The Just Distribution of Income and Wealth

December 26, 2011

by Mario Rizzo

There has been a lot of talk this year, and especially during the holiday season, about the inequities in the distribution of wealth and income. But most of what has been written is quite simple-minded, if the writers mean to convey something more than their own personal preferences for a different distribution.

I have no objection to passive expressions of preference. But I do have objection when people attempt to bolster their case for intervention by the state under the banner of distributive justice, morality, religion or whatever is supposed to evoke some objectivity.

I also have no objection to those who want to give efficacy to their views (mistaken or not) by giving away their own money – much like Jesus urged the rich man to do and then to follow him.

It is obvious that I cannot engage in a full-length treatment of this issue here. But I can list some of the questions and issues that serious people ought to consider.

  1. There seems to be very little concern, in the popular press, for the causes of unequal distribution. This includes, especially, the causes of the increasing unequal distribution over the past few decades. (However, recessions seem to be good for reducing income at the top.) Reformers should always consider causes before advising cures.
  2. There is a confounding of the results of a process that produces a distribution with the process itself. If person A steals money from person B, I object to the process (theft) first and foremost, and not to the resultant distribution of wealth. I really don’t care if it results in a more equal or less equal distribution.
  3. If there is something wrong with the rules-of-the-game, that is, the process that generates wealth and income distribution, let us attend to that. For example, if people are getting rich because of the warfare state or because the institutions they work for are bailed out by taxpayer money, let us address those issues.
  4. What exactly constitutes a more just distribution? The economist Paul Samuelson (and other amateur “moral philosophers”) used to equate, in his textbook, equity with greater income equality. (He famously, but ignorantly, said that the Soviet Union “chose” greater equity at the expense of efficiently – but nevertheless they would surpass us in wealth soon, anyway.)
  5. Justice does not simply imply equality. Sometimes it implies equality and sometimes inequality (as when the criminal gets his punishment, but the rest of us do not).
  6. Is it important that the positive entitlement to resources must be bought with the effort of others who might believe they have better uses for their money?
  7. Why should the hierarchy of values that emerges out a political system — based on favors, special interests, power-plays, (rationally) ignorant voters, self-interested politicians, and people much less moral than you and me – dominate  over my and your moral judgments?
  8. Do the putative moral claims of the “poor” stop at the water’ edge? Given that the poor of the US are rich by world standards, what kind of objective morality of distributive justice allows that “our” poor get preference over, say, North Korea’s poor? Do we have a tribal morality?
  9. To what extent are the commentators (law professors and economists especially included) trying to publicly signal their “goodness” by using their technical skills to come up with schemes that pander to unthought-out popular prejudices. After all, how much respect from the general public can academics get by coming up with some theorem on the quasi-transitivity of preferences, or what not?
  10. Last, but not least, do the redistributioners have any idea how the so-called welfare state works in practice? Do they know how the state uses one hand to make the poor poorer (unseen) and uses the other hand to help them out (seen)? Do they see the coming bankruptcy of the welfare state?

 

63 Responses to “The Just Distribution of Income and Wealth”

  1. Tim Says:

    This is an awesome post; thank you. I’d encourage you to expand these ideas and clarify some of the writing for a broader audience. As is, I think it will resonate with sympathetic-minded people, who can fill in many of the blanks. But people not predisposed to agree need to be walked through the thinking more slowly.

    For #2, consider “Some people think they object to inequality as an outcome. But they don’t object to inequality per se; they object to unfair processes that happen to produce inequality. We can see there are inequality-producing processes that they like just fine.”

  2. bill greene Says:

    This excellent post raises some of the key issues concerning redistribution of income and/or wealth within a society. But the best policy to adhere to, for most Western states, especially America, is not rocket science.

    First, it is important to accept the fact that a free market and competition creates the most wealth for the most people–as compared to a socialist/communist state. History and actual measurable results provide a firm base for this caveat.

    Second, to minimize the inequities that occur within a free marketplace it is essential to have a level playing field, an equal opportunity for all to participate, and a minimum of graft, favoritism, or regulations that restrict a full and fair open economy.

    Third, the government that decides on how to provide a safety net for those “that fall by the way” must create a fair and equitable welfare system, and they must pay for it within the limits of the government’s income.

