UnWarrented

by Don Boudreaux on September 28, 2011

in Hubris and humility, Man of System, Myths and Fallacies, Other People's Money, Seen and Unseen, Video

In Thursday’s (Sept. 29th’s) Wall Street Journal, Russ tackles Elizabeth Warren’s recent claim that, because government (allegedly) contributes x toward each successful entrepreneur’s and investor’s prosperity, each such entrepreneur and investor is morally obliged to fork over to government x + (whatever additional sums the current gaggle of government officials claims government ‘needs’).

Warren’s is a frightening – and frighteningly mistake and non sequitur filled – assertion.

Russ does a splendid job challenging Warren’s assertion.  Here are a couple of paragraphs:

Ms. Warren implies that the rich aren’t paying their fair share. I’m not sure what that is, but they’re already paying a lot of taxes. In the latest data from the Congressional Budget Office, from 2007, the top 1% of households paid 28.1% of all federal tax revenue—income taxes, payroll taxes and so on—for a total of $722 billion. That would buy plenty of roads, police and fire protection—and plenty of education, too.

But perhaps Ms. Warren shouldn’t mention education. Government does such a bad job educating workers in the public school system that businesses have to spend a lot of money training their work forces in basic skills. Does that mean entrepreneurs and factory owners can get a partial refund on their taxes?

UPDATE: My good buddy Todd Zywicki, from over in GMU’s School of Law, e-mails me to say that he also especially appreciates Rich Lowry’s observation that crediting government with the success of entrepreneurs in the market is like crediting the person who built Bill Gates’s parents’ garage with the success of Microsoft: Microsoft was, after all, founded in the Gates’s garage.

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{ 139 comments }

Plac Ebo September 28, 2011 at 11:15 pm

The top 1% earn 25% of the nation’s income and own half of all stocks, bonds, and mutual fund assets.

Are the top 1% earning their fair share?

Don Boudreaux September 28, 2011 at 11:18 pm

To the extent that they’re earning these sums in market exchanges, the answer is an unambiguous yes.

muirgeo September 29, 2011 at 12:33 am

So in other words NO. Or I guess Don considers lobbying a market exchange.

Richard Stands September 29, 2011 at 12:41 am

Clearly, he does not.

http://cafehayek.com/?s=lobbyists

muirgeo September 29, 2011 at 1:36 am

Then his answer should be NO not yes because far too many are NOT earning their income.

Sam Grove September 29, 2011 at 12:52 am

Must you continually exhibit such faulty reading comprehension?

muirgeo September 29, 2011 at 1:18 am

Finance industry going from 15% of all corporate profits to 40% of all corporate profits didn’t happen because Wall Street actually suddenly added so much more productivity…. it simply stole from the productive economy. But I guess the professor will give them a pass or as I said the answer is NO…. the top 1%…especially the top 0.1% did NOT earn their share.

vikingvista September 29, 2011 at 2:06 am

“especially the top 0.1% did NOT earn their share.”

Well, I’m not omniscient like you are, to know that for certain about each and every individual in the top 0.1% of earners in whatever time frame you are talking about, but I’ll give you Warren Buffet and George Soros, if you like.

Mikenshmirtz September 29, 2011 at 9:31 am

Stop borrowing their money, then.

Methinks1776 September 29, 2011 at 3:01 pm

Shhhhh…..Muirdiot doesn’t understand the importance of developed capital markets. If you tell him, you’ll severely disturb his mental unbalance.

muirgeo September 29, 2011 at 5:41 pm

I am NOT borrowing their money they are getting free money from our government subsidized by actual working producitve people.

See the Econtlak:
http://www.econtalk.org/archives/2011/08/admati_on_finan.html
Russ
So, my question is: As an institution, as an investment bank, as an investor in such an institution, I like leverage. Why? Why do I like leverage? Explain to us why?

Prof Admati:
Because leverage, as you pointed out–there are a lot of different ways to define it. But it’s clear that say, between 1980 and 2007 there was a big change. In 1980 investment banks were “using their own money”–they were partnerships. What are the advantages to being able to borrow lots of money and why do you think it happened that it changed so dramatically over the last 20-30 years? The advantages of debt–there might be reasons here that we are not completely understanding, because when I talk to bankers there seem to be ways they think about it that don’t make sense to me. From what I see as rationalities from their perspective are mostly subsidies of the debt. Debt funding is subsidized for banks through the tax code…..”

BLAMMM!!

Anotherphil September 29, 2011 at 3:20 pm

Finance industry going from 15% of all corporate profits to 40% of all corporate profits didn’t happen because Wall Street actually suddenly added so much more productivity…

How do you know?

Mesa Econoguy September 30, 2011 at 8:04 pm

Tu stultus es

vikingvista September 29, 2011 at 1:58 am

How can you possibly tell by looking at the percentages?

Rob September 29, 2011 at 8:07 am

Sadly these two have a point here. Russ and Don like to point out the extent to which crony capitalism occurs today especially in the banking sector. What these two fail to realize is that the solution is not higher taxes but the elimination of crony capitalism! Get government out of the business of handing out money!!!

Dan H September 29, 2011 at 8:16 am

You beat me to it.

If someone is using the force of government to enrich themselves, you take away governments power to do so. You don’t punish ALL productive persons by trying to steal back. Many people have gotten rich off crony capitalism, and it makes me sick. But many enriched themselves in an honest and productive manner, and they need not be punished.

Chris O'Leary September 29, 2011 at 9:26 am

Dear lib friends,

Crony capitalism is the problem, not the solution.

