Billionaires haven’t earned all they have
marketwatch.comI don’t necessarily have a problem with a person having a billion dollars. I do have a problem with the influence of money in the U.S. political system. Moving to federally and state funded election would be a start. That and a tax on wealth, not income, that would erode the accumulated assets over a generation would lead to greater equality.
I agree that changes need to be made, but a lot of the “wealth tax” discussion that has been going on lately would directly impact most people’s retirement plans (in the US), which are based on 401ks and other investments. Since we don’t have pensions anymore, and Social Security isn’t sufficient for a lot of people, building wealth is one of the only remaining options.
We'd also have to take into account media influence. (i.e. Hollywood, which is notoriously one-sided in it's political communications).
Just making money even wouldn't be fair.
Everyone who makes this much money exploited some kind of feedback loop and economy of scale.
Once you make so much money you can buy laws to make yourself more money. (as you mentioned)
Once you have so much money you can buy competition before it becomes competition. (Look at how much of Microsoft's portfolio is actually acquisitions.) Their scale makes it infinitely easier to buy their reinvention (all while current legacy revenue still flows in as contracts end), and shift capital from a dying business to the future (like IBM buying Red Hat. Dell buying VMWare.)
Once you have so much market share, and you become a default part of all business (Outlook, Visa, ATT/Verizon, Google/Facebook ads) you become more of a tax on business. Companies either pay that necessary business tax, or they cant compete. Once institutions hit that "you need us to even exist, more than we need you as customers" level, their money multiplies itself. Obviously they can fade over time if they dont reinvent themselves (see above paragraph.)
Once billions are accrued into one place they tend to not just disappear.
These are market failures. Billionaires are becoming billionaires because of something not protecting against these feedback loops amplifying themselves ad infinitum.
There are often arguments that billionaire philanthropists and inventors spend their money better than governments. Tech giants do seem to have replaced the military and nasa in ways.
There may be a middle ground between "dont let billionaires buy influence and power, and collect riches, tax their wealth for equality" and "private industry is better than government." One of those middle grounds may be some kind of reimbursement or credit for contributions to society. Imagine a world where Facebook and Googles open source contribution values are quantified in a way that counts as charity. Another middle ground is public-private hybrids, where funding for research is public, research and profit for invention is private, and the output is publicly owned. Tax billionaires, and break up monopolies arent the only answers. They may be some answer, but they are reactive and dont address root causes of loops, and they dont actually create new creation systems to replace what they break apart.
One of the greatest market failures government power is capable of addressing is proprietary institutional silos. They should use their authority to incentivize consortium to implement open, federated, and decentralized standards, that any new market entrant can latch onto, benefit from, and improve. Whether those standards be payment networks, accounting system interoperability, communication, or data and infrastructure portability. Additionally, Government is equipped to incentivize long term value creation over short term wealth extraction. Absent of Government, companies seem to need to be either be private, or pseudo-private autocracies, where one or a few shareholders can stand firm and focus on the long game.
There are basically 2 ways to make money. You can provide value where people are willing to voluntarily trade their own labor for that perceived value, and taking it by force. Bill Gates is an example of both. His contribution and a lot of the money he earned was because the value of his product was worth far more to people than the asking price. He received a fraction of the value he created in the world. He also got the government to give him a monopoly on the ideas that were implemented, preventing others from implementing those ideas with violence. I'm in the camp that says the latter is inexcusable in a society. I suspect gates and most billionaires would not be billionaires if it weren't for the monopoly protections enforced by government. Where would the rest of that wealth have gone? To anyone who was able to compete against the ideas.
That's definitely possible. But it's also possible no one would have spent the time to come up with the idea if they knew someone else could build on their work and release the same thing for cheaper.
I don't know which is true, although I have suspicions, and unless you've revolutionized the discipline of economics (and decided to inform the world in Internet comments) your certainty is unwarranted. You could have at least acknowledged that counterarguments to your thesis exist.