    America’s problems with redistribution are due primarily to the fact that Congress has created too many overlapping and poorly controlled welfare programs. They are inefficient and unfair and subject to great abuse. Politicians set one class against another and curry voter favor by granting special favors to every possible recipient. All business subsidies and bailouts are not even called for since they are not a safety net for disadvantaged individuals.

    And, of course, the promised hand-outs are excessive. For practical purposes, and as a brake on spending, they should only be paid for within a balanced budget.

    The problem with welfare and redistribution is not its existence, which is clearly not debatable, but simply with the inequity and excess which sullies our programs.

  3. Jeremy L. Says:

    Prof. Rizzo, I wonder whether it might be helpful to frame this discussion in terms of the tradition of moral philosophy that gives us the term “distributive justice”.

    The traditional distinction is between distributive and commutative justice. Commutative justice happens between individuals, when they engage in mutually consensual interactions. It means that every individual, in every exchange, has all of what is his and only what is his. (Restoring stolen goods to their rightful owner is commutative justice, not distributive.)

    When we adhere to principles of commutative justice, the resulting distribution will always be “just” in the sense intended by commutative justice. The point of the distinction is that we also want results to be equitable (which is not necessarily as strong a claim as “equal”). We don’t want people dying of preventable causes, for example. This isn’t just a matter of personal preference.

    Libertarians typically discount distributive justice altogether. Socialists typically discount commutative justice. That means there’s no conversation happening. Each is outside the realm of what the other recognizes as reasonable, conscionable disagreement. But at the same time, they’re both outside the realm of reasonable, conscionable disagreement for anyone who is persuaded there’s a valid distinction and both kinds of justice are valuable.

    Mill and Mises argue for free enterprise, free trade, and the institution of private property on the grounds that adhering to principles of commutative justice is, on the main, one of the best ways to promote distributive justice too. Libertarians can’t make that argument if they don’t recognize the validity of a concept of distributive justice in the first place.

    Why can’t we say that the one can’t come at the wholesale price of the other? That universal justice, justice tout court, requires that we find solutions to social problems that satisfy both kinds of justice insofar as we are able, and neither trumps the other when we aren’t?

  4. Jeremy L. Says:

    I admit I’m taking some rhetorical license with my authorities. But whether Mill or Mises argue quite that thing isn’t really my point. Isn’t there an argument there? That’s one I’d *like* to see, anyway!

  5. bill greene Says:

    Mr Says’ rather theoretical and philosophical points are interesting, but shouldn’t we begin by reducing the widespread fraud and inefficiencies in our present system, and also rein in total expenditures so we are only redistributing this generation’s money and not our descendant’s future money?

    Regardless of one’s philosophy or basis of argument, there are many handicapped individuals who require some support. The problem is to decide how much to give them, and how to determine who truly merits the assistance. That would take care of those physically or mentally unable to provide fully for themselves. However, in view of our demonstrated ability to find jobs for the disabled, distributive support should not be allowed to operate as a disincentive for them to find gainful employment.

    And, for all those not handicapped, it is a mistake to provide any significant assistance to able bodied individuals, as current programs do; and giving such aid creates an inequity to those who struggle as “the working poor.”

    There is a need for unemployment insurance, which should be self-funded, but any long-term welfare to able bodied people has to be severely rationed if we are to keep redistribution costs withing a balanced budget. Such practical considerations may trump the philosophical issues.

    An interesting philosophical question would be to define the responsibility of individuals to care for themselves. How much positive effort can be expected from an individual before we give aid? And how much self-destructive behavior should be tolerated before limiting assistance? Without some such standards, poverty will expand in direct proportion to the amount of money alleviating it.


  6. Sadly, most of the people who come to moral judgments like “There’s too much inequality” would not consider using logic and facts to arrive at their judgment. This list serves more to make it clear that their claims to morality are not to be respected.

  7. Bill Stepp Says:

    Good post. Additional factors to consider are interventions in labor markets as well as intellectual monopolies.
    Attorneys average around $195-200k per thanks to barriers such as occupational licensure and the fact that a college degree is a prerequisite to law school. Indeed, law school shouldn’t be a prereq to becoming a barrister. Ditto for medical docs, etc.
    As for IM, Johnny Depp made $100 m last year. Without copyright he’d have made a bundle, but not so much. This is true for his fellow A-listers as well. Ditto for authors, artists, musicians. Inventors and the firms eploying them reap monopoly rents from patents.

