Why Rich People Should Insist On A Full-Employment Economy New Analysis Challenges Key Institutional Assumptions One of the most egregious failings of the economist caste in modern times has been its collective inability to ‘solve’ the problem of chronic unemployment. As a philosopher-economist, my habit is to question the fundamental assumptions upon which many economic theories are based. In the presentation that follows, I expose a foundational flaw within the clutch of arguments economists have used for decades to justify their tolerance of unemployment. Generally speaking, I attribute their reluctance to embrace Full Employment to three factors: 1) Rich people in general have not wanted to pay higher taxes, which they’ve long expected would be required if the government were to try to achieve the goal of Full-Employment. 2) Rich people have been led to believe, by mainstream economists & finance theorists, that the cost---to rich people---of inflation exceeds the cost---to rich people---of chronic unemployment. 3) Too few rich people have been able to mentally grasp how they would truly benefit from the elimination of all unemployment. In this article, I introduce a new analytical focus to the discussion which I call The Real Economy perspective. With it, I am able to show why there is absolutely nothing about Full Employment that rich people should be fearful of. It begins with a discussion of first principles, viz. the central importance of the marketplace’s dynamic price-setting process. From this we soon arrive at a couple of key observations re: purchasing power in market economies. One of the most intriguing revelations derived from these foundational observations is the discovery that even steeply progressive income tax rates do not actually impose any material sacrifice on rich people. More new ground is covered when an advanced understanding of purchasing power in market economies opens the door to a radically different characterization of the phenomenon of inflation. Far from being the malignant economic disease it is often made out to be, inflation is shown to be essentially harmless, when it comes to its impact on the purchasing power of households. From this we are led by logic to the conclusion that the real costs---to rich people---of solving the unemployment problem are virtually non-existent when viewed from the perspective of The REAL Economy. Focusing On The REAL Economy Quite literally, the real economy is what you have left when you think of the entire economic universe and then completely remove money from the picture. The REAL Economy is the productive behavior of people; it is the actual goods and services that people produce and trade and consume on a daily basis. To get a better sense of what I am talking about, imagine what it would be like if everyone were to somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated 'wealth.' We'd all then be able to share the same great experience of luxury living, right? Well, actually no. Instead, what every one of these wealthy retirees would soon discover is that none of them actually possesses any real wealth at all (aside from their current holdings). Why? Because no one would be out there producing anything of value that they could buy with their saved dollars. The only reason why money has value in our eyes is because it gives us a claim on the productive efforts of others. How wealthy you actually are depends more on what others are doing than it does on your personal accumulations of paper notes. Just ponder that for a moment. You think you want money so badly...but what you really want ultimately is people out there investing themselves in economic activities that will make your money actually worth something. What you truly want is a very productive economy, one that is fully engaged in creating real things that you hope your money accumulations will obtain for you. So if one of your goals in this life is to become increasingly wealthy in real terms, then you need to be concerned about more than just the number of disposable dollars you are able to get your hands on. You absolutely must be concerned about the productive status of The REAL Economy, as well. ----------- Let us now reflect another imaginative scenario which also illustrates the significance of the real economy at the same time that it exposes the folly of ‘collectivist schemes.’ Imagine what it would be like if our representatives in Washington one day decided that they were going to fix everyone’s financial problems by handing out $10 million dollars to every household in America. In this scenario, we’ll assume that no one wants to retire, but that everyone decides instead that they just want to be ‘rich’ at whatever they’re doing. Wouldn’t this initiative at least give all the economy’s participants the economic security they have always longed for? Well...no, it wouldn’t. What it would do instead is ignite an explosive round of inflation. Over a fairly short period of time, the price of everything would skyrocket dramatically. After the hyperinflation had finally run its course, there would still be roughly the same numbers of rich and poor and Middle Class citizens in the country as there were before the $10 million giveaway was distributed. This is because roughly the same amount of product would be brought to market as before, the total of which would sustain the same approximate number of upper-class and middle-class ‘standards-of-living’ as before. The number of luxury goods & services available in the economy will not magically multiply overnight just because someone came up with the bright idea of giving everyone a huge pile of disposable dollars. In the real world the only way it is possible to increase everyone’s purchasing power---in real terms---is by actually increasing the quantities available of those goods/services which were previously too scarce for any but a few to enjoy. If you find yourself nevertheless wondering how we can be so sure that this ‘hyperinflation’ would occur, it is because you do not yet have a solid understanding of the dynamic process the marketplace uses to set prices every day. How The Marketplace Determine Prices Any competent economist will tell you that the marketplace determines prices by auctioning the scarcest goods & services to the highest bidders. The auction process that occurs in most markets is different from the one we see at Sotheby’s, but the results are the same. The essential element driving the process is the freedom sellers have to charge the highest price for their products that they think the market will bear. With extraordinarily few exceptions, this is precisely what sellers in most markets always do. If sellers become aware that---for whatever reason---supplies of the product they sell will soon be in short supply relative to demand, they will immediately raise their prices. They understand that, given the shortage expected, many people will be willing to pay a higher price for the product rather than do without. How high will the price ultimately go? That is what the auctioning process ultimately determines. A seller starts off by trying to guess the highest price she can charge while still being able to sell all of her products. If her guess is too high, product will remain on the shelf unpurchased. But if instead she finds her products are ‘flying off the shelf’ at the original price she set, she will increase her prices further to see what happens. If they are still flying off the shelf, she will proceed to raise them again. The price she charges will continue to go up until sales slow to a trickle and product remains on her shelves unpurchased. When this happens, she will then lower her price just enough to move the product off the shelf, but no lower. Equilibrium---for the moment---is achieved. In this “Markets Method” of auction, sellers try to guess the winning high bid in advance, ask for it up front, and then allow potential buyers some time to respond. Potential buyers only participate in the auction if they believe they can afford the winning high bid that the seller/auctioneer has already set. The result? The scarcest luxuries always end up in the hands of the richest people. Sellers are always going to do their best to price everyone else out of the market. It is important for us to understand that in a free-market economy, prices are always going to go as high as they can possibly go, until a price is finally reached where no one remains who is willing/able to buy at the price requested. In any market, this highest price achieved is always determined by the quantity of buyers who happen to have sufficient disposable dollars (and the will) to buy all that is offered for sale at the price requested. This is the process, then, which makes it a certainty that any and all collectivist schemes designed to