I think Linux is a counter example to that. A lot of commercial companies have contributed to the evolution and made a lot of money competing with each other delivering support for public projects. Linux has added a ton of value to the world yet there are no companies or people approaching the value of MS. The wealth was distributed via competition and a lot more of it stayed with the customers than othwerwise would have.
Open source is a good example of people not acting for immediate monetary gain, you're right, although legally the licenses rely on copyright law.
I absolutely didn't mean to say the comment I replied to was necessarily wrong, I wanted to point out the commentator made a confident claim that completely failed to address any of it's well-known counterarguments. I meant to criticize the commentator for failing to acknowledge that reasonable people have argued against their case; if I had used that to make a case that their argument was wrong I'd have succumbed to the ad-hominem fallacy.
I stopped reading at “Most wealth is created, maintained and sustained by extracting unearned rents from the rest of us” because that is a description of a zero-sum situation; it is impossible to create wealth that way, one can only redistribute it. Bill Gates for example created a company that was valued by the market at many billions of dollars, billions of dollars of value that did not exist prior to Microsoft. He did not “trick me into paying more than necessary for something out of ignorance” (asymmetric information), but instead created a tool worth thousands of times its cost to me (a software developer).
Saying that there's something bad in 'rents' is a hypocrisy. Every income which is not a job, is rent. Profit from every business, economically, can be split into rent and (real and/or virtual) salary of the owner (with small business usually being wholly or mostly "salary"). You can tell there is some non-"salary" component when you can sell your business for the price higher than liquidation price of it's physical+financial assets. That price is a capitalized cost of the rent. There's nothing morally wrong with it.
A job digging a hole and refilling the whole and digging it again is rebt seeking.
Maybe you’re not understanding the concept of Rent Seeking and therefore don’t understand why it is detrimental to the economy as a whole.
There will never be a completely elimination if rent seeking as long ad humans are involved but it ahoulsnt be rewarded like it is
no, rent is (non-value-creating) income from simply owning capital. capital put to productive use, along with labor, generates profits, which is compensation for value creation.
But owning capital comes about when you have a competitive advantage. Basically, if you make some profit but can't sell your company, you are just working your ass off: it's a job (say a typical software dev agency is). With maybe a modest premium for risks. Goal and only point of business is exactly rent-seeking, this is what capitalism is: profit you get on a capital is rent.
And yes, rent isn't value-creating. You created value when you well, created that capital which gives you rent. Value is the capital, not rent. Then yeah, you just sit on your ass and milk it, or just sell. Every capital is a monetary expression of the value of the unfair, rent-creating advantage you got. There's nothing wrong with that.
> And yes, rent isn't value-creating.
Some rents create value.
Say that I am a construction company and I need a huuuuge crane to complete a building. I can borrow money to buy the crane (rent goes to the person who lent me capital) or I can lease the crane (rent goes to the person who lent me capital in the form of a crane). Either way, no rent no new building. Someone values the building otherwise I wouldn't be building it. Hence, rent creates value.
Suppose I am a working stiff and I need a huuuuge house to raise a family. I can borrow money to buy a house (rent goes to the person who lent me capital) or I can lease a house (rent goes to the person who lent me capital in the form of a house). Either way, no living space no family. I value my family otherwise I wouldn't be building it. Hence, rent creates value.
no, you're confusing (and trying to redefine) basic economic concepts that are generally well-understood and well-defined by economists (particularly you're conflating profits with rents[0]).
by definition, profits are rewards for productive use of capital, while rent is the income gained from simply having capital.
some lazy and greedy market participants (e.g., plutocrats) contrive to rent-seek, but capitalism (and economics in general) considers such a misallocation of resources the worst kind of economic sin. so yes, there is something wrong with that.
capitalism expects such situations to be short-lived, as compeition drives such profits to zero. if that doesn't happen, then the market is distorted (by some expression of power).
[0] "The word 'rent'... [refers] to Adam Smith's division of incomes into profit, wage, and rent." - https://en.wikipedia.org/wiki/Rent-seeking#Description