For example: Bill Gates comes along with Microsoft, and sells Windows to businesses worldwide, who all benefit. Why is GDP not growing? And even if it magically doesn't grow, how has that made me poorer?
Did GDP grow during the pandemic? Did dozens of Bill Gates's spawn?
How did you even get the idea that Bill gates has increaeed inequality? Thousands of people were able to get a well paid job or start a business, inequality probably decreased on average.
But when there is wealth inequality this assumption breaks down. A person with large wealth can offer higher prices for less utility compared to a less wealthy individual.
This biases markets to satisfy wealthy individuals, overall reducing total utility production.
A slightly better seat on an airplane is 10x the price of economy seats. Without those seats, economy seats would cost much more each.
A slightly better car spec is 2x the price of the base model. Without the better spec model, the base model would cost much more.
Additionally, just the development of new technology is often for the wealthy first, as it's prohibitively expensive, and then as manufacturing techniques work out the tech filters to a large group of people. E.g. Tesla cars; computers; pretty much everything, really.
That's a perfect example of when inequality biases a market to produce suboptimal outcomes.
Why?
Because if people wouldn't be able to afford an airplane ticket in perfect market conditions, then that is the optimal allocation of resources.
If they can afford that in current market conditions that's a less optimal resource allocation.
In other words, the resources spent to subsidize air travel (in your example) could have been more efficiently spent elsewhere.
Sorry, you've lost me. How do you define perfect market conditions?
It requires a bunch of idealizing conditions that never holds in practice. But it's still useful to study what effects deviations from perfect competition has on efficiency.
Think about it like this: subsidies lets you buy something you don't actually want, that's inefficient.
For subsidies to make sense, they need to compensate some other deviation from perfect competition. For example, it can make sense to subsidize green energy because fossile fuels has external costs not accounted for by the market.
But the fact that a rich individual is willing to pay your air ticket is not a good reason to subsidize something.
An intuitive example: A rich guy enters a bar and yells "free ice cream for everyone!". That's nice. But if the same cash were distributed among the guests, some would've gotten beers and some wine. But when faced with the choice "pay for beer or get free ice cream" everyone choose ice cream despite there being a better allocation of resources.
> People choosing free ice cream over expensive beer doesn't strike me as inefficient.
But it is!
With the total available resources we have two options:
All get beer. Or all get ice cream.
Total utility (value/happiness/whatever) is maximized when everyone gets beer.
When resources are unevenly distributed, ice cream is subsidized, and all get ice cream.
When resources are evenly distributed everyone can make the choice themselves, and they get beer.
Clearly "resources evenly distributed" had the better outcome.
The point is not that redistribution is a good idea. The point is that wealth inequality makes the economy less efficient, and that it is something we should take into consideration.
Redistributing wealth might also make the economy less efficient, that's an argument that can be made.
From where I stand, it seems the inefficiency caused by wealth inequality is too rarely discussed relative to its harmful impact.
The problems caused by redistribution/taxes etc. are otoh extremely often raised.
But I do think your argument of efficiency is not persuasive, as the definition of utility relies on people making choices they never regret, or that don't harm their total lifetime utility.
E.g. some people might want to take that money and save it, and if you come back to the situation in a year's time they now have more money than the people that bought beer. Now there's wealth inequality and they can buy something the others can't. Viewing the original situation in microcosm makes buying beer the "efficient" thing to do, but it also makes the second scenario less "efficient".
If you don't want to frame it in terms of "evil" or "profiteering" that's fine.
But this issue is important. The expected consequence of inequality is reduced economic output (in terms of utility). It leads to inefficiency. I feel this is a perspective that's not stressed enough.