“The richest person in the world in the 1830s was Nathan Rothschild, whose personal net worth was around 0.6 per cent of national income. Despite this vast fortune, Rothschild died at age 58 in 1836 of an infection that $10 of antibiotics could likely cure today. Similarly, the richest people in the world today, such as Bill Gates or Jeff Bezos, presumably have a marginal utility from additional consumption spending that is zero. Nevertheless, their utility still increases when new goods (smartphones or LLMs) are invented. These examples suggest that more consumption of a fixed set of goods eventually hits a marginal utility of zero while the invention of new goods or higher quality goods continues to increase wellbeing.”
As seen on a Students For Liberty comment on a Facebook page I follow. The quote was cited by this chap: Karthik Tadepalli, of the Becker Friedman Institute For Economics, University of Chicago. I don’t have the original link. There are some super-smart young classical liberals out there, and many seem to be coming from places such as Eastern Europe, India, etc.
The point about marginal utility reminds me of a comment from Perry Metzger on this blog on 2014, debunking the Thomas Piketty book that purported to claim that wealth rises faster than the overall economy and that the “rich” will eventually swallow up the world unless restrained by wealth taxes and so on. Perry M got in a reference to Douglas Adams, which is always the mark of a good article, IMHO.
While this is true it’s not free market folk’s best card against the ravenous socialist wolves. Because if you make the obvious, if incorrect, assumption that you can aggregate the consumption utility of different individuals, then robbing rich Peter to pay poor Paul increases aggregate consumption utility.
There are of course many other problems with socialists and egalitarians, but “the rich don’t really benefit from being as rich as they are” is walking into a sucker punch.
Depends on how you define “benefit”. If it’s just “stuff”, then yes, past a certain point, you can have any stuff you want…including new organs from China! But you are as beholden as the rest of us to advances in science and tech for a lot of that stuff.
So, why pursue riches beyond that level? Simple: power. The power to maintain your riches, but also the power to put your ideas (Musk, Bezos), or evil plans (Gates), into action.
Or just to buy political power (Soros).
But these all boil down to power, whether it’s being used for good or ill.
When Musk hits $1T, he’ll be able to have billionaires killed! Not that he would.
The idea that inequality produces poverty is found, for example, in the 1891 Encyclical of Pope Leo XIV (although influenced by Cardinal Manning – an Englishman)- with its claim that a “few rich men” controlled the economy and that they had reduced wages to “starvation” levels, the document also claims that there had been a massive increase in “moral degeneracy”. The proposed solution being a mixture of direct state intervention (although the document is somewhat vague as to what form this intervention would take) and the state giving powers to unions to help them in Collective Bargaining.
There are two problem with the document – first its claims are FALSE, indeed they are the opposite of the truth. Wages and general conditions of life were higher (not lower) than they had been in the past – they had never been higher (not lower), as for the claim that moral degeneracy had increased – the document produces no evidence for this claim, none-at-all, not births out of wedlock, not sexual disease rates, nothing. The other problem with its document is that it is proposed solution to the (mythical – nonexistent) situation it claims exists, would make life worse (worse – not better) – for example the state giving unions more power for Collective Bargaining would increase UNEMPLOYMENT – it would be classic “Institutional Unemployment”.
It is not religious bigotry to point out the factual errors, the false claims and illogical proposals, in a document – and Protestant and Jewish writers have produced documents that are just as bad or worse (much worse). I point to the 1891 Encyclical because of its influence into modern times – for example on Joseph “Joe 10% for the Big Guy” Biden, and Andrew “Andy” Burnham. The modern day successors of, for example, Mayor Curley of Boston, and Mr Sullivan of the Sullivan Act in New York – with their endless attacks on “the rich”, support of more powers (from the state) for union “Collective Bargaining”, and state benefits and public services – the politics of “Social Justice” (as opposed to the traditional understanding of justice as to each their own).
As for saying that someone is being “a Tom Gradgrind” for insisting on logical arguments and truthful (factual – rather than false) statements – if that is a “crime” according to “Social Justice” thinking – then human beings should be proud to be “guilty” of this “crime”.
