<p>Scrooge McDuck likes swimming in money, which is why he accumulates a lot of it without any intention of ever spending it. If you think bringing in Scrooge McDuck is far-fetched and irrelevant, you are right. People do not generally accumulate wealth with no intention of ever spending it. </p>

<p>But suppose there were such people and, to make things concrete, their wealth is in terms of houses. They don't live in these houses or use them in any way- otherwise, they would have consumption patterns very different from the rest of us. So there are a lot of unused houses standing around. You may consider such unused resources a problem.</p>

CC BY-SA 3.0
2018-04-27T23:52:49.627Z
2018-04-27T23:52:49.627Z
Michael Greinecker
<p>Too much inequality is probably still bad even in a simple model.  Too much equality is probably not good either.  A balance has to be found. </p>

<p>Let's say every enterprise consisting of production of goods/services, middlemen, etc. distributes 99% of its profits to that one individual. Then the consumer is paying a price that reflects that and its effectively like a tax on that good/service.  If that individual wasn't there, there's two ways the market could correct: prices could fall, facilitating more economic transactions, or they stay the same and the wealth gets redistributed. (Or most likely, somewhere in between).  I have a hard time believing in the latter case that both the spending rate and prices would remain unchanged, but lets assume it does in this model.  You'd still have negative effects in the unequal case, primarily relating to monopolistic business practices and some amount of stifling of innovation.  Ultimately a great deal of economic success can be attributed to intellectual innovation that relies on that capital.  Competition is good as well because it drives innovation.  If the control of capital is too consolidated, it can stagnate things: there is little incentive for an indentured servant to try and better themselves if there is no way to do so, and there's little reason for the feudal lord to educate and facilitate those serfs into competitors.  There's likely a bit of a balance though.  As income inequality goes down, you're likely to see a more educated workforce.  There's a limit to how far that can go though, since we need unskilled labor to function.   Again, there also might be limited incentive to innovate if any extra income you make is likely to be appropriated. </p>

CC BY-SA 3.0
2018-04-27T00:05:03.943Z
2018-04-27T00:05:03.943Z
user193873
<p>Wealth inequality, if earned through merit and productivity have no economic problems.</p>

<p><a href="https://www.hedweb.com/bgcharlton/evolpsych.html" rel="nofollow noreferrer">https://www.hedweb.com/bgcharlton/evolpsych.html</a></p>

<p>However it have certain biological problems.</p>

<p>Humans instinctively want to be "richer" than the rest. Your girlfriend, pick the richer guys.</p>

<p>In other word, if your girlfriend want to choose between you and Bob, all the money that Bob earns reduce your happiness.</p>

<p>Hence, a lot of what happens in politic, is people complaining about inequality without even bother pointing out how they are made worse off.</p>

<p>They are not made worse off in anyway economically. However, instinctively, their ancestors have a hard time getting laid because someone else' are even richer.</p>

<p>Wealth inequality may lead to power inequality. Here, the rich don't just stay idle with money. They use their money to sponsor politicians that give them favor makes it even richer.</p>

<p>Samples:</p>

<p>US founding fathers say that people shouldn't inherit wealth (I think there is a question about it in politic stackexchange)
Ming emperor preventing merchants from sailing overseas because he fears merchants can end up being richer than him. Again, the emperor is not made worse off by those merchants. However, he prohibits anyway.</p>

<p>I strongly suspected that income taxes are made to create poverty instead of to pay for anything.</p>

<p>Some answers point out that many rich people don't spend their cash.</p>

<p>That is wrong. Rich people invest their cash. That cash is then lent to another people that use their cash. So all cash is always used.</p>

CC BY-SA 3.0
2018-04-28T20:18:52.513Z
Person A had private tutors in evenings and via friends of parents of friends has contacts in multiple high-income professions. Person B often missed school to care for a sick relative (case of a country without universal healthcare), and knows a few people wealthy enough to own a used car.

Person A has a GPA of 3.5 and 10 weekly hours in a worthwhile volunteer activity. Person B has a GPA of 3.49 and 10 weekly hours in a dead-end job because they needed money.

