There is such a thing as being too rich

by Ingrid Robeyns on July 12, 2021

I spoke to some US-based scholars today about a study they are planning to do on the question whether American citizens think one can say that at some point, one is having too much money. Long-time readers of our blog might recall that in January 2018 I asked you for input on a study I was setting up in the Netherlands to find out whether the Dutch think there is the symmetrical thing of a poverty line – a riches line. And yes, they do. The study has in the meantime been conducted and published in the journal Social Indicators Reserach, and is open access – available to all. I am very grateful to my collaborators and (economic) sociologists Tanja van der Lippe, Vincent Buskens, Arnout van de Rijt and Nina Vergeldt, since I would never have been able to do this on my own: the last time I did empirical work was in 2002 (and in the good tradition of economics graduate training, I never collected my own data when I was trained as an economist, hence it was a great adventure to set up this survey).

Based on our data, we find that 96,5% of the respondents made a distinction between a family that is rich and one that is extremely rich, whereby the standard of living of the latter is described as: “This family has much more than they need to lead an affluent life. They never have to consider whether they can afford certain luxury spending, and even then, they still have plenty of money left to do extraordinary things that almost no one can afford. No one needs that much luxury.”

We constructed based on the vignettes in the study an indicator that resembled the wealth that such a family of four (in their fourties, with two kids) would have, and found that most respondents put the riches line between 1 and 3 million Euro, with the mean at 2,2 million. Of course, it is important to keep the Dutch specific context in mind – I think having a collectivized health care system, as well as a public pension system (which is not part of that estimated wealth) are important features. In a country where major health emergencies or one’s pension would have to be paid out of one’s savings, those savings would have to be much higher in order to have the same over-the-lifetime standard of living in a Dutch (or similar) setting.

I have no illusions – this study undoubtedly has shortcomings and flaws; we made it in the spirit that we had to start somewhere if we wanted to start an empirical literature on the question whether we can draw a line between ‘very rich’ and ‘too rich’. One other avenue to explore might be to conduct such a study in a qualitative way, by means of focus groups – this is the route that a group of scholars from LSE’s Center for the Analysis of Social Exclusion have taken. Their study, too, is available to all to read.

I hope more scholars will take up this line of trying to find out what the public thinks about the question of having too much – although, as our data showed, many might think that a certain amount of personal wealth is too much money, but not take the step to saying that this implies there should be a cap on wealth, savings, inheritance, or any other financial source (which is what I’m arguing in my philosophical research on limitarianism, see e.g. here). So it’s important for scholars of attitudes on affluence to carefully distinguish between different types of claims that respondents might or might not endorse.

{ 117 comments… read them below or add one }

1

Gareth Wilson 07.12.21 at 9:36 pm

Most of the respondents disagree with your headline.

2

Alex SL 07.12.21 at 9:53 pm

Ironically, I would probably set the line of “starting to be obscenely rich” somewhat higher than 1-3M Euro, although I would myself be perfectly happy with a society in which the richest household does not earn more than, say, 3x the income of the poorest. Perhaps ten million?

What isn’t quite clear to me is what the criteria are.

Is too rich where people hog resources that others, or society as a whole, need more? Is it where they have wealth that nobody can possibly ‘deserve’ in the sense of the rewards being proportional to the contribution somebody has made? Is it where it becomes damaging even to the rich person themselves, because it negatively affects their own psychology and perception of the world? Is it where it becomes damaging to societal cohesion and functionality to have such strong imbalance between rich and poor?

Depending on the criterion, the line may end up in quite different places. I would set the bar for ‘you have got as much of our collective wealth as you deserve’ quite low, because I simply don’t see that e.g. a CEO is making a significantly higher contribution to societal wealth than, say, a train driver. But I might set the bar a bit higher if the question is about damaging societal imbalances.

3

Fake Dave 07.12.21 at 10:57 pm

I wonder about the number being so “low.” If a few million is too much, what about the people with thousands of times that much? I agree that your question doesn’t really distinguish between having too much for their own good (greed and pride are mortal sins, after all) as opposed to having too much for everyone’s good. People in a traditionally Christian context may lowball how much money they consider “too much” in order to highlight their own virtues of thrift, charity, and humility. Single-digit millionaires might be endangering their souls, but that doesn’t mean most people are actually that bothered about them. At what level of wealth hoarding do people feel compelled to more than just wag their fingers?

It seems like you need another category for people who don’t just have too much money in a moral or philosophical sense, but also have too much money in the sociopolitical sense. At what point does excessive wealth become an unbearable burden on the rest of us? How many of us consider the ultrarich to be parasites who harm society simply by existing? If you say something like that in the corporate press you get called a “radical” or a “populist” but I wouldn’t be surprised if it was actually the overwhelming majority opinion.

4

nastywoman 07.12.21 at 11:27 pm

‘There is such a thing as being too rich’

YES! – agrees wholeheartedly my European side – while my American parts –
(with the exception of the ‘Indian’ ones) know – that a lot of my fellow Americans will
NOT –
come to the same conclusion!

5

Matt 07.13.21 at 3:51 am

You touch on this at the end, but I worry that the connection between “No one needs that much luxury”, which I think is going to be obviously true at some point that is well below what the top rich people in the world has, for any plausible sense of “need”, and any particular normative conclusion is fairly week. This is so for a number of reasons. For one, it can be true that “no one needs x” and that there is just no reason to do anything at all about someone having X. For there to be a reason to do anything, we’d need some further argument (people having X causes certain problems, say), and then why not just focus on those arguments, rather than the round-about method here? Second, we’d need to know something about the likely impact of various methods of setting limits are (and whether setting limits, as opposed to other methods) is a good idea. (It’s not obvious to me that setting a wealth limit is clearly better than just increasingly high marginal rates of taxation, for example.)

Admittedly, I’ve only briefly skimmed the paper, but I worry that the survey results are just very weak guides to any deeper conclusions. (I think there are other worries about survey results like this, too – how far they really get at anything important – but leave that aside.)

6

J-D 07.13.21 at 4:13 am

We constructed based on the vignettes in the study an indicator that resembled the wealth that such a family of four (in their fourties, with two kids

How did you select this as the model household structure? I couldn’t find that information in the study.

7

Ingrid Robeyns 07.13.21 at 7:11 am

If you go to the appendix of the paper, the first question starts like this:
“We give you a description of the lives of 10 families. Each family consists of two parents (in their forties) and two children. For each family, we would like to know your judgement on how affluent they are. ”

J-D – does this answer your question? We could also have opted for another household structure, but it seemed to me the most important thing was to keep it constant.

This phrasing also indicates that with the vignettes, we were asking the respondents view on their evaluation of different levels of affluence, not on the prescriptive or political view on whether anything should be done about this. On that latter question, the respondents are clearly not in favor of caps, but suprisingly, in the questions after the vignette, there is one that struck us in how redistributive the response was:
Q: “If the government Rutte III had to choose between cutting services for the most vulnerable people in society or increasing taxes on the income of the rich and superrich, they should choose a tax increase.” – 69% responds (strongly) agrees, with only 12% responds (strongly) disagrees. So one hypothesis (which we can’t test with these data) is that respondents have non-redistributive reasons to object to a cap (on income, savings, inheritance, etc.), perhaps because they see it as punlishment, rather than redistribution? Either way, this also suggests that exact framing and wording matters a lot, as I believe is known from other survey design.

Matt- I agree therefore that the survey results are only very weak guidelines to anything deeper; what we really wanted to know was whether the Dutch would make a distinction between well-off, rich and extremely rich, and whether they would make that distinction in a consistent way (which is the first part of the survey). And we’d like to get academia started on measuring these things – we had to start somewhere but I totally agree there must be more sofisticated instruments possible. Is the relation between affluence and its material basis linear or does it top off? Based on our data, the public holds it is the latter, and I think that’s something we can conclude.

8

nastywoman 07.13.21 at 7:16 am

and let’s make the prediction – that the question whether American citizens think one can say that at some point, one is having too much money – will be answered by my fellow Americans in a completely different way than by my fellow Europeans.

Shall we predict that there still is a majority in the US for:

YOU never can have enough money?
(or is that too stereotypical?)

9

nastywoman 07.13.21 at 7:27 am

AND as the stereotypical (American) idea of:
‘It’s all about the money’

in any European-American Family –
ALWAYS –
leads to years and years of –
sometimes –
very ‘contentious’ battles
(with no end in sight)
How about headlining the America study with:
‘There is such a thing as being too poor’.

10

nastywoman 07.13.21 at 7:39 am

and after years and years ago –
(after the so called LA riots) –
a German TV Team got the answer from a (black) American – that he doesn’t want to ‘overthrow any government or capitalistic system’ –
and that ALL he wants is to profit from this system too –
and –
that he much rather lives in a country where you can get ‘richer than good’ – than in any country where ‘the cult of less’ is popular –
I’m looking forward –
(or NOT?)
to this ‘homeland-survey…’

11

Gorgonzola Petrovna 07.13.21 at 7:46 am

This sounds more like the line of ‘conspicuous consumption’. One could have a net worth in tens of millions while driving Toyota and taking no holidays. Afaik, Northern European cultures are quite self-conscious about crossing this line, regardless of the wealth. Wasn’t there an anecdote about ABBA musicians living in modest apartments? Interpreting the disapproval of ‘conspicuous consumption’ as a definition of ‘maximum wealth’ seems problematic.

12

MisterMr 07.13.21 at 8:41 am

I agree with Gorgonzola @11 on this.

There are certainly strong cultural prescription against excessive consumption, so that spending too much on non necessary things is perceived as a sin, but this doesn’t mean that there are the same prescriptions against the accumulation of wealth per se – the so called protestant ethic.

This would explain why many respondents would say that a family is too rich (in the sense of excessive consumption, a sin) but is against cvapping income/wealth (that is seen as an example of thrift, a virtue).

13

MFB 07.13.21 at 9:31 am

I must just mention that 2.2 million euroes is almost a thousand times the average wealth of South Africans (and because our national inequality is extremely high, and because our social services are scanty, this rather understates the disparity between what this study defines as unacceptable riches and what the experience of the average South African is).

This again suggests that European standards are perhaps not to be applied beyond the narrow confines of Western Europe.

14

Tim Worstall 07.13.21 at 9:32 am

There’s a possible – and deeply cynical – explanation of the findings. That rich, or extremely rich, or too rich even, starts just beyond the likely possible position of the respondent.

“Well off” being where the respondent can reasonably – however deludedly – see themselves getting. “Too rich” being beyond that.

At which point:

“and found that most respondents put the riches line between 1 and 3 million Euro, with the mean at 2,2 million.”

and:

“we find that 96,5% of the respondents”

OK. A quick with our friend, Mr. Google, says:

“In the Netherlands, 223 thousand households had assets of 1 million euros or more in 2019. This means that 2.8 percent of all households were millionaire households.”

With a bit of rounding 97% say 1 million is lots, 3% have 1 million and don’t.

Yes, I know there are all sorts of gaps in that. But the findings aren’t exactly proof dispositive of the cynical explanation……

15

nastywoman 07.13.21 at 10:06 am

‘This sounds more like the line of ‘conspicuous consumption’. One could have a net worth in tens of millions while driving Toyota and taking no holidays. Afaik, Northern European cultures are quite self-conscious about crossing this line, regardless of the wealth’.

BUT isn’t this survey very straightforward asking from ‘how much’
(the mean at 2,2 million) –
is ‘too rich’?
(conspicuous consumed or not)

16

nastywoman 07.13.21 at 10:19 am

and about ‘the real beef’:
‘saying that this implies there should be a cap on wealth, savings, inheritance, or any other financial source (which is what I’m arguing in my philosophical research on limitarianism, see e.g. here)’ – there are these… these Americans – who might think – if you tell them ‘There is such a thing as being too rich’ – that you are ‘the typical foolishly moralistic European’ who just doesn’t understand the secret of TEH strongest economy in the World
the incentive to become THE FIRST and Richest Man -(or woman) on the yearly Forbes List.

17

Ingrid Robeyns 07.13.21 at 12:30 pm

@MFB – yes, obviously this number does not apply to countries with very different economies – we state and discuss that in the paper, and in earlier theoretical work on the riches line I’ve also argued why it should be a context-dependent measure (the same is the case for the poverty line, by the way, which is also in material terms way higher in the Netherlands or some other country in the OECD, then the international poverty lines used by, e.g. the world bank). The context-dependency of the riches line also explains why we work with ‘vignettes’ that describe a certain set of goods one has access too, and they are then translated into a financial equivalent.