“But can not state intervention not produce artificial inequality?” – yes it can, for example the much discussed “Cantillon Effect” (named after Richard Cantillon of some three centuries ago) where an increase in Credit Money, i.e. the lending out of “money” that has no physical existence (is not gold, silver, copper – indeed is nothing at all), that did not even exist before it was lent out – i.e. was not Real Savings, the actual sacrifice of consumption by Real Savers. This “cheap money” or “low interest rate money” clearly benefits rich individuals and groups – indeed, for example, the business model of BlackRock had been based upon it.
It is also the case that high tax rates reduce competition for the existing rich – a person who already is rich can find many ways to avoid high taxes (for example “investing” their wealth in government debt) and employ expensive tax lawyers, and structure their life to take advantage of loopholes – but a person who has founded a productive business (actually created it) has no time for all this, and so high tax rates cripple them.
Regulations also protect established interests and prevent new challengers – a vast corporation can afford a legal department to deal with the endless regulations, and will also have strong connections with the state to influence the regulations in its favour – to keep down competition.
An example of what happens can be seen in the treatment of J.J. Hill and his Great Northern Railroad in the United States – having failed to destroy him with bullets and bombs (armed attacks) – his rivals (who operated a de facto Cartel) turned to the government.
Both the Interstate Commerce Commission (created in 1887) and the Sherman Anti Trust Act (1890) were used against Mr Hill, indeed attacking people who would not go along with the Cartel was the purpose of such “laws” – the idea that they “protected the customers” or “protected the workers” is Moonshine.
Indeed “Anti Trust” (beloved by that strange person Tucker Carlson – who thinks that the “Anti Trust” antics, which were often arbitrary, of “Teddy” Roosevelt “created the American middle class”) is sometimes so insane that it drives production out of the country – as with the later “Anti Trust” attacks on American shoe making machinery company and the American aluminum company. How closing factories and forcing production overseas, benefits “the customers” or “the workers” is never explained. And the idea that it is about “breaking up cartels” is so false that it is almost the opposite of the truth. Regulations and other government interventions are far more likely to be used on someone who steps-out-of-line – refuses to go along with the Cartel-herd.
Government interventions, eventually – in the end, HARM (not help) both customers and workers in the long run – making their lives worse (not better) than would otherwise be the case.
Yes living standards may still improve over time – due to technological advance and capital investment, but LESS than they otherwise would have.
Lastly on Wealth Taxes, Capital Gains Taxes and Inheritance Taxes.
Such attacks on individual and family wealth, including family owned business enterprises, would have the effect of handing over the economy to vast Corporate bureaucracies (“owned” by other Corporate bureaucracies such as Pension Funds) – vast Corporate bureaucracies joined-at-the-hip with government – indeed international government. The international Corporate State – very Henri Saint-Simon.
If anyone thinks this is a good idea – I advise you to get a job with the Economist magazine, you would fit in well.
Referring to Douglas Adams’s Shoe Event Horizon as a marker of sliding into poverty I can’t help but wonder if we are suffering from a Democracy Event Horizon. Until now voting for a government (in the West perhaps?) has resulted in a government that supports the Universal Davos Policy whatever colour rosette they wear.
Discovered Joys.
President Trump has ended mass illegal immigration – and deported many illegal immigrants (and many are also self-deporting due to the new restrictions on government benefits and services, including taxpayer funded health care, for illegals), has withdrawn from the World Health Organization, and has withdrawn from the various international “Climate” (Carbon Dioxide) agreements.
But whether any political party elected in Britain would be able (be allowed) to do such things, is indeed doubtful.
If (IF) the answer is “no” – “no government elected in Britain would be allowed to do such things” – then democracy in this land is not real.
“You can vote for anyone you like – but the elected government must obey the officials and experts” is not democratic governance.
And calling Liz Truss and others “Neo Nazis” (as lazy establishment “comedians” do) for telling the truth – does not change this.
0.6% of the economy is less than 1%.
This may seem to be an obvious point – but a very large number of people do not seem to grasp it, and will tell you that “Rothschild controlled the economy” and so on.
Some of the same people (for example Mr Tucker Carlson) will also tell you that “demons” (Devils from Hell) gave the United States nuclear technology – that human scientists did not discover such things.
Mr Carlson has a very large number of followers – he tells then that President Trump (supposedly a tool of the Jews) may, perhaps, also be the “Anti Christ”.
Mr Carlson claims that the “official story” (which he does not believe – Mr Carlson believes that Satan and other Devils gave the science to the United States) was that “German scientists” did the work on atomic physics.
