Free Markets

by Don Boudreaux on June 29, 2022

in Growth, Inequality, Innovation, Standard of Living

David Beito shared, yesterday on his Facebook page, this image. It conveys much truth.

Progressives and people gripped by the sin of envy focus on the difference, under capitalism, between the height of the tall-person’s eye level and that of the other two persons, and especially that of the short person. Classical liberals and libertarians (and many, tho’ by no means all, conservatives) focus instead on the absolute increase achieved by capitalism in the eye levels of everyone, but especially in that of the short person.

And yet the above image, as profound as it is, doesn’t fully capture the benefits of free, innovative markets. While the amount of monetary income received, and monetary wealth owned, by the super-rich might well in capitalist societies be much greater in absolute terms than is the amount of monetary income received, and monetary wealth owned, by the non-rich, in capitalist societies access to consumption outcomes becomes ever-more equal across all groups of people.

It’s true that super-rich people such as Jeff Bezos and Lady Gaga enjoy absolutely better consumption experiences than do I and nearly everyone else. But the difference in the amount and quality of what the super-rich consume today and what ordinary people consume today is much less than was this difference centuries, or even decades, ago. Well-fed Louis XIV always had hard roofs over his head and hard floors beneath his feet; many of his subjects literally confronted serious risks of starvation and slept on thresh-covered dirt floors beneath roofs of vermin-infested thatch. Today, Mr. Bezos and Ms. Gaga own more and larger hard roofs and hard floors than do Joe and Jane Sixpack, but Joe and Jane also have hard roofs and hard floors. And Joe and Jane are at no more risk of starvation than are Jeff and Lady.
…..
Today is the 15th anniversary of the introduction of the iPhone. This marvelous device – now nearly ubiquitous – of course enables middle-class and poor people to communicate with others in ways that differ little from the ways that Mr. Bezos and Ms. Gaga can communicate. (The telephone itself contributed much toward this outcome.) But the iPhone also enables each user to keep accurate time, stream music of all sorts, monitor the news, instantly acquire driving or walking directions, check the weather forecast, do advanced mathematical calculations, perform financial transactions, summon surface transportation…. You can add to this impressive list. Smartphones make the consumption opportunities of the middle-class and poor closer to those of the super-rich.

Finally, don’t forget that, in the course of no more than a mere century, innovative capitalism arguably made middle-income Americans materially wealthier than was the wealthiest American just 100 years earlier.

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