Do billionaires earn their money?

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Cartoon by Joseph Keppler via Wikimedia CommonsA few days ago I wrote a post about why Democrats can’t build a welfare state by taxing only billionaires:I wrote:Once upon a time, class politics pitted the middle class and poor against the upper classes; now, American politics may reflect a status conflict between millionaires and billionaires. If Democrats have become the party of the millionaires-against-billionaires, that would explain why their tax policies are focused on soaking the ultra-rich while easing the burden of the merely-rich.As if to emphasize this point, just a couple of days later, Alexandria Ocasio-Cortez declared that “There’s a certain level of wealth that’s unearned…You can’t earn a billion dollars.”This immediately raises the question: What amount of wealth does AOC think you can “earn”? A hundred million dollars? Ten million? Presumably there’s some number of millions that she thinks can be earned. That definitely fits the “party of millionaires-against-billionaires” framing from my post.But the more important question is: Is AOC right? Can a billion dollars be “earned”? It depends on what “earned” means, of course. To most people, the word probably means something very vague — basically, “I think you deserve this amount of money.” You can come up with more specific definitions if you want. For example, if you’re a socialist, you might define only labor income as “earned” and capital income as “unearned”. If you’re a free-marketer, you might define “earned” income as your marginal product — i.e., the amount by which society would be poorer if you had …