Finally, an economist who has re-discovered the basis for ALL successful economic systems, and therefore the basis for global human advancement. Not to mention the reason that the economist profession exists at all (although to tell the truth, I'm not exactly sure what the "interest of society" is that an economist promotes) ;)
Well and truly said, good Doctor! Human liberty is absolutely and utterly interconnected to economic liberty. One cannot thrive (or even long exist) without the other as the Chinese Communist regime has discovered.
Also, your daughter showed amazing talent as a high schooler. What an extraordinary gift.
Smith has an apt quote for many situations, including the current state of Silicon Valley. From Theory of Moral Sentiments: "It is from our disposition to admire, and consequently to imitate, the rich and the great, that they are enabled to set, or to lead what is called the fashion. Their dress is the fashionable dress; the language of their conversation, the fashionable style; their air and deportment, the fashionable behaviour. Even their vices and follies are fashionable; and the greater part of men are proud to imitate and resemble them in the very qualities which dishonour and degrade them. Vain men often give themselves airs of a fashionable profligacy, which, in their hearts, they do not approve of, and of which, perhaps, they are really not guilty. They desire to be praised for what they themselves do not think praise-worthy, and are ashamed of unfashionable virtues which they sometimes practise in secret, and for which they have secretly some degree of real veneration. There are hypocrites of wealth and greatness, as well as of religion and virtue; and a vain man is as apt to pretend to be what he is not, in the one way, as a cunning man is in the other. "
Remember: the vast majority of investors in venture capital comes from institutional investors. For example, state pension funds. While people complain about individual wealth, it’s funding their retirement and other benefits. Success is in our best interest to raise the standard of living.
Would the answer possibly be that by using positive discussion such as this, word of mouth, social media, and further publication do what it has done in the past in the recognition of such problems and also their solution?
Gini Coefficient: Measures the gap between income distribution and perfect equality. It highlights a steady rise in inequality during the 19th and 20th centuries.
Top Income Shares (e.g., top 1% or 10%): Studies show that the share of income for the top 1% has increased significantly over the past 30-40 years, particularly in the US.
I have seen too much variation in those reports to trust any of them, and some (Piketty et al) seem positively fraudulent. People don't need to lie like that when they truth is on their side, which makes me think reality is the opposite.
Say that a billionaire, or family of billionaires, donates $3,000 tax-free to each household, every year. Over the working lifetime of a householder, call it forty years, this amounts to $120k, and more if the retirement years are included. That's rather generous.
Society could easily spread the wealth around more evenly, but politicians.
You might want to clarify that last sentence. Are you seriously claiming that "society" could easily redistribute other people's wealth but politicians get in the way? How do you propose society steal people's wealth without politicians?
$3k per year per household is $400 billion/year for the US (which has ~130-135 million households).
Elon Musk could fund that for about 2 years, if you took away all his assets.
So a "billionaire or family of billionaires" can't do what you suggest for 30 years.
The total estimated net worth of all US billionaires combined is something like $6-7 trillion, if I can trust things on the internet. They could fund your scheme for 15 years (ignoring for now whether their wealth grows), and again, they would have to do that by selling stakes in various companies, which will be bought by .... who, exactly?
I've heard of it, but I don't see what it has to do with your claim that "a family of billionaires" could plausibly donate $3k annually to every household in the US on a consistent basis.
Concretely, the total wealth of the Walton family is something like $500 billion, so they could manage it for 1.25 years or so.
The Walmart Effect is the reduction in living costs amounting to in 2025 a little over $3,000 per household per annum. You don't even have to shop at Walmart. Other traders have to drop prices to compete with Walmart.
OK, so your "donate" was not meant to be actual donations, it was meant to be "effects on people's disposable income, because the billionaiers in question do not fully capture the benefits of their activity"? In that case, we are probably in violent agreement. ;)
Wealth concentration is not always what one thinks. Yes, Jeff Bezos has power. But he controls something that can be regulated, taxed, and sued. He has to watch his step. The days of secret payoffs and bundles of oil man cash being stuffed into coat pockets of Senators is less today than a century ago. Appearing in the WSJ and People magazine is not power — and even the wealthy can be harassed if they exercise it.
