Sunday, June 28, 2009

On Lifeboats and Redistribution

Justification for wealth redistribution rests on the presumption that resources are finite in number and, being finite, should not be horded by any one person or group. Consider the useful example of a lifeboat, with a set ration of resources aboard and a suffering manifest of starving, apprehensive passengers. Indeed, if there were a fixed quantity of resources in the world, it may be most ethical to distribute it evenly amongst the populace. If we lived in a world in which one man could only gain by another’s loss, in which one passenger’s dinner came at the exclusion of another passenger’s breakfast, then it may well be most ethical to “redistribute” resources evenly, ensuring no person enjoyed two dinners before all had enjoyed their first. Fortunately, this is not the world in which we live. Our world is not a lifeboat and it ought not to be considered as such.

Our world, most thankfully, is one in which wealth is created by man. Wealth is not finite. If one requires compelling evidence of this assertion, one may simply look at the material benefits enjoyed by man 50,000 years ago. These benefits included sticks, rocks, some meat and pelts, and the occasional cave. Fast forward to 2,000 B.C. and material goods have increased dramatically – the average human then owning pots and pans, bronze tools, musical instruments, styled garments, spices, various types of food (bread and butter!) and usually a hovel of humble standard. All these new goods were not “discovered” in the forests, they were created by man’s effort and traded amongst men, each trade benefiting both traders. All this new wealth existed for the average person, despite the fact that the human population had increased substantially. There were more goods for more people. The lifeboat analogy is thus an inadequate representation of reality.

Fast forward again, to 2000 A.D., and once again an incalculable amount of new material wealth exists for a vastly larger population. Stereos, advanced medicines, Teflon-coated cooking pots! The average family (in the freest parts of the world) owns all these things and much more. Cars, microwaves, sonic toothbrushes and the cappuccino – the material goods enjoyed by people today are unimaginably greater than those which existed only a few hundred years ago. Again, the wealth was not found in the forests… it was created by man, and not created by man as a group but by individual men and women, each working in their own self-interest; each seeking profit and plentitude. The new wealth is created and traded amongst those who combine the proper skills and resources, which in turn originated from still other producers, engineers, and organizers. Wealth is not found, and the vast majority of wealth was never consciously “distributed” in the first place. Wealth is created just as songs, poetry, and paintings are created, and it would make little sense to “redistribute” these items, though some may claim to suffer from an art deficiency. Should vast sums of art be usurped from the current owners and presented to anyone in need of a Monet? This is a preposterous question.

It should thus be apparent that goods tend to increase in number – that the “pie” (a terrible metaphor itself) expands – and that this occurs as the result of man’s efforts and industry. To deny that wealth increases is to deny the computer screen upon which this sentence is written. Understanding this concept – that wealth is created – is fundamental to any argument against “redistribution,” because by redistributing goods, one is changing the incentives which produced those very goods in the first place. Whenever goods are redistributed, it alters the mechanism by which they originate. If wealth grew on trees, it would be ill-advised to harm the tress, and it is similarly imprudent to harm productive individuals. Those people who tend to produce the most wealth are, in our society, typically labeled the “rich,” and it is these people whose incentives change when the product of their life and work are taken from them by force and given to someone else. The result, as one should expect, is for less production to occur in aggregate. When the rich have less to trade, less trade will occur, and society as a whole will suffer for it.

Society suffers because every dollar in the millionaire’s bank account represents more than one dollar of benefit gained by whoever gave him that dollar. When one sees a man with a million dollars, one should be thankful to him, because he has likely provided over a million dollars worth of gain to other people, for to obtain that money legally he is required to produce and trade. His million wasn’t “taken” from someone else; his dinner came at the expense of nobody’s breakfast. One could relatively easily audit the rich man’s bank account, highlight the deposits, call the depositors, and ask whether they received more in value than the amount of their deposit. The answer is likely to be… “yes.”

