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Comment by WalterBright | Hacker News Reader

> At the same time that the major factors expanding the economic pie were losing momentum, other powerful forces emerged that would push toward dividing the pie more unequally

The framing of the issue influences what conclusions one draws. Here, the authors think of the economy as a "pie" created by "factors" that gets "divided up". What naturally follows is that if some get a bigger "slice" than others, it is inherently unfair.

But a free market economy is not a pie. It's a collection of people that create wealth. Some create more wealth than others. Bob creating more wealth than Fred does not mean that Bob took it from Fred. There's nothing unfair about Bob creating more than Fred.

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Bob starts with 11 units of utility. Fred starts with 2. It costs 1 unit of utility to exist. Each of Bob and Fred invest their remaining utility in the utility market, which grows at 10% per year regardless of what either of them do. 25 years later, Bob has 109 units of utility, and Fred has roughly 12 units of utility. At the beginning of this thought experiment, Bob had 5.5x the utility units of Fred. At the end, he had more than 9x.

This is a simple thought experiment that I hope illuminates something important: in an economy where there is year over year growth, inequality grows by default as a function of exposure to the market. Here, Bob starts with more and can be more exposed to the market. In this example, Bob started with 5.5x more assets - but in America today, the top 10% of households have a median net worth of $1.6m, and the 40th-60th percentile of households have a median net worth of $88k, a multiplier of 18x (note: this data is from 2016).

Most Americans have little to no exposure to the market, while the richest 10% own 84% of stocks. There are many factors driving inequality, and I don’t think anyone would argue that some people are more economically productive than others. But it’s not the case that inequality in the United States is purely a function of hard work by talented people - there are very significant structural factors.

But this thought experiment has no connection to what causes most people to make more money than others. That's that they get jobs that pay different amounts of money. There is no guaranteed 10% per year investment.

The most significant structural factor that creates wealth inequality is personal conduct and talent, and the second is that some people have crappy parents. Third is location.

None of it is society [1], unless you consider refraining from forcibly conscripting everybody into communist slavery to be a structural factor.

[1] Except for all the laws I dislike.

Or they come from wealth. It does not require a massive inheritance to get ahead here - it requires enough to be exposed to the market, which most Americans don’t get.

The 10% above is to make this example clear and easy, not a specific asset class.

We can discuss to what extent people receive opportunities to gain significant personal income, but I strongly disagree that personal conduct and talent are the primary factor. The number one rule of the world is “people respond to incentives” - there are massive structural deltas in incentive landscape and opportunity exposure as a function of background. You can have amazing parents who do right by you, and grow up poor and stay poor for want of exposure to opportunities and the market.

Because year-over-year growth is runaway, time in the market is of extreme importance too. In a very real sense - every second you don’t have more assets in the market than the next person, they are pulling away from you in literally exponential manner.

A huge amount of it is society, and there’s a lot of light between “let’s try to make society better by preventing the gravity-like accumulation of capital entirely into a modern feudalist state” and “communist slavery”.

There just aren't enough people who come from wealth for it to matter.

>The most significant structural factor that creates wealth inequality is personal conduct and talent, and the second is that some people have crappy parents. Third is location.

If this is true then how come despite people being richer today than in the past they are still less wealthy from a relative perspective? Your statement is obviously incompatible with our current world and fails to explain why we had less inequality in the past where people had less talent and worse personal conduct.

>None of it is society [1], unless you consider refraining from forcibly conscripting everybody into communist slavery to be a structural factor.

I don't know where you get these crazy ideas but the conventional solution to high unemployment is to just increase consumer inflation which makes it lucrative for everyone to work and whatever inflation we have right now is clearly benefiting existing wealth holders at the expensive of workers.

Decreasing wealth inequality is quite simple. Just increase wealth at the bottom. If poor people at the bottom have $100 to their name and Bill Gates has $100 billion then he is a billion times richer but if you made sure everyone at the bottom had $200 then Bill Gate's relative wealth would basically be cut in half and he would only be half a billion times richer.