Look at DJ Trump. He has been hounded since he first won political office.
Wealth Power is not unlimited or as influential when the tide turns. Ask John D. Rockefeller. When he was monopolizing kerosene for lamps, … and made it safe by standardizing it, …, the real price dropped year after year. He was vilified. And when Standard Oil was busted up, …, the price of kerosene and refined oil products began to rise. Where was his power? The market competition and his own drive kept him check. When the government created less competition by busting up the market disruptor, the real price increased.
Who would ever have guessed Bill Gates would become a person who is ridiculed (messy divorce, Epstein, foundation hi-jinx). Wealth is not power — it may buy lawyers, medical care, public relations agents, homes in Aspen, invites to Davos, a jet, and perhaps some notoriety, … but wealth alone is not political power. It is a target.
As for wealth concentration, we control that by refusing to make Bezos and Gates rich. We can boycott their products. That will teach them.
There is considerable power in wealth. Twenty years ago the National Realtor group decided the best way to stop true buyer agency was to abrogate the law of agency altogether. They spent over $50m to lobby every state legislature to allow agents to push in house listings, while maintaining they were buyer agents as long as they were not the principal broker or the listing agent. Surprise, surprise, it worked!
A company actually committed to buyer agency had grown to 75 offices nationally. They are now down to two offices, soon to be one. If someone comes after you with a war chest of $50m, you gotta problem.
Speaking of gotta, I have to get back to PLb now. Later Prez.
Tell that to the on-line sell your own home services that are eating away at commissions in real estate. And real estate agents and agencies can often do well, but they are rarely rich and powerful except by association and lobbying. The same can be said for union workers. Wealth concentration that arises from free association (note, union membership is often required, not a free decision) is never protected forever. Northeast and West Coast unions do have significant power, …, and they face declining populations as the police, municipal workers, healthcare, and teachers see their clients move to Texas and Florida. Power concentrates and eventually dissipates. If wealth were power, Standard Oil, GM and IBM would run the US. How did that work out?
Thank you John! This is a most learned piece of information as indicated by the others who have commented. As discussions like this and in your other endeavors, you provide the "energy" and the "mass" necessary to enable the solutions to the economic, political and historic quandaries of the present day." "E=MC squared"!
"I generally stick to the practical case, not the moral case. We do not have to argue freedom vs. prosperity. We are lucky that the cause and effect is devastatingly true. But the moral case for freedom adds to its practical case. And underlies it as well."
I long ago came to the conclusion that every question of policy, every question of what government should do, was "get out of the way" and "stop meddling", because freedom provides the flexibility that encourages innovation, and there is no other way to progress. Those who would restrict progress tomorrow for the sake of the status quo today are hypocrites who would scream bloody murder if anyone applied their stasis retroactively.
I think there is a moral case to be made about capitalism vs socialism/communism. We need to make it. Not compromise. We might try to be "nice", but the other side isn't very nice. Especially when they take power
Your daughter is a gifted artist! Art... and opera and ballet bring happiness to so many. (But why did so many take such offense to one knucklehead's comment? Parents aren't teaching about sticks and stones anymore)
A billionaire can escape condemnation by condemning wealth in others. For example a certain Formula One driver who earns about a hundred million a year, and is my hero when he's on the track, but off the track, who tweets daily about inequality.
Beautiful post. The Bay Area folks you reference should take note that Smith said "By pursuing his own interest he FREQUENTLY promotes that of the society more effectually than when he really intends to promote it." (My emphasis) Smith knew full well that markets can fail, so he qualified the statement. Yet, wearing an Adam Smith tie to a party today, even an academic party (or maybe especially an academic party), isn't the way to endear yourself to the crowd. The irony is that it is the people who look dimly on the work of Adam Smith who are the narrow-minded ones. Science is non-partisan. The real anti-science is politically-driven mob mentality.