The rich man didn’t produce and trade to be generous; his sole intention was to help himself, just as the people with whom he traded were helping themselves. So long as theft and fraud are avoided, when people are permitted to help themselves, one can expect that people will tend to be helped. People will tend to be better off, because they are trying to that end; they are producing for that result. This, of course, was Adam Smith’s central argument; this was his revolutionary idea, as he famously suggested, “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” As such, it can be expected that by discouraging the self-interest of the butcher, brewer, and baker – by punishing them in the form of taxation levied upon their work – one is likely to discourage someone’s dinner, or someone’s breakfast, from appearing at the table.

When one grasps these concepts, the notion of redistribution quickly becomes preposterous. For the best way to help the poor is to allow the producers to produce, to their fullest and greatest capacity. By so doing, more wealth will come into being, and over time (though not necessarily over the time of a political term) the standard of living of people will tend to rise. Most importantly, living standards will rise justly and morally because they happened through the voluntary actions of individuals, instead of through the violent force of Government.

By engaging in redistribution, by handing Bob a welfare check, Government helps Bob at the expense of at least two other people: the unwilling wealthy man who provided the money, and the unknowing poor man with whom the former will no longer be transacting, for he has now been robbed of the wealth and the motivation to do so. Unfortunately, people see Bob smiling with his new check, and see the rich man who can certainly still afford dinner, and they rest easily believing that “the poor” have been helped by their forceful intervention and that the rich man resists only because he is selfish and uncaring. The other poor man, Bastiat’s crucial “unseen,” is the tragic victim who goes unnoticed as his business sells one fewer goods the next day. You can perhaps understand that he may be the next man in line at the welfare office – a second welfare check then required. And so it continues.

For anyone who values individual liberty (each man’s right to live his life as he sees fit so long as he respects the same right of others), the only compatible political system is one which gets out of the way so that unbridled production and trade may occur. For anyone who values charity (helping others who warrant assistance), the only compatible political system is likewise one which gets out of the way so that unbridled production and trade may occur. It is wonderfully fortunate for those who fall into both categories, like the author, that the solution to both concerns is the same. It is woefully unfortunate that society prevents the solution from occurring, believing us all to be stuck in a lifeboat with ever-dwindling rations. The irony is that the lifeboat is becoming increasingly applicable to our situation.

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Sunday, June 14, 2009

The Morality of Progressive Taxation

To suggest that one man should be given the property of another requires the implication of a right. The claim that the poor have a right to the wealth of the rich is perhaps the most pernicious fallacy in our society, for by what right can this be so? In America, a man is alleged to have a right of property. This was one of, if not the most, fundamental assertions in the founding of the nation. This was the great breakthrough of America, that man owns himself and thus his property, and that he is free to do with either so long as he extends the same respect to other men. This is the very principle of “America,” that each man is free from theft and violence, regardless of whether the intrusion originates from other men or from the “State” which is, of course, just more men. Because of this simple principle, America became the great nation that it was (note the dismayed usage of past tense), with capitalism the inevitable social result and practical implementation of freedom and property rights.

Today, somehow, we’ve turned into a country where this prime principle of America’s founding is all but completely inverted. Today, a man only has a right to his property until a politician wishes to expropriate it. This means that no right exists in the first place. Rights today are an illusory relic from America’s past. Americans, now, do not own property by right but instead by permission from whatever administration happens to be in charge that year. Whatever a man earns, whatever he produces and saves, is no longer his. Instead, he merely is permitted to use it until it’s required “for the benefit of society.” Society is just a collection of individuals, so Americans must now surrender their earnings, the product of their life’s work on Earth, to other individuals at the sole discretion of Washington, or in other words, at the sole discretion of still other individuals. This is utterly antagonistic to the concept of America and will lead not to a “progressive” era of universal prosperity, but instead to a regressive era of universal mediocrity, at best. Wealth redistribution is not the policy of a nation of free men, but of slaves – each man to everyone else.

