Arthur Brooks explains it all

Arthur Brooks, whom I teased in another context a couple of posts ago, straightens us out about fairness and taxes in that cave of wonders, the Washington Post opinion section: more taxes (than whatever number you have in mind, I guess) on people who have a lot of money are unfair.

He sounds his horn to alert us that “rewards are fair when they are proportional to merit”.  This prescription has troubled philosophers for centuries, because they have rather  stupidly failed to see how easy merit is to discern.  Cutting bravely through this fog, Arthur shows (and is sure we see) that merit is measured by income and wealth, with only the most occasional and unimportant errors.  (Well, shows is maybe a little strong; it’s sort of an “as any fool can plainly see; I can see!” argument.)  Indeed, by halfway through his piece, all the victims of these looming unfair tax increases are entrepreneurs, not a Paris Hilton among them; and conversely, there’s no merit at all for poets, artists, firefighters, doctors undermining the American way by practicing in clinics for the poor instead of LA plastic surgery suites, teachers….

Perhaps it’s meritorious to choose wealthy parents, or get yourself born into a two-parent family that makes you do your homework, and can afford to live where the schools work. There’s certainly no question in Brooks’ mind that all of the amazing increase in American productivity of the last couple of decades is due entirely to the brilliance of the financial sector, and the chief executives of the companies whose paper it plays with. It can’t have anything to do with workers, because they haven’t kept any of the wealth it created, QED! The captains of industry who trashed their companies and walked away fixed for life under golden parachutes, too: nothing but merit there.

Indeed, the logic has the beautiful seamlessness of, um, a circle, completed by

And even if only a portion of the outcomes in life were due to merit, we should still gear our system to the part that is under our control. Otherwise, we have no incentive to be industrious, honest, innovative and optimistic — and there’s no reason to teach these values to our kids, either.

The only incentive for merit is to make money, the only evidence of merit that matters is having made a lot, and it’s both fair and efficient that the people who should pay taxes are the people who haven’t. Dang.

Toward the end, he commits some serious ideological errors for which his colleagues and funders will rap his knuckles cruelly, admitting that

There is certainly a role for government in this system. Private markets can fail due to monopolies (which eliminate competition), externalities (such as pollution), the need for public goods (such as education, which is indispensable in an opportunity society), corruption and crime. Furthermore, most economists agree that some social safety net is appropriate in a civilized society. When the government focuses on these things, it assists the free-enterprise system.

His technical chops are a little rusty; education is great, and it may be a market failure, but it’s certainly not a public good. Still, the nose of the camel is in the tent.

The problem this piece presents to readers, however, is assuredly the fault of careless work at the WaPo, where a harried editor apparently removed the paragraph in which  Brooks wraps up his argument.  It must read something like this:  That government role consumes resources, even after our ruthless extirpation of waste, fraud and abuse, so someone has to be taxed.  Now that we know that the rich are meritorious and the poor (except for the odd unfortunate who fell in the safety net) merely lazy or feckless, we can see the logic of taxing the poor until the laudable (and unique) incentive really bites and they stop doing it, and the radiant fairness of allowing them as has to keep it all.  A graduated income tax is not the problem; the problem is that the one we have is graduated the wrong way!

Comments

  1. C.S. says

    You omitted the part where Brooks admits he’s a total dick. At least, I read it as an admission.

  2. Bernard Yomtov says

    …most economists agree that some social safety net is appropriate in a civilized society.

    I wasn’t aware this was a question of economic theory.

  3. Ebenezer Scrooge says

    Bernard:
    “Economist” means “smart person” (or maybe “shaman”) these days. Tim Geithner is routinely called an economist, despite his lack of formal training in the subject.

  4. Brett Bellmore says

    “more taxes (than whatever number you have in mind, I guess) on people who have a lot of money are unfair.”

    Well, they are.

    “Fair” is that you get what you pay for, and pay for what you get. I walk into a McDonald’s, a billionaire walks into McDonald’s, we both order a cheeseburger, we both pay 99 cents. THAT is fair. We both walk in, I pay 1 cent, and he pays $5000, just because he’s got a lot more money? No, not remotely fair. No matter how much I might appreciate a 1 cent burger. Not even if I’m really hungry, and don’t have 99 cents.

    Higher taxes on the wealthy? It’s motivated by what Dillinger said about why he robs banks: “That’s where the money is.” Politicians buy votes with government spending, while diverting a fraction of it to their own pockets. You can’t buy votes very effectively if you have to charge the voters the actual cost of the spending they’re benefiting from. So you impose most of the taxes on a minority, to create a large population who are net beneficiaries, and will vote for you. “Fair” has nothing to do with it.

    On a theoretical basis, it’s justified by a combination of elevating spite and envy to high moral principles, and mobster ethics. (I didn’t burn down your factory, so I’m an important factor in production, you owe me!)

    Now, we do face a serious problem, in that a lot of people don’t have enough income to pay their FAIR share of taxes. To that extent, departures from fairness are inevitable. But that doesn’t mean we have to maximize them, and pretend we’re dishing out a higher form of fairness. We’re not, we’re simply going where the money is, and fairness be damned.

  5. Katja says

    Brett Bellmore: “I walk into a McDonald’s, a billionaire walks into McDonald’s, we both order a cheeseburger, we both pay 99 cents. THAT is fair.”

    Anatole France: “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” (From “Le Lys Rouge”.)

  6. Barry says

    Brett, the day that you and a billionaire are getting the same thing from government and society, I’ll agree with you. Until then, you’re a BS artist, as usual.