increase everyone’s disposable income will end up generating a price inflation “adjustment” in all of the markets that the gift recipients participate in. The Purchasing Power Of A Household’s Income With a solid understanding of marketplace dynamics we are now able to derive a supremely important economic truth: the purchasing power you wield in the marketplace is not determined solely by the number of dollars you have. What determines your purchasing power is the number of dollars you have compared to everyone else. The purchasing power of your disposable income is ultimately determined by its ranking within the hierarchy of all disposable incomes. Those who have more disposable dollars available have a higher ranking than those who have fewer. The higher your ranking, the better able you are to ‘outbid’ others for the scarcest luxury experiences. One principle stands out above all others: whenever a household experiences an increase in its disposable income, its purchasing power will either increase, decrease, or not change at all depending on what has happened to the disposable incomes of all other households. • Your household income may increase next year, but that welcome development would only provide your household with an increase in purchasing power if your gain in $$ earnings is exceptional, i.e., if not everybody else experienced the same increase you did (e.g., you win the lottery, or land a much better paying job). • If the only reason your disposable income increases next year is because you and everyone else got a nice tax cut, then none of you is going to experience an improvement in your rankings within the hierarchy, and that means none of you will experience an improvement in your purchasing power in the marketplace, all else equal. • A third possibility: your household income increases next year at a time when everyone else’s has increased more. In this case, your household’s purchasing power would actually decline---all else equal---even though your nominal income had increased, because your ranking within the hierarchy would decline relative to everyone else. • Yet another possibility: your household’s disposable income declines next year, but because everyone else’s disposable income declines even more you actually end up experiencing an improvement in your purchasing power; this, because your ranking will improve relative to everyone else. Just how important is this lesson re: purchasing power? As we shall see in the next section, it turns out to be very important indeed. Something You Never Knew About The Income Tax With a more sophisticated understanding of purchasing power we are now able to see why it is indeed a fact that imposing steeply progressive income tax rates on rich people does not actually impose any kind of material sacrifice on them whatsoever. Through its use of marginal tax rates, the Income Tax is structured in a way which preserves the disposable income rankings---and therefore the purchasing power---of all those who are taxed. With any increase in the progressivity of the income tax, once the luxury markets have adjusted their prices through the auction process, rich tax payers will find that their privileged lifestyles are just as affordable to them as they were before their taxes went up. You see, decreasing the number of dollars that rich people have available to spend by taxing them more does not decrease the quantity of the luxury experiences that are brought to market. The marketplace is still going to auction them off to the highest bidders. Because [now heavily taxed] rich people will still have the highest disposable incomes in the land, they will still be the ones who win these auctions, since their rankings at the top of the hierarchy would not change. The same luxuries will still be bought by the same people, once the price has dropped to a level that they perceive to be affordable. To put it in the simplest of terms, markets work. In the real world---the world of actual goods/services consumed---nothing changes for rich people when they are heavily taxed in this way. And thus the fear that so many rich people have always had of deprivation and unfair treatment via the Income Tax has never had any basis in reality. In the world of Public Finance and Taxation Theory, it is simply not possible to conceive of a method of taxation that is more fair to rich people than one which actually preserves both their material possessions and their purchasing power in the marketplace, in spite of the fact that they are being asked to hand over large amounts of money to the government to pay for its bills. All the Income Tax really does is take excess dollars from all rich people that they don’t actually need to be able to purchase their very privileged lifestyles at the top of the economic ladder. And yet, though the Income Tax is ideally fair in its construction, there are still some important fairness issues that rich people need to be concerned about. There is, for example, the high likelihood that if the Income Tax’s top marginal rates were made much more steeply progressive, certain disreputable rich people would feel inspired to defy the supremely virtuous intent of the Income Tax by acting to enhance their own disposable income rankings at the expense of all other rich people. Which is to say they will seek to cheat, lie, or otherwise game the system that has been set up to calculate the government’s share, often by not reporting all of their sources of income. If/when they do such things at the same time the majority of rich people are following the rules they would indeed be able to improve their rankings within the hierarchy of all disposable incomes. So maybe all rich people should copy their behavior? Well if they did, it would negate the benefit that is enjoyed when only a few are cheating the system. If all rich people were to follow their example, then none of them would be able to improve their rankings relative to each other (assuming they all cheat equally). Notice the fallacy of composition which informs the cheater’s POV. In order for these scoundrels to truly benefit as they desire, they need for most rich people to play by the rules while they are cheating. So if you are a rich person who has come to realize that the income tax is indeed the fairest method of taxation you could ever hope for, it does not mean that all of your concerns about fairness have gone away. It simply means that you no longer need to be an unwitting dupe manipulated by sycophants and political opportunists into wrongly blaming 1) the Income Tax itself, and/or 2) the Federal Government as the “victimizers” who threaten you with unfair treatment. The people who are actually trying to victimize you with unfair treatment are those ‘other’ rich people out there who don’t want to play by the rules, rules that are set up to protect all rich people from any loss of purchasing power in the marketplace. This would seem, then, to eliminate one of the major objections rich people have long had to any ambitious government spending programs that would almost certainly eliminate all unemployment. But the prospect of higher taxes has only been one of the reasons for their resistance to calls for Full Employment, isn’t it? There is another scary monster out there they’ve been repeatedly warned about: Inflation. Indeed, they have been advised ad nauseam by bankers, politicians, and economists that inflation is a horrifying economic disease that must be stamped out forcefully in order to keep its pernicious effects at bay. Something You Never Knew About Inflation For nearly a decade, European policy makers have promoted the specious notion that austerity---i.e., high levels of unemployment---has been the medicine required in order to protect Europeans from the horrifying effects of Inflation. It is an attitude that virtually all orthodox economists embrace and encourage through certain theoretical constructs that can be found in any economics textbook. Perhaps the most important of these is the concept of ‘The Price Level’ promoted by Irving Fisher early in the previous century, based ultimately on the foundational assumptions of the Quantity Theory of Money. The problem with Fisher’s conceptualization of The Price Level was that it encouraged economists to imagine price inflation---price increases caused by monetary inflation---as some kind of mysterious ‘effect’ which spreads out evenly like a mist over the entire economy, causing all prices to increase by about the same percentage. It is, indeed, common practice now for economists and accountants to use official measurements of The Price Level to calculate the supposedly ‘real’ value (imagined purchasing power) of a firm’s/individual’s/nation’s earnings over a specified period of time. The ultimate foolishness of using these calculations of The Price