<blockquote>
<p>How true is &quot;wealth inequality is a side effect of prosperity&quot;?</p>
</blockquote>
<p>This statement is true in the sense that natural state of mankind is universal poverty. When first hunter gatherer societies emerged everyone was approximately equally poor.</p>
<p>Wealth is accumulated through saving, saving is by definition unconsumed income (e.g. see Blanchard et al Macroeconomics ch 3). Hence wealth inequality is fundamentally result of differences in;</p>
<ul>
<li>income</li>
<li>saving decision</li>
</ul>
<p>Clearly more prosperous societies can allocate more of their income to saving and thus leading to wealth inequality.</p>
<p>Economy is not <em>necessarily</em> zero sum game. When you write song and sell it you are not getting income at someone’s else’s expense. Similarly, your saving doesn’t come <em>necessarily</em> at someone’s else’s expense.</p>
<p>However, emphasis is on necessary. A person doesn’t need to be drug kingpin for their wealth to come at an expense of someone else. For example, if a company, in non-competitive industry, exploits its market power, then it will earn extra profit, and thus also presumably income for shareholders, at an expense of consumers and this can lead to more income inequality while making consumers poorer.</p>
<p>Moreover, to an extent that hypothetical drug kingpin would provide drugs at marginal costs, it would be hard to argue, the wealth of the kingpin comes at an expense of consumers. You might disapprove of drug use morally but it’s not necessarily at expense of drug consumer.</p>
<blockquote>
<p>Is the result of (average) people struggling to pay for basic amenities such as rent and bills a result of the rising income of the middle class and not the rich?</p>
</blockquote>
<p>I think premise of this question is false.</p>
<p>Because income and wealth distributions are not normally distributed, average person will typically have higher income and wealth than “ordinary” person.</p>
<p>Next, even if you would change your question to median person, it would be absurd to argue that median person struggles in most economies to pay their bills. This would need to be supported by some further evidence.</p>
<p>Lastly, since someone’s high income and wealth is not necessarily result of someone’s else low income and wealth you can’t really argue, a priory, that someone’s inability to pay their bills is fault of someone with higher income. It could be but it is not given.</p>

CC BY-SA 4.0
2024-12-29T18:51:23.593Z
Thank you @1muflon1 as always. For my final question on the struggle for basic amenities, would it make more sense if there were more people instead of higher income? Because more (of the similar in terms of income) people would mean greater demand for similar products and drive up these prices. Therefore, it could mean a greater struggle for basic amenities.
KaiSqDist
CC BY-SA 4.0
2024-12-29T19:16:36.907Z
@KaiSqDist not necessarily, more people means also more production. What even more in modern endogenous growth theories more people means also more innovation. Innovation is non-rival, and its production depends on absolute number of people engaged in R&D, that is society of 100 scientists will experience slower technological, and hence economic progress, than society of 8 billion people where only 5% of those people do R&D. This is why Malthusian traps do not really exists in societies that have good enough institutions that encourage R&D (eg patent laws or well funded research universities)
1muflon1
CC BY-SA 4.0
2024-12-29T17:52:27.100Z
2024-12-29T17:52:27.100Z
1muflon1
<p>I recently watched a video by <em>Economics Explained</em> (a YouTube channel on econs) <a href="https://www.youtube.com/watch?v=swOpLpZaA78&amp;ab_channel=EconomicsExplained" rel="nofollow noreferrer">https://www.youtube.com/watch?v=swOpLpZaA78&amp;ab_channel=EconomicsExplained</a></p>
<p>One of the striking messages I got was &quot;wealth inequality is a side effect of prosperity&quot;, which states that the absolute standard of living for everyone has risen, and that wealth inequality does not actually cause lower standard of living for others. For example, Bill Gates has considerably more wealth than the average individual, but has made contributions to society. In contrast with that of a drug kingpin, who also has considerable wealth, but has pushed the standards of living for others down. The video advocates that the anger by directed to the rich should be directed to the right people (perhaps not the key message of the video).</p>
<p>Besides the main question in the title, I would like to ask to confirm the following: <strong>Is the result of (average) people struggling to pay for basic amenities such as rent and bills a result of the rising income of the middle class and not the rich?</strong></p>

<microeconomics><economic-growth><inequality><wealth><basic-income>
How true is "wealth inequality is a side effect of prosperity"?
KaiSqDist
# How true is "wealth inequality is a side effect of prosperity"?

