Some Musings on Wealth

Going back to a post from the other day, I have seen a number of people make the argument that Rockefeller was indeed wealthier than average Americans, despite the fact the average American has such a higher standard of living, because he had servants.  This is true.  He did have servants that he could direct.  But so do we.  I can have the Boston Symphony Orchestra play Vivaldi for me at a moment’s notice.  I can have professional baseballers entertain me on my own schedule.  I can get hot food made for me and delivered.  And so can all of you.  Each of us commands thousands of servants, and in turn each of us serve.  That is the glory of markets.

But let’s take this argument at its literal face value, that wealth comes not from a standard of living but the amount of people under your direct control rather than one’s standard of living.  Even that argument is prima facie silly.  Let’s take a look at some contemporaries of us to see what I mean: Raul Castro has more people at his immediate command than the average American, but would anyone honestly claim he lives better than Americans?  What about Robert Mugabe?  Kim Jong Un?  Russian oligarchs?  Sure, they all live better than their citizens, but certainly not better than many Americans.

But let’s go one step more and explore the “status is wealth” claim.  If that were true, the flows of immigration would move opposite from the way they do.  Currently, people migrate from areas of relative poverty to relative wealth.  In doing this, they lose social status.  Moving to wealthy areas means a relative loss of purchasing power (it’s more expensive to live in the US than live in Africa), and means one could afford less “status” items (like servants) in their move.  By moving from a relatively poor area to a relatively rich one, one loses relative status.

If status was the end goal, rather than standard of living, we would see people moving from relatively wealthy areas to relatively poor.  It’s easy to be wealthy in a 3rd World Country.  Most Americans are in the global 1%, and even the poorest among us are in the Top 20%.  If they were to relocate to a 3rd World Nation (or heck, even a 2nd World Nation like Mexico), they could easily command social status and have servants.  Yet they don’t.  I argue this is evidence of people valuing comfort over status.  We do see people jockeying for status within an income class or trying to move up, but I am unaware of any migration, mass or otherwise, where people willingly lower their standard of living to gain a higher social status.

Wealth is a difficult thing to discuss as it is very nebulous.  It’s more than just money.  But we need to guard against such silly things as claiming someone who didn’t have half of what the average person has now was wealthier simply because they paid higher costs for lesser quality and lesser quantity.

2 thoughts on “Some Musings on Wealth

  1. My comment to Don Boudreaux on the topic:

    It’s not true that Rockefeller had more power to “order” people around than an ordinary middle-class American has today. As you said, Rockefeller could hire legions of people to do his direct biding, but by the power of division of labor and economies of scale, I suspect I can order, albeit indirectly, many more people today than could Rockefeller a hundred years ago. It doesn’t matter if I “share” them with millions of other people (who incidentally help me pay for their work), I still have them to do an inordinate amount of work for me that Rockefeller wouldn’t be able to do even if he commanded every single human, animal, machine, etc in the world 24/7 back then.

    (Of course, with the technology available today, people are much more productive)

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