Who “merits” the opportunity that will enable to further develop their abilities?
nathanwww
CC BY-SA 3.0
2018-04-29T02:04:33.033Z
whichever the market decide. Now put your self in the shoes of a rich businessmen like me. Why should I work harder if my kids don't have better chance than other kids? So a kid enjoy not only the fruit of his labor but also the fruit of his parents labor. It's the same reason I enjoy not only the fruit of my current labor but also the fruit of my past self. Denying that will make me want to slack off now.
user4234
CC BY-SA 3.0
2018-04-29T02:16:28.130Z
Person B is a much better programmer than Person A. But Person A have build his own start up and earn more money. Who deserves more money? The same way. Person B may be smarter than Person A. But if person's A parents have built some start up, of course Person A will have an edge. If person A doesn't have an edge, then why would anyone bother working?
user4234
CC BY-SA 3.0
2018-04-28T02:19:17.357Z
2018-04-28T11:09:22.467Z
2018-04-28T11:09:22.467Z
user4234
<p>I have been searching around online, but cannot really find an answer to my question.</p>

<p>I can find a lot of material covering wealth inequality and how it has developed over time, but haven’t found any material to support my theory (or the opposite).</p>

<p>My question is: Is wealth inequality actually a problem? With this I mean the super wealthy vs the rest (if that makes a difference).</p>

<p>I will try to explain my thinking as good as possible. My theory is, that super wealthy people tend to not spend all of their money, they may invest it or set it aside.</p>

<p>Consider a scenario where an individual owns 99% of all the wealth <em>(i.e. money, disregard stocks, bonds etc in this scenario)</em> in an economy, but spends roughly the same as everyone else in the same economy, effectively “disabling” a huge portion of the wealth. Would the “poor” actually be affected by this negatively? Would prices on goods reflect that “effective” wealth, or the total wealth in said economy?</p>

<p>Another scenario could be where one person owns most or all shares in all companies in the economy, and everyone else living of of salary. Would this actually be a problem? I imagine that it is same as above scenario.</p>

<p>Obviously these are silly extreme scenarios, I was just trying to paint a bit clearer picture of where I am coming from.</p>

<p>If the super rich (or perhaps top 1%) have an average spending similar to everyone else in an economy, with the only difference that they own more wealth, would that actually be a problem; or perhaps in reality a smaller problem than how it is depicted in the media?</p>

<p>I am not looking for political standpoints, but a more fact based answer. </p>

<macroeconomics><inequality><wealth>
Is wealth inequality actually a problem
ssn
# Is wealth inequality actually a problem

(Asked by: username_0 on 2018-04-26)

I have been searching around online, but cannot really find an answer to my question.

I can find a lot of material covering wealth inequality and how it has developed over time, but haven’t found any material to support my theory (or the opposite).

My question is: Is wealth inequality actually a problem? With this I mean the super wealthy vs the rest (if that makes a difference).

I will try to explain my thinking as good as possible. My theory is, that super wealthy people tend to not spend all of their money, they may invest it or set it aside.

Consider a scenario where an individual owns 99% of all the wealth *(i.e. money, disregard stocks, bonds etc in this scenario)* in an economy, but spends roughly the same as everyone else in the same economy, effectively “disabling” a huge portion of the wealth. Would the “poor” actually be affected by this negatively? Would prices on goods reflect that “effective” wealth, or the total wealth in said economy?

Another scenario could be where one person owns most or all shares in all companies in the economy, and everyone else living of of salary. Would this actually be a problem? I imagine that it is same as above scenario.

Obviously these are silly extreme scenarios, I was just trying to paint a bit clearer picture of where I am coming from.

If the super rich (or perhaps top 1%) have an average spending similar to everyone else in an economy, with the only difference that they own more wealth, would that actually be a problem; or perhaps in reality a smaller problem than how it is depicted in the media?

I am not looking for political standpoints, but a more fact based answer.

**Tags:** macroeconomics, inequality, wealth


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## 3 answers

### Answer by username_1 on 2018-04-27. Score: 4

Scrooge McDuck likes swimming in money, which is why he accumulates a lot of it without any intention of ever spending it. If you think bringing in Scrooge McDuck is far-fetched and irrelevant, you are right. People do not generally accumulate wealth with no intention of ever spending it.