Me

Gordon Richens September 29, 2011 at 10:08 am

Chris:
Unless we all participate in crony capitalism, then it all becomes a wash and the problem is solved.

Ryan Vann September 28, 2011 at 11:39 pm

Well the inverse certainly seems to be the case. Big money husslers contribute x amount to the general tax fund, and get to own a sizable portion of the government.

Anotherphil September 28, 2011 at 11:54 pm

Apart from her curiously deficient knowledge, er willful ignorance of economics, this woman seems to have spent most of her life at the trough, so when she groups herself in with “the rest of us”, that’s the biggest bovine excrement of her inane rant., although she seems somewhat more porcine to me.

She objects to people utilizing public goods as an adjunct input to success, when she is a direct and explicit dependent. She couldn’t produce anything of value in a world where consumer sovereignty reigned supreme-the market for windy legal briefs is small outside law schools and regulatory agencies.

This woman is a parasite pretending to speak for the interests of the host organism. Leeches united for humanity!

Price B September 29, 2011 at 1:55 am

I’m now making the phrase ‘Bovine Excrement’ a public good.

Thanks for producing something of value, but I’m not paying you for it because I pay taxes and taxes were used to provide you with the education you used to produce something of value.

I like using Mrs. Warren’s logic in reverse because I only see like nine or ten big holes, tops.

They’re all packed with bovine excrement though. Like toothpaste in drywall.

Anotherphil September 29, 2011 at 3:22 pm

Price, fear not I only produced value from that portion of my education I acquired at no taxpayer cost.

Randy September 29, 2011 at 6:36 am

Yep. The politicians cannot escape the fact that their so called “services” are provided with money that is taken by force, and nothing else they do or say has meaning as long as this is true.

“What you are shouts so loudly in my ears I cannot hear what you say.” Emerson(?)

Bill Conerly September 29, 2011 at 12:30 am

I don’t hear anyone asking, “Why should Warren Buffett have a greater social obligation than Bill Conerly?” Sure he has more wealth and higher annual income, but why does that lead to a greater responsibility?

Elizabeth Warren seems to be addressing this question (which nobody on the right is bold enough to ask) by asserting greater benefit. Kudos to her for implying a question that most politicians wouldn’t dare ask.

One answer would be to cite Lysander Spooner and say an obligation only exists if a contract was voluntarily entered into before the act leading to the obligation.

Another answer is more pragmatic: Buffett benefits less from defense (for example) than the panhandler on the street. Buffett could figure out how to deal with a Stalinist occupation better than the people who are poor could figure it out. He would understand what must be done to feed one’s family and stay out of the Gulags. The less fortunate members of our society would be hugely less fortunate under foreign occupation.

The same comparison could be applied to most other areas of government activity.

Dan J September 29, 2011 at 12:37 am

Kings and queens of yesteryear proclaimed all to be rightfully theirs since all lands, homes, or objects had the kings currency or gold was used to pay for the shovel and horse that plowed the field, the tools tha were used to harvest the crops, the lumber or axe heed for building a home, etc.,…… They want to be authoritarians. At their universities, they spoke, and all did. The Obama admin is full of people with disturbing ideas on govt.

muirgeo September 29, 2011 at 1:14 am

You dummy. The Kings and Queens will be these wealthy people as they procure ever more and more wealth, property and means of production and more government rule … leaving the rest… except for their dedicated jesters, tory’s, suck ups and shills like YOU …. as serfs.

tarran September 29, 2011 at 10:44 am

You are an utter idiot; to the poiojnt I question how you could have made it through med school.

Muirgeo, at the begining of the industrial revolution, wealth was concentrated with the aristocracy, and there was a vast pool of serfs in poverty.

Now, in the absence of all the economic regulations that you shill for, during the course of the revolution, a middle class arose.

If you were right, at the end of th e19th century, wealth would have been even more concentrated than it was at the end of the 16th century.

But the opposite was true.

Free markets benefit all classes because workers are paid according to their marginal productivity which is increasing due to capital investments.

Honestly, your pronouncements on economics are painfully backward – as if you showed up at the clinic tomorrow preaching the Aristotelian theory of disease and calling Pasteur some religious cultist.

Fred September 29, 2011 at 12:42 pm

Kings and Queens didn’t have “means of production”.

They had men with long knives who would plunder those who dared to produce anything.
Serfs stayed serfs because anything they produced beyond what the men with long knives thought they needed was confiscated.

The only difference between that system and what you see as ideal is that instead of Kings and Queens you have elected officials, and instead of men with long knives you have men with guns.

Otherwise what you desire is no different than the feudal system.

Anotherphil September 29, 2011 at 3:24 pm

Did a wealthy person buy you the computer you use to pollute cyberspace?

Henri Hein September 29, 2011 at 12:50 am

I am surprised Warren gets so much attention. Her rant seemed like generic liberal rhetoric. I have a quibble, though: Bill Gates did not spend that much time in his parents’ garage. Most of his beginnings were at the computer room at Lakeside and various dorm facilities at Harvard.

muirgeo September 29, 2011 at 1:11 am

Yeah you would think this those 50% making of Americans making a living off < $33,000 would just shut up and be happy since they hardly pay any taxes. Oh the peasantry … what ever shall we do with them?

muirgeo September 29, 2011 at 1:08 am

“Ms. Warren implies that the rich aren’t paying their fair share. I’m not sure what that is, but they’re already paying a lot of taxes. In the latest data from the Congressional Budget Office, from 2007, the top 1% of households paid 28.1% of all federal tax revenue—”

It’s sad that Russ would state this as if he is making a point…. Indeed if over the next decade the top 1% goes on to capture 30% of all income instead of their current 20% they will be paying even MORE of all income. I wonder if that would make them sad to know this might happen.

