Income Gap vs. Money Supply

Pretend that there are 1,000 people in the world. And everyone is given $1. Assuming that certain people profit and others do not, it would mean that someone could end up having $5 for himself and four other people would have $0.

People have argued that to me, and I'm not really sure how to defend the free market in that stance. I know I have before, but I've lost the concept somehow. I know that Friedman advocated adding to the money supply every so often, but other people have argued that someone profiting doesn't necessarily mean someone else has less money.

I hope it makes sense what I'm saying. Can someone help me out?

Pretend that there are 1,000 people in the world. And everyone is given $1. Assuming that certain people profit and others do not, it would mean that someone could end up having $5 for himself and four other people would have $0.

1) How does that come about?

2) So what?

3) I think it's an unrealistic scenario where the game is rigged to make free markets and a market money supply look bad from the start. Anyways, those people without money could still barter. Or work for money.

Brian:

Assuming that certain people profit and others do not, it would mean that someone could end up having $5 for himself and four other people would have $0.

In a fixed money economy, overall profit is not measured by dollars but by subjective progress made by the civilization. The evil boss guy pays employees money to build cars, who then take their money to the store to buy stuff, whos owners reinvest the money into the car factory etc etc. Its a constant cycle... the system gets better because people keep working producing things and investing in capital. Money just allows us to trade; it is not goods in and of themselves.

Am I missing something here? Everyone gets $1 in the beginning. Then, some people exchange their dollars for goods and services. In other words, they consume their wealth. Now they have no more money left.

What exactly is the problem?

The problem is they now have to labour to earn wages, or entrepreneurialise to earn profits, and work sucks...............

Brian:

Assuming that certain people profit and others do not...

That sentence is the key to the whole thing. We have to know what happened.

What did they do with their dollar? Probably spent it on something they want. OK, now do these people have jobs? If they do, they will get paid and have money again. This happens in real life all the time, people living from paycheck to paycheck.

If they don't have jobs, what has this to do with the money supply? The problem is with the factors which leave them out of jobs. Maybe there is a minimum wage law, or a union granted too much power by laws, or inflation has caused malinvestments and they got fired. Or they are too old or too young or too something to work. Fine. What has this to do with the supply of money?

Anyways, those people without money could still barter. Or work for money.

That is usually what I tell them. The thing that people bring up when I say, "They obviously bought something with their $1, and they can sell it to someone else for the same price or more, if they can," is that people may buy food with it. If all they can buy with their salary is food, then there's nothing to sell. And when I tell them that everyone always has money in the shape of their own body (since everyone's hard work equals money), they can just work more. Some people think that being a janitor or doing a 'dirty' job is somehow below them. I can't seem to convince them otherwise. It seems like I'm arguing with their opinion.

If there are 1,000 people in the world and they are given equal money shouldn't their buying power be about $60 billion each?  Whoever is setting up this proposition must know that their dollar is worth a lot more than a dollar if there are only 1,000 of them.  $1 will get you a lot more than food.  Plus, you shouldn't have to spend a penny on food because it's easy to make your own, assuming there isn't any already.

 

This is a very blank scenario.  Is it this world?  What's there?  Are the people humans?  Are there plants and animals there?

This is a very blank scenario.  Is it this world?  What's there?  Are the people humans?  Are there plants and animals there?

I can't tell if that's a joke. It's this world. Everything is the same except you pretend it's a completely free market. The population can be whatever you want. I chose 1,000 because it's an easy, even number.

Some people think that being a janitor or doing a 'dirty' job is somehow below them. I can't seem to convince them otherwise. It seems like I'm arguing with their opinion.

That is exactly what you are doing--arguing with their opinion.  Knowledge of each actor's cash holdings doesn't tell us what exchanges occurred and their nature.

Don't feel a need to continue arguing if your opponent refuses to make an argument aside from asserting his distaste for the situation (even explaining WHY he finds the state of affairs distasteful would be a start).