@Tim Worstall – yes, that is a real worry. I believe my collaborators did some sensitivity analysis on this but I’ll try to see whether one can dig that information up. But I recall from discussing the doctoral reseach of Katarine Hecht (LSE), who interviewed “economic high achievers” that she discovered some of the phenomenon that you encountered. My sense is that it plays a role, but doesn’t explain all of it.

18

SamChevre 07.13.21 at 12:40 pm

I am having difficulty seeing the internal consistency in these numbers: I’m not certain if that is because I am mis-understanding, or because the respondents are not doing the math.

This family has much more than they need to lead an affluent life

I would read that to mean that they can comfortably spend at more than the 90th percentile income-earner, out of wealth, in perpetuity. I cannot find Dutch household incomes, but median personal income at the 90th percentile seems to be about 100k Euro.

I cannot see any way that this is possible with 3 million Euro.

19

Alex SL 07.13.21 at 1:40 pm

Tim Worstall,

That is an interesting observation/hypothesis!

Unlikely to be applicable across all ideologies and cultures, I suspect, however. Certainly the armies of billionaire defenders that always pop up on Twitter (“he has earned it by creating wealth”, “how will people be motivated if they cannot get rich”, etc.) cannot possibly be so deluded as to assume that they personally could ever become as rich as Musk or Bezos. I think. I mean, I hope. They can’t be that twee, right?

20

Starry Gordon 07.13.21 at 2:53 pm

There would be a level of wealth or income at which one could no longer spend it on things or services which one (or one’s family or friends) could enjoy personally, so that about the only way to use it would be politically, that is, to obtain power over others. Stuff is usually not rivalrous; if I have a Rolls, you can have one too. But power is inevitably rivalrous; if I have more, you have less. That, I think, would be of general concern, since it impinges on people’s freedom and security, and might call for some kind of restraint. But many people, like the Black guy on German TV above, seem to confuse the two, and view the second kind of wealth as being harmless as the first, which it is not.

As usual I have oversimplified; but you probably know what I mean.

21

Trader Joe 07.13.21 at 3:13 pm

I don’t know if its helpful, but this is a definition that the US Broker Dealer/Investment banks figured out some time ago.

In general >$5m of liquid net worth (i.e. ex homes and pensions) is called High Net Worth (HNW) while those in the $1-5 m range are called “Mass affluent”

Typically the HNW customer has an interest in different risk categories of products, wealth transfer need and usually tax strategies. By contrast a Mass Affluent customers will have primarily accumulated money to support their retirement and is often more focused on capital preservation and distribution strategies to support their living needs. Both customer sets are obviously wealthy by any conventional definition, but are seeking to utilize their stack differently.

I find it interesting that the survey respondents came fairly close to these distinctions without being prompted to them – which sorta suggests that wealth is something that you know it when you see it and not all $5m nest eggs are created equal.

22

RichardM 07.13.21 at 3:27 pm

@18: According to the calculator below, 3 million needs 2.85% returns to give you 100,000 annually for 60 years. Even 0 returns will obviously suffice for 30 years.

https://www.bankrate.com/calculators/investing/annuity-calculator.aspx

Historical index fund returns are of course > 5%, which allows withdrawing ~50% more.

23

CJColucci 07.13.21 at 4:34 pm

Financial advisors used to use a 4% rule of thumb. For any given amount of capital, you could withdraw 4% a year in, for all practical purposes, perpetuity because what you could reliably earn on the capital would cover the withdrawals. There are several problems with this “rule,” but it’s not a bad starting point. I use it myself in retirement planning, at least for rough cuts.
On that theory, 3 million dollars or 3 million euros can fund a roughly middle-class life, especially if you’ve paid off the mortgage and your kids are on their own. (I’m assuming decent health insurance, too.)

24

Alan Peakall 07.13.21 at 4:54 pm

It would be nice if it were possible to track the average popularly reported threshold for being “too rich” over time and compare it with average nominal, real and hedonically adjusted incomes together with those same incomes divided by the contemporary risk-free rate of return. Are respondents’ answers based (however loosely) on converting wealth back into an current income stream while preserving real capital value, or do they internally impose a taboo on bequest of capital to children of the household and perform something closer to an annuity valuation?

25

Howard F. 07.13.21 at 5:27 pm

You are describing a world in which Americans’ two principal reasons for saving do not exist. That’s going to make it hard for Americans to understand; I had to keep checking back to make you were talking about wealth, not income. (In the US, the definition of millionaire has gradually changed so that it now means someone with annual income over 1 million dollars, though billionaire still refers to wealth.)

26

mutant_dog 07.13.21 at 5:30 pm

How do we feel about “billionairies in Space” ? Is today’s discussion among the crooked timber informed by this newish Space Race ? Are you hearing admiration or disgust on this topic, where you live ? [American here.] Are the vanities of the wealthy ultimately a public good,or not ? Who would fund a Taj Mahal if not a wealthy person ?

Elon Musk’s first Tesla, a Roadster, now orbits between Earth and Mars, mannequin Starman at the wheel.. folly ? Art ? Mere engineering testload, plus tax write-off ? Addition to the public dialogue – like a Banksy self-shredder ? Or, finally..symptom of “too much wealth” ?

27

Dr. Hilarius 07.13.21 at 7:09 pm

The mention of conspicuous consumption and “billionaires in space” sparked a memory: Gil Scott-Heron’s 1970 song “Whitey on the Moon.” Scott-Heron was singing about the Apollo moon landings. We have now progressed from space travel being a public venture to one of private wealth.

28

Chetan Murthy 07.13.21 at 11:43 pm

Ingrid,

I read some of the paper, and it answered a number of the questions I had (and that others asked here). Some thoughts:
1. it isn’t made sufficiently clear that the 1-3m Euro refers to wealth and not income. Eventually I inferred this, but it would have been nice if, in the introduction, this was made very clear.
2. it isn’t adequately described what things can be assumed as “taken care of” by the state. I think health care was mentioned, but (decent) education, retirement, what else? That is to say, these two are big reasons why many Americans save money. More and more, from what I read, this is true in the UK. For the record, I wish I lived in a country with much higher taxes, where most residents didn’t have to worry about these things. And I know that everyone in my intellectual milieu saves a ton of money for these things — everyone.

Another thing that stands out from these comments: lots of people here are sufficiently well-educated that they can have some hopes of actually reaching 10m Euro in wealth. This, I fear warps their sensibilities (“temporarily embarrassed decamillionaires,” wot). It’s funny, Tim Worstall cites the figure of only 3% of Dutch having 1m Euro wealth. [He’ll probably say, nOOoOoOo, he didn’t mean that, but …] Gosh, his argument sure seems like “the ones who say they think 1m Euro is the ‘rich limit’ are the ones who could never get there anyway, it’s just sour grapes”.

Lotta crabs in that bucket, in short.

P.S. If the meaning of “1m Euro wealth” is taken to mean “after all education, retirement, health care” needs are taken care of, then it sure looks much more reasonable. And 3m Euro at that point …. well, as CJColucci points out, at 4%, that’s 120k Euro a year: should be enough to live on: lots and lots (and lots and lots) of people earn a lot less and they have to actually work for that.

29

Seekonk 07.14.21 at 2:47 am

Significant wealth/income inequality is certainly destructive and hurtful. I think it’s useful to focus on the source of wealth and income as well as the disparity in amount.

Suppose mineral resources, aquifers, arable land, and enterprise work product could not be privately owned. Suppose the critical mass of banking, telecommunications, housing, and health care were publicly controlled.

30

Kiwanda 07.14.21 at 5:26 am

As an American with children, I save not only to be able to pay for health insurance and to have an adequate pension, but also to provide as much as possible to my children, now and after my death, so that they will be able to have adequate health insurance, afford a home, pay for college for their children, and eventually, have an adequate pension themselves. So the shitty U.S. healthcare system, the inadequacy of social security, and the high cost of college and housing, have a multiplied impact in this way.

31

J-D 07.14.21 at 6:03 am

J-D – does this answer your question?

No, because it doesn’t explain …

We could also have opted for another household structure, …

… why you didn’t do that.

… but it seemed to me the most important thing was to keep it constant.

Sure, absolutely! But there was available to you a list of options (even if you didn’t think it through explicitly in this way) which might be set out like this:
one adult;
one adult and one child;
two adults;
one adult and two children;
two adults and one child;
three adults;
one adult and three children;
two adults and two children;
three adults and one child;
(and so on).

Out of this list of an indefinite number of possibilities, you chose two adults and two children over any of the others you might have chosen. Even if you didn’t explicitly and systematically think it through then, there must be a reason why you made that choice.

Also, it’s not clear why you felt impelled to nominate an age bracket (for the adults but not for the children), nor why you chose the particular age bracket that you did.

If you knew that the two-adult-and-two-child household structure is the commonest single household structure in the Netherlands, that would answer my question (except for the part about age brackets); but if in fact some other household structure is commoner, then I think that would most likely reveal something interesting about your choice.

32

Tim Worstall 07.14.21 at 10:02 am

@28

” It’s funny, Tim Worstall cites the figure of only 3% of Dutch having 1m Euro wealth. [He’ll probably say, nOOoOoOo, he didn’t mean that, but …] Gosh, his argument sure seems like “the ones who say they think 1m Euro is the ‘rich limit’ are the ones who could never get there anyway, it’s just sour grapes”.”

Quite so, I do indeed say I don’t mean that. But explicit in the very concept of relative wealth – or as we measure poverty these days, relative poverty – is the concept of relative.

OK, relative to what? My statement is only that maybe – maybe! – the definition of “too rich” is just beyond where the respondent can see themselves getting given a decent following wind.

It wouldn’t be a great surprise if this were true. When income caps are discussed as even theoretical possibilities it’s just amazing how much current income determines where the cap might be. Many to most seeming to think that it’s somewhere ahead of what they currently gain.

Would be a rather odd world where this wasn’t true too. Ask the question in 1850 when GDP per capita for the UK was whatever it was, $4,000 in 1992 dollars? Something like that. Today it’s something like $40,000. OK.

What people today determine is a valid minimum – as in minimum wage, minimum income, minimum living standard – is higher than it was then. Possibly because that rising tide has lifted all boats. Why wouldn’t the same effect be true of wealth, too rich, too much income and all the rest? Our definitions of “too” being heavily influenced by where we ourselves are now?

33

nastywoman 07.14.21 at 10:54 am

some of these comments are very… very…?
con… fusing –
as can’t you guys just tell US if y’all also think that ‘There is such a thing as being too rich’
and where y’all see the ‘riches line’ for the type of family which was used in the Dutch survey?

As I actually would be really interested to know what y’all ‘thunk’?
(especially the guys who always write a lot but never any straightforward and/or useful information)

34

Jonathan Monroe 07.14.21 at 2:59 pm

The big issue that confounds the “how much wealth is too much” isn’t healthcare – it’s housing. The extreme example is London, where there are hundreds of thousands of middle-class lefties living in million pound homes who think that £200,000 a year is too much money. If taken seriously, these people think that nobody should be able to afford an ordinary middle-class home.

Looking at the paper, the €2.2 million that the average Dutch survey respondent identified as “extremely rich” is not a number that appeared in the survey – it is a calculated net worth figure for representative vignette 6, dominated by the authors’ estimate of the cost of a villa with a private pool, a second home in the south of France and two luxury cars. Given that this map implies that housing in upper middle-class neighbourhoods of Amsterdam costs €8000 per square metre and up, you could create a vignette with the same net worth consisting of a 200 square metre townhouse in an appropriate neighbourhood, two newish bicycles, and the same €500k savings. I don’t think that would read as “extremely rich”.

Also, people with single-figure millions net worth in northern Europe do not have private swimming pools – so including them in the representative vignettes 6 and 7 is probably misleading.

35

Chip Daniels 07.14.21 at 6:05 pm

I think it is a good time for modern societies to re-evaluate the concept of property rights.
Currently the common understanding of them is that they are some absolute thing, unassailable.
People accept the concept of taxes but only grudgingly as a last resort utilitarian measure.