In reality Ernest Rutherford and MOST of the other physicists who did the work on atomic physics (for example at the Cavendish labs in Cambridge) were not German. And most of them were not Jewish.
This is demonstrably the case. Any politician knows this is a major issue with the electorate for years now. You sort that one and the next election is a landslide and politicians are (almost by definition) whores for votes. But it hasn’t happened.
Lee Moore: !but `the rich don’t really benefit from being as rich as they are’ is walking into a sucker punch”.
Not really, because the point is designed to defeat the trope that the reason why gazillionaires want to add to their fortunes is megalomania and greed, when for many of them, the pleasure of building and creating things is the goal.
So, why pursue riches beyond that level? Simple: power. The power to maintain your riches, but also the power to put your ideas (Musk, Bezos), or evil plans (Gates), into action.
Well, as you say, GregWA, people can use their wealth for good ends and less good ones. Whether those ends are good ultimately is a matter of opinion, and unless the rule of law is broken, it is not the business of a State to say “I don’t like your views and I want to strip your wealth to stop you trying to make them reality.” In fact, I have heard comments such as this about Musk. There was a BBC documentary a few days ago about Musk’s desire to go to Mars, and a journalist, rather like the muckrakers who went after Rockefeller, seemed to have a personal animus against the objects of their ire that was, to my mind, unprofessional. She said his desire to build new human habits on Mars showed he had a dystopian view of the world. Maybe he does, maybe he doesn’t. But let’s assume the wealth he has amassed is via a free market, in broad terms – what is it anyone’s business, such as some journalist, whether his goals are crazy or sane? (Here is a link to this journalist to get a sense of what I mean: https://uk.video.search.yahoo.com/search/video?fr=mcafee&p=journalist+from+Business+Insider+who+went+after+Musk+ofter+wastage+at+the+Tesla+plant&type=E210GB1357G0#id=2&vid=be69e3fe27a4e8613dbf69ac6b3bdceb&action=click
(Of course, there are arguments that we have set out on this blog that some of the extreme wealth valuations of today’s billionaires are an example of what the Sage Of Kettering, Paul Marks, reminds us of with the credit bubble economy effect. Strip out central bank funny money and some of the heat around billionaires will abate. But I suspect the envy of successful people is not driven by a tender care for sound money. I rarely hear Leftists talk about the topic at all.)
This encapsulates the fundamental misunderstanding that leads to deeply dangerous policies like “soak the rich”. AOC tells us “Elon Musk has 800 billion dollars, if we took 75% of that in taxes I’m sure he could survive on just 200 billion” with a snide, ironic grin. But those that say this do so because they have never actually created wealth, never understood where it comes from, and don’t understand what rich people do with wealth. Bill Gates (who I think is a loathsomely human for many reasons, but one cannot doubt that he created MASSIVE wealth) gives his wealth away. I don’t agree with many of his causes, but I am certain that his wealth given away in private charity brought about 100x as much improvement to the world as it would have had were it first flowed through the sticky hands of government.
Elon Musk thought, is perhaps a perfect example of what benefit not soaking the wealthy can do. They guy doesn’t own a home, he doesn’t own a yacht, he isn’t sitting eating peeled grapes in the Caribbean. He does have a private jet, but given what he does, running multiple companies in different locations and the demands on his time, this seems more like a business necessity than a luxury (though I am sure it is very nice.)
Aside from the private plane, the lifestyle he leads I don’t doubt he could get by on a few $100k a year.
So that money that AOC wants to take from him, what does he do with it? Does he have it in gold coins in a pool in his basement like Scrooge McDuck? No, instead what he does with it is creates the future. Creates a new and better world. Creates a world of abundance and riches that could not have been imagined before. Tax him 75% and he is 75% less able to do those things. The world is 75% worse off.
The idea that the government can spend that money better than Musk is utter insanity. The government will piss it away on useless crap and actually use it to make us poorer. Musk uses his wealth to create new companies, new products, jobs, wealth for others, abundance for the world. The story of macro economics insofar as it isn’t bullshit, is inflation, oppression and corruption and conflict, created by an ever bloating government, being balanced and hopefully cancelled out by new technology causing deflation, wealth, freedom and peace.
