Tuesday, June 07, 2005

Rant on the Distribution of Wealth

One of the favorite memes going around red state culture is the lunch story. You see, four friends go to lunch together every day and split the bill according to their income. The bill, with tip, comes to $40.00. The first guy pays $37.80; the next guy pays $1.95; the third guy pays a quarter, and the last guy pockets the tip. Wait, you’re supposed to say, that’s not fair! They should all pay the same!

Well, says the clever storyteller, that’s exactly what the government is doing to us. It’s called progressive taxation, but it doesn’t sound like progress to me.

The effect of this story is to personalize an economic process. It distorts the nature of economic justice by turning it into a kindergarten tale about sharing. It fails to take into account the generating function that creates these unequal incomes. Where is the fairness in that? Well, they say, what is the good of working hard and using your God-given talents to earn more if the federal government is just going to suck it away? Don’t you want to reward people for contributing to the economy?

The fact is that people who have God-given talents and people who work hard generally make more money than others. God-given talents are a form of capital. People who can write well. People with great mathematical skills, doctors, lawyers, linguists, inventors, if they are good at it, all make more money than their peers in the same line of business. But who is really making the big money? Let’s be honest about it. For every Warren Buffett and Bill Gates there are a hundred John DuPont’s who are raking in the dough faster than they can waste it. The very best athletes can also make a lot of money. But for every Michael Jordan, there are a hundred thousand Joe Schmos seeking the same dream, but stuck in poverty.

The average doctor or lawyer works harder and makes less than they did a generation ago. When I was growing up, my doctor had his own x-ray equipment and did house calls in a big black Cadillac. My children’s doctor drives a Honda, works too many hours and recently moved to another state to get away from outrageous medical insurance. Where did that money go? Our economy has supposedly gained incredible amounts of productivity, but somehow, it is coming out of the young doctor’s pocket, someone who has to master much more technology, science and social/ethical training than my doctor could even dream of.

How hard do the rich work? I can tell you one thing about hard work. Lots of rich people moan about how lazy American workers are. When they get you alone, they love to tell jokes about it. They want to get you to laugh at poor black people. Hey it’s just a joke. But when they’re serious they will tell you with a straight face that the hardest workers in America are illegal Mexican immigrants. This may well be true, but, pray tell, what are the future prospects of these people? Will they be taking home a significant share of America’s wealth for all their hard work?

Someone who had a brilliant idea years ago could make it, patent it and market it. I don’t know, maybe it’s just a myth that it ever worked that way. Maybe there were never any "acres of diamonds", but we know what would happen today. The poor inventor wouldn’t stand a chance. If the idea actually got off the ground in spite of all the protective legislation that big companies are wrapped with, then the big companies would just steal it and tie up the hapless inventor in court.

(I got started on this rant by reading a post on FreeFrankWarner. He got started by reading the New York Times excellent series on how the rich get richer. Since you read this far, you might also be interested in my early post on the virtues of land tax.)

6/7/2005 10:31 PM

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