(Asked by: username_0 on 2024-12-29)

I recently watched a video by *Economics Explained* (a YouTube channel on econs) <https://www.youtube.com/watch?v=swOpLpZaA78&ab_channel=EconomicsExplained>

One of the striking messages I got was "wealth inequality is a side effect of prosperity", which states that the absolute standard of living for everyone has risen, and that wealth inequality does not actually cause lower standard of living for others. For example, Bill Gates has considerably more wealth than the average individual, but has made contributions to society. In contrast with that of a drug kingpin, who also has considerable wealth, but has pushed the standards of living for others down. The video advocates that the anger by directed to the rich should be directed to the right people (perhaps not the key message of the video).

Besides the main question in the title, I would like to ask to confirm the following: **Is the result of (average) people struggling to pay for basic amenities such as rent and bills a result of the rising income of the middle class and not the rich?**

**Tags:** microeconomics, economic-growth, inequality, wealth, basic-income


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## 1 answers

### Answer by username_1 on 2024-12-29. Score: 2 | Accepted answer

> How true is "wealth inequality is a side effect of prosperity"?

This statement is true in the sense that natural state of mankind is universal poverty. When first hunter gatherer societies emerged everyone was approximately equally poor.

Wealth is accumulated through saving, saving is by definition unconsumed income (e.g. see Blanchard et al Macroeconomics ch 3). Hence wealth inequality is fundamentally result of differences in;

* income
* saving decision

Clearly more prosperous societies can allocate more of their income to saving and thus leading to wealth inequality.

Economy is not *necessarily* zero sum game. When you write song and sell it you are not getting income at someone’s else’s expense. Similarly, your saving doesn’t come *necessarily* at someone’s else’s expense.

However, emphasis is on necessary. A person doesn’t need to be drug kingpin for their wealth to come at an expense of someone else. For example, if a company, in non-competitive industry, exploits its market power, then it will earn extra profit, and thus also presumably income for shareholders, at an expense of consumers and this can lead to more income inequality while making consumers poorer.

Moreover, to an extent that hypothetical drug kingpin would provide drugs at marginal costs, it would be hard to argue, the wealth of the kingpin comes at an expense of consumers. You might disapprove of drug use morally but it’s not necessarily at expense of drug consumer.

> Is the result of (average) people struggling to pay for basic amenities such as rent and bills a result of the rising income of the middle class and not the rich?

I think premise of this question is false.

Because income and wealth distributions are not normally distributed, average person will typically have higher income and wealth than “ordinary” person.

Next, even if you would change your question to median person, it would be absurd to argue that median person struggles in most economies to pay their bills. This would need to be supported by some further evidence.

Lastly, since someone’s high income and wealth is not necessarily result of someone’s else low income and wealth you can’t really argue, a priory, that someone’s inability to pay their bills is fault of someone with higher income. It could be but it is not given.

> **Comments:**
> **username_0**: Thank you @username_1 as always. For my final question on the struggle for basic amenities, would it make more sense if there were more people instead of higher income? Because more (of the similar in terms of income) people would mean greater demand for similar products and drive up these prices. Therefore, it could mean a greater struggle for basic amenities.  
> **username_1**: @username_0 not necessarily, more people means also more production. What even more in modern endogenous growth theories more people means also more innovation. Innovation is non-rival, and its production depends on absolute number of people engaged in R&D, that is society of 100 scientists will experience slower technological, and hence economic progress, than society of 8 billion people where only 5% of those people do R&D. This is why Malthusian traps do not really exists in societies that have good enough institutions that encourage R&D (eg patent laws or well funded research universities)  

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