Likewise , the poor won’t be too sad to know they have to pay more taxes if it meant they had a job or were going to be making X amount more next year.

Further, I guess the rich 1% would prefer we go back to the pre-Reagan taxes when they only had to pay 19% of all taxes instead their current 38%???

The problem again is stagnant wages for the middle and lower classes. Until that improves the economy will not improve and the rich will pay a greater share of all income.

One thing is for sure the baloney of supply side economic is exposed for what it is. The rich have huge amounts of money and these supposed job creators are not creating any jobs. Massive income inequality is bad for economics and these professors refuse to acknowledge this in spite of all the evidence.

You guys are wrong and you are just so committed to what you believe you have no hope of seeing how wrong you are.

Again the economy will not improve until the massive wage stagnation and thus income inequality improves. That will NOT happen with out major policy changes. Austerity will make things worse.

If there is any sort of class warfare going on here it is being waged and decidedly won by the wealthy and their supporters like the professors here. The reason they have so much money and pay so much in taxes is because they have bought the policy that enables them to do so. Seeing the professor consistently defend this massive rent seeking or at least ignoring it a s a source of income inequality is discouraging indeed.

The Other Tim September 29, 2011 at 1:31 am

“Capture 30% of all income”

Well, that one phrase says it all. People who earn money don’t earn it by capturing it from some stock of wealth, they earn it by creating a producer surplus. Provided someone’s earnings are derived from market prices and not economic rents, earnings are equivalent to one’s marginal product. When the leftist wishes the rich weren’t making as much money, he is in effect wishing the rich provided fewer services which provide lower utility.

muirgeo September 29, 2011 at 1:39 am

TOT,

Can you name the top three richest counties in this country?

The Other Tim September 29, 2011 at 2:04 am

Really? You think it helps your side of the argument to bring up the fact that the richest counties in America are suburbs of D.C.?

Methinks1776 September 29, 2011 at 8:41 am

I, for one, find Muirdiot’s capitalization of words like “NOT”, “NO” and “MORE” for emphasis to be a convincing argument in itself. If one just asserts mental vomit aggressively enough, it’ll be true. And not vomit.

muirgeo September 29, 2011 at 9:18 am

The Other Tim September 29, 2011 at 2:04 am
Really? You think it helps your side …

Yes it does because that explains the use of the word “capture” as opposed to earn.

muirgeo September 29, 2011 at 9:23 am

I, for one, find Muirdiot’s capitalization of words like “NOT”, “NO” and “MORE” for…

OK …so put on your monotone computer talk voice because that is how we should talk when we blog. As if in regular speech and emphasis and gestures have no importance. I’M ITALIAN for Christ sake….WHAT”S amatter YOU!!?!!!

Gordon Richens September 29, 2011 at 10:15 am

or I AM NOT A PSYCHO!

Anotherphil September 29, 2011 at 3:26 pm

Have you noticed muirbot thinKs visceral indignity is the same thing as reasoned insight?

Methinks1776 September 29, 2011 at 5:55 pm

Gordon, when I told Muirdiot he’s psychotic, he took issue with being called a psychic.

In caps lock. Naturally.

brotio September 30, 2011 at 3:24 am

he took issue with being called a psychic.

Methinks,

Yasafi objected because you misspelled, “physic”.

dsylexic September 29, 2011 at 7:10 am

why does obama accept money from goldman and fannie mae and GE and other big corporations? .is that allowed in liberaltopia?

the only one not accepting money from corporations is ron paul.guess why no lobbyists want to do anything with him.

muirgeo September 29, 2011 at 9:24 am

Bernie Sanders does not….and he has all lobbyist escorted OUT of his office.

Methinks1776 September 29, 2011 at 9:27 am

Yep…..to the pub down the street.

brotio September 30, 2011 at 3:27 am

Quack… Quack… Quack…

The answer to, “why does obama accept money from goldman and fannie mae and GE and other big corporations?” is not, “Bernie Sanders does not

Try again.

Quack… Quack… Quack…

Stone Glasgow September 30, 2011 at 3:30 am

Indeed.

Greg Webb September 30, 2011 at 2:20 pm

brotio, LMAO!

But, for George, it may have been better to say:

“QUACK, QUACK, QUACK!!!!!”

ChrisN September 29, 2011 at 12:36 pm

“Again the economy will not improve until the massive wage stagnation and thus income inequality improves. That will NOT happen with out major policy changes. Austerity will make things worse.”

Let’s pass legislation so everyone makes at least $1mil. I would call that a major policy change, no? How much do you think a loaf of bread or a car would then cost? Don’t worry, everyone will be a millionaire

Something tells me that you would rather tax the rich to the point where they have the same disposable income as the “working poor”

The Other Tim September 29, 2011 at 2:57 pm

That one gave me a laugh to. Muir doesn’t seem to realize that real wages can’t go up without increasing a worker’s marginal product. In other words, industry needs to find new and productive uses for labor. In other words, low real wages are a supply side problem.

House of Cards September 29, 2011 at 1:23 am

What is the difference between the rich and incurable cancer?
There isn’t any.

