As a big fan of the original Star Trek, I have to confess that it was kind of neat to see Captain Kirk actually go into space. But there is a real issue here about the silly games of the superrich that is worth some thought.

There have been numerous stories and papers about the huge increase in the wealth of the superrich since the pandemic began. Virtually all of this is due to the run-up in the stock market during this period. Part of that is bounce back, the S&P 500 lost almost a third of its value between its pre-pandemic peak in February of 2020 and its pandemic trough a month later. If we want to tell a really dramatic story we can start at the pandemic trough and take the rise in the stock market from March 20.

But even if we are being serious, there has been an extraordinary run-up in the stock market in the last twenty months. The S&P 500 is more than a third higher than its pre-pandemic peak.

There are several different explanations for this increase. One is simply that low interest rates generally boost stock prices. Interest rates did plummet during the pandemic shutdown, with the ten-year Treasury rate falling from a bit over 1.8 percent in February of 2020 to lows of under 0.6 percent last summer. As a general rule, lower interest rates will mean higher stock prices.

But this explanation will not go too far: the interest rate on ten-year Treasury bonds is currently over 1.6 percent. The gap between a 1.8 percent pre-pandemic Treasury yield and the current 1.6 percent yield could only explain a small portion of the rise in the stock market.

A second possibility is that stock investors are genuinely optimistic about the outlook for future profits. People are often confused about what the stock market is supposed to measure. Stock investors don’t give a damn about the future of the economy, they are asking about the future profits of Amazon, Facebook, and other stocks that they hold. If they think that their profit picture looks good, then they are willing to pay more for their shares.

This could be because they think that the economy will do well and that all the doomsayers in the media don’t have a clue. If the economy has strong growth in 2022 and 2023, and corporations get their share in higher profits, then high stock prices might be justified.

An alternative story would be that they expect the recent shift from wages to profits to continue. In this case, profit growth could be strong even if economic growth is not. This would again mean that all the people whining in the media, about companies being squeezed by rising labor costs, are clueless. But, what else is new?

And, there is the third possibility that we are just seeing another case of irrational exuberance. The possibility that there is no rational basis for stock prices should not seem strange to anyone who saw the collapse of the stock bubble at the end of the 1990s and the collapse of the housing bubble from 2007 to 2009. Investors are often ignorant of economic fundamentals, so it is certainly possible that there was no economic basis for the run-up in stock prices over the last twenty months.

But, whatever the rationale, there is no disputing that the run-up in stock prices has made the superrich much wealthier. The question is how much should we worry about this.

I have always said that I am not very concerned about wealth inequality. It is poorly measured and highly volatile. I am far more concerned about income inequality.

I recognize the political power that is associated with extreme wealth, but I don’t believe the people who make this argument have given it serious thought. Suppose we cut the wealth of the superrich by 50 percent or even 75 percent. Will Jeff Bezos lack the resources to push his political agenda if he only had $50 billion at his disposal? If we want to address the enormous gap in political power created by extremes of wealth, we have to look for ways to build the power of those at the middle and bottom. The idea that we will do it by reducing the wealth of those at the top is hardly plausible.