At the moment, the poor person and the rich person are both buying things. If the rich person buys more vaccine, that means they will buy less of the other things, so the poor person will be able to have more of them. So the question is about the ratios of how much the two guys care about the vaccine and how much they care about the other thing… and the answer is the rich guy will pay up for the vaccine when his vaccine:other ratio is higher than the other guys. This is the efficient allocation.
It might be the case that it is separately desirable to redistribute wealth from the rich guy to the poor guy. This would indeed allow the poor guy to buy more things. But, conditional on a certain wealth distribution, it is best to allow market forces to allocate goods within that distribution.
(For simplicity I have ignored macroeconomics in this post, but the same argument broadly goes through if you don’t.)
At the moment, the poor person and the rich person are both buying things. If the rich person buys more vaccine, that means they will buy less of the other things, so the poor person will be able to have more of them. So the question is about the ratios of how much the two guys care about the vaccine and how much they care about the other thing… and the answer is the rich guy will pay up for the vaccine when his vaccine:other ratio is higher than the other guys.
This is only true if the rich person is already spending as much money as possible, so an increase in spending on Item A must cause a decrease in spending on Item B. For someone like Jeff Bezos, an increase in spending on Item A probably just results in slightly less money spent by his great-grandchildren in 100 years.
It might be the case that it is separately desirable to redistribute wealth from the rich guy to the poor guy. This would indeed allow the poor guy to buy more things. But, conditional on a certain wealth distribution, it is best to allow market forces to allocate goods within that distribution.
I don’t see why this has to be true in all scenarios. If we want to make sure that the starving guy gets some of the food, can’t we just allocate the food to him directly, rather than having to give him enough money to win a bidding war with Jeff Bezos? Perhaps we desire a system where, in general, Jeff Bezos can use his money to do whatever he wants, but we have safeguards in place to prevent him from outbidding a starving guy on the food he needs to survive. I recognize that this may not be efficient in monetary terms, but it could be efficient in terms of overall human utility.
I think I disagree a bit with both (but what do I know).
For someone like Jeff Bezos, an increase in spending on Item A probably just results in slightly less money spent by his great-grandchildren in 100 years.
This doens’t seem to me to be the right way to think about it. Short term, the more he spends on Item A will result in lower spending on Item B, or lower investment in his companies, a lower transfer of money from him to someone else (like through lower savings). Or more money being spent overall if he just uses up cash he had hidden in his pillow; which increases prices for everyone (but this will be made up for in some future).
If we want to make sure that the starving guy gets some of the food, can’t we just allocate the food to him directly, rather than having to give him enough money to win a bidding war with Jeff Bezos?
Who produces the food and can set the prices? If it’s private companies, then they wouldn’t sell it to the state for cheaper than to Bezos, so it would be as expensive to the state as giving that same money to the poor and let them outbid Bezos. If the state owns the stuff, then [insert standard anti-socialism arguments]. If the prices are fixed by the state, then its inefficient and there may not enough production for all. If the prices fixed by the state but depend on the person—or on how many of X you have bought this month or stuff like that—then that introduces whole new types of messes.
I agree that in a very strict sense money spent on X definitionally cannot be spent on something else (you already spent it so don’t have it). But does that type of tautological view matter here? (And if that is not the basis of your point and I’m misunderstanding, sorry.)
This kind of reminds me of the old Richard Pryor movie Bruster’s Millions.
I suspect the numbers have change but at one point I recall Bezos had a new worth of 90 billion. Even with a paltry 1% return on total assets that’s like 900 million a year. Could you spend all that? I’m not sure I could really keep tracking of an income stream like that—I suspect I would often be doing the equivalent of dropping a million on the floor now and then and forgetting to pick it up for a week or so.
So the rich buying more vaccines doesn’t really equate to not buying enough of other things that prices for those other things drop enough to make more available to the poor (who are budget constrained much more realistically than are the rich).
I am under the impression that you are thinking something like: “Bezos has ~100 billion to spend. If he spends 1 million in X, then he has 1 million less to spend on the rest. But he won’t even get to spend it in his lifetime, so that extra million in X doesn’t change how much he would spend in Y. Therefore, it’s wrong to say that Y will become more available because Bezos spent in X.”.
