IDEAS home Printed from https://ideas.repec.org/p/zbw/capwps/201902.html
   My bibliography  Save this paper

How the rich are different: Hierarchical power as the basis of income and class

Author

Listed:
  • Fix, Blair

Abstract

What makes the rich different? Are they more productive, as mainstream economists claim? I offer another explanation. What makes the rich different, I propose, is hierarchical power. The rich command hierarchies. The poor do not. It is this greater control over subordinates, I hypothesize, that explains the income and class of the very rich. I test this idea using evidence from US CEOs. I find that the relative income of CEOs increases with their hierarchical power, as does the capitalist portion of their income. This suggests that among CEOs, both income size and income class relate to hierarchical power. I then use a numerical model to test if the CEO evidence extends to the US general public. The model suggest that this is plausible. Using this model, I infer the relation between income size, income class, and hierarchical power among the US public. The results suggests that behind the income and class of the very rich lies immense hierarchical power.

Suggested Citation

  • Fix, Blair, 2019. "How the rich are different: Hierarchical power as the basis of income and class," Working Papers on Capital as Power 2019/02, Capital As Power - Toward a New Cosmology of Capitalism.
  • Handle: RePEc:zbw:capwps:201902
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/196154/1/1663458073.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stefania Vitali & James B Glattfelder & Stefano Battiston, 2011. "The Network of Global Corporate Control," PLOS ONE, Public Library of Science, vol. 6(10), pages 1-6, October.
    2. Avi J. Cohen, 2003. "Retrospectives: Whatever Happened to the Cambridge Capital Theory Controversies?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 199-214, Winter.
    3. Thomas J. Dohmen & Ben Kriechel & Gerard A. Pfann, 2004. "Monkey bars and ladders: The importance of lateral and vertical job mobility in internal labor market careers," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(2), pages 193-228, June.
    4. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    5. J. B. Glattfelder & S. Battiston, 2009. "Backbone of complex networks of corporations: The flow of control," Papers 0902.0878, arXiv.org, revised Aug 2009.
    6. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 133(2), pages 553-609.
    7. James T. Peach, 1987. "Distribution and Economic Progress," Journal of Economic Issues, Taylor & Francis Journals, vol. 21(4), pages 1495-1529, September.
    8. Baker, George & Gibbs, Michael & Holmstrom, Bengt, 1993. "Hierarchies and compensation: A case study," European Economic Review, Elsevier, vol. 37(2-3), pages 366-378, April.
    9. Shuhei Aoki & Makoto Nirei, 2016. "Pareto Distribution of Income in Neoclassical Growth Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 25-42, April.
    10. Francisco Lima, 2000. "Internal labour markets: a case study," FEUNL Working Paper Series wp378, Universidade Nova de Lisboa, Faculdade de Economia.
    11. Rick Audas & Tim Barmby & John Treble, 2004. "Luck, Effort, and Reward in an Organizational Hierarchy," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 379-396, April.
    12. Treble, John & van Gameren, Edwin & Bridges, Sarah & Barmby, Tim, 2001. "The internal economics of the firm: further evidence from personnel data," Labour Economics, Elsevier, vol. 8(5), pages 531-552, December.
    13. Samuelson, Paul, 2012. "Understanding the Marxian Notion of Exploitation: A Summary of the So-CalledTransformation Problem Between Marxian Values and Competitive Prices," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 182-202, August.
    14. Nitzan, Jonathan & Bichler, Shimshon, 2009. "Capital as Power. A Study of Order and Creorder," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157973, November.
    15. Toda, Alexis Akira, 2012. "The double power law in income distribution: Explanations and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 364-381.
    16. Veblen, Thorstein, 1904. "Theory of Business Enterprise," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1904.
    17. Bichler, Shimshon & Nitzan, Jonathan, 2012. "Capital as Power: Toward a New Cosmology of Capitalism," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 65-84.
