When It Comes to Wealth Creation, There Is No Pie
by
Yaron Brook and
Don Watkins | June 14, 2011 |
Forbes.com
...
Metaphors, to use an overused metaphor, are a double-edged sword: sometimes they clarify, sometimes they confuse. One metaphor responsible for a great deal of confusion is that of wealth as a pie — a metaphor that shows up again and again in debates over income inequality.
“No matter how you slice it, when it comes to income and wealth in America the rich get most of the pie and the rest get the leftovers,” writes a critic of income inequality. “[T]he people who are in the top 1 percent today earn a larger share of the income pie than the people who were in the top 1 percent 25 years ago,” notes economist Russ Roberts, a non-critic.
One implication of the pie metaphor is that wealth is a zero-sum game: there is a fixed amount of houses, cars, medicines, etc., to go around, and the more Steve Jobs gets the less is left for the rest of us. That may have had some plausibility 250 years ago when most wealth was in the form of land. But today, when an iPhone 3G verges on outdated technology, it’s impossible to miss the fact that
wealth grows. Roberts puts the point this way: “[T]he pie is not constant. So your well-being can grow even when your share of the pie falls if the pie is getting sufficiently larger.”
Wealth grows. True. But the pie metaphor carries with it another implication, which Roberts doesn’t challenge. It treats wealth as
owned by society. We happen to find ourselves in possession of a pie. How did it get here? That’s never made too clear, but it’s here, and now we have to decide how to divide it up fairly.
In accepting the pie metaphor, we concede a moral point that should not be conceded. Wealth does
not arise from an amorphous social process; “society” owns no pie.
Wealth is
created by and
morally belongs to the individual creator. As Rand observes, since “man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave.”
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Metaphors, to use an overused metaphor, are a double-edged sword: sometimes they clarify, sometimes they confuse. One metaphor responsible for a great deal of confusion is that of wealth as a pie — a metaphor that shows up again and again in debates over income inequality. “No matter how you...
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