The trouble is that income/wealth inequality is often ignored in macroeconomic models. The math gets tough and an easy way to simplify the equations is to assume an equilibrium growth path. More complex models use a dynamic stochastic general equilibrium, but an equilibrium all the same.
Unfortunately, the key feature of rising inequality is that it may move the system into an unstable equilibrium. For example, if a handful of billionaires hang out together at Davos and get a bit of groupthink, they might decide to misallocate some capital (accidentally). If they make a mistake in a truly dramatic fashion, (investing heavily in Bitcoin, for example) they could evaporate a large chunk of the nation's wealth. When a handful of actors has an extreme influence on capital allocation, we've effectively become a command-economy instead of a free-market economy.
I think the “us vs them” mentality is too strong here. Don’t you think these billionaires are just as against each other (if not more so) than against the common man?
I don't think they'd need to intentionally cooperate. In fact, one of the worst motivations could be competitive status-seeking. A few billionaires trying to go to space is good. What if 10 of them do it?
Read about Fordlandia. It's hard to measure the economic impact of Ford's obsessions on Detroit.
> us vs them
I'm not sure where you got that sense. Capitalist societies tend to create log-normal distributions of wealth. There's no threshold where you can say one person is "us" and the next on the curve is "them".
The trouble is that income/wealth inequality is often ignored in macroeconomic models. The math gets tough and an easy way to simplify the equations is to assume an equilibrium growth path. More complex models use a dynamic stochastic general equilibrium, but an equilibrium all the same.
Unfortunately, the key feature of rising inequality is that it may move the system into an unstable equilibrium. For example, if a handful of billionaires hang out together at Davos and get a bit of groupthink, they might decide to misallocate some capital (accidentally). If they make a mistake in a truly dramatic fashion, (investing heavily in Bitcoin, for example) they could evaporate a large chunk of the nation's wealth. When a handful of actors has an extreme influence on capital allocation, we've effectively become a command-economy instead of a free-market economy.