  7. dave schutz says

    Aphorisms! I like aphorisms! Here is Colbert: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing” Here is John Kennedy: “An economy hampered by restrictive tax rates will never produce enough revenue to balance our budget, just as it will never produce enough jobs or enough profits”

    Brooks pushes merit, and he is very affecting on the problems of short bald men, tall men who keep their hair do better. And I pay attention!!! the Schutz men are falling behind in this important area. My grandfather was of average height for WWI draftees, at 5’7″. My dad was spot on for WWII, at 5’8 1/2″. And I? well, the Vietnam draftee average has nearly an inch on me. and my adored spouse, who is very kind, has taken to calling me ‘solar-powered’. Sure enough, I work for a guy who is taller than me, and has more hair. ‘Nother aphorism: Edison – “Genius is 1% inspiration and 99% perspiration!” bonus quote: “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

    I want to partly agree, and partly disagree, with Brooks. I think his column is really a mess, has a whole lot of things going on and assumes connections which ought to be made much more explicitly. This is the piece I’m focusing on: “But when a government that has overspent for years turns to tax increases instead of spending cuts simply for the sake of “fairness,” it weakens free enterprise, lowers opportunity and impoverishes us in many ways.” I don’t care about ‘has overspent for years’ – we need to be thinking how best to go forward from here, how to best enable our citizens to make the most of themselves and to be part of the national enterprise. The Edison line – I think a great deal is given to us, the 1% inspiration. Social capital is HUGE, but Brooks is quite right that “..even if only a portion of the outcomes in life were due to merit, we should still gear our system to the part that is under our control. Otherwise, we have no incentive to be industrious, honest, innovative and optimistic — and there’s no reason to teach these values to our kids, either. ..” Edison was a really smart guy, and the inspiration came to him as a gift. But he NOTICED the ’99 per cent perspiration’, that was the effort that he could either make or refrain from making. You want people to see their perspiration rewarded, because it is only the perspiration that they can choose whether to provide or withhold.

    In a policy argument, whenever you can wrap yourself in the cloak of John F Kennedy, well, you should do it. “..restrictive tax rates will never produce enough revenue to balance our budget..” Nice line. The higher you raise taxes on income, the more your Ingvar Kamprads and Johnny Hallydays and Mick Jaggers move away. Some people can actually up sticks and move to Switzerland, and some just move to Texas. Some decide that their business needs to buy a deductible car for them. Some decide that they should make their new investments in China, or Brazil. Doesn’t mean you shouldn’t decide what public purposes the government ought to be serving, and raise the taxes to pay for them – but it does suggest that income taxes can reach a point where they discourage economic vigor. It’s not, in my mind, a question of fairness so much as of efficacy.

    We can’t keep borrowing money for current expenditures. If we want to continue to fund our huge military and public education and end-of-life health care and public pensions, we have to get the money from current taxation. Both Obama and Brooks seem to assume that income taxes are the way to do it – with Obama concentrating on the wealthiest for ‘fairness’ reasons, and Brooks suggesting that taxing the wealthy more heavily is unfair, and is going to discourage effort. I think we should try hard to get additional revenue from other sources than the income tax – my nostrums are gas tax, road tolls, transaction taxes on stock transfers, concentrate a far lower housing subsidy on tax credits on the first $150000 borrowed, not another dime for corn based ethanol, etc etc.

  8. bobbyp says

    I walk into Congress. A billionaire walks into Congress. We both order a just society. I get endless wars, a bloated military establishment, failing schools, a tattered social safety net, and decaying infrastructure. Oh, yes, and a tax bill. The billionaire gets endless wars to make the world safe for investors, the world’s biggest military to protect his wealth, and a tax break, sometimes even one crafted just for him alone. He has to buy lunch. The rest? Not his problem.

  9. says

    Brett,

    See you have this almost totally backwards.

    First off, your McDonald’s example. McDonald’s is free to set a fixed price as you prefer, but there is nothing ‘unfair’ about having different prices for different customers. Some businesses still work by haggling (ever buy a car?) in which case the wealthier customer might well pay more for each item than poorer individuals. If McDonald’s or some other outfit were to operate by haggling, then most likely the wealthier person would pay more, being more interested in getting the meal quickly than in saving a few dollars, given that the marginal utility of each dollar is less for the billionaire than for the pauper. No, there is nothing unfair at all in the wealthier paying more because they are wealthier. There is nothing unfair in them paying the same. This is an issue in which fairness plays no role.

    On the other hand, as you say, you should pay for what you get. The wealthy derive far more revenue from the services provided by the government than do the poor. The wealthy depend upon having the government protect their investors and investments from loss via a special degree of liability called incorporation. Some of the wealthy derive their revenue directly from the government providing a guarantee of sole use of frequencies in the electromagnetic spectrum (the whole of the broadcast industry, much of the advertising industry and all of telecommunications). Some of the wealthy depend for their revenue directly upon the extensive copyright protection provided by the government. This is, by no means, and exhaustive list. These wealthy people ought, in all fairness, to pay the market value of these services. The poor, generally, do not need these things for their income, deriving their income rather from the direct trading of their labor for wages. A larger fraction of the revenue earned by the wealthy comes directly from services provided by the government, hence a larger fraction of their revenue should be paid to the government in taxes. This is perfectly fair.

    As far as I can see the Republican/Conservative preference is to have the government provide these valuable services for free, with absolutely no obligation to do anything in return on the part of the recipient (because they oppose government handouts) and thus do nothing for the general population that is providing the services. The Democratic/Liberal preference is to provide these services and charge for them at a rate a good deal less than market value (we want our customers to make money) and then spend that money to be able to continue providing the services and on things of general value to the service providers. I’m a capitalist. I prefer the Democratic/Liberal option.

  10. Bloix says

    “Now, we do face a serious problem, in that a lot of people don’t have enough income to pay their FAIR share of taxes.”

    Actually, we have a fairly flat tax system now. The bottom 20% pay about 18% of their income in taxes (all taxes – income, property, sales, payroll – state and federal). The rate rises to about 30% for the top 20% (it’s actually lower for the top 1% than for the rest of the top 10%.) I don’t know how much more tax you’d like to see from people who earn l$15,000 a year, but perhaps you might tell us why it would be FAIR for them to pay more so that people who make $10 million a year can pay less.

    http://econproph.com/2011/04/18/more-on-tax-fairness/

  11. navarro says

    if you like aphorisms then you’ll like the navarro aphorism regarding wealth, taxes, and services–

    “the more one earns the more one benefits from the public goods the government creates.”

    i’ve always been happy to pay my taxes whatever my income has been because i know i’ve gotten valuable services in exchange for those taxes. i’m sure there are deadweight losses in taxation as well as free riders but there are very few of us who derive no benefit from the government we pay for. even someone as isolated as ted kaczynski relied on the infrastructure provided by government funds. every time i go to the grocery store, visit a public park, go to a public library, use the internet, sleep safely in my home, or deposit my money in a federally regulated and insured bank i gain the benefits of the government i pay for at whatever level the taxing authority is. certainly the wealthiest among us, including corporations, should pay their taxes at a rational level. if not as high as the level at which they benefit from the government, then at least at a level that is not less than the rate at which second quintile pays.