It's pretty obvious that there are fundamental problems in modern economies and a lot of them relate to government policy.

If you're mad that Bill Gates is rich, you aren't really interested in helping the poor.

But finite life expectancies effectively act as a cap on that process. In the very best case, you only have about half a century to compound wealth.

Modern America is not very conducive to preserving intergenerational wealth. Of the top ten richest Americans, only one is not a first-generation billionaire. Rockefeller despite amassing an enormous fortune, equivalent to $400 billion today, does not have any heirs in the top 100 a century later.

There's a number of factors at play here. First, US estate taxes tend to be consistently high around 35%+ and pretty hard to avoid. Second, unlike traditional aristocracies, the scions of American capitalism rarely arrange marriages with other prominent families. Consequently dynastic wealth almost always gets diluted by 50% or more every generation. Third, US GDP growth has historically averaged pretty high around 3% per annum. The relative size of a fortune to the broader economy is constantly shrinking per year.

These factors combine to make the relative size of a dynastic fortune shrink by about 85% per generation. Assuming a generation gap of 30 years, you'd have to achieve consistent real returns of 7% a year. And that's assuming no loss of capital due to consumption, philanthropy, divorce, capital gains tax, dividend taxes or fraud.

Over the past century, equities have only averaged a 6% real rate of return. Unless you have significant financial or business acumen, sustainably beating the stock market on a large portfolio over decades is virtually impossible. On an inter-generational basis that talent is very unlikely to be present in every scion. A dynasty with a penchant for risk-taking is far more likely to blow their fortune by some idiot son along the way.

Rockefeller had a tax rate more than twice what today’s tax rate on the super wealthy is.

What you say is simply not true - we know this because the fundamental measure - concentration of wealth - is continually increasing.

Intergenerational mobility, particularly at the very top, is interesting, but ultimately irrelevant to most people. What is relevant are the vast quantities of people who suffer from poverty and grotesque inequality.

Imagine explaining to some homeless person that society was pretty fine actually because in several generations somebody will have overtaken Bezos.

Put another way - you don't make an unfair ladder fair by rapidly re-arranging people on it as much as possible (aka "social mobility" or "opportunity") you make it fair by flattening the ladder (inequality reduction) and making the bottom of the ladder a less unpleasant place to be (poverty reduction).

That doesn't seem to matter, though. To extend the parent's example:

Bob and Fred both die at age 43 (18 + 25). During their life, they both married and had children, Barbara and Felicia, respectively. While the US system is not conductive to preserving intergenerational wealth, it's still true that the wealthier can pass on more than the less wealthy.

So at their age of 18, Barbra starts with 20 units of utility, and Fiona with 8. Sure, Bob has passed on much smaller percentage of their wealth than Fred, but his descendant is still better off than Fred's.

This is inline with my reasoning. Certain circles say that the affluent are causation for capital markets operating efficiently. More specifically, that the purchasing power of the affluent are the source or "spring" from which economic activity is generated. It's just not true.

Economic activity is generated by the act of expenditure. The act is a threshold behavior relative to the an economic agent's ratio of liquid assets to fixed costs. "Hey, the rich spend a lot of the cash and pump the economy!". "Hey, conversely, the debt to income ratio of Bob will always disincentivize him against market participation!".

Back to your point. The financial system favors the wealthy because it's capitalism. Capital is power and power is influence. That influence has systemically skewed political and financial institutions to favor those with aggregations of wealth. This is also true in free enterprise markets where consolidation is a natural result of the economic cycle and economies of scale.

But, I wholeheartedly disagree with posing personal wealth inequality as a core driver of economic inequality in the US. I honestly see this as a symptom of vast market consolidation occurring since the 1950's. Bigger business structures eliminate structural redundancies in a market which can reduce costs for the consumer. But, the side effect is income hierarchies are stratified and flattened at a market level creating economic caste systems. And, being a vibrant and faithful patron of the free market system becomes a lot harder for normal guys like Bob.