    Moving down the income scale, there are a myriad of occupations that require a state-granted license, such as hair dressing and massage in many states. Some states require workers in hundreds (thousands?) of occupations to meet licensing reqs.
    Do the economists studying this matter ever take these inteventions into account? Do they ever complain about them?
    Do Krugman or DeLong ever rise to their defense? Somehow I doubt it.
    .


  8. Thanks to Bill Stepp for raising these issues. Occupational licensure is a major barrier to the entrepreneurial poor and less well-off moving up the income ladder. The Institute for Justice has been battling legal cases in this area for 20 years.

  9. Allan Walstad Says:

    @Bill Greene: “The problem with welfare and redistribution is not its existence…”

    Depends on whether it’s coercive or voluntary. In a free society, nobody’s stopping you from helping people in need and soliciting others to join you. Does distributive justice stop at the US border? If so, on what substantive philosophical basis? If not, just how much are you prepared to give up to the tax man, to redistribute to billions of destitute people around the world?

    “…they must pay for it within the limits of the government’s income.”

    And what limits are those? Last I heard, the Supreme Court held that there is no limit at all to the extent of the feds’ power to tax. So the only limit would be at the point where the level of the tax generates diminishing returns by depressing economic activity.

    @Jeremy L. re “distributive justice:” Please spare us the euphemisms for robbery. You are welcome to distribute your income to others if you choose. So am I, and I could easily spare more for that purpose if I didn’t need to give money to organizations that are fighting for what’s left of liberty.


  10. Perhaps the key term that someone mentioned was “free market” as the key concept that get’s to heart of the matter is indeed “markets that are free.”

    If all citizens are given free (without charge) access to the major selling spaces in any city then you will have a truly just re-distribution of wealth. So a shopping mall of 100 shops becomes a mall of 1,000 individual traders who DON’T pay for the selling space and who have no permanent spot. Yet the importer of a container load of tea is facilitated and the seller of small packs of tea is facilitated.

    In one fell swoop you are tackling unemployment, social welfare and isolation as well as creating wealth that stays local.

  11. Daniel Says:

    If we talk about the just distribution of income/ wealth made by the state, we will find a single answer: it is always injust and unfair. Why? Because our mindset has not a real and corerct view.

    I written about the only reason for any unfair distribution on my blog: http://economicscenarios.blogspot.com/2011/10/apparent-paradox.html

  12. Allan Walstad Says:

    @Amal Abdalhakim-Douglas: “If all citizens are given free (without charge) access to the major selling spaces in any city then you will have a truly just re-distribution of wealth. So a shopping mall of 100 shops becomes a mall of 1,000 individual traders who DON’T pay for the selling space and who have no permanent spot.”

    Interesting idea. I take it you will be sinking your own funds into building and maintaining this mall? Or is this just another idea about what to do with other people’s money?

  13. bill greene Says:

    Alan asks about my comment: …they must pay for it within the limits of the government’s income.”

    “And what limits are those? Last I heard, the Supreme Court held that there is no limit at all to the extent of the feds’ power to tax.”

    I do not mean to imply I favor heavy taxes, but the first step in reforming government spending is to limit it to the government’s income–without printing money or expanding the debt. Once that is done, if the politicians have to raise taxes to cover their spending, they will face the voters’ rath. At present, they can overspend and hide it by printing money. So I suggest taking one step at a time.

    It would be better to go further: Require a balanced budget AND limit all taxes to something like 20% of one’s income or consumption.

    It should be clear after 50 years of deficit spending that Congress will not reform unless we impose mandates on them! They’ve imposed enough on us already!

  14. bill greene Says:

    Alan, among others, has asked: “Does distributive justice stop at the US border?”

    Philosophically, or from a moral or religious point of view, it probably should not. Half the world’s people are poorer than America’s poorest. Should not they come ahead of the relatively more comfortable poor in this country? In an ideal world–Yes!

    But we are far from an ideal world–And, from a practical point of view we can’t afford it. America is going broke just supporting the huge government and entitlement programs we have. But even more realistically, almost all our billions of foreign aid is wasted and does no permanant good. Indeed it often maintains foreign despots in power and perpetuates the poverty of their people.