  12. Betsy says

    Brooks’s argument simply equals the ‘Just World’ fallacy, dressed up in a nice suit and using 50-cent words.

  13. James Wimberley says

    Michael Robinson: “..f McDonald’s or some other outfit were to operate by haggling, then most likely the wealthier person would pay more..” It’s not just carpet vendors in souks that do this. There are at least two modern industries that operate systematic price discrimination: airlines and private universities. The dumb rich pay a lot more in both than the clever poor.

    Brett: what’s your take on Bernoulli and the St. Petersburg paradox? Doesn’t it offer a pretty strong technical argument in favour of the commonsense intuition that the marginal utility of money (in fact everything) declines? And if it declines, Colbert’s principle of equal pain implies strongly progressive taxation (not that he applied it to the idle aristocrats of Versailles). $10m extra to a hedge-fund manager earning $100m is probably worth less to him in satisfaction than an extra $1,000 (an equal proportional increase) to a burger-flipper earning $10,000. The marginal $10m has of course value in status points at the country club; but you and your rivals earn these from pre-tax income, not post-tax.

  14. larry birnbaum says

    Like Katja, I was reminded of Anatole Frane’s famous line by Brett Bellmore’s post, the application of which could be made a bit clearer with a bit of jiggering: The law, in its majestic equality, protects the property rights and wealth of the poor as well as the rich.

  15. Bruce Wilder says

    “There are at least two modern industries that operate systematic price discrimination . . .”

    “at least two”??!

    Price discrimination is general and pervasive in the metaphoric “market” of administrative pricing. And, contra Michael Robinson’s intuition, it does not necessarily favor the poor over the rich.

    In some forms of price discrimination, those with a lower marginal cost of household production, due to a lower opportunity cost, are better able, for example, to clip supermarket coupons or to plan vacation air travel well ahead of the time-horizon of business men. These do have the effect of leveling real income across the middle-class — they do it better in a world of single-earner, multi-adult-member households than in two-earner households living in a world without union protections and overtime pay, but be that as it may be.

    Other forms of price discrimination, rather than creating make-work for the consumer, operate by financial means: they are bundling kinds of “insurance” and/or “risk” into the purchase. Extended warranties are a straight-forward example; cheap cotton socks are less easily recognized as exploiting those with a highly-restricted cash budget. These are more of a mixed-bag, as far as the leveling of real income distribution is concerned, and many of these gambits would be recognizable as frauds. Many large American corporations — AT&T has been doing it for years, with businesses and consumers — now routinely create billing errors (in their own favor); the banksters of the mortgage-servicing industry has been exposed for a similar strategy of cutting procedural corners to contain administrative operating costs and piling on made-up “fees”.

    One of the most ominous cases of emerging financial price discrimination involves the electronic payment systems, operated by the monopoly credit/debit card banksters. The dominant system — known to the public as Visa/Mastercard — was until recently a non-profit condominium owned jointly by a bunch of banks, but, now, it has been converted into a for-profit concern. In the interest of profits, the “system” has been trying to increase charges on merchants using these services, while the retail credit-card arms have been increasing the “rewards” and “cash-back bonuses” and “airlines miles” offered to the comfortably solvent middle-classes. Oh, yes, and many welfare services, like food stamps, are now channelled through debit cards, with various burdens imposed on the poor recipients.

    Thus, “price discrimination” capable of skimming a percent or two or more is being built into the payments system.

    The U.S. has lagged behind Europe in shifting from a system of bank drafts (aka “checks”) to the new credit/debit card scheme, but it has been far more aggressive in creating a system vulnerable to frauds and skims. The U.S. has no equivalent of the gyro. And, legal protections against check frauds have been eliminated, almost entirely, for individuals, while the idea of a contract governing between the individual and the bank, governing the credit card, has been replaced by bank diktat and usury.

    The majestic law of our brave neo-feudal order protects the rich and powerful and exploits the poor and vulnerable with increasing directness.

  16. says

    Gosh. This is not about spite, Brett. This goes back to fundamental questions of human agency and social capital. Just as financial capital is leveraged for profit, so is social capital.

    We live in a society filled with opportunities, many of which go unexploited. Why is this? The basic premise of science is that there are causes to most everything. This is the premise of social science. We look at society and see causes. We look at billionaires and poor people and we see causes.

    Yet this basic premise is denied. Why? While opportunities exist to be exploited, why do we we assume that everyone can exploit them? If one does not know how to exploit them, how can he? And if another knows how to exploit them, why would he be expected to have done otherwise? Social capital is a causal factor.

    But so if you correct for social capital, and luck, what do you have left? From where does human initiative come? This seems to me the final question. The billionaire and the pauper in Mc Donalds are two completely different people, who’ve had different life experiences, and – specifically – had different levels of access to social capital. If the two could be said to have possessed the same social leverage in their lives, one single price, or one single tax rate would be fair. But they clearly had not. The billionaire cannot claim to have earned his wealth apart from the leveraging of opportunities beyond his control. Likewise the pauper.

    Marx had the insight that the leveraging of inequities in financial capital creates inequities in society. So too inequities in social capital, whether by birth or by family learning and culture, are leveraged by degree. Society is an organism that cannot be separated and reduced to the pseudo-scientific conception of actions that are free from temporal or spatial causality. We are society, warts and all. To deny this basic reality is not only a scientific error, but one that serves to prop up and excuse the most egregious forms of inequity, those that are inevitably exploitative and corrosive to the conception of the human right to freedom and self-realization.