Good essay. Applause to your daughter as an artist and to you as a writer.
But a question: what were Adam Smith's assumptions about norms that might have guided his brewer, butcher and baker? Yes, we gain a better meal from them acting in their self interest. But what if they polluted the river that was everyone's water source? what if they operated a cartel that was coercive or even violent toward their suppliers, employees, potential competitors, and/or customers? What were the implied guardrails (moral, social, legal) for the brewer, butcher and baker, to prevent negative externalities?
I like your theme that the United States was founded with a positive understanding of capitalism and the ways that a free capitalist system "channels self-interest to decent public outcome". To me, 'channels' is the operative word. Back in the late 1800s, there was started a debate about how to set guardrails, how to channel, the self-interest of the robber barons toward a more decent set of public outcomes. That debate continues. Shouldn't that be at the center of an essay about Smith and Jefferson at 250?
Finally, an economist who has re-discovered the basis for ALL successful economic systems, and therefore the basis for global human advancement. Not to mention the reason that the economist profession exists at all (although to tell the truth, I'm not exactly sure what the "interest of society" is that an economist promotes) ;)
Well and truly said, good Doctor! Human liberty is absolutely and utterly interconnected to economic liberty. One cannot thrive (or even long exist) without the other as the Chinese Communist regime has discovered.
Also, your daughter showed amazing talent as a high schooler. What an extraordinary gift.
Smith has an apt quote for many situations, including the current state of Silicon Valley. From Theory of Moral Sentiments: "It is from our disposition to admire, and consequently to imitate, the rich and the great, that they are enabled to set, or to lead what is called the fashion. Their dress is the fashionable dress; the language of their conversation, the fashionable style; their air and deportment, the fashionable behaviour. Even their vices and follies are fashionable; and the greater part of men are proud to imitate and resemble them in the very qualities which dishonour and degrade them. Vain men often give themselves airs of a fashionable profligacy, which, in their hearts, they do not approve of, and of which, perhaps, they are really not guilty. They desire to be praised for what they themselves do not think praise-worthy, and are ashamed of unfashionable virtues which they sometimes practise in secret, and for which they have secretly some degree of real veneration. There are hypocrites of wealth and greatness, as well as of religion and virtue; and a vain man is as apt to pretend to be what he is not, in the one way, as a cunning man is in the other. "
Vanitas vanitatum, omnia vanitas. (Like they say.)
Remember: the vast majority of investors in venture capital comes from institutional investors. For example, state pension funds. While people complain about individual wealth, it’s funding their retirement and other benefits. Success is in our best interest to raise the standard of living.
I have a positive statement and a normative question:
The US has seen wealth concentrate since the 1980s; the magnitude is debated, but assume it’s significant.
Too much wealth concentration (hard to define a specific level) poses real political risks.
How do we attack that issue while realizing the social benefits of individual wealth?
Would the answer possibly be that by using positive discussion such as this, word of mouth, social media, and further publication do what it has done in the past in the recognition of such problems and also their solution?
You assume wealth has concentrated. Why?
Gini Coefficient: Measures the gap between income distribution and perfect equality. It highlights a steady rise in inequality during the 19th and 20th centuries.
Top Income Shares (e.g., top 1% or 10%): Studies show that the share of income for the top 1% has increased significantly over the past 30-40 years, particularly in the US.
I have seen too much variation in those reports to trust any of them, and some (Piketty et al) seem positively fraudulent. People don't need to lie like that when they truth is on their side, which makes me think reality is the opposite.
Do you like inflation? :-)
Say that a billionaire, or family of billionaires, donates $3,000 tax-free to each household, every year. Over the working lifetime of a householder, call it forty years, this amounts to $120k, and more if the retirement years are included. That's rather generous.
Society could easily spread the wealth around more evenly, but politicians.
