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Economics Gurus, a question....

UtahBill

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Seems to me that unequal distribution of wealth, by natural means and not via govt mandate, is a good thing, but here is a question for you who know more about economics than I do....
Actually, I have bounced this idea off the retired ECON professor next door.

Isn't it better to have a thousand millionaires that it is to have one billionaire....?

That is 999 more consumers to help stimulate the economy, for starters...that is one argument for the pro side, any others out there? Any for the con side?
 
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Kushinator

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Seems to me that the distribution of wealth, by natural means and not via govt mandate, is a good thing, so here is a question for you who know more about economics than I do....
Actually, I have bounced this idea off the retired ECON professor next door.

Isn't it better to have a thousand millionaires that it is to have one billionaire....?

That is 999 more consumers to help stimulate the economy, for starters...that is one argument for the pro side, any others out there? Any for the con side?
Of course 1000 millionaires is better than 1 billionaire. Lets look at Russia; my last visit there was revealing. There are nearly as many billionares in Moscow than in NYC. A decent (not fancy) dinner for two runs you about 7500 rubles per person (or around $200 bucks).
 

Lord Tammerlain

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More competition with the 1000 millionaires, would generally mean they will be more efficient in running thier business.

The main issue for me would be poltical and social. 1 billionaire will have a massive amount of political influence, being able to turn politics to his benifit at the expense of the general populace. While 1000 millonaires will be competing against each other for political influence.
 

Gipper

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More millionaires would be better because a larger percentage of their money gets recycled. Usually in the hands of billionaires, cash tends to sit idle for a large part, which is bad for an economy.
 

LaMidRighter

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Depends on usage I guess. If 1k millionaires are trying to become billionaires by using savings to accrue interest then less demand will exist in the market although more money will exist in banks to lend to credit users......but the same could be said for the billionaire using his money for those purposes as well. If the billionaire is living it up while the millionaires are not it would ultimately be the same thing, if the millionaires are all spending then it would be better than 1 billionaire. So realistically it comes down to how the money is used.
 

Southern Man

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One thousand millionaires is a better economic system, but you won't get that by burdening high achievers with punitive taxation.
 

oldreliable67

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A general principle is that the less wealth is concentrated, the better for society as a whole. Higher concentrations are thought to lead to abuses (i.e., Power corrupts; absolute power corrupts absolutely).

More in econ terms, dispersion among 1k suggests more diversification of spending habits. Yes, they will all spend on food, shelter, etc., but other tastes and preferences among 1k will likely be more diverse, therefore providing more widespread support for econ activity than only 1B. Moreover, providing food and shelter for 1k households will most likely support a wider, more diverse group of econ actors in the aggregate than that supporting only one household (immense though it may be).
 

tacomancer

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More millionaires would be better because a larger percentage of their money gets recycled. Usually in the hands of billionaires, cash tends to sit idle for a large part, which is bad for an economy.
Isn't this one of the arguments against taxation though? The idea that the rich can accumulate wealth which gets loaned out for investment purposes.
 

Harry Guerrilla

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Isn't this one of the arguments against taxation though? The idea that the rich can accumulate wealth which gets loaned out for investment purposes.
We're talking about billionaires and millionaires.
Billionaires are an incredibly tiny portion of the overall population of rich people, while millionaires are more common and those people move in and out all the time.
 

UtahBill

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More competition with the 1000 millionaires, would generally mean they will be more efficient in running thier business.

The main issue for me would be poltical and social. 1 billionaire will have a massive amount of political influence, being able to turn politics to his benifit at the expense of the general populace. While 1000 millonaires will be competing against each other for political influence.
Good point, some of the extremely wealthly just can't stay out of politics. If their goals are to better themselves, we can do without them. Some of them have honorable goals, even tho they might have been less than honorable in the wealth gaining process.
 

phattonez

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Seems to me that unequal distribution of wealth, by natural means and not via govt mandate, is a good thing, but here is a question for you who know more about economics than I do....
Actually, I have bounced this idea off the retired ECON professor next door.

Isn't it better to have a thousand millionaires that it is to have one billionaire....?

That is 999 more consumers to help stimulate the economy, for starters...that is one argument for the pro side, any others out there? Any for the con side?
The question as asked is kind of worthless. We have to assume that the money is earned rather than distributed, which means that the people who have that money had to do something to earn it (or the parents did). The important part of this question is that in the end, it doesn't matter. The millionaires will save and spend. The billionaire will do the same. Either way, the money will not be wasted. Money in this sense can't be wasted, so it makes no difference.

