Comment by robertlagrant
Comment by robertlagrant 2 days ago
Markets
Comment by robertlagrant 2 days ago
Markets
> Markets cease to function efficiently in the presence of massive concentrations of wealth
Why?
Not the OP, but one reason is because concentrated wealth allows you to adjust the rules of the market or suppress competition. Another reason is that the market only rewards you for delivering value to people who can pay for it, so wealth concentration skews the production of goods towards a small quantity of luxury items, which lack the economies of scale for efficient production. This may still be a Pareto efficient market but not one that maximizes national wealth or welfare.
The self-balancing mechanism of markets requires "skin in the game", which is to say, there must be incentive for individual actors to make wise decisions backed by the risk of loss. However, as wealth accumulates, the marginal value of a dollar decreases. Beyond a certain point of wealth accumulation, losing money is no longer a punishment, which means wise decisions are no longer systematically incentivized. This gives individual actors unilateral power to keep markets irrational for longer than wise actors can remain solvent, creating market failure.
There's a fixed supply of money (ish, the real life stuff money represents is actually scarce). If wealth disparity is great that means that less money is available for working people. You can't really gain a dollar here without losing a dollar there.
The problem here is working people ARE the economy. If they no longer have the power of consumption everything crumples. Of course it's a sliding scale, but even just a bit less consumerism can be catastrophic for some industries.
Money is just a proxy for time spent, so yes there is a fixed amount because we all have only so much time.
You can make gains by new technology(printing press vs handwritten), cutting quality(cheaper inputs/materials) or improving efficiency(work cell design).
Looking at it from a view of consumerism paints a bleak picture, if you look at if from a view of social stability without a functioning economy everyone will starve since the fertilizer, DEF fluid, John Deere tractor code and everything that ties all those together are so far spread out that is has become like a spider web facing a hurricane.
Singapore (for example) is better at markets than the US.