Posts Tagged ‘economics’

A reason for that it’s better for economy when people are rich

June 28, 2016

Not being a professional economist, I nevertheless present in this short blog post of a reason for having people rich is better for economy.

This reason is that when distributing risks between a several entities, it is preferred that richer entities bear the risk.

For example if I’d be proposed to receive $1000000 (million USD) with probability 20% or receive $100000 (hundred thousands USD) with probability 100%, I would prefer the second, despite then mean value of the first offer is two times better. This is because a million is not my urgent need.

Having more money, I would be able to create some (probably not many, such as 1/2, but this is a general principle and the exact sum does not matter) new jobs and/or invest and/or buy some goods so supporting the producers.

So I choose risks in a way inefficient for economy accordingly basic economic laws (it is however efficient, because having more money I’d have more time to volunteer).

The conclusion: Risk distribution is one factor which makes richer people better for economy.

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