Ok, it seems like a fairly simple and straightforward assumption to say the following : the market for employment is not an elastic free market. Numerous artifical barriers and entities with large power exist. One thing is that large employers for a kind of Oligopoly. For a person with a specific set of skills, the number of employers who will give him or her a good job may be limited.
Furthermore, there are many employees and fewer employers, since there are numerous companies with tens of thousands of employees.
Anyways, unions make for a simple and clear way to address this power imbalance. All the employers merge into mega-corporations and offer a limited number of jobs, so the employees merge into unions and bargain collectively for their labor.
Well, recent history has suggested that unions have serious problems.
And, possibly as an unrelated event, all of the wealth of the world is gradually concentrating into fewer and fewer hands. This may be an unavoidable consequence of a free market economy. If you think about it, the richer someone becomes, the smaller “overhead” expenses like keeping themselves alive, providing for the family, accounting for their funds, and paying attorneys.
If you think about it, a mere 10-millionaire is more efficient than a 1-millionaire, because the 10 millionaire has to spend a far smaller portion of his or her funds paying attorneys, accountants, etc. A Cayman Islands tax shelter, for example, costs a large amount of money to set up, a fixed cost, and so it doesn’t even pay off unless a person earns above a certain income.
Furthermore, a 10-millionaire or above doesn’t need to even use more than a tiny fraction of his fortune in the U.S., so he can skate on paying income taxes at all.
A 100-millionaire would presumably be more efficient still, and a billionaire even more so.
Anyways, if being super-rich is more efficient, then over time you would expect the super rich to grow richer.
Anyways, what on earth can be done? Should anything be done? For any given country, what is better? What bugs me is that doesn’t money have an exponentially diminishing utility? Doesn’t the relative enjoyment a 10-millionaire gets out of life compare closely to that of a 1-millionaire, or even a 100-thousandaire?
The reason for this is that goods and services only get marginally better with increasing cost. Examples :
A $5k used car is much more reliable than a $1k jalopy. A $10k used car is somewhat more reliable than the $5k car. A $20k new car is a little bit nice. A $40k new car is marginally more luxurious than the $20k car, but not enough to make up for the fact it costs the same of 2 of them. And so on, until you get to ludicrous 2 million dollar cars that are only a hair better than mere $250k automobiles.
The best hospital in the city only has marginally better recovery rates than the worst hospital. In some cases, there is basically no relationship between cost and quality.
Houses follow a similar relationship to cars, such that the Hilton hotel sized palaces the uber-rich own provide many rooms that are likely never used by direct family members.
Or another viewpoint : a given person will only live about 80 years, and can only enjoy a finite amount of goods and services before they die. If the person enjoys top tier everything, just not the stupidly expensive stuff, they will spend a finite amount of money before death.
The point is, for a nation as a whole, it actually seems like a reasonable argument that policies that result in the majority of the population becoming, say, 10% better off would result in more net happiness than ones that make the uber-rich 100% wealthier.
An argument is made that the “top 1%” NEED that extra money, or they won’t go to work (and create jobs). If money has a diminishing utility, it is frankly hard to see how that works. However, I’ve never been in the top 1%, so maybe I am wrong.