put in 8 straight hours of hard work, you get the same reward. What can be fairer that that?

You are a talented baker. You take simple raw ingredients (Flour, sugar, apples, butter) and make incredibly delicious apple tarts. These are the best tarts in the city.

Your neighbor is the worst baker in the city. He takes identical raw ingredients and makes half-raw, half-burnt inedible messes.

You are creating value. He is destroying value. You both put in equal effort. Do you really think that he should be paid the same amount as you? 

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Re: Is it ethical to make money from something you own?
« Reply #128 on: March 10, 2014, 07:52:56 AM »
Read the rest of that post where I arrive at a very similar conclusion. Yes, basing reward on effort spent alone is a bad idea.

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Re: Is it ethical to make money from something you own?
« Reply #129 on: March 10, 2014, 08:00:13 AM »
But it's not useful in any way.
Imagine saying to your boss, "our customers have a few problems with our service" and getting the response "well, why don't you go work somewhere else where the customers are happier, then?".

Imagine saying to your wife, "we don't do enough things together" and her saying "well, why don't you find someone else to do things with, then?".

Hopefully you can see how the debate could have been constructive but was shut down by the reply.

No.  To have the correct comparison, in your first example, the boss would ask for alternate suggestions on how to improve customer support and hopefully you have some ideas (just as we ask for alternate economic suggestions, and hope the poster has some ideas).  The second example is similar (wife may ask how to improve that).

We didn't shut down the conversation with "Well why don't you go live somewhere else, COMRADE," we asked for alternate suggestions.  That opens up the conversation, it doesn't shuts it down.

Further we did that after answering all the other questions.  I don't know how you can claim on a thread this long with the good discussion that occurred the conversation was "shut down" - we discussed the main topic, and now are asking:
Quote
if you don't want money making more money, what economic system DO you want?

I think that's a fair question at this point in the conversation, and isn't designed to shut down conversation but open it up and allow it to continue.
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Re: Is it ethical to make money from something you own?
« Reply #130 on: March 10, 2014, 12:19:00 PM »
  Vilx thank you for the ethical question on interest.  This philosophical debate dates back centuries.  It shows concern for those less fortunate than us.  Sounds like you found the the answers you were looking for.
  I feel compassion is one of the greatest achievements/abilities of humanity.  Personally I think we are seeing a change in the consciousness of humanity as we become more aware of our impact on each other.  Thank you again for getting me/us to review our habits.

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Re: Is it ethical to make money from something you own?
« Reply #131 on: March 10, 2014, 12:41:36 PM »
Read the rest of that post where I arrive at a very similar conclusion. Yes, basing reward on effort spent alone is a bad idea.

Absolutely, yes it is. You might as well give A's to every student who shows up for class and spends x time on homework. I used to teach and it amazed me when students would complain that I "only" gave them a B+ because, after all, they "tried really hard!" Trying hard is good, and it will get you the best grade you can get, but if there are students whose work is better than yours it's going to get a better grade--whether it took them more time or less time than you to do it. If you want to be measured solely on how long it took you to do something, sign up for a 5k run.

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Re: Is it ethical to make money from something you own?
« Reply #132 on: March 10, 2014, 12:58:41 PM »
Nobody's disagreeing about that.

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Re: Is it ethical to make money from something you own?
« Reply #133 on: March 10, 2014, 05:45:27 PM »
I think that's a fair question at this point in the conversation, and isn't designed to shut down conversation but open it up and allow it to continue.
Yes, it's a fair question, and I didn't read it as trying to shut the conversation down. My second response was against grantmeaname's assertion that it's "not useful in any way", not against arebelspy's question.

My point is it's still useful to identify problems without proposing solutions to them. Still, how about a kid who points out your rear light is defective, and you ask her, "OK, how do you suggest I fix it?".

At least in mathematics, there are many interesting problems that a child could discover, yet a world expert couldn't solve. In economics too, I don't see any benefit from requiring that nobody pose a problem without also offering a solution.

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Re: Is it ethical to make money from something you own?
« Reply #134 on: March 10, 2014, 10:50:14 PM »
...concluding that a system has problems isn't the same as concluding that there is a better system. I think it's useful to discuss what the problems are, even if we aren't offering solutions.

That's the root of our mutual incomprehension right there: I, and I think most here, simply do not agree that your 'problem' IS a problem - far from it!   In the parlance of software development, "it's not a bug, it's a feature" :-)

My point is it's still useful to identify problems without proposing solutions to them. Still, how about a kid who points out your rear light is defective, and you ask her, "OK, how do you suggest I fix it?".

Except that this discussion is like arguing with a kid who insists that your brake lights must be defective because they aren't lit up all the time.
« Last Edit: March 10, 2014, 10:56:16 PM by Jamesqf »

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Re: Is it ethical to make money from something you own?
« Reply #135 on: March 10, 2014, 11:13:38 PM »
OP:

You're confusing ethics with choice, laws, and structure. What is unethical about selling something to someone who is willing to buy? You're not understanding that these transactions aren't forced. You're just seeing face value.