That was a joke. But, truly the rich are more like a plague on society. Rich is bad because it is wasteful, and economically inefficient. Instead of buying big yachts and million dollar diamond rings, they should be paying to find a cure for cancer that, after all, may strike them down one day. It’s only prudent, rational self-interest to worry about your own premature demise.

http://consumerist.com/2011/04/costco-selling-1-million-diamond-ring.html

The Other Tim September 29, 2011 at 1:43 am

As I told Muir above, provided people earn their money through undistorted market transactions, earnings are equal to one’s marginal product. If someone provides a service which a company values at $2 mil, but the market price for that service is only $1 mil, he creates $2 mil in wealth, for which he is only payed $1 mil. However he chooses to use his compensation is really none of your business, because he already created more utility than he’ll end up “wasting.”

House of Cards September 29, 2011 at 2:12 am

Typical fascist librarian to tell me what is my business and what isn’t.

J. W. September 29, 2011 at 3:08 am

Is it or is it not his business to say what is not your business?

Stone Glasgow September 29, 2011 at 3:54 am

I think we have only one Troll here, and he spends his evenings high on opiates, moving from one username to another, misspelling words at random, until he falls into a drug-induced stupor and wakes the next day with a terrible hangover to care for America’s children. Thank God for his ready acces to Desoxyn and Ritalin.

Dano September 29, 2011 at 10:46 am

“misspelling words at random”

The public schools did a great job educating the troll.

Dan H September 29, 2011 at 8:23 am

“Typical fascist librarian to tell me what is my business and what isn’t.”

Perhaps since this is now a library full of librarians, one of us fascist librarians can kindly direct you to a book on collectivism, socialism, and fascism. Then you can tell us who the real fascists are.

Methinks1776 September 29, 2011 at 8:42 am

:)

muirgeo September 29, 2011 at 9:25 am

TOT ,

Guess what ….the real world is not found inside your little perfect economics textbook. That’s what makes your economic fundamentalism as dangerous as a jihad or some other form of cult.

Dan H September 29, 2011 at 9:28 am

“….the real world is not found inside your little perfect economics textbook.”

Most of my textbooks in college were written by Keynesians. So you’re probably right about this one.

+1 for muirgeo! THAT JUST HAPPENED!

muirgeo September 29, 2011 at 9:56 pm

Moldova??? Why not Somalia?

http://www.youtube.com/watch?v=7QDv4sYwjO0

The Other Tim September 29, 2011 at 1:49 pm

Well, now, that sticks you in an awkward position. On the one hand, you can agree with me that we have a general understanding of how people acquire wealth under normative conditions. On the other hand, you can argue that we don’t, that the “real world” doesn’t operate like the textbooks say, but in doing so you tacitly argue that we have a knowledge problem that goes even further than the one Hayek described. Hayek only argued that we don’t understand all the trillions upon trillions of specifics you’d need in order to regulate the economy. Now you argue we don’t understand the basics.

Dan H September 29, 2011 at 2:36 pm

Ohhhhh, snap!

Bravo, Tim! Bravo indeed!

How do you suppose you’ll get out of that corner that Tim backed you into, muir?

Methinks1776 September 29, 2011 at 3:09 pm

By not being smart enough to realize he’s in one, Dan H.

Dan H September 29, 2011 at 3:17 pm

True, very true, methinks.

Btw, just booked our honeymoon to Moldova! Future Mrs. Dan H will get to see her mom and siblings for the first time in 7 years! (and she’ll see her nephews and nieces for the first time ever)

Not sure it’s the greatest spot for a honeymoon, but I do hear they have good wine :-)

Randy September 29, 2011 at 3:39 pm

Well, he’ll ignore it, of course.

Well done Tim.

muirgeo September 29, 2011 at 5:55 pm

“Hayek only argued that we don’t understand all the trillions upon trillions of specifics you’d need in order to regulate the economy. Now you argue we don’t understand the basics.”

We understand the basics but YOUR basics aren’t necassarily the correct ones.

We understand reality because we have multiple examples of societies real time and throuigh history. Evidence shows the most liberating and economically successful societies are the social democracies. There are NO libertarian societies.

And repeated episodes of economic cycoes shows that lack of demand leads to boom and bust economies… steady demand cushions these cycles. 2 major episodes of great depressions following lazy fair policies with massive wealth inequality further support that we DO know the basics of policiy and economics that lead to success.

HINT: what you believe is no where near what history and reality suggest.

Methinks1776 September 29, 2011 at 5:57 pm

Dan H, that’s great. I’m very happy for you.

You’re going to need the wine.

(don’t listen to me, I’ve never been to Moldova)

Greg Webb September 30, 2011 at 2:42 pm

HINT: what you believe is no where near what history and reality suggest.

George, you are pretending at knowledge again…this time history. History teaches many lessons, among which are :( 1) those who seek to control other people’s economic activities by saying that they want to help people, but end up helping themselves (see the Obama administration’s crony capitalism with Solyndra and resultant kickbacks that we are just now finding out about) and (2) greater governmental control of economic activities lead to poorer citizens and greater wealth disparity with government officials as the lords and the citizens as serfs (see Roman Emperor Diocletian’s economic controls that established the basis for the feudal society that developed in Europe).

Price B September 29, 2011 at 2:03 am

It might not be the absolute best expenditure for society as a whole, but it’s still a far more efficient allocation of scarce resources than any state-sponsored solution.

Credit: Von Mises, “Liberalism”

House of Cards September 29, 2011 at 2:28 am

Let’s say that an average Pell grant is $2,000, then instead of buying a polished rock for $1,000,000, you could help provide 500 college students with similar financial assistence. What were you saying about a “far more efficient allocation of scarce resources”? Also, people may have been killed in the process of obtaining that diamond.

