Hunter Lewis asks a truly vital question in the book Are the Rich Necessary? The answer, of course, is yes. However, most people hate the rich and would love to "stick it to them." Even the rich themselves rarely understand their role in society. Lewis’s approach is to tackle the issue by examining the "rich problem" on a variety of issues by providing both pro and con perspectives.
It might be surprising for many that the "rich question" is the issue on which economics was founded. In 1730, Richard Cantillon first invented economic theory with his model of the isolated estate, where one landlord owned everything. Despite this vast possession, Cantillon noted that the landlord would benefit little if he did not hire workers to make the land productive. Naturally workers would have to be given enough sustenance for their families to survive and if the landlord wanted luxuries he would have to pay them even more. Cantillon then went on to show that the landlord could forego the duties of managing the estate if he leased land to his most capable farmers and used the rents to buy all the goods he desired. With prices and profits at work, the estate would operate as if it was directed by an invisible hand and everyone would be mutually dependent.
Cantillon’s most notable student used the first part of the model (the isolated estate) in his Theory of Moral Sentiments and the second part (the market economy) in the Wealth of Nations. Most of Cantillon’s readers never knew his name because his book was published anonymously more than twenty years after his murder, but Adam Smith mentioned him prominently in the first part of the Wealth of Nations.
Are the Rich Necessary thus brings the age-old lessons into a modern context. Despite his objective approach, Lewis makes clear at every turn that getting rid of the rich would be a disaster for society and that every harm we intend to the rich would only makes us worse off. The first section pits egalitarianism against the vital role the rich play in amassing and managing wealth. Like the landlord who consumes a tiny fraction of the output of his estate, Bill Gates consumes a tiny fraction of his wealth, most of which is tied up employing Microsoft employees who produce software products for our use.
To answer the question of whether the rich are compatible with democracy, Lewis uses Mises’s position that the market is actually much better than democracy in "representing" our choices. Consumers, not producers, ultimately have the final say in markets and are better served than voters. Also, in the market there are both upward and downward mobility and the little guys are regularly sending the rich guys both up and down the economic ladder depending on who better serves them.
The middle section of the book deals with the profit system, inequality, and greed from a variety of perspectives, followed by chapters on government’s role and the role of the central bank (very good). Despite offering opposing points of view on these subjects, the fact that Austrian and libertarian arguments are introduced throughout the book is very refreshing. I’m not sure if your average college student will see the correct answers, but unlike most books, at least they are there to be seen. Speaking of seen and unseen, the pro-rich arguments in this book have much in common with Bastiat’s views on economics (i.e. both the rich and other classes should want each other to prosper so that they themselves prosper).
In the final two chapters Lewis describes four different value systems and then attempts to offer a reconciliation of these systems from his own point of view. I was actually surprised that the author sided with "philanthropism" rather than "reciprocalism" (which would represent Bastiat’s views of laissez faire). Lewis concludes that we must increase the size of the non-profit sector and to do so he suggests that tax credits be given for donations to not-for-profit social service organizations. Happily he does openly recognize all the problems with this approach, including increased government regulation of charities. I would respond that eliminating government taxes and social services would result in both a booming economy and private charity. Maybe we could agree to a temporary tax credit that would expire along with taxes and welfare?
With that aside, the book is refreshing. The more people who read this book the better. It would make a fine book for classes on social issues and would be great for colleges that have college-wide reading requirements which are now dominated by books with socialist points of view. It would be a particularly interesting exercise for students to determine which rich people are the parasites on society and which ones are the pillars of society.
Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.