You might want to clarify that last sentence. Are you seriously claiming that "society" could easily redistribute other people's wealth but politicians get in the way? How do you propose society steal people's wealth without politicians?
$3k per year per household is $400 billion/year for the US (which has ~130-135 million households).
Elon Musk could fund that for about 2 years, if you took away all his assets.
So a "billionaire or family of billionaires" can't do what you suggest for 30 years.
The total estimated net worth of all US billionaires combined is something like $6-7 trillion, if I can trust things on the internet. They could fund your scheme for 15 years (ignoring for now whether their wealth grows), and again, they would have to do that by selling stakes in various companies, which will be bought by .... who, exactly?
Hello-oo? Haven't you heard of the Walmart Effect?
Apparently it's unrelated to reality, whatever it is, as you apply it.
I've heard of it, but I don't see what it has to do with your claim that "a family of billionaires" could plausibly donate $3k annually to every household in the US on a consistent basis.
Concretely, the total wealth of the Walton family is something like $500 billion, so they could manage it for 1.25 years or so.
The Walmart Effect is the reduction in living costs amounting to in 2025 a little over $3,000 per household per annum. You don't even have to shop at Walmart. Other traders have to drop prices to compete with Walmart.
Here's something that might help to reinforce the good-natured spirit in which this conversation is taking place. Jessica Frech singing People Of Walmart. https://www.youtube.com/watch?v=77LNBK8jZZg&list=RD77LNBK8jZZg&start_radio=1
OK, so your "donate" was not meant to be actual donations, it was meant to be "effects on people's disposable income, because the billionaiers in question do not fully capture the benefits of their activity"? In that case, we are probably in violent agreement. ;)
Wealth concentration is not always what one thinks. Yes, Jeff Bezos has power. But he controls something that can be regulated, taxed, and sued. He has to watch his step. The days of secret payoffs and bundles of oil man cash being stuffed into coat pockets of Senators is less today than a century ago. Appearing in the WSJ and People magazine is not power — and even the wealthy can be harassed if they exercise it.
Look at DJ Trump. He has been hounded since he first won political office.
Wealth Power is not unlimited or as influential when the tide turns. Ask John D. Rockefeller. When he was monopolizing kerosene for lamps, … and made it safe by standardizing it, …, the real price dropped year after year. He was vilified. And when Standard Oil was busted up, …, the price of kerosene and refined oil products began to rise. Where was his power? The market competition and his own drive kept him check. When the government created less competition by busting up the market disruptor, the real price increased.
Who would ever have guessed Bill Gates would become a person who is ridiculed (messy divorce, Epstein, foundation hi-jinx). Wealth is not power — it may buy lawyers, medical care, public relations agents, homes in Aspen, invites to Davos, a jet, and perhaps some notoriety, … but wealth alone is not political power. It is a target.
As for wealth concentration, we control that by refusing to make Bezos and Gates rich. We can boycott their products. That will teach them.
Hello Mr. President:
There is considerable power in wealth. Twenty years ago the National Realtor group decided the best way to stop true buyer agency was to abrogate the law of agency altogether. They spent over $50m to lobby every state legislature to allow agents to push in house listings, while maintaining they were buyer agents as long as they were not the principal broker or the listing agent. Surprise, surprise, it worked!
A company actually committed to buyer agency had grown to 75 offices nationally. They are now down to two offices, soon to be one. If someone comes after you with a war chest of $50m, you gotta problem.
Speaking of gotta, I have to get back to PLb now. Later Prez.
Tell that to the on-line sell your own home services that are eating away at commissions in real estate. And real estate agents and agencies can often do well, but they are rarely rich and powerful except by association and lobbying. The same can be said for union workers. Wealth concentration that arises from free association (note, union membership is often required, not a free decision) is never protected forever. Northeast and West Coast unions do have significant power, …, and they face declining populations as the police, municipal workers, healthcare, and teachers see their clients move to Texas and Florida. Power concentrates and eventually dissipates. If wealth were power, Standard Oil, GM and IBM would run the US. How did that work out?