    18. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    19. G. C. Harcourt, 2015. "On the Cambridge, England, Critique of the Marginal Productivity Theory of Distribution," Review of Radical Political Economics, Union for Radical Political Economics, vol. 47(2), pages 243-255, June.
    20. Joan Robinson, 1953. "The Production Function and the Theory of Capital," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 81-106.
    21. Jesus Felipe & Franklin M. Fisher, 2003. "Aggregation in Production Functions: What Applied Economists should Know," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 208-262, May.
    22. David R. Roberts, 1956. "A General Theory of Executive Compensation Based on Statistically Tested Propositions," The Quarterly Journal of Economics, Oxford University Press, vol. 70(2), pages 270-294.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fix, Blair, 2019. "An Evolutionary Theory of Resource Distribution," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 65-97.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fix, Blair, 2019. "How the Rich Are Different: Hierarchical Power as the Basis of Income Size and Class," SocArXiv t8muy, Center for Open Science.
    2. Fix, Blair, 2019. "How the rich are different: Hierarchical power as the basis of income size and class," Working Papers on Capital as Power 2019/02 (v.2), Capital As Power - Toward a New Cosmology of Capitalism.
    3. Fix, Blair, 2018. "Capitalist income and hierarchical power: A gradient hypothesis," Working Papers on Capital as Power 2018/06, Capital As Power - Toward a New Cosmology of Capitalism.
    4. Fix, Blair, 2018. "Capitalist Income and Hierarchical Power," SocArXiv u8epv, Center for Open Science.
    5. Fix, Blair, 2018. "The trouble with human capital theory," Working Papers on Capital as Power 2018/07, Capital As Power - Toward a New Cosmology of Capitalism.
    6. Fix, Blair, 2018. "The Trouble with Human Capital Theory," SocArXiv ax6k7, Center for Open Science.
    7. Fix, Blair, 2018. "The Trouble With Human Capital Theory," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 15-32.
    8. Fix, Blair, 2017. "Evidence for a Power Theory of Personal Income Distribution," Working Papers on Capital as Power 2017/03, Capital As Power - Toward a New Cosmology of Capitalism.
    9. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," SocArXiv g86am, Center for Open Science.
    10. Blair Fix, 2018. "Hierarchy and the power-law income distribution tail," Journal of Computational Social Science, Springer, vol. 1(2), pages 471-491, September.
    11. Fix, Blair, 2020. "Economic Development and the Death of the Free Market," Working Papers on Capital as Power 2020/01, Capital As Power - Toward a New Cosmology of Capitalism.
    12. Fix, Blair, 2018. "The growth of US top income inequality: A hierarchical redistribution hypothesis," Working Papers on Capital as Power 2018/05, Capital As Power - Toward a New Cosmology of Capitalism.
    13. Fix, Blair, 2018. "The Growth of US Top Income Inequality: A Hierarchical Redistribution Hypothesis," SocArXiv suqnk, Center for Open Science.
    14. Fix, Blair, 2017. "Evidence for a Power Theory of Personal Income Distribution," SocArXiv qgwus, Center for Open Science.
    15. Fix, Blair, 2021. "Living the good life in a non-growth world: Investigating the role of hierarchy," SocArXiv wem9p, Center for Open Science.
    16. Fix, Blair, 2021. "Living the Good Life in a Non-Growth World. Investigating the Role of Hierarchy," Working Papers on Capital as Power 2021/02, Capital As Power - Toward a New Cosmology of Capitalism.
    17. Fix, Blair, 2019. "Energy, Hierarchy and the Origin of Inequality," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 1-32.
    18. Blair Fix, 2019. "The Aggregation Problem: Implications for Ecological and Biophysical Economics," Biophysical Economics and Resource Quality, Springer, vol. 4(1), pages 1-15, March.
    19. Blair Fix, 2019. "Energy, hierarchy and the origin of inequality," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-32, April.
    20. Fix, Blair, 2014. "Rethinking Profit: How Redistribution Drives Growth," Working Papers on Capital as Power 2014/02, Capital As Power - Toward a New Cosmology of Capitalism.

    More about this item

    Keywords

    hierarchy; power; functional income distribution; personal income distribution; inequality; capital as power; class;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:capwps:201902. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: http://www.capitalaspower.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.