The idea of soak the rich comes from a deep misunderstanding of wealth, wealth generation and the effectiveness of government.
FWIW, it is my belief that AI and robotics will make us all incredibly wealthy. I think it is growing more and more likely that the end game is massive wealth generated by these new technologies and a big tax used to fund a universal income for everyone, all Americans anyway. I am not AT ALL a fan of universal income as a policy, but I think the technological path makes it almost inevitable. There will be a lot of jobs at the boundary of technology and people. But I think there will be a lot of free time for people. This does make me fearful of the future far more than a “Terminator” style future. Why? Because as my dear mother used to say, “idle hands do the devil’s work.” We see this with, for example, the devastation that comes from idled factory workers, or the idle rich trust fund kids, descending into drug addiction, alcohol addiction, depression and many other negative behaviors. The next ten to fifteen years are going to turn the world upside down, and I think the most important question is not “what will the tech do”, but rather what do YOU want to do? What do you want to do if you don’t have to work 40 or 60 hours a week just to pay for the basic necessities? Where will you find your purpose and meaning in a world where it doesn’t come from work or productivity? Unfortunately, I don’t think too many people are thinking about this. I think a LOT of people are so lacking in introspection that they might not be capable of this. It is the sort of thing you ask when you are about to retire — what will I do with the rest of my time here on earth? With AI and robotics, we will all be retiring early.
According to “AOC” and other “Democratic Socialists” in the United States, the reason that taxpayers are fleeing from places such as New York and California for places such as Tennessee, Texas and Florida is sympathy for the Confederacy (which ended in 1865 with almost every family on the South having dead sons, brothers, husbands, and cities and towns burned to the ground) – racism (plus sexism, homophobia, transphobia, Islamophobia and Climate Denialism).
One can not reach the minds of socialists (Democratic or otherwise) with reason – they reject reason, totally. They will even defend such long refuted absurdities as the Labour Theory of Value and Ricardo’s theory on land.
When they see someone like the late Jon Huntsman (senior) they do not see a man who was born in a “house” made of cardboard, become a billionaire in productive industry, and devoted most of his wealth to cancer research – no, the Democratic Socialists see an “Exploiter and Oppressor”.
The richest man in the world may well be Elon Musk – but he does not dress like a rich man, or live in a palace – so what does he do with his wealth – he devotes it to causes he believes in, such as Freedom of Speech – he bought Twitter (now X) as a struggle against the “Woke” (Critical Theory Marxist) censorship that it was enforcing, that cost him tens-of-billion-of-Dollars.
Tens of Billions of Dollars – tens of Billions of Dollars.
Most of us grumble about how liberty is being destroyed – Mr Musk acts to try and prevent the destruction of liberty.
This isn’t quite the argument that more serious people are making when they are arguing against “wealth” and “investment” per se.
(The “Students Of Liberty” folks are generally pretty sound – I’m familiar with them and follow them – but they have some blind spots)
The argument is that if the rate on return on investment outstrips the the growth of the economy, then the only way to invest profitably is to buy up existing productive enterprises, thus concentrating productivity into an ever-smaller amount of hands, which allows price-setting above “market-clearing” rates.
Very broadly speaking, in retail, you only actually need 25% of a given market to be able to set the pricing for the entire market. I know that seems really low, but that’s emprically true; there’s loads of nuances in there, and there’s obviously places where it’s not quite true, but broadly speaking, that’s the percentage needed. It’s not 100%, it’s 90%, it’s not over 50% – it’s 25% (ish).
It’s especially true if you have one “main player” who has 25%, and then a load who have 8% or 5% or whatever, because the public “anchor” their idea of what the correct price is based on the main player. If you have 4 players, all of whom have 25%, then it’s still true, as why on earth would they “defect” – no need, because 25% if the market is still enormous, and no need to risk it. There’s obviously a bunch in between where it’s less true, and more nuance applies, but it’s sound enough.
The argument against “wealth” is often expressed in terms of, I guess, envy – why should I be choosing between “heating my house” and “feeding my children” when Jeff Bezos is choosing between whether to plate his toilets in silver or gold? And you’d be hard-pressed to argue against that, and I have sympathy for that view, what with me not being an utter sociopath.
But more properly, it should be expressed in terms of the wealthy owning all of the productive enterprises, which is an *enormous* problem.
