Billionaires are a market failure now

Richard Murphy says:
November 13 2019 at 7:05 am
Hell no

Rational economics addressing the market failure that lets billionaires happen

One analysis has it that the annual consumer value of the simple existence of the google search engine is $18,000 per person per year.

Larry and Sergey have a few tens of $billions each as capital, not annual, sums.

There are 7 billion people in the world.

The Waltons, the children of Sam, have $150 billion in that one off stack of wealth. The existence of Walmart is said to produce an annual consumer benefit to US peeps alone of $260 billion a year.

Bill Nordhaus, the economics laureate a couple of years back, did a paper showing that entrepreneurs, on average, capture 3% of the total value created by their innovations.

I’m not seeing markets failing here, I’m seeing them work.

8 thoughts on “Billionaires are a market failure now”

  1. Dennis, CPA to the Gods

    More envy and resentment.

    I have a feeling his search for new sources of income isn’t going swimmingly.

  2. In an entrepreneurial economy there will be lots of people starting businesses. Some fraction of those will be successes, so there will, of course, be many failures. Of the successes some smaller fraction will become reasonably substantial successes, but many, such as a successful restaurant, will always be small businesses. Of the substantial successes some small fraction will become huge successes. They also often consume lots of investor cash to finance that growth.

    As these firms are newish, when those that do become extremely successful will still have much of their equity in the hands of the founders, early employees and early investors. So, as big successes are also valuable businesses, these shareholders become very rich.

    From which you can draw the conclusion that to prevent billionaires you want to try to avoid having an entrepreneurial society. Certainly you want to make it difficult for investors. By doing so you can probably stop anyone from becoming a billionaire. Yes, there will probably be higher unemployment, a generally poorer society, and we’ll forgo all things the entrepreneurs would have provided us, and your retirement plan growth might be pretty stagnant, but isn’t that a small price to pay for a Gini Coefficient more to your liking.

  3. Tim Martin of Wetherspoon omn blistering form:

    “Furthermore, the founder of PIRC, Alan MacDougall who still sits on his own board after 33 years (but seems to believe I shouldn’t be on mine), has no relevant PLC experience having, according to his LinkedIn profile, a “BA Sociaology (sic) 2:2 – Social policy and Soviet Studies” and work experience at the National Union of Mineworkers and the Greater London Council.”

  4. The argument is that in a thriving free market, competitors should emerge long before one entrepreneur reaches the $/€/£1bn mark. But that misses the mark – the objection should be to companies with excess earnings, not individuals with excess wealth.

    In practice it’s hard to spot any actual market failures. Philip Green is a billionaire (or near enough) from simple clothing retail, hardly an uncompetitive market. The tech billionaires made their fortunes in a highly competitive and unregulated sector. The worst examples of market failure are in sectors which are already highly regulated (Carlos Slim and his telecoms monopoly).

  5. Dennis, CPA to the Gods

    Leftists never have, and never will, understand the concept of wealth creation.

    For them, economic activity is a zero sum game…Wealth is extracted, rather than created.

  6. Bloke in North Dorset

    Its not long ago, certainly in my adult lifetime, that lefties used to wail about millionaires, now its billionaires. I wonder why that is?

    It can’t be inflation, we can’t have had 3 orders of magnitude of wage inflation, even at the top end?

    Perhaps its because many lefties now qualify as millionaires? I understand that Corbyn himself qualifies, as does his backer Jon Lansman. Add to that all those public sector types in not very senior positions who will qualify as millionaires once pensions are added. I suspect a few senior trades union officials aren’t short of a bit of wealth either.

  7. Dear Mr Worstall

    Oh yes. Billionaires are a feature of market failure. We need fewer billionaires so we can all be richer poorer richer poorer, or, er, dunno.

    Let’s face it, if we had fewer billionaires, we wouldn’t have any individuals who could fund their very own space programme. Or own their own private yacht. Or own their own private jet. Or have a nicer car than my 20 year old Honda. Or be richer than me*, the effing bastards.

    Of course it was so much better in the 1800’s when everyone was so more equally poor. And before.


    * I don’t earn enough to pay tax, so that probably means all of you bastards.

  8. Spud is merely echoing what other leftists are saying.

    Chris Giles, economics editor of the Finanical Times, has tweeted: “1. You should be a billionaire if you’re worth it. 2. Probably, no one is. 3. If you’re not worth it and a billionaire – you’ve got your money from rent exploitation – which should be stopped/taxed.”

    Meanwhile, Chris Dillow claims people can only obtain such extraordinary wealth if competition is not working – i.e. if owners and investors enjoy super-normal profits that don’t get competed away.

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