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

dsylexic September 29, 2011 at 7:15 am

whar do you have got against the families of poor diamond polishers and salesmen.are these mom and pop jewelrymen to die because your liberal heart doesnt have space for them?

i_am_a_lead_pencil September 29, 2011 at 9:06 am

“…instead of buying a polished rock for $1,000,000, you could help provide 500 college students with similar financial assistence.”

Do you practice what you preach?

Children in third world countries can be kept alive for as little as a dollar a day. By your logic you should never go out to eat or buy a coffee at Starbucks as the dollar “could help” poor children to simply survive – a much better use of your surplus.

Slappy McFee September 29, 2011 at 9:22 am

Actually, what House of Cards really should be pushing for is that we don’t spend money on college educations and we should be sending it to feed starving people around the planet. But since that closes off most voters from the trough, I doubt any democrat will be pushing such an idea.

Sam Grove September 29, 2011 at 9:53 am

So the money just disappears after the rock is exchanged?

Leftists seem to uniformly believe that money IS wealth.

House of Cards September 29, 2011 at 12:33 pm

As a pauper yourself, you seem to think you know a lot about wealth. Maybe you lost all your “money” in Bush/Greenspan’s Real Estate Market Crash. If you had gotten a better education, you might be employable in this economy instead of living off ….
Yeah, what do you live off, since you don’t work? I suspect that you are a big hypocrite.

Lerxst von Syrinx September 30, 2011 at 4:14 pm

Looks like House of Cards couldn’t find a hole in your argument (or didn’t understand it), couldn’t admit that you are right, so just resorted to the personal attack. Sad really.

SweetLiberty September 29, 2011 at 10:09 am

HoC,

Let’s say that an average Pell grant is $2,000, then instead of buying a new car for $30,000, you could help provide 15 college students with similar financial assistance. Instead of going to the movies for $10 a ticket, you could skip 200 movies and help provide 1 college student with a Pell grant. Instead of eating what you want, you could save maybe $6,000 a year by eating Ramen noodles and send 3 kids to college.

If you would please be so good as to post your personal financial information (assuming you have a job) I would be happy to show you just how many college students you could help by cutting back to a standard of living I would choose for you. Deal?

Slappy McFee September 29, 2011 at 10:49 am

Just think of all the people HoC, IB and the gud duktor could help if instead of trolling the internets, they actually went out and helped people.

SweetLiberty September 29, 2011 at 12:42 pm

Are you implying that there is another way to help people other than using government force to reach into their pockets? For shame!

Gordon Richens September 29, 2011 at 11:35 am

It costs me $600 per year to put 5 kids through elementary school in Sri Lanka.

Under your scheme, I would be wasting $1mm to educate 500 students to become unproductive, self-entitled voters.

Scru-em. I like my idea better.

SweetLiberty September 29, 2011 at 12:43 pm

*Like*

The Other Tim September 29, 2011 at 1:52 pm

You’re looking at it from the wrong angle. People earn money because they create something which another person finds more useful than the money. People don’t earn money in order to do useful things with it, they earn money because they already did useful things.

Ghengis Khak September 29, 2011 at 2:27 pm

Wealth is not a fixed sized pie to be allocated as you see fit.

A sheep isn’t going to happily stand there while you skin him. If you forcibly redistribute that $1,000,000, the previous owner of that $1M is far less likely to generate that $1M in future transactions. And they are far less likely to engage in the economic activity that generated that $1M.

To rephrase this in very simple terms for you — we wouldn’t have access to wonderful things like Google if Google’s executives were unable to reap large benefits from creating it. This would be a very bad thing for everyone (though a few would benefit in the short-run).

So in your plan, 500 more students go to college this year. Then when they graduate in 4 years, they have nowhere to work because the economy is destroyed due to your redistribution scheme. And they can’t start their own business on account of the tomes of regulations they are subjected to. And why would they want to, when the potential upside is so heavily curtailed (again, thanks to your scheme)?

dsylexic September 29, 2011 at 7:13 am

the yacht sold employes yacht makers and the hundreds of thousands of factory workers,salesmen and their families -some of them maybe cancer victims themselves.so you freaking cold hearted bastard want THESE cancer victims to die because of lost yacht sales so that the rich can benefit?. your house of cards is made of bunch of jokers

Richard Stands September 29, 2011 at 9:56 am

Underneath all of these types of arguments is the presumption that the speaker knows better how to arrange people’s affairs than the people themselves, participating in peaceful voluntary trade. Underneath these arguments, coercion and force are always lurking.

Dan H September 29, 2011 at 10:14 am

” they should be paying to find a cure for cancer that, after all, may strike them down one day.”

They’re doing just that. It’s called investing in biotech. Our semi-free market has introduced more innovations to medicine in the past 50 years than every other country combine.

A lot of great research has been done at both private and public universities, but the drugs and technology are rarely if ever brought to market without the massive investments provided by those greedy and evil Wall Street types like myself.

And we usually don’t buy yachts until AFTER our biotech investments pay off.

Economic Freedom September 29, 2011 at 1:31 am

We should also credit the makers of blackboards and chalk with contributing to Einstein’s theory of relativity. He couldn’t have done it without them.

Frank September 29, 2011 at 3:59 am

Put aside the partisan rancor, the anger, the finger pointing, just for a second and think objectively, coolly…

When wealth is amassed as it’s been in America, it poisons the whole of society. People who are denied more and more become more and more bitter, social fabric will start to rend, the rich will increasingly have to wall themselves in. Is that any kind of goal? Don’t you see that coming?

