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Your Neighbor's Fancy Car Should Make You Feel Better About Income Inequality

Today while I was out running errands in my 5-year-old Honda Accord, I passed a Tesla. If I were a different kind of guy, seeing Elon Musk's latest creation whisk past me as I trundled along in my middleclassmobile might have inspired a sense of personal envy, or even some worry about the social implications of inequality in America.

But I'm an economist. And let's face it: In practical terms, the difference between a $200,000 Tesla and my last car, a beat-up minivan worth $2,000 at trade-in, is not all that large. They're both safe forms of transportation that get you from point A to point B and, given legal limits and the reality of suburban traffic, most of the time they're driven at roughly the same speeds.

In that sense, measures of income inequality overstate the differences within a developed country like the United States. The products available to the masses are, in many cases, nearly as good as those available only to the elite. Your garbageman's old Timex and your podiatrist's brand new Rolex serve almost precisely the same function.

It wasn't always so. A century ago, a hungry rich person had access to significantly more food and more choices than a poor one. Yet even bluebloods would have been able to get their hands on less variety and quality than one now finds at an average Midwestern all-you-can-eat buffet. When Herbert Hoover promised "a chicken in every pot" in the election of 1928, it was the sort of pledge that no one expected a politician to actually keep. Today, each American consumes an average of 27 chickens a year, and obesity is a bigger problem than hunger.

The chasm between the very rich and the median citizen yawns wider the further back you look. Three centuries ago, an aristocrat riding in a cushioned carriage would have looked down at a peasant trudging barefoot through the muck—a much more substantial difference than the Honda-Tesla gap today.

So why the 21st century panic about the gap between the rich and poor? At first glance, the numbers do look damning. Median family income has grown by about 20 percent since the 1970s, while income for those in the top 5 percent of households has grown by 75 percent or more, according to the Center for Budget and Policy Priorities. Economists Thomas Piketty and Emmanuel Saez looked at IRS data and concluded that the share of total pre-tax, pre-transfer income going to the top 1 percent has risen to levels not seen since the 1920s. That suggests an increase, not a decrease, in inequality.

But appearances can be deceiving. As the Brookings economist Gary Burtless has pointed out, if you account for transfers such as government housing assistance and employer-provided health insurance, "Americans in the bottom one-fifth of the distribution saw their real net incomes climb by almost 50 percent" since the late 1970s, while "those in the middle fifth of the distribution saw their incomes grow 36 percent." It's worth remembering that anytime someone says the gap between rich and poor is increasing, what he usually means is that rich people are getting richer faster than poor people are getting richer—not that any group is becoming worse off overall.

In their own perverse way, by throwing fistfuls of money at truly scarce resources, the social climbers, status seekers, and strivers are doing their part to rectify those income equality numbers that have everyone running scared.

Meanwhile, the difference between the lived experiences of Americans at different income levels has actually been decreasing. Changes in the quality of goods consumed by almost everyone mean we're a whole lot more equal than the data superficially suggest.

What's more, the same behavior that sparks personal envy and political angst—splashing out on fancy apartments, rare jewels, and other truly scarce goods—may actually be a sign of the closing gap between rich and poor in practical terms. When everyone is wealthier, it becomes harder to demonstrate differences in wealth.

Better Off

Economic growth and the technological developments it fuels have been spectacularly effective at making incredible products cheap enough to be attainable for most families. As a result, Americans can routinely enjoy luxuries of the sort they once might have assumed they'd have to win the lottery to afford. The big-screen TV that a super-wealthy denizen of Beverly Hills might have bragged about 30 years ago can't be given away today on Craigslist; a low-end Android smartphone boasts many times more computing power than the best supercomputers available only to scientists in 1985. And while many Americans may never make it to Africa, considering the wealth of programming available from places like the National Geographic channel and Netflix, they hardly need to.

If you suddenly became a multi-millionaire, what would you do with the money? Hire a chauffeur? Eat better food? Wear custom-designed clothes? Many of those very outcomes could soon be available to us all, assuming robust enough economic and technological advancement.