But suppose there were such people and, to make things concrete, their wealth is in terms of houses. They don't live in these houses or use them in any way- otherwise, they would have consumption patterns very different from the rest of us. So there are a lot of unused houses standing around. You may consider such unused resources a problem.


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### Answer by username_2 on 2018-04-27. Score: 2

Too much inequality is probably still bad even in a simple model. Too much equality is probably not good either. A balance has to be found.

Let's say every enterprise consisting of production of goods/services, middlemen, etc. distributes 99% of its profits to that one individual. Then the consumer is paying a price that reflects that and its effectively like a tax on that good/service. If that individual wasn't there, there's two ways the market could correct: prices could fall, facilitating more economic transactions, or they stay the same and the wealth gets redistributed. (Or most likely, somewhere in between). I have a hard time believing in the latter case that both the spending rate and prices would remain unchanged, but lets assume it does in this model. You'd still have negative effects in the unequal case, primarily relating to monopolistic business practices and some amount of stifling of innovation. Ultimately a great deal of economic success can be attributed to intellectual innovation that relies on that capital. Competition is good as well because it drives innovation. If the control of capital is too consolidated, it can stagnate things: there is little incentive for an indentured servant to try and better themselves if there is no way to do so, and there's little reason for the feudal lord to educate and facilitate those serfs into competitors. There's likely a bit of a balance though. As income inequality goes down, you're likely to see a more educated workforce. There's a limit to how far that can go though, since we need unskilled labor to function. Again, there also might be limited incentive to innovate if any extra income you make is likely to be appropriated.


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### Answer by username_3 on 2018-04-28. Score: -2

Wealth inequality, if earned through merit and productivity have no economic problems.

<https://www.hedweb.com/bgcharlton/evolpsych.html>

However it have certain biological problems.

Humans instinctively want to be "richer" than the rest. Your girlfriend, pick the richer guys.

In other word, if your girlfriend want to choose between you and Bob, all the money that Bob earns reduce your happiness.

Hence, a lot of what happens in politic, is people complaining about inequality without even bother pointing out how they are made worse off.

They are not made worse off in anyway economically. However, instinctively, their ancestors have a hard time getting laid because someone else' are even richer.

Wealth inequality may lead to power inequality. Here, the rich don't just stay idle with money. They use their money to sponsor politicians that give them favor makes it even richer.

Samples:

US founding fathers say that people shouldn't inherit wealth (I think there is a question about it in politic stackexchange)
Ming emperor preventing merchants from sailing overseas because he fears merchants can end up being richer than him. Again, the emperor is not made worse off by those merchants. However, he prohibits anyway.

I strongly suspected that income taxes are made to create poverty instead of to pay for anything.

Some answers point out that many rich people don't spend their cash.

That is wrong. Rich people invest their cash. That cash is then lent to another people that use their cash. So all cash is always used.

> **Comments:**
> **username_4**: Person A had private tutors in evenings and via friends of parents of friends has contacts in multiple high-income professions. Person B often missed school to care for a sick relative (case of a country without universal healthcare), and knows a few people wealthy enough to own a used car.  Person A has a GPA of 3.5 and 10 weekly hours in a worthwhile volunteer activity. Person B has a GPA of 3.49 and 10 weekly hours in a dead-end job because they needed money.  Who “merits” the opportunity that will enable to further develop their abilities?  
> **username_3**: whichever the market decide. Now put your self in the shoes of a rich businessmen like me. Why should I work harder if my kids don't have better chance than other kids? So a kid enjoy not only the fruit of his labor but also the fruit of his parents labor. It's the same reason I enjoy not only the fruit of my current labor but also the fruit of my past self. Denying that will make me want to slack off now.  
> **username_3**: Person B is a much better programmer than Person A. But Person A have build his own start up and earn more money. Who deserves more money? The same way. Person B may be smarter than Person A. But if person's A parents have built some start up, of course Person A will have an edge. If person A doesn't have an edge, then why would anyone bother working?  

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