    Both Hernando deSoto and George B. Ayitteh have written on this subject and lay out bthe case against foreign aid as we know it. They also establish quite clearly that the only way to reduce poverty is to create a level playing field for the world’s poor. Their countries at present do not allow the vast majority of their people access to a free market. DeSoto documents how the world’s poor already “own” more wealth than the Millennium Plan would provide them in 100 years! But they can’t use it, sell it, or borrow against it, because they are all forced to operate in the illegal marketplace. When laws, taxes, and financial institutions become too oppressive people have to operate in the underground economy and that limits the building and preservation of wealth.

    It was observed above that licensing requirements even in America are absurd and keep many would be entrepreneurs out of the mainstream. DeSoto found that in most South American countries it takes two years and hundreds of forms to get a license for the most minimal trade. The Womens’ World Bank and the Grameen Bank have done more good breaking down barriers and helping the world’s poor than our State Department. (Google them).And note that every time our own Congress enacts extreme regulation, licensing requirement, reporting mandates, and recurring fees and taxes, they are moving us a step closer to the Third World nation status.

  15. Roger McKinney Says:

    It has been my experience discussing the issue with those on the left that they will consider the list you provide; give quasi-libertarian answers; then insist that the state redistribute income. It’s an emotional issue, not an intellectual one.

    Envy drives some of it. Media types and academics consider themselves smarter than most millionaires, so justice would demand that they make as much money. Then there is the idea that average incomes are earned but anything above average is luck, so the people who get above average incomes don’t deserve them and it’s OK to take the money from them.

  16. Young Back Says:

    Mario,
    Indeed, social critics who complain most vigorously about inequality (and its increase) seldom propose to investigate into the causes for the pattern of distribution. The attitude reflects their belief in equality as the supreme ideal. Consequently, any deviation from equality is abnormal, caused by luck or unjust acts. A misunderstanding of the market process and the nature of profit tend to make social critics (including I am sorry to say many economists) to indiscriminately suspect ill-gotten fortune on the part of the haves and undeserved and unjust deprivation on the part of the have-nots, no matter what they have done in the past. They become despondent, and display their outrage, when the measured degree of inequality increases, (regardless the causes.) They switch at will between a relative measure of inequality (as when stock market is booming) and an absolute measure of standard of living (as when the economy is recession) in making their case for greater equality. They incite envy and propose measures to redress what they regard as the state of injustice. Fearing envy some of the haves publicly display their sympathy with egalitarianism, (when there is nothing to prevent them from sharing all their possessions with the less well off.)

  17. greghill1000 Says:

    What do libertarians implicitly assume when criticizing the *re*distribution of wealth and income? I suspect it’s something like Robert Nozick’s imagined scenario in which individuals originally acquire property rights by mixing their labor with parts of nature, thereby acquiring rights to these things, which they freely exchange, so that the resulting distribution, being the product of free exchange, is unobjectionable.

    But even Nozick recognized some of the weak points in this line of reasoning: acquiring rights to parts of nature was only legitimate if others weren’t harmed; there have been countless acts of robbery, fraud, slavery, etc., during the centuries following the first acquisition of property; hence, the existing distribution is not the exclusive product of free exchange; therefore some rectification (redistribution) is in order.

    Very few egalitarians argue for equal incomes tout court. For example, John Rawls argues that inequalities are just insofar as they work (via incentive effects) to everyone’s advantage. “Working to everyone’s advantage” doesn’t mean maximizing per capita income. Thus, when the top 1% of income recipients are capturing 75% of the total income gains, it’s hard to say that inequality is “working to everyone’s advantage.”

    But look how badly the European welfare states are doing? Did you know that if you exclude the top 1% in both the U.S. and France, the average income of the remaining 99% is actually higher in France than in the U.S.?

  18. Allan Walstad Says:

    “But we are far from an ideal world–And, from a practical point of view we can’t afford it.”

    I’m sorry, Bill, but this just doesn’t cut it. If even our poorer people are better off than billions of poor folks around the world, and if the richer owe redistribution to the poorer — at the point of the tax man’s gun — then you and I owe it and they have a right to see it taken from us. If you can draw the line at the US border, I can draw the line at the border of my family. The same case against foreign aid and in favor of more economic freedom can be made at home. Feel free to help whoever you want to help with your own time, effort, and money, and leave others free to do the same.