Imagine a world where self-driving luxury cars cost so little that the average family thinks it's normal to buy a new one every year, where fast-casual joints sell the equivalent of cuisine now served only at five-star restaurants, and where bespoke suits are computer-fitted and delivered by drone for the cost of a cheap three-pack of T-shirts today. What's crazy about these possibilities is that they're just that: possible.

Economic growth and technological development can do much to change your material standard of living, and they have done much to reduce the disparities in people's material well-being in the developed world. The result is something that looks not like you coming into millions overnight but like almost everyone coming into millions.

But if that's so, why do so many Americans feel that they're just getting by?

Hard to Find Good Help These Days

As people find they can afford more and better goods and services, their expectations rise. Think about how you'd feel if someone dropped that 30-year-old big-screen TV on your doorstep. Less than grateful, I'm betting.

But there is one class of commodities that does not become more attainable: the kind that can't be reproduced infinitely, no matter the technology. Unlike cars and food and clothing, which become cheaper to make over time, these truly scarce items rise in price as more and more consumers become wealthy enough to covet and compete over them.

The most obvious example is human labor. As society gets richer, people's time and energy get more expensive. Robots can substitute for some of this, but—barring perfect humanoid machines—any product that requires individual human beings, especially skilled human beings, will go up in price relative to ordinary goods.

This phenomenon is so common and predictable it even has a name: the servant problem. People in newly prosperous developing countries often complain of not being able to find good household help. There was a time when middle-class families, who might have struggled to pay for international flights or new electronics, were nonetheless accustomed to having cooks, maids, nannies, and the like take care of much of their domestic work. As the average citizen's income and purchasing power grew, a new world of products opened up. Yet domestic services once taken for granted moved further from the ordinary worker's reach.

In the cold light of day, few rational people would trade away the fruits of economic and technological advancement, from modern medicine to air conditioning to YouTube, merely to have someone to do their laundry. But that doesn't mean we don't still look wistfully, maybe resentfully, at elites who seem to have it all, including a live-in housekeeper now estimated to cost north of $35,000 per year.

Give Me Park Avenue

A small apartment in New York City cost the equivalent of $530 a month in today's dollars in the period right after World War II. Now the median rent there is nearly $3,000. The median price of a U.S. home was $71,314 in current dollars in 1950; it's almost $300,000 today.

Of course, in 1950 the average home was under 1,000 square feet, and it featured just two bedrooms and one bath. The typical new home today is closer to 2,500 square feet, sSource: Zillow; compiled by John V.C. NyeSource: Zillow; compiled by John V.C. Nyeits on two stories, and has three bedrooms and two-and-a-half baths. When what was once luxurious starts to be viewed as necessary, or at least normal, it's hard to know who to be jealous of or why.

In the D.C. area, where I live, it's easy to see that what we call housing costs are really a product of two very different attributes: the price of materials and the price of good location. A three-bedroom rowhouse in the Georgetown neighborhood, with its cobblestone streets, shaded parks, and high-end shopping, can easily run over a million dollars. A couple of hours to the west in rural Virginia, you can get a 3,500-square-foot McMansion with four bedrooms, five baths, and many custom features for $400,000 or less. But you have to be willing to live in an isolated location, often with poor access to developed infrastructure. At the very least, you're in for a long commute to downtown Washington, where most of the jobs are.

Or compare San Francisco and Phoenix. Both are prosperous—Phoenix is hardly a rust-belt straggler—but the price of the median home in the latter place went from a nominal cost of under $100,000 in 1989 to about $200,000 by 2014. In San Francisco, no doubt fueled by the growth of Silicon Valley over the same period, the median home price went from around $200,000 to nearly $800,000.

These places' very different experiences are not fully captured by national inflation measures. Housing costs are rising much more quickly in certain areas than everything else, including wages. So someone who started out in a modest one-bedroom flat in San Francisco might well have seen his or her income increase faster than the national average and still be unable to upgrade to a two- or three-bedroom place in a comparable location.

To understand why that might be, look at the two cities' natural environments. Phoenix is in the desert, a.k.a. prime construction terrain. San Francisco is surrounded on three sides by water. This makes it much harder to add new units to the housing stock in the latter place—where would you build them?—even as demand skyrockets. And geography isn't the only issue: San Francisco has stricter land use controls, making it difficult to develop high-density, high-rise buildings.

