Does the Desire to Make More Money Increase Economic Inequality?

BY Paul Solman  January 10, 2012 at 11:20 AM EST


Photo of Steve Jobs in 2010 by Justin Sullivan/Getty Images.

Paul Solman frequently answers questions from NewsHour viewers and web users on business and economic news on his Making Sen$e page. Here’s Tuesday’s query:

Name: John Livingston

Making Sense

Question: Income inequality: If people were only driven by making money, why did Steve Jobs keep Pixar private when it wasn’t making money? If you’ve made your first billion, why would money drive you anymore? You can’t spend it all and obviously it can’t buy good health and long life.

Paul Solman: Well, John, no one of whom I’m aware argues that people are “only driven by making money,” even the people who make oodles of it. In fact, well before the first billion, money seems to be subject to the economic verity of “diminishing returns.” That is, the next dollar is worth less to you than the last. And clearly, after a certain point, the next dollar’s value is vanishingly small.


But what does this have to do with economic inequality? Surely the billionaire is a lot better off than the thousandaire — she can afford security, education and a host of the good, perhaps even necessary — things of life. OK, for the sake of argument, let’s say that many billionaires make their money out of the pureness of their hearts, or their drive to create, or for some other non-monetary reason. Let’s even say they “deserve” it, whatever that means.

More importantly, perhaps, billionaires leave fortunes to their heirs. You do see how folks might think that’s unfair, don’t you?

Here’s arch-industrialist Andrew Carnegie on the subject, in his famous defense of capitalism (against socialism) in 1889, “The Gospel of Wealth:”

“…it is difficult to set bounds to the share of a rich man’s estate which should go at his death to the public through the agency of the state, and by all means such taxes should be graduated, beginning at nothing upon moderate sums to dependents, and increasing rapidly as the amounts swell, until of the millionaire’s hoard, as of Shylock’s, at least,

_ The other half
Comes to the privy coffer of the state.”

That is, Carnegie was urging a death tax of at least 50 percent on substantial fortunes. Because, presumably, he thought it sustained unfair economic inequality.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._