We need to challenge this with the notion that property rights themselves are only a utility intended to further the flourishing of society, and as the amount of wealth grows, the legitimacy of the claim to the wealth grows weaker until at some point it vanishes altogether.

I premise this on the way we intuitively find a nexus between labor and the wealth produced; If you create something with your labor, it rightfully belongs to you.

But there is obviously an upper limit to how much wealth can be produced by any human person. Even the most wildly talented superstar can only sell so many records or dunk so many baskets.
And in an industrialized system, as the person’s enterprise grows, the entreprenuer grows more and more distant from the actual production of the labor.

At one point Steve Jobs might have actually performed software coding or product design directly. But as he ascended the corporate rank, he grew more and more detached from the actual making of the thing, and his wealth grew more and more from passive income and investment and the labor of others.

We can say that he “earned” his riches, but it isn’t an unassailable argument; It could easily be said that very little of his wealth was actually the product of his own labor, and the rest belongs to society.

36

Gareth Wilson 07.14.21 at 8:30 pm

“At one point Steve Jobs might have actually performed software coding or product design directly. But as he ascended the corporate rank, he grew more and more detached from the actual making of the thing, and his wealth grew more and more from passive income and investment and the labor of others.”

25 years after Jobs founded Apple, he was throwing Apple devices in fish tanks and screaming specific instructions to the engineers to improve them. He’s really not the best example of passive exploitation of employees.

37

notGoodenough 07.14.21 at 9:16 pm

Jonathan Monroe @ 34

“The big issue that confounds the “how much wealth is too much” isn’t healthcare – it’s housing.”

In Europe, typically yes. However, not everyone in the world lives in Europe, so generalising from the specific to the universal is probably not too helpful – people noting healthcare as a major consideration in this thread seem to be USians, which may account for this difference in perspectives.

“If taken seriously, these people think that nobody should be able to afford an ordinary middle-class home”

or, potentially, that “these people” think housing in London should be more affordable than it currently is (just to offer one possible alternative interpretation).

I don’t think that would read as “extremely rich”.

You would not consider a net worth of €2.2 million – expressed as a vignette including a 200 square metre townhouse in an appropriate neighbourhood, two newish bicycles, and the same €500k savings – extremely rich?

I suppose a lot depends on what you imagine “rich” means – as numerous CT discussions have highlighted, there is considerable debate around this point (particularly with regards to wealth, income, education, etc.).

Consider a different attempt to establish a “richness threshold” by l’Observatoire des Inégalités [1]. If I understand correctly (though I should note I am not fluent in French), they put the threshold for “rich” at an income of €3,470 per month for a single person, or €7,287 per month for a couple with two children (about 8% of the population meets this). In the spirit of a spherical-horse-in-a-vacuum approach to these numbers: if a couple started with combined savings of €500,000, and each walked immediately into a job earning €3,470 per month, and neither had any expenditure at all, it would take about 20 years to earn the remaining €1.7 million. Indeed, it would seem that, according to the Knight Frank Wealth Sizing report, €2.2 million net wealth would put you in/pretty close to the top 1% within many European countries, including France (though not, for obvious reasons, Monaco or Switzerland). Moreover, if I understand the data from the National Bureau of Statistics [2], having assets of over €1 million puts you comfortably within the top 5% of households in the Netherlands.

While I would not wish to draw any significant conclusions from any of this (and certainly any discussion along these lines must be carefully caveated and will almost certainly have limitations and flaws), it may be worth keeping in mind that (given the general distributions one sees) the bar to reach the upper percentiles within Europe can be surprisingly low (particularly given we are talking about net worth).

“Also, people with single-figure millions net worth in northern Europe do not have private swimming pools – so including them in the representative vignettes 6 and 7 is probably misleading.”

Leidsevaart [3] 24 E & D 2161 As Lisse. €1,485,000. 6 bedrooms, 330 m2 living space.
Description: “Beautiful thatched detached villa with double garage and wonderful heated outdoor pool. This fine villa is located at a stone’s throw from the “Leidsevaart” in Lisse and comes with a large basement and spacious business space. In addition, the villa has no less than 6 bedrooms and 2 bathrooms, one of which is on the ground floor.

[1] Rapport sur les inégalités en France, Sous la direction d’Anne Brunner et Louis Maurin
[2] https://opendata.cbs.nl/statline/#/CBS/nl/dataset/83835NED/table?ts=1546102118832
[3] Amongst others: https://www.funda.nl/koop/lisse/huis-41215634-leidsevaart-24-e-en-d/

38

Alex SL 07.14.21 at 10:10 pm

Jonathan Monroe,

Yes, while certainly not what I would call obscenely rich, 200k is more than anybody should need in a society where the median income is 30k. In other words, that is more than six times (!) the money the highest-earning person in the lower 50% of the population earns. If one needs that much to achieve middle-class-dom, then one has just redefined middle class to mean less than the top 5%.

(As the saying goes, everybody always sees themselves as middle class, no matter how wealthy they are, because they only ever compare upwards and bracket the people below them out of the equation. I remember seeing parts of a political talk show from the UK a few years back where some guy was incandescent that Corbyn’s Labour would increase taxes on a low income earner such as himself if they won the election, calling the Labour guy on the panel out for being dishonest about targeting only the well-off with their tax policy. The audience was cheering and applauding him for letting a politician have it. Then he mentioned that he was earning considerably more than 100k pounds, and you could hear the applause faltering, and an uncomfortable silence taking its place. When somebody pointed out to him that he was in the top 5% of earners, he just would not believe it; that fact just bounced off him. Fake news, I guess.)

The solution is to realise that a middle class house is unsustainably overvalued at >1M, objectively not worth that much money in terms of land use, materials, and quality of build, and only that expensive due to a property bubble where people have convinced themselves that a house is an ‘investment’ because number go up all the time.

Result: houses too expensive, some people think themselves investment geniuses for having arrived at the property market with a financial head start and successfully overbid and priced 2-3 other, poorer or younger families out of ownership forever, and we all take the next loop on the ever deepening inequality spiral. (Same situation here, not just the UK.)

The only argument is about the arrow of causality – do some of us ‘need’ much higher salaries than the other 95% because in contrast to them we deserve to own a house which just happens to be that expensive by Act Of God, or are the houses only that expensive because some of us happen to have so much more disposable income in the first place that we can become property investors and bid up the prices? Chicken and egg, of course, and ultimately only two sides of the same coin that is inequality.

39

Seekonk 07.15.21 at 12:18 am

As to the wealth of someone like Steve Jobs, a ‘new’ tech idea is almost always a relatively tiny accretion in which is embedded the cumulative scientific inquiry of the ages: Archimedes, Pythagoras, Descartes, Galileo, Newton, Curie, Faraday, etc., plus countless, nameless other thinkers and workers.

Fairness doesn’t require that Bloomberg, Gates, Jobs, etc., be granted untold wealth for their ‘discoveries’; and if their idea is necessary or beneficial for general application, it’s anti-social to give them a monopoly on its use.

40

nastywoman 07.15.21 at 3:11 am

@34
‘The big issue that confounds the “how much wealth is too much” isn’t healthcare – it’s housing’.

That’s true and as in CA every Beach Shag is already above a million bucks – the answer to the answer – that ‘There is such a thing as being too rich’ might be completely different than in ‘London’ –
(Pope County Arkansas) –
but isn’t that… ‘the thing’?

41

Gorgonzola Petrovna 07.15.21 at 5:58 am

@MisterMr, 12, “…the so called protestant ethic”

Yes, in the Netherlands it probably is the so-called protestant ethic. But to north-east from there, it’s a much more interesting — and more radical — concept of egalitarianism. The concept of egalitarianism that has nothing whatsoever to do with wealth and income: the Law of Jante.

42

Tim Worstall 07.15.21 at 7:23 am

@35 :

“At one point Steve Jobs might have actually performed software coding or product design directly.”

Jobs is well known as having very little technical skill at all.

https://www.businessinsider.com/steve-jobs-never-wrote-computer-code-for-apple-2013-8

“We can say that he “earned” his riches, but it isn’t an unassailable argument; It could easily be said that very little of his wealth was actually the product of his own labor, and the rest belongs to society.”

Jobs was an entrepreneur. Some neoclassicals will argue/model that this is the fourth factor of production to add to land, labour and capital. Someone, somewhere, has to grab the thing by the scruff of the neck and get the organisation as a whole to work.

We can get all Mazzucato about it if we like. The iPhone – all the technologies were funded and originally developed by government. I don’t think that’s true for a moment but let’s run with her argument. OK, but it’s still true that someone, somewhere, needs to assemble them into this new product, this smartphone, that people will queue around the block to buy. Someone has to create the supply chain. To negotiate with the airtime companies. To organise the retail stores.

The entrepreneur.

Arguably Jobs did this four or five times. The Apple II, the Mac, Pixar, iPod and iPhone.

This is a rare skill, or talent, or method of exploitation of the labour of others, to taste.

This leaves open whether it should be rewarded as well as it is, or in Jobs’ case was. But being able to drive an organisation into the development of a new product is a rare skill. Rewarding it would seem likely to provide us all with more new products developed.

43

nastywoman 07.15.21 at 9:30 am

and could we please forget the (typical) American discussion about who deserves to be TOO rich – as isn’t this thread about –

Do you guys think that the survey in the US will come to completely different results than in the Netherlands – BE-cause Americans believe that everybody who is TOO rich deserves to be TOO rich?

44

MisterMr 07.15.21 at 9:30 am

In a case of sincronicity, Milanovic wrote about a very similar argument in his blog:
http://glineq.blogspot.com/2021/07/on-luxury.html

@Gorgonzola Petrovna
Generally I’m dubious of this kind of cultural explanations. For example in the case of ‘protestant ethics’ I think that first societies become more and more mercantile, and later a new religion was created that followed mercantile ethics more closely than middle ages catholicism (that justified aristocracy but hated rich mercants).

So I think that this Law of Jante thing is something quite natural as people dislike other people going beyond them. On the other hand, there are places and situations where showing off wealth is valued: for example in the cases of Berlusconi and Trump, part of their charme towards their voters was that, being very rich, they were perceived as very succesful.
I think that this is based on the idea that if someone is very rich, we can assume that he is also capable, the same logic where since a Picasso painting is very expensive, we accept that it is very artistic, if a movie grosses out a lot of money many will accept that it is better than another movie that was a flop etc. (while others will just assume that succesful movies are commercial and that true art is only in obscure art house movies).
I dont know in what situation one mindset prevails on the other, maybe both mindsets can coexist in the same society.

45

Tim H. 07.15.21 at 10:23 am

@42 The Compensation of Steve Jobs seems less controversial to me than that of leadership teams that create little more than variations on last year’s, or last decade’s model. How creative they are with the toy box of mostly prior art and occasional innovation matters.

46

Tm 07.15.21 at 10:26 am

Was that number „between 1 and 3 million“ suggested by the respondents? It seems to me that this (relatively low) kind of number reflects, once again, the inability of the public to grasp how rich the super rich really have become, for whom a few million don’t even register as peanuts.

47

nastywoman 07.15.21 at 1:23 pm

@41
UHHH!
The Law of Jante!
and wasn’t that… ‘Satire’? –
just like the joke about ‘the Swabian Housewife’ (Merkel)
who much rather sells the dog and barks herself?
(because the Satire satisfies all stereotypes of ‘geizige’ or ‘frugal’ – ‘socialistic equalisers’)
BUT there is still the question
how will the American survey look like?

48

Trader Joe 07.15.21 at 5:50 pm

The American’s speak

“According to a recent survey from Charles Schwab (Just published yesterday) that gauged investor attitudes about various financial issues and other topics, respondents said that on average being wealthy means having a personal net worth of $1.9 million. That’s down from $2.6 million in the prior year’s annual “Modern Wealth Survey.”

The survey was a national sample of 1,000 Americans examining how they think about saving, spending, investing and wealth.”

Interestingly actually a bit lower than the Dutch survey, despite no healthcare and no pensions. There was no indication in the survey whether people with $1.9 million should be that rich or not…just that the survey respondents said that was the threshold for where one could properly be viewed as “rich”

49

steven t johnson 07.15.21 at 9:02 pm

Googling law of Jante
“You’re not to think you are anything special.
You’re not to think you are as good as we are.
You’re not to think you are smarter than we are.
You’re not to convince yourself that you are better than we are.
You’re not to think you know more than we do.
You’re not to think you are more important than we are.
You’re not to think you are good at anything.
You’re not to laugh at us.
You’re not to think anyone cares about you.
You’re not to think you can teach us anything.”