Living quarters in San Francisco are scarce in a way they aren't in other places. And in a society growing wealthier, truly scarce items become ever more expensive.

Location, Location, Location

Location is what the economist Fred Hirsch described as a positional good—something whose value depends on how many people desire it and on its standing relative to other goods. When a lot of people want to live somewhere and they have a lot of resources at their disposal, it becomes much more expensive to beat out your competitors.

Source: Bureau of Labor Statistics; compiled by Mark J. Perry, American Enterprise InstituteSource: Bureau of Labor Statistics; compiled by Mark J. Perry, American Enterprise InstituteThe higher the rate of economic growth—and the better we get at satisfying the average person's material demands—the harder it will be to obtain elite, positional goods. If we're wealthy enough as a country, everyone can drive a Tesla. But only one person can live in the best Manhattan penthouse.

This isn't just a matter of status; positional competition affects even people who aren't bothered by social standing. While you can certainly get more for your money in remote rural Virginia than downtown D.C., if the time spent commuting to work eats into your ability to have dinner with your spouse or put your kids to bed, the trade-off might not be worth it.

Or consider the safety and quality of schools. As a 2016 Washington Post article put it, "The one thing rich parents do for their kids that makes all the difference" is to buy "pricey homes in nice neighborhoods with good school districts." Actual educational opportunities probably differ very little between public schools in solidly middle-class areas and public schools in 1-percenter enclaves. But to the extent that a child's classmates affect his or her outcomes, well-off families may feel they're in a "red-queen's race": They have to run harder as they get richer just to stay in place. Inevitably, this widens the perception of inequality, even if it doesn't make anyone worse off in absolute terms.

Where status combines with social externalities, the effects are multiplied. Most state universities today are staffed with top researchers with Ph.D.s and boast critical facilities such as libraries that put most of modern learning within reach of good students of modest means. And thanks to the internet, a lot of lectures can be heard at a nominal cost from the comfort of your living room. Yet even as it's gotten easier for self-motivated people to learn as much as they want from anywhere in the country, demand for admission to the few dozen top-ranked universities has only grown.

The prices have escalated too. Tuition for one year at Harvard cost just $600 in 1950, or about $6,000 in today's money. By 2016–17, the cost was $43,280, not including fees or room and board. That's more than a sevenfold increase. (Tuition and fees at four-year public universities also increased, from $2,600 in 2016 dollars per year in 1976–77 to $9,650 per year today.) But the real wonder is that their prices aren't even higher. Is there any doubt that if the 10 best private universities chose to raise tuition to $100,000 a year, there would still be enormous competition to enter?

Top colleges are desirable for two reasons. First, because they have the top students, so the benefits of attending go beyond what can be learned at home and encompass all the advantages of academic networking and high-level peer pressure. But second, because the very best spots are scarce—there can, by definition, be only 10 top-10 schools. Access to them, like access to the nicest housing locations, is a positional good. Technology can't make more of it.

Tax the Rich

The good news is that humans in the developed world are in real terms more equal than ever before. In addition, as increased competition makes positional goods more expensive, the richest subset of the population—people who would have gotten the best of the best anyway—will have to part with more money in order to enjoy them. This creates a built-in disincentive to worry too much about status.

Those who choose to live in expensive areas simply because they prefer the cachet, even though a sober-minded analysis would show they could live better if they decamped to somewhere less fashionable, are taxing themselves. A person who could work less and earn less while living just as well in Phoenix, but who chooses to put in longer hours so he can afford to be in San Francisco, is in effect toiling for the privilege of his pricey zip code. In their own perverse way, by throwing fistfuls of money at truly scarce resources, the social climbers, status seekers, and strivers are doing their part to rectify those income equality numbers that have everyone running scared.

On the other hand, even in the most utopian science fiction vision, it's impossible to eliminate scarcity. One can imagine a scenario where material inequality is almost entirely abolished. But the inequalities that remained would be just as intractable as ever. In fact, since they would be the only differences left, whatever method was used to allocate the choicest piece of real estate, the experimental prototype, or the spot at an elite school would likely seem even more galling than before. While life is getting better for almost everyone, conflict over who gets what isn't going anywhere.