The question of “how much redistribution is appropriate?” is only applicable after society has decided that “redistribution” itself is morally legitimate. Clearly, today, the Government and most Americans believe that redistribution is indeed morally legitimate. However, it does not matter if 1% or 99% of a populace believe something if that something in question is supposed to be an inalienable right of man. If 99% of the nation votes that one man must give up his property to another, that does not make it legitimate. Men’s property, like their lives, are not supposed to be up for popular vote. Rights cannot be voted away, and in fact this is their defining attribute. When a man is taxed, he is working (he is spending his life) for the benefit of the recipient of those taxes. This is no different than slavery in principle, it is only a question of extent. 99% of the nation should not be able to vote a man into slavery. For the same reason, 99% should not be able to vote a man’s life into servitude through taxation. What is man’s by right is his by right, not by permission of his neighbors.
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If private property is not a right of man, if America wishes to alter its founding principles, then let it proclaim loud and clear to the rest of the world that such is the case. If America does not value freedom, then let it proclaim as such. As politicians usurp men’s liberties, let them at least be honest about their activity. The nation has already implicitly and explicitly denounced capitalism, which is simply the combination of freedom and legal property rights, so why does America still hide behind the false pretense of liberty? America has become a nation of a fraudulent philosophy, proclaiming to be the beacon of freedom, though resting atop the same socialist tyranny that exists elsewhere in the world. When Russian newspapers condemn America’s policies as “overtly Marxist,” what further indication of impending tyranny is needed?
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If some salaries are too high in this country, then denounce them as such and convince the men paying those salaries that they’re bargaining incorrectly. But do not legislate against other peoples’ right to trade their property as they wish, for you have no right to do so. If some people who are unable to help themselves are rotting under bridges, then organize charities to help them. But do not legislate the confiscation of one man’s wealth for the sake of those upon whom you personally take pity, for you have no right to do so. If the Government is so effective at allocating resources, then by all means hand yours over to them as an investment and convince others to do the same voluntarily. But do not assume that all people agree with your assessment of the fiduciary finesse of Government, and do not legislate that others must agree and submit to your investment strategy, for you have no right to do so.
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By what justification does one man have the right to enjoy life at the expense of another man, if that other man has committed no crime? It is slavery, partial but in fact. If slavery is immoral in principle, so too is wealth redistribution, and for the very same reason. If wealth redistribution is moral in principle, then so too is slavery, and any argument against slavery must be made on the basis of degree, not of principle. Slaves must surrender 100% of their work to their master. Should slaves be freed because they simply endure “too much servitude” and all that’s needed to remedy the injustice is to tax them at a lower rate, something less than 100%? Or, should slaves be freed because men, by their nature, should be free? If a 50% tax is moral, but a 100% tax is not, then at what tax rate does the morality invert? Is it simply a matter to be left to popular vote? And if so, can America please openly proclaim as such, so that those still clinging to delusions of liberty don’t waste their breath in vein?
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After all the taxes, today’s American must surrender 40-60% of the product of his work to other individuals at the discretion of still other individuals voted into power by the former. So I must wonder, is America supposed to be a nation where nobody is a full slave but everyone half so?
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Thursday, June 11, 2009

On Job Creation


Obama’s plan to create jobs is very interesting and unexpected!

Let’s analyze this plan a bit… after all, important issues warrant analysis.

Each Federal Department seems to have the task of “creating jobs.” For example, quoting from Biden’s “Road Map”:

-The Department of Education will fund 135,000 education jobs
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways
-The Department of Justice will hire or maintain 5,000 law enforcement officers.

If we want to be honest with ourselves, we will acknowledge that there are the benefits of the job creation AND the negatives of the cost of the jobs. It’s fair to calculate the costs of a program, right?

For each department’s initiative, let’s just add one simple phrase to more accurately account for this cost:
-The Department of Education will fund 135,000 education jobs at the expense of the taxpayers.
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways at the expense of the taxpayers.
-The Department of Justice will hire or maintain 5,000 law enforcement officers at the expense of the taxpayers.

