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Depends on how it was earned and invested. For example assume that a new billionaire is minted by a lottery with 100 million people buying a $10 dollar ticket.
by slv77 10y ago
Depends on how it was earned and invested.
For example assume that a new billionaire is minted by a lottery with 100 million people buying a $10 dollar ticket. Long term it's neutral but in the short term it effectively removes $1B in near term consumption from the economy and spreads it out over 100+ years.
On the other side a million people will likely better invest and sound a thousand dollars than one person will invest one billion.
- robotresearcher 10y agoBut the new billionaire doesn't stuff her mattress with ten million hundreds. She buys investments, which go back into the economy. Or she puts cash in the bank, which goes back into the economy....
- slv77 10y agoThe money she collected from the lottery ultimately represent a call option on someone's future labor. After the lottery that call option has been handed to a single individual who may never make that call in her lifetime. The effect is similar to the coal mining town's company store where you can only buy what they sell at the price they set. The effect is to concentrate economic activity in specific sectors where banks are willing to lend which means the economy is less flexible overall. An economy with $1B of debt and $1B in savings spread over 10,000 people is going to be more diverse and resilient than 9,999 people who have $1B in debt and one person with $1B in savings invested in housing and car loans. The best outcome would be if she invested in new equity in a company that created a positive ROI in excess of what the lottery ticket buyers would have produced. Anything else is a net negative.