“My wealth does not create your poverty.”

In Russ Roberts’ take on Occupy Wall Street he points us to P.J. O’Rourke characterization of wealth:

But as the writer P.J. O’Rourke has said, wealth is not a pizza. If we’re sharing a pie, and you get a bigger piece, that does not mean that I have less to eat. It depends on what happens to the size of the pizza. Ten percent of an enormous pizza is more filling than all of a tiny one.

For those who think of wealth as a fixed pie, I don’t think the ‘pizza-size’ analogy helps them see what’s really happening with wealth, because they still view it as one pizza to be divvied up somehow.

What P.J. O’Rourke actually said (btw, I recommend his book On The Wealth of Nations) is better than the ‘pizza-size’ analogy (emphasis and numbers added):

Wealth is not a pizza where, if I have too many slices, you have to eat the Dominos box. [1] My wealth does not create your poverty. Your wealth does not create my poverty. They’re separate questions. [2] And we can generate more wealth.

O’Rourke makes two excellent points, as numbered.

Point 1:  Your wealth does not mean I have less wealth.  This is the point that the ‘pizza-size’ analogy misses.

Point 2:  We can create more wealth, which is the ‘pizza-size’ analogy again.  But, it’s helpful to understand point 1 before thinking about point 2. Instead of thinking about the size of the pizza, though, maybe we should just say that we can make more pizzas.

Unfortunately, both points are counter intuitive and that’s why we have such debate on the issue of wealth.

When you hear someone say things like ‘wealth is concentrated’ or ‘1% controls some large percent of wealth’, ask yourself where did that wealth come from?