You defenders of “market forces”, you economic rationalists, you over look the human equation constantly. Do you care? Do you care that people who work hard every day of their lives – not the welfare queens you constantly rail against – will continue to work too hard for too little and die exhausted?

No, just continue to hoard it all, and gorge yourselves until you become as sick with bloat as the country you are making sick with fear and anger for lack of money and opportunity.

Take off the green eyeshades and give a flying f*ck about someone else. Please. For once.

Emil September 29, 2011 at 6:27 am

yes, that was an excellent example of a non-partisan and objective post… NOT

Randy September 29, 2011 at 6:43 am

Frank,

I believe that Ayn Rand had the best answer for you. You would prefer a world without wealth, and that is what you should have.

dsylexic September 29, 2011 at 7:17 am

lol.you think your anger is doing something good? libertarians advocate these positions not because they are greedy moneybags(some of us maybe),but primarily because it is the ONLY humanitarian and moral position in a world full of trade offs and scarcities.

Fred September 29, 2011 at 8:11 am

When wealth is amassed through trade, everyone benefits.
Each accumulation of wealth through trade represents an equivalent amount of wealth spread out through society.
Take Bill Gates for example. His great accumulation of wealth happened as a result of Microsoft products being spread out through society.
Is society not richer for having Microsoft products?
Would you prefer it if Gates had not been allowed to accumulate wealth?
If so then you must think society would be better off without Microsoft products.
You can’t have it both ways.

Methinks1776 September 29, 2011 at 9:06 am

Frank,

Wealth is not a fixed pie. The rich don’t “amass” it, they create it. they become wealthy by serving their fellow man. Do you doubt that all the innovations by now very wealthy entrepreneurs has made your life better and improved the lives of even the poorest Americans (whose standard of living exceeds that of the middle class in Europe)? How is it possible for the life of the average American to become worse if the only way for the rich to become richer is by producing something that pleases the masses?

The ability to create and keep as much wealth as you want means that wealth is not restricted to friends of politicians who get it by having the politicians rob you on their behalf. That’s how it’s done in Europe and it’s pretty much the only way. Entrepreneurial types leave and go to India and Singapore (they used to come here). Europe is poor. American is rich. If you want to impoverish the average, politically unconnected American, give government the power to punish success and to redistribute wealth. Europe is burning. The mix of social decay. unrest and apathy there is completely foreign to Americans.

I don’t know if you realize this, but this idea of the wealthy becoming wealthy in a capitalist system as the poor become poorer is Marxian (I don’t know if it’s original to him, but he embraced it). It’s not logical. Who are these wealthy titans selling to if the population is impoverished? Why would a free, unencumbered people quit innovating and creating more wealth?

Richard Stands September 29, 2011 at 9:32 pm

Just to be clear, my post below should have been at this level as a response to Methinks’ post above. It was the her comment about the nature of wealth (not being fixed) that I found valuable. This is an important perspective and not often understood.

Richard Stands September 29, 2011 at 10:18 am

Excellent points. I think one of the primary drivers of class warfare is competing narratives.

Narrative one: Free markets allow every person to trade with any other person and wealth is created. The economy grows. The “rich” get richer, and the “poor” get richer.

Narrative two: Greedy “rich” people claim a growing portion of a fixed amount of wealth by making it off the backs of the “poor”. The income gap between “rich” and “poor” expands.

Depending on one’s narrative, the same circumstances can seem filled with unlimited possibility and almost endlessly adaptive to each person’s needs and desires – or they can seem like and endlessly unjust grind where others have more than you for inexplicable reasons and resentment from that view breeds hostility.

Darren September 29, 2011 at 2:09 pm

Free markets allow every person to trade with any other person and wealth is created.

The problem is that there are winners and losers. On net, society as a whole prospers, but there will always be those on the bottom rung. The problem is how to help those who actually *need* help as opposed to those who are simply prefer to sponge off the rest of society. Both groups will always exist. Helping the former group helps everyone. Helping the latter group hurts everyone. How does one differentiate between the two? BTW, I defined *need* as without nutritious food, decent clothing, and proper shelter; not without an ipod, big-screen tv, and a car.

Fred September 29, 2011 at 2:20 pm

Voluntary charity.
With government charity there is an incentive to “help” as many as you can, regardless of if they *need* it or not. It’s not your money, and unlike voluntary charity the people giving you the money don’t have a choice.
With voluntary charity there is an incentive to please your donors, because if you don’t then they might stop giving you money.
If the donors want you to only help those in *need*, then you have an incentive to do your best to weed out the sponges.
Neither system is perfect, but at least the latter is moral.

Dan H September 29, 2011 at 2:42 pm

In a voluntary exchange, there are rarely winners and losers. Jim only exchanges money for Bob’s car because he values the car more than his money and Bob values the money more than his car.

As far as the “losers” in society go, it’s hard to be a loser if you never competed in the first place. You have to get off the sidelines and compete in the first place, which many people chose not to do these days since empoering the government to rob people on their behalf is easier.

And there will be those that compete that lose, but all it takes is one win. My dad struggled for quite a long time before he found his niche. He probably “lost” at 2-4 career attempts. Then he found his niche. And he won, and continues to win.

vikingvista September 29, 2011 at 4:32 pm

Some folks consider a loser to be someone whose winnings from voluntary trade are less than what they hoped (or than what they once were). If such folk want to see a real loser, they should look at someone who has boycotted voluntary trade altogether.