Level for that purpose is revealed by the ‘duh’ discovery that different income groups experience different rates of inflation. This graph published by Forbes magazine illustrates the significantly higher rate of price inflation that rich people experienced in the years that followed the big tax cuts they received from politicians in recent decades, beginning in the 1980’s. Here’s another price index which shows the same burst of intensified inflation that rich people experienced at the time: A review of the price changes that occurred in the real estate and art markets at the same time would show us the same thing. The reason why this ‘extra’ inflation occurred within the upper brackets is because Congress decided in the early 1980’s to reduce the top marginal income tax rates (including capital gains tax rates) of all rich people. As a result, the disposable incomes of all rich Americans went up significantly. Rich people, of course, did what rich people always do when they acquire a big windfall of disposable dollars: they threw them at the asset and luxury markets. Yes, this big money gift from Congress to all rich people was, by definition, a collectivist scheme intended to provide all the members of a group with an improvement in purchasing power. (It is acknowledged that most non-rich income earners also received a tax cut at the same time, but the percentage increase in their disposable dollars was much smaller, and therefore generated much smaller inflationary effects, as shown in the Forbes graph.) Because the money gift was presented to all rich people in a manner which did nothing to change their rankings within the distribution of all disposable incomes, none of them experienced any improvement in the purchasing power of their incomes in the marketplace. Markets, of course, responded the way they always do: they burned up all those additional disposable dollars in an economically useless inflation event. All of the luxuries and assets rich people purchased with the tax cut dollars they were given would have been purchased by them anyway at lower prices if they had not received the tax cut. In terms of the real economy, they gained nothing whatsoever. At the same time that rich people were seeing their disposable incomes increase dramatically, the out-sourcing of good-paying jobs and the weakening of labor unions generally put downward market pressure on the incomes of common wage earners. As these graphs illustrate, in the years since the 1980’s income tax cuts, the rich and the non-rich have experienced significantly different rates of inflation for reasons that make a tremendous amount of sense. In light of these empirical facts, we are confronted with a supremely important economic reality: It is indeed quite possible for one income group to experience disinflation, or even deflation, at the same time another income group is experiencing double-digit inflation The Right Way To Calculate Inflation Rates Given this impossible-to-dismiss variance in inflation rates across income groups, how can anyone imagine that an ‘averaging’ of those variations would be helpful in estimating the ‘real’ purchasing power of some individual household’s/firm’s earnings? The use of a single index number to estimate ‘overall’ price changes unavoidably hides all kinds of useful information regarding the variance of inflation rates across the width and breadth of the economy. It is a practice which defies all rational explanation. Both within the Real Economy, and on a conceptual/theoretical level, there is no ‘Price Level’ [that accurately represents the whole of the economy]. My proposal has been that the Bureau of Labor Statistics should compile and publish a spectrum of inflation rates derived from ‘market baskets’ configured to reflect the spending habits of income earners in various income brackets (with asset prices prominently featured in the market baskets of the highest income earners, properly weighted). With the data that such a report would provide, both academics and policy makers would be forced to explain which income group’s inflation they are concerned about and why. And while they are pondering those questions, they might notice that rich people really don’t mind inflation when it is their own incomes that are being inflated. It is only the inflation that wage-earners experience which bothers them. Why? Could it possibly be the fact that---generally speaking---the incomes of common wage-earners are a ‘cost’ to the wealthiest members of society? From this new analytical perspective, it is really no surprise that the big expansion of the money supply following the 2008 financial crisis did not produce a big jump in inflation as measured by the CPI. The inflation did occur; it just didn’t occur within the income groups that are represented in the CPI. Inflation Has No Negative Impact On Household Purchasing Power Let’s go ahead and spell it out formally: Inflation is always and everywhere harmless when it comes to its impact on the purchasing power of incomes Fisher was just one of a legion of economists who have long depicted price Inflation as a great economic evil which hurts lower class folks by forcing up the prices they have to pay for things. What they always neglect to point out is the fact that in order for price increases to be correctly attributed to inflation, it must necessarily be true that those paying the higher prices had already seen their incomes inflated enough to cover the higher prices. That’s right, gains in disposable dollars must have occurred that were large enough for them to be able to afford the higher prices being charged, otherwise the higher prices would not hold. Of course, prices do go up for reasons other than inflation. When a price increase is due to supply shortages, real economic pain (a loss of purchasing power) is going to be experienced by someone, for the price increase that occurs is going to price some consumers out of the market. As always, the smaller supplies available will be auctioned off to the highest bidders. So with respect to that portion of a price increase that can be blamed on inflation, consumers will have already been handed a sufficient number of debased dollars to cover it. It cannot be otherwise, by definition. Economists and political theorists need to understand this essential economic truth: Whilst it is true that inflation dollars do not provide households with any gain in purchasing power, it is also true that none of them loses any purchasing power if/when the price increases they are paying were caused by inflation. You see, price inflation really is harmless in terms of its overall impact on the purchasing power of households in the Real Economy So Does Inflation Hurt Rich People or Doesn’t It? There certainly appears to be ample anecdotal evidence that the high rates of inflation rich people have experienced over the past three and a half decades did not inflict any suffering on them. Indeed, one gets the impression they have considered it to be ‘the best of times’ for people like them. Based on the arguments that have been presented in this essay, it can be asserted with the highest level of confidence that rich people did not lose any of their purchasing power over this period in spite of the higher rates of inflation they endured. So the question then becomes, “Does inflation in the lower classes hurt rich people?” After all, their incomes generally represent a cost to the upper class. The answer is still no. In order for wage earners to gain possession of the inflation dollars that will eventually drive up prices, they must already have received them from their employers (who acquired possession of those inflation dollars first). So the cost to employers of paying higher inflation wages to their employees has already been covered as far as employers are concerned by their own businesses’ inflated incomes. When all business owners are being forced to pay higher wages, then none of them faces a competitive disadvantage. This is a crucial principle business owners need to understand to be able to correctly assess their situation within a competitive environment. If a single firm is thinking about giving her employees and extra week of paid vacation, she must consider whether or not all other employers would be doing the same thing. But if all are required to give the extra week of vacation, then none of them is put at a competitive disadvantage. And that is what really matters to a business owner. Firm owners want to increase their rankings within the hierarchy of all business owners’ disposable incomes because they’d like to experience the increase in purchasing power they’d reap if they did improve their rankings. But if all firms are required to absorb the same increase in costs, then none of them loses their position within the hierarchy, all