It is not clear how this is different from
“You are nobody special.
You aren’t as good a person as me.
You’re not smarter than me.
You’re not worth more than me.
You don’t know any more than I do.
You’re not more important than me.
You have no skills that matter.
I’m a serious person whom you better not laugh at.
I don’t care about you.
I will not listen to you.”

It is not clear these moral value contribute to much of anything in practice. A humble owner of large property may have the common touch but still runs things by virtue of owning.

That refers directly back to the OP, of course. The emphasis on consumption, as opposed to property, much less the real world position in social life, seems doubtful to me. (No doubt that would be the Marxist influence.) But even in looking at that, there may be other questions to ask?
1. Is a person who is fat have too rich?
2.Is a person who owns a large TV set but doesn’t have good teeth too rich?
3.Is a person who drives a gas guzzling SUV or a towering pickup truck they don’t need too rich?
4.Is a person who eats meat every mean too rich?
5.Is a person who gets plastic surgery too rich?

I suspect there is not a well-ordered set of ideas about too rich.

Going in a different direction, other questions may be?
1.Is a person who can get access to top office holders because they are essential cash donors too rich?
2.Is a person who can afford to hire a lawyer and sue someone when they want too rich?
3.Is a person who can pull their advertising from a large media source and put it into a media source that cultivates the right kind of audience/sociopolitical attitudes too rich?’
4.Is a person who can immortalize themselves with charitable contributions to art and hospitals too rich?
5. Is a person who can endow a chair or fund a policy institute too rich?

I also suspect there is genuine support for the notion that private wealth of this kind is, as the phrase has it, civic society, which is by definition better than government. And that giving such priority to private wealth of this kind is in fact the opposite of totalitarianism, which has zero support in the academy.

But perhaps not? Perhaps there really isn’t widespread support for inequality?
1.Is it a problem when wealthy people and/or their business require large amounts of local government spending, driving up taxes, along with driving up land prices, perhaps even beyond the ability of other residents to cope with?
2.Is it a problem when wealthy tourists get obsequious service by service workers hoping for a large tip?
3.Is it a problem when the power grid is coordinated and open market prices for energy raise prices for low income areas higher?
4.Is it a problem when banks and health care are all part of a national network with policies set by corporate HQ?
5.Is it a problem when the high land values in some areas either raise the costs of infrastructure development to extremely high levels or bias such development in low cost, i.e., poor neighborhoods?

Perhaps there would be disagreement about these too?

Mister Mr@44 suggests that theology follows changes. Given that amount of church property; the role of holy days as holidays; the economic impact of shrines, pilgrimages and fairs; the export of monies to Rome; the relationship of education and government service, from lowly clerk to high bureaucrat…it seems that theology, reformation, as a weapon in politics (or even, horribile dictu, class struggle) has a more fraught relationship to changes in property than might seem obvious. That the Wars of Religion might be a phase in the emergence of bourgeois society may seem to give capitalism a less than glorious birth may be an insuperable objection for some, though.

50

Alex SL 07.15.21 at 10:29 pm

Fascinating, this discussion on whether a billionaire deserves ‘compensation’ for being a good entrepreneur. Imagine a small village in which one guy has an idea for how they could slightly improve their irrigation system, and then he argues that as a reward he should live in a palace with dozens of servants who feed him grapes and quail eggs and carry him around in a litter while everybody else has to make do with leaky huts, rags, and gruel to pay for that luxury, and then his son gets to inherit that status while the other village kids need to stay poor, because how else do you reward innovation?

I mean, look, I am a scientist. Although admittedly not in software engineering, I come up with new ideas and am then ‘compensated’ by …. wait for it … being given a salary and a pat on the back. Call me crazy if you want, but I am pretty sure that rewards system would also work for innovation in electronic payment systems, glossy laptops with constantly changing plug designs, or the insight that one could sell books online.

51

J-D 07.16.21 at 4:54 am

When I wanted to be sure whether I was rich, I asked my daughter (who confirmed that I am rich). Now I feel I’m going to have to ask her whether I’m too rich.

(I realise that just because this works for me doesn’t mean it will work for everybody. Not everybody has my daughter.)

52

John Quiggin 07.16.21 at 5:01 am

The article starts off with discussion of a 70 per cent top marginal tax rate which is roughly the amount that is estimated to raise the most revenue (the high point of what has been misnamed the Laffer curve).

If you take the view that there is no social benefit in people getting incomes above some threshold level, but also no particular harm, you would to have a 70 per cent MTR at that threshold. Raising the rate further would reduce incomes above that level, but also reduce the revenue available for desirable public goals like health and education. Is that desirable?

There’s a case in relation to billionaires (taken as a stand-in for “people so wealthy that they can control political processes for their personal benefit), but it seems as if predistribution would offer better prospects of preventing the emergence of such concentrations of wealth. On the other hand, it’s arguable that even if multi-millionaires don’t have significant individual power, they can act as a group to promote their class interests.

53

Chetan Murthy 07.16.21 at 6:23 am

There is discussion up-thread about whether billionaires deserve all the money they get.

Thinking about this is always riddled with the problem of evaluating counterfactuals. If this one guy hadn’t done the work he did, how much longer would society have gone on, until somebody else came along to do that work? Well, it turns out there is evidence for this. Andrew Odlyzko in The Decline of Unfettered Research points out that in the early 20th century (and before), an invention like photography and xerography would entail not just one patent, but a whole flurry of patents in related areas, as the inventor was very much ahead of his competition. But by the late 20th century, that was no longer the case: for example, high-temp superconductivity was discovered by one group, but other applications were patented almost immediately by other groups all over the world.

In a real sense, if John Galt had “stepped back”, a thousand second-rank guys would have stepped forward, and life would have gone on as before. So for instance, in the case of HTTP and the Web, most of us techies pretty much agree that if Tim Berners-Lee hadn’t invented HTTP when he did, somebody else would have taken some other protocol, like Gopher, and done the minimal changes to produce a work-alike. Similarly, NCSA Mosaic looks revolutionary, but it wasn’t much different from Symbolics LISPM “Active Objects”. Somebody would have seen the application. Again, we’d have done without for maybe a few years.

I know of only one counter-example to this: a guy who wrote an IP-based storage-area networking product long before others. But even he told me, 10yr later, that his work was no longer that different from the competition. And in fact, he found that as groundbreaking as his product was, he wished he’d done something much simpler — which is what most of the industry was doing while he was doing his work — b/c it would have been easier to sell.

The director of research at a big-ass enterprise I/T company was once approached by a chip designer, who demanded to be paid a fixed (small) percentage of the money his work earned for the company. Undisputed was that this guy actually did earn a ton for the company by his work. The director responded with: “pay rises logarithmically with value; to do otherwise, is to produce mass starvation”. Notice that this is inside of a big company — a capitalist organization. They understood that you can’t pay people enough to do all the necessary bits (equiv of paving the roads, teaching the kids, wiping the bums) if you’re paying the high-flyers a percentage of the value they “create”. B/c those high-flyers require the rest of society to exist and function in order to fly so high.

54

Alex SL 07.16.21 at 7:28 am

John Quiggin,

Taxation of income is, as you write yourself, only one tool in the arsenal against harmful concentrations of wealth (which is a form of power). Inheritance tax, wealth tax, legislation against monopolies and cartels, nationalisation of services that tend to quasi-monopolistic by their nature anyway (e.g. there is no reason why the internet needs more than one search engine that is run as a public service), etc.

In this context it might also be mentioned that enormous profits that create billionaires are never just rewards anyway. They are evidence for market failure. If there was a functioning, free market, profits would come down to near-zero through competition. Again, problem of some activities tending by their nature to favour non-market-shaped solutions. If those are then run for-profit by a private actor they amass enormous degrees of control and wealth.

55

J-D 07.16.21 at 9:50 am

There would be a level of wealth or income at which one could no longer spend it on things or services which one (or one’s family or friends) could enjoy personally, so that about the only way to use it would be politically, that is, to obtain power over others.

I wonder how much money it would cost to buy Brett Kavanaugh.

If you have enough money to buy a Supreme Court Justice, does that make you too rich?

56

Tim Worstall 07.16.21 at 1:17 pm

@50.

Sure, I left open whether Jobs should have got quite so much. But I’m always taken with the William Nordhaus paper on Schumpeterian profits:

https://www.nber.org/papers/w10433

The entrepreneurs end up with, on average, about 3% of the value creation. Is this just and righteous? I’ve no idea.

Is it pragmatic? Seems to be. We certainly have a constant supply of people trying to be entrepreneurs. And a 3/97 split on whatever value they might produce seems a good deal for us out here.

57

Ingrid Robeyns 07.16.21 at 3:00 pm

John – I agree that trying to use as much ‘predistribution’ interventions rather than ‘redistribution’ interventions in order to limit inequality is the best thing to do. For various reasons redistributive measrues are superior — they are immune to tax avoidance and evasion and to a large extent also to the other powers of the “wealth defense industry”; they are immune against the ideological frame of “taxation is theft’; they give those who receive from their activities a greater sense of dignity; etc.

But since we’ve been so bad at protecting the interests of the 99% over the last decades, only predistribution now will not do. I think egalitarians should especially use any occasion they get to debate (and argue for) proposals for a change in inheritance tax that leave the ordinary family, who wants to leave something to their children, off the hook, but massively taxes fortunes. This would be totally to the benefit a supermajority in all countries, but popular opposition to inheritance tax is very strong, alas – in part I’d think because the right-libertarians and conversatives have been very good at framing the issue as ‘death tax’ etc.

58

Tim Worstall 07.16.21 at 3:07 pm

@JQ

“The article starts off with discussion of a 70 per cent top marginal tax rate which is roughly the amount that is estimated to raise the most revenue (the high point of what has been misnamed the Laffer curve).”

Well, yes and no. From the Diamond and Saez paper at least that’s the total MTR on labour income. Not, absolutely not, the income tax rate. Sure, you and I know this but many others won’t.

It includes all other levies on that labour income, including those nominally paid by the employer. So, in Oz, the superannuation guarantee of what is it, 10%? And the Medicare 2%. In the UK the employer national insurance (umm, 14%?), the employee of 2% on high incomes and income tax as well at 45%.

It’s “taxes on labour income” not “income tax”.

Then there’s the rather more argued about issue of “allowances”. With them it’s more like 54% than 70%. This can mean things like capital gains being taxed at a lower rate and there’s always a certain amount of choice in reporting income as capital or labour. But being able to leave the country and be free of the tax system is also an allowance in this sense.

It’s really not, just not, that the Laffer peaks at 70% income tax rates.

59

Alan Peakall 07.16.21 at 5:19 pm

Ingrid, I think that conceding the legitimacy of “the ordinary family leaving something to their childred” is what is central to the calculation. I have heard plausible claims that existing systems of taxing inherited wealth bear significantly more heavily (proportionately) on millionaires than on billionaires and so to talk vaguely about the legitimate amount of inherited wealth as “something” risks begging the question.

Even in some states with public health provision, end of life care is accounted separately. If people are expected to run down their wealth at the end of their lives to pay the worst case bill for end-of-life care, they will regard themselves as entitled to bequeath, tax-free, the same amount of wealth if they fall in the fortunate 50% whose end-of-life care costs are comparatively small. You then have 25% of two-adult households bequeathing 2 x the worst case cost of end-of-life care – a sum which is probably more than half the popularly chosen too-rich number that you started with (albeit perhaps shared between more than one beneficiary).

It may be equally obvious to both right libertarians and democratic socialists that insurance is the arithmetic solution to end-of-life care costs, but a state system has a commitment problem in capping its own redistributive character, and a market system will exclude those (at least a significant minority) who did not earn enough during their working lives (or inherit enough) to accumulate a potential inheritance worth insuring.

The capping of taxes on earned income at or below 50% over the last 35 years or so has facilitated wealth accumulation in the hands of the mass affluent. The experience of Ireland in run up to and aftermath of the financial crisis and the UK in the wake of the Cameron/Clegg coalition’s aggressive increases in the personal tax allowance shows dangers to social spending of eroding the proportion of revenue drawn from standard rate income tax (itself less regressive than value added tax or social security contributions) without finding an alternative with the similar character that gets labelled by electrical supply engineers as “base load”.

