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Zero Sum Economics

The Washington Post reports (HT: Carrie Conko) on Forbes’s list of the 400 richest people in America. Turns out they’re all billionaires:

It’s not news that Bill Gates is the richest person in America,
according to Forbes magazine’s annual list of the nation’s 400 richest
people, released yesterday. He has been for 13 years. Barring a second
Stone Age in which computers are good only for hurling at other
cavemen, Gates will always be rich.

The news is: On this list, $999 million is chump change.

For the first time, all 400 Gotbucks on the Forbes tally are
billionaires, from Gates (worth $53 billion) down to the bottom, Los
Angeles semiconductor magnate Sehat Sutardja ($1 billion).

So is this good news or bad news?

"It is a really big deal that it’s all billionaires," said Forbes
associate editor Matthew Miller, who edited the list and led the team
that spent a year compiling it. "It shows economic growth and, as this
magazine is a fan of capitalism, it shows progress."

The Post found one economist with a different perspective:

think it’s very bad," said Dean Baker, a macroeconomist at the Center
for Economic and Policy Research in Washington. "If the U.S. had
experienced really extraordinary growth, then maybe that would be the
reason" for all the billionaires. Baker pointed out that U.S. economic
growth in the past 25 years — the period that hatched this crop of
billionaires — is actually slower than in the preceding
quarter-century, which produced only 13 billionaires.

Now that’s quite an impressive cheap trick for an economist to use—Baker is ignoring the role of inflation in artificially creating billionaires. But I’ll cut him some slack—maybe he’s actually made the correction and figured out that we have more billionaires even after correcting for inflation. But it’s the next line that’s really special:

"If these people pull away so much wealth," he said, "that means everyone else has less."

If economists had to have licenses to practice their profession, that remark would result in a suspended license. He wouldn’t be alone, unfortunately.

Two of the people on the list, by the way, are the founders of Google, Sergey Brin (No. 12, $14.1 billion) and Larry Page (No. 13, $14 billion). They created wealth, they didn’t take it from others. They created wealth by creating something new that people valued. We pay nothing directly for Google and we Google users are better off along with Brin and Page.

By the way, Google was incorporated eight years ago, so when someone tells you that the top 1% now have this or that much of the wealth or income, remember that ten years ago, Brin and Page weren’t in the top 1%.