else equal. From a Real Economy perspective, any true price inflation occurring within the wage-earner class is actually quite painless---in real terms---to the business owners who must pay the higher wages. Inflation’s Winners/Losers? In most economics textbooks you can find a listing of those parties who are deemed to be Winners and Losers during periods of higher inflation. In the minds of most creditors, they are the ones who stand to lose the most if measured inflation is allowed to reach double-digit levels for periods of time in a Full Employment economy. It is a concern which arises from their perception that the loans they make today will---in a high inflation economy---be paid back with significantly “cheaper” dollars years from now, dollars that have been debased by the horrifying effects of inflation. How much of this specious reasoning actually holds up when we review the situation of creditors in an inflationary economy from a Real Economy perspective? Not much. Simply applying the definitions + observations we’ve arrived at thus far, if a bank is concerned about inflation reducing the purchasing power of the dollars it receives from debtors, it becomes quite difficult to see what it is they’re complaining about. If you (a bank, a creditor) are concerned that inflation will reduce the purchasing power of the dollars you receive in the future, then what you are actually saying is that you believe your income will become inflated over time along with those of all/most of those participating in financial asset markets. If this inflation of lenders’ incomes does not occur, then we could not properly describe any loss of purchasing power they might experience as being attributable to inflation. As has been pointed out previously, if the higher prices a buyer is facing are due to inflation---and that is indeed what creditors are worried about---then she and all the other participants in those markets must all have necessarily received enough debased dollars to cover the price increases. That means no banker/creditor loses any purchasing power in those markets in which creditors typically spend their money (income streams + real property) as a consequence of inflation. It is not actually accurate to call them ‘losers’ in economies that are experiencing robust levels of inflation. It is important for us to understand that individual dollars only lose purchasing power due to inflation when (1) they are spent in certain markets, AND when (2) most of the buyers in those markets experienced inflated incomes. Most of those who worry about inflation habitually forget the other side of the inflation coin: the fact that price inflation is ultimately dependent upon inflated incomes. Sure, creditors may not end up making the gains in purchasing power they’d like to see, but then again, none of us are. But actual real economy losses of purchasing power directly attributable to inflation? They simply don’t exist. Another group that is most often mentioned in economics textbooks as one of the big Losers during periods of inflation is the fixed-income recipient. The concern is that pensioners and others on fixed incomes have no means to ‘keep up with inflation.’ Indeed, how can they if their incomes are fixed and non-negotiable? The good news is that this is one problem that is incredibly easy to fix. All the government needs to do to fix this problem is keystroke into existence any extra dollars pensioners might need in order to maintain their rankings within the hierarchy of all disposable incomes. This simple fix---at virtually no real cost---is all that needs to be done to ensure that fixed income households will suffer no loss of purchasing power due to overall price inflation. A New Costs Vs. Benefits Equation To Consider From a Real Economy perspective, rich people should now be able to see that because markets work they actually experience no loss of purchasing power either when their incomes are heavily taxed, or when the working class is experiencing significantly higher inflation rates. This means that the costs vs. benefits equation re: Full Employment that rich people worry about has changed dramatically. On the costs side of the equation we now see only an asterisk, denoting some positive value of utter insignificance that is barely worth mentioning. Even without any discussion of the benefits side of the equation, this new information alone has the potential to change many rich individuals’ attitudes toward the goal of Full Employment dramatically. I can’t help but think that a sober acknowledgement of these facts alone would persuade many a rich person to view the conceptual ideal of Full Employment in a much more favorable light...no longer as something which threatens them, but rather as something that looks a lot like opportunity, instead. Most open-minded rich people are already quite aware that both poor people and they, themselves, would be better off if only there was some way to get everybody working, but they just haven’t been willing to make a big sacrifice, themselves, in order to make that happen. But now---if we can agree that my essential arguments are sound---there is no longer any reason for them to oppose a grand plan to eliminate all unemployment (while reserving the right to quibble over the details). If they were to execute such a plan, they would be able to maintain their privileged positions at the top of the economic ladder, continue to enjoy their lives of luxury as before, but instead of being hated by the poor people they’ve long had reason to fear, they get to be loved and valued by them instead. So if taxes are not a problem and inflation is not a problem, then perhaps the time has come for rich people to start asking themselves: not what is the least we can do for the underprivileged, but rather what is the best we could ever do for them? And should we be automatically assuming that we would not like that option? My advice to any rich people who feel inspired to reflect on these questions is that they first imagine themselves being ‘stuck’ in the working class and then try to imagine what an ideal economy would look like for someone in that position, someone who has little hope of ever ascending to the upper rungs of the economic ladder... An Ideal Economy For The Working Class (1) Back when he was fighting to advance the cause of the Working Class in a revolutionary environment, Lenin---like everyone else at the time---had an flawed understanding of what an Ideal Economy for the Working Class would look like. Focusing on the Money Economy, most Leninists undoubtedly assumed---at least initially---that equalizing disposable money incomes would result in an equalized standard of living across the board. But the reality they soon discovered once they obtained supreme political power is that scarcity in Nature makes it impossible to produce an equality of distribution of productive output across the whole of society. In the real world, sellers bring to market a wide variety of grades/qualities of product, all of which the marketplace auctions to the highest bidders. Generally speaking, the larger the quantities available, the lower the price. No matter what is done to equalize money incomes, it will not solve the fundamental problem of scarcity in Nature. So for all those who advocate for the lower classes, the goal cannot simply be to equalize disposable incomes. From a Real Economy perspective, the goal must be twofold: 1) To maximize the flow of product (real wealth) being offered to the lower classes, a goal that crucially requires the elimination of all unemployment. 