It seems to me that, politically, it might be most effective to compaign for reform of personal capital taxation along the lines of an accession tax based on a life time allowance which treats inherited wealth as merely one pot along with capital draw-down from trusts (including pensions), capital gains on owner-occupied housing, sale of close companies etc. I think that might be sold to the mass affluent on the grounds that their modest losses to higher capital taxes would be cushioned by gains from (or at least avoided losses to higher) income tax while the tax avoidance strategies available to those much richer than they would be closed down.

60

MisterMr 07.17.21 at 2:42 am

@Tim Worstall 56

If I said, look, congressmen and other politicians have the very necessarious job of organising the nation, and they only get 3% of total national gdp, isn’t that a bargain, you would not accept it, I’m not sure why you think this is ok with enterpreneurs.

61

J-D 07.17.21 at 7:51 am

I have heard plausible claims that existing systems of taxing inherited wealth bear significantly more heavily (proportionately) on millionaires than on billionaires …

That can’t be true in all countries; at any rate, it can’t be true in those countries which don’t tax inheritances.

62

roger gathmann 07.17.21 at 12:30 pm

To me, the question isn’t so much about the luxury as the power of the plutocrats. To my mind, this over power of the few to shape the economic and social lives of the many is a question that is at the heart of democratic politics. I’m content to see our billionaires beaten down into multi-millionaires – less yachts, perhaps, but still yachted – while being bound with infinite Lilliputian strings so that they can’t, for instance, under the guise of private equity or the useless instruments of the financial sector, determine what we do, both collectively and individually. And I would like to see that power structurally hindered – for instance, by tying the tax paid by corporations to the inequalities in their compensation structure. The higher the inequality in the latter, the higher the tax paid – a punitive tax that will give a kick in the ass to what has become corporate robbery. There are a lot of clever and necessary ways to bring down the plutocrats. We should do them.

63

Gorgonzola Petrovna 07.17.21 at 9:33 pm

62: “There are a lot of clever and necessary ways to bring down the plutocrats.”

Hmm. No, there are not. I believe there’s only one way. It isn’t clever, and it’s highly uncertain.

As Frederick Engels wrote: “People who boasted that they had made a revolution have always seen the next day that they had no idea what they were doing, that the revolution made did not in the least resemble the one they would have liked to make. That is what Hegel calls the irony of history, an irony which few historic personalities escape.

64

Anon 07.17.21 at 9:44 pm

Personally, it never bothered me that 10s of millions of people had more income and/or wealth than I do. Even bazillionaires. I’ve never had to worry about paying for shelter or food or medicines. So I live a remarkably comfortable, if not a ‘fancy’, life.

What does bother me is the 100s of millions of people who DO have to worry about paying for, or even obtaining, shelter or food or medicine. It must be rough on them.

If you can try to donate to homeless shelters or food banks or the like.

65

John Quiggin 07.17.21 at 11:26 pm

Tim W, the superannuation guarantee levy isn’t tax on labour income. It’s a requirement that the employer contribute to the employee’s accumulation account. From the employee’s POV, it’s forced saving.

66

Alex SL 07.18.21 at 12:04 am

Tim Worstall,

Economics is not my area, but I am given to understand that in the 1950s-1970s economic inequality was considerably lower in ‘Western’ societies than it is now, and that there was no expectation that successful entrepreneurs and innovators should be rewarded with riches equivalent to the assets of a small nation. Nonetheless, there were entrepreneurship and innovation in a variety of areas from medicine to computing. The Soviet Union, for that matter, had excellent scientists and engineers, in my field for example Armen Leonovich Takhtajan. How was that possible?

In my eyes that observation alone renders absurd the proposition that having billionaires could even potentially turn out to be just if we think about it a bit more. Combine that with the question of power imbalances as just restated by Roger Gathmann (what is my level of influence on my community versus that of this other guy who personally controls half the newspapers, a top-three TV station, and most local radio stations?), and the same goes for the proposition it could be in any way pragmatic in the sense of overall optimal outcomes.

When somebody suggests that having billionaires may be ethically or democratically tolerable or even beneficial it sounds to me a priori as likely as, say, “try sawing your arm off, who knows, you may end up with four arms, and that would be a great outcome”. That is a sentence, I guess, but I don’t find it possible to take it serious in the light of what I already know about how things work.

67

J-D 07.18.21 at 1:06 am

There are a lot of clever and necessary ways to bring down the plutocrats. We should do them.

So, what have you got planned for after lunch?

68

David Orr 07.18.21 at 1:22 am

7.6 billion humans: 13% of the global population still lacks access to modern electricity (U.N.); one in three people do not have access to safe drinking water, two out of five people do not have a basic hand-washing facility with soap and water (U.N.); , about 260 million children were still out of school in 2018 — nearly one fifth of the global population in that age group. And more than half of all children and adolescents worldwide are not meeting minimum proficiency standards in reading and mathematics (U.N.); An estimated 2 billion people in the world did not have regular access to safe, nutritious and sufficient food in 2019 (U.N.); etc.
And you envy your neighbor’s ability to buy a Rolex watch and Mercedes-Benz car (2nd hand) when all you can buy is a Casio watch and a new Ford? You both have watches and cars.
Might it be time to open world markets to free enterprise that has so enriched the west these last 100 years?

69

Gorgonzola Petrovna 07.18.21 at 7:43 am

@steven t johnson, 49 “A humble owner of large property may have the common touch but still runs things by virtue of owning.”

But someone has to run things. In the case of Steve Jobs, him running Apple doesn’t strike me as a horrible injustice. And, if (hypothetically) his wealth is all tied up in shares of Apple Inc., and his consumption patterns are not too far above the average, what is the main objection?
Well, okay, I think I know what the main objection is: Steve Jobs’ purpose is to maximize Apple’s profits, instead of maximizing its social value. That is true. But perhaps the result is close enough?

@49 “Is a person who can get access to top office holders because they are essential cash donors too rich?”

But the director of the Soviet version of Apple Inc. would also have a direct line to the Obkom’s first secretary. The adage ‘wealth is power’ makes sense, but it’s not a literal equivalence.

70

Tim Worstall 07.18.21 at 8:07 am

“If I said, look, congressmen and other politicians have the very necessarious job of organising the nation, and they only get 3% of total national gdp, isn’t that a bargain,”

Given that rich world governments dispose of 35 to 45% of GDP then yes, I would call it a bargain. If they only disposed of 3% that is.

And yes, I know, not quite what you mean. But our billionaire is rich because he can command the labour of others. In this sense the disposal of 35% of GDP by the political class is that same thing – the political class gets to comand the labour of 35% of the people, the economy.

Wealth is, as some of the comments above point out, being able to tell other people what to do.

BTW, more to your point, those in government do gain 3% of GDP and more…..not the politicians aone but government, yes.

” the UK in the wake of the Cameron/Clegg coalition’s aggressive increases in the personal tax allowance”

Ah, the one policy actually enacted that I can claim some decent portion of the credit for. For it really was me at the ASI and a couple of folks at the CPS who brought that idea into being and then shouted about it so much it was adopted. I even know the name of the person who I convinced who then convinced Clegg (the CPS working on Osborne).

JQ: “Tim W, the superannuation guarantee levy isn’t tax on labour income. It’s a requirement that the employer contribute to the employee’s accumulation account. From the employee’s POV, it’s forced saving.”

So is Social Security but that’s definitely included as tax upon labour income in the Diamond/Saez calculations.

71

Tim Worstall 07.18.21 at 8:38 am

“Economics is not my area, but I am given to understand that in the 1950s-1970s economic inequality was considerably lower in ‘Western’ societies than it is now, and that there was no expectation that successful entrepreneurs and innovators should be rewarded with riches equivalent to the assets of a small nation. Nonetheless, there were entrepreneurship and innovation in a variety of areas from medicine to computing. The Soviet Union, for that matter, had excellent scientists and engineers, in my field for example Armen Leonovich Takhtajan. How was that possible?”

The Soviet example is an excellent one – I spent most of the 90s combing through the rubble of that system for what might be of value. There was indeed some excellent work done. I made my living for a decade out of some of it (the work that had been done on scandium was vastly in advance of that in the “West” and to a decent approximation I was exporting that).

There was a significant lack of what I would call entrepreneurialism though. I once owned a Soviet washing machine (in my early days there, still Soviet Union at this point). A plastic tub with a rotating arm that you placed in the bath.

As Hans Rosling has pointed out (Ha-Joon Chang too, both using it as an example of domestic technologies) the washing machine is a hugely liberating tech. Hugely desired too.

Further, once you’ve got the base technologies necessary it’s not a difficult one. You need steel to make it, concrete for the weight around the drum – the Soviets certainly had both of those. You also need ball bearings – and the Soviets had an entire Ministry for those.

I’d say the Soviets did suffer from a definite lack of entrepreneurs – those who take extant assets and make them into something that people desire.

As to billionaires. A technical point, you’re comparing the wealth of the billionaires to the GDP of a nation – which isn’t right. GDP is the annual income, not the wealth of a nation. The assets of the UK are £15 trillion or so (that’s just household wealth) rather than the £2 trillion of GDP. Of the US some $100 trillion, not the $20 trillion of GDP.

The assets of Bezos – whatever it is, $100 billion, $200 – is to be compared with the assets, not the GDP. Luxembourg has a national wealth (households only) of perhaps $200 billion. So it’s a pretty small country he’s beating.

As to a greater concentration of wealth now, not wholly sure about that. Or at least not much. Number one on the first Forbes list was Daniel Ludwig with, I think., $4 billion. Or 0.04% of global GDP at the time (both in early 80s dollars). Bezos is today with $200 billion (?) on 0.2% of global GDP of $100 trillion. Sure, an order of magnitude different, and more. But it’s still a pretty small portion.

“Might it be time to open world markets to free enterprise that has so enriched the west these last 100 years?”

And there is of course that as well. The past few decades of this neoliberal globalisation – when we’ve let the billionaires rip and all that – has at the very least coincided with the greatest reduction in absolute poverty in the history of our species. Perhaps we should make absolutely damn sure it’s not all causative as well as coincidental before deciding to change policies?

72

Alex SL 07.18.21 at 12:05 pm

Gorgonzola Petrovna,

There is an enormous difference in legitimacy between somebody who has a direct line to the head of government because that comes with the job that the head of government has given them and somebody who is influential because they have such enormous amounts of private wealth and can bribe the head of government and all of the governing party’s parliamentarians, or bully them into submission with a media campaign.

Tim Worstall,

You cannot seriously argue that elected and accountable politicians managing a decent chunk of our collective wealth in our name is the same as somebody unelected and (except at most to a few wealthy shareholders) unaccountable owning a decent chunk of our collective wealth privately.

I am not arguing in favour of the arrangements as they were in the USSR; it is just an extreme example demonstrating the hollowness of the idea that people would just stay in stone age forever if they can’t have a shot at becoming billionaires. I myself, for example, am not at all motivated by or even interested in becoming rich. Give me a stable salary and recognition by my peers, and I am happy to give my best every day. There are many, many more people who are like me. Of course, if we deliberately build a system that rewards sociopathy and exploitation we may end up with sociopaths and exploiters in its top positions and then conclude that what motivates that kind of person is what it takes to motivate successful people…

Even under the most charitable interpretation of our present arrangements it is, of course, the same problem as always: the owners do not create in isolation and therefore do not deserve such excessive wealth in the first place. They would be completely helpless without staff and the infrastructure, public education, and legal and military protection provided by everybody else through their taxes.

Sometimes I wonder how one could ever convince certain parties of this simple fact, perhaps empirically. Drop five billionaires on a tiny desert island and come back ten years later to see what startling business empires they have (completely failed to) build in the meantime? And when somebody says, “well, that isn’t fair, obviously you have to give them a workforce etc.”, we have at least progressed to the stage of you are sooo close to getting it.

There is also the problem, as a fellow evolutionary biologist once put it, of fitting a birth model to what is a birth-death process, meaning in non-biology speak that the thousands of failed entrepreneurs who were equally hard-working, clever and inventive but simply had bad luck in a market where only 2-3 could ever make it are conveniently ignored by those who want so desperately to believe that a free market always produces fair and optimal outcomes.

As for the rest, I am puzzled where you get the idea that I am confusing GDP and assets and am thinking of a large nation when I write in #66, literally, “the assets of a small nation”.

