Entrepreneur explains: the rich don't create jobs

Was there a demand for the iPad? For chunky spaghetti sauce? For flat panel TV's.

There are a lot of products that people didn't know they wanted until it was in front of them. One of the reasons entrepreneurs flourish, despite big company market research.

There is almost always a demand for lower prices (lower priced buggy whips, not so much, cost reduction doesn't work well on obsolete products).

 

The central point he is making is true, the rich do not create jobs. At least no more jobs than anyone else. And it is a dangerous assumption since so much of our political economic "common sense" is based on it. Anyone who watches the video should be able to grasp the facts and the concept.

It comes down to what people spend most of their money on. Secure middle class people will spend money on necessities, leisure (and a few extravagances to keep up with the Joneses) and then on investments and savings. And with a slightly above moderate wage that spending is about equal on all three expenses.

A very poor person is likely to spend most of their money on necessities and then a little on leisure, and almost none on savings or investments.

A wealthy person will spend most of their money on savings and investments/assets. These assets, if they are seen to be bullet proof like technology or real estate, will attract the attention of other wealthy consumers and those who would like to emulate them. This creates unrealistic expectations of the value of these assets, or as we call it now bubbles.

So the end result of wealth inequity is a very unstable and dangerous economy.

I would stress that this is just in the nature of economics, in closed systems (like the GLOBAL economy) things eventually accumulate. Without some drastic change or threat those accumulations will tend to remain stable.

People need to be aware of the problem, not so they can blame each other for it, but so that they can work together to fix it.

 

Not even close to accurate. You've been hoodwinked by charlatans.

To the contrary. Growth of demand has been slow, which is why economic growth has been slow. If there was greater demand, we'd be seeing increases in prices and eanded production to meet it.

 

Could be. You're making the classic error of using anecdotal evidence of one or two products upon which you base conclusions as to the economy as a whole.

If there was more demand we'd have entreprenuers opening more businesses and established businesses expanding production.

But the middle class is tapped out by the housing bubble and the fact that over the past 30 years almost all the growth in income and wealth has gone to the top 10%, mostly the top 1%. The middle classes don't have the same relative spending power, hence we have a sluggish economy.

 

I'm answering your comment that consumer demand drives innovation.

Consumer demand is a huge factor, but that effects the economy as a whole. The new jobs being created by entrepreneurs are a small part of that (but then, if we increased those on the payroll by 7.7%, there would be no unemployment).

Consumer demand is only one factor that determines if an entrepreneur starts, or grows a business. Profitability is the primary factor. If the demand grows, but costs (taxes, regulations, mandatory benefits, etc.) grow faster, profitability is insufficient to justify the risk.

That depends on how you look at the numbers. Here is an interview (written and in podcast) that shows the middle class isn't as stagnant as the politicians would like you to believe.

http://www.econtalk.org/archives/2012/04/burkhauser_on_t.html

 

And making the classic error of using anecdotal evidence of one or two products upon which you base conclusions as to the economy as a whole.

That is true, we are on the margins

What determines profitability? Whether people will buy the product. Sure, if they can't afford it, they won't buy it. That's the point.

Feel free to summarize it if you think it presents a good argument. I'm not going to spend an hour listening to it.

 

Where did I say that innovative products drive the economy as a whole?

This is the margins?

What product will people buy in a year? What price will they pay? What is the cost to design, tool, assemble, market, sell, and ship that product? What will the price of competitive products be? Will there be other products that are more compelling, reducing demand?

It is all so simple......

Did you look at the page - there is a summary at the top:

 

Wrong. Most capital in China is now privately owned.

Because all the natural resources are state owned, especially the land. But socialism requires collective ownership of capital as well as land, so China is no longer socialist.

As I said, natural resources (coal, oil, broadcast spectrum, etc.) are still state owned, but that does not make China socialist. There is a lot of privately owned banking, and even some privately owned infrastructure in addition to the vast majority of real estate improvements. China is neither capitalist nor socialist, because it has separated ownership of capital from ownership of land.

 

Clearly you have no idea of what GDP actually is, or how it is actually measured. Assets, including natural resources, play no part of it. Neither does capital, unless it is actually spent.

 

Why prove your ignorance?

<sigh> Wrong, obviously. The whole point of capital is to increase production (+ to GDP) to generate operating income. Natural resources yield rents, which also figure in GDP.

 

By your use of tow or three companies to argue your position that production drives demand.

From that perspective.

Depends on their needs and wants, and how much money they have. Without the latter, the others don't matter.

Varies by product.

Just so. If the people who would spend don't have the money, you have less demand, and thus less production, particularly in a slack economy.

