A Zero-Sum Wealth Quiz

One of the really bad ideas that drive some of the worst government actions is the notion that wealth is somehow fixed, and that by implication all wealth is acquired at someone else's expense.  I am working on my annual tax-day post on the zero sum fallacy, but in the mean time here is a brief quiz.

The quiz consists of matching a description to the owners of these two houses:

House1a House2b

One house has hot and cold running water, central air conditioning, electricity and flush toilets.  The other does not.  One owner has a a computer, a high speed connection to the Internet, a DVD player with a movie collection, and several television sets.  The other has none of these things.  One owner has a refrigerator, a vacuum cleaner, a toaster oven, an iPod, an alarm clock that plays music in the morning, a coffee maker, and a decent car.  The other has none of these.  One owner has ice cubes for his lemonade, while the other has to drink his warm in the summer time.  One owner can pick up the telephone and do business with anyone in the world, while the other had to travel by train and ship for days (or weeks) to conduct business in real time.

I think most of you have guessed by now that the homeowner with all the wonderful products of wealth, from cars to stereo systems, lives on the right (the former home of a friend of mine in the Seattle area).  The home on the left was owned by Mark Hopkins, railroad millionaire and one of the most powerful men of his age in California.  Hopkins had a mansion with zillions of rooms and servants to cook and clean for him, but he never saw a movie, never listened to music except when it was live, never crossed the country in less than a week.  And while he could afford numerous servants around the house, Hopkins (like his business associates) tended to work 6 and 7 day weeks of 70 hours or more, in part due to the total lack of business productivity tools (telephone, computer, air travel, etc.) we take for granted.  Hopkins likely never read after dark by any light other than a flame.

If Mark Hopkins or any of his family contracted cancer, TB, polio, heart disease, or even appendicitis, they would probably die.  All the rage today is to moan about people's access to health care, but Hopkins had less access to health care than the poorest resident of East St. Louis.  Hopkins died at 64, an old man in an era where the average life span was in the early forties.  He saw at least one of his children die young, as most others of his age did.  In fact, Stanford University owes its founding to the early death (at 15) of the son of Leland Stanford, Hopkin's business partner and neighbor.  The richest men of his age had more than a ten times greater chance of seeing at least one of their kids die young than the poorest person in the US does today.

Hopkin's mansion pictured above was eventually consumed in the fires of 1906, in large part because San Francisco's infrastructure and emergency services were more backwards than those of many third world nations today.

Here is a man, Mark Hopkins, who was one of the richest and most envied men of his day.  He owned a mansion that would dwarf many hotels I have stayed in.  He had servants at his beck and call.  And I would not even consider trading lives or houses with him.  What we sometimes forget is that we are all infinitely more wealthy than even the richest of the "robber barons" of the 19th century.  We have longer lives, more leisure time, and more stuff to do in that time.   Not only is the sum of wealth not static, but it is expanding so fast that we can't even measure it.  Charts like those here measure the explosion of income, but still fall short in measuring things like leisure, life expectancy, and the explosion of possibilities we are all able to comprehend and grasp.

More, coming soon...

Update:  An example of why this topic is always timely:

Paul Krugman foresees an increasing left-leaning electorate. The cause?

The main force driving this shift to the left is probably rising

income inequality. According to Pew, there has recently been a sharp

increase in the percentage of Americans who agree with the statement

that "the rich get richer while the poor get poorer."

Russel Roberts goes on to tear into this red meat.  Read it all.

 

  • Dale

    I like this blog entry because it shows the progress the US and global economies have made in creating wealth and delivering luxuries (as well as needs) to individuals. The comparison of the "Bill Gates" home of the early 1900's vs the 2000's "average citizen's" home is powerful. Another powerful comparison would be to show how the average citizen lived in the early 1900's vs the early 2000's.

  • http://www.hodakvalue.com/blog M. Hodak

    Amazing post. I'm so glad I discovered this blog.

  • Dan

    I think its disingenuous of you to say that age 64 represented an "old man" at a time when the average lifespan was in the 40s, as you do. I'm sure you know as well as I do that the reason the average lifespan was so much shorter than was because of the high rate of death from childhood diseases and deaths in childbirth. Once you get past those, people normally lived into their 60s, 70s and 80s and even longer just as they do now. If you look at the lifespans of some of the better known people of the age (Queen Victoria, Joseph Haydn, Thomas Jefferson, just to name a few), it's obvious that it wasn't unusual for someone to live 75 or 80 years.

  • markm

    Dan: If "wasn't unusual" means under 10%. When Social Security was inaugurated, only one in ten working men were expected to live to 65 and begin collecting.

  • dearieme

    Dan, on the other hand look at the life-span of Queen Vic's husband, Prince Albert. And his cause of death. Or Mozart's life-span. Or that of Mr Jefferson's slaves.

  • http://andrightlyso.com/index.php civil truth

    I guess a large part is choosing whether to focus on what you have or on what you don't have that others have. Contentment versus envy.

    And while we're not talking zero-sum, there are certain things we've have to trade for our century's greater material prosperity. While we have become less vulnerable to many things in our environment, in other ways we are more vulnerable.

    Still your post is a timely warning against the purveyors of discontent.

    **By the way, I've given you a Thinking Blogger award**.

  • The Dirty Mac

    Often the "peak" of material prosperity for average Americans is set sometime in the 1960's or less frequently at or about the time Carter was in office (obviously targeted at those who do not remember the Carter era). The Buchanan/Dobbs golden age was clearly in the 1950's.

    The absurdity of the argument can then be obscured by baby boomers nostalgia for the days of their youth.

  • http://heritagebiblecollege.edu/news/last/adipex-p test
  • http://www.facebook.com/jswhyman John S. Whyman

    So your point is that I should stop my work on a time machine?