Musings On Spreading The Wealth, and Walnut Grove …

A friend sent me the following missive in response to the recent news story that claimed 47% of U.S. households paid no federal income taxes whatsoever. (pic via Gaspard)

With an average income of 344K, paying taxes is no biggie. One can still live a VERY nice life. Is it just “want more and more “ at that stage of income?. Sorry, I do believe in redistribution of wealth via Government. As a society we should be proud to give a hand up to the poor (I am not going to get hung up on a few welfare Queens who abuse the system).

I don’t have the time or space to give this a full treatment, but let’s take a look at some quick thoughts.

The above is, I believe, a very common sentiment among the left and statists of various stripes. I think it spawns at least in part from a few misunderstandings. I think the first and most prevalent is the belief that trade and free exchange are a zero-sum game. That is, in every (or at least most) transactions there is a winner and a loser; every time someone becomes better off financially, someone else is made equally worse off. This is, in my opinion, one of the most dangerous and widespread fallacies in economics. Non-coercive trade is a positive-sum game. Two people trade (money for coffee, a newspaper, a laptop, lunch, whatever) because of subjective value. They do not value the two things being exchanged equally, they each value the other thing more than what they already have. If this was not true, the exchange would not take place, due to transaction costs alone. (see Part 3 of Economics for the Citizen)

So what does this tell us? For one thing, that even with a fixed number of “goods” in the world, we can all be made off by simply exchanging them peaceably. But it gets better. There are not simply a fixed number of goods in the world, new products and services are constantly being created thanks to creative human minds (see Julian Simon). If there were a fixed number of goods being traded, I suppose we would just be cavemen repeatedly trading the same stones, hides, and spears back and forth? ;-)

At this point we have the facts that non-coercive trade is a positive-sum game, and the fact that human ingenuity constantly creates new and better products and services making us better off. Now let’s expand on the idea that individuals create new and better things. Using a simple example let’s say that Charles Ingalls spends evenings working in his barn and makes a wooden chair to sell in order to sell to provide for his family. He has created new wealth. Let’s ignore economics for a moment and look at morality. Do the other residents of Walnut Grove have a moral claim to a part of the chair (or the proceeds from its sale) simply due to the fact that the chair has now been brought into existence? What about the residents of Minnesota? Or the U.S. as a whole? I would argue that no, no one else has a moral claim to the chair. Now let’s scale that up. What if Chaz Ingalls creates a new drug, transistor, or wristwatch in 2010. Does anyone else have a moral claim to those products? Again, I say no, none of the salient points has fundamentally changed. This is I think at its core the problem I have the “spread the wealth” mantra.

But doesn’t Chaz already own a chair? What about others that don’t yet have chairs? Does the fact that he might have more chairs than he “needs” (an ambiguous term, for another day/post) mean that it is okay for others to forcibly take his chair from him? I full support the call to help others via charity and friendship. But this is very different than using the state to steal from others.

Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame and danger that their acts would otherwise involve… But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them and gives it to the other persons to whom it doesn’t belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Then abolish that law without delay … No legal plunder; this is the principle of justice, peace, order, stability, harmony and logic.
— Frederic Bastiat

Did the man earning $366,400 harm anyone to make his money? In a relatively free market and free society, unless he stole the money or cheated someone, he actually made others better off by making so much money. Realizing that exchange is a positive-sum game is critical to this concept. And what of the need we often hear about to “give something back?” Once we understand again that free exchange makes both parties better off, there is no need to “give back,” unless of course that person has cheated or stolen from others.

Please note that I am very much not advocating against charity, quite the opposite. Charity is an important part of a civil society in my opinion (while there is already a lot of of private charity, I think there would be a great deal more if not for being crowded-out by govt.). And I believe each of use is called to help others in numerous ways. But please do not confuse using the apparatus of the state to steal from others with charity. They are two very different things. The government should not be in the charity business for several reasons, not the least of which are the facts that it’s generally inefficient and full of graft and political maneuvering.

I strongly recommend the two links below. In the first, Dr. Walter Williams VERY clearly and briefly explains the difference between charity and theft. The second link is to a ten-part series of one-page columns explaining basic economics. Both are very readable and easy to understand. I left a few relevant quotes below, too.

When plunder becomes a way of life for a group of men living together in society,
they create for themselves in the course of time a legal system that authorizes it
and a moral code that glorifies it.
– Frederic Bastiat

The state is the great fiction by which everybody seeks to live at the expense
of everybody else.
– Frederic Bastiat

In general, the art of government consists in taking as much money as possible
from one party of the citizens to give to the other.
– Voltaire, “Money” (1770)

Additional links:
Is It Theft? – By Walter E. Williams
Economics for the Citizen – By Dr. Walter Williams

  • wintercow20

    You get an A.

  • Speedmaster

    >> "You get an A."

    Thank you, sir! ;-)

  • Helena

    Great points! We should have the ability to be as charitable (or not) as we want and not have our money in the form of taxes going towards things/people/practices we would never choose for ourselves.

  • ScottsHighland

    Excellent posting! Our constitution outlined some very basic services that we as citizens should have no qualms with paying for as part of our social contract. Sadly our democratic system has allowed us to add and add to this list of things we expect from our government. While the founders intended the judiciary to keep this in check, their dependence on the executive and legislative meant ultimately they would end up approving the popular demands. We almost need a truly independent court system to be able to tell us "No – you don't need that from your government, even if you voted for it!"

    Cheers!

  • skh.pcola

    More of these well-thought through opinion pieces, please. This is the first time that you've gone on at length about anything, and I've been here for quite a long while. Thanks!

  • http://www.beckiswholelife.com Becki Jacobs

    Thanks for sending this Chris!  Did you think I would like this because I love little house or because I would agree with every word here:-).  Charles (and a few others in Walnut Grove) are excellent examples of people working hard to make this country great without relying on the government.  To your point about free trade being a positive sum game – if Charles’ chairs became very popular he would create jobs – very much like the people today who make 344k and are the subject of increased taxation – even though they currently pay a huge chunk or our taxes already.  Having wealth  in our society is a good thing for the economy and I am kind of sick and tired of people making wealth out to be evil.  To the person’s point about “not getting hung up on the few welfare queens”  I am not going to call every rich person evil just because there are some wealthy people out there who cheat the system.

    I also like your point about charity – people would be more willing to be charitable if they weren’t so burdened by the government…..and charity through the gov’t is certainly not charity.

    • http://pretenseofknowledge.com/ speedmaster

      Thanks, Becki!  :-)