2) To optimize the economic security of those who must work for wages, a goal which is achieved only when Full Employment is maintained indefinitely. Significantly, both of these goals can be achieved to the great satisfaction of ‘the masses’ without depriving rich people of any of their real wealth. This, because rich people and poor people do not compete for the same consumable resources. None of the scarce luxuries that rich people can afford need to be sacrificed (or ever would be) in order for poorer people to experience the ideal level of real wealth consumption that is possible for them, given the finite capacities of the economy. The hierarchy of disposable dollars + daily marketplace auctions ensure this outcome. From a rich person’s perspective, providing the masses with an ideal economy for them would actually expand and enhance of the total amount of real wealth that rich people get to experience in their own lives. An Ideal Economy For The Working Class (2) The ideal economy for a wage earner is a free market economy in which there is always a chronic labor shortage, i.e., an economy where there are always more jobs available than there are people to fill them. If Congress were to take action to create and maintain a labor shortage, the bottom half of the economy’s participants would soon discover that they are living in the best of all possible economic worlds. In such an economy, market forces would always put upward pressure on the wages and benefits they work for, obviating the need for government 'band-aid remedies' like minimum wage laws and unemployment insurance. Indeed, many of the ‘do something’ welfare programs that have been set up by governments to deal with the pain and suffering caused by chronic unemployment could ultimately be dismantled. The marketplace would finally be functioning in a way that ideally serves those on the bottom half of the economic ladder. Rich people often need to be reminded that when people are working for the income they spend, they are actually doing something that benefits everyone else. This is because those who are not working do not stop consuming; they just aren't producing any of the stuff they consume. Somebody else is. As a society, we all become richer in real terms when all those who are idle become productive. If part of your productive output is no longer needed to help provide for the basic consumption needs of the unemployed (because they are now producing for themselves), then that means more of your output becomes available for your own consumption. So one of the headline benefits we would want to place on the benefits side of the costs-benefits equation is the cost savings that would be reaped if all unemployment was eliminated. Yes, many who are not rich would benefit from these cost savings, but so would rich people. Another important way that a sustained labor shortage would significantly enhance the standard of living of poorer folks is by dramatically reducing crime levels. Indeed, the vast majority of those who are victims of property crimes happen to be members of the working poor. It should be perfectly obvious to anyone who is not insane that ‘high crime areas’ would be transformed into low crime areas if it was suddenly very easy for young people to get a decent paying job. Anyone perceived to be ‘slacking’ in a labor shortage environment would quickly become the target of tremendous family + community pressure to start earning their own disposable dollars like everyone else. Indeed, many if not all of the socially dysfunctional consequences of ‘idleness’ would be virtually eliminated if a chronic labor shortage were maintained indefinitely. The working poor would be the primary beneficiaries of the reduction in crime that would occur, but rich people would benefit, too. They’d benefit financially when the government is able to reduce its spending on police protection and facilities to incarcerate apprehended criminals. But then they’d also benefit from the esteem they’d receive---and deserve---for their successful efforts to eliminate poverty. Optimizing The Economic Security Of People Who Are Not Rich In a labor shortage economy, income security would become a Working Class norm. Of course, people would still lose their jobs as they do today, but it wouldn’t matter. New jobs would always be easy to find. Citizens would not enjoy specific-job security, but they would enjoy a higher level of income security. More generally, it should be obvious that one of the major reasons why everyone wants to be rich is because of the financial security we know it would provide us against future uncertainties. The only problem with this ‘answer’ for the individual is that it is a goal which is impossible for everyone* to achieve. From a Real Economy perspective, we know that we cannot all be rich in this way. Still, thanks to human cleverness, we are able to act collectively to provide each other with real economic security, so long as we can keep the number of those suffering from deprivation at a manageable level. (When we are sick or injured, we are dependent upon others who are not sick/injured to help us to regain our health. In times of plague or war, this arrangement can become quite problematic.) All insurance schemes (against future risks), whether privately managed or government managed, depend upon the fact that not everyone requires help at the same time. Through this approach, we essentially agree to contribute---when we are healthy and productive---to the needs of those whose income-earning ability has become impaired---due to injury/illness/aging/etc.---with the understanding that when/if we ourselves become disabled by fate, we will be provided for by the contributions of those who are healthy and productive at that time. What we have discovered is that this is a solution to the problem of future uncertainty that actually works because it is practicable in normal circumstances. It is a clever means by which not rich people can experience much of the same financial security that only rich people are otherwise able to experience. What this objective requires from a Real Economy perspective is a certain commitment of economic resources to the provision of ‘help’ (health care facilities, etc.) for those who are in need of it. The more resources we are willing to commit to that need, the less likely it will be that anyone needs to ‘wait in line’ for those services. If you are a rich person who has finally come to realize that high taxation rates would not impose any kind of material sacrifice on you, then there is really no rational reason for you to oppose efforts to provide the underclass with much of the same economic security that you are able to enjoy due to your high ranking within the hierarchy. Why not give them the best, since it would cost you nothing, in real terms? Resource Allocation (1) The Real Economy analytical perspective I’ve presented in this article is very helpful in the way it exposes many common misperceptions re: purchasing power that are born of Money Illusion and fallacies of composition. With it, we are able to see why certain collectivist schemes that have been turned into national policy (e.g., tax cuts for rich people) end up not providing the intended beneficiaries with any actual improvement in their purchasing power within the marketplace. There is, however, a ‘secondary’ real wealth benefit that can be reaped by the intended recipients of certain collectivist schemes, but it only occurs when the money flows generated by these schemes affect the allocation of economic resources in a way that will ultimately increase the quantity of real wealth that is brought to market for the consumption of those intended beneficiaries. That is precisely what we would expect to see happen at the bottom half of the economic ladder if Congress were to act to create and maintain a labor shortage in the American economy. You see, when poor people receive ‘inflation dollars’, they tend to spend nearly all of them. When they spend them in markets that were previously mostly unaffordable to them, it will cause some price inflation in those markets in the short run. But those same inflation dollars will end up in the hands of suppliers, who will use them to order larger quantities of product from wholesalers/manufacturers. (Because sales are up!) When manufacturers receive these extra dollars, they will then be able to invest in an expansion of their productive capacity, because there is clearly increased demand for what they sell. With an expansion of productive capacity, the total amount of product brought to market increases. When previously unemployed human resources are hired to expand output, more real wealth is produced and consumed. It is only in this way---via favorable changes in resource allocation---that a collectivist scheme to inflate the disposable incomes of all those in a targeted income group can actually bring about an increase in total real wealth consumption. So even though Full Employment would generate some inflation within the lower classes (none of them would see an improvement in their rankings) we would also expect that same inflation to cause a more favorable allocation of natural + human resources to unfold, thereby increasing the quantities of products brought to market, which makes them more affordable to poorer people. From a Real Economy perspective, the marketplace would finally be functioning in a way which optimizes the welfare of ‘the least among us’ by drawing additional resources to their continuing sustenance. The simple truth is that there is nothing that society could do for the underprivileged that would be more kind, more helpful, or more generous than to maintain a Labor Shortage for them. It would provide those on the bottom half of the economic ladder with both an increase in the amount of real wealth they consume AND a dramatic improvement in their economic security. Resource Allocation (2) We might well ask, if poor people would benefit in real terms from higher levels of inflation due to its effects on resource