J. W. September 29, 2011 at 4:23 pm

Every time I consider the “human equation,” it makes me not less but *more* likely to support individual liberty and hence the free market.

Also: Caring is cheap. My life is made better by people who don’t even know me than it is by all of those politicians who “care.” The man looking for a buck is more likely to help me satisfy my preferences than the man looking for a vote.

zoro September 29, 2011 at 5:40 am

I am from Greece and I deal with leftists every day. I am talking about hardcore stalinists, violent anarcho communists, old school Marxists-Leninists, Trotskyists, anti-patriarchical lesbians and feminists, animal rights advocates, supporters of the violent overthrow of the goverment. The progressives you have in America aren’t in any way as crazy as all these groups, their mindset of course is pretty similar so they are still pretty disgusting.

Randy September 29, 2011 at 6:54 am

The lesson of history seems to be that a small band of dedicated violent leftists can overturn even a stable social order. Because a mass of progressives will always exist, and the essence of progressivism is envy and greed, and these can be used to the advantage of a radical political organization with no moral reservations about the consequences of doing so.

Methinks1776 September 29, 2011 at 9:08 am

But wait….I thought you guys spread the wealth around and that eliminates all that seething and social unrest. What, you mean……?

Good luck to you.

Libt September 29, 2011 at 7:00 am

muirgeo, will keep on complaining the financial industry is growing so much. Then at the same time he will support TARP because of the scare tactics from the politicians, support the forcing of easy credit to poor people, support central banks printing ever more money – and yet he wonders why the financial industry is growing it so much.

dsylexic September 29, 2011 at 7:18 am

did muirduck support TARP? damn,he lost all my respect

Fred September 29, 2011 at 8:21 am

The attitude of “the rich don’t pay their fair share” demands the question “what is their fair share?”

The answer is, and always will be, “more than they’re paying now”.

Why? Because they’re still rich.

If they paid their fair share then they wouldn’t be rich.

Only when there are no more rich people to envy and resent will these people be satisfied.

It’s so sad to see so many grown adults so captive to their emotions that they are unable to use the rational brain that separates them from being mere animals.

Nickolaus September 29, 2011 at 8:35 am

“Fair share” is the most cringeworthy phrase of this decade. And I’ve never, not once, heard anyone define what fair is.

Gordon Richens September 29, 2011 at 10:32 am

Nash equilibrium might be a reasonable proxy (all things being equal).

However when it comes to setting a “fair” level of taxation/contribution, a government that attempts to discover how much the fleecing “so-called” rich will put up with runs the risk of blowing up the game. Which seems to be what is happening right now.

Gordon Richens September 29, 2011 at 10:33 am

“…fleecing the..:

anomdebus September 29, 2011 at 11:09 am

Sally: Please note the size and color of each item, and send as many as possible. If it seems too complicated, make it easy on yourself: just send money. How about tens and twenties?
Charlie Brown: TENS AND TWENTIES? Oh, even my baby sister! Sally: All I want is what I… I have coming to me. All I want is my fair share.

Jim In StL September 29, 2011 at 8:39 am

MicroSoft was founded in a Harvard dorm.
Apple was founded in Jobs’s garage.

Hasdrubal September 29, 2011 at 10:12 am

Isn’t the core fallacy about the rich owing a portion of their success to government due to the existence of public goods the fact that public goods are equally available to everyone? The public goods didn’t make successful people successful, successful just did a better job of leveraging them than the rest of us.

Their success rests on what THEY brought to the table, not the baseline goods that everyone has access to. If it were the other way around, if the public goods were the deciding factor, wouldn’t everybody be equally rich or poor?

Richard Stands September 29, 2011 at 10:22 am

Good observation.

Dan H September 29, 2011 at 10:23 am

Excellent point… +1000

I drove on the same roads as the guy down the street from me. My parents bought a cheaper house so they could afford to send myself and my siblings to a private catholic school. The guy down the street went to public school, and his parents bought the bigger house since they didn’t care to pay for his education. So I actually consumed less public money than he did. We were both in gifted programs at our respective schools. He bartends. I work at an investment bank. So because I made better choices, I get punished? Sounds Stalinistic to me.

tms September 29, 2011 at 10:23 am

Stage one thinking: ignore incentive effects of high marginal tax rates

Stage two thinking: high marginal tax rates are a disincentive to work save and invest

Stage three thinking: high marginal tax rates are a disincentive to work save and invest, and an incentive for politicians to take care of the super rich

Brian September 29, 2011 at 10:55 am

So by Warren’s own argument, if entrepreneurs hired only those educated in private schools (or hired no one at all and were themselves educated in a private schools), conducted their business in a way that avoided any use of government roads, and employed their own security force, they wouldn’t have to pay any taxes?

g-dub September 29, 2011 at 12:19 pm

There is no way to avoid the tentacles of government unless one lives in a remote cabin.

The government crowded out private firms in producing things like security, roads, education, and etcetera.

Warren’s claim is specious. It amounts to “we coerced the situation so you had little choice but to leverage the goods and services we co-opted, so now you are obligated to be coerced for using that of which you had little choice but to leverage, unless you wished to deny yourself the benefits of society (but not government) and live in a remote cabin in Idaho.”

It amounts to “coercion justifies coercion.” It is circular.

John Donnelly September 29, 2011 at 11:44 am

Dr. Robert’s assertion about education? What kind of evidence does he have? I would guess anecdotal at best. As a businessman, I don’t believe that is true. School is overkill when it comes to job skills. Kids that can solve quadratics are making change at McDonalds. I wonder if there is any evidence to support my observation.