Photo Credit: Joanna Andreasson

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  • MultiSlacker||

    Uncle Tom is far better off than his forebears?

  • Robert||

    Forebears? No, it's 3 bears. & not an uncle, but grandma. Except that was with a wolf. Maybe the wolf was named Tom. Makes me cry uncle. Start again?

  • Robert||

    Of course, Tom Wolfe! But he can be hard to bear too, let alone four.

  • Jerryskids||

    If I were a different kind of guy, seeing Elon Musk's latest creation whisk past me as I trundled along in my middleclassmobile might have inspired a sense of personal envy, or even some worry about the social implications of inequality in America.

    The problem is that most people are that different kind of guy. It's why the Seven Deadly Sins include Envy, Greed, Gluttony, Lust - wanting stuff you don't have, don't deserve, more stuff than it's healthy for you to want. It's also why the Ten Commandments include multiple admonitions to keep your hands to yourself, don't take stuff that doesn't belong to you, don't be eyeballing your neighbors stuff and thinking about taking his stuff.

    "Inequality" isn't in and of itself a problem, it's that human beings have a natural tendency to be greedy thieving bastards who'll whack their neighbor on the head and steal their stuff if you give them half a chance - and most of them are too stupid to disguise their greedy thieving bastardry by becoming politicians or "social activists", calling their greedy thieving bastardry "compassion" and hiring out the head-bashing and the thievery to lawyers, cops, and IRS agents.

  • Bra Ket||

    The existence of rich people causes poor people to suffer emotionally, even if those poor people are actually very wealthy from a historic perspective.

    Rather than have them be left to their own devices and get over it, or treat them via some kind of psychiatric approach, we prefer to implement a massive leviathan of a redistribution system sucking the efficiency and productivity out of society. Coincidentally, political leaders with this kind of forward thinking strategy always seem to end up stinking rich themselves in the process.

  • Texasmotiv||

    I agree with this completely. Part of my underlying philosophy is that there will always be evil in this world because human beings are wired to have these faults : greed, envy, hate, etc. there is no utopia. One fix just leads to more problems. Politics is just changing parameters mid-experiment over and over and never checking the results. Then fighting over the next way to tamper with it.

    I've always observed that people perceive everything in a relative sense. "It's cold" "well compared to what?", "I dont have much money" "compared to whom?". You can't know how much is a lot of money without relative measures. How much do other people make? How much does bread cost? How much does a car cost, and what kind of car?"

    I always feel like the entire "income inequality" narrative starts falling apart when you look at levels of wealth relative to even the recent past. And start comparing it to standards of living in non-western societies. If you look at the way that numbers have to be cooked to show how children are going hungry by citing "food insecurity" numbers (my local news unabashedly quoted that city-wide the number was 1 in 5). Having to create an epidemic to boost your cause. Once you start having to lie or mislead to make your point you need to reevaluate your position.

  • Jerryskids||

    Thomas Sowell had a bit about poverty in NYC where the homeless sleep on steam grates and bathe in the public library bathrooms and eat out of dumpsters - in really poor countries there's no steam grates to sleep on, no public library bathrooms to bathe in and no dumpsters to eat out of. You think it's rough being poor in NYC? Try being poor in Mogadishu.

  • Gracchus||

    If we take your assumption of everlasting evil as a given, then doesn't that make the libertarian project rather pointless? The point of most political movements, at least superficially, is to make things better. Libertarians (or classical liberals, whatever you want to call yourselves) think that this involves the dismantling of social and economic barriers and the minimization of force. But if humans are incapable of achieving this utopia (which it is, most idealistic visions are utopian), then what's the bloody point? Some humans are just going to find flaws within the system and overpower it no matter how meticulously you design it or how many fail-safes you install in it. If you don't believe me, just look at what the past 200 years have done to Madison's checks and balances.

  • Sevo||

    Utopia is not an option, and we don't need (and can't get) perfection.
    But, the point is, we can do far better than we are now.

  • Gracchus||

    Of course we can do better, but if you believe evil is indestructible, it logically follows that no system will be able to suppress or even contain this impulse, which will inevitable erode any barriers set in its path. Case in point, the U.S. Constitution. People will eventually find flaws in the system and exploit them, bringing everybody back to square one and starting the whole Sisyphean cycle all over again.

