Friday, December 17, 2010

Revenue, Taxes, and "Fair Share" Redux

My reply to commenter BigVic on my previous post on the subject got too big to post in a comment.  So it gets its own post.

First, let's get the "value judgements" and hypocrite thing out of the way. I am not saying that anyone isn't free to "rail against" ... anything. Rail away, I do. What I am "railing against" here is the audacity of those who use the coercive power of government to restrict my liberty to engage in what may be self-destructive behavior. That is not hypocritical. It is fully consistent with what I believe.

True, I did assume that when you mentioned leaving out how the 51% gained their possessions that you were one of the pie people -- for if they didn't take it from someone else's piece, why would you care how they got it?

IMHO, Nobel prizes are overrated, being as much gauge of popularity of one's ideas at the time they are bestowed as anything else. And respected economists disagree vehemently over how things actually work. This is once again betrayed by the fact that you're still talking about models and theories as if they are fact. Milton Friedman used a model to ... "prove" ... this shows an inherent lack of understanding of scientific method.

Models don't prove anything. Evidence can support the accuracy of models, and good models can predict things with varying degrees of accuracy, but models never, ever "prove" anything. The sooner you understand this, the better your education will be. Take it from someone who figured that out after he graduated and wished he'd realized it sooner.

Besides, what you're saying he "proved" is that inflation is a monetary phenomenon. I think a fifth grader could have told you that without using a Dynamic Aggregate Supply model. Ok, maybe an 8th grader.

No, what I call "wealth" is the accumulation of property and/or the ability to obtain goods and/or services via trading what I have, or vouchers for what I have (money or credit against assumed future earnings). In aggregate, I suppose you change "I" to "We" or "They" and you have the equivalent of a "society's" wealth. But I tend to see the world first through the lens of the individual.

Not using the terms economists happen to use doesn't mean I have any less grasp of basic economics. As a matter of fact, I believe the fact that I can explain it without peppering it with academic jargon is an indication that I do actually have a grasp of it. If you can explain it to a fifth grader, you understand it. If you can't, it's quite possible that you just memorized the words some professor spewed out in a class somewhere.

"Giving" money to the rich is not what I was talking about. I was talking about "taking less" from them, or "not taking more" from them, whichever way you care to look at it (though I can see neither is the way you're accustomed to looking at it). Leaving more in the hands of those to whom it belonged in the first place is not "giving". And of course, it's not as simple as leaving them with x amount more gives you f(x) more jobs. One reason why economics will never be an exact "science" ... or a science at all ... is that humans are complex and have a bit of an unpredictable streak. Economics is at its core more the study of human behavior in the realm of motivations, needs, and desires than it is anything else. (the reason it can't ever be a real science is that it would be immoral to experiment on actual humans -- not that Marxists haven't been trying it for the last century).

But we can make some generalizations based on observations and our own human experience, and one consistent thing that we find in human behavior is that in general, the more one has, the more one is willing to risk. It's not that leaving more in the hands of those to whom it belongs directly causes them to go out and hire a few more people tomorrow, though that can happen. The bigger payoff is when that person or group of people decide to expand a business or perhaps start a new one, or perhaps a whole new industry which creates a whole slew of new jobs. Sure, some of them will go buy another yacht. But it's their money. Who am I to tell them what they must do with it?

As to restaurant workers, here's a little thought experiment. Suppose I go out and load a truck full of water and drive it around trying to sell it. In the Mississippi valley, where water supply is plentiful, I'd have a hard time selling it at all. Because it isn't worth anything to them. They have plenty. The demand is saturated with supply. I might have better luck in Arizona or New Mexico, though.

Now, suppose everybody cooked at home, and nobody went to restaurants. Well that was actually pretty much the case all over the country when my mother-in-law was young back in the WW-II days and before. There were few restaurants at all, and those were generally in hotels. But as America and Americans became wealthier, some people thought, "hey, what if I open a business where people actually come and we cook for them, serve them food, and clean up after them and ... they pay us to do it?"

At first it was just Mom and Pop and maybe a couple of the kids, but as the business became more popular, they needed more help. So they put out the word. "Hey, we need help. We'll pay this much."

And some people said, "yeah, I'll do that work for that much money." And so they were hired. That trade of labor for money (wealth vouchers) was worth more to him or her than whatever he or she was doing before, or they wouldn't have taken the job. Ergo, wealthier than before. And the restaurant owners got what they needed. They are also wealthier. They exchanged goods and services at a "price" agreeable to both. If it were not agreeable, they would not have agreed.

The new waitress didn't have a "right" to that job, and the restaurant owners didn't have a "right" to have labor supplied. It was a mutual agreement between free people.

The point here being that you get paid what your labor is worth to someone. You may do all the work in your restaurant where you cook and produce all the value ... but that's the point. What *is* that value? It is what someone will pay for it, and no more - no matter how hard you worked.

As to the Soviet Union's "fastest growing" there was, of course, the absorption of eastern bloc countries it had conquered (and their accumulated wealth, to be redistributed) from WWII, and from war reparations from Germany including equipment and industrial materials. Growth rates are funny things, too. A lot of times you can grow really fast from near zero to something quite a bit above zero, and still not be very big. I didn't say you can't grow an economy from zero by effectively enslaving a population. It also helps if you have a lot fewer mouths to feed when you, say, starve off a few million Ukrainians.  (Seems something like this happened in China, too.  Coincidence?)

When agricultural production dropped 23% in the Soviet Union during the second 5 year plan, they actually got it to go up by later by ... wait for it ... allowing peasants private plots to farm and allowing them to sell what they grew on them in the open market.

The sixth 5 year plan again discouraged the practice and ... funny thing.  Agricultural output went down again.  Weird!

If you're actually advocating moving to a system where people actually are literally forced to accept jobs they wouldn't otherwise agree to at prices fixed by "experts" in the government (with no *possible* chance of corruption, as an aside) -- I'm not going there with you. I'm squarely in the Life, Liberty, and Pursuit of Happiness camp. I know several people who lived under the Soviet and Chinese systems. Oddly, they don't have anything good to say about them.

No comments: