Poor Billionaire (Relatively Speaking)

by Don Boudreaux on July 6, 2014

in Inequality

Suppose that you are Nicholas Woodman.  You awaken one morning and discover from a news report that Bill Gates is 55 times – 55 times! – financially richer than you are.  How do you feel?  Envious?  Of course.  Relatively deprived?  How could you not suffer such a deflating sentiment?

In an absolute sense, you must admit, you live quite well.  You are one of the richest human beings ever to trod this earth (and, indeed, one of the richest to trod it in the relatively prosperous early 21st century).  Yet you understand from the “Progressive” ethos that what really matters is not one’s absolute standard of living over the course of a lifetime.  Instead, what matters (according to this ethos) is relative financial rankings today – that is, how much $$$ you are currently worth relative to how much $$$ other people are currently worth.  If other people have a great deal more money than you have, you are deprived.  You are entitled to feel envious and to pontificate about the immorality of such financial inequality.

So even though you, Nicholas Woodman, currently have a net worth of $1.3 billion, your financial wealth remains a paltry 1.8 percent of Bill Gates’s financial fortune of $72 billion.  Should you complain?  Should you demand government action to ‘redistribute’ some of Gates’s wealth to you?

Anyone who knows that you, Nicholas Woodman, are on the 2013 Forbes list of 400 richest Americans would think you to be insufferably envious, appallingly ungrateful, pathetically insensitive, unspeakably greedy, and, indeed, likely mentally unbalanced if you complained and moaned about how much more financial wealth Bill Gates currently has relative to the amount of financial wealth that you have.  You, after all, have daily and easy access to an array of goods and services that most people in the world can only dream, with futility, of ever enjoying.  And historically, your consumption possibilities – what you can and do daily consume – is indescribably greater than what any of your ancestors until just a generation or two ago could consume.  So why are you complaining?

You answer: “Because, relative to the richest American, I’m financially poor.”  And indeed, financially you have virtually nothing compared to Mr. Gates.  (What, after all, is a puny $1.3 billion relative to $72 billion?)

And yet I’m quite confident that no one would think your complaints to be justified.  I for sure would not think that your complaints are justified (should you in fact, rather than in my simple hypothetical here, actually issue such complaints).


So why do we in America today think it appropriate for middle-income (or even “poor”) Americans to complain about the financial wealth of rich Americans?  Middle-income, and even “poor,” Americans are among the richest human beings ever to breathe.  The goods and services that ordinary and “poor” Americans today consume on a daily basis are far larger in volume and far grander in variety than what most people on the globe today consume on a daily basis – and unimaginably greater than what ordinary (and even “rich”) people throughout most of history consumed on a daily basis.  Even Louis XIV never spoke in real time with anyone who was not within earshot of Louis’s royal voice.

In 2012 (the latest year for which I can find reliable data), the mean household income of the top 5 percent (income-wise) of American households was only 28 times larger than the mean household income of the bottom 20 percent (income-wise) of American households.  (The mean household income of the top 20 percent of American households was only 16 times larger than the mean household income of the bottom 20 percent of American households.)

And the minimum annual income necessary for a household to be in the top one percent in the U.S. in 2012 – just above $394,000 – means that even some one-percenter households have annual incomes that are ‘only’ 34 times larger than the annual incomes of the typical households in the bottom quintile.

In other words, the difference in the current financial income of a typical bottom-quintile American household in 2012 from that of each of the incomes of even some households in the top one percent is smaller than is the difference in the current financial status of Forbes‘s lowest-ranked American billionaire, Nicholas Woodman, (on its list of the 400 wealthiest Americans for 2013) and that of America’s wealthiest tycoon (Bill Gates).

So riddle me this: if we believe (as I suspect most of us do believe) that Nicholas Woodman would have no business envying or otherwise fretting about the size of Bill Gates’s fortune relative to his own, why do so many of us accept as appropriate the envying and fretting by middle-class and poor Americans about the size of the fortunes of the top ten or top one percent?  I can see no good reason.


I understand that in the above I do not distinguish as carefully as I would in other contexts the differences between household incomes and individual incomes.  Nor do I – again, as carefully as I would in other contexts – either explain the especially great hazards of using data on household incomes (as opposed to individual incomes) or distinguish between income and wealth.  But none of these distinctions is relevant for the point of this post, which is that the difference between the financial well-being (however measured) of the person (Woodman) at the bottom of the Forbes‘s list of 400 richest Americans and that of the person (Gates) at the top of that list is greater than is the difference between the financial well-being of even poor Americans and that of many Americans in the top five percent or even the top one percent.

If billionaire Woodman ought not complain about the wealth (or income) of Bill Gates, then ordinary and even ‘poor’ Americans ought not complain about the wealth (or income) of the typical person or household in the top 20, 10, 5, or 1 percent.


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