  17. Bruce Wilder says

    Rather than a putative “fairness”, concerned with the effect of proposed rules on the satisfactions of others (and self), one could reason entirely from considerations of how the rules will affect, not the welfare, but, rather, the behavior of others.

    One of the things that distinguishes a liberal from a libertarian is that a liberal thinks government should provide a lot of cheap “insurance” to the masses, both in the manner of policing and judicial decision-making (government as a counter-vailing force and tribune for the individual) and in straight-forward schemes, like Social Security or Medicare.

    The only useful application of great financial wealth is to provide “insurance” and increasing quantities and concentrations of financial wealth will inevitably seek to corrupt society to make such profitable opportunities available to itself. The liberal is fearfully suspicious of increasing concentrations of wealth, as they carry the seeds of third-world impoverishment.

    The libertarian wants always to reduce marginal taxes, arguing that marginal tax rates reduce the incentive to effort; the liberal sees “economic rents” behind business profits and high individual incomes: “economic rents” which neither reward nor motivate productive activity. (A classic example of an “economic rent” is the increase in the price (and rents) of land, which accompany rising wages and the building out of roads; the land isn’t motivated and has no moral agency, but it receives, in a market economy, most of the rewards of good government policy and the increasing productivity of labor. The “owners” of such rents are not easily distinguishable in moral terms from drones, and, to the extent that they exploit their ownership of “economic rents” to provide “insurance” on exploitive terms, they become parasites.

    Advocates of “free-trade” are wont to remember the abstract arguments of Ricardo, but the Corn Laws were only repealed after the horrifying spectacle of the English landed aristocracy starving to death, two million Irish peasants.

  18. Mitch Guthman says

    Brett,

    I hate to pile on but since, as others have mentioned, you do seem to be almost parodying the famous Anatole France quote, answer me this: Is the fact that rich and poor alike are forbidden by the law from sleeping under bridges, pissing in the streets and stealing bread an example fundamental fairness or of inequality dressed up in the trappings of equality?

  19. J. Michael Neal says

    Brett makes the fundamental error of thinking that there is one and only one way to define “fairness.” Coincidentally, it’s the definition that best supports his preferred policies. Most of us recognize that “fairness” is a very slippery beast, with not only a wide variety of definitions, but that often stands in opposition to itself. There is no happy state of absolute fairness. There comes a point at which increasing one type of fairness, or fairness for one set of people, can only come by decreasing fairness somewhere else. At that point, appeals to fairness are useless in policy debates. Because fairness is so slippery, it’s possible to disagree as to when society has reached that point. Brett clearly thinks that we have not, or ignores the problem altogether. The rest of us think we have. Therefore, Brett, your argument has no persuasive ability, since the rest of us think that you’re ignoring a lot of very important things.

    Note also the different ways Brett treats different deadly sins. Greed, we are told (accurately, I believe), is an inherent part of human nature that we can never eradicate. Therefore, it is best to structure an economic system that can harness greed in a way that causes it to serve desired ends rather than just being a force for destruction. Envy, on the other hand, is an evil, destructive force at which we must wax extremely wroth every time we even think that it is a motivating force. We can’t take time to figure out if it actually is the primary motivation, or even a motivation at all. We certainly can’t come to the conclusion that envy is an inherent part of human nature that we can never eradicate, and therefore find ways to dissipate it or maybe harness to good ends. No, no. That would be . . . something. Probably communism.

  20. J. Michael Neal says

    As for price discrimination, people have missed perhaps the best example: the price discrimination on money. This is a case where the wealthy benefit from the discrimination. Banks offer higher interest rates on accounts that have a larger balance in them. The rich are able to get loans at lower interest rates.

    As others have been pointing out, Brett seems to think that discrimination can only exist if the basis of the discrimination is stated explicitly in terms of the characteristic in question. In the case of loan rates, I think this standard is met: the rich get lower rates explicitly because they have a lot of money. However, the premise is clearly absurd. There are all sorts of ways to write policies in order to make the discrimination implicit, either deliberately or accidentally.

    It isn’t even necessarily wrong: the rich get loans at lower interest rates for the very good reason that they are more likely to pay them back. However, it demonstrates that our society doesn’t even meet the standard of fairness by Brett’s own definition. Fairness simply can’t be the sole and absolute criteria by which we measure the desirability of policy.

  21. larry birnbaum says

    James, good luck trying to engage a conservative on the question of how marginal utility relates to taxation fairness. They understand it quite well; but they also understand that it’s a little subtle, and that most people don’t understand it, and that as a result it’s more intuitive to most people that a flat tax is a fair tax (although you can help them refine their intuitions by concretely discussing, for example, what $1K means to someone who only has $10K vs. what $1M means to someone who has $10M).

    For example, Kevin Drum was complaining about Will Wilkinson a week or two ago and quoted him as saying, among other things, “It’s rather less intuitive that fairness demands that the wealthy not only pay more in taxes, but pay a larger percentage of income…” That’s a fascinating locution, isn’t it? “It’s rather less intuitive.” Yes, it is. This makes it completely clear that Wilkinson understands the point very well; and he’s figured out a way to mislead people while in a literal sense telling the truth.

    And for some reason he thinks that’s OK.

  22. says

    You folks don’t understand. Brett knows your arguments, and has decided that they hold no merit, regardless of how clever or accurate they may be. In his majesty, he (and Paul Ryan, and Arthur Brooks) have determined that they and only they are the defenders of American prosperity. So save your breath, there’s no need to rebut what he says. Use the time and energy to write op-eds and submit them to the NY Times, WaPo, etc, in volume. Maybe then, you can convince the unconvinced.

  23. Brett Bellmore says

    “The wealthy derive far more revenue from the services provided by the government than do the poor.”

    No, they don’t. Not unless they’re profiting from discriminatory treatment by the government, which is it’s own form of unfairness. The government provides roads, which both Bill Gates and his gardener use to drive to work. The government enforces laws against murder, neither Gates nor his gardener want to be killed. If the government, by doing this, is responsible for Gates’ wealth, why isn’t Gates’ gardener a gazillionaire?

    You want to know what’s responsible for wealth, you don’t look at the constants, you look at the variables. And that’s not, in a *fair* society, government.

