Should we ban being rich?

Reducing a person's assets from, say, $10 billion to $20 million, and limiting annual income to $1 million might sound outrageous. Perhaps cruel! But is it really all that terrible? How would it change the life of that person? Obviously it would not affect security, or health, or the ability to lead a comfortable, even luxurious, life. The only use for additional millions of dollars would be the ability to exercise more power, or to indulge in outlandish luxuries, such as owning several lavish homes in diverse places, or owning a jet airplane. The monetary loss might be perceived as a loss of prestige. But the last point would perhaps be softened by the fact that the same treatment would be inflicted on all other super-rich people, so there would generally not be much of a loss in standing. There are, very roughly, about 160,000 American families with assets over $20 million

Or understand that everyone can do it?

But while there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum, there are also a significant number who get rich by creating wealth. And creating wealth, as a source of economic inequality, is different from taking it—not just morally, but also practically, in the sense that it is harder to eradicate. One reason is that variation in productivity is accelerating. The rate at which individuals can create wealth depends on the technology available to them, and that grows exponentially. The other reason creating wealth is such a tenacious source of inequality is that it can expand to accommodate a lot of people.

If you ban people from making money, they may stop creating wealth, no? PG also reminds us that the problem is poverty, not that people have different levels of wealth, so why don't we attack that problem?

There are lots of things wrong with the US that have economic inequality as a symptom. We should fix those things. In the process we may decrease economic inequality. But we can't start from the symptom and hope to fix the underlying causes.

Labels: economics