Who gets the Next Fruit?: Stagnation in Real Inequality

I have previously written about the fact that the rich have the same stuff as the middle class and even the poor. There are very few commodities that the 1% have that the rest don’t; things like private jets and swimming pools. My new question is is this a problem? You’ll often hear libertarians praise the wealthy as commodity producers but they are also championed for being at the forefront when it comes to consuming. High end consumers and early adopters play the unique role of testing out new technology and products for the rest of us. They usually pay a considerable premium to have new products first, often only several months before severe price drops. They often get products with bugs and flaws that are remedied for later customers because they are discovered during the roll-out.  This phenomenon has slowed.

Currently, it would seem that the wealthy have hit something of a ceiling when it comes to making purchases and living lives that allow them to distinguish themselves from everyone else (and I imagine this must be rather frustrating for persons who have 1. worked rather hard and taken unique risks their whole lives and 2. who are very aware of fact 1. and feel rather entitled to their spoils). This is certainly true when today’s rich are compared to the wealthy of the early part of the 20th century who could travel in cars, to Europe, and air-condition their homes, unlike their counterparts. As I have written, these seem to me like wide, fundamental disparities between the rich and the rest. Indeed, it seems reasonable to conclude that the rich lived essentially different lives in the past, as though they were from another planet. Today’s rich cannot say as much. They make their progress primarily along the axis of quality. They own Iphones, like everyone else.

This disparity (or lack thereof) is circumstantial evidence of Tyler Cowen’s “Great Stagnation” hypothesis. We have picked all the low-hanging fruit and found ways to make the jam cheap and widely available. Where is the next fruit and who will get to eat it first?

The innovation frontier appears to be on the internet where overhead costs are low and early adopters don’t have to be rich. Also the returns to internet innovation are not so great as returns were to things like electricity or television. Those new commodities created new industries that employed millions and still do. The internet is doing alot more job destruction (at least in the US) by making information cheaper and its aggregation more efficient. If the rich live lives so much like the rest what does that mean for product development? Will there ever be another car or television, a new product that we can’t all have right away? Scarier still, today’s highest prices are all focused in healthcare. High prices could lead to some incredible advances in health technology that might allow us to live far longer. I would call “longer lives for the rich” a fundamentally unique commodity. I would also be less certain of our economic systems’ ability to handle such a shock without falling completely apart and spilling lots of jam.

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