    “Is the fact that rich and poor alike are forbidden by the law from sleeping under bridges, pissing in the streets and stealing bread an example fundamental fairness or of inequality dressed up in the trappings of equality?”

    It is, in fact, to the extent it’s actually TRUE, (Not enough, IOW.) an example of fundamental fairness. Though scarcely the whole of it. It is not incidental that the poor pissing in the streets are pissing in the streets traversed by the other poor, and stealing bread from the other poor. The poor, more than anybody else, need impartial enforcement of the law. To the extent the law is actually just…

    As for the St. Petersburg paradox, I see nothing paradoxical in it. Humans are mortal, and must concern themselves far more with downsides than upsides, because you only get to die once, and it’s game over, and you don’t have eternity to recover from setbacks. This clearly limits how much it’s rational to invest in long shot gains.

    And, yes, I treat the “deadly sins” differently. So long as it is satisfied by consensual transactions, “greed” is not particularly harmful to society, because in a free market, you have to benefit others to benefit yourself. Spit and envy, the very core of egalitarianism, have no such saving grace.

    Finally, yeah, I’m aware that there are varying conceptions of “fairness”. Maybe you guys could be aware of that too? You’d have less confusion when confronted by ordinary people who don’t support punitive rates of taxation on income levels they’ve got no chance of achieving. It’s not because we’re idiots, or under the sway of diabolical mind control rays. It’s because we don’t think punitive taxation is FAIR, even though you do. We simply disagree with you about what’s fair.

  24. J. Michael Neal says

    So long as it is satisfied by consensual transactions, “greed” is not particularly harmful to society, because in a free market, you have to benefit others to benefit yourself.

    No, you don’t. Pollution is clearly an example where you don’t have to benefit anyone else. Under your concept of a free market, in which we don’t ensure that externalities are priced into goods, it’s actually quite common for one person’s benefit to come at the expense of another. And under pretty much any definition of a free market, engaging in a transaction with someone else will often result in harm to a third party who was not involved in the exchange.

    A capitalist market system is an attempt to harness greed to produce good, but it is far from perfectly successful at doing so. It really is remarkable the extent to which people who proclaim that there is no such thing as a free lunch have a system is based upon finding a meal just lying around. Magic tax fairies producing greater revenue by lowering tax rates. A simple concept of markets that can completely eliminate the harm of greed. The existence of market pressures that eradicate the incentives to provide poor or dangerous services or goods. (This last is particularly amusing, since most of its proponents argue that the tort system can be used to provide reparations for harm actually done while simultaneously doing their best to ensure that people can’t sue for adequate damages.) Life’s not that simple, and the choice of a market system involves trade-offs.

    Setting aside whether or not these are the same thing, the purpose of a market system is as much to mitigate the harm done by greed as it is to enhance the good that greed does. Were greed not an inherent part of human nature, there would be better economic systems to implement. It is, so we cobble together what we can and trade away some of this for some of that. In the same way, envy is an inherent part of human nature. You never will get rid of it, so you had damned well better build an acknowledgment of that into the system. That’s one of the benefits of democracy: it provides an outlet through which envy can be exercised without the violent revolution required in autocratic systems.

    Aside from all that, I don’t think there is a bright line to draw between greed and envy. They’re inextricably linked. In practice, almost all expressions of greed have a component of envy within them. People don’t strive in a vacuum. They want more relative to other people. That’s just the way humans operate. There’s a reason “staying ahead of the Jonses” became a common saying.

  25. Russell L. Carter says

    “No, they don’t. Not unless they’re profiting from discriminatory treatment by the government,”

    Ah. To be a bankster these days. The folks at Goldman are deeply appreciative of your hard earned tax dollars, Brett.

    “It’s not because we’re idiots…”

    Not *just* because you’re idiots, although you are that. There’s also a certain level of amorality involved.

  26. J. Michael Neal says

    It’s because we don’t think punitive taxation is FAIR, even though you do.

    Sort of. The biggest part of the disagreement is over your use of the word “punitive.” That goes to motive, and you are wrong about most of us engaging in punishment. If it were, we’d try to ensure that we extracted more than the amount of additional income. That’s how you deter unwanted behavior.

    Other than that, we disagree less than you think. Yes, higher tax rates for some people than others is unfair. However, rather than punishment, we engage in it in order to redress other instances of unfairness. Your argument is exactly what I mean when I say that you only recognize one definition of fairness. Stating it as you do, as if declaring that high tax rates are unfair somehow ends the debate, says exactly that. If you admit that there are other types and other sources of unfairness, then the debate has to extend past that. It gets into trade-offs that you can’t purport to answer with two sentence platitudes. It gets complicated.

  27. says

    Brett,

    You skipped the one where the government created a copyright protection regime of life of the author plus 90 years and negotiated treaties with countries around the world to enforce the same equally for Bill Gates and for his gardener. You may have left it off because it is so clearly not true.

    By your argument, given this rather striking difference, all of Gates’ wealth is due to the government. Look at the differences.

    Another option would be to take a more market based approach, have the government charge market value for the copyright protection and then the market could set what part of his income is due to his labor and what part is due to the government.

    Your option of just saying that it is all due to Bill because, well because you know it is, is not, I think, very good at all.

  28. J. Michael Neal says

    You skipped the one where the government created a copyright protection regime of life of the author plus 90 years

    More fundamentally, he’s also skipping over the fact that the entire concept of the corporation is the creation of government. He seems to think that the state of nature, red in tooth and claw, included limited liability and intangible persons.

  29. Brett Bellmore says

    No, I seem to think that the reason we’ve got so many corporations around is because the government is herding people into the corporate form of organization.

  30. larry birnbaum says

    BB: You want to know what’s responsible for wealth, you don’t look at the constants, you look at the variables. And that’s not, in a *fair* society, government.

    Like many other theoretical dicta, this is both obvious and false. Empirically and historically, a lot of what’s responsible for wealth is scientific and technical progress; and a lot of the time what’s paid for scientific and technical progress has been government.

