Instead, many of the individuals at the top of the wealth distribution are, in one way or another, geniuses at business. Some might claim, for instance, that Steve Jobs or the innovators of search engines or social media were, in their way, geniuses. Jobs was number 110 on the Forbes list of the world's wealthiest billionaires before his death, and Mark Zuckerberg was 52. But many of these "geniuses" built their business empires on the shoulders of giants, such as Tim Berners-Lee, the inventor of the World Wide Web, who has never appeared on the Forbes list. Berners-Lee could have become a billionaire but chose not to—he made his idea available freely, which greatly speeded up the development of the Internet.
A closer look at the successes of those at the top of the wealth distribution shows that more than a small part of their genius resides in devising better ways of exploiting market power and other market imperfections—and, in many cases, finding better ways of ensuring that politics works for them rather than for society more generally.
We've already commented on financiers, who make up a significant portion of the top 1 or 0.1 percent. While some gained their wealth by producing value, others did so in no small part by one of the myriad forms of rent seeking that we described earlier. At the top, in addition to the financiers, whom we have already discussed, are the monopolists and their descendants who, through one mechanism or another, have succeeded in achieving and sustaining market dominance. After the railroad barons of the nineteenth century came John D. Rockefeller and Standard Oil. The end of the twentieth century saw Bill Gates and Microsoft's domination of the PC software industry.
Internationally, there is the case of Carlos Slim, a Mexican businessman who 30 was ranked by Forbes as the wealthiest person in the world in 2011. Thanks to his dominance of the telephone industry in Mexico, Slim is able to charge prices that are a multiple of those in more competitive markets. He made his breakthrough when he was able to acquire a large share in Mexico's telecommunications system after the country privatized it, a strategy that lies behind many of the world's great fortunes. As we've seen, it's easy to get rich by getting a state asset at a deep discount. Many of Russia's current oligarchs, for example, obtained their initial wealth by buying state assets at below-market prices and then ensuring continuing profits through monopoly power. (In America most of our government giveaways tend to be more subtle. We design rules for, say, selling government assets that are in effect partial giveaways, but less transparently so than what Russia did.) . . .
A final large group of rent seekers consists of the top-flight lawyers, including those who became wealthy by helping others engage in their rent seeking in ways that skirt the law but do not (usually) land them in prison. They help write the complex tax laws in which loopholes are put, so their clients can avoid taxes, and they then design the complex deals to take advantage of these loopholes. They helped design the complex and nontransparent derivatives market. They help design the contractual arrangements that generate monopoly power, seemingly within the law. And for all this assistance in making our markets work not the way markets should but as instruments for the benefit of those at the top, they get amply rewarded.
UNDERSTANDING THE TEXT
What does Stiglitz see as the government's role in creating economic inequality? How can the government address the problems that arise from this inequality?
How do differences in power lead to differences in economic opportunity? How, according to Stiglitz, do people who have power use that power to tilt the economic playing field to their advantage?
What does Stiglitz mean by "marginal productivity theory"? To what extent does this theory hold true in our society?
What is the difference between "wealth transfer" and "wealth creation"? Which one leads to a greater degree of economic inequality?
How does Stiglitz define "rent seeking"? What are some examples of ways that government actions allow some people to generate revenue without expending any labor or assuming any costs?
What kinds of innovations tend to produce the greatest wealth? What kinds tend to produce the wealthiest people? Are they the same? Why or why not?
MAKING CONNECTIONS
How might you use Stiglitz's arguments to rebut the assertions of Garrett Hardin (p. 582)? Does Stiglitz see poverty as an inherent problem in human society or as a preventable one?
How would Stiglitz evaluate the governing philosophies of Lao Tzu (p. 384), who believed that leaders should interfere as little as possible in the economy and allow nature to take its course? What might happen in an advanced economy if government refused to interfere at all?
How does Stiglitz's view of equality compare with Simone Weil's in "Equality"
(p. 571)? Would Weil feel, like Stiglitz, that the government should address inequality in our society?
WRITING ABOUT THE TEXT
Examine the way that "rent seeking" functions in economic areas with which you are familiar. Explore at least one example of an economic activity that makes money without producing anything of value or generating wealth.
Research the Gini coefficient, which ranks countries by the level of inequality between their richest and poorest citizens. Describe the features that countries with a low Gini coefficient (ones with more equality) share, and how they differ from countries with high levels of inequality.
Write a rebuttal to Stiglitz in which you argue that inequality is inherent in the human condition and cannot be profitably addressed by government action. Use readings
in the "Human Nature and the Mind" chapter of this textbook as evidence for your assertions.
PART 2
A GUIDE TO READING
AND WRITING
READING IDEAS
^Reading can be either passive or active. You read passively when, for example, you pick up a piece of writing and read it straight through, starting at the beginning, moving quickly through passages that do not interest you, and putting it aside when you have finished. Many people read passively most of the time—and with very good reason. Passive reading works perfectly well for getting the gist of a piece of writing. It allows for fairly simple information to be communicated from the author to the reader. Passive reading works just fine for skimming the status updates of friends, browsing the Web, or curling up in bed with an entertaining novel.
College-level reading, however, usually requires a more active approach. Reading challenging texts like the ones in this book is not the same as reading the back of a cereal box. No one can read difficult texts without some effort. People who read challenging texts successfully are not necessarily smarter than other people; they have simply mastered a set of strategies that allow them to get the most out of what they read.
This chapter will explore some of these active reading strategies, including pre- reading, annotating, identifying patterns, reading visual texts, summarizing, and reading with a critical eye. Mastering these skills will allow you to make your way through challenging material—and the texts in this book will give you plenty of practice.
PREREADING
Experienced readers rarely approach difficult texts without a pretty good idea of what they will find. This may sound odd, since the whole point of reading something is to find out what it says. But good readers know that reading is a process that begins long before they physically pass their eyes over the words on a page. Prereading encompasses all of the things that you do before you start reading to increase your capacity to understand the material. In many cases, taking just a few minutes to learn more about what you are going to read can dramatically increase reading comprehension and retention.