> and yet wealth inequality keeps steadily getting worse
Disagree that wealth inequality is inherently bad. I think the rise in wealth inequality is downstream from a smaller fraction of people producing a greater fraction of value.
For example, J.K. Rowling has a net worth of around $1.2 billion. Her books have sold over 600 million copies worldwide, along with over 1 billion movie tickets. Her work provided an enormous amount of value to people. If you consider $1 per book and $1 per movie ticket to be reasonable compensation, then a net worth of $1.6 billion is fair. Such a large fraction of the global population reading the same books and watching the same movies, is not something that would have happened in the 1950s.
I suspect that people who provide lots of value are more likely to be undercompensated than overcompensated. Just because you provide a lot of value doesn’t mean you capture much of it. E.g., Linus Torvalds has probably done more good for the world than Bill Gates, but since Linus gives his OS away for free his net worth is far lower.
Some people become wealthy through corruption, or fraud, or by taking advantage of people with skill issues (junk food, sports betting, engagement-maximizing social media algorithms) but the problem there is the harm done, not the inequality itself.
I don’t think it’s inherently bad. It’s fine that many things in life follow a power-law distribution, but this inequality shouldn’t feed into itself. If you’ve ever played Monopoly you know that it’s so unsustainable that even the winner won’t want to continue.
But I strongly disagree that rich people provide value. Windows is not a good operation system, and the competition they prevented would have made for a better world. Most of what made Bill Gates rich was essentially stolen as well. It wasn’t just that you picked a bad example, most rich people are not the original creators of value. If it were people like Alan Turing and Neumann who became billionares, then I’d agree with you, but it’s actually companies like King (they made a clone of an old flash game called Bejeweled and made billions). Nikola Tesla died penniless and in debt.
You assume that more popular things are more valuable, but is that really the case? Most of what I enjoy is obscure, and most of what I dislike is common. You could counter that with “While gold is worth more than iron, it would hurt us more if all iron disappeared than if all gold did”. So if value = quality * quantity, then yes, all the most popular things are the most valuable, but should we really define value in this way?
A poor product which is well marketed often does better than a good product which is never marketed, so reach is rewarded more than quality. And the things which made us rich are often harmful to others (which is why money is considered the root of all evil). Chances are that if you are a good hacker, or good at finding loopholes in laws and such, then you’re also good at making money. There’s a Youtuber called The Spiffing Brit who breaks video games with exploits, but he does the same to the Steam market and the same to the Youtube algorithm, and this is because it’s the one and same ability. If we assume that richer people simple added more value to the world, then we can conclude that scammers are good for society and that people like Tesla were a waste of oxygen, but that conclusion is the opposite of the truth. Ideally, merit = reward, but we’re so far away from the ideal that the two hardly correlate (in my opinion).
It’s plausible that a typical Harry Potter fan gets at least $1 worth in value from having one of the books or watching one of the movies. But in a hypothetical world where JKR never exists, I think that typical Potter fan is a fan of something else instead. They read a different book, watch a different movie. Maybe they get a bit less enjoyment from it than from the corresponding Harry Potter thing back in our world—after all, in that world they chose Harry Potter over the other thing. But maybe not; which books/movies/songs/… turn out to be big successes seems to owe a lot to luck. At any rate, I don’t think we can credit Rowling with all the value the fans get from her work.
Also, the process by which a Harry Potter fan gets value from Rowling’s work doesn’t only involve them and Rowling. The book probably got significantly improved by the editors (at least, the first few books did, before JKR got big enough to ignore their good advice). The movies needed actors and directors and film crews. Books and movies alike needed distributing and selling.
On the broader point of whether the reason for rising inequality is that we have “a smaller fraction of people producing a greater fraction of value”:
First of all, what causes inequality is a smaller fraction of people capturing a greater fraction of value, and it sure looks like that’s a thing that’s happening; e.g., CEO salaries have become much higher relative to those of their employees, and it’s far from obvious to me that much of the value is being created by the CEO rather than the employees. Second, even if it’s true that fewer people are producing a greater fraction of the value, that isn’t necessarily a matter of the few Very Greatest Value-Producers doing their thing more effectively; it could equally be that there are lots of roughly equally good value-producers, and today’s market dynamics are more ruthless about picking a few basically at random and making them the ones everyone’s heard of, who therefore get all the profits. It’s then true that those few people are the ones providing the value, but all the others could have done just as good a job if they’d been the ones to get lucky instead.