73

J-D 07.18.21 at 1:20 pm

Economics is not my area, but I am given to understand that in the 1950s-1970s economic inequality was considerably lower in ‘Western’ societies than it is now …

As to a greater concentration of wealth now, not wholly sure about that. Or at least not much. Number one on the first Forbes list was Daniel Ludwig with, I think., $4 billion. Or 0.04% of global GDP at the time (both in early 80s dollars). Bezos is today with $200 billion (?) on 0.2% of global GDP of $100 trillion. Sure, an order of magnitude different, and more. …

Alex SL reports reading or hearing that economic inequality now is much greater than it was in the 1950s-1970s. Tim Worstall responds that it’s not so much greater now than it was in the early 80s. Is this a deliberate misreading?

74

steven t johnson 07.18.21 at 3:52 pm

Gorgonzola Petrovna@69 rhetorically asks if Steve Jobs maximizing his wealth is close enough to maximizing social value. To me it seems perfectly obvious that human welfare is not being well-served by private ownership of the means of production in complex societies. “Owning” Apple is not the same as owning your personal toolkit. Most disagree with me, and agree with Petrovna: Private control over investment in an intensively social system of production, even private control over money creation are effective in providing for humanity.

I believe that the golden age of bourgeois society in the empires of the nineteenth century came crashing down in the Great War for a reason. That the supposed trente glorieuse were paid for by WWII. Further, they were partial in their glory. The inglorious parts of humanity were not those who failed capitalism, but just trapped in the normal workings of the bourgeois world system. Like capitalism, bourgeois society, in its earliest days, actually existing socialism didn’t fill the headiest dreams. But like capitalism, bourgeois society centuries before, it was the way out. That’s way every capitalist restoration has in my judgment resulted a worse society, for most, however profitable it is for a few. The rotten fruit of capitalist restoration I think refutes Petrovna et al. decisively.

The Soviet head of a computer division approaches a party secretary in a different way than a wealthy man approaches a politician. The rich are buying, the bourgeois politicians are selling (save when the rich tire of buying them and try to do it themselves.) A man who is nobody when he loses his job is not the same as the man who owns the jobs of others.

75

Gorgonzola Petrovna 07.18.21 at 7:39 pm

@72, 74
“There is an enormous difference in legitimacy between somebody who has a direct line to the head of government because that comes with the job that the head of government has given them and somebody who is influential because they have such enormous amounts of private wealth…”

Agreed, but my point was that in the particular case of Steve Jobs/Apple the difference was, perhaps, not all that enormous. And if we can find (and agree on) a few significant cases where owner’s net worth doesn’t appear to be detrimental, then perhaps the focus might shift from ‘private wealth is evil’ to ‘abuse of private wealth is evil’. Or not.

Besides, managers and boards of directors (who may or not may not be rich) of public companies are probably doing far more buying and bullying of bourgeois politicians than rich individuals.

76

John Quiggin 07.19.21 at 2:13 am

@73 This happens all the time in debates about inequality. It’s obviously risen a lot on many different dimensions since about 1960, but it’s always possible to argue about when it took place, which dimension matters most and so on.

On Steve Jobs, this reminds me of pro-war arguments that rely entirely on Hitler (and perhaps the Confederacy). You can always point to exceptions to any general principle.

“And if we can find (and agree on) a few significant cases where owner’s net worth doesn’t appear to be detrimental, then perhaps the focus might shift from ‘private wealth is evil’ to ‘abuse of private wealth is evil’. Or not.”

“Not” Implication is we should shift the focus to “how can we motivate the rare exceptions who are making a big contribution, while maintaining a general presumption against private wealth”.

77

J-D 07.19.21 at 3:28 am

This happens all the time in debates about inequality. It’s obviously risen a lot on many different dimensions since about 1960, but it’s always possible to argue about when it took place, which dimension matters most and so on.

I suspect that what seems obvious to you is not so obvious to Tim Worstall.

78

JimV 07.19.21 at 3:50 am

Having lived through the inception and growth of Apple Computer, mention of the devil Steve Jobs pushes many of my buttons.

Steve Wozniak created a beautiful micro-computer, having to fight Steve Jobs on critical design details such as the number of expansion ports. Hobbyists like myself loved that machine. Woz published the workings, circuit diagrams, and some of the ROM code in his Apple Reference Manual. In a few years I had written over 300 (5-1/4″) disk-fulls of game/music/paint-the-screen programs. I could make the machine talk (in a scratchy voice) by clicking the speaker diaphragm in and out in machine code (using the instruction given in the Apple reference manual). I worked mostly for the fun of it, but sold three Apple II programs commercially, and would have done many more in my spare time, except …

Then Jobs got control and changed the Apple philosophy 180 degrees with the Macintosh. It was 100% incompatible with Apple II machine code (all my 300 disks useless and couldn’t even be inserted in the Mac); no expansion ports; no thousands of third-party add-ons and programs. Want to program it? Buy a Developers License from Apple, somewhere in the many thousands of dollars. I refused to get involved in personal-computer programming for the next 20 years after that traumatic experience.

The Lisa and first Mac were big failures solely driven by Jobs. He didn’t care what computers did or how they could be used, just that they looked stylish and could be hyped with marketing tricks.

I’ve gotten back into personal computer work as a hobby in a small way. Most of the tools I use and love are open-source and available for free–but I always make a big donation. I use (ugh) Microsoft PC’s. They are a long way off from the Woz philosophy, but better than what Jobs turned Apple into. I seriously believe Jobs set back PC development by a generation. Compared to what it could have been, maybe forever.

79

nastywoman 07.19.21 at 5:05 am

Reading the comments made US think –
perhaps? –
for the American survey the:
‘There is such a thing as being too rich’
just has to be changed into:
‘There is NO such a thing as being too expensive’?
(in this century)
as… it might make ‘the people’ better understand that there is something like being soooo rich – that you can afford to buy – ‘a 3-foot-tall silver bunny, created by Jeff Koons in 1986, sold at an auction for $91 million?

And couldn’t that help @76 – ‘to shift the focus to “how can we motivate the rare exceptions who are making a big contribution, while maintaining a general presumption against private wealth’.

80

nastywoman 07.19.21 at 5:20 am

and as I already posted –
there is this… this
‘opening heaven’s door’
on the First of August on the Swiss-German Border –

https://youtu.be/QAtSGgnurZs

and we got only two applications from Americans –
(one from ‘Trump’ and one from a guy called ‘Greenwald’) and we believe – that they think that there are the HUUUGEST riches behind the door –
which might be true – let’s see…

81

Tim Worstall 07.19.21 at 6:39 am

“You cannot seriously argue that elected and accountable politicians managing a decent chunk of our collective wealth in our name is the same as somebody unelected and (except at most to a few wealthy shareholders) unaccountable owning a decent chunk of our collective wealth privately.”

It is partly, and clearly I would have thought, rhetorical overdrive there. And yet governance does descend into that at times. It’s the easiest way of describing Zimbabwe or Equatorial Guinea. Or even most of history – the governors, by dint of being the governors, do control the wealth of the nation.

That it doesn’t happen entirely in some places doesn’t mean that there’s not a bit of it there. Even after ew match age, education and so on, in the UK at least – and once we add in pensions and conditions of work – those in the public sector gain significantly higher pay than those in the private. Sure, it’s possible to argue that the public sector just pays what ought to be paid. It’s also possible to describe this as those rules costing everyone some percentage of GDP – say, 3%?

“I myself, for example, am not at all motivated by or even interested in becoming rich. Give me a stable salary and recognition by my peers, and I am happy to give my best every day. There are many, many more people who are like me.”

Cool. Utility is decided by the individual. Some aren’t so motivated. So, why not have a system in which more than one set of incentives are available?

” the owners do not create in isolation and therefore do not deserve such excessive wealth in the first place. ”

Sure, which is the point of the Nordhaus paper. 97% of the return to the activity goes to the wider society in general in that consumer surplus. Is this not enough?

“clever and inventive but simply had bad luck in a market where only 2-3 could ever make it are conveniently ignored by those who want so desperately to believe that a free market always produces fair and optimal outcomes.”

As one who has failed that “bad luck test” multiply (I think it’s actually just that I’m not very good at being an entrepreneur) I agree there is indeed an amount of luck. Lots of it. But then I’ve never claimed that this market outcome is fair. Only that if we want technological change and advance, thus increasing wealth in general, the outcome is optimal.

Do recall Brad Delong’s point, the one big economic question, the only one, is what the hell happened in 1750? Why did technological advance, for the first time, get ahead of Malthusian pressures? That people could own that advance and get rich from it might be one answer.

@73. “Tim Worstall responds that it’s not so much greater now than it was in the early 80s. Is this a deliberate misreading?”

No, the Forbes list was first published in the early 80s. So the timing comes from information availability, nothing else. As it happens Ludwig’s fortune was declining by then.

@76 ““Not” Implication is we should shift the focus to “how can we motivate the rare exceptions who are making a big contribution, while maintaining a general presumption against private wealth”.”

Assuming – not that I agree – that we don’t want to have private wealth then yes, that is the correct question. For it does start with the correct assumption that incentives matter…..

Various systems have been tried as well. Medals, titles, triumphs, societal celebration of ancestral achievements, hereditary peerages, special privileges for children (the Soviets were keen on this, no?). Well, which works best?

Which brings us back to the 1750 question. Well, which system does work best?

82

Gorgonzola Petrovna 07.19.21 at 8:01 am

49 has a principled objection to people running things because they own them. But, in my experience, people who run things without owning them act more or less the same way as the people who run things they own. I worked for privately owned start-up companies and I loved it. I worked for public companies and government agencies, and I sometimes hated it. Money coming from hired managers of public companies corrupt the political process just the same. Where’s the evidence that private wealth/ownership is the root culprit? Is there an empirical case? I don’t know: maybe Yugoslavia under Marshal Tito? Most Yugoslavs I know remember it tenderly.

83

J-D 07.19.21 at 8:27 am

But then I’ve never claimed that this market outcome is fair. Only that if we want technological change and advance, thus increasing wealth in general, the outcome is optimal.

So, the optimal outcome turns out to be just exactly the outcome we actually have? I think Alexander Pope got there a little bit earlier:

All nature is but art, unknown to thee;
All chance, direction, which thou canst not see;
All discord, harmony, not understood;
All partial evil, universal good:
And, spite of pride, in erring reason’s spite,
One truth is clear, Whatever is, is right.

“Tim Worstall responds that it’s not so much greater now than it was in the early 80s. Is this a deliberate misreading?”

No, the Forbes list was first published in the early 80s. So the timing comes from information availability, nothing else. As it happens Ludwig’s fortune was declining by then.

So, you don’t have the information available to show that what Alex SL wrote was wrong; and the way you deal with that is to show (or at any rate try to show) that something else, which is not what Alex SL wrote, is wrong, without explicitly acknowledging the difference.

84

Tm 07.19.21 at 10:23 am

From the OP: “I think having a collectivized health care system, as well as a public pension system (which is not part of that estimated wealth) are important features. In a country where major health emergencies or one’s pension would have to be paid out of one’s savings, those savings would have to be much higher in order to have the same over-the-lifetime standard of living in a Dutch (or similar) setting.”

Is it really likely that affluent people in the Netherlands rely on the public pension system for their retirement? Even a decent pension system won’t fund an affluent life style (let alone a life of luxury and doing “extraordinary things that almost no one can afford”). I suspect that most people with a net wealth of 1-3 million will still have a large part of that invested in retirement savings, and of course in their home. Which is not to downplay their affluence, but it seems quite different from the lifestyle of unlimited luxury conceptualized in the survey.

85

MisterMr 07.19.21 at 1:47 pm

@Tim Worstall 70

“BTW, more to your point, those in government do gain 3% of GDP and more…..not the politicians aone but government, yes.”

For some reason you always make this confusion but government spending is not what government “gets” (since the government is not a person), but what government spends, that is to say you are calculating the money spent on e.g. a private contractor placing asphalt on the roads as if was government revenues.

If you want a more realistic comparison it’s between enterpreneurs/capitalist income (the two are not the same in principle but often in pratice they are) and politician’s wages. Unfortunately I can’t find a reliable source for this but I assume it’s lower than 3%, and the share of net income on net product (NDP instead than GDP because we are measuring revenue) to be way higer than 3%.