I think the most illustrative example is that wretched graph (Max Rosen, I think?), “proving” that living standards have risen because wages have risen. I don’t know how numb-brained you have to be to believe that if someone was able to provide (say) £100 worth of goods by producing £60 of it themselves, and £40 by wage labour in the 1800s, and now they can only provide £10 of it themselves (due to decreased access to food, less time, both parents working and many more reasons) and £60 by wage labour, your measure is “they’re better off because their wages have increased by 50%!”
And yet, some people believe that’s an increase in living standards.
No neonsnake – the private ownership of productive enterprises (whether of farms, mines or factories) is not an “enormous problem” – it is the basis, the foundation, of most of what is good.
And many of the people who have historically owned farms and other enterprises (including factories) did not start out wealthy.
Sadly the “alternative” offered by the education system to Karl Marx, J.S. Mill, shared many of the fallacies and absurdities of Karl Marx – including hostility to individual ownership of large amounts of land and hostility to the individual ownership of large factories and-so-on.
No wonder such politicians as John Burns turned out the way they did.
The father of Prime Minister Sharon lived on a communal farm experiment in Israel – it was a nightmare, endless meetings – so he left. Such communities never attracted more than 5% of the Jewish population, in spite of the massive subsidies and favorable treatment they got – both from the Israeli government and external forces. They have been in decline for half a century.
Which part of my post are you quoting here?
Quote the whole sentence, please that you have pulled your quote from.
Was it the idea that having an increasingly smaller amount of people owning industry would be a problem?
I mean…that’s an idea that is pretty classical, unless one is bought and paid for.
Ta.
Sadly tax law and regulations mean that most large enterprises are NOT owned by a rich individual or family, they are “owned” by institutions such as Pension Funds – corporate bureaucracies, “owned” by other corporate bureaucracies.
Even the family owned manufacturing enterprises of Germany are being undermined – not just by such government policies as absurdly high energy costs, but also by changes in tax law (for example Inheritance Tax law) that are designed to undermine individual and family ownership.
The last year in the United Kingdom when most shares (even only 51%) were owned by individuals was 1965 – now the vast majority of shares in large enterprises are “owed” by institutions – Corporate bureaucracies “owned” by other Corporate bureaucracies (such as Pension Funds). All individuals – not just “a few rich” individuals, only owned about half of the shares in 1965 – and now own only a small fraction of shares.
It is much the same in the United States – and it is a very long standing trend.
Even a century ago, in the 1920s, the great houses in New York City and other cities, that had been built by the individual owners of great enterprises (and creators – they created the enterprises) that sometimes had their own power generation and underground stations to provide them with supplies, were being torn down – and replaced by bland apartment blocks, and Corporate offices.
From an architectural point of view this was a tragedy – as these houses were remarkable and had been built to last for centuries – yet were just torn down (as H.G. Wells, and other evil men, had dreamed of before the First World War – they wanted everything beautiful destroyed). But it was also a sign of the times – the decline of individual owners and the rise of Corporate bureaucracy backed by the endless Credit Money of the Federal Reserve and the banks linked to it (much the same with the Bank of England and “The City” in Britain).
And, yes, before anyone points it out – I know that the National Banking Acts passed, as an emergency measure, during the American Civil War (but, tragically, not repealed after the Civil War) were also an outrage – handing out privileges that no business enterprise should have (basically legalizing fraud – the lending out of “money” that does-not-exist), but the creation of the Federal Reserve in 1913 (the same year the Federal Income Tax was created – soon to go up to absurd top rates) made everything vastly worse – it made the Credit Money bubbles vastly bigger (not smaller – bigger).
In this environment, which is common to so many nations, to warn of the danger of a few rich individuals (or families) owning most of the economy, is like shouting “fire” in the middle of Noah’s Flood.
It is a sobering thought to remember that the last American President to really remember a, basically, free society (without an Income Tax or a Federal Reserve system) was Eisenhower – as he was born in 1890 and was, thus, 23 years old in 1913.
As John Bright pointed out in Britain in the 1840s (when Sir Robert Peel reintroduced the Income Tax that had been abolished 20 years before) this is not just an economic matter – it is also a matter of Civil Liberties, for to make an Income Tax “work” the government must know every detail of the economic lives of the people, thus making privacy (a private sphere) a nullity.