Why Can't We All Just Get ... Rich?

Crossposted from unbossed

Conservative politicians and rich folks sometimes propose the following solution to poverty:  if people would just major in the right subjects in college (say, business), then enter a lucrative profession (say, finance), then they, too could become rich.

Voila!  No more poor people!

A recent opinion piece by economist Ben Stein makes this argument.  However, his proposed solution violates the most basic law of economics.

In the New York Times Business section on Sunday, October 15 (on their website by subscription only), Ben Stein had an opinion piece called, "You Can Complain, or You Can Make Money".  Unlike many members of the wealthy elite class, Mr. Stein acknowledges both the existence and problems of economic inequality.  He has previously written that it's unfair for working-class kids going off to war while the wealthy enjoy the benefits of society.  He has even advocated higher tax rates for wealthy people like himself.  (Ben Stein also played, among other roles, that hilariously boring science teacher in Wonder Years.)

In his October 15 editorial, Stein begins by admitting the existence of vast, and increasing, inequality of wealth and income.  But he proposes that people who don't like the current situation should get rich themselves instead of just complaining about it.  He points out that some subjects in college won't start you on a path to wealth, while others will.  Stein give the same career advice that bank robber Willie Sutton would have given (Sutton robbed banks because that's where the money is): Stein suggests, for example, careers in finance.  There's a huge amount of money sloshing around on Wall Street, and even if only a little of it sticks to you, that's still a lot.  That's how you, too, can get to be among the wealthiest one percent.

Will this advice help reduce poverty or inequality?

No.  Here are two reasons why.

First, how many people can ever be in the top 1 %?  The answer is: exactly 1%.  No matter how hard everybody works, no matter what they study in college (even assuming colleges admit everyone), by definition, the top 1 % only has room for 1 %.  So, Stein's advice will not reduce either inequality or poverty.

Second, Stein's advice violates that most basic law of economics, the law of supply and demand.  Suppose, all of a sudden, a whole bunch of people wanted to major in business or finance, then enter the business and finance professions.  Standard economic theory, specifically the law of supply and demand, predicts that business and finance would no longer be lucrative professions.  Economics doesn't get any more basic than that.