Third, inequality occurs at different scales. There’s the inequality of the super-rich versus everyone else; here you give the example of Rowling, though most of the richest people are owners of businesses rather than creators of art and entertainment. But there’s also inequality between broader groups. Rich nations versus poor ones. Rich industries versus poor ones. Bosses versus minions. My understanding is that these sorts of inequality have increased too, and it’s not obvious that it’s for the reasons you describe.
On the overarching point of whether rising inequality is actually bad:
It’s certainly possible for something to happen that increases inequality but is good overall. If the world gets much richer and the gains are very unevenly distributed, this might be a net improvement. But I don’t think you can just gesture at that situation, say “look, this is better overall”, and conclude that inequality isn’t a problem! There are two separable things there, the increase in wealth and the increase in inequality, and maybe the first is Just Good and the second is Just Bad and we merely got lucky that the first one outweighed the second. I think you need to ask questions like: is the increase in inequality an important part of why the increase in overall wealth happened? and: is there a way we could have less inequality while keeping most or all of the increase in wealth? -- and I don’t think these are easy questions to answer.
(BTW, I think it’s very clear that inequality-as-such has bad consequences, whether or not in a given case it’s bad when considered as part of the whole economic situation. It means big differences in political influence, which in turn means that the poorer people get more badly screwed than they would with less inequality. And it means, if compared with a more equal situation with the same total wealth level, less total utility because of decreasing marginal gains. And it means more envy and resentment, which means less social stability. Again, it may turn out that those are just prices that you have to pay for overall progress that helps everyone, but I think that needs more supporting arguments than just “look, the world is getting richer” or whatever. It certainly needs more than “look, I’ve identified an otherwise-benign thing that causes increasing inequality”; the problem with inequality is its consequences more than its causes.)
> and yet wealth inequality keeps steadily getting worse
Disagree that wealth inequality is inherently bad. I think the rise in wealth inequality is downstream from a smaller fraction of people producing a greater fraction of value.
For example, J.K. Rowling has a net worth of around $1.2 billion. Her books have sold over 600 million copies worldwide, along with over 1 billion movie tickets. Her work provided an enormous amount of value to people. If you consider $1 per book and $1 per movie ticket to be reasonable compensation, then a net worth of $1.6 billion is fair. Such a large fraction of the global population reading the same books and watching the same movies, is not something that would have happened in the 1950s.
I suspect that people who provide lots of value are more likely to be undercompensated than overcompensated. Just because you provide a lot of value doesn’t mean you capture much of it. E.g., Linus Torvalds has probably done more good for the world than Bill Gates, but since Linus gives his OS away for free his net worth is far lower.
Some people become wealthy through corruption, or fraud, or by taking advantage of people with skill issues (junk food, sports betting, engagement-maximizing social media algorithms) but the problem there is the harm done, not the inequality itself.
I don’t think it’s inherently bad. It’s fine that many things in life follow a power-law distribution, but this inequality shouldn’t feed into itself. If you’ve ever played Monopoly you know that it’s so unsustainable that even the winner won’t want to continue.
But I strongly disagree that rich people provide value. Windows is not a good operation system, and the competition they prevented would have made for a better world. Most of what made Bill Gates rich was essentially stolen as well. It wasn’t just that you picked a bad example, most rich people are not the original creators of value. If it were people like Alan Turing and Neumann who became billionares, then I’d agree with you, but it’s actually companies like King (they made a clone of an old flash game called Bejeweled and made billions). Nikola Tesla died penniless and in debt.
You assume that more popular things are more valuable, but is that really the case? Most of what I enjoy is obscure, and most of what I dislike is common. You could counter that with “While gold is worth more than iron, it would hurt us more if all iron disappeared than if all gold did”. So if value = quality * quantity, then yes, all the most popular things are the most valuable, but should we really define value in this way?
