Why Equality Drives Entrepreneurship and Innovation

Coming at this question from my typical perspective: a business owner facing a national economy.

You run a mid-sized business selling high-quality furniture. You’ve developed a new chair that’s better than the other chairs on the market. (Think: the Herman Miller Aeron Chair.) Say you’re planning to sell it for $700. (You can’t sell it for much less, no matter the volume, without losing money.)

Would you rather be selling into an economy with wide disparities of income and wealth, or one that’s more equal?

Let’s build one of each.

Imagine a million-dollar economy with ten people in it.

Economy 1: Each person has an income of $100,000.

Economy 2: Two people earn $300K each, and the other eight earn $50K each.

In which economy can you expect to sell more chairs?

In which economy would you expect to see more innovators and entrepreneurs thriving?

This is not quantum physics.

Cross-posted at Asymptosis.