  19. Mario Rizzo Says:

    Mr. Hill is almost entirely wrong. The fact that, in ages past, there was much theft and so forth that contributed to property rights as we have them today is unfortunate. But it has no bearing on the importance of the security of possession today. First, you cannot rectify in accordance with the previous violations of rights. The paths of historical influence and causation are too complex to trace out. Rectification would be essentially redistribution according to political or subjective considerations. I doubt that you would try to find out what William the Conquerer stole and from whom. Second, the market each day distributes wealth and income to those who satisfy the demands of consumers best. Since these latter individuals are among the living this is quite relevant. Historically-dubiously acquired money must, if prperty rights are secure today, work to provide benefits to who engage in exchange. Third, some of the “poor” (almost no one is poor in America by world standards) are poor because they have not been responsible, taken too many risks, are lazy and have such characteristics that make them unproductive due to their own fault. Others are poor because they have been unlucky, sick, mentally ill and would be proper candidates for charity. It is not easy to tell the difference because people can counteract bad luck — Hellen Keller did. Thus, all this is the proper domain for private charities, especially for those with the local knowledge of the circumstances of the poor people in question. Fourth, the political system makes a mess of redistribution as we have and will see when the sh-t hits the fan.

    P.S. John Rawls’s standard has very little operational meaning in the absence of solid economic analysis and data. But I also think in the last analysis it is much like utilitarianism: it tells what to do if you had the information you can never get. And if you want to see a vision of the state divorced from all realism about how the state actually works, John Rawls is your man.


  20. I will add one point.

    Almost everyone is focusing on the adjective and not the noun. There is no “distribution” in a market economy. There is just production and exchange.

    Income is an unintended outcome of the complex interactions resulting from income and production. Wealth is a product of conscious decisions and skill: how much to save and where to invest. It is a matter of personal reponsibility.

    If the process is just, the outcome is just. What is the just distribution of points or scores in sports? It is the result of fairly played games. Nothing else. Any attempt to “adjust” points or scores is ipso facto unfair.

  21. Allan Walstad Says:

    @greghill1000: “there have been countless acts of robbery, fraud, slavery, etc., during the centuries following the first acquisition of property; hence, the existing distribution is not the exclusive product of free exchange; therefore some rectification (redistribution) is in order.”

    Let me get this straight — you think that because some tribe stole some other tribe’s piece of land centuries ago, nobody’s title today is secure? Without restitution? To whom? In most cases the antagonists have been dead a long time. The present wealth of those whose distant ancestors were displaced from their land many generations ago probably does not on average differ from those whose ancestors did the displacing — in fact, probably most peoples’ ancestors by now include both categories.

    It’s been quite awhile since I read Nozick, but I do remember he pointed out that the effect of old injustices decays exponentially, at least in anything like a free society where economic opportunity is available. Take any of the great number of successful entrepreneurs who rose from humble beginnings — say Thomas Edison. People were going to buy his light bulbs and make him rich, regardless of what was done by, or to, his distant ancestors. Why should he or Steve Jobs or Bill Gates or Herman Cain owe restitution for property they acquired non-coercively? Clear and transferrable title to private property is essential for the rapid economic advance that in a market economy benefits people by and large far more than any system of robbery implemented on the lame excuse that if you go back long enough, this or that acre of ground was stolen by somebody from somebody else. Shades of original sin.


  22. [...] NYU economist Mario Rizzo gives a list of some of the questions and issues that serious people ought…: [...]

  23. bill greene Says:

    I suggest that instead of thinking of welfare as some moral redistribution to correct the rigors of inequality that instead we see welfare as what it should be, and used to be– a safety net for the most disadvantaged who are suffering from real privation.

    In a free economy, provided there is a level playing field, with opportunity for all, there should be no reason to equalize incomes. Each person gets what he is willing to work for.

    The only reason for welfare is to assist those who truly cannot care for themselves–and there are such cases, and they do require help, and if the churches and other benevolent societies do not provide it, the community should take a collection for them, and that may take the form of taxes leveled on the successful. In Colonial days they had poor farms where the indigent could live under spartan conditions–much like our shelters for the homeless. It makes sense to do a little better for such people.

    Alan argues above that “If you can draw the line at the US border, I can draw the line at the border of my family.” I agree that any theoretical desire to equalize income can stop at my wallet–but I do feel that we all should contribute to those in true need. And I bet that would be about one in ten of those now getting support.