86

MPAVictoria 07.19.21 at 3:04 pm

“Even after ew match age, education and so on, in the UK at least – and once we add in pensions and conditions of work – those in the public sector gain significantly higher pay than those in the private.”

I see this claim all the time in Canada and usually it falls apart once you look at the jobs, experience and education you are trying to compare. Also worth pointing out that public sector is one of the few places where women earn close to what men earn and where management is not obscenely overcompensated. So perhaps the issue is with the private sector?

87

Tim Worstall 07.19.21 at 3:14 pm

“No, the Forbes list was first published in the early 80s. So the timing comes from information availability, nothing else. As it happens Ludwig’s fortune was declining by then.

So, you don’t have the information available to show that what Alex SL wrote was wrong; and the way you deal with that is to show (or at any rate try to show) that something else, which is not what Alex SL wrote, is wrong, without explicitly acknowledging the difference.”

OK. So, I reached for a quick and dirty number just because it was something I’d seen recently.

Late 1950s, Getty, perhaps $1 billion, global GDP some $1.3 trillion (both dollars of then). 0.1% of GDP. 60s and 70s, Howard Hughes. $2.5 billion apparently. Global GDP of 2.5 trillion or so. Again, 0.1%.

Much the same result then. Shrug.

88

Tm 07.19.21 at 5:38 pm

TW 87: I’m not even sure what your “out of the hat” numbers are even supposed to prove, but your statement at 71 – “Sure, an order of magnitude different, and more. But it’s still a pretty small portion” – is curious. An order of magnitude is nothing, really Mr economist?

Putting extreme wealth into perspective … may be a question of perspective?
“The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population…”
https://www.oxfam.org/en/press-releases/worlds-billionaires-have-more-wealth-46-billion-people

89

J-D 07.19.21 at 11:51 pm

So, I reached for a quick and dirty number just because it was something I’d seen recently.

… and without regard for its relevance.

Of course it’s easiest to search under the lamppost, where the illumination is best, but it’s pointless to do so if that’s not where the object of the search is located.

90

Alex SL 07.20.21 at 12:05 am

Whether there is more inequality now or in the 1950s-1970s depends on whether we think within ‘Western’ societies or global poverty, and whether we think differences in living standards or numbers of billionaires.

Gorgonzola Petrovna,

The problem with private ownership of enormous chunks of our collective assets is not whether the owners can be nice to their staff, but a question of legitimacy and democracy.

The argument for private ownership is either (a) they ‘deserve it’ for creating all the wealth by themselves, which is easily demonstrated to be nonsense, or (b) they need to be rewarded that lavishly or nobody will ever innovate, which is easily demonstrated to be nonsense, or (c) that private ownership creates an incentive to be a good steward of the asset, because it is yours and will be your children’s, whereas a public manager may not care.

The latter is the strongest, and it works well for a corner store or a family farm, not so well for a massive company that is actually run by a manager who will walk off with a golden handshake in two years anyway. In that case you get all the disadvantages of private ownership without the only advantage.

Money coming from hired managers of public companies corrupt the political process just the same.

How does that work? If I manage the nationalised railway system, do I get to privately use its profits to buy newspapers or bribe ministers? I think not.

91

Peter T 07.20.21 at 4:07 am

Side note: whatever happened in 1750, it was not a change in property rights. And it happened in Great Britain – the most centrally controlled state in the world at the time, one of the highest-taxing, and arguably one of the most predatory (certainly a great deal of its wealth came from predation).

92

roger gathmann 07.20.21 at 8:58 am

67, I notice my clever and simple ideas – two of them included in my comment – didn’t impress you! I once wrote up a list of progressive ideas that were never implemented. For instance, Roosevelt’s progressives, under William Taft, actually passed a bill that would have changed the wealth landscape quite a bit. For instance: force all interstate businesses to incorporate not with their fave state – but the Federal government. That is, the Commerce department. Wiping out in one blow many of the current features of our inequality. Did you know that your interest rate on your credit card is determined by South Dakota – which kindly abolished usury laws and was subsequently made the HQ of various credit card companies? And here’s a clever and easy idea from 1911: In 1911, a bill was voted through the House of Representatives and narrowly turned down in the Senate that would have smashed this legal structure. S. 232 built on legislative ideas already crafted during Roosevelt’s term (remember, Roosevelt was in the wings in 1911, and would run in 1912, thus ruining Taft’s chance at a second term). S. 232 would not only have required federal incorporation of all interstate businesses. Here’s Mitchell’s description of it in The Speculation Economy:

“It would have replaced traditional state corporate finance law by preventing companies from issuing “new stock” for more than the cash value of their assets, addressing both traditional antitrust concerns and newer worries about the stability of the stock market by preventing overcapitalization. But it would have done much more.

S. 232 was designed to restore industry to its primary role in American business, subjugating finance to its service. It would have directed the proceeds of securities issues to industrial progress by preventing corporations from issuing stock except “for the purpose of enlarging or extending the business of such corporation or for improvements or betterments”, and only with the permission of the Secretary of Commerce and Labor. Corporations would only be permitted to issue stock to finance revenue-generating industrial activities rather than finance the ambitions of sellers and promoters. … S. 232 would have restored the industrial business model to American corporate capitalism and prevented the spread of the finance combination from continuing it dominance of American industry.” (137) In Sklar’s account of the Roosevelt era draft, ‘whenever the amount of outstanding stock should exceed the value of assets, the secretary would require the corporation to call in all staock and issue new stock in lieu thereof in an amount not exceeding the value of assets, and each stockholder would be required to surrender the old stock and receive the new issue in an amount proportionate to the old holdings.”

Smashing the structure of the financial sector would accomplish much in the matter of wealth inequality.
Along with tying corporate compensation to the tax structure – penalizing heavily inequality in corporations – we can make sure that the government not only taxes wealth but uses its regulatory and taxing power to prod – as with a bulldozer – the businesses operating in America to spread the wealth.

Easy and simple ideas, see.

93

J-D 07.20.21 at 10:57 pm

67, I notice my clever and simple ideas – two of them included in my comment – didn’t impress you! I once wrote up a list of progressive ideas that were never implemented.

Never implemented.

Never implemented.

Now, why do you suppose that was?

94

Fake Dave 07.21.21 at 5:10 am

It’s pretty funny to see Luxembourg as Worstall’s “small country” when it’s a famous tax haven with one of the highest wealth per capita rates in the world. Wikipedia lists Luxembourg as #65 on the list of countries by wealth, putting it ahead of such “small countries” as Argentina (67), Ethiopia (69, and Ghana (84), and more than 100 others. I wonder why he didn’t pick any of those?

95

roger gathmann 07.21.21 at 12:24 pm

93 – because ideas about creating a more egalitarian system have been captured, in the neolib era, by the issue of taxing the wealthy as the sole ground of discussion? When was the last time you heard any discussion of ending the system of state incorporation of multi-state businesses? When has that been brought up? Implementation doesn’t happen if there is no discussion. Pitifully, the neoliberal idea is to talk a lot about the poor – a theological category, not a class one. It wills away the position of the poor as laborers. And then we start talking about whether the billionaire’s yacht should be morally balanced against the poor’s hovel, etc. As if they were completely disconnected, economically, but juxtapoxed, morally, by the bien-pensant. I’ve long thought this is the discursive highway to hell.

96

Tim Worstall 07.21.21 at 3:18 pm

“Putting extreme wealth into perspective … may be a question of perspective?
“The world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 percent of the planet’s population…””

Well, yes. If we look at the Saez and Zucman paper on changes in the American wealth distribution they do point out that the bottom 50% normally have very little (they say under 5%) of the wealth. That’s just the way wealth distributions do work.

I also rather like the Bernie Sanders (I think it was) observation that the four Waltons have more than the bottom 30% of Americans in aggregate. But then having $10 and no debts gives you more than the bottom 25% of Americans in aggregate. It’s possible to have negative wealth d’ye see? Some of which – not all, no – is just the way we count. Being 22 with a degree and some student debt gives you negative wealth just because the debt is negative but we assign no value to the sheepskin. Despite, as was recently pointed out around here, it offering you a substantially higher lifetime income which is a pretty useful pointer to it being wealth.

It’s also amusing that that Oxfam survey draws on the Credit Suisse annual survey. Which points out that the vast majority of those at the bottom of the wealth distribution are actually in the rich countries. Because those are the only places where there’s a credit system robust enough for anyone to have a significant negative wealth value.

The bottom of the wealth distribution isn’t some landless peasant in India. It’s that near mythical laddie at Occupy who owed $200k on his MFA in puppetry from Yale.

But then of course I’m just some right wing loon* with no perspective on such issues.

“(b) they need to be rewarded that lavishly or nobody will ever innovate,”

No. Without the incentive that fewer will. Fewer is not none. The argument is comparable – is, in one sense, simply the inverse – of that for subsidy from taxation to a public education system. All agree that there will be some education in a purely free market system. Everyone other than Ayn Rand would also probably agree that without some form of intervention – Adam Smith was fine with subsidy to what we would now call primary schools for example even as he fiercely argued for direct student to university lecturer payments, to the point that he forcibly returned some when he left before the end of term – that we’d end up with less than the socially optimal amount of education.

So too with innovation. Agreed that even without the lust for lucre there would always be some innovation. The socially optimal amount? Well, before folks could get rich through inventing we did have invention but it seemed to happen slower than Malthus could catch up with it. Ever since Scrooge McDuck was possible invention seems to have stayed ahead of the Malthusian outcome…..

“It’s pretty funny to see Luxembourg as Worstall’s “small country” ”

Population of Luxembourg: 613,000

Argentina: 45,000,000

Ghana: 30,400,000

Ethiopia: 112,000,000

Small is small, no?

I regularly use Luxembourg as a comparison to companies, true. On the grounds that a large company is a few hundred thousand rich world people working away. As Luxembourg is a few hundred thousand rich world people working away. This is a useful comparison for some things – like what’s the gross income of a few hundred thousand rich world people working away – and not for others but there we are, that’s rtrue of all comparisons.

*A badge I wear with pride after Ms. Mazzucato decided to use that description when writing to the editor of a publication I’d written for. She was unhappy with my characterization of her work.

97

jwl 07.21.21 at 9:19 pm

Luxembourg is a weird example to use. Luxembourg’s GDP, like Ireland’s, is artificially inflated by being a very small country with lots of corporations that domicile there for tax reasons. Its GDP per capita is almost double the US’s. ($113K versus $65K)

A more reasonable check on Bezos $211B relative to GDP is to compare to a wealthy company like Germany ($4.3T and 83M people) and a less wealthy country like Argentina ($444B and 44M people). So Bezos has assets equal to 1/20 of Germany’s GDP and 4M Germans or 1/2 of Argentina’s GDP and 22M Argentines.

That’s a lot! Also, even with Luxembourg, its GDP is only $69B, so Bezos has assets equivalent to 3.5 Luxembourgs.

Many companies are not “a few hundred thousand rich world people”. Amazon has substantial people in the company below 50% of the US median, so more equivalent to developing world people, i.e., second world, not first.

98

J-D 07.21.21 at 11:22 pm

Implementation doesn’t happen if there is no discussion.

It would be a mistake to suppose that continued discussion is sufficient to produce implementation. There are many ideas which have been discussed extensively without ever being implemented. When all is said and done, there’s a lot more said than done. Anybody who supposes ‘All I need to do is get more people talking about my idea’ is mistaken.

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J-D 07.21.21 at 11:25 pm

If we look at the Saez and Zucman paper on changes in the American wealth distribution they do point out that the bottom 50% normally have very little (they say under 5%) of the wealth. That’s just the way wealth distributions do work.

It’s not clear what is meant by ‘That’s just the way wealth distributions do work’. There’s no justification for concluding that nothing different is possible.

A badge I wear with pride …

I note with interest your confession of sin, but I am not in a position to absolve you.

100

Peter T 07.22.21 at 1:18 am

@ 96

“Because those [rich countries]are the only places where there’s a credit system robust enough for anyone to have a significant negative wealth value.”

Tim would have us believe that the poorest person in the world was Donald Trump in the throes of bankruptcy. Somehow my heart fails to bleed.

“The bottom of the wealth distribution isn’t some landless peasant in India.”

