Has anyone ever stopped to try to get an estimate of how much of these gains this 5% have created?
I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?
Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.
Milton Friedman said that most fallacies in economic thinking were derived from the "fixed pie" assumption: that one party can gain only at the expense of another. In an ideal world, the pie would always be growing, and those marginal increases in utility would spill over and everybody would increase well-being gradually over time.
But that's not what happens.
The top 5 percent may create some gains for the other 95, but their gains that "trickle down" do so very, very selectively, and only go so far. Probably the most obvious evidence that trickle-down economics doesn't work is this:
The share of wealth held by the bottom 60% dropped 7.5%.
When over half of the people are on the shrinking pie side of the table, it's pretty tough to spell "Net win"
So the pie hasn't grown? I'm serious asking-- I don't know.
It it has, then it COULD be a net win. Example: Pie consists of $100. I (rich guy) have $50, the rest of the folks (5 people) split the other $50, and have $10 apiece. I cleverly invest abroad and double my money. I now have $100. The rest of the folks invest less cleverly, and turn their $10 into $12. Their share of the wealth declines, no?
In absolute sense (number of dollars) the pie grows and so does everybody's share in the pie. But you have to take in to account buying power as well and once you do that for lots of people their actual take drops.
But also remember that there are things they can buy now with those dollars (even if they have less of them) that before they just couldn't.
They might be making less inflation adjusted dollars than their parents did in the 70's working at the Ford plant, but how many 1970's dollars did it take to buy an iPad, or laser vision correction, flat screen HD tv, cable with 500 channels etc etc? (1)
Steve Jobs is a billionaire. I make less programming than my dad did at my age as a lowly salesman. But I have so much more. I'm OK with that.
(1) I don't mean what would the inflation adjusted price of the iPad be in 1975 or whatever. I mean all the money in the world in 1975 couldn't have bought even one seeing as how they didn't exist and all. "The Pie" is more than dollars.
This depends on what I'm trying to buy; if I'm having to spend a lot of money on buying positional goods, I'm not wealthier.
Before anyone assumes that 'positional goods' means "biggest house on the block" or "huge speedboat", I might point out that "a house to rent/buy in a high school district that doesn't completely suck" and "time with a competent doctor" are a couple examples of de facto positional goods.
I'm aware that we could see a big increase in the supply of that latter in theory, of course... but I'd be willing to bet that it'll be quite likely to see big-screen TV halve in price in the next 5 years, or a mid-market car add most of the features of a 2011 luxury car by 2016, etc. I'd also bet that the relative pricing of good educating, lawyering or doctoring goes up in the same time frame, even taking into account innovations in these spaces (Khan academy, do-it-yourself legal stuff, ...)
For positional goods, it doesn't matter much what happens to the share of the wealth held by the bottom 10%.
Distribution of positional goods is determined primarily by position - the bottom 10% are always stuck in last place for positional goods. There is nothing you can do about that short of making everyone's wealth identically equal.
> Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.
IANAE, but I don't think wealth creation works like that (the Randian hero as the engine of humanity). I'm inclined to think that parents are the greatest wealth creators, followed by teachers
I honestly have no idea what this number would look like but it must be non-zero. Everybody wants to fit a picture of a fat, stupid, cartoonish banker gambling away grandma's pension and getting a mammoth bonus into this slot but how much is that the case? If the number's not zero, then its something. How much?
Its not completely outside the realm of possibility that the 5% created nearly all of the gains and then only grabbed most. Net win.