>>Economic activity is generated by the act of expenditure.

The tendency toward expending money for products is not a scarce economic resource. It is always abundant, and leads to almost everything produced being consumed, as it reaches its market clearing price.

What's scarce is capital and production, and only the profit-motivated investment that emerges when people are secure in their right to their private property has been shown to rapidly make it less scarce. Witness China before and after its market reforms.

The facet I'm viewing economic activity from is the magnitude, distribution, and probability of expenditure based on the differential between an individual's cost of living and luxury purchases.

The aggregation of wealth in a subset of individuals, with respect to the cost of living, will leave them more free or willing to make nonessential purchases which generate an expansion in economic activity. I'm getting at the point that distributing those liquid assets across more individuals will lead to an increase in the magnitude, distribution, and frequency of aggregate economic expenditure (i.e. monetary velocity). It's tricky because, as you referenced, there are markets for fixed resources which could be negatively impacted if that debt to income ratio gets too large for the majority of market participants. Although I think the trajectory of consumer markets further favors my view point as purchases are transitioning from physical goods to services and digital goods.

In that same vein, I believe profit-motivated investment is only reinforced by a greater diffusion of economic expenditure. The diffusion only increases the frequency of opportunity available for firms to enter an arbitrary market.

>>This is a simple thought experiment that I hope illuminates something important: in an economy where there is year over year growth, inequality grows by default as a function of exposure to the market.

This is not true. Investment rates of return are much higher when you have smaller amounts of capital to invest, ceteris paribus.

Can you provide a citation for this? I appreciate that it is a bit unfair to ask for one here, but I fundamentally disagree with your point and would like to learn more about why you believe it to be true. While I concede that at the extreme high end, there are limited ways to invest without distorting the market yourself, it’s just not the case that returns are higher with less money. If anything, returns are lower, because Fred in this example must pick more conservative investments with his single unit of investable utility - he has only the one to lose! By contrast, Bob is free to make riskier bets with higher payoffs, as his asset portfolio starts with ten units of utility.

One example of returns being greater with less capital is your gains are taxed at a lower rate. 0% for gains less than $15,000 for example.

> Fred in this example must pick more conservative investments with his single unit of investable utility - he has only the one to lose!

Must? Clearly not, as lottery "investments" skew heavily towards lower income people, and the lottery is a terrible investment as it has a negative net rate of return.

I don't have a source. I make this claim based on:

1. The observation that very wealthy people like Bill Gates and Elon Musk saw their net worth increase at a far faster pace earlier in their career.

2. Basic complexity theory. Managing less assets is less complex than managing more.

3. The range of investments that can absorb one's entire capital without market distortions grows as one has less capital to invest. Say one finds a great opportunity in an ice cream stand on a busy corner that costs $50K. If they only have $50K, they can invest the entire amount and get a great return on investment on their entire net worth. If they have $50 million, that ice cream stand could only efficiently utilize 0.1% of their capital. They would need to find 1,000 similar opportunities to match the return on investment they could have obtained if they were able to invest all of their capital into that one opportunity.

Most investments are not $50k into an ice cream stand but $50k into the stock market. Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company.

Small businesses are a huge target of investments. As for stocks, micro-caps have historically outperformed large-caps, and micro-caps individually are limited in how much investment capital they can efficiently utilize.

>Also someone with $50 million can still invest into an ice cream stand but someone with $50k cannot be an early investor into a tech company.

That is mostly due to regulatory restrictions on public offerings, and yes, that contributes to greater income inequality.

In a free market however, you'd see low-friction token sales, with thousands of contributors, providing the tech company with its initial capital, not a small cadre of VCs.

The comment you're replying to is a simplification, but so is yours. Returns on your investments are pretty much zero, if, like a disturbingly large number of people, you don't have any money left at the end of the month to invest and an unexpected expenditure of a few hundred dollars requires you to take on debt.

