Adam Davidson had an interesting article in last Sunday New York Times Magazine titled “Are the rich worth a damn?” This is a review of the book written by Edward Conard, former partner of Mitt Romney at Bain Capital. It addresses some basic notions of Economics and social thinking.

The basic thrust of Conrad is that the enormous and growing income inequality in the United States is not a sign that the system is rigged, but a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off.

Conard contends that the superrich spend only a small portion of their wealth on personal comforts and most of their money is invested in productive businesses that make life better for everyone.

“Most citizens are consumers, not investors. They don’t recognize the benefits to consumers that come from investment.”

Conard gives the example of a small number of innovators and investors who earned disproportionate billions as the I.T. industry grew, but they got that money by competing to constantly improve their products and simultaneously lower prices. Their work has helped everyone get a lot more value. Cheap, improved computing helps us do our jobs more effectively and, often, earn more money. Countless other industries (travel, telecom, entertainment) use that computing power to lower their prices and enhance their products. This generally makes life more efficient and helps the economy grow.

Some economists believe society often benefits from investments by the wealthy and by a ratio is 5 to 1, meaning that for every dollar an investor earns, the public receives the equivalent of $5 of value. The Google founder Sergey Brin might be very rich, but the world is far richer than he is because of Google. This ratio might be even higher when you consider  agriculture, where since the 1940s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profit from that innovation — like seed companies and fast-food restaurants — have made their owners rich, the average U.S. consumer has benefited far more. Conard concludes that for every dollar an investor gets, the public reaps up to $20 in value. This is crucial to his argument: he thinks it proves that we should all appreciate the vast wealth of others more, because we’re benefiting, proportionally, from it.

How about investment banks, with their complicated financial derivatives and overleveraged balance sheets? Conard argues that they make the economy more efficient, too. The financial crisis, he writes, was not the result of corrupt bankers selling dodgy financial products. It was a simple, old-fashioned run on the banks, which, he says, were just doing their job. There are a huge number of people in our economy who want ready access to their savings — pension-fund managers, insurance companies and you and me with our bank accounts. And because economic growth comes from long-term investments in things like housing, factories and research, the central role of banks, Conard says, is to turn the short-term assets of nervous savers into risky long-term loans that help the economy grow.

Conard thinks every once in a while, this system breaks down as for one reason or another, savers panic and demand all their money back. This causes a massive problem because the money isn’t sitting at the bank; it’s out in the world in the form of long-term loans. “A lot of people don’t realize that what happened in 2008 was nearly identical to what happened in 1929,” he says. “Depositors ran to the bank to withdraw their money only to discover, like the citizens of Bedford Falls” — referring to the movie “It’s a Wonderful Life” — “that there was no money in the vault. All that money had been lent.” He points to the fact that, according to the Financial Crisis Inquiry Commission, in 2008, banks lost $320 billion through mortgage-backed securities, but withdrawals disproportionately amounted to five times that.

Conard concedes that the banks made some mistakes, but the important thing now, he says, is to provide them even stronger government support. He advocates creating a new government program that guarantees to bail out the banks if they ever face another run. As for exotic derivatives, Conard doesn’t see a problem. He argues that collateralized-debt obligations, credit-default swaps, mortgage-backed securities and other (now deemed toxic) financial products were fundamentally sound. They were new tools that served a market need for the world’s most sophisticated investors, who bought them in droves. And they didn’t cause the panic anyway, he says; the withdrawals did.

Conard picked up a soda can and pointed to the way the can’s side bent inward at the top. “I worked with the company that makes the machine that tapers that can,” he told me. That little taper allows manufacturers to make the same size can with a tiny bit less aluminum. “It saves a fraction of a penny on every can,” he said. “There are a lot of soda cans in the world. That means the economy can produce more cans with the same amount of resources. It makes every American who buys a soda can a little bit richer because their paycheck buys more.”

It might be hard to get excited about milligrams of aluminum, but Conard says that we live longer, healthier and richer lives because of countless micro improvements like that one. While we often hear about the greatest successes — penicillin, the iPhone — we rarely hear about the countless failures and the people and companies who financed them. A central problem with the U.S. economy Conard said, is finding a way to get more people to look for solutions despite these terrible odds of success. His solution is simple. Society benefits if the successful risk takers get a lot of money.

Conard expressed anger over the praise that Warren Buffett has received for pledging billions of his fortune to charity. It was no sacrifice, Conard argued; Buffett still has plenty left over to lead his normal quality of life. By taking billions out of productive investment, he was depriving the middle class of the potential of its 20-to-1 benefits. If anyone was sacrificing, it was those people. “Quit taking a victory lap,” he said, referring to Buffett. “That money was for the middle class.”

Conard rejects the notion that America has “some monopoly on hard work or entrepreneurship.” “I think its simple economics,” he said. “If the payoff for risk-taking is better, people will take more risks.” Conard sees the success of the U.S. economy as, in part, the result of a series of historic accidents. Most recently, the coincidence of Roe v. Wade and the late 1970s economic malaise allowed Ronald Reagan to unify social conservatives and free-market advocates and set the country on a pro-investment path for decades. Europeans, he says, made all the wrong decisions. Concern about promoting equality and protecting favored industries have led to onerous work rules, higher taxes and all sorts of social programs that keep them poorer than Americans.

Now we’re at a particularly crucial moment, he writes. Technology and global competition have made it more important than ever that the United States remain the world’s most productive, risk-taking, success-rewarding society. He blames Obama for  dampening incentives and slowing the accumulation of equity by fighting income inequality. Only with a pro-investment president, he says, can the American economy reach its full potential.

A lot of economists would say that Conard has too much faith in the market’s ability to reward only those who create real value. Conard, for instance, insists that even the dodgiest financial products must have been beneficial or else nobody would have bought them in the first place. If a Wall Street trader or a corporate chief executive is filthy rich, Conard says that the merciless process of economic selection has assured that they have somehow benefited society. Even pro-market Romney supporters take issue with this and that Conard ought to be more concerned about crony capitalism

“Unintended Consequences” ignores some of the most important economic work of the past few decades, about how power and politics influence economic growth. In technical language, this field is the study of “rent seeking,” in which people or companies get rich because of their power, not because of their ideas. This is one of the few fields in economics in which left and right share many influences and ideas — namely that wealthy individuals and corporations are able to influence politicians and regulators to make seemingly insignificant changes to regulations that benefit themselves – in other words, to rig the game. One classic example is banking. Banks have enormous resources to constantly put explicit or subtle pressure on lawmakers and regulators so that regulation can eventually serve their interests.

On the question of  Conard said that when you go off to a third-world country, there’s a dictator who says, ‘I’m giving the telephone franchise to my brother-in-law.’ It’s pretty hard to do that in the US. What Conard fails to see is that rent-seeking in the United States is a much more subtle but still destructive process. If some rich people are able to get and stay rich by messing around with the rules, then liberal Arts majors will feel as if they have no chance to break into a well-connected, well-protected elite.

Is having a small elite with vast wealth is good for the poor and middle class?