Itchy September 29, 2011 at 11:49 am

No, cash registers are making change at McDonald’s.

Try paying $1.03 for something that costs $0.98 and watch the look of confusion. Or even better, use fractions (not necessarily at McDonald’s) … painful to watch

Fred September 29, 2011 at 11:52 am

Or give $21 for something that is $5 and change. They hand the one back to me. I give back to them. They hand it back. I say “just punch it in” and this look of awe falls over them as the machine tells them to give me $15 and change.

One time I asked the meat guy at the local grocery to cut this bone-in pork loin into three pieces. He came back with four.

John Donnelly September 29, 2011 at 11:58 am

I don’t see that. The level of knowledge they teach in High School here in Nevada (and we don’t have great schools), is vastly beyond what is necessary to function in any accounting profession.

Methinks1776 September 29, 2011 at 11:50 am

John, do you have kids in the public school system? Have you been paying attention to how poorly American kids score on basic tests? The jobs I offer require basic math. As a businesswoaman, I’m not impressed.

John Donnelly September 29, 2011 at 12:00 pm

Yes I do have a son in 11th grade. He struggles but not because they don’t teach well I think, it is because the level is very high. Algebra II is COllege Prep not vocational material. I see a whole lot of overtrained kids or maybe trained for more education and not necessarily a menial job in the business world.??.

Dan H September 29, 2011 at 12:01 pm

You think the bar is set low in the public schooling system?

I know some serious idiots who have college degrees, some with masters. One of these idiots just started a part-time MBA program at a decent private school and she couldn’t tell me how to figure out the slope of a line. Not a curve. A line.

John Donnelly September 29, 2011 at 12:05 pm

That happens I’m sure. I think some of it has to do with retention. Maybe there is too much cramming. I had to redo Algebra in college to move to Calculus because I just didn’t retain much of it.

Itchy September 29, 2011 at 11:45 am

This quote from Steve Jobs illustrates the difference in mindset between the producers and the parasites of the world:

“We weren’t going to find a place where we could go for a month to be enlightened. It was one of the first times that I started to realize that maybe Thomas Edison did a lot more to improve the world than Karl Marx and [guru] Neem Kairolie Baba put together.”

http://www.amazon.com/Steve-Jobs-Brilliant-Behind-Portraits/dp/1433900602

John Donnelly September 29, 2011 at 12:03 pm

I would try to be a little kinder to the “people” of the world. Unless you have walked a mile in their shoes eh? Why call them “parasites”? Everyone is trying to get by. We bob and weave. If I stumble into a position that you might characterize as parasitic, I might apologize. If you do too I’m ok with that. Believe it or not, everyone is doing just about the best they can however misguided that may be.

Dan H September 29, 2011 at 12:09 pm

JD,

I’ll agree there are a lot of people who are just trying to get by in the world who may not realize if their actions are parasitic.

But I think he’s referring more or less to people like Karl Marx, who knew exactly what they were doing and tried to rationalize it.

Itchy September 29, 2011 at 12:16 pm

I was specifically referring to people like Elizabeth Warren who assume and argue that everyone with wealth made zero contribution and somehow “owe” something back for their success

Scratchy September 29, 2011 at 11:48 am

Karl Marx is a low bar.

Itchy September 29, 2011 at 12:18 pm

I would have used different examples:

“… maybe Steve Jobs did a lot more to improve the world than Elizabeth Warren and Paul Krugman put together.”

Methinks1776 September 29, 2011 at 9:15 pm

Ugh. They’re not much better :(

Jim September 29, 2011 at 12:49 pm

Ms. Warren first caught my attention in her exit interview from the Consumer Financial Protection Bureau, where she was tasked with rationalizing the seven agencies administering 19 federal financial statutes!!!!! No doubt her long, successful career in change management got her the job.

Her remarks were intriguing:

Typical families often cannot afford the high-quality education, health care and neighborhoods required to be middle class today… how little attention the nation and our government have paid to the way Americans really live.

While this quote could come from any free market advocate, Ms. Warren seemed unaware that all the rising costs she cited were government induced, and untroubled that her solution was more government.

When you are a big government hammer, every problem looks like a nail.

Fred September 29, 2011 at 12:56 pm

“Ms. Warren seemed unaware that all the rising costs she cited were government induced”

Of course not.
If the results are criticized, the reaction will be to defend the intentions.
There was never any intention for government action to cause costs to rise, and that is as far as the thought process goes.
It stops at intentions.

nnn September 29, 2011 at 8:37 pm

Why none of these blowhards call for a reduction in middle class taxes, always an increase in upper income taxes?

If the real issue was fairness rather than growing leviathan you would expect at least SOME of them to conclude that the middle class taxes are too HIGH. But no, every single comment about the middle class/upper class tax comparisons concludes that the rich should pay more.

They have revealed their hand.

Lee Waaks September 29, 2011 at 9:24 pm

Antony de Jasay’s essay, “Your Dog Owns Your House,” available online at Liberty Fund (http://www.econlib.org/library/Columns/Jasaydog.html), is one of the best arguments ever put forth in response to Elizabeth Warren’s social democratic rhetoric.

Jim September 30, 2011 at 2:30 am

But the author’s reasoning would suggest unions should have negotiated for stock options rather than security since they own part of the company. And surely they would all be much richer if they had, and GM would perhaps not gone bankrupt.

I am missing something in Ms. Warren’s arguments, for surely they can not be as irrational as they seem.

Ron H September 30, 2011 at 1:11 pm

Yes they can. You are not missing anything.

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