Myth: Theres no reason we shouldnt allow people to get extremely rich.

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Note: This video is part of a series which debunks myths pertinent to laissez-faire capitalism. Many points not addressed in this video can be found at the above link.

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There are two problems with allowing people to get extremely rich, or in other words, with institutionalizing social systems which distribute wealth in an unequal manner, thereby allowing relatively few people to have most of the resources.

First, with wealth comes power, and people with power very often use it in a manner which harms others.

Second, the resources currently allotted to those who are already wealthy can be put to much more effective use. Research shows people aren't able to benefit very much from wealth beyond that which meets their basic needs. [http://www.psychologymatters.org/happiness.html]. In economics, this is called the law of diminishing marginal utility. One glass of water in the desert saves your life, and the next two or three glasses are enjoyable, but one hundred additional glasses are not particularly useful to you. They almost certainly will be useful to others, however.

So if a super-wealthy person's life isn't of a much higher quality than my own, even though s/he may have hundreds of thousands of times as much income as I do, it stands to reason that there are better things to do with the income we currently choose to distribute to her or him.

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Tags:

• capitalism
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• conservative
• economics
• empathy
• happiness
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• socialism

[FreeEcon]

But who should decide who gets what level of income?

[muridsilat]

Rich people don't typically store their capital under a mattress. They either buy stuff, which provides capital to the sellers, or they invest their money (which, again, provides capital for others). In other words, everyone is drinking from their water.

Also, as far as the Super Rich who seem impervious to competition, these people have almost always used their money to lobby government for special protections, licenses, and privileges. That's not the free market; it's corporate fascism.

[notbored12]

@ineptsegue

I agree, if governments are going to enforce private property rights they need to provide a floor for the standard of living so that the poor do not have to worry about starvation or homelessness. Negative tax rates for the very poor would likely work, ideology about people having no motivation when provided a minimum standard gets in the way of that happening though.

[notbored12]

@notbored12

There's a simple solution to this controversy, make the highest marginal tax rate 99%, for both individuals and corporations, and see what happens to innovation and development.

[notbored12]

@ineptsegue

There are lots of examples where entrepreneurs took large risks and did earn their wealth, not all wealthy people are Paris Hilton, look at John Walker, the founder of Autodesk, the maker of AutoCAD, for one example. That still doesn't address the problem with your original argument, which was dismissing wealth due to it not providing a linear increase of happiness. So what? It has other benefits to individuals and to society that aren't purely psychological.

[notbored12]

@ineptsegue

Even though happiness isn't a linear function of the amount of wealth someone has (and it's naive to start with that assumption anyway), it doesn't follow that we shouldn't allow people to become as wealthy as they are able. Besides being plain coercive, that would also severely restrict the philanthropy we see today and throughout history from wealthy private individuals.

[notbored12]

I'm sure super-rich people are a lot more comfortable than you, or the average person. They have yachts, estates, servants, can travel anywhere they want and buy anything they desire, and drive whatever cars they want, and can spend their time freely pursuing their own goals rather than working for mediocre wages most of their waking lives, and have access to the best education. Not to mention the fringe benefits of high social status that come with wealth.

[catgumart]

wealth is a form of power and the rich use their money as a leverage to maintain control...so much for equality and democracy.