Wealth seeking reconsidered

Abstract

If individuals are interested in their relative wealth position, they engage in contests for wealth. This leads to a steady state with overaccumulation. In a simple growth model it is shown that, if some individuals are engaged in wealth seeking activity, but others are not, the latter might benefit. However, wealth seeking is not welfare enhancing under usual assumptions concerning production technology. The steady-state equilibrium is characterized by a marginal productivity of capital that is below the steady-state rate of time preference and by emergence of a class structure.