There’s a reason Obama leaves “at the expense of the taxpayers” off of his sentences, but let’s continue. In America, because of “progressive tax rates” the wealthy are forced to pay much much much more than everyone else. The top 5% of income earners (making about $150k or more) pay 60% of the nation’s tax revenue, or in other words, they pay the majority. The wealthiest 5% pay the majority of the taxes in America.

So we can rewrite this job creation plan more accurately still:
-The Department of Education will fund 135,000 education jobs at the expense primarily of the wealthiest 5%.
-The Department of Transportation will begin improvements at 98 airports and 1,500 highways at the expense primarily of the wealthiest 5%.
-The Department of Justice will hire or maintain 5,000 law enforcement officers at the expense primarily of the wealthiest 5%.

We could actual abstract this plan to all government programs in the US as follows:
-The Department of ____________ will _____________ at the expense primarily of the wealthiest 5%.

Is it any wonder that politicians operate in this manner? All they must do is tax a very small minority and in return give “benefits” to 95% of Americans. Quite an obvious and intelligent tactic for anyone whose career requires popular support.

Is this a just society? If so, which principle of morality makes it just? If not, why do we allow it to continue? I understand why immoral mobs of beggars allow it, for they are receiving the handouts at the expense of 5% of their neighbors.

But, why do the 5%?
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Wednesday, June 10, 2009

The Timeliness of the Broken Window


Below is an excerpt from the Wikipedia article on the Parable of the Broken Window, Bastiat’s crucial principle which most of the world does not understand. Next time Government discusses “job creation,” consider the following ideas (GE’s life-support is equally applicable):

Some claim that war is a benefactor, since historically it often has focused the use of resources and triggered advances in technology and other areas. The increased production and employment associated with war often leads some to claim that "war is good for the economy." However, this is an example of the broken window fallacy. The money spent on the war effort, for example, is money that cannot be spent on food, clothing, health care, consumer electronics or other areas. The stimulus felt in one sector of the economy comes at a direct—but hidden—cost to other sectors.

More importantly, war destroys property and lives. The economic stimulus to the
defense sector is offset not only by immediate opportunity costs, but also by the costs of the damage and devastation of war. This forms the basis of a second application of the broken window fallacy: rebuilding what war destroys stimulates the economy, particularly the construction sector. However, immense resources are spent merely to restore pre-war conditions. After a war, there is only a rebuilt city. Without a war, there are opportunities for the same resources to be applied to more fruitful purposes. Instead of rebuilding a destroyed city, the resources could have been used to build a second city or add improvements.
….
Special interests request money from the government (in the form of subsidies, grants, etc.), and the government then forces the taxpayer to provide the funds. The recipients certainly do benefit, so the government action is often regarded by the people as benefitting everyone. But the people are failing to consider the hidden costs: the taxpayers are now poorer by exactly that much money. The food, clothing or other items they might have purchased with that money will now not be purchased—but since there is no way to count "non-purchases," this is a
hidden cost, sometimes called opportunity cost. Bastiat referred to this in his essay as "what is not seen". Because the costs are hidden, there is an illusion that the benefits cost nothing. Hazlitt summarized the principle by saying, "Everything we get, outside the free gifts of nature, must in some way be paid for."

http://en.wikipedia.org/wiki/Parable_of_the_broken_window

As examples of the popular prevalence of this absurdity in those who drive the opinions of America:
- Keynes famously suggested that, at times, it would be a good idea for the government to build completely useless pyramids so as to employ workers and get money flowing.
- More recently, Keynes’ lovechild Paul Krugman suggested that the destruction of the World Trade Center may benefit the American economy because “rebuilding will generate at least some increase in business spending.”

Keynes and Krugman are Nobel-winning economists. We really do still live in the dark ages of popular economic understanding. Llewellyn H. Rockwell, Jr., of the Mises Economics Blog, states it well, "[The Broken Window Fallacy] sounds like an unexceptional claim. But herein rests the core case against everything the government does. Perhaps, then, we can see why the allegory is not better known. If we took it seriously, we would dismantle the whole apparatus of American economic intervention."

For more comment, read an excellent article from Mr. Rockwell here: http://www.mises.org/story/2868
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