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I think you're right. Just FYI, the line of thought of Gates here is probably based on the idea that you need "capital" in order to have a productive work forc

I think you're right. Just FYI, the line of thought of Gates here is probably based on the idea that you need "capital" in order to have a productive work force. If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes. I personally don't buy the argument; I believe that it goes too far into abstract models, confuses finances for the real world, and (like so much of economics) ignores the existence of banks. If Bill Gates were to sell shares to finance frivolous consumption, this would obviously not cause the physical destruction of factories and machines etc. At the same time, it would encourage the companies he buys from to expand their production and invest. Now, some people may wonder what investors/financiers those companies can find if all the rich guys sell their investments to consume. Well, those companies can always go to banks, which have an essentially unlimited capacity for funding real-world investments.

dragonwriter 12y ago
> If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes. Spending money doesn't make it go away, it just gives it to someone else. If everyone spent all their money for consumption, and no one invested, that would probably be a bad thing, but short of actually punishing investment compared to other uses of money, its hard to see how that would happen. Heck, its particular hardest to see how it would happen with the rich, anyhow. Simple declining marginal utility means that past a certain point, the additional present consumption that people find useful drops off and the value of securing an adequate future support base by investing money now vs. consuming more now increases with increasing income. The idea that we need to tax-favor investment even more than we currently do by taxing only consumption (rather than taxing income, but taxing the income from investment favorably compared to "ordinary income" and particularly favorably compared to labor income) seems to be based on a conception of human behavior that has no support at all in how humans, and particularly the rich, actually use their money in the status quo system.
nhaehnle 12y ago
Great... you make the effort of writing a balanced comment that both explains an argument of somebody and why that argument is probably misleading and/or incomplete, and it gets downvoted without a single reply actually challenging the contents (note that dragonwriter's reply simply adds another aspect to this discussion).

dragonwriter 12y ago

> If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes. Spending money doesn't make it go away, it just gives it to someone else. If everyone spent all their money for consumption, and no one invested, that would probably be a bad thing, but short of actually punishing investment compared to other uses of money, its hard to see how that would happen. Heck, its particular hardest to see how it would happen with the rich, anyhow. Simple declining marginal utility means that past a certain point, the additional present consumption that people find useful drops off and the value of securing an adequate future support base by investing money now vs. consuming more now increases with increasing income. The idea that we need to tax-favor investment even more than we currently do by taxing only consumption (rather than taxing income, but taxing the income from investment favorably compared to "ordinary income" and particularly favorably compared to labor income) seems to be based on a conception of human behavior that has no support at all in how humans, and particularly the rich, actually use their money in the status quo system.

nhaehnle 12y ago

Great... you make the effort of writing a balanced comment that both explains an argument of somebody and why that argument is probably misleading and/or incomplete, and it gets downvoted without a single reply actually challenging the contents (note that dragonwriter's reply simply adds another aspect to this discussion).