Wealth Distribution Fallacy

I’ve seen several people post to this video recently.

This is just a quick response I posted as a Facebook comment somewhere.

TL;DR I want to point out that the ‘rightness’ or ‘wrongness’ of wealth distribution should be in terms of where people are in regards to how much wealth is needed to maintain a good quality of life, not how wealth is distributed in relation to the total amount of wealth.

If the total amount of wealth is $100 under today’s rate of monetary value (e.g. $1 in this scenario buys what $1 today would) with the same amount of people as today, everyone’s doing shit. Doesn’t matter if 10 people own $60…we’re all going to die.

On the other hand, if the total amount of wealth is 100 centillion with the same amount of people, we’re all doing fine and every single one of us can almost certainly buy and do anything we want. The reason for this is just because in this scenario, there is so much more total actual wealth than in the first scenario. There’s pretty much an infinite supply of food, water, land, and any other resource, and we’ve probably conquered a couple galaxies or some shit and implemented some crazy good population control measures. Who cares if 1% of the people own 50% of the wealth? There’s more than enough wealth for anyone who wants anything.

Hence, it makes no sense to compare wealth distribution in relative terms to the total amount of wealth. It’s the objective amount of wealth that matters. I’d rather live in a world where 1% owned 99% of the wealth but everyone made at least a million dollars a year than in a world where everyone split $100 equally.

Our world is nowhere close to this, and it is indeed a problem that so many of us live on less than $1 a day and in degrading, deeply entrenched poverty. But that’s the issue, not wealth distribution. The issue is getting everyone to enough wealth to maintain a good quality of life, not in redistributing wealth per se.

Redistributing some wealth may very well be part of the solution to this problem, but our progress should be measured in terms of how well we are all doing in relatively to what is necessary to maintain a good quality of life, not in how evenly the money is being distributed.

TL;DR the TL;DR: Yeah, sorry. That got kind of out of hand.

Anyway, here’s my original Facebook comment:

There’s a bit of a fallacy in dividing up the total ‘wealth’ and supposing that that wealth should be relatively fairly divided among the entire set of people. This implicitly assumes two things - 1. that wealth is zero sum, and if someone has more wealth, then someone else has less, which is definitely not true, and 2. that the amount of wealth one needs is relative somehow to the total amount of wealth in the world or a country, which is totally not true.

For example, given the same value of money as today (as in, $1 in this scenario buys just as much as $1 buys now), what’s a better world. A world in which every person has $100,000 and one person has fifty centillion dollars and essentially all the money in the world, or today’s world? What’s better - a world where everyone makes $500 a year and all the wealth is entirely evenly divided, or today’s world, where a lot of people do make $500 a year or less, but many more enjoy better lives as well?

For point 1, the ability to retain much of their generated wealth incentivizes people to create more wealth by adding value into the system. Examples - the invention of invaluable software, the invention of the assembly line, or the printing press, etc. etc. etc.

If you invent the printing press and make a billion dollars yet reduce the cost of books 100000% and enable proportionally that many more people to purchase books at literally cents to the dollar of the previous cost, is it justified? Do you deserve to keep a fraction of the wealth you generated for the world (calculate this wealth as the # of extra books in the world vs the # of books that would be in the world without the printing press given a set amount of input money - if there are 10000x more books, then that’s how much value you added to the system, and it’s feasible that a billion dollars off that is only 1% or even less of the generated wealth)?

So - would we rather live in a world where people are incentivized to invent and profit from their contributions to the greater progress of humanity, or would we rather live in a world where people aren’t, and everyone is still starving because no one can be bothered to innovate and improve the human condition?

Granted, there are many cases of systemic inequality and not all cases of wealth inequality are examples of value add, but many, many, many are. And almost all of the richest people in the world got there by adding something of significant value and worth to the world - how else do you get people to give you money? You give them something they want or need.

So while some of the system definitely should be fixed, the mere fact of wealth distribution inequality is an entirely misleading reason why.