Will Wilkinson who I agree with overwhelmingly on the topic at hand and in particular in this post states
If we take a moment to note that the United States contains 40% of the world’s billionaires, and stop to see how America’s wealthiest people came by their fortunes, it’s easy to conclude that the statistic Mr Kristof waves about like a bloody shirt actually reflects the fact that American institutions are unsually conducive to innovation and the creation (as opposed to the expropriation) of immense wealth. I do worry that America’s nexus of political and financial institutions in particular have made it too easy for a small class of people to hoover up massive amounts of cash while producing little of value to the rest of us. But it’s worth noting that the people at the top of the Forbes list have grown rich mostly by making useful stuff, or making or selling useful stuff more efficiently. I don’t think American innovation would much suffer were these folks to face somewhat higher income-tax rates. At the same time, the fact that innovation is so richly rewarded in America surely has something to do with why America produces so much of it.
I am less and less sure of this. Would Jobs had said “Aw fuck it, why boher” if the Apple turn around only made him $200 Million rather than billions.” Assuming of course that his rank ordering among other billionaires would be the same – I do think being among the richest probably matters a lot regardless of the absolute level – I am guessing he wouldn’t have worked an hour less even if his paycheck was cut by 90%
Same with our other billionaire innovators.
Our innovators are so richly rewarded, I would argue, because we tolerate so much innovation. The natural human propensity to tinker and tweak can produce breakthroughs that have unimaginable social value. Allowing as many of those breakthroughs to thrive means a population with people earning vast fortunes.
This is probably independent of whether or not we use those fortunes to finance public goods, redistribution, etc.
I know Will is sympathetic to this point but maximizing the space for innovation, entrepreneurship and dynamism may be almost completely orthogonal to personal financial gains from doing so.