What can you do with money? You can spend it: the benefits are obvious. You can invest/save it: the money will be used for capital goods. You can stuff it in a mattress/burn it: the value of other people's money then will respectively increase, so goods become cheaper for everyone else.
 
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UtahBill

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The question as asked is kind of worthless. We have to assume that the money is earned rather than distributed, which means that the people who have that money had to do something to earn it (or the parents did). The important part of this question is that in the end, it doesn't matter. The millionaires will save and spend. The billionaire will do the same. Either way, the money will not be wasted. Money in this sense can't be wasted, so it makes no difference.

What can you do with money? You can spend it: the benefits are obvious. You can invest/save it: the money will be used for capital goods. You can stuff it in a mattress/burn it: the value of other people's money then will respectively increase, so goods become cheaper for everyone else.
Do you really think that ONE person with lots of money will spend as much as a THOUSAND people will spend? or that saving/investing it automatically means it will be used for capital goods?
Since you have such a dim view of the question, how would YOU phrase it?
 

LaMidRighter

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Do you really think that ONE person with lots of money will spend as much as a THOUSAND people will spend? or that saving/investing it automatically means it will be used for capital goods?
Since you have such a dim view of the question, how would YOU phrase it?
I'll answer. The bigger the budget the bigger the expenditures. Just like 1k dollars means a lot to us and nothing to a millionaire, 100k means less to a billionaire than a millionaire. It's all about scale.
 

phattonez

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Do you really think that ONE person with lots of money will spend as much as a THOUSAND people will spend? or that saving/investing it automatically means it will be used for capital goods?
Since you have such a dim view of the question, how would YOU phrase it?
Investing pretty much translates into capital goods. Saved money will be used for capital goods in accordance with its reserve ratio, and the rest will have the function of making other bills in circulation worth more (like the stuffing in the mattress scenario that I alluded to). In the end, it doesn't make much difference whether you have millionaires or 1 billionaire.
 

UtahBill

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Investing pretty much translates into capital goods. Saved money will be used for capital goods in accordance with its reserve ratio, and the rest will have the function of making other bills in circulation worth more (like the stuffing in the mattress scenario that I alluded to). In the end, it doesn't make much difference whether you have millionaires or 1 billionaire.
So you really think it is that simple? Human nature plays a big part here, and just because people have more money doesn't mean they will spend in proportion.
Three times in our young married days we had people ask us how come we always had money to spend, knowing our income and what we save and what we donate to charities. Each time I wanted to say, "the real question is why you don't have money to spend". One couple actually asked for advice, and we helped them change to better spending habits...
The foibles of humans can never be reliabley factored into to any economic formula...
 

LaMidRighter

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So you really think it is that simple? Human nature plays a big part here, and just because people have more money doesn't mean they will spend in proportion.
Correct to a degree, but one caviotte. The only way the larger income not being used on consumption would actually do nothing or hurt the economy would be a true cash hoarding situation in which the billions were kept in a mattress or wall safe. As long as the money is saved or invested it's in the market and thus contributing to those who need loans or the invested capital.
Three times in our young married days we had people ask us how come we always had money to spend, knowing our income and what we save and what we donate to charities. Each time I wanted to say, "the real question is why you don't have money to spend". One couple actually asked for advice, and we helped them change to better spending habits...
I assume though you had money saved in the bank, in that case you were still contributing in part to others access to funds and earning interest. I'd say it's a good thing.
The foibles of humans can never be reliabley factored into to any economic formula...
I won't argue against that, very true.
 

Kushinator

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can invest/save it: the money will be used for capital goods. You can stuff it in a mattress/burn it: the value of other people's money then will respectively increase, so goods become cheaper for everyone else.
Investing is not the same as saving, as you are trading liquidity for an asset that can only be redeemed (at face value or greater) if the market posses the proper liquidity as well as demand. Burning money only eradicates liquidity.

Therefore: Saving ≠ Investing

However, paying off debt = saving :prof
 

Kushinator

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Correct to a degree, but one caveat The only way the larger income not being used on consumption would actually do nothing or hurt the economy would be a true cash hoarding situation in which the billions were kept in a mattress or wall safe. As long as the money is saved or invested it's in the market and thus contributing to those who need loans or the invested capital.
Depends on interest rates really. When short term rates are close to zero with a money multiplier near (or below) 1 , keeping money in a depository/savings account (as opposed to an investment account) is hoarding.
 

