Is Wealth Inequality Actually a Problem?

The wealthiest among us today live a

life unparalleled by any other human

throughout history the greatest Kings

and Emperors could only dream of the

life afforded to today's Global

billionaires and it doesn't end there

even me multi-millionaires are living

through a time where they have access to

information unhindered mobility and

Limitless personal Comforts but this is

all taking place in a time where a

swelling population of people are

struggling to make ends meet the issue

of wealth inequality is a hugely

controversial one people from either

extreme the debate advocate for absolute

wealth accumulation or bringing back The

Guillotines these passionate extremes

might be very fun to explore but in

reality their arguments are just not

productive wealth inequality is a hot

button issue that is only going to get

more divisive as the world gets richer

but is wealth inequality actually a

problem it's never nice to see stories

about a billionaire getting their fifth

mega yacht while single mothers are

struggling to pay bills but is one

actually causing the other if we were to

put emotions and morality away to answer

these questions we would have to look at

a few key factors why is the world

becoming more unequal are there any

benefits to wealth inequality does the

wealthy getting wealthier mean average

people are becoming poorer and what are

the drawbacks of wealth inequality

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economics explained

perhaps the reason wealth inequality has

come to the Forefront of the public

Consciousness in recent decades is

because it is becoming more and more

severe today the wealthiest seven people

in the world have more Collective wealth

than the poorest 50 percent that's seven

people with more wealth than 3.9 billion

people these people are frustrated that

technological innovation has not made

Humanity richer but rather it has only

made a handful of people richer although

that's not entirely correct in fact

inequality itself is more just a side

The Rise of Wealth Inequality

effect of prosperity imagine a tribe

living in a time before the first

civilizations took shape these were

people using very basic tools and living

in groups no larger than a hundred or so

these societies had very little wealth

inequality the richest member of such a

society might be a chief or an elder

they might not need to go out and hunt

or gather as much they might live in a

slightly larger Hut and get the first

pick of food but there wasn't a huge

difference in fact if we look at

Maslow's hierarchy of needs we will see

that a majority of the difference came

from the more social levels of the

pyramid a majority of this society's

time was spent just staying alive when a

society is living meal to meal there

isn't much room for disparity apart from

respect honor relationships and all the

stuff that doesn't really rely on

technology to produce it if we push the

society forward a few thousand years

into the Middle Ages we would find a

very similar situation now there are

Kings and Lords who live in castles and

enjoy a regular diet grown by their

peasants toiling in the fields

inequality has grown because there was

more room for it to grow Society had

developed from where humans were

basically animals in the wild struggling

day to day to survive to basic Farmers

this Step Up in technological prowess

gave people like kings and queens and

Lords the ability to exist but even the

richest and most prosperous King from

these times would not hold a candle to

the quality of life enjoyed by the

average American today in the modern day

people from developed countries have

robust housing with the ability to

regulate temperature year round they

have robotic slaves that do their

laundry and even the bottom dredges of

society like grad students have the

ability to travel almost anywhere in the

world comfortably and quickly this is of

course to say nothing of the Miracles in

modern medicine or our boundless access

to information the extreme pace of

technical Innovation over the past three

centuries has meant that quality of life

by almost all metrics has massively

improved for everyone but of course in

the same way that farming steal weapons

and basic architecture gave rise to a

class of nobility the information age

has given rise to a modern Global upper

class dingy castles without running

water ha try a 17 bedroom palace with

swimming pools a 30 car garage and

underfloor heating gold-plated

horse-drawn carriage how about a private

jet that travels 98 the speed of sound a

jet that can get a modern billionaire

from anywhere in the world to anywhere

in the world in less than 24 hours all

with one phone call to Giovanni the

butler boy on a gold-plated iPhone this

is all to say that the absolute Pinnacle

of wealth in the society body has

increased as the general level of wealth

in a society has grown along with it in

300 years it's not inconceivable to

think that we will be reading

heart-wrenching stories about a single

mother who was unable to make payments

on her spaceship that she needed to get

