Brookings Institution metropolitan policy program economics and policy wonk Jonathan Rothwell debunks three myths often used to explain away the profound success the 1% enjoys in feathering its social and financial nest.
Rothwell focuses on capital shares, skills, and technology as inadequate explanations for why the nation's top earners enjoy such a large and growing financial advantage. He says the real reason, hidden by these myths, is the lack of open access and market competition in elite investment and labor markets. Take hedge funds, for instance, Rothwell writes:
A hedge fund is a loose term referring to an investment portfolio that is less regulated than other funds, because only very rich individuals or approved institutions (accredited investors or qualified purchasers) can participate in it. This regulatory distinction allows hedge funds to take more risk, borrowing levels of money that greatly exceed their assets (and avoid many onerous reporting requirements). These regulatory advantages have allowed hedge funds to consistently outperform stocks and other assets by roughly 2 percentage points each year.