America has thrived on capitalism, which is partly why America is one of the richest countries on earth. We have innovators, efficient (ok, debatable) financial systems, fairly good business regulations, fairly good tax laws, etc...

Your logic is flawed and it's due to a lack of understanding how things work and what constitutes ethical behavior...

Sure there are some things you can get by with in America and make money that is of questionable ethics due to our complex laws. IE: suing someone because you tripped over their dog and broke your hand.

However, investing is nothing like that... In the case of the lawsuit example, the defendant didn't ask to be used, but In the case of buying, the buyer either initiated or accepted the transaction on their own free will.

You really need to read more on the subject of economics and capitalism and even financial law before you go any further...
« Last Edit: March 10, 2014, 11:22:57 PM by Ricky »

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Re: Is it ethical to make money from something you own?
« Reply #136 on: March 11, 2014, 09:03:45 AM »
I, and I think most here, simply do not agree that your 'problem' IS a problem - far from it!   In the parlance of software development, "it's not a bug, it's a feature" :-)
And other people think it's a bug. And I think it's more productive to resolve that disagreement, than to start proposing bugfixes.

For reference, I'm not really on either side of this debate. I do think it's unfortunate that people can be paid much more for owning than they can be for doing, but I don't see it as an ethical conundrum. In my mind it's a market inefficiency; such owners are paid a lot more to continue owning than their marginal cost of continuing to own.

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Re: Is it ethical to make money from something you own?
« Reply #137 on: March 11, 2014, 09:13:35 AM »
For reference, I'm not really on either side of this debate. I do think it's unfortunate that people can be paid much more for owning than they can be for doing, but I don't see it as an ethical conundrum. In my mind it's a market inefficiency; such owners are paid a lot more to continue owning than their marginal cost of continuing to own.

Temporarily, but the fix is built right into the system.
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Re: Is it ethical to make money from something you own?
« Reply #138 on: March 11, 2014, 09:32:52 AM »
For reference, I'm not really on either side of this debate. I do think it's unfortunate that people can be paid much more for owning than they can be for doing, but I don't see it as an ethical conundrum. In my mind it's a market inefficiency; such owners are paid a lot more to continue owning than their marginal cost of continuing to own.
Why shouldn't capital be rewarded proportionally to the amount of productivity it enables? If you can own capital that contributes as much to society as the labor of fifty thousand workers, why shouldn't you be paid accordingly? If we create some arbitrary rule like "stock market returns are limited to the amount it hurts your feelings that you can't buy NFL tickets with the money you've invested", we're accomplishing nothing productive other than making marxists feel good about themselves. It would hugely distort market incentives, make the system less fair, and make literally nobody better off at the end of the day.

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Re: Is it ethical to make money from something you own?
« Reply #139 on: March 11, 2014, 09:48:14 AM »
It's way more ethical to make money off of something you own than off something you don't own.  Now if you'll excuse me, I need to go fence my neighbor's television.

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Re: Is it ethical to make money from something you own?
« Reply #140 on: March 11, 2014, 11:00:51 AM »
Why shouldn't capital be rewarded proportionally to the amount of productivity it enables?
You are using words like "should" when I've already explicitly said I don't see it as an ethical conundrum.

Productive ownership can be rewarded the same way any other production is rewarded; in an efficient market, that means close to the marginal cost of production.

If you sell bikes, the price I pay for a bike (and by extension, your profit from selling it) isn't determined by how much productivity it enables; try selling me a bike at that price, and I'll buy from someone else. Competition among bike manufacturers means whoever sells me the bike cheapest gets paid, and the cheapest they can sell a bike is a little more than what it costs to make a bike. My employer sells educations; the price of those educations reflects not on their value to the students, but on the cost of providing them.

If owning a house for another year costs $10,000 in taxes/maintenance/&c., then in an efficient, competitive market, the owner would be rewarded a little more than $10,000 for continuing to own the house - since that's her marginal cost of "producing" another year's ownership of the house. As arebelspy points out, the fix is to some extent built into the system: increased competition, which should already be incentivised by the returns available.
« Last Edit: March 11, 2014, 11:02:32 AM by warfreak2 »

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Re: Is it ethical to make money from something you own?
« Reply #141 on: March 11, 2014, 11:23:30 AM »
Why shouldn't capital be rewarded proportionally to the amount of productivity it enables?
You are using words like "should" when I've already explicitly said I don't see it as an ethical conundrum.