to her second job on Mars and this leads

us neatly on to the often overlooked

benefits of inequality

The Benefits of Inequality

when the issue of wealth inequality is

explored it's agreed by both Advocates

and opposition alike that wealth

inequality drives motivation to be

better more efficient workers people

wouldn't go through the effort of

tertiary education or long arduous

careers or even putting in some overtime

if there wasn't the promise of higher

standards of living this isn't to say

that everyone going to college expects

to be a millionaire but rather they do

intend to increase their standard of

living through more readily available

work better conditions and yes of course

more competitive remuneration a common

counter argument to this is that often

higher compensation can lead to lower

performance a popular study asked people

to shoot basketball hoops for varying

prizes from Modest sums all the way up

to very significant amounts of cash it

was found that the higher the prize was

the worse the expected results were

people have used this practical

demonstration to show that wealth

inequality doesn't actually produce

hyper performance but this is actually a

pretty terrible model for a few reasons

the first is that most business is not

based on performance in a single moment

if a life-changing amount of money was

offered to someone who could throw 10

three pointers in a row that person may

dedicate a year to do nothing but

getting really really good at throwing

three pointers in the same way if

someone was offered two million dollars

to design a bridge they might not design

a very good Bridge because they would be

distracted by thinking about the new

boat they are going to buy but if the

role of chief engineer and huge civil

projects attracted a seven-figure income

you might find that people go to school

for many years to get the technical

knowledge they need to perform that task

huge compensation might not make

people's performance better day to day

but it does make people far more

motivated to attain the skills they need

to perform a role tomorrow the second

floor in this EXP government were that

the results were dubious at best repeat

experiments did not find a strong

pattern between higher compensation and

poorer performance okay so inequality

means that people are motivated nothing

particularly revolutionary there but

what is often overlooked is some of the

more subtle benefits of huge

accumulations of wealth the first steam

engines were assembled by wealthy Nobles

effectively as a hobby the Renaissance

and the Resurgence of science that came

along with it was fueled by the

patronage of wealthy families and modern

spaceflight was something that was only

made possible by pooling the collective

cash of the wealthiest nations in the

world steam engines modern science space

flight and a myriad of other

developments have all been hugely

beneficial to life in the modern world

none of these technological Marvels

would have been possible if it weren't

for the huge concentration of wealth the

idealistic notion of trickle-down

economics has been hair heavily

criticized by most economists to the

point that trickle down is actually a

phrase used to discredit economic

theories but perhaps it's not wealth

that trickles down in the form of cash

rather it trickles down as technical

Innovation by extension if we were to

speculate about the future of humanity

it's not inconceivable to foresee

billionaires being the bridge between

Earth and Mars bringing along with it

all the prosperity that would come from

being a multi-planet species

now wealth-driving Innovation while

simultaneously motivating a more

productive Workforce is great and most

people don't have any problem with

individuals becoming wealthy so long as

they didn't get there by pushing others

down there is an increasingly popular

narrative that the world's modern

billionaires are becoming wealthier by

pushing others down into poverty

Graphics like this that show a majority

of the United States wealth being

hoarded amongst a few certainly back up

this idea the reality of this is rather

unsatisfying though it depends there are

billionaires today that have genuinely

added a huge amount of value to society

and have been rewarded for it think of

individuals like Bill Gates say what you

will about his Shady business practices

Microsoft has revolutionized the way

that we do business one person with

Excel can do the work of 20 bookkeepers

with an abacus the increase in product

activity accommodated by this everyday

business software has delivered

incalculable increases in global

efficiency the same is true for a lot of

other innovators they got rich by

sharing in a slice of the value that

they added to Society on the other hand

there are individuals that rightfully

deserve some criticism

intermediaries like payday loan

companies gambling institutions or black

market criminals are clearly claiming

more money for themselves than what they

are contributing to the collective

wealth of society in fact to enrich

themselves they are actually making

Society poorer which is very clearly a