allocation, then why shouldn’t we likewise assume that the inflation rich people experienced in recent decades also produced the same kind of resource allocation benefits for them? The answer is that, generally speaking, rich people are only interested in spending their extra inflation dollars on assets & luxuries & ‘experiences’ that are permanently scarce. This means that, when rich people spend their inflation dollars in those markets, it will not result in more of them being produced and brought to market---no matter how much money is thrown at them---because they are absolutely limited in Nature. There are only so many luxurious mansions that can be built on the top of a hill that has a great view of the valley below. There are only so many Rembrandts available for purchase. The Best restaurants in a location are absolutely limited in number. The same is true re: The Best entertainers and The Best companies to include in your portfolio. Indeed, one of the major reasons why the richest of the rich value these possessions---these ‘positional goods’---is because they are permanently scarce. This is why we are able to rationally predict that virtually any proposal to increase the disposable dollar accumulations of all rich people will do nothing more than burn up those extra dollars in a purely wasteful and economically meaningless inflation event. Almost none of the extra tax-cut dollars that rich people received in recent decades caused larger quantities of luxury goods to be brought to market that would not have occurred anyway if the tax-cut gifts had never been dispensed. Historically, there is almost never a time when an optimal amount of resources is not being devoted to the effort to bring the scarcest of luxury experiences to the wealthiest consumers in the economy. Suppliers of luxuries always have enough disposable dollars to outbid all other competitors in the resource markets. In dramatic contrast, inflating the disposable incomes of the lower classes---especially in economies where there are a lot of unemployed resources---can be rationally expected to generate larger quantities of real wealth for their consumption, thereby enhancing their standard of living without negatively affecting the amount of real wealth that rich people always get to enjoy. So if we go ahead and tax rich people at higher rates, and those revenues are spent by the government on real economic investments, creating a labor shortage and higher rates of inflation for poorer people, we would expect to see a reversal of the inflation dichotomy that unfolded over the past 3-4 decades, only this time those experiencing the inflation could expect to see real gains in their living standards. Instead of rich people experiencing robust levels of inflation at the same time lower class citizens were experiencing disinflation, we would likely see a period of deflation unfold within the upper classes at the same time that higher inflation levels are bestowed upon the lower classes. And no, the inflation the lower classes would experience would not help them in terms of improved purchasing power compared to everybody else (none of their rankings would improve relative to each other), but its impact on resource allocation would help them...and incidentally, rich people besides. How To Stimulate Job Creation In The Economy The first thing politicians need to keep in mind, if they want to eliminate all unemployment, is the fact that all jobs in the economy are dependent for their existence on the SPENDING of consumers, firms, and governments. Without income from the expenditures of customers, no one gets paid. It is always true that whenever aggregate spending increases in an economy that is struggling with unemployed human resources, jobs are created. When aggregate spending drops, jobs are destroyed. It really is as simple as that. No job was ever ‘saved’ into existence. Indeed, the act of saving money removes it from the economy. Saved money only plays an incidental role in creating a job if/when it is lent to a bank which then lends it to someone else who then spends it on something. The practice of saving money certainly has its place in our economy, but it is simply wrong to think that jobs can be created by increasing savings levels. An increase in savings necessarily means a drop in spending by definition: SAVINGS = INCOME - SPENDING The most rational fiscal policy for any legislative body to pursue---if it wants to stimulate the economy to create new jobs---is to increase taxes on the economy’s biggest savers and then spend that money on real wealth economic investments. When you increase the tax obligations of the biggest savers, it will indeed reduce their consumption levels somewhat (in the short term, until prices have finally dropped enough for them to buy again). But because we are talking about the economy’s biggest savers, most of the money that the government would be getting from them in taxes would otherwise have been removed from the economy. When the government gains possession of those dollars, instead, it will promptly inject them into the economy by spending them. The end result is that the total drop in consumption that a tax increase on rich people would cause would be less than the total increase in government spending that would occur at the same time. C < G The final outcome: a net increase in aggregate spending overall, which is the very definition of an economic stimulus. So contrary to everything you were told about fiscal policy options in your economics classes, increasing taxes will not contract the economy, but will generate a net economic stimulus instead, so long as the extra tax revenues spent by the government were collected from the economy’s biggest savers. For the governments of Greece, Portugal, Spain, Italy, and France, the answer to their unemployment + debt problems has always been to raise the income tax rates that their richest citizens are required to pay and then spend those euros on real economic investments. If they had pursued this option with sufficient vigor, they would have been able to eliminate unemployment in their countries without increasing government debt levels in the short term, while also reducing debt pressures in the longer term as incomes and tax collections would increase with growing prosperity. It is an approach they could have pursued while completely ignoring the austerity advice of the banking industry. The ultimate reason why this was not done in Europe: the political class was advised repeatedly---and wrongly---by the financial elite that increasing the tax obligations of rich people would have a contractionary effect on their economies. The actual truth is quite the opposite of their claims. Pity the poor people who have been victims of their ignorance for so many years... The Best Approach: Investment If Congress were to finally decide that it wanted to create a labor shortage in the American economy, it would simply need to raise the tax obligations of rich people through the income tax (imposing no real sacrifice on them) and then spend the increased revenues they would collect. What should Congress spend this additional money on? Generally speaking, you can’t go wrong when the government’s extra spending is devoted to economic investments. No, not financial investments, economic investments. It’s important that we understand the difference between the two. Economic investments: purchases of capital goods or other economic resources by firms or governments that are used to either produce more capital goods or more final goods that consumers find desirable. Generally speaking, economic investments either increase output or expand the supply-side's productive capacity. They increase the amount of real wealth produced, either in the short term, or a few years down the road. That is what happens when firms purchase machinery/equipment to improve productive efficiency or when they spend money on the construction of new stores or factories or on the salaries of new employees. However, not all firm expenditures are economic investments, e.g., money spent by firms on advertising that either (a) misleads consumers or (b) does nothing to help them with their purchasing decisions cannot be construed to be an economic investment. And notice also that true economic investments occur when governments increase their spending on infrastructure or on environmental cleanup, or on education, or health care. Financial investments---are purchases or commitments of money that provide the ‘investor’ with an income stream or a capital gain. Saving money is a financial investment because it provides interest income; purchases of assets can be financial investments if they eventually provide a capital gain. Economic investments made by firms are usually also financial investments because they are