Should billionaires exist in a well-functioning economy?

Mayher Tyagi, Ousedale School

Fewer than 60,000 people now own three times as much wealth as half of humanity. In 2025, the world's top 10% earned more than the bottom 90% combined and held around 75% of wealth, while the poorest half held just 2% of wealth and under 10% of income. The share of wealth held by the top 0.001% has risen from 4% in 1995 to 6% today, and billionaire and centi-millionaire fortunes have grown 8% a year, twice the rate of the bottom 50%. Extreme inequality is not just large. It is accelerating.

Faced with figures like these, it is natural to ask whether billionaires should exist at all. But the billionaire count is an imperfect measure of what we really care about. Someone worth $990 million is not counted, despite having almost exactly the same economic power as someone worth $1 billion. To avoid this cliff effect, my essay asks a broader question. Should extreme concentration of wealth and income exist in a well-functioning economy? I approached it through two lenses, the theoretical and the empirical.

The theory: it depends how the fortune was made

On one side stands limitarianism: philosopher Ingrid Robeyns's idea that individual wealth should have an upper moral limit. Extreme concentration, she argues, undermines democratic governance and political equality, and the excess could instead fund public goods and the unmet needs of the poor.

Economist William Baumol reframes the problem. The question, he argues, is not whether billionaires exist but how their fortunes were made. Productive entrepreneurs create value through innovation, and that value spills over into the wider economy, generating prosperity for others. Unproductive entrepreneurship, by contrast, extracts value through rent-seeking and wastes resources. The contrast is stark. Russia's oligarchs amassed billions in the 1990s by using political connections to acquire the country's natural resources below their value through the loans-for-shares scheme. Mo Ibrahim, on the other hand, built Celtel's mobile network across more than ten African countries, connecting millions of people, before selling the business for $3.4 billion.

The evidence supports Baumol. William Nordhaus estimates that innovators capture only about 2.2% of the total surplus their innovations create, with the rest flowing to consumers. Benjamin Jones and Lawrence Summers, using a different, economy-wide method, reach the same conclusion. The social returns to innovation vastly exceed its costs, and the value flows mainly to society rather than to the innovator, even when the innovator becomes a billionaire. Perhaps most significantly, Sutirtha Bagchi and Jan Svejnar find that billionaire wealth undermines economic growth only when it is politically connected, not when it is self-made. How extreme wealth is acquired matters more than the fact that it exists.

The data: does concentration actually undermine prosperity?

To test these hypotheses, I merged the World Inequality Database with the IMF's World Economic Outlook database, creating a panel of around 190 to 215 economies from 1980 to 2024, with 9,700 country-year observations on inequality and 7,900 on macroeconomic performance.

The first finding is that income concentration is negatively related to prosperity, but only at the broad top. The correlation between the top 10% income share and GDP per capita is minus 42%, meaning economies where the top decile captures more income are, on average, poorer. Yet this relationship weakens steadily as we move up the distribution, and by the top 0.001%, where most billionaires sit, it disappears entirely. That absence of correlation suggests concentration at the very top does not damage prosperity. What matters is not a handful of ultra-wealthy individuals but how much income is captured by the broad top 10%.

Human development reveals a similar pattern. The Human Development Index is negatively correlated with the top 10% income share, but the relationship turns positive for the top 0.01% and 0.001%. High-HDI countries tend to be developed economies with institutional guardrails, such as the rule of law, competition policy and constraints on corruption, that prevent wealth being accumulated through rent-seeking.

Finally, I tested whether rising wealth concentration is associated with economic growth across 191 countries over a 20-year period. To reduce confounding from differences in national income levels, I compared countries within similar income groups. The analysis found no meaningful relationship between increasing wealth concentration and economic growth.

So should billionaires exist?

Both the theory and the evidence point to the same conclusion: what matters most is not how concentrated wealth becomes, but how that wealth is created. Fortunes built through innovation can generate benefits that extend far beyond the gains captured by the innovator. Wealth accumulated through rent-seeking, by contrast, undermines both economic efficiency and social equity. Robeyns’s warning, however, remains important. Even legitimately earned wealth confers political power that, beyond a point, threatens democratic equality.

The aim, then, should not be to abolish extreme wealth. It should be to ensure that wealth is earned through innovation and genuine value creation, and to prevent its power from capturing the very system that produced it.

BIBLIOGRAPHY

Bagchi, Sutirtha, and Jan Svejnar. "Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty." Journal of Comparative Economics 43, no. 3 (2015): 505–30.

Baumol, William J. . "Entrepreneurship: Productive, Unproductive, and Destructive." Journal of Business Venturing 11, no. 1 (1996): 3–22.

Gómez-Carrera, Ricardo World Inequality Report. World Inequality Lab (2026).

Hoffman, David E. The Oligarchs: Wealth and Power in the New Russia. New York: PublicAffairs, 2002.

Ibrahim, Mo "Celtel's Founder on Building a Business on the World's Poorest Continent." Harvard Business Review 90, no. 10 (2012): 41–44.

IMF. "World Economic Outlook Database." Washington, D.C: International Monetary Fund, 2026.

Jones, Benjamin F. , and Lawrence H. Summers. "A Calculation of the Social Returns to Innovation." Cambridge, MA: National Bureau of Economic Research, 2020.

Nordhaus, William D. . "Schumpeterian Profits in the American Economy: Theory and Measurement." Cambridge, MA: NBER Working Paper Series, 2004.

Robeyns, Ingrid Limitarianism: The Case against Extreme Wealth. New York, NY: Astra House, 2024.

United Nations Development Programme. "Human Development Index (Hdi)." 2025.

World Inequality Lab. "World Inequality Database." Paris: World Inequality Lab, 2026.