I must admit to a bit of hyperbole here. Of course the wealthy matter. It’s true that they invest the money, and they do in fact buy expensive things and lots of them (go look up just how many celebrities buy a massive lot for their family compounds–and all the surrounding lots plus houses that sit empty, for privacy).
But that’s a relative drop in the bucket. After coming across this blog post, a point of discussion occurred to me, especially after reading this:
“Why can’t the conspicuous-luxury consumption sector account for a growing share of employment, as the top 10-15% capture a larger and larger share of GDP growth on account of skill-biased technological change ? Really, why not ?”
Well, forgive me if I missed a tonal shift or an important point of clarification here, but the answer is simple:
Let’s assume that people are going to act reasonably up to a point. That is, even if a rich person wants the most hyphenated cow ever (hand-fed, free-range, etc), they’re not going to have fifty cows each with a personal servant just for their morning cream-and-coffee. A rich person won’t buy a dozen yachts or a hundred diamond-encrusted iPhones. Not only that, no amount of investment will matter the slightest bit if nobody poorer than they can afford their product or service en masse. The end result of technological advance in this sector is massive post-scarcity abundance, when money ceases to have significant meaning. In the meantime, there is basic income.
The best way to get money cycling through the economy is to get it into the hands of people who will spend it the most: the not-rich. Bill Gates can’t do as much as economic good buying a $15m yacht as 600 people can do with $25k apiece, if only because you really only buy the yacht once and maintenance is probably less than cost for a while.
And as for the concept of full-employment, I invite you to read the wonderful Charles Stross’s post about just that.
And I don’t mean to sound as if I am scoffing at the author; a quick perusal of the site shows a much greater depth of examination of the various economic phenomena in question than I, really, care to undertake (I, on the other hand, strive for breadth, and so I tend to see the edges of things; that’s what the experts are for). Rather, I wish only to make the point: a top-heavy economy does not result in as much money moving around in ways that generate the most good as a more middle-focused economy. The paths just don’t line up properly.