Today: Chance Favors the Concentration of More Wealth in Fewer Hands

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Sep 8, 2011

Chance Favors the Concentration of More Wealth in Fewer Hands

Wealth accumulation might be due to a number of factors: hard work, intelligence, lack of ethics, or all of the above. Wealth concentration, on the other hand, is determined primarily by chance and the effect of compounding returns, according to a study published in the journal PLoS One.
The distribution of wealth is far more uneven than popular economic models would suggest, report researchers Joseph E. Fargione, Clarence Lehman, and Stephen Polasky. Given a situation where "all individuals have equal talent and begin with the same amount of capital," an increasingly smaller number of investors accumulated an ever larger share of wealth at the expense of the other investors.
The researchers also found that larger concentrations of wealth decrease diversity within the economy, which decreases the amount of additional wealth that economy is able to create.
A separate report from the liberal Institute for Policy Studies found that, of the 100 highest paid American CEOs of 2010, 22 made more in compensation and benefits than their companies paid in taxes.

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