Thoughts on the Super-Rich
By Arnold Kling
If it is luck or talent, the 60% of me that is a social democrat thinks that this is grossly unfair, and that we should think very seriously about powerful public policies that will level the distribution of income.
Then the 20% of me that is a libertarian breaks its chains, comes running out of the cave, hits the social democrat on the head with a brick, grabs the microphone and rants: “Do you really trust the American government to manage a major downward redistribution of wealth without doing immense harm? And who would you rather have deciding how Bill Gates’s $100 billion and Warren Buffett’s $40 billion will be spent–Karl Rove or Bill Gates and the staff of the Bill and Melinda Gates Foundation?”
It’s an interesting meditation on income inequality. Read the whole thing–I just chose the excerpt because it is funny.
My question is this: is the growth in the top 1 percent of incomes due to the fact that the top 1 percent are adding more to the economic pie than ever?
If the top 1 percent is adding more to the pie than ever, then it seems to me that those of us in the bottom 99 percent have no reason to complain. On the other hand, if the share of income going to the top 1 percent is rising but their contribution to economic growth is not, then some populist resentment is understandable.I’ll admit to holding some prejudices. I tend to think that entrepreneurs create wealth. I don’t think of them as coming up with ways to steal more of the pie for themselves. I think of them as coming up with ways to make the pie bigger.
I am not so sure about investment bankers or CEO’s of Fortune 500 companies. I think of them as pie-grabbing rather than pie-expanding.
Again, those are pure prejudices. No empirical data. But my attitude about the growth in incomes of the top 1 percent would probably depend on whether that reflects more entrepreneurial rewards vs. higher executive compensation or investment-banker winnings.
With all that said, my sympathies are with Brad’s cave-dwelling libertarian.
Thanks to Alex Tabarrok for the pointer to DeLong’s post.