I enjoyed this essay immensely when it came out, and it's still worth discussion.
One thing that isn't discussed much [1] in this essay is the difference between rent collection and wealth creation (I wouldn't go quite so far as to say it's missing, which would imply that it should be there and isn't).
PG does conclude in this essay that on critical ingredient to encouraging wealth creation is allowing people who create wealth to keep (a lot of) it. I do agree. But looking back at the massive banking bailout (for instance), it's hard to avoid the conclusion that at least some of the massive fortunes were obtained through rent collection or even wealth destruction. Even in Silicon Valley, there are issues as well. The massive wealth of Microsoft was based heavily on leveraging a pretty aggressive monopoly - I've also read arguments that Facebook also occupies an incredibly profitable spot as a natural monopoly - earned fair and square, perhaps, but a monopoly nonetheless.
My guess is that everyone agrees that there is a mix of rent collecting and wealth creation - the real differences probably come in the extent to which people believe these two different activities occur. If you believe that most of the fortunes in the US are based on highly creative wealth generation, you're probably at ease with inequality and low taxes. If you believe that it is mainly rent collection, cartel and monopoly building, and an incestuous relationship with government, you probably aren't at ease with these things.
[1] It is mentioned, particularly in the first paragraph under wealth in power. I'd be interested in reading a PG specifically devoted to the difference between rent collection and wealth generation, the extent to which this is a problem, and what we might do about it.
Comments
I enjoyed this essay immensely when it came out, and it's still worth discussion.
One thing that isn't discussed much [1] in this essay is the difference between rent collection and wealth creation (I wouldn't go quite so far as to say it's missing, which would imply that it should be there and isn't).
PG does conclude in this essay that on critical ingredient to encouraging wealth creation is allowing people who create wealth to keep (a lot of) it. I do agree. But looking back at the massive banking bailout (for instance), it's hard to avoid the conclusion that at least some of the massive fortunes were obtained through rent collection or even wealth destruction. Even in Silicon Valley, there are issues as well. The massive wealth of Microsoft was based heavily on leveraging a pretty aggressive monopoly - I've also read arguments that Facebook also occupies an incredibly profitable spot as a natural monopoly - earned fair and square, perhaps, but a monopoly nonetheless.
My guess is that everyone agrees that there is a mix of rent collecting and wealth creation - the real differences probably come in the extent to which people believe these two different activities occur. If you believe that most of the fortunes in the US are based on highly creative wealth generation, you're probably at ease with inequality and low taxes. If you believe that it is mainly rent collection, cartel and monopoly building, and an incestuous relationship with government, you probably aren't at ease with these things.
[1] It is mentioned, particularly in the first paragraph under wealth in power. I'd be interested in reading a PG specifically devoted to the difference between rent collection and wealth generation, the extent to which this is a problem, and what we might do about it.