    One of the reasons why "the Left" is so successful (at least according to what I've heard on these message boards) is that it offers people a compelling social vision that rouses them to action. You may despise that vision or think its utopian, but it ultimately works. One of the reasons why libertarianism isn't as appealing imo is that it lacks this central vision. Sometimes you need a little utopianism to get political movements going, even if you think it's ultimately unattainable.

    The main thing I'm getting at is that libertarians seem to hold two contradictory opinions. One, the best system possible is one where everybody follows the NAP and does their own thing with minimal coercion. And two, humans are inherently flawed, and so all systems that attempt to achieve utopia are bound to fail. It seems to me that you can believe in one or the other, but not both, since any system designed by humans can and will be eroded over time.

  • Leo Kovalensky||

    You've got the Libertarian position wrong on this. The best system possible is where people are free to do and choose as they please and the market (many thousands of people) chooses the best option. This position is not reliant on the infallibility of humans as you surmise in your 2nd point. It's instead based upon the reality that unfettered markets are bound to improve the human condition, and that people in mass will select the most desirable option.

    One need look no further than to compare Cuba to the USA to see the difference between free(er) markets in the US and the consequences of central planning in Cuba. Which is closer to the Utopia you desire?

    Your comment about the Constitution that people will find flaws and exploit them is largely due to interpretations of the Constitution as living, or more aptly, due to excessive regulations. The more rules that are in place or the more broadly a given set of rules can be applied leads to more select ways to skirt the rules, thus putting only the brightest legal minds at an advantage relative to John Q Public.

  • Leo Kovalensky||

    You've got the Libertarian position wrong on this. The best system possible is where people are free to do and choose as they please and the market (many thousands of people) chooses the best option. This position is not reliant on the infallibility of humans as you surmise in your 2nd point. It's instead based upon the reality that unfettered markets are bound to improve the human condition, and that people in mass will select the most desirable option.

    One need look no further than to compare Cuba to the USA to see the difference between free(er) markets in the US and the consequences of central planning in Cuba. Which is closer to the Utopia you desire?

    Your comment about the Constitution that people will find flaws and exploit them is largely due to interpretations of the Constitution as living, or more aptly, due to excessive regulations. The more rules that are in place or the more broadly a given set of rules can be applied leads to more select ways to skirt the rules, thus putting only the brightest legal minds at an advantage relative to John Q Public.

  • Sevo||

    "It seems to me that you can believe in one or the other, but not both, since any system designed by humans can and will be eroded over time."

    To strive to improve, while admitting perfection isn't possible is in no way contradictory. Are you willfully 'misunderstanding' that?

  • STSA||

    The real definition of greed is wanting something that doesn't belong to you.

    "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his male or female servant, his ox or donkey, or anything that belongs to your neighbor."
    Exodus 20:1

    That simply means get your own, and stop obsessing about stuff that isn't yours.

    The 7 deadly sins is BS, it's not even in the bible. The bible doesn't say anything about gluttony. Anyone who lives in the bible belt will tell you that the best part of church is the food afterwards. Those church ladies can cook!

    " it's that human beings have a natural tendency to be greedy thieving bastards "

    Not true. Most people are decent, most don't commit crimes. The negative perception against people comes from the media, if all you do is watch the local news, you're going to think that everyone is a crook, thief, murderer, etc, because that's the kind of news that get attention. Once in a while they'll report of someone who jumped over a bridge to save a drowning child, but that's just filler, and nobody remembers it. Heroes are boring for the most part, unless they have a dark side, or trauma, or something negative that makes them relatable.

    Besides, inequality is normal. If we have inequality in attractiveness, motivation, desire, drive, education, why shouldn't we have financial inequality?

  • One Last Caress||

    And I feel like a King. That's why I support certain welfare considerations such as cheap public golf courses and unrestricted access to public hunting lands as official foreign policy positions of my kingdom. You're damn right I want the Kingdom of Microsoft to subsidize my lands.

  • Robert||

    The ultimate positional good is att'n. Remember when mass communication used to be expensive, because it was mostly printing or use of scarce b'cast spectrum? Now you can put your word (or pic) out to the world at trivial cost. But so does everyone else, even though your message is so much more important than theirs.