Thank you John! This is a most learned piece of information as indicated by the others who have commented. As discussions like this and in your other endeavors, you provide the "energy" and the "mass" necessary to enable the solutions to the economic, political and historic quandaries of the present day." "E=MC squared"!
Thanks, and especially love the more art and less do-goodyism.
Seems "self evident." It's demoralizing to see how many of our own citizens just can't/won't see it. Shame on us and our "educators."
"I generally stick to the practical case, not the moral case. We do not have to argue freedom vs. prosperity. We are lucky that the cause and effect is devastatingly true. But the moral case for freedom adds to its practical case. And underlies it as well."
I long ago came to the conclusion that every question of policy, every question of what government should do, was "get out of the way" and "stop meddling", because freedom provides the flexibility that encourages innovation, and there is no other way to progress. Those who would restrict progress tomorrow for the sake of the status quo today are hypocrites who would scream bloody murder if anyone applied their stasis retroactively.
I think there is a moral case to be made about capitalism vs socialism/communism. We need to make it. Not compromise. We might try to be "nice", but the other side isn't very nice. Especially when they take power
I'm a fan of the Light Touch. (Not related to the Light Sniff.) Some intervention is necessary.
Prove it. Prove "some" intervention is necessary. Then explain who decides which and how much intervention is necessary.
Aha, so you're a Defund The Police activist.
Ah, so you have a limited imagination.
ETA: If you want a more serious response, you yourself should have supplied a serious response.
Ah, so you have a limited intelligence. I proved that intervention is necessary. QED.
The only thing you’ve proved is that you don’t understand the word.
Your daughter is a gifted artist! Art... and opera and ballet bring happiness to so many. (But why did so many take such offense to one knucklehead's comment? Parents aren't teaching about sticks and stones anymore)
A billionaire can escape condemnation by condemning wealth in others. For example a certain Formula One driver who earns about a hundred million a year, and is my hero when he's on the track, but off the track, who tweets daily about inequality.
kudos to your daughter
fantastic work on her part
really, really good
wow!
I read The Wealth of Nations when I was a brand new person at the SEC in Washington
It was life changing for me
I am old now and I don't have the optimism or energy to try persuading others of the value of The Wealth of Nations
if they require persuasion they're aren't likely to understand anyway
There's big money in poverty and helplessness (bigger now than it ever has been), but the poor and the helpless aren't the ones making it
Beautiful post. The Bay Area folks you reference should take note that Smith said "By pursuing his own interest he FREQUENTLY promotes that of the society more effectually than when he really intends to promote it." (My emphasis) Smith knew full well that markets can fail, so he qualified the statement. Yet, wearing an Adam Smith tie to a party today, even an academic party (or maybe especially an academic party), isn't the way to endear yourself to the crowd. The irony is that it is the people who look dimly on the work of Adam Smith who are the narrow-minded ones. Science is non-partisan. The real anti-science is politically-driven mob mentality.
Two thumbs up. Thanks.
Good essay. Applause to your daughter as an artist and to you as a writer.
But a question: what were Adam Smith's assumptions about norms that might have guided his brewer, butcher and baker? Yes, we gain a better meal from them acting in their self interest. But what if they polluted the river that was everyone's water source? what if they operated a cartel that was coercive or even violent toward their suppliers, employees, potential competitors, and/or customers? What were the implied guardrails (moral, social, legal) for the brewer, butcher and baker, to prevent negative externalities?
I like your theme that the United States was founded with a positive understanding of capitalism and the ways that a free capitalist system "channels self-interest to decent public outcome". To me, 'channels' is the operative word. Back in the late 1800s, there was started a debate about how to set guardrails, how to channel, the self-interest of the robber barons toward a more decent set of public outcomes. That debate continues. Shouldn't that be at the center of an essay about Smith and Jefferson at 250?
There is nothing like incentive to conquer lassitude and fear, and trigger curiosity.