A poor product which is well marketed often does better than a good product which is never marketed, so reach is rewarded more than quality. And the things which made us rich are often harmful to others (which is why money is considered the root of all evil). Chances are that if you are a good hacker, or good at finding loopholes in laws and such, then you’re also good at making money. There’s a Youtuber called The Spiffing Brit who breaks video games with exploits, but he does the same to the Steam market and the same to the Youtube algorithm, and this is because it’s the one and same ability. If we assume that richer people simple added more value to the world, then we can conclude that scammers are good for society and that people like Tesla were a waste of oxygen, but that conclusion is the opposite of the truth. Ideally, merit = reward, but we’re so far away from the ideal that the two hardly correlate (in my opinion).
On your specific example:
It’s plausible that a typical Harry Potter fan gets at least $1 worth in value from having one of the books or watching one of the movies. But in a hypothetical world where JKR never exists, I think that typical Potter fan is a fan of something else instead. They read a different book, watch a different movie. Maybe they get a bit less enjoyment from it than from the corresponding Harry Potter thing back in our world—after all, in that world they chose Harry Potter over the other thing. But maybe not; which books/movies/songs/… turn out to be big successes seems to owe a lot to luck. At any rate, I don’t think we can credit Rowling with all the value the fans get from her work.
Also, the process by which a Harry Potter fan gets value from Rowling’s work doesn’t only involve them and Rowling. The book probably got significantly improved by the editors (at least, the first few books did, before JKR got big enough to ignore their good advice). The movies needed actors and directors and film crews. Books and movies alike needed distributing and selling.
On the broader point of whether the reason for rising inequality is that we have “a smaller fraction of people producing a greater fraction of value”:
First of all, what causes inequality is a smaller fraction of people capturing a greater fraction of value, and it sure looks like that’s a thing that’s happening; e.g., CEO salaries have become much higher relative to those of their employees, and it’s far from obvious to me that much of the value is being created by the CEO rather than the employees. Second, even if it’s true that fewer people are producing a greater fraction of the value, that isn’t necessarily a matter of the few Very Greatest Value-Producers doing their thing more effectively; it could equally be that there are lots of roughly equally good value-producers, and today’s market dynamics are more ruthless about picking a few basically at random and making them the ones everyone’s heard of, who therefore get all the profits. It’s then true that those few people are the ones providing the value, but all the others could have done just as good a job if they’d been the ones to get lucky instead.
Third, inequality occurs at different scales. There’s the inequality of the super-rich versus everyone else; here you give the example of Rowling, though most of the richest people are owners of businesses rather than creators of art and entertainment. But there’s also inequality between broader groups. Rich nations versus poor ones. Rich industries versus poor ones. Bosses versus minions. My understanding is that these sorts of inequality have increased too, and it’s not obvious that it’s for the reasons you describe.
On the overarching point of whether rising inequality is actually bad:
It’s certainly possible for something to happen that increases inequality but is good overall. If the world gets much richer and the gains are very unevenly distributed, this might be a net improvement. But I don’t think you can just gesture at that situation, say “look, this is better overall”, and conclude that inequality isn’t a problem! There are two separable things there, the increase in wealth and the increase in inequality, and maybe the first is Just Good and the second is Just Bad and we merely got lucky that the first one outweighed the second. I think you need to ask questions like: is the increase in inequality an important part of why the increase in overall wealth happened? and: is there a way we could have less inequality while keeping most or all of the increase in wealth? -- and I don’t think these are easy questions to answer.
(BTW, I think it’s very clear that inequality-as-such has bad consequences, whether or not in a given case it’s bad when considered as part of the whole economic situation. It means big differences in political influence, which in turn means that the poorer people get more badly screwed than they would with less inequality. And it means, if compared with a more equal situation with the same total wealth level, less total utility because of decreasing marginal gains. And it means more envy and resentment, which means less social stability. Again, it may turn out that those are just prices that you have to pay for overall progress that helps everyone, but I think that needs more supporting arguments than just “look, the world is getting richer” or whatever. It certainly needs more than “look, I’ve identified an otherwise-benign thing that causes increasing inequality”; the problem with inequality is its consequences more than its causes.)