Why Do We Need the Rich?

Because they make investments no one else will make. See Robin Hanson here and here, who points to this NBER study:

In 2007, private U.S. firms accounted for 54.5% of aggregate non-residential fixed investment, 67.1% of private sector employment, 57.6% of sales, and 20.6% of aggregate pre-tax profits. Nearly all of the 6 million U.S. firms are private (only 0.08% are listed), and many are small, but even among the larger firms, private firms predominate: Among those with 500 or more employees, for example, private firms accounted for 85.6% in 2007. … 94.1% of the larger private firms in the survey have fewer than ten shareholders (most have fewer than three), and 83.2% are managed by the controlling shareholder.

Comments (7)

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  1. Buster says:

    Maybe the explanation should simply have been… because they invest!

  2. Brian says:

    I would argue that we need diversity across the income spectrum and that people in all income strata need to be enabled and encouraged to invest (via tax policy, etc.). The rich should not be too few, and the middle class shouldn’t be too weak nor too small.

  3. Davie says:

    Americans need to overcome the fear and hatred associated with wealth. Wealth is earned. The focus would be far better placed on ill-gotten gains.

  4. Brian Williams. says:

    Michael Moore says we don’t need the rich.
    http://www.youtube.com/watch?v=uoNudMqaOz8

  5. Nico says:

    Sure, we need private firms because public ones are too obsessed with meeting short-term earnings goals to make long-term investments, even if they have positive ROI. But couldn’t that instead be an argument for why the stock market mantra of maximizing shareholder value is “the dumbest idea in the world?” (cf. http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/)

  6. steve says:

    “Wealth is earned. ”

    BANKERS.

    Steve

  7. Davie says:

    @Steve — My statement was clearly followed by “the focus would be far better placed on ill-gotten gains.” We’re on the same page.