I did say 'ceteris paribus'.

In fact the opposite is true and wealthier households get higher investment returns, even within asset classes: https://www.dropbox.com/s/njzzx31616uek7p/JMP_Xavier.pdf?dl=...

The trouble is once Bob owns most of the pie he can use that wealth to build moats, buy political favours and extract rents from the Freds of the world.

Apple turns into a trillion dollar company and independent developers become share croppers on Apple's land.

To make this something other than a pedantic correction, you'd need to show how your framing would materially change anything they've written.

So what would be different?

> what would be different?

A fair question.

The focus would be on the absolute state of the people at the lower end, rather than their relative state. There wouldn't be an implicit assumption that the (let's call them wealth creators) did something wrong.

Some create more wealth than others. Bob creating more wealth than Fred does not mean that Bob took it from Fred. There's nothing unfair about Bob creating more than Fred.

Sure, I think this is pretty much universally recognized. But if Bob creates 10x the wealth but receives 100x the income, that is unfair. And that is the situation that many believe we find ourselves in, where the wealthy are being systematically over-rewarded by the system we have in place to distribute the wealth that is being created.

I am not sure if the story of "creating" wealth is correct. When I look at people like Bezos or Gates I am not sure they created as much as they were able to gain a larger share of a market. I think without them we would have been fine and other players would have been in the market. So I think to some degree they took wealth from others.

I also don't believe that the top 1% (or pick another number) are creating more wealth than they did 50 years ago which then would justify them taking ever larger shares of the economy for themselves. I think to a large degree modern mature economies are pretty fixed with very even overall growth so it comes down to distributing the gains in a fair way.

> are creating more wealth than they did 50 years ago

But they are - this is due to the huge productivity gains brought about by the application of computers.

For a small example, in the 1960's and 70s, my dad was writing a book, using a typewriter. Every set of revisions meant typing the book over again (to get a clean manuscript). My mom helped out, spending hours and hours banging out a new manuscript. I still feel bad for her doing that boring, numbing work, but that's how things were in those days.

In the 90s, my dad used a text editor to make revisions and just pushed a button to print out a clean manuscript.

Not only that, his computer was cheaper than his old typewriter was. Despite it being cheaper, the computer company got rich off of this. It also took my dad far, far less time to create a new book. It didn't sell well, but the computer company hardly stole their wealth from my dad.

P.S. The typewriter was also a big productivity gain over what went before - laboriously drawing each letter by hand. Companies made a lot of money selling typewriters, and that was wealth they created.

I think GP’s point is that Bill Gates is not rich because he invented word processing, or because word processing would never have become popular without his help. A big part of Microsoft’s success is network effects, where they are able to maintain market share because compatibility with their software is highly valued (because of their large existing market share).

As technologies develop there often seems to be a window of opportunity where some players are too early (the technology isn’t ready yet) and some are too late (where big companies have become relatively entrenched). Companies with the right timing may be able to capture most of the value but I don’t think that means they are totally responsible for the productivity gains.

The big value Microsoft brought to the table was standardization. You could write one version of your app and it would work on millions of computers and be compatible with everyone else.

The 8 bit and mainframe world at the time was anything but that. Unsurprisingly, somewhere north of 90% of programming was done for DOS.

If MS hadn’t done it I bet somebody else would have done it. It’s also not clear if the dominance of Microsoft was good for the industry and the overall world. Maybe they actually suppressed wealth that others would have been able to create.

My point was about the top 1% creating more wealth or not. I think society as a whole is creating more wealth with many people contributing. But somehow we ended up with a situation where there top 1% percent are taking an increasing share of that wealth.

> there top 1% percent are taking an increasing share of that wealth.

Here's where framing comes into play. Let's reframe your statement as:

"there top 1% percent are creating an increasing percentage of that wealth."

"taking" implies some pie someone is taking a bigger slice of that they had no hand in creating.

