Who is worse for your wealth, politicians or billionaires?

People in the United States now think that billionaires are a sign of bad policy. Billionaires are being made out to be bad people by politicians like Alexandria Ocasio-Cortez and Elizabeth Warren. Left-leaning politicians and their allies think that the wealth of billionaires hurts society because it makes inequality worse. As a result, many people propose taxation as a way to make things more fair by redistributing resources. However, these ideas aren't always good and could be driven by envy.

When people talk about taxing billionaires in a compassionate way, they are more likely to get people to agree with them. Most of the time, we think that suggestions to tax billionaires are based on ideas of fairness and justice. Most people are appalled by acts of unfairness and injustice, and some might think it's unfair and unjust for some people to make billions while others barely have enough to eat.

But it was shocking to learn from research that support for redistribution is largely driven by envy and self-interest. In a 2017 paper, evolutionary psychologists wrote that "evolved motives for navigating interpersonal interactions clearly predict attitudes about redistribution, but a taste for procedural fairness or distributional fairness does not." More recent evidence also shows that malicious envy can make people want to redistribute wealth.

Readers shouldn't be surprised that envy drives support for redistribution because people who don't do well in the market tend to dislike those who do. Intellectuals, for example, think it's wrong that entertainers and people with a lot of influence make more money than they do, even though intellectuals have more education and knowledge. By attacking people who make money, people who don't do well in life can feel better about themselves at the expense of society, because their plans to punish billionaires will hurt society.

People become billionaires by making things that people want or need. If billionaires' inventions and services didn't do anything useful, they wouldn't have made so much money. Getting to be a billionaire is a reward for making a lot of money. Also, most of the benefits of technological innovations go to consumers instead of the people who made them. Billionaires are net value creators because they put more into society than they get back.

Bill Gates became a billionaire because of Microsoft, but the company's effect on increasing the productivity of businesses around the world and boosting economic activity is bigger than Gates' wealth. The ambition of billionaires has led to market-based innovations that have brought down prices for consumers and made luxury goods available to the masses. Even though billionaires have benefits, some people say that taxing them would give the government more money to pay for welfare for the poor.

This idea is wrong because most billionaires are generous, and many of them have signed a pledge saying that most of their money will go to charity. Aside from giving money to charity, billionaires are committed to using their money to solve some of the most important problems in the world. A UBS report found that 95 percent of billionaires surveyed thought they should use their money or resources to help solve global problems, and more than two-thirds said it's their job to make things better.

Billionaires have more power than national governments and can help as many people as possible around the world. Also, when governments pay for welfare, they use tax money, while billionaires use their own money. In an ideal world, if government policies make it easier for people to become billionaires, private giving can become a bigger source of money for welfare. If the government doesn't need as much money from taxes, taxpayers will have more money to save and invest, which will increase the stock of capital assets and help spur future innovations.

A society with fewer billionaires is less dynamic and efficient. Countries that make it hard for people to start their own businesses by putting in place high taxes and lots of rules tend to fail in the long run. Sweden's move to the left in the 1970s and 1980s made it hard for people to start their own businesses. In 2004, only two of the top 100 firms in Sweden with the most revenue were started by entrepreneurs, compared to 21 that were started before 1913.

Clearly, Sweden lost out on innovations that could have made the country more dynamic and wealthy because of the attacks on entrepreneurship at the time. Normal people also couldn't make profitable investments in stocks, which they would have been able to do if the government had made it easier for small businesses to succeed.

Philosophers Jessica Flanigan and Christopher Freiman wrote in an article defending billionaires that working people get a lot out of the value-creating activities of billionaires:

To the extent that billionaires make their money through investments in productive companies, they have powerful incentives to produce goods, services, and useful public infrastructure, which benefits everyone, including the poor. . . . Overwhelmingly, large retail companies benefit low-income consumers through economies of scale, even if they also produce billionaires.

If you try to make people dislike billionaires, bad things will happen. Billionaires show that things are getting better and better. So, trying to stop new billionaires from getting rich will bring down living standards and hurt the chances of the people left-wing politicians say they want to help.