expected to generate income that exceeds their cost. The economic investments made by governments that improve infrastructure or human capital are not financial investments because they do not provide the government with an income stream. Some financial investments are also economic investments, but many of them are not. The purchase of a piece of land, for example, is a financial investment if it appreciates in value over time, but it is not an economic investment if it just sits there, undeveloped. Purchases of stocks in secondary markets (NYSE, NASDAQ) are clearly financial investments if the stocks appreciate in value, but they are not economic investments because they involve nothing more than exchanges of titles of ownership of already existing assets. Such transactions do not typically put any money into the hands of firm managers that could be used for economic investments. That normally happens only when stocks are first sold to underwriters, prior to an initial public offering. But Aren’t Incentives Needed To Stimulate Private Sector Investments? Historically, political opportunists representing Wall Street have cleverly taken advantage of the impreciseness of the word investment to craft tax policy proposals that sound as though they are beneficial to the economy, but actually are not. The famous Capital Gains Tax Cut, for example, is frequently promoted as an incentive that would stimulate ‘investment.’ Unfortunately, the only investment that such a tax cut is likely to stimulate is increased financial investments in stocks and other real assets, directly creating the asset price inflation bubbles that we have seen in recent decades. One financial investor hands money over to another financial investor for a piece of paper. Very little if any of the money involved in these transactions ends up being spent on capital goods that would increase output or the productive capacity of the economy. Nevertheless, it must be said that even though capital gains tax cuts are a very stupid way to try to try to achieve the end, it is still a good idea in principle to ‘further’ private sector investments in the economy if some logically sound initiatives can be identified that would actually achieve that end. So we might want to begin by asking when do firms need special government incentives to motivate them to invest in new capital goods? Well, it turns out that the answer is never. In modern market economies, competition provides firm managers with the most powerful motivation to continually invest that they will ever need: fear. They ultimately face both the fear of bankruptcy and the fear of lost opportunity. If your competition lowers its costs by investing in new equipment, or improves the appeal of its products by incorporating new innovations, then you’d better do the same or you will soon find yourself driven out of business. With only very few exceptions, additional government-provided $$ incentives are nothing more than an unnecessary waste of tax dollars. Consider the position of the entrepreneur. These individuals do not need any additional incentives provided by the government to encourage them to assume the risks of creating a new business. True risk takers believe that their ideas will succeed in the market and have so much of their identities invested in them, they really don’t care if they receive any return at all on their invested time and money, sometimes for several years, as long as they have hope of eventual success. The problem for these start up companies is not that the entrepreneurs lack motivation; it's that they can't find someone who is willing to provide them with a loan that banks, venture capitalists, and angel investors find too risky. In confronting this situation, Congress has a couple of options. One option is to do nothing and simply allow the marketplace to reward firms-that-make-wise-investments with the market share of firms-that-do-not. Another option would be for lawmakers to help entrepreneurs (and established firms that banks deem 'too-risky') to obtain the funding they need for investment in the hope that they might thereby become more competitive with the better established firms. The rational---i.e., more efficient---way to do this is to provide these marginal firms with targeted investment tax credits or perhaps with guarantees on private loans. These kinds of programs would put government tax revenues directly into the hands of those who want to make an economic investment. Compare this to the insanely stupid idea of giving tremendous amounts of extra disposable dollars to wealthy savers in general in the hope that their extra savings will somehow make their way into the hands of true economic investors when private banks have already rejected their borrowing plans as too risky. Very little, if any, of those billions of dollars ‘spent’ by the government would actually end up helping needy entrepreneurs or firm managers to make economic investments. What those tax-cut dollars will do is create a lot of economically useless price inflation in the asset markets. Government Spending vs. Private Philanthropy In spite of these many arguments in favor of increasing government spending to eliminate unemployment, many politicians loudly argue that rich people should always prefer the option of private philanthropy over the alternative of using the government to express their generosity. One reason for this is the fact that the government option typically deprives rich people of an opportunity to personally witness the good that their tax money may be accomplishing for society. Now, it is certainly true that current government practices do not provide major tax contributors with a feeling of ‘ownership’ in the wealth-producing activities of government. My recommendation is that government policy wonks innovate some new practices that would provide these individuals with that feeling of ownership they desire. Individual taxpayers could, for example, be charged a premium above and beyond their basic tax obligations for the opportunity to obtain ‘shares’ of the cost of certain federal projects and perhaps also for the right to dedicate all or most of their tax contributions to specific government projects. Unlike shares of ownership that are purchased in stock markets, share-of-contribution documents would establish in a publicly observable way the magnitude of the contribution of individual taxpayers. Those who pay the premium would be able to keep their personal tax dollar contributions from being 'lost' in the pool of general tax revenues. Individual taxpayers would be able to identify themselves with certain government projects, helping to define their personal 'brands.' In a sense, the government would be selling sponsorship opportunities to individual taxpayers. Such practices might complicate things, but perhaps they would be worth the cost of implementation if rich people end up feeling better about the contributions they make to the public treasury. Ideally, you want to start with a basic, steeply progressive income tax structure that is designed to make it truly painless---for rich people---to pay the vast majority of the government’s bills. For this, they would pay nothing in terms of lost purchasing power. Then, on top of that base of revenue, something of value to many rich people---branding identification---would be offered in a ‘market’ the government would create. We would thereby discover a price that rich people are willing to pay for such opportunities. Needed Changes In The Central Bank’s Charter The single most important reason why America’s economy almost never reaches a level of zero unemployment is because the Federal Reserve will dependably throw the economy into a recession just before that ideal state is allowed to happen. It accomplishes this by reducing total bank lending, thus causing a reduction in Aggregate Demand. This provides it with an effective way to restore higher unemployment levels since AD in the economy is normally dependent to a certain degree on the spending of borrowed money (big ticket items, etc.). The Fed always does this because it interprets its Dual Mandate* from Congress (that it try to achieve both maximum employment and stable prices) to mean that it should do all it can to eliminate unemployment, but only so long as that effort does not threaten price stability. This interpretation of the Central Bank’s duty to society needs to change if America wants to experience the optimum levels of real wealth production and consumption that would occur if a labor shortage was created and maintained by Congress. A new and improved mandate would inform the managers of the nation’s money supply that their duty is to pursue the goal of price ‘stability’ in a general sense, but only so long as that effort does not threaten full employment. Instead