  • misthiocracy||

    How much was your neighbour's Tesla subsidized by the government? What kind of tax credits did your neighbour receive to "incentivize" him into buying that Tesla.

    That's a case where envy is perfectly justified. You shouldn't be envious of your neighbour's success. You should be envious of your neighbour's preferential treatment by the benevolent powers-that-be.

  • creech||

    My reaction too. The Timex v. Rolex comparison made sense but not the Tesla v. beat up minivan. It is funny how those questing for the unearned are the same folks who accuse libertarians of being greedy.

  • ||

    I'm pretty sure the Tesla tax credits are available to anyone who can come up with the rest of the purchase price.

    This doesn't make the tax credits good policy but they are not limited to a privileged few, unless your definition of a privileged few is "very rich".

  • C. S. P. Schofield||

    Timex and Rolex watches both wrk well. The beat up minimal probably works decently. The Tesla is a toy, and has most of the problems usually associated with the toys of the rich; reliability and a tendency to self-destruct being the ons that come to mind immediately.

    So, yes, the comparisons are less than apposite.

  • STSA||

    The cheapest Tesla is $70,000, so we're basically giving subsidies to people that don't need them. It's like PBS and NPR, most of the people watching it make $100,000 to $150,000, sometimes more. Why are we paying for that garbage? Let them run commercials like everyone else, it's not the end of the world. Rush Limbaugh is #1 on the radio, and people are OK with his "timeouts" and "obscene profit" moments as he calls them.

  • swampwiz||

    But to the owner, driving a Tesla relative to an ICE car has no value other than to impress other like-minded folks. However, the Tesla, as a cutting-edge piece of technology that can definitely help our world become sustainable (i.e., by working toward getting the technology so that its cost is comparable to the ICE car, and thus everyone can be persuaded or forced to use it instead), so it is worth collectivist spending.

  • Ride 'Em||

    I've been arguing for several years that while income inequality has consumer equality has countered it. Being of an older generation I can remember when IBM PC's cost over 5 grand and now are a tenth of that. So, i don't envy the super rich as I believe their purchase of costly technology will only bring the cost down to my level. What was available in a Lexus last year becomes available in an F-150 this year.

  • Number 7||

    I knew a guy who bought a VCR in like 1976, the size of a refrigerator and cost him like $5k. I felt like I was an early adopter as I got one in 1982 for over a grand but even by the time I got mine his was obsolete. Thanks buddy for investing in the R&D for me.

  • C. S. P. Schofield||

    Remember when CD players were $1000 or so?

  • Juice||

    And they skipped if you breathed too hard near them.

  • swampwiz||

    While whizzbang gadgets get cheap, health & education spending (and the financing for the latter) are both hideously expensive. MOOCs could cure the latter, although in a zero-sum employment market, its cachet will be inferior to the canonical campus education. And as long as we continue with free-market health care, I see no end in sight for hte former.

  • ||

    What a pant load.

  • Number 7||

    "On the other hand, even in the most utopian science fiction vision, it's impossible to eliminate scarcity."

    So, even in Bernie's perfect world we all don't get a Harvard education, just those who are connected to the politburo. Socialism just takes the scarcity and gives preference not to those with money but to those with influence.

  • Tony||

    This is a joke, and the punchline is "And that's why we should cut more taxes on billionaires."

  • Sevo||

    I see you didn't read the last section, but then logical thought has never been one of your skills, so it hardly matters.
    Emote on, envious twit!

  • Len Bias||

    No, the joke is progressives always claiming "we just want to tax billionaires." It never stops there, though. Like Obama forcing the lower middle class to buy insurance they can't afford, or to pay a penaltax.

  • ChroMikey||

    You actually have a bit of a point.. The author claims to be an economist, but he omits the control the centralized powers have over the economy.. What he says is true; but, these benefits are in spite of, not because of, this centralized control via regulations and too big to fail.. He makes a free market argument, yet fails to illustrate how it's not a free market.. Maybe I'm wrong, but I smell the faint waft of rat..

  • Number 7||

    I think the punchline is that you can raise their taxes all you want but their kids are still getting into Harvard and you're not, you're not going to create equality but taking money from the rich.