Right, but you also said: "I do think it's unfortunate"

I think his point was "Why do you think it's unfortunate? [Insert grant's post here.]"
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Re: Is it ethical to make money from something you own?
« Reply #142 on: March 11, 2014, 11:28:48 AM »
I, and I think most here, simply do not agree that your 'problem' IS a problem - far from it!   In the parlance of software development, "it's not a bug, it's a feature" :-)
And other people think it's a bug. And I think it's more productive to resolve that disagreement, than to start proposing bugfixes.

Yeah, and some people think the Earth is flat - and would continue to insist that it was even if you gave them an all-expenses paid trip to the ISS (see e.g. http://www.answersingenesis.org ).  How do you suggest we resolve that disagreement?


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Re: Is it ethical to make money from something you own?
« Reply #143 on: March 11, 2014, 12:25:40 PM »
I think it's unfortunate that owners are typically paid in proportion to the productivity of the things they own, while workers typically aren't paid in proportion to the productivity of the work they do. I think it would be good for workers to be paid in proportion to their productivity, for the same reason you think it's good for owners to be paid in proportion to theirs. I don't, however, propose an alternate economic system which would make this so, and I'm not sure there is a palatable one.

I think it's unfortunate that the wealthy have access to investments that the poor don't, because this means that inequality tends to increase, so that the poor tend to get relatively poorer, despite producing more.

"The Earth is flat" is a factual matter to be resolved by evidence, not by philosophy. I think it's pretty condescending to compare people who disagree with your subjective opinion to flat-Earthers.

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Re: Is it ethical to make money from something you own?
« Reply #144 on: March 11, 2014, 01:16:06 PM »
"The Earth is flat" is a factual matter to be resolved by evidence, not by philosophy. I think it's pretty condescending to compare people who disagree with your subjective opinion to flat-Earthers.

Thank you.  I think it's quite nice of me to condescend to the less...  Well, I'll be nice :-)

The question you should be asking, though, is whether what I wrote is really a subjective opinion, or whether it is nothing more or less than an objective observation on how economies work.  The world is as it is: you may not like the fact that if you jump off a cliff, you will shortly be splattered on the ground below, but gravity doesn't care about your feelings.

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Re: Is it ethical to make money from something you own?
« Reply #145 on: March 11, 2014, 01:47:58 PM »
Erm... TL;DR. What are we talking about right now? :)

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Re: Is it ethical to make money from something you own?
« Reply #146 on: March 11, 2014, 01:57:33 PM »
Gravity isn't the law because we discussed it democratically and that seemed to be the best way to go about our business. Obviously.

Capitalism is a choice that society has made; it appears to be the best choice available, but it's a choice nonetheless and it's worth debating the upsides and downsides of that choice. Circumstances change, and if there should ever be a better choice, of course we'd want to adopt it - but that means we should continually assess the choices we've made, just as a mustachians continually assess the financial decisions they've made.

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Re: Is it ethical to make money from something you own?
« Reply #147 on: March 11, 2014, 02:41:50 PM »
Neat.  So let's discuss other choices.  I still haven't heard any alternatives proposed.

(I do agree with you we can critique a system without providing alternatives - we could in fact improve that system, though I suppose that would be an alternative.)
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Re: Is it ethical to make money from something you own?
« Reply #148 on: March 12, 2014, 09:56:59 AM »
Neat.  So let's discuss other choices.  I still haven't heard any alternatives proposed.

(I do agree with you we can critique a system without providing alternatives - we could in fact improve that system, though I suppose that would be an alternative.)

  To rephrase the original question.  If 5% a year interest is considered a fair rate of return on a mortgage and 50% is illegal at what point do you feel the maximum yearly percentage you'd consider ethical to charge?
  For the purpose of the question assume you have 500,000 to make mortgage loans with in a legal manor like a loan website.  Also only consider this as a home mortgage loan, leave capital investments and other loan type/options out.
  I feel 10% is the max I'd consider charging in our current economy.  If I felt someone was a greater risk then they really are not ready to buy.  I would be concerned I would cause greater financial problems versus help.
 
« Last Edit: March 12, 2014, 09:58:41 AM by Luck better Skill »

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Re: Is it ethical to make money from something you own?
« Reply #149 on: March 12, 2014, 01:39:02 PM »
Neat.  So let's discuss other choices.  I still haven't heard any alternatives proposed.

(I do agree with you we can critique a system without providing alternatives - we could in fact improve that system, though I suppose that would be an alternative.)

  To rephrase the original question.  If 5% a year interest is considered a fair rate of return on a mortgage and 50% is illegal at what point do you feel the maximum yearly percentage you'd consider ethical to charge?
  For the purpose of the question assume you have 500,000 to make mortgage loans with in a legal manor like a loan website.  Also only consider this as a home mortgage loan, leave capital investments and other loan type/options out.
  I feel 10% is the max I'd consider charging in our current economy.  If I felt someone was a greater risk then they really are not ready to buy.  I would be concerned I would cause greater financial problems versus help.
 

Is it a cop-out to say we don't need to limit interest rates, because if they are too high people will not borrow money?