Not very meaningful without examining his methology. But even if we accept his conclusion -- that median income has grown 36% (I assume real) over the past 40 years, that equates to about 3/4% growth per year. That is well below average income and not even in the ballpark of the growth seen by the 1%. It is also insufficient to drive economic growth in the ~3% range we have averaged historically before the 2000s.

 

The only person proving his ignorance is you.

GDP is spending, all the spending, and nothing but the spending, on real things in the real world. It has three components: consumer spending, government spending on real things (i.e., excluding debt repayment and transfer payments), and business spending on real things (a.k.a. "gross investment"). There is also an import/export adjustment, and an adjustment for changes in inventories, but those are small compared to the rest.

Assets are not part of GDP. Rents are not part of GDP. Interest is not part of GDP.

http://www.investopedia.com/terms/g/gdp.asp

 

LOL!

Natural resources and capital goods are both real things in the real world. So thanks for proving that I am right and you are wrong.

Consumers spend on rent, and so do businesses and to a lesser extent governments. YOUR OWN SOURCE says that everything businesses spend on capital goods adds to GDP:

"GDP = C + G + I + NX
.
.
.
"I" is the sum of all the country's businesses spending on capital"

All capital assets add to GDP when purchased, as proved by YOUR OWN SOURCE, quoted above.

They are definitely part of GDP, as money is spent on them.

Who said it was?

Uh-huh. Try reading it.

 

Oh brilliant. So how much did China spend last year to buy all the land in China? Zero. Land doesn't count in GDP. Only manufactured goods count, and only when they are bought, not when they are previously owned.

So when you said:

... you were WRONG, WRONG, WRONG. Go ahead and admit it. If you're honest enough to do so.

Yes they do. And NO, that doesn't count in GDP.

Gee, my own source said exactly what I said: business spending on real things in the real world, a.k.a gross investment, is part of GDP. Only Roy L could claim that my own source agreeing with what I said makes me wrong. Sheesh. Next time, read for content. Or just read.

Yes they do, as I said. But YOU said that land and natural resources count in GDP. Which they don't, as my source (which you have now accepted) shows. Which means you were WRONG WRONG WRONG.

They are part of GDP only during the quarter during which they were purchased, when the purchase counts as spending for real things (as I explained earlier). But an asset which is already owned (like the land and natural resources that you falsely and wrongly claim are part of GDP) plays no part in GDP, and never will.

Land and natural resources are not part of GDP, as you falsely claimed. Clearly you have no idea of what GDP is -- or you didn't, until I schooled you.

 

The funny thing is, you actually imagine the fact that self-payments don't count toward GDP is relevant.

<yawn> Try having any GDP without it...

Wrong again. All payments for services also count in GDP.

I see. So, in what we might laughingly call your "understanding" of economics, all the capital equipment purchased in previous years that is used to help produce goods and services this year doesn't add to this year's GDP....?

ROTFLMAO!!!

I was definitely not wrong. All the natural resources in China ARE state owned, and that ownership definitely adds to the government share of GDP.

I am not responsible for your fabrications about what I plainly wrote.

I didn't say it COUNTS IN GDP. I said it ADDS TO GDP. Just like previous years' investments in capital equipment.

Ah, no, your source proved me right and you wrong.

Nope. You now have exactly two choices, Poor Debater (there's honesty in advertising for you!): either post a direct, verbatim, in-context quote to that effect, or admit that you are lying about what I plainly wrote.

No, you are just WRONG WRONG WRONG when you claim I said they do.

I see. So, the oil resources owned by the Saudi government, say, play no part in that country's GDP? What do you suppose all the oil companies are doing there then, hmmmmmmmmm?

You are making a laughing stock of yourself.

<yawn> Can a country have any GDP without land or natural resources...?

<crickets>

LOL! I have demolished and humiliated you -- and proved your forum name all too accurate.

 

Yeah but the rules on it are so strict as to put them on government control. They had a funny story on the news recently about how investment restrictions are causing malinvestment in the real estate sector. Building American looking ghost towns and kicking out the people that used to live there that are now homeless because they can't afford to live in the investment grade housing.

It is improving for sure, but they are very limited to what type of investments they are allowed to make still. They have room to grow even further and faster if they were freed up.

Well, they aren't 100% socialist, no country is really. But they are on that side of the spectrum more so then most 2nd and 1st tier countries, so it is usually acceptable to call them "socialist".

 

1 global warming is proven BS, russian now say 200 years of cooling ahead lol
2 being rich doesn't mean you create jobs, no
3 jobs alone are not good, many jobs are welfare jobs
4 production and free trade and free purchases or non purchases are best, unregualted capitalism just stops governmetn bs and does better, helping poor more than other systems including parasite capitalism democrats love and we have now
5 science would solve mas sproduced housing problem if not hoobled by government and parasite capitalists