I don’t think that’s the right way to think about all this. (Warning: oversimplification coming):
Bezos earns some income, say, in a year. Almost all of it will be spent. Most will be invested and not consumed, so it will still increase his net worth, but that demand for stuff is still there, affecting the economy. Bezos is already probably spending about as much as he can, and what he is not spending he is saving which probably means transferring it to someone else who will spend it. So, if he spends USD 10 in X, it’s reasonable imho to “expect” the economy to get USD 10 less spending in non-X stuff (on avg)
At the moment, the poor person and the rich person are both buying things. If the rich person buys more vaccine, that means they will buy less of the other things, so the poor person will be able to have more of them. So the question is about the ratios of how much the two guys care about the vaccine and how much they care about the other thing… and the answer is the rich guy will pay up for the vaccine when his vaccine:other ratio is higher than the other guys. This is the efficient allocation.
It might be the case that it is separately desirable to redistribute wealth from the rich guy to the poor guy. This would indeed allow the poor guy to buy more things. But, conditional on a certain wealth distribution, it is best to allow market forces to allocate goods within that distribution.
(For simplicity I have ignored macroeconomics in this post, but the same argument broadly goes through if you don’t.)
This is only true if the rich person is already spending as much money as possible, so an increase in spending on Item A must cause a decrease in spending on Item B. For someone like Jeff Bezos, an increase in spending on Item A probably just results in slightly less money spent by his great-grandchildren in 100 years.
I don’t see why this has to be true in all scenarios. If we want to make sure that the starving guy gets some of the food, can’t we just allocate the food to him directly, rather than having to give him enough money to win a bidding war with Jeff Bezos? Perhaps we desire a system where, in general, Jeff Bezos can use his money to do whatever he wants, but we have safeguards in place to prevent him from outbidding a starving guy on the food he needs to survive. I recognize that this may not be efficient in monetary terms, but it could be efficient in terms of overall human utility.
I think I disagree a bit with both (but what do I know).
This doens’t seem to me to be the right way to think about it. Short term, the more he spends on Item A will result in lower spending on Item B, or lower investment in his companies, a lower transfer of money from him to someone else (like through lower savings). Or more money being spent overall if he just uses up cash he had hidden in his pillow; which increases prices for everyone (but this will be made up for in some future).
Who produces the food and can set the prices? If it’s private companies, then they wouldn’t sell it to the state for cheaper than to Bezos, so it would be as expensive to the state as giving that same money to the poor and let them outbid Bezos. If the state owns the stuff, then [insert standard anti-socialism arguments]. If the prices are fixed by the state, then its inefficient and there may not enough production for all. If the prices fixed by the state but depend on the person—or on how many of X you have bought this month or stuff like that—then that introduces whole new types of messes.
I agree that in a very strict sense money spent on X definitionally cannot be spent on something else (you already spent it so don’t have it). But does that type of tautological view matter here? (And if that is not the basis of your point and I’m misunderstanding, sorry.)
This kind of reminds me of the old Richard Pryor movie Bruster’s Millions.
I suspect the numbers have change but at one point I recall Bezos had a new worth of 90 billion. Even with a paltry 1% return on total assets that’s like 900 million a year. Could you spend all that? I’m not sure I could really keep tracking of an income stream like that—I suspect I would often be doing the equivalent of dropping a million on the floor now and then and forgetting to pick it up for a week or so.
So the rich buying more vaccines doesn’t really equate to not buying enough of other things that prices for those other things drop enough to make more available to the poor (who are budget constrained much more realistically than are the rich).
Yeah, I wasn’t trying to be tautological.
I am under the impression that you are thinking something like: “Bezos has ~100 billion to spend. If he spends 1 million in X, then he has 1 million less to spend on the rest. But he won’t even get to spend it in his lifetime, so that extra million in X doesn’t change how much he would spend in Y. Therefore, it’s wrong to say that Y will become more available because Bezos spent in X.”.
I don’t think that’s the right way to think about all this. (Warning: oversimplification coming):
Bezos earns some income, say, in a year. Almost all of it will be spent. Most will be invested and not consumed, so it will still increase his net worth, but that demand for stuff is still there, affecting the economy. Bezos is already probably spending about as much as he can, and what he is not spending he is saving which probably means transferring it to someone else who will spend it. So, if he spends USD 10 in X, it’s reasonable imho to “expect” the economy to get USD 10 less spending in non-X stuff (on avg)
Are you saying there would be a causal link from the poor person’s vaccine:other ratio to the rich person’s purchasing decision? How does that work?