Talk about moving the goalposts. This rant has absolutely nothing to do with the question of what putting $80 million* into a local economy does. And I object to your mischaracterizing my post. I said to spread the $80 million homes “across the country” not in a local economy. I’ll also point out that you don’t seem to recognize that Branson, MO is the southern Las Vegas, a city built around tourism and attracting home buyers no standard small city would. Las Vegas lives and grows on attracting the ultra-rich; Branson keeps itself afloat with the same logic on a smaller scale.
* I see the actual construction costs were much lower, but still sizable. The fault is yours, because you didn’t properly understand or research your claim.
As noted above, this is just a corollary to the broken window fallacy. If I burn down some rich jerk’s vacation home and he spends millions to rebuild it, have I helped the economy? Is it better if I burn down multi million dollar vacation homes all across the country?
In plain English: No, it isn’t; Technically, of course you have; Technically, why not, people sink billions into rebuilding after natural disasters.
But I’m arguing economics and you’re just repeating that billionaires are evil. I remember that the OP asked a reasonable question about wealth. “Billionaires are evil” doesn’t address it in any way.
Assuming that he can afford to rebuild it and that he wasn’t going to spend that money in a different, more productive way, like by building a factory or something, then yes, obviously, that would stimulate the economy. How is that even debatable?
Better in what sense? Again, if we assume every home you burn down is rebuilt, then yes, it is trivially true that if you burn homes across the country you will stimulate economic growth across the country.
You might also stimulate other things, like fear and distrust in one’s seemingly arsonistic neighbors, so it might not be ‘better’ for the country, but obviously it does cause economic growth.
That’s why economic policy (and businesses, for that matter) generally has goals beyond “Line go up”.
Pity the ones without boats though. The shore is only [further away](https://[quote=“Crafter_Man, post:23, topic:1007678”] Yep. A rising tide lifts all boats. [/quote]) now.
Regarding the idea that vacation homes are a good thing, I know that there are entire apartment buildings in Manhattan, London and other major cities where the apartments are owned by non-resident billionaires. So the billionaire lives full time somewhere else but might live in a $50 million Manhattan triplex for a couple of weeks a year.
You might think, who cares if the apartments sit empty most of the year? But if an apartment is occupied full-time, the residents are eating dinner in local restaurants, shopping at the bodega or supermarket and sending their kids to school. I think it’s better for the life of the city if the number of non-resident owners is minimized.
It grew by the cost paid for resources and labor at every stage between the extraction of the raw resources used, the processing of them into construction materials, and the assembly of said materials into a house; including the costs incurred by transporting the materials and the administrative overhead of buying and selling them.
Gross Domestic Product has its flaws, but it’s a much better measurement than Gross Vacation Home Count.
And if the labor used for the house is being drawn from the pool of labor available for normal people, or for home renovations? That might mean the supply shrinks and prices go up, locking people out of first homes. It might mean that businesses in area can’t hire people from outside. People stuck into apartments might decide they don’t want to have kids until they can afford a home, which hurts that segment of the economy.
And of course it is unlikely that putting money into a house being rebuilt is the use of that money growing the economy better.
That’s the whole argument against stock buybacks. That money could be used to grow the business, which would be more effective than the benefit a few shareholders get from a higher price. The biggest recipient of benefits is the CEO whose huge bonus depends on stock price, of course.
Very true, plus all those apartments basically out of the housing stock raises prices of other ones, keeping people out of the market and/or making it hard to find vacant apartments. That’s the argument against AirBnB in places like New York.
The economy is not a zero sum game. Greater demand for these things creates the incentives that lead to the creation of more of these goods and services.
No, billionaires building mansions for themselves isn’t the cause of shrinking housing supply. If the incredibly rich are contributing to the issue, it is by buying up massive quantities of “normal” houses and renting them out rather than selling them.
Nobody said it was the best use for the economy. I was responding to someone who incredulously asked “how could burning down a house grow the economy”, when very clearly rebuilding a house does in fact create more consumption and thus demand and thus the economy grows
That doesn’t mean that burning down and rebuilding houses is the best way to grow the economy. It very obviously isn’t, but demolishing that straw man isn’t very impressive.
It is unlikely that a single house is going to inspire all sorts of people to get into the trades, so in the short term it could hurt the local economy. No, a single billionaire isn’t the major cause of a housing shortage, but a whole bunch of million dollar houses might be. I’m one of the culprits.
My major point was that in economics there are all kinds of secondary effects which must be considered before saying that a specific action will grow the economy. Just look at the view of those who think trickle down economics is a good thing. We’ve seen good response to that idea in this thread.
And it shrunk by the value of the vacation home you destroyed. And there is an opportunity cost in that those resources and labor could have been used to build other homes instead of rebuilding a vacation house.
The point is it’s just “broken window fallacy”. Your paying people to do work without creating real economic value. You talk a lot about “costs” but you don’t mention the actual value that’s being created.
And that’s true enough. But we aren’t talking about shopkeepers, we are talking about billionaires who can afford to rebuild an arbitrary number of multimillion dollar houses. Obviously if there’s a danger that the house won’t be rebuilt, or in the example of a window maker, a danger that if he has to replace too much glass he will go out of business.
Again, this all began because of people wailing about how horrible it is that billionaires can buy multi million dollar homes. The point is that compared to, say, buying massive companies or entire financial institutions, the sorts of investments that return their cost many times over, building a mansion does not increase wealth inequality.
The value is in people being employed and then using the fund they gained from employment to feed their families.
So I think this story provides a good example of why wealth goes to the 1%
Basically some AI scientist got frustrated and quit Google to start his own company. Google decided they needed him back so they acquired his company for a billions dollars.
It’s am example of the “winner take all” mentality where people (or at least the people who have money to invest) believe that success (and by extension, massive wealth) is the result of a few “unicorn” companies or the exceptional “rock stars” who found and run them.
Part of it is true. Technology and the global reach of the internet means the market won’t support multiple Amazons or Googles or Apples across a region. And there are some pretty smart people who do some really smart things.
But to a certain extent, it’s also created a closed ecosystem of venture capital, private equity, investment banks and wealth managers that has money to throw at any stupid idea in hopes of capitalizing on one of them working out. And of course then structuring things to minimize any tax burden.
Another example is at the Fortune 500 bank where I’m consulting at. The day to day operations are a total shit show. They just completed another round of layoffs a few months ago and are seem like they are in the middle of another restructuring. But they also just hired a new Head of Banking who just bought a $10 million apartment with his $50 million comp package.
Sure if by next year the company shows massive growth, pay him whatever. But does the company think that this one man will make that much of a difference, as opposed to hiring someone at half the price along with 25 really competent executives they can pay a paltry $1 million each?
I guarantee you that if Google bought his company for a billion, they think they can make at least a few billion more than they otherwise would by buying him up.
Should they be forbidden from doing so?
I just don’t get the criticism.
Is that really the mentality? I’ve always heard how important it is to diversify your investment portfolio.
Have you ever tried to get funding for a business venture? They definitely aren’t just randomly throwing money at the wall to see what sticks. This is a very cartoonish view of how these investment firms act.
Obviously they do seem to think that, or they’d have hired the 25 executives. Unless you think the chair of the board hired his nephew as Head of Banking or something, which would be both illegal and a breach of the board members’ fiduciary duty.
The post was about a billionaire building a house worth $80M that nobody has lived in for the last 30 years. Somebody commented about him throwing his money away, and the White Knights came in to point out that builders were given jobs 30 years ago, and we’d all be better off if more billionaires spent their money on expensive follies because it boosts the economy.
That’s the core of trickle down economics. If you encourage the mega rich to become mega richer, they’ll sprinkle a few drops on the rest of us from time to time. You don’t have to defend the drops as being better than nothing.
My point was that if we compare two actions a billionaire can take - investing in a business or fund of some kind, or building a giant mansion in the middle of nowhere - one of those increases inequality while the other decreases it, and building mansions actually decreases inequality for all the reasons listed.
That doesn’t mean that the appropriate course of action for our society is to build and rebuild mansions in the middle of nowhere forever. (But if a billionaire DID choose to do that, he would decrease inequality by going bankrupt…)
Let me be clear. I think increasing income inequality is a serious problem. But I think many in this thread fail to grasp the economics involved in how income inequality arises or why it causes problems.
I’m neither advocating trickle down economics nor defending the drops. I am advocating an actual understanding of the economic systems under discussion, and what the very serious problems with them are, rather than empty Occupy Wall Street slogans. There’s a reason why that movement fizzled, and it’s important that the next time we have popular support for changing the system, we actually understand what the system is and what changes we should demand, otherwise any future movement is also doomed to failure.
The problem with trickle down economics is not that when rich people get rich they build mansions which doesn’t help the economy. Some things rich people do DO help the economy. And of course, per capital, rich people positively impact the economy more than us regular people do.
One problem is that per dollar, they positively impact the economy much less, because a poor person puts all of their money back into the economy while a company like Apple locks away billions.
Another, bigger problem is that when they have money, they don’t just spend it on yachts and houses; they also spend it on factories, on banks, on businesses and mutual funds and so on. And all of that, again, does actually have a positive impact on the economy.
But as they buy up and consolidate all these things - the means of production - they gain something that a mansion or yacht could never give them: the ability to make even more money. Exponentially more money. And this is what concentrates wealth and increases inequality - when rich people buy up businesses, thus securing more and more of the gains that come with their undeniable positive impact on the total size of the economy. Sure, they benefit the economy, but they ensure that more and more and more of that bigger pie belongs to them.
THAT is something worth criticizing. But instead, we focus on the flashy yachts and mansions.