Who, oddly enough, are too frequently in debt to the point of suicide. See: https://en.wikipedia.org/wiki/Farmers%27_suicides_in_India

I think I will skip over Tim for the rest of this thread.

101

JimV 07.22.21 at 2:56 am

Two cents may be an overestimate of this’s value, but in my experience, people who do entrepreneuring/innovating mostly out of greed, such as say, Steve Jobs, or oil company CEO’s, or Jack Welch, can do as much harm as good. Whereas as people like Steve Wozniak, that do it for fun and to help others don’t make as much money but do mostly good. Just my anecdotal experience with the above. (Not that Steve Jobs did much innovating, he hired and fired people for that; as for Welch for a while there was a GE incentive program called “Innovators are Heroes”, until he heard about it and changed the slogan to “Innovators are Zeroes” and got rid of it.)

102

Alan White 07.22.21 at 4:31 am

These discussions about the relative merits of accurately describing what constitutes immoral barriers to access to a universal means of economic decency of life are themselves part of the problem, because they undermine the very question of whether there is such a problem at all at that metalevel. In other words, this is reflective, intentionally or not, of the US Republican Party’s present approach to all issues: blockade progress by questioning and speculating on the issues, no matter how rampantly fictional or irrelevant.

103

Gorgonzola Petrovna 07.22.21 at 7:10 am

@Alex SL
Funny, I’ve never expected to find myself in the corner of defenders of the status quo. Please consider that I’m doing this without any passion.

The argument for private ownership is that it’s been practiced for a long time. If we take the post-war period, the last 76 years, it’s been relatively successful. No revolutions, not even any significant dissent. The system appears to be flexible enough, adjustments are made all the time. No major collapse in sight (knock on wood).
Yes, there are serious problems. Globalization presents challenges. There’s an all-mighty upper class, and powerless underclass. But most are in the middle, and their standard of living is improving. Or stagnating, but still on a relatively high plain. And that’s something. Also, in China, a combination of private ownership and nationalist governance produced some really remarkable results.

So, if you think you know a better model, the burden is on you to convince others.

“If I manage the nationalised railway system…”

I meant ‘public corporations’. Ordinary citizens pulling their resources together to achieve some economic goal. At least this is how it’s supposed to be, in theory. But I suspect government-owned/financed enterprises (the military-industrial complex?) do their part as well.

104

Tim Worstall 07.22.21 at 7:24 am

“Also, even with Luxembourg, its GDP is only $69B, so Bezos has assets”

As above, GDP is not assets. The household wealth of Luxembourg is more like $200 billion.

“Amazon has substantial people in the company below 50% of the US median, so more equivalent to developing world people, i.e., second world, not first.”

50% of US median is around $30,000 a year household income. -ish. If that’s for one individual then that’s still in the top 5% of global incomes. If it’s for the mythical two parents, two kids family it’s still top 20%. That’s pretty high up the developing world standard….

“Tim would have us believe that the poorest person in the world was Donald Trump in the throes of bankruptcy.”

By which measure of poverty? By income? Clearly not. By consumption? Hell no. By the way we measure the wealth distribution? Yes, at that point roughly so. Which is a useful guide to the importance of knowing what is being measured and how, no?

If our hearts are not to bleed over the poorest – by current wealth measurements – person in the world then that takes some of the sting out of the criticisms of the wealth distribution, no? Or perhaps guide us to thinking about better ways of measuring the wealth distribution so that we find results that hearts might/should bleed over? This last being something I would wholly agree with. A measurement system that has Trump as the poorest person in the world isn’t producing a useful result. Therefore perhaps we should use a different one?

105

roger gathmann 07.22.21 at 8:00 am

True enough. And on that score, in talking about radical measures, the Roosevelt Progressives got a lot done. Interstate commerce act. The Income Tax constitutional amendment. Increased trust-busting surveillance. The regulatory structure that administered the financial sector, which was added to by FDR et al. Talking also got a lot done for the neo-libs, whose discourse – talking – led to the Democratic party’s surrender to Reaganism – or really, just plain conservatism, since Ed Kennedy’s deregulation of the airlines – which has led to our present awful airline companies – preceded Reagan. They talked a good game about the private sector being our savior and the government being our enemy, and after talking like that for decades got a hella number of mooks to follow them. If something is shut out of conversation – and I hate, or rather love, to point this out, putting up a comment on Crooked Timber is NOT implementation, sadly, as this blog has no governance powers, but counts as “talking” = that something is not going to be “implemented”. Did I mention the Post Office Bank, another policy that would also help repress inequality in the U.S.? Talk talk talk, that is what you can do on a blog. Any claim that really tough people are in here implementing is, well, bullshit.

106

J-D 07.22.21 at 8:51 am

“The bottom of the wealth distribution isn’t some landless peasant in India.”

Who, oddly enough, are too frequently in debt to the point of suicide. See: https://en.wikipedia.org/wiki/Farmers%27_suicides_in_India

See also:
https://en.wikipedia.org/wiki/Debt_bondage

Currently, debt bondage is the most common method of enslavement with an estimated 8.1 million people bonded to labour illegally as cited by the International Labour Organization in 2005. …
… When a pledge to provide services to pay off debt is made by an individual, the employer often illegally inflates interest rates at an unreasonable amount, making it impossible for the individual to leave bonded labour. When the bonded labourer dies, debts are often passed on to children.

107

Tim Worstall 07.22.21 at 4:30 pm

From your link about farmer suicides in India:

“Farm suicides per 100,000 farmers can be reliably calculated for 2001 because accurate data on the number of farmers in the country and states are available for 2001 from the Census of India. The farm suicide rate was 12.9 suicides per 100,000 farmers, which was higher than the general suicide rate at 10.6 for 2001 in India.”

The suicide rate for farmers in Scotland seems to be 31/100,000 as against the general 11.2 for the UK population as a whole.

https://pubmed.ncbi.nlm.nih.gov/16563050/

Suicide anywhere and everywhere is a tragedy both for those who do it and for those they leave behind.

However, it’s not obvious that the Indian rate among farmers is a gotcha concerning the wealth distribution.

108

jwl 07.22.21 at 6:30 pm

Luxembourg is a terrible example to use. It’s the “richest” European country to use, and is distorted by tax evasion.

$25K or less for a household of 4, taking into account PPP, is much closer to developing world. Why do you consider a two parent, two child family “mythical”? They exist, I’m met them and so have you, I suspect.

109

J-D 07.22.21 at 11:46 pm

These discussions about the relative merits of accurately describing what constitutes immoral barriers to access to a universal means of economic decency of life are themselves part of the problem, because they undermine the very question of whether there is such a problem at all at that metalevel. In other words, this is reflective, intentionally or not, of the US Republican Party’s present approach to all issues: blockade progress by questioning and speculating on the issues, no matter how rampantly fictional or irrelevant.

If you want people not to think of an elephant, then telling them not to think of an elephant is not merely unhelpful, it is actively counter-productive. If your comment is correct in identifying a problem, then it is also exacerbating that problem.

110

J-D 07.22.21 at 11:51 pm

“Tim would have us believe that the poorest person in the world was Donald Trump in the throes of bankruptcy.”

By which measure of poverty? By income? Clearly not. By consumption? Hell no. By the way we measure the wealth distribution? Yes, at that point roughly so.

No, that’s not established. If you want people to accept that Donald Trump in the throes of bankruptcy was at a lower point in the wealth distribution than a Pakistani reduced to a condition equivalent to slavery by a debt that exceeds not only what his household can repay in a lifetime but also what his children can repay in their lifetimes, you need to show your working.

111

J-D 07.22.21 at 11:53 pm

Talking also got a lot done for the neo-libs, whose discourse – talking – led to the Democratic party’s surrender to Reaganism – or really, just plain conservatism, since Ed Kennedy’s deregulation of the airlines – which has led to our present awful airline companies – preceded Reagan.

You think they got that done just by talking about it? I find that implausible.

If something is shut out of conversation – and I hate, or rather love, to point this out, putting up a comment on Crooked Timber is NOT implementation, sadly, as this blog has no governance powers, but counts as “talking” = that something is not going to be “implemented”.

Your comments are not shut out of conversation on Crooked Timber, but what effect do they have?

112

Tm 07.23.21 at 8:51 am

I too marvel at your trust in the power of the word Roger. It hasn’t occurred to me that the economic paradigm shift often referred to as neoliberalism was achieved merely by talking about it. But perhaps this idea gives us hope that our talking isn’t completely futile.

113

Tim Worstall 07.23.21 at 11:59 am

“No, that’s not established. If you want people to accept that Donald Trump in the throes of bankruptcy was at a lower point in the wealth distribution than a Pakistani reduced to a condition equivalent to slavery by a debt that exceeds not only what his household can repay in a lifetime but also what his children can repay in their lifetimes, you need to show your working.”

OK. We say that Jeff Bezos is the richest man in the world by counting up the pile of dollars that he has. Or assets that are convertible into dollars at least.

As we move down the wealth distribution people have fewer dollars, net of their debts. As we move toward the bottom of that wealth distribution people have fewer dollars than their debts – they have negative wealth. In the US population this starts at about, roughly, 75% down the distribution. The bottom 25% have zero or less than zero wealth either individually or in aggregate.

As people have ever fewer dollars compared to their debts then they are ever further down that wealth distribution. This is simply the mirror image of the way we’re counting the top of it. Bezos has many dollars compared to his debts. The people at the bottom have fewer compared to their debts.

I agree entirely that that Pakistani locked into transgenerational debt bondage is much poorer than the guy with a minus $100 million net worth in the time period between filing for and being dismissed from bankruptcy. But that’s not actually the way that we count it. Which is what my comment is about – how we count the wealth distribution. The people at the bottom of that wealth distribution are those who have debts greater than their assets. And the greater the debt then the lower they are on that wealth distribution.

This does indeed mean that the American filing with hundreds of millions in debt is poorer, by the way we count wealth, than the landless peasant, or even the one locked into debt bondage. Because the one owes hundreds of millions of $ and the other perhaps a few thousand $ plus the lives of his children. Because we’re counting wealth by the numbers – negative here – of dollars only.

The problem here is how we count wealth. Of course Trump rolling out of court having wiped debt is richer than the peasant. Of course he was before the debt was wiped even if only because the wiping wsa possible. But by the method all are using to measure the wealth distribution that truth isn’t, umm, true.

114

Tm 07.23.21 at 12:13 pm

Let me add that I agree with you Roger. Of course it would be useful to talk about the kind of issues you raise (and yes I did know about South Dakota). I’m just not convinced that our primary problem is a lack of discussion of clever ideas. But more power to you if you want to discuss clever ideas. That’s what this forum should be here for.

115

J-D 07.24.21 at 12:26 am

The problem here is how we count wealth. Of course Trump rolling out of court having wiped debt is richer than the peasant. Of course he was before the debt was wiped even if only because the wiping wsa possible. But by the method all are using to measure the wealth distribution that truth isn’t, umm, true.

You describe the way we count wealth as a problem. It seems to me that if we could agree on a less problematic method of counting wealth, the people at the bottom of the wealth distribution would be slaves, but the people at the top of the wealth distribution would still be pretty much the same people–and the inequality would be of similar dimensions. That’s just a guess, though–I know I haven’t done the sums. So what’s your guess?

116

Alan White 07.24.21 at 4:10 am

“If you want people not to think of an elephant, then telling them not to think of an elephant is not merely unhelpful, it is actively counter-productive. If your comment is correct in identifying a problem, then it is also exacerbating that problem.”

How utterly wrong. I’m calling for them to think of the elephant, and not to just talk about how the blind might differently describe it.

117

roger gathmann 07.24.21 at 10:36 am

Tm, thanks. I am definitely not of the opinion that the neoliberal shift “was achieved merely by talking about it”. It is a necessary but not sufficient condition. The idea that there is a public opinion, and that it is an important influence on the state, is part and parcel of democratic theory since the 19th century at least. It isn’t me, but Frederick Engels, among others, who pointed this out. In as much as talking involves organizing, demonstrating, actions like strikes, etc., it involves change. I really marvel that people who think talking is a craxy waste of time then crazily waste their time by writing a comment in an academic blog. This is best explained by the fact that policing talk even on the micro-level does keep our current order going, so there is that. Talking that talks down talking here is part of the task of public discourse, which makes certain ideas not only discussable but actionable and others not. This goes all the way up to making “policy”, which exists as a textual thing that produces acts.

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