A System that Allows Billionaires to Exist

I do think that a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong.--Rep. Alexandria Ocasio-Cortez (See here for a video.); and here for her amusing interview with Colbert.)

Ocasio-Cortez is right here concretely and in the abstract. One need not be a socialist (or Marxist) to agree with her (yes, go ahead read Rawls and the work he inspired in public health and the ethics of health care (e.g., Norman Daniels)).  But here I don't want to focus on the normative parts of her claim. Yet, she has been pummeled for her purported economic ignorance (in the New York Post and some of my friends) on social media by folks who claim to be friends of markets and commercial society. I am responding here to such critics.

The way I interpret her remark is inspired by the twitter handle by her policy adviser, Dan Riffle,"Every Billionaire Is A Policy Failure." To simplify: while under feudalism people were wealthy due to inherited privilege, in the modern world billionaires become billionaires either through (anti-competitive) rent-seeking or by building businesses on the clever use of patents, licensing, copy-rights, farm-subsidies, and rising asset prices thanks to (upwardly!) re-distributionist urban land and central-bank monetary policies that favor the rich.+(And, of course, a ridiculously low inheritance taxes.)++ The underlying idea has been nicely labeled "The Captured Economy" by Brink Lindsey, Steven Teles  (see their book;* see also my post on the history of regulatory capture.)

As an aside,  it is possible, of course,that returns to capital will stay much higher than other sources of income even in a much better, less rent-seeing economic system than the present. We can call this 'counter-factual Piketty-world.' That's not my expectation. But more important, I don't think we have to debate it because I doubt we can attain such a natural system of liberty because it would entail the absence of politics.

The renewed focus on extreme wealth inequality is an opportunity to create a broad coalition of folk that want to undermine the many ways the current economy is structured to protect the well-connected rich. This does not entail ignoring genuine normative and political differences over, say, the utility of competition and regulation. But the mobilization of public opinion and idealistic youth against entrenched economic privilege is a welcome turn and can produce unusual partnerships that will improve 'the system.'

 

 

+In some places (Stateside) one should also add a rather permissive anti-trust framework.

*Thank you Jacob T. Levy for reminding me.

 

Comments

[ajkreider]

I take it that your list is supposed to be problematic. I mean, there must be some causes for such wealth. I take it that it is not analytically true that a cause of great wealth is a worry. Licensing (Gates)? Copyright (Rowling)? Not sure where Bezos or Zuckerberg fall here - as most of their wealth is simply transferred from other wealthy people (who bought the stock, and would have, regardless of Fed policy).

By "rent-seeking" do you mean that these folks wouldn't have become so rich, had they not sought to manipulate the political system for their benefit? Or, do you mean that "rent-seeking" entails that the wealth is a consequence of a system that uses the power of state to enforce things like copyrights, etc.? If it's the latter, I'm not sure who would disagree. Yes, the state protects some view of property. The former just looks false.

One might reject that concept of property (and the state's defense of it). But that's the normative issue. On that, AOC's blurb is not correct in the concrete or the abstract. It's some rhetorical flourish that amounts to a false dichotomy. Many countries with great state healthcare have billionaires.