Functions and Justifications of Individual Wealth in Economic Paradigms from Adam Smith to Neo-liberalism
We observe rising inequalities in the distribution of income and wealth in almost all countries in the world for about the last three decades. Globalization, technological progress and several political factors are the most important determinants which are intensively discussed in the recent literature on growing inequal¬ity within nations. Another important, but much less discussed question concerns the economic function and justifica-tion of high incomes and wealth. Is the possibility to become rich an essential incentive for economic effort that drives economic progress and ultimately increases society’s welfare, as a widespread nar¬rative states? What do modern and older theories of economics say about the economic function of individual richness and wealth? The authors of Classical Political Economy were critical of wealth not used for capital accumu¬lation, but for excessive consumption (unproductive expenditure). In today’s leading economic theories there is a vain search for a systematic handling of wealth. With the excep¬tion of neoliberalism, normative distribution questions are widely banned from economics. By study¬ing the main economic paradigms, this paper shows the changed attitude toward individual wealth over time. I argue for including normative considerations in the economic research about individual wealth and inequalities in general. This paper attempts to show how wealth has been assessed and (sometimes) justified in different economic paradigms. First, two significant Greek philosophers are introduced, as their opinions of capital, interest, and wealth influenced many subsequent generations until the 19th century. The Scottish moral philosopher and economist Adam Smith as well as certain other representatives of classical economics of the 18th and 19th centuries are discussed in more detail, as they offered many, often fruitful thoughts on the function and assessment of wealth. Certain central views of the utopian socialists and Marx are pre
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Keywords: Income and Wealth Distribution, Classical Political Economy, Adam Smith, Karl Marx, Marginalism, Neoliberalism, Moral Philosophy
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