    Academics, philosophers, and their useful idiots who seek equal results, however, are totally wrong to muddle such aid to the indigent with some theoretical need to equalize income of all. Their error is to confuse “equality of opportunity” with “equality of results.” Such communist systems have never worked because everyone ends up with less. In a free country we have the right to take care of ourselves but no right to be taken care of.

    Unfortunately, demagogues in politics seek votes and elected office by pandering to socialist sensibilities and promise a hand-out to almost everyone. The result is bankrupting our nation. That is why demanding a balanced budget would limit excess redistribution much faster than arguing over the theory or justice of it all. If welfare was rationed to those funds available (without printing money) the hard choices of paring back to just the few who really need it would be accomplished.

  24. lxm Says:

    Here’s a question for you:

    Does too much inequality produce less wealth? If so, then it might be a good idea to reduce inequality. It’s not a moral question. (Think of it this way: does too high a tax rate kill growth? Yes. Does too high inequality also kill growth? There’s evidence that it does.)

    And here’s another one:

    Have there been changes in US policies that encourage the growth of inequality? Have we encouraged trickle up? There’s evidence that we have done exactly that.

  25. greghill1000 Says:

    Mario, Jerry, Allan, and Bill,

    Nozick’s point about rectification is not that we should try to figure out what would have happened in the absence of slavery, etc., but that, given these crimes, “the process” that Jerry points to has not, in fact, been just, and therefore “the outcome” isn’t either. In light of this actual history, Nozick allows that there may be a role for principles other than “just acquisition” and “free exchange” in thinking about justice.  (Although I’m not a big fan of Nozick, I thought he might have a bit more traction on this website.)

    There seems to be a just-so story lying beneath the surface of the anti-redistribution commentary above, which goes something like this. People who work hard, take risks, and save are rewarded with higher incomes; and almost anyone can climb this latter. Hence, we shouldn’t tax high incomes at higher rates and use some of the proceeds to improve the opportunities of needy students (Pell Grants), or raise the after-tax income of low-wage workers (EITC), or provide health care to low-income people (Medicaid).

    So here’s my question: when you think about policies that combine a progressive income tax with the sort of egalitarian programs mentioned above, does the degree of inequality make *any* difference in your evaluation of this package? Do you oppose this policy package just as vehemently when the ratio of the top income decile to the bottom decile is 10 as when it’s 1,000?

  26. Allan Walstad Says:

    lxm: Does liberty conduce to general prosperity? Yes. Has the government produced greater inequality in the US? Probably, through crony capitalism, which is not liberty.

    Greg: Does robbery become less wrong if the people you’re robbing are better off? Maybe, in the sense that if one is bound and determined to commit robbery, perhaps the better-off can more easily afford the loss. So what? Again, rather than presume to rob your neighbors through the power of the state, kindly confine yourself to helping people in need directly with your own time and money.

  27. greghill1000 Says:

    @Allan writes, “Greg: Does robbery become less wrong if the people you’re robbing are better off?”

    Allan, my post is just a few inches above. Is this really the conclusion you draw from it? The point is not that robbing rich people is ok because they’re better off, but that a checkered history of “transactions” weakens absolute claims to entitlement on Nozick’s own, very libertarian theory.

    I don’t know whether you belong to the “taxation is slavery” camp, but this view also appeals to an absolutist conception of property rights, which, in turn, is undermined by the many involuntary “exchanges” that have left their mark on the current distribution of “entitlements.”

  28. Bill Stepp Says:

    I doubt Nozick will get any traction on a site populated by libertarians. AS&U was refuted by Larry White and Roy Childs Jr., to name two libertarian critics.
    In a libertarian world, violations of property rights (defined to include crimes against persons, such as murder) would be redressed, but this would not imply some sort of egalitarian wealth redistribution conducted by the State.

  29. Bill Stepp Says:

    Regarding the point made above about France’s income distribution being more equal than the U.S.’s, that might be the case, but there is relatively little innovation in France, so the top 1% of income earners are going to have incomes that are closer to the lower 99% of the income-earning population.

  30. Allan Walstad Says:

    Greg, to quote your previous post: “So here’s my question: when you think about policies that combine a progressive income tax with the sort of egalitarian programs mentioned above, does the degree of inequality make *any* difference in your evaluation of this package? Do you oppose this policy package just as vehemently when the ratio of the top income decile to the bottom decile is 10 as when it’s 1,000?”

