It connects.  It just doesn't make any sense whatsoever.

Like I showed earlier, there really hasn't been much of a compounding effect if any over the last 20 years or so.   Personal Gini coefficent remained fairly unchanged.

If we're talking income that is.

That the rich have more money is common sense... in that they are rich.   If things ever get bad for a rich person they can start living like a middle class person.

The Gini coeeficient did get worse earlier last decade, right before the bubble hit.  During the years of Clinton, where taxes went up on the upper end some, it got softened.  Now, it is still a bit early to say what is going on, but apparently the wealth are doing better.

Now, the thing is that years of the compounding effect could of taken its toll, if it is a bad thing, resulting in such a separation in income and income gains, that growth has stagnated.  

And it isn't just the fact they have more money, but the quality of what they have that makes a difference.  And, the way things are, the rich have a much easier time also getting credit, and life works that, as a rule people are more likely to get help when they need it the least.  The person who is able to get a different job, is far more likely to do so, when they are working.  When a society is doing well, it builds on itself also, and this leads to a separation.

I'm not sure where your getting that information from.

The Dot Com bubble burst in 2000.  Individual Gini Coefficent dropped off WELL before then.  In 1997.

While Family and Household Gini coefficents rose in 2000.

Chart again....

http://3.bp.blogspot.com/-1Y25WlUbsXM/TqdJJKE5YHI/AAAAAAAAEgc/mEfoQs_f7xs/s1600/US-Gini-Coefficient-for-Individuals-Families-Households-1994-2010.png

Individual Gini Coefficent is what you'd use to measure the Matthew Effect and well... it just doesn't seem to be happening lately.

Well, unless you consider the fact that rich people are more and more likely to marry other rich people part of the "Matthew Effect"

Although, to be 100% honest with you... I'm sick of using the term Matthew Effect... because this isn't the Matthew Effect.  The Matthew Effect refers to the fact that famous researchers will get credit for observations and discoveries by less favorite ones.

It wasn't meant to have economic implications.

Wealth Condensation would be a better phrase.

Either way, for a long time now, the individually wealthy have been getting less wealthy, this has been masked by the rise in "group sorting" in marriage and a few Super rich dudes being super freaking rich making people jealous.

So I know what your thinking   "So where did all that extra money created go?"

If I had to take a guess?   I'd say the expansion of the Labor Force.   Keep in mind Labor Force Participation Rates are a LOT higher now then they used to be.

The Median income is the same despite a HUGE addition in workers, mostly lower end workers.  Normally when you add a bunch of numbers to the lower half mathmatically you'd expect that to drag the Median down, wouldn't you?

Used to be is pre-2000?  Are you talking about the United States or the world?  Labor force participation has declined since a high point in 2000.  Of course, more are getting old, but private sector hiring flatlined last decade and now only shows a bit of recovery, but still is not good.

http://www.businessweek.com/the_thread/economicsunbound/archives/2009/06/a_lost_decade_f.html

Here is a chart from since 2002.  I would dig back further, but it would likely be too big to fit here:

http://data.bls.gov/timeseries/LNS11300000

In regards to what is discussed, the focus had to do with looking if the idea of compounding of benefits for people who are advantaged is a good thing or not.  So, maybe "Mathew Effect" is a worn out turn, but the phrase "rich getting richer" is still out there.

I feel like we're going in a cricle here now.

I mean, are we just talking about a hypotehtical here now? 

It's like your asking "Is global cooling a good thing" when it's been pretty well established global cooling isn't occuring.

Though i do know that Labor Force Pariticpation has shrunk since the financial crisis.

The intial post was about a general state of reality, where advantages can compound and asked if that is a good thing.  It does happen.  It doesn't mean it happens all the time, or things can't be done to counter it.

In regards to labor force participation, when I looked it up, I saw it has been declining for over a decade now.  That is bound to continue to happen as the baby boomers retire.  If it doesn't happen, that is a sign people aren't retiring.    What will be needed to be found is if people want to retire aren't able to, but also can't find work, for whatever reason.

So it is a hypothetical then.

I don't get the point of bringing up extreme outliers as hypotheticals.

More often then not, when the rich are getting richer, it boosts the economy for everybody.

I mean, may as well ask if giving food away for free is good.

Then pointing out a case where a person died of a peanut allergy because the food was prepared near peanuts.

You can find hypotehticals where ANYTHING is bad.

It was asking about what happens normally in economies that are unregulated, if the effect is a good thing or not.  If you want to discuss outliers, then you would argue the outliers that you want to discuss are negative outliers.  You have said it is a good thing, based on what you wrote there, and that everyone benefits from the compounding effect of advantages.  Either that, or you say the effect doesn't exist at all.  You apparently think, on the whole, it is a good thing.   I would ask you why this separation is a good thing.

Here is the original post:

In life, with economic systems, and other parts, also seen in games, there is something called "the rich getting richer".  In this, individuals who have an advantage, are able to compound this advantage and use the compounding effect to offset weaknesses.  This can lead to an exponential expansion of separation between those who have and those who have not.

My question is this: Is the "rich getting richer" effect a problem?   Is it healthy for a system to end up resulting in a few individuals on top with dominance, while many below who aren't as fortunate, and could end up falling further behind, as rather than compounding advantages witness a compounding of problems and a chain of events that could cause them to even suffer a shortness of life?

If it isn't health to allow this to be left unchecked, then what can be done that would be a way to balance things out more?

I wil say, often in games, where this happens, it is a problem that makes a game less fun to play.

The imbalance trickles from quality of life to stress to the life expectancy of nations. The US isn't even in the top ten. Most Americans aren't even expected to reach the age of 80 because of the conditions they live under in this country. The more stress they encounter trying to find a decent quality of life the harder it will be. The Corporate Healthcare system is broken and this gap between the rich and poor is astoundingly large that the middle class will slip through the huge crack that is forming. They defend the sanity of the establishment as much as they want, but sooner or later they will feel it. Even in 2008 the heir to the Johnson & Johnson fortune made a documentary about how its effecting Americans. Sooner or later they will shut him up and he'll follow suit.

I think the "most people not reaching 80" may not be a valid way to view averages.  Because life expetancy would be under 80, doesn't mean that most people don't reach it.  What causes life expetancy to end up being lower is infant mortality or individuals dying in a very young age.  All these can impact things.  What is needed to be seen is, once you get past a certain age, how long would you be expected to live.