This Isn't A Fixed Pie

Al asks if Dave sees a problem with the top income-earning 11,000 families having such a disparity with the bottom 25 million. Dave says he does but not the way Al thinks.

QUESTION: Al in Texas asks if Dave sees a problem with the top income-earning 11,000 families having such a disparity with the bottom 25 million. Dave says he does but not the way Al thinks.

ANSWER: Yes, I see it as a problem. I will tell you that my experience with people who ask that question is that the large majority of people who ask that question—probably you, Al—believe that the way to fix it would be different than the way I believe.

I’m not pleased that money is more concentrated among a fewer number of people. I don’t think that’s good. I think it would be great if everyone was winning. But there are two problems with some people’s viewpoint of this. Problem number one is they think that there’s a fixed pie. There is X number of dollars, and so if 11,000 people have X number of dollars, then everybody else can’t have those dollars. That’s not the way economies work. That’s a very naïve understanding of economics to assume a fixed-pie theory, because money grows other money. It’s not a fixed pie. When you make money, you can make money out of nothing. It’s not just the trading of the existing number of dollars. So if there were six Bill Gates that evolved, they wouldn’t necessarily have to have taken all of the money away from someone else to have gotten the money. The pie just grows. There’s not a limited number of pies or a limited size to the pie. That’s problem number one with people who start down this road of, “We need to redistribute income because income inequality is so evil.” In one generation, it will be concentrated again because money always does that. Money follows your habits patterns, your character, and your knowledge level. You can’t stop that from happening. If you do poor people stuff, you get to be poor people whether you’re rich or poor. Poor people stuff is the way people act in their decisions, emotional maturity, their spiritual outlook and all of those things.

I don’t like income inequality, but I would never take it away from someone to give it to someone else to fix it—ever. On the contrary, I believe what Milton Friedman, Nobel Prize winning economist, said. He happened to be a capitalist. He says, “The record of history is absolutely crystal clear. There is no alternative way of improving the lot of ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”

Socialism doesn’t give the little man as good a chance as capitalism does. Communism doesn’t give the little man as good a chance as capitalism does. That’s the great mythology of income redistribution theory. It doesn’t work, Al. While I do have a problem with income inequality, the way to solve it is to teach the people who are not at the top how to get there, so there will be more of them at the top. That does not necessitate that there are more at the bottom. It is not a fixed pie.