  • Len Bias||

    The real punchline for Tony is taxing the rich (and not-so-rich) is an end, not a means.

  • Paloma||

    Why would anyone want to go to Harvard?

  • Lester224||

    For the elite law and business schools, the alumni network could get you a very high paying job in finance or at a corp law firm right out of the gate.

  • C. S. P. Schofield||

    Taxing billionaires is non-productive. It doesn't transfer money to the have-less, it transfers money to the State, which is already bloated.

  • Leo Kovalensky||

    The real inequality is in access to government services.

    A billionaire pays millions in taxes and gets theoretically the same (in reality fewer) services from his government than the person making $30k/year and paying nothing in taxes.

    In what other industry or good would you expect people to pay based on the percentage of income that they have? You want a Ferrari? That costs 10% of your income.... It's easy to see how the person making $30k might be at an advantage in this situation.

    But I know, fair share is clearly a sliding scale... to be determined by whoever is in power, not based on any principles of economics.

  • swampwiz||

    But the rich guy has more stuff that needs to be guarded.

  • Bubba Jones||

    I like the contrast between physical goods and tuition. Rich people make my cars better. They make my tuition higher.

    Watches are a funny example in that their primary purpose is no longer to tell time. They are jewelry. You have to spend a crap load of money on a fancy watch to even begin to approach the accuracy of something you might get in a happy meal.

  • Sevo||

    The guy in the Tesla ought to be handing out "Thank You" notes to every taxpayer for getting his Message Mobile at a cut-rate price.

  • swampwiz||

    Future generations will thank folks like him for doing their part in making the world sustainable.

  • PurityDiluting||

    "Imagine a world where self-driving luxury cars cost so little that the average family thinks it's normal to buy a new one every year"
    I prefer living in a world where durable goods are kept for years and years because they are durable, not dispensed with just because the market price does not reflect all costs incurred to produce them.

  • C. S. P. Schofield||

    I don't get people who buy new cars every few years. I understand that it's,usual, I just can't see poundng more than 10K down a rathole when I have a car that will continue to be reliable for several years yet.

    I understand people who accumulate cars. I don't have either the interest or the space, but I get the appeal. But buyng a new Mercedes when the one I'm driving is only three years old, amd I'm going to dispose of it? I have things I would rather do with the money. Including setting fire it, one dollar bill at a time.

  • JFree||

    While life is getting better for almost everyone, conflict over who gets what isn't going anywhere.

    Nor should it since it is fucking irrelevant. 'Conflict' in economic terms is what competition means and free markets CANNOT EXIST without it. But Reason doesn't ever seem to understand that. 'Free markets' have traditionally created opportunity at the bottom and fear/uncertainty at the top. That particular dynamic is always the best measure of whether free markets actually exist and is also why TRUE free markets have always had an underlying sense of revolution about them and why they are almost always opposed by those who currently sit on top.

    Instead Reason always busies itself polishing the dingleberries of the status quo and creating nonsense. So those who own housing in SF/NYC are actually taxing themselves now instead of benefiting from rigged asset/capital markets and a rigged tax system? Yes of course they are. Why didn't I realize that before.

    There is a good reason that 'free markets' no longer really resonate with those who would actually benefit most from them. And it is the purported advocates for 'free markets' who are almost entirely to blame. Because those who purport to advocate them are fucking clueless asswipes who can no longer even recognize rigged markets and who are incapable of selling the idea of liberty to a slave. So they no longer even bother trying. They merely rationalize THAT failure and keep polishing the dingleberries.

  • Migrant Log Chipper||

    Except for me, Mr Free....lolololol.

  • brec||

    a $200,000 Tesla

    At tesla.com the most expensive possible new Model S that can be configured costs $168,000. The entry level variant, plus the two options for what is called Autopilot (current) and full self-driving (future), costs $77,500. These are cash prices before any tax credit.

  • m.EK||

    Yes, lets focus on the example and ignore the point.

  • josh||

    My favorite line is, "The middle class are disappearing!" No one bothers asking the next logical question, "Where are they going?", but if they're one person smaller than they were yesterday, then you'd think the 1% ate them or something.

  • Qsl||

    Misses the point.