I doubt that the top 1 percent are creating more wealth than the top 1 percent did forty years ago. But somehow a bigger share of wealth is going to them now in a system that has been shaped by them. So I think they are “taking” more than they used to.

If you doubt the top 1% are creating more wealth than 40 years ago, what makes you believe the bottom 99% do?

The creation of Google, for example, has added immeasurably to the wealth of the world. Ditto spreadsheets, operating systems. Thanks to Amazon, I waste a tiny fraction of the time my parents historically did shopping, since I don’t have to run to the store basically ever. I’m taking a free university course from one of the top people in the field in between bottle feedings, thanks to YouTube.

The economy is not a fixed pie, at all.

> The creation of Google, for example, has added immeasurably to the wealth of the world.

Google and other software advancements have offered amazing utility to everyone, freeing up people to do other tasks by reducing many hours spent on previously tedious tasks.

However, unless there is opportunity for the people who used to perform the obviated tasks to produce something others will value, then all of the wealth that was added will only show up in the profits of Google and other capital owners who benefit from decreased labor costs.

It is possible that previous technological advances obviated people slowly enough that it does not result in their labor’s value being reduced so abruptly. But what happens if it occurs in the course of 5 to 10 years? Certainly, the previously valuable travel agents, secretaries, cashiers, retail employees, etc experience a drop in demand for their labor, so unless they are able to offer the market something else, their value has dropped precipitously.

> However, unless there is opportunity for the people who used to perform the obviated tasks to produce something others will value, then all of the wealth that was added will only show up in the profits of Google and other capital owners who benefit from decreased labor costs.

An effective search allows all kinds of businesses to exist that couldn't have before.

It's similar to while cars replaced horses and the horse industry, it created far more industry that couldn't have existed before.

It depends if the displaced people can benefit from the ability to create or participate in the newly created business opportunities.

For example, I can now search for real estate listings without talking to any agent or broker. Used to be someone needed to be paid to keep their ear to the ground and alert you if possible deals. Now, a lot of that is automated, and even if an agent or broker is required, 1 can probably do the work of 5 or 10.

What are those displaced agents and brokers going to do? Learn how to program and make a website showing 3D tours of the house? Even that only needs 1 or 2 solitons. Point being that while long term change can be positive, the short term turbulence can be negative for many. I posit it’s the reason for so much of the political turmoil these days, but that’s a different discussion.

About a hundred of years ago, when starting to mechanize the agriculture: what are all those displaced farm workers going to do?

Have a little faith in humanity. We learn and adapt. We’ll manage. Your worries are misplaced.

Whether the economy is fair or not is purely a function of government policy and right now the rules are heavily favoring rich people and companies. Just looking at it from a purely economic perspective doesn't cut it.

Taxes certainly don't favor rich people.

"The top 1 percent paid a greater share of individual income taxes (37.3 percent) than the bottom 90 percent combined (30.5 percent). The top 1 percent of taxpayers paid a 26.9 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.7 percent)."

  -- google's answer to "percent of federal income tax paid by top 1"

It's a mix.

There is a pie that is growing slowly. And more rapidly, the exiting pie were reallocated.

And the reallocation is more prominent because the growth is not as big as before.

> The framing of the issue influences what conclusions one draws. Here, the authors think of the economy as a "pie" created by "factors" that gets "divided up". What naturally follows is that if some get a bigger "slice" than others, it is inherently unfair.

I don't think inherent unfairness logically follows - in many cases, this is not true (which I think is your point). However, from the ~fact that it is not always "unfair", it does not then logically follow that it is always "fair". Reality is extremely complex - clever semantics and non-comprehensive, low-dimensional perspectives (intentional or not) can easily hide the full spectrum of all that is happening. This phenomenon can be observed in many domains, from relationships to economics to geopolitics.

> But a free market economy is not a pie. It's a collection of people that create wealth. Some create more wealth than others. Bob creating more wealth than Fred does not mean that Bob took it from Fred. There's nothing unfair about Bob creating more than Fred.