negative outcome this all exists on a

spectrum from radical innovators that

massively contribute to society and get

rewarded for it on one hand all the way

down to the leeches on the other hand it

is easy to categorize every extremely

wealthy person as an equally ruthless

Tyrant but the this anger probably

distracts from the real problem here

it's much more important to stop people

getting wealthy from leeching off

Society rather than stopping extreme

wealth altogether all that being said

even if someone becomes wealthy through

the most virtuous of means and makes

great contributions towards the future

of humanity it doesn't necessarily mean

that the wealth they receive from these

actions is going to cause a great

benefit

if anything else it can cause a

Savings Glut

misguided Market economists will look at

people's marginal propensity to consume

and save what this means is that for

every extra dollar someone receives how

much will they spend and how much will

they save average people spend a good

majority of the money they make because

well living is expensive there are bills

to pay and mouths to feed extremely

wealthy individuals tend to spend a

lower portion of their income though

they spend more overall but less in

relative terms because there are only so

many cars and planes and bottles of

champagne that you can realistically buy

this means that wealthy people

accumulate money the rich get richer as

it were most of the time these wealthy

people will try to invest this extra

cash into businesses or real estate or

whatever else they think will increase

in value to make them even wealthier but

there is a problem if too many people

become too rich the opportunities for

good Investments dry up if a group of

billionaires are waiting for the next

promising tech company to go public

they're going to start a wild bidding

war driving the price up from something

that is reasonable to something that

actually makes it a pretty poor

investment the same is true for high-end

real estate eventually these people

accumulate more money than they know

what to do with which is a problem they

could put it in a bank but low interest

rates make that an unappealing decision

so they are forced to invest into less

and less promising ventures in the hope

to achieve some return this is called a

glut which is a real problem for the

economy a recent paper by the National

Bureau of economic research and authored

by Harvard Professor Ludwig Stroud talks

about the modern savings glut of the

rich in this paper it is identified that

the wealthy Elite of the world are

running out of safe havens to hoard

their vast piles of money this has only

been accelerated by the economic Fallout

of 2020 which has rocked markets that

were once thought to be very stable a

savings glut is what led to the hoarding

of mortgage-backed Securities before

2008. today we see very wealthy

investors putting money into companies

with no plan to ever turn a profit

simply because they don't have anywhere

else better to put it recessions are

caused by debt and poor Investments

these debts and poor Investments are

facilitated by money that has nowhere

better to go now an important Point here

is that savings gluts are less of a

problem if it is from the lower and

middle classes for one lower earners

don't have the capacity to hoard quite

as much Capital as the truly wealthy

Elites of the world and two they have

more ability to put it towards smaller

scale projects the world today is full

of fantastic investment opportunities

but loaning someone five thousand

dollars to start an online 2D glasses

business is just not worth the attention

of a billionaire even if this business

could return a 300 return on investment

in the first year it wouldn't pay for

the fuel it took the billionaires jet to

come and see the investment pitch if a

billion dollars was spread out amongst

20 000 households though then these

Endeavors would find much more traction

meaning that more money would go towards

promising small-scale businesses and

less money would go towards not so

promising large-scale businesses

Conclusion

foreign

wealth and power is always going to be a

controversial issue an issue argued back

and forth between the words of many who

can only make so much noise and the

voices of a few who can make quite a lot

wealth inequality and the misallocation

of capital is an issue but it's not the

type of issue that most people think it

is why is the world becoming more

unequal because it is becoming wealthier

are there any benefits to wealth

inequality yes some of Mankind's

greatest achievements have come from

extreme concentrations of wealth does

the wealthy getting wealthier mean

average people are becoming poorer well

in some cases unfortunately yes and what

are the drawbacks of wealth inequality

well they are there and they are serious

but some billionaires spending 200

million dollars on a yacht is not that

drawback if anything building a yacht is

actually a great way to employ yacht

builders and crew members no no

outrageous spending makes for better

headlines but it's not the real issue

the real issue is outrageous investing