    BB: “Is the fact that rich and poor alike are forbidden by the law from sleeping under bridges, pissing in the streets and stealing bread an example fundamental fairness or of inequality dressed up in the trappings of equality?” It is, in fact, to the extent it’s actually TRUE, (Not enough, IOW.) an example of fundamental fairness.

    Ah yes, those lucky-ducky poor, getting away with murder while virtuous rich folk are arraigned for every small sin… in any case this deliberately misses the point of how France’s statement applies in this instance, viz., the rich benefit far more than the poor from the government’s protection and enforcement of property rights. Therefore should pay more. And we can then start to argue about whether the value they derive is merely linear.

    BB: As for the St. Petersburg paradox, I see nothing paradoxical in it. Humans are mortal, and must concern themselves far more with downsides than upsides, because you only get to die once, and it’s game over, and you don’t have eternity to recover from setbacks. This clearly limits how much it’s rational to invest in long shot gains.

    Again, deliberately missing James’s point about how marginal utility applies to taxation, viz., that the value of an equal percent of a larger sum of money to someone who starts with that larger sum is less than the value of the same percent of a smaller amount of money taken away from someone who starts with that smaller amount. In other words a flat tax takes more value from (and causes more pain to) someone with less money than someone with more.

    BB: Finally, yeah, I’m aware that there are varying conceptions of “fairness”. Maybe you guys could be aware of that too? You’d have less confusion when confronted by ordinary people who don’t support punitive rates of taxation on income levels they’ve got no chance of achieving. It’s not because we’re idiots, or under the sway of diabolical mind control rays. It’s because we don’t think punitive taxation is FAIR, even though you do. We simply disagree with you about what’s fair.

    Red herring; if anyone were proposing a tax structure that reflects true marginal utility (with marginal tax rates approaching 100%) this might be a sensible rejoinder. The notion that “punitive rates of taxation” are on the table is laughable. In fact what is on the table is exactly a compromise between a notion of fairness that ignores marginal utility (flat tax) and a notion of fairness that takes it completely into account (with marginal tax rates approaching 100%) — i.e., a mildly progressive tax structure with the highest bracket being significantly under 50%.

    This is what I mean. You pretend to engage on these issues; but you don’t really.

  31. Mitch Guthman says

    Brett,

    Perhaps I didn’t express myself as clearly as I would have liked, by my point was not with poverty as such but rather with the fact that some laws which seemingly (or on their face) treat rich and poor alike are, in fact, repressive and would only apply to disadvantaged segments of the people. Obviously, a law that forbids sleeping under bridges, stealing bread or begging in the street will ever only be used to police the poor.

    But the longer quote from Anatole France (which is rarely used) makes it clear that even though the political systems is dressed up in the clothes of equality, it is the poor who must work to pay the taxes, must worry about a place to live and perhaps, at the margins of poverty, support themselves by begging, while the idle rich quite obviously do not: “Another reason for pride, that of being a citizen! For the poor citizenship consists of supporting and sustaining the power and idleness of the rich. They must work for those goals before the majestic equality of the laws, which forbids rich and poor alike to sleep under bridges, to beg in the streets and to steal bread.”

    This longer quote provides more context and is echoed in bobbyp’s comment that the rich often sustain themselves as parasites sucking at the taxpayers’ tit: “I walk into Congress. A billionaire walks into Congress. We both order a just society. I get endless wars, a bloated military establishment, failing schools, a tattered social safety net, and decaying infrastructure. Oh, yes, and a tax bill. The billionaire gets endless wars to make the world safe for investors, the world’s biggest military to protect his wealth, and a tax break, sometimes even one crafted just for him alone. He has to buy lunch. The rest? Not his problem.” In principle, rich and poor alike have the same access to lawmakers but only the rich have to money to give the bribes necessary to guarantee legislative outcomes in their favor.

    But we are all of us just dancing around two questions: What kind of a world to we want to live in? Mississippi or Sweden or perhaps something in between like Canada or France? Ayn Rand talked a great game about “objectivism” and laissez-faire capitalism but she didn’t live a life which was even remotely based upon her own principles and, indeed, when the chips were down she was happy to take from the social safety net with both hands. But, of course, she wasn’t alone in this. One cannot help noticing how few Galtian overlords actually live in Objectivist oriented place like Mississippi or Somalia, preferring instead to live in places like New York, Massachusetts, California. But as we are now learning in California, you really can’t get something for nothing. You can either live in a high-tax/high service economy or you can live in a low-tax/low service economy. Nearly all of our Galtian overlords greatly prefer enjoying pleasant places to live. They just don’t want to pay for the privilege.

    Which brings me to this point: When considering optimal taxes and what is a fair share for the rich to pay, shouldn’t we take into account that those with the most to lose should pay the most to keep it safe? If our Galtian overlords want to live the good life in California, they have to pay. Or move to Mississippi.

  32. Brett Bellmore says

    “This longer quote provides more context and is echoed in bobbyp’s comment that the rich often sustain themselves as parasites sucking at the taxpayers’ tit:”

    And more often don’t, or progressive taxation would be a futile endeavor, just recycling the taxes extracted from the poorer classes with attendant losses. But, yes, I’m not terribly impressed with people who get wealthy by lobbying the government, instead of productive work. It’s no minor point that the more money pours through the government, the more swollen with fresh blood it becomes, the more ticks it attracts.

    Not an accident, of course: It’s part of the mechanism for laundering tax money into the hands of those running the government: The ticks PAY for the privilege of sucking at a handy vein.

    But, who’s proposing progressive taxation which distinguishes between sources of income, to go after the ticks, and not the productive citizens? Instead of just assuming that anybody who makes more than average can be regarded as a tick? Only person suggesting that, that I’m aware of, is Glen Reynolds, what do you think of his proposal? I’m all for it.

    “Which brings me to this point: When considering optimal taxes and what is a fair share for the rich to pay, shouldn’t we take into account that those with the most to lose should pay the most to keep it safe?”

    Like I said before: Progressive taxation, justified by mobster thinking. Who does the government make them safe from, in this scenario? Why, primarily the government itself. The wealthy aren’t, after all, incapable of hiring security guards. The only people they really can’t defend themselves from are the government itself.