of being charged to maintain price stability, they would instead be charged to minimize price instability. It is an important nuance that would make all the difference in the world. Such a directive would make a lot of sense, since it would be consistent with a new understanding of the real costs of inflation (nearly non-existent) compared to the real costs of unemployment (excessive and utterly unnecessary). With a new mandate from Congress, the nation’s Central Bank would be required by law to tolerate higher levels of measured inflation. Of course, in order for it to competently execute that responsibility, it would first need to decide on---and justify---which income group’s inflation rate it ought to be monitoring. Or instead of concerning itself with the price inflation that is occurring within one income group or another, perhaps it would be a far more sensible idea for the CB to focus its attention what is happening to prices in particular markets. Which markets? Well, Silly, how about those markets whose customers are more likely to be the recipients of the new inflation dollars that are being pumped into the economy? After all, the means by which new inflation dollars are injected into the economy is well-known: generally speaking, they are lent into the economy by banks, whose customers then spend them into the hands of other spenders. This suggests that the rational way to monitor price inflation in the economy is to keep track of the changes in prices of those markets which seem likely to be affected by recent lending activity. Managing The Money Supply With Credit Controls With or without a labor shortage, bank lending must be attenuated if/when a central banker wants to limit the amount of inflation that is occurring within the economy. If an uptick in price increases in one of these markets is correlated with an uptick in lending associated with that market/industry, then there is a significant likelihood that this is one of the markets through which inflation dollars are pouring into the greater economy. But if the price increases we observe do not correlate with an explanatory increase in lending to that market/industry, then those price increases are likely due to a supply shock, and not to incomes inflation. When price increases are due to supply shocks, the central bank’s only responsibility is to inform the public that, because the increases are not due to incomes inflation, there is nothing it can do to ameliorate the problem. Generally speaking---in a labor shortage economy---if prices in certain markets are rising ‘too fast’ due to incomes inflation, it is prudent for the CB to restrict additional lending into those markets by absolutely limiting the amount of dollars that banks can lend to the firms/individuals who participate in those markets. If this is done, hyperinflation becomes an absolute impossibility. The rational way to do this is with credit controls which do not seek to micro-manage credit transactions. One way a central bank can do this by simply deciding on a certain limited number of dollars that it is willing to allow banks to lend over a certain time period to certain customers for certain purposes. It then needs to find that price (interest rate) to charge for these funds that will finally discourage potential borrowers from borrowing any more than the targeted quantity of loanable funds that has been set. If the price they choose is too low, more money will be borrowed within this category than is desirable, so the interest rate on these loans will have to be increased further until it finally discourages enough would-be borrowers from seeking to leverage larger purchases. It is precisely in this way that a central bank can proactively discourage the kind of speculative hoarding that we would otherwise expect to see in an economy that has achieved a sustained labor shortage. What can turn the ‘natural’ instinct to hoard into a major fallacy-of-composition headache for society is when speculators begin to use the availability of cheap credit to leverage huge purchases of non-perishable commodities they think will go up in price significantly in the future. When one clever wealthy speculator makes this kind of move, she may very well profit from the strategy, but if/when many, many others make the same play, then they are all going to bid up prices to the very high levels that they were hoping to sell the product at later in order to make a profit. The good news is that central banks can staunch this kind of inflation worsening behavior by making the speculators’ cost of borrowing so high that they will no longer see such an inviting opportunity. Nearly all asset bubbles can be prevented from happening in this way. An Important Political Observation Rich people have been misadvised re: their economic interests since forever by a class of highly educated sycophants who now dominate the halls of academia and most political bodies, as well. These individuals fully expect to benefit from gaining a reputation---in the eyes of rich people---for being capable advocates of government behavior that favors the richest members of society. These individuals have traditionally sought the favor of rich people by promoting a cluster of specious arguments which they’ve used to justify their calls for legislation intended to benefit rich people in particular. Their hope---always---is that their efforts to further enrich the richest people in society will lead to greater derivative benefits for themselves. The influence that these opportunists wield in our society has grown to the point where they now effectively control both of America’s two major political parties. It is not surprising that this socio-political phenomenon has unfolded the way it has. We are, after all, talking about human nature. At some point, however, I think most highly-educated souls can be persuaded to prize logic and truth over simple-minded perceptions of self-interest that are transparently flawed to the point of ridicule. In this essay I have attempted to explicate a new, more sophisticated, and more accurate, understanding of purchasing power in market economies. When economic actors lack a solid understanding of the key variables which determine purchasing power in market economies, they become susceptible to certain perceptual errors re: their ‘interests’ which are ultimately born of money illusion. Nearly always, a fallacy-of-composition assumption can be found at the root of these perceptual errors. It is precisely these perceptual errors which have informed the historical advice that sycophantic politicians have offered to the richest members of society: that they should act together as a class to execute collectivist political schemes that will provide all rich people with extra disposable dollars. It is my hope that a growing number of thoughtful rich people will come to recognize the Real Economy opportunities that lie before them, and with that knowledge, start to challenge the stupidity of those ‘collectivists’ within the Upper Class who are demonstrably ignorant re: the determinants of purchasing power in market economies. For Rich People, Happiness Is A Full Employment Economy Bill Gates is a very wealthy man who frequently has the opportunity to travel around the world and meet with the rich people of other lands. It is only natural, of course, in these encounters for Bill to want to feel some pride in the stature and accomplishments of his tribe. Surely rich Americans enjoy being able to point out to their hosts in other lands the high standard-of-living that a large percentage of America’s population gets to enjoy. It seems altogether reasonable to suppose that Bill would feel a tremendous sense of accomplishment at such times if he and most other rich Americans had acted together to optimize the welfare of those on the lower rungs of America’s economic ladder and had succeeded in impressive fashion. Surely it would demonstrate to the rich people of other lands that America’s Upper Crust knows how to ‘take care of their poor people.’ The bottom line reality is this: contrary to everything rich people been told about their predicament by sycophant politicians + economists, there happens to be a rather desirable option available to them that they never knew was a realistic possibility... They can keep their privileged positions at the top of the economic ladder, continue to enjoy their lives of luxury as before, but instead of being hated by the poor people they fear, they get to be loved and valued by them instead. Authentic emotion generating a peak moment of human satisfaction. Such a reward may be intangible, but there is no way to exaggerate its priceless value. For rich people, it offers a perhaps unexpected answer to the age-old question: if you already have ‘everything’, what else is there to reach for?