Simple argument for why wealth distribution is what it is.

 

Lets find some common ground.

 

The bulk of innovation comes from individuals and small business.

The bulk of economic growth comes from individuals and small business.

The goal of a nation state is to increase the wealth of those within it as much as possible.

People are basically lazy.

People are willing to trade being lazy for their own enrichment.

Innovation and economic growth often requires money in the form of tools, materials etc.

 

So wouldn't a state where everyone had the same amount of money make sense?

You would have the most people with the assets to make innovation.

BUT

Why would anyone want to work harder?  If I can sleep all day and make the same amount of money or risk my beer or soda money on some new idea that won't ever pay back that beer money why would anyone do that?  Also some forms of innovation are VERY expensive such as having your own company making spaceships or building a massive bridge.  And modern innovation often requires a lot of education which requires a certain amount of investment in the form of education for 16 years.

 

So wouldn't a situation where some vast number of people have the same amount of money and only the "winners" have say twice as much make sense?

BUT

Some people like Steve Jobs have consistently used their wealth in a manner that benefited society.  Jobs was able to essentially buy Apple because he owned pixar and NEXT.  Jobs at apple has produced innovation in the computing sector that was not possible under a different person.  Sometimes the rich really are better at something valuable and you need to keep them motivated.  The HP, X-Prize rocket company, Tesla electrical car, segway many of these products were funded by rich people who already made plenty of money but used their money to keep making interesting things.

 

 

Well

What if we just gave all the money to the rich people?

 

BUT

Paris Hilton is an example of this, she was raised believing that she would one day be rich and could spend her life partying.  Paris makes her own money from what I understand but she never bothered to go to graduate school or be really innovative.  The world doesn't need a million Paris Hiltons that isn't how you get prosperity.

 

 

Well won't all the wealth eventually end up in the rich's hands if they really are better at something?  Won't their kids be even better prepared and thus able to take over the family business and do even better?

 

BUT 

The escrow tax exists for just this purpose.  People used to have 5 kids and give each a stake in their fortune insuring that money was recycled but with smaller families this is a less powerful mechanism.  The escrow tax of ~50% for the really rich seems to be a fair way of saying you can have all the fun you want while you are alive, you can even set your kids up to have fun but they can't have as much fun as you are having unless they earn it.

 

ANSWER

So the answer is that there is a wealth distribution that is optimum for a given set of circumstances.  I don't know what that distribution is.  But its not flat, its not all at the top, it needs to have a lot of money distributed in the middle class.  We have had economic growth in the past and historians can tell us what the distribution was during those times and we can move toward that distribution.  If we do I believe that our innovation and national wealth will increase.  

 

 

 

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Comments

2 Comments

Happy Days Are Here Again!

  Great idea donkeykong. All we have to do is return to the tax rates of 1950 and all of our problems are solved.

by nanobot 2011-06-09 02:46AM | 0 recs
Happy Days Are Here Again!

  Great idea donkeykong. All we have to do is return to the tax rates of 1950 and all of our problems are solved.

by nanobot 2011-06-09 02:46AM | 0 recs

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