At a given snapshot in time, is there not in some sense a finite pie, the makeup of which derives from an individual or organization recognizing and exploiting opportunities(!) for wealth creation that existed (but were not yet discovered) in reality? And is it not at least sometimes true that the one who happens to ~unlock this opportunity first [1] can realize a significant advantage over competitors who may have only been a few steps behind? And once dominance is established in certain categories, are there not other phenomena [2] that sometimes kick in to further expand and cement this dominance, potentially permanently?

[1] https://www.investopedia.com/terms/f/firstmover.asp

[2] https://www.investopedia.com/terms/n/network-effect.asp

There are many different perspectives from which one can view and evaluate reality - it is not difficult to find two perspectives that are perfectly valid (within their constrained domain), but also diametrically opposed. This norm we seem to have developed in society where an articulation of a single constrained/non-comprehensive perspective (out of a pool of many possible accurate perspectives) is broadly accepted as comprehensively true, or an evaluation of reality that is singularly sufficient for setting policy, seems not only highly flawed, but I would say getting into the realm of immorality, in that: if the one who is positing/marketing such a perspective has the intellectual capability to see the other valid and conflicting perspectives, but ~chooses not to (to the detriment of broad swaths of society)...I don't think their mother and father would be very proud of how their child is conducting themselves in society.

I’m not sure what you are objecting to. The section you quoted does not use the word unfair, but unequal. The linked article does not seem to be a call for socialism, but rather a series of proposals to increase growth via normal economic measures, like removing regulatory barriers to new housing, or being less hawkish on monetary policy since inflation has been consistently over-estimated.

If you are arguing that factors (like regulation, tax / fiscal / monetary policy, etc) do not affect the size of the economy or the distribution of income, I disagree.

I also think a model of the economy that consists of only wealth creators is overly simplified. If I inherit (or even buy) a house in Palo Alto and it undergoes millions of dollars of appreciation due to a growing industry nearby that I do not work in, did I create that wealth?

> The section you quoted does not use the word unfair, but unequal

Calling unequal a problem means it's unfair.

> If I inherit (or even buy) a house in Palo Alto and it undergoes millions of dollars of appreciation due to a growing industry nearby that I do not work in, did I create that wealth?

Yes. I speak as a person who has repeatedly lost money in real estate. Real estate is hardly a slam-dunk guaranteed money making machine, as plenty of people in 2008 will attest to. It's a tough business. Just looking at the winners is called confirmation bias.

> Yes. I speak as a person who has repeatedly lost money in real estate. Real estate is hardly a slam-dunk guaranteed money making machine, as plenty of people in 2008 will attest to. It's a tough business. Just looking at the winners is called confirmation bias.

That doesn't really prove your point. Just like you may gain wealth in real estate without having to have created it, you can lose wealth without it being your fault in any way.

Making better decisions about how to allocate resources is wealth creation.

Again, the article is proposing things like allowing the market to build new housing. So, according to your framing of the issue, doing this would hurt "wealth creators" that sit on a house they inherited (in a growing location by chance), and reward wealth destroyers, like people who build new housing for people to live. Does this framing seem more useful than the article's?

It's easy to develop a knee-jerk reaction to bad economic ideas that are frequently justified by "fairness", which IMO is such a fuzzy term as to be pretty much useless. But this does not seem to be a collection of those ideas, but instead reasonable ones based on examining cause-effect relationships and where current regulations may be leading to negative outcomes. Do you really mean to object to this?

Rather than price being determined by "wealth creation", I think a more nuanced view is price is determined by supply and demand. But that the real wealth of countries in the long run is determined by productivity (units of output per unit of labor), and that these things may be correlated but not perfectly so (shortages and inflation make prices go up but don't create wealth).