  33. says

    Like I said before: Progressive taxation, justified by mobster thinking. Who does the government make them safe from, in this scenario? Why, primarily the government itself. The wealthy aren’t, after all, incapable of hiring security guards. The only people they really can’t defend themselves from are the government itself.

    No where on the face of the earth, never in the history of mankind, has there been a wealthy society without a government. It was not the Romans with there weight of government suffering in poverty while the Germanic tribes enjoyed large accumulations of wealth. Nor the Chinese and Mongols, nor the English and Scottish Highlanders in the middle ages, nor anyone else. Ever. No it is not government that rich people are protected from. Being rich requires security, which governments provide very well, very efficiently, and far better than does the private sector.

  34. larry birnbaum says

    Government as justified mobster thinking. Sure, but so what? Blood-sucking ticks. Is this name-calling supposed to make me think government an immoral concept? Let’s try this one on instead: private property is theft. Capitalists are blood-sucking vampires. There, does that convince you? These are a 3 year-old’s conceptions of right and wrong and how to think about them.

    In any case you’re still internally inconsistent; if wealthy people were required to pay security forces for the protection of their property, they’d still have to pay more the more they owned.

  35. Brett Bellmore says

    Yeah, and nowhere have there been people without guts full of sh*t. That doesn’t make feces the source of all human wealth. Just because something is omnipresent doesn’t mean it’s a positive.

    There are no wealthy societies without government, because they’d be invaded and sacked by neighboring societies that DID have governments. And because if that didn’t happen, the Mafia would BECOME a government.

    “No it is not government that rich people are protected from.”

    Sure it is. All you need to do is try not paying taxes, to verify that. Any protection racket is going to provide you with SOME degree of protection, if only to keep the competition from horning in. But the way you distinguish a protection racket from a legitimate enterprise is not what it does if you give it the money. It’s by what it does if you DON’T give it the money.

    And by that standard, governments are protection rackets. They’re just highly successful protection rackets with good PR departments.

  36. larry birnbaum says

    P.S. James, I told you he wouldn’t actually engage the issue of marginal utility’s relationship with fair taxation. They never do. These aren’t actually discussions. The best to be hoped for is to make sure that people who are new to this rope-a-dope don’t get confused by it.

  37. Russell L. Carter says

    “Instead of just assuming that anybody who makes more than average can be regarded as a tick? Only person suggesting that, that I’m aware of, is Glen Reynolds, what do you think of his proposal? I’m all for it.”

    Hey indeedy! Also, the top 50 or so employees of corporations who take a bailout should forfeit all remuneration for 5 years beyond $100K. GM, banks, etc. Bonuses should be based on performance computed averaged over at least 10 years. I’m all Nassim Taleb on this stuff.

    I think you’d find a lot of us on The Left, as opposed to corporatist liberals, would be quite amenable to such schemes.

    However, let’s slide back into reality. Fact is Brett, that the people you tacitly support (even if with a certain queasiness) own and operate the government, are fully on board your desire to transfer as much money to the rich as possible, and to punish the poor (and their children) for the crime of inhabiting an earth that should be entirely allocated to the richest to do with as they see fittest.

    Look Brett, the reason you come off as being earnest but terminally dumb, is that we tried all your theories back in the 18th century. It didn’t work out well. If a man should (nay.. must!) keep what a man has earned, then a man keeps his slaves. Right? Maybe you ought to inform your new friends in your new town of your interesting (and ancient) theories.

  38. says

    Brett,

    It’s a dangerous world out there. You need other people to protect you and you really need other people to help you if you hope to accumulate any large amount of property. Government is an extremely efficient means of providing that protection. If you are going to have the help provided by other people, you will have to do something for them in return. Government is an extremely effective means of providing that protection and it requires that you do something in return. There is nothing unfair in this. There is nothing like a protection racket in this. And yes, if you try and have the protection without providing anything comparable in return, the rest of the people who are a) providing you the protection and b) who comprise the government will not take it well.

  39. Mitch Guthman says

    Brett,

    I think you are making what I understand to be a mistake common among modern “libertarians”. You seem to be implying that people would do better in essentially a state of nature because government is nothing but a “protection racket” that leeches off the most vibrant and productive individuals in society. Wouldn’t it be better and more just if we lived without relying on government or a “social contract” to take care of us? But, it seems to me, that it’s too easy to be an individualist and rail against the government’s “protection racket” while still enjoying its many benefits. In fact, you yourself constantly enjoy the benefits of government even while grumbling that since you could do just as well for yourself (and at a lower cost), taxation is simply theft.

    As a practical matter, I don’t this is possible even if it might be desirable. Without the state your food almost certainly would be safe to eat since profit-maximizing ranchers and meat-packers would not waste money on cleanliness neither would they waste money testing for mad-cow disease. Where would you keep your money? In a bank? If it were robbed who would try to recover your money? If there were a run on the bank, your money would be lost. If you became ill, what would happen to your property and your family? Who would you trust to protect your family while you slept or went hunting for meat? And so on, endlessly. You rail against the government’s “mobster thinking” safe within the relative safety of its cocoon.

    You say, glibly, that people are capable of hiring security guards. That’s true but only for the rich and even then it’s an iffy proposition. After all, in the bigger scheme of things, who will keep the rich man safe from the strongest of his bodyguards? In a state of nature, if I am stronger than the rich man, isn’t that the signal that I should take his land, his money, his woman and his horses or cows? If one learns anything from history, it is that the warlord doesn’t typically sleep well or live very long. There is always a new, up and coming alpha male.

    Do you really want to live in a society where life is nasty, shortish and brute? Why would anyone want to live in a world where he can posses only that which he can personally defend? There is a reason most people think life is better in the United States, Europe and Japan then in, say, Somalia or Afghanistan.

  40. Russell L. Carter says

    Right.

    So would it not too badly violate the rules of extremist inclusion if we could, say, debate social issues of class and its attendant impacts on the fundamental rights of people w/o having to turn http://www.samefacts.com into BrettBellmore.com?

