Inequality and Technological Progress

Another favorite trope of the right is that inequality is necessary for technological progress.  Like many fantastical tales, this has a germ of truth, but seems to be more false than true.  What is clear is that technological progress requires accumulation and allocation of capital.  The plausible mechanisms for that are capitalism and socialism.  It's probably not a coincidence that every successful economy in the world today is mixed, with both capitalist and socialist elements.

Most pure science, for example, is almost purely socialist, practiced and driven by institutions which are funded and run in a socialized fashion, with profit motives being a minor or nonexistent component of their operations.  One can not imagine, or at least I can't imagine, CERN or the Space Telescope Institute run as for profit organizations.  Both of these institutions, and all similar ones, do depend heavily on profit making institutions to supply their instruments, infrastructure and elements of their operational support.

In contrast, consumer products are overwhelmingly produced by the for profit sector, and attempts to produce them in socialized industries have a poor record.

So if capitalism is to work, surpluses have to be accumulated by individuals and their has to be incentive for them to invest.  Economic history suggests, though, that technological change is good at producing vast fortunes, but not especially dependent on them.  A few examples are worth looking at.

Many of the great fortunes recently created in the US are the result of one or a few entrepreneurs pushing the opportunities created by a new technology to what only a few could see was a logical conclusion.  Jeff Bezos created Amazon with an idea and fairly modest amounts of capital which he grew into a trillion dollar corporation.  Microsoft and Apple followed similar trajectories.  In these examples, at least, modest amounts of capital sufficed to create the enterprise.

It's common for such enterprises to get support of venture capital in their early stages, and this is probably the point at which already wealthy individuals play a key role.  Even here, though, the amounts of capital involved are typically far less than the enormous fortunes accumulated by Bezos and the other founders.

So did these guys need the incentive of enormous wealth to create their various behemoths?  I don't know, but I have some doubts.  Certainly the competition with other rich people to be number one is a plausible motive, but would Bezos, say, really have said "screw this if all I'm going to wind up with is a lousy ten billion?"


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