Anyway, the article doesn't seem to be a call for dramatic expansion of government but rather a call to examine cause-effect relationships and to use existing policy tools in a smarter way, including removing harmful regulations, in the interest having economic opportunity be more widespread. I think this is exactly the sort of thinking we need, and rejecting it because it sounds a bit superficially similar to bad economic thinking is a mistake. Bad economic ideas are likely to be the alternative.

I carefully wrote "free market". Government can (and does) set all sorts of conditions that impede the free market from operating.

I still think it is useful to make a distinction between prices and wealth creation, even taking the government out of it.

For example, the economics of much of human history are basically agricultural societies. The US was in a better position because of a virtually unlimited supply of capital (land), but in many other countries the model was the serfs work the land, and pay rent to the nobility who own it (and who in most cases inherit it from their parents). Such a system doesn't really require a violation of free markets.

In this scenario, is it really correct to say that the nobility are the real "wealth creators"? They neither created the productive asset (land) or are working to produce the goods (food).

If you accept that income = wealth creation, the nobility can simply create more wealth by raising the rent on the serfs (as long as they can survive). And they would be creating less wealth if they give the serfs a break.

This is where I think a different definition of wealth creation makes more sense, that focuses on productivity (which determines the total size of the pie, for a given amount of labor). So different farming techniques that produce more from the same land would increase wealth. Or capital investments in farming equipment that raise productivity. And if the same amount of goods is being produced but only the rent changes, that is not producing or reducing wealth, simply changing the distribution.

This is lazy libertarianism at its worst.

> But a free market economy is not a pie.

Of course it is. Wealth is exclusionary control over finite resources, and coercive control over others (particularly their labor). My ownership of my car literally means the right to exclude others from the usage of it.

> Bob creating more wealth than Fred does not mean that Bob took it from Fred.

Yes it does. Property law violently denied it from Fred, on behalf of Bob.

> There's nothing unfair about Bob creating more than Fred.

Yes there is. Wealth isn't creation, it's about control (ask any open source developer about this). It's about Bob forcing Fred to work for sub minimum wage in his chain of stores because Bob inherited them from Bob Snr.

Do you think there is difference in peoples ability to compound wealth?

Of course.

> ask any open source developer about this

I am a full time open source developer, and wealth is created.

You are mistaken. Goods and services are created, and then control over them is allocated via property law.

Goods and services are created, i.e. wealth is created.

Goods and services are not wealth, control over goods and services is wealth.

Well, ultimately, politics is not about the implementation of optimal economic policy, or fairness, but about power.

While the struggle for power is often framed as a good vs evil struggle, in practice it's more about the elite vs the rest of society. Good vs evil, with few exceptions (say, the Nazi regime, or ISIS), is mostly a discourse perpetrated by the elites to make the peons do their bidding.

That's not to say all the elites do is bad, or that their existence at all is a negative; certainly there are benefits to hierarchy as well. Without that we'd still be hunter-gatherers or subsistence farmers. OTOH when elites get too much power it leads to oligarchism, stasis, and most people living a much lower level of quality of life than what the society could afford. A balance is needed. The historical way of re-balancing is to chop off the heads of the elites and start again.

Back to the market economy, certainly the free market has increased the living standards of Western societies beyond the wildest dreams. But also the market tends to concentrate wealth, and ultimately economical power begets political power. Progressive taxation, inheritance taxes etc. are ways societies can choose to avoid the oligarchy/stasis of too much concentration of power.

So no, Bob creating more wealth than Fred isn't necessarily unfair, but even so, both Bob and Fred would likely benefit from a more egalitarian society (Fred gets a better standard of living, and Bob gets to keep his head).

It’s interesting that nobody really talks this way about anything other than wealth, even though there are many things other than wealth that people desire — and it’s just because wealth is easy to confiscate and transfer.

I’d like to be better looking, but don’t demand that George Clooney pay into a special tax fund to give me a makeover. I’d like to have sex with more women, but don’t demand that playboys invite me to a threesome for every three women they sleep with. I’d like to be taller, but don’t demand that Shaq carry me at his eye level for 10 minutes a day.

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