Why Does 1% of History Have 99% of the Wealth? | Learn Liberty – YouTube

Throughout the history of the world, the average person on earth has been extremely poor: subsisting on the modern equivalent of $3 per day.


This was true until 1800, at which point average wages—and standards of living—began to rise dramatically.

Prof. Deirdre McCloskey explains how this tremendous increase in wealth came about.

In the past 30 years alone, the number of people in the world living on less than $3 per day has been halved.

The cause of the economic growth we have witnessed in the past 200 years may surprise you.

It’s not exploitation, or investment. Innovation—new ideas, new inventions, materials, machinery, organizational structures—has fueled this economic boom.

Prof. McCloskey explains how changes in Holland and England in the 1600s and 1700s opened the door for innovation to take off—starting the growth that continues to benefit us today.

via Why Does 1% of History Have 99% of the Wealth? | Learn Liberty – YouTube.

Economic Progress since Howard Hughes in the 1960s

Back in the day, with two flatmates, we bought a VCR for about $1000.

videocassette recorder (VCR)

It was a remote control albeit this was connected by a cord to the machine – luxury

These days, DVD players go for $50.

Cafe Hayek makes these wonderful elaborations about how ordinary people live their lives as well as the billionaire Howard Hughes did in 1965:

  • Hughes could afford to talk on the phone for hours to someone hundreds or thousands of miles away.  Even the poorest pays no long-distance charges even when making an overseas telephone call. There is Viber and Skype.

  • Hughes could afford to equip his house with a large screen, a state-of-the-art projector, an impressive sound system, and a film library filled with thousands of movies, documentaries, and television shows, so that he had a virtual movie theatre in his home.  Today, nearly everyone can buy a large-screen hi-definition television, a surround-sound speaker system, and download movies.

  • Hughes could afford to staff his kitchen with chefs from Thailand, Korea, Japan, Vietnam, Ethiopia, Afghanistan, Morocco, Lebanon, and India. Today, such restaurants are common-place.

  • Hughes could easily afford to equip each member of his family with an automobile of his or her own.  Today it’s not unusual for a middle-class household to have one car each for every person in that household who is at least 17 years old.

  • Hughes could easily afford to holiday in a foreign country.  In New Zealand, overseas travel is included in living wage calculations.

  • Hughes could afford to fly to whatever distant locations he visited.  Air travel is now emphatically routine even for high school students.

  • Hughes hired servants to wash his dishes.  Today, automatic dishwashers are the norm.

  • Hughes could afford to equip his residence with an always-at-the-ready dark room so that he could take high-quality photographs and view them minutes later. People upload their photos and videos to Facebook and Instagram moments after they take them.

The Rawlsian social justice case for super-entrepreneurs and many more billionaires

The report SuperEntrepreneurs shows that:

  • SuperEntrepreneurs founded half the largest new firms created since the end of the Second World War
  • There is a strong correlation between high rates of SuperEntrepreneurship in a country and low tax rates
  • a low regulatory burden and high rates of philanthropy both correlate strongly with high rates of SuperEntrepreneurship
  • Active government and supranational programmes to encourage entrepreneurship – such as the EU’s Lisbon Strategy – have largely failed.
  • Yet governments can encourage entrepreneurialism by lowering taxes (particularly capital gains taxes which have a particularly high impact on entrepreneurialism while raising relatively insignificant revenues); by reducing regulations; and by vigorously enforcing property rights.
  • High rates of self-employment and innovative entrepreneurship are both important for the economy.
  • Yet policy makers should recognise that they are not synonymous and should not assume policies which encourage self-employment necessarily promote entrepreneurship.
  • Policy makers should use a definition of entrepreneurship which is based on innovation.

SuperEntrepreneurs examined about 1,000 self-made men and women who have earned at least $1 billion dollars and who appeared in Forbes magazine list of the world’s richest people between 1996 and 2010.

Hong Kong has the most, with around three SuperEntrepreneurs per million inhabitants, followed by Israel, the US, Switzerland and Singapore.

The US is roughly four times more super-entrepreneurial than Western Europe and three times more super-entrepreneurial than Japan.

Super-entrepreneurs tend to be well-educated – 84% have a university degree.

Many started their own company but there is no clear relationship between self-employment and successful entrepreneurship

Steven Kaplan and Joshua Rauh’s “It’s the Market: The Broad-Based Rise in the Return to Top TalentJournal of Economic Perspectives 2013 found that those in the Forbes 400 richest are less likely to have inherited their wealth or grown-up wealthy.

Today’s super-rich are self-made rich because they produce new and better products and services that people wanted and are willing to pay for.

John Rawls was alive to the importance of incentives in a just and prosperous society.

With his emphasis on fair distributions of income, Rawls’ initial appeal was to the Left. Left-wing thinkers then started to dislike his acceptance of capitalism and his tolerance of large discrepancies in income and wealth.

Rawls excluded envy when we are behind his veil of ignorance designed the social contract about how the society will be organised. He believed that principles of justice should not be affected by individual inclinations, which are mere accidents.

Rawls also argued that the liberties and political status of equal citizens encourage self-respect even when one is less well off than others; and background institutions (including a competitive economy) make it likely that excessive inequalities will not be the rule. He supposes that

the main psychological root of our liability to envy is a lack of self-confidence in our own worth combined with a sense of impotence

Then there is the old Russian joke that tells the story of a peasant with one cow who hates his neighbour because he has two. A sorcerer offers to grant the envious farmer a single wish any thing he wants: “Shoot my neighbour’s cow!” he demands.

via http://www.kiwiblog.co.nz/2014/04/entrepreneurship.html

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