    If you are speaking to a selection of material goods, yes there is little differentiation between the wealthy and not so wealthy (except maybe your Tesla won't require a $3,000 transmission rebuild at any point during it's lifecycle. A portion of that $200,000 upfront costs is peace of mind).

    But how about access to healthcare (and the relative outcomes of rich and poor), and the ability to recover from the hit? How about competent legal representation as required, or even the ability to buy your own laws as needed? Are these scenarios equivalent between the wealthy and the poor? Don't these things matter more than whether a Timex keeps accurate time as a Rolex? Is it the same that the poor can take advantage of 2 for $5 sales while the wealthy can takes advantage of stock splits to increase their portfolio size?

    Not that I begrudge the wealthy, but these types of articles are about as asinine as saying the homeless person is less encumbered by the state (no income tax burden! Never has to deal with a HOA!) and therefore more free.

  • JFree||

    Agree completely. The tilting of the playing field itself is easily the biggest hurdle for those who haven't already made it. That has always been the promise of the free market. And it is ignored in this article.

    Just to give one example - which is actually pretty minor compared to some others. Access to - and cost of - healthcare is the 'servant problem' in reverse.

  • Tamfang||

    Adding to the housing stock of San Francisco might be more feasible if it weren't illegal.

    I heard once that most of the west side (where I lived in 1988–97) is zoned for five storeys, but you can't get a permit for more than three.

  • CZmacure||

    And I feel like a King. That's why I support certain welfare considerations such as cheap public golf courses and unrestricted access to public hunting lands as official foreign policy positions of my kingdom. You're damn right I want the Kingdom of Microsoft to subsidize my lands.
    My recent post: SyndRanker Review

    My recent post: Dental Marketing Confidential Review

  • CE||

    So why the 21st century panic about the gap between the rich and poor?

    Because commies want "equality", and because the power hungry see that the poor outnumber the rich and they want to be their "champion" to ensconce themselves in a position of pelf and privilege.

    Income inequality is the inevitable result of freedom and should be welcomed. If people are free to succeed, they are free to improve the quality of life for everyone and motivated to work really hard to make positive changes in the world.

  • CE||

    I never feel envious when I see someone driving a more expensive car. I figure they are a fool because they are leasing it.

  • m.EK||

    Personally, I appreciate those that like the fancy stuff. I figure if I'm comfortable and the one's I love are comfortable then those that like to show off are just running "interference" for me and those that like to take other peoplels shit. Also, when the SHTF stuff happens (and the economics are literally baked in the cake), I would rather have the money saved and invested in us than in showing off and attracting the "admiration" of those that have little or nothing to lose.

  • swampwiz||

    I've always thought that the simple striving to do a little better than one's neighbor would continue to motivate folks to work in a high-tax, Guaranteed-Income system. In this example, the balloon of cash would be attenuated, but so would the price of the positional goods - so in essence, there would be a redistribution from the rentiers who own the stuff that the strivers want to the lumpenproletariat.

    Ironically, I see someone like Trump not being so concerned about paying a lot of taxes, but rather that he gets the adulation of being a successful businessman. And of course, the world's oldest profession notwithstanding, men will always try to show dominance to access to sexual intimacy, and the men who can only show prowess by being productive will be motivated to work even in the face of confiscatory tax rates.

  • Dr. Robert Lipkowitz||

    Sorry folks…all of you are not rich enough to take part in this. But there is another option:

    "Let there be no doubt, the single most important aspect we are really battling for here is to control the future—our future—for the good of the whole. Will we control it or let the wealthy elite control our destiny? Make no mistake; what happens here will determine the outcome of humanity."

    "We are fast approaching the Technological Singularity, an era of runaway technological growth, where the wealthy elite will continue to manipulate Income Inequality and Economic Inequality more and more to their advantage. In the end they will gain the unrestricted authority to control our lives—that is—if we are even allowed to live at all."

    "Taking action now is the only way for us to survive. At long last we must awake, open our eyes, and act on our own behalf; not doing so guarantees humanity's death. Join us to stop them now before it is too late."

    I strongly suggest anyone who is interested in the above course of action go to the FirstRateCrowd.com website and view the available options just like I did. There is a way out.

    Dr. Lipkowitz