    Brett Bellmore has generated colossal amounts of obfuscatory prose, most nonsensical, over the last 10 years of commenting on the blogs he infests. He’s not personal, he’s almost always not abusive (if one ignores the “kill politicians who differ with me”), but I think that there should be a discussion about who can drive the conversation. You will note that Brett drove the discussion here, and what was the value add? Libertarians are adolescents. Do adults necessarily have to continually address adolescent arguments when the compulsive promulgator is more than 50 years old?

    I’m just sayin’.

  41. Brett Bellmore says

    “. You seem to be implying that people would do better in essentially a state of nature because government is nothing but a “protection racket” that leeches off the most vibrant and productive individuals in society.”

    I mean to imply nothing of the sort. Government is a nasty institution, but that doesn’t mean we’d be better off without it. Or, to be more precise, it doesn’t mean we’d be better off without any given government, because the tragedy we live under is that we CAN’T be without it. But that’s like saying death is unavoidable. Doesn’t make it a GOOD thing, to be sought after, rather than something we ought to try to minimize.

    And as far as driving the discussion, O’Hare started out with an expression of contempt for the idea that high taxes on the wealthy could be unfair. He could have acknowledged that “fairness” is, fundamentally, a contested concept, that different people have different notions of what’s fair, and that a substantial, and not insane, fraction of the population would agree with that proposition, even as he disagreed with it.

    But no, he didn’t. And *I’m* the one that doesn’t understand people disagree about what “fair” means?

  42. larry birnbaum says

    Projection is an interesting thing. Of course it is Brooks and Bellmore who could have acknowledged that there are different views of fairness and acknowledged that in order to make society work it might be necessary to compromise among these. And as for expressions of contempt, we have “blood-sucking ticks” and “successful protection racket with good PR.”

    Speaking of contempt, people, whom we usually call heroes, have given their lives to maintain the freedom we enjoy in the successful protection racket known at the United States, which allows Mr. Bellmore to speak as he thinks.

    And it’s impossible not to be struck once again by how thin-skinned this is. “Ma, he’s looking at me funny” indeed.

    It wasn’t the only — well, let’s say psychological oddness — exhibited in her books, but the absence of families and children as either a practical reality or the fundamental emotional core of human life, was one of Rand’s more striking distortions. If families aren’t part of your picture of human life, then I could see how social action might come to seem superfluous. If they are, then its centrality in human existence seems obvious.

  43. Brett Bellmore says

    “Speaking of contempt, people, whom we usually call heroes, have given their lives to maintain the freedom we enjoy in the successful protection racket known at the United States, which allows Mr. Bellmore to speak as he thinks.”

    I am firmly of the opinion that the US government is pretty close to being the “least worst” government in the world, much as democracy has been called “The worst form of government, except for all the others.” However, what with the war on drugs, and similar destructive idiocy, it achieves this status mostly by virtue of how bad the competition is.

    And, yeah, unless you’re in Dearborn, and want to criticize Islam, you’re allowed to speak as you want. Note that we gauge the virtue of a government on the basis of the extent to which it leaves you alone. That’s how you judge the virtue of a protection racket: Not by the benefits you get from it, but by the harms it refrains from inflicting.

  44. larry birnbaum says

    I also gauge the government by how well it’s establishing Justice, insuring domestic Tranquility, providing for the common defense, and promoting the general Welfare. Stuff like that.

  45. CharlesWT says

    “The law, in its majestic equality, protects the property rights and wealth of the poor as well as the rich.”

    Except when government wants to strip the poor of their property so that billionaires can build stadiums for millionaires to play in.

  46. Brett Bellmore says

    Or raze a neighborhood because a University wants to expand it’s campus. Here’s the thing: If the government is going to be discriminatory in it’s enforcement of rights, it is, as a practical matter, not going to be discriminatory in favor of the poor. So, yes, the poor do need that majestic equality, because the alternative is worse for the poor.

  47. politicalfootball says

    Now, we do face a serious problem, in that a lot of people don’t have enough income to pay their FAIR share of taxes.

    Brett understands the authoritarian nature of the libertarian ideal. Justice would be better served if government confiscated the entire income of poor people. The only objection to doing this is that it would be impractical. As a result, you’ve got Paris Hilton grossly overpaying her taxes so that some guy working two dishwashing jobs (probably at a state-mandated minimum wage!) can be permitted to keep some of his income.

    Why does Ms. Hilton put up with it? Brett explains: The “mobster ethics” of the poor require that the wealthy pay what amounts to extortion.

  48. curious says

    I think something got inverted in the discussion about the role of government in keeping the wealthy safe and therefore justifying a higher marginal tax rate: It is not simply a question of the wealthy benefitting more from government and therefore being obligated to fund it at a higher rate than those who are not. Rich people are not rich in spite of government but because of it; wealth itself in the form of private property is an artificial construct that doesn’t exist independent of the state (i.e. government at all levels); it doesn’t exist in a state of nature and rich people couldn’t hire enough security guards to replicate the system of private property that exists in this country. ditto all corporate forms of group organizations from corporations to partnerships to limited liability enterprises.

    As for price discrimination, part of the reason you don’t see different prices charged at the retail level is that is generally against the law in this country to charge different prices for the same goods (absent mitigating facts) to different customers. Governments impose this notion of fairness in the form of laws preserving competition (i.e. the robinson-patman act and state law equivalents for anyone who is curious and wants to look it up).

    As I always tell my kids, fair doesn’t always mean equal or anything else; fairness is a relative concept.

  49. CharlesWT says

    • The top 1% of personal income earners ($380,000 or more) earned 20% of the total personal income and pay 38% of the total income taxes.

    • The top 5% of personal income earners earn 35% of the total personal income and pay 60% of the total income taxes.

    • Of the top 400 earners each year over a 15 year period, only 27% have appeared more than once.

    • Of the top 10% of earners, only 2% earned a million dollars or more.

    • Standard of living cost varies greatly depending on location. It can cost more than two and two-thirds as much to live in Manhattan than in Wichita, KS.

    • 45% of the people filing tax returns for 2010 will pay no income tax. Of course everybody pays other taxes, both explicit and hidden.

    • Historically, high or low marginal income tax rates has had little impact on federal tax revenues.

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