LaMidRighter

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Depends on interest rates really. When short term rates are close to zero with a money multiplier near (or below) 1 , keeping money in a depository/savings account (as opposed to an investment account) is hoarding.
That's exactly right. I guess my overall point in this thread is that the original question is unanswerable because of the individual nature of all account holders and the rates they hold at, everything is situational.
 

UtahBill

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That's exactly right. I guess my overall point in this thread is that the original question is unanswerable because of the individual nature of all account holders and the rates they hold at, everything is situational.
Even ethics is situational, that is part of the problem on Wall Street.
I tell my kids to hold on to what they have, but don't invest any more until their mortgages are paid off. As long as savings rates are so low, they are money ahead to rid themselves of all debt as soon as possible.
If I was advising others, I would say have some reserve no matter how poor the return, but my kids have an advantage, mom and dad can afford to back them up if things get beyond their control. One of them is doing very well, the other has medical bills for their oldest child that impacts their financial health.

But my question is not about individual economics, it is about economics of communities. IMO, the issue isn't taxes, it is jobs, and that requires more consumers, more so than less taxes. The truly rich upper class can afford to spend more, even after taxes. The truly poor lower class, with little or no discretionary income, is too likely to grow if we don't get them back to work...

In the meantime, I suspect the middle class will shrink until the economy turns around...
 

phattonez

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Investing is not the same as saving, as you are trading liquidity for an asset that can only be redeemed (at face value or greater) if the market posses the proper liquidity as well as demand. Burning money only eradicates liquidity.

Therefore: Saving ≠ Investing

However, paying off debt = saving :prof
I never said that they were the same thing. In fact I highlighted important differences. Next time you try to teach me try reading what I write.
 

Kushinator

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I never said that they were the same thing. In fact I highlighted important differences. Next time you try to teach me try reading what I write.
The common misconception is that saving money is the same as investing. When you clumped them together :
You can invest/save it: .
As described in another post: saving money when short term rates are at zero along with a money multiplier at or below one is in fact hording.
 

LaMidRighter

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Even ethics is situational, that is part of the problem on Wall Street.
Some ethics are situational but overall there is a standard ethical practice in financials. While these are rock solid and many enforceable by fines or imprisonment adherence becomes situational, that is some people on wall street have a lot of pull and can do massive damage by doing the wrong thing, however that doesn't stop them from doing said wrong thing as it turns a hell of a profit for them.
I tell my kids to hold on to what they have, but don't invest any more until their mortgages are paid off.
It's good advice. Playing the market should never be an all or nothing venture. I tell people if you wouldn't play blackjack with needed money or your kid's college fund then you likewise shouldn't play the market with that money.
As long as savings rates are so low, they are money ahead to rid themselves of all debt as soon as possible.
Very cool, they can always try their hands later if that is desired.
If I was advising others, I would say have some reserve no matter how poor the return, but my kids have an advantage, mom and dad can afford to back them up if things get beyond their control. One of them is doing very well, the other has medical bills for their oldest child that impacts their financial health.
I remember you speaking of that a while back, hope things are getting better in that aspect. Health expenditures aren't a problem unless they hit you by surprise, hope they bounce back.

But my question is not about individual economics, it is about economics of communities. IMO, the issue isn't taxes, it is jobs, and that requires more consumers, more so than less taxes.
The two aren't necessarily exclusive. While it's true that more consumers is a great thing there has to be a hiring climate in which to create them. Depending on where the money taxed comes from like say.....a wealthy person who pays themselves last out of business profits that are likewise counted as their assets will take a heavy beating in that respect, when the business assets are also personal those tax losses eat away at the hiring budget and so it becomes a vicious cycle. This nets a loss of new or continual consumers within the market.
The truly rich upper class can afford to spend more, even after taxes.
It is true that after taxes they still have much more income than the lower pay rates, however if you give them even more money then the idea is that their investments and expenditures should grow even faster, which leads to more jobs created. I'm not exactly asking people to accept that trickle down theory works, but it is the only one that makes sense to me personally.
The truly poor lower class, with little or no discretionary income, is too likely to grow if we don't get them back to work...

In the meantime, I suspect the middle class will shrink until the economy turns around...
I want them working as well, for the exact same reasons of consumption and moving the money, the idea is to facilitate the most dynamic climate with the easist adaptation to rapid changes in the market.
 
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