    This sounds to me like you are asking if the coerced redistribution (aka robbery) you advocate becomes less wrong or more ok to the extent that the people being relieved of their property are better off. Perhaps that’s not what you meant, but that’s the way it comes across.

    “The point is not that robbing rich people is ok because they’re better off, but that a checkered history of “transactions” weakens absolute claims to entitlement…”

    I answered that point approximately 13 hours ago. Mario Rizzo answered similarly a few minutes before that.

  31. bill greene Says:

    There is a problem “of logic” embedded within most of these posts: The desire to solve a mundane practical problem by constructing an intellectual theory. Social studies is not like mathematics–absolute rules and formulas do not compute when dealing with people!

    Most everyone agrees that it is wrong to take money from others– but every society needs some funds to operate. Thus, we can not argue that ALL taxation is wrong. The social contract calls for some degree of cooperation and sharing of burdens. We need bridges and alms for the poor. So, It is all a matter of degree.

    Rizzo’s point in this original post is that he does not agree with those who would “bolster their case for intervention by the state under the banner of distributive justice, morality, religion or whatever is supposed to evoke some objectivity.” We all know that to create true equality would be folly and there is no “objectivity” to any efforts to do so. Rizzo goes on to list ten useful considerations that raise questions concerning the legitimacy of welfare programs but he ducks the real question–When is welfare, supported by taxation, essential, and to what degree should it be alleviated?

    From a practical point of view some minimum assistance is needed for the most disadvantaged citizens–if only to keep them off the streets. There has to be some taxation to cover those costs. All we can do is make the system as efficient and just as possible–and a start would be to limit it to available funds without creating a deficit.

  32. Greg Hill Says:

    Allan, you write, “This sounds to me like you are asking if the coerced redistribution (aka robbery) you advocate becomes less wrong or more ok to the extent that the people being relieved of their property are better off. Perhaps that’s not what you meant, but that’s the way it comes across.”

    The phrase “coerced redistribution (aka robbery)” has as its correlate an “absolute right to everything I own” (the taking of which, by taxation, is robbery pure and simple). The trouble is that the correlate isn’t very convincing on a variety of grounds.

    Since Nozick has no traction here, let me try Elizabeth Warren, who pointed that even innovative entrepreneurs like Bill Gates enjoy massive benefits because of the public infrastructure that surrounds them, the internet in particular. Or, has Bill Gates’s father, who ran an unsuccessful initiative in Washingto State to establish an income tax on incomes over $1 million, put it, “Bill probably wouldn’t have amounted to much if he’d been born in Africa” (rough paraphrase).

  33. lxm Says:

    Alan Walstad says: “Does liberty conduce to general prosperity? Yes.” Thanks for the bromide, Alan. But you do not address the issue which is does too much inequality reduce the wealth and liberty of all.

  34. Bill Stepp Says:

    Re: Bill Gates (Elizabeth Warren’s point), he was a billionaire well ahead of the internet. MSFT was founded in 1975 and had its IPO in 1986.
    Gates’ Sr’s. point is true but irrelevant.
    The only infrastructure worth having (that excludes the 800 military bases run by the ce@Washington) is actually built by private firms (such as Reith Reilly). Infrastructure would be privately built and better managed and maintained in a free market, i.e., a society in which the State would be about as big as anarchy plus a street-constable. It might then actually be worthy of the name government, in the sense used by Mr. Nock.

  35. bill greene Says:

    Greg Hill writes : “even innovative entrepreneurs like Bill Gates enjoy massive benefits because of the public infrastructure that surrounds them.” Hill apparently uses this rationale as justification for redistribution of Bill Gates’ wealth–

    Now, it is a fact that we live in a great nation with economic freedom and its resulting prosperity, and that does indeed make it easier for each new generation to create successful new enterprises. But the proposed distributees of today did nothing to create this successful society. It was built by the efforts of hard working and innovative individuals of the past like Bill Gates. The would be recipients of today’s taxes have for the most part done nothing to build on this record of achievement.

    If there is any justice in this world, such “onlookers” would not be granted anything more than the most barebone safety net. The fact that they won the birth lottery–being born in America instead of some Third World Hellhole–should almost be enough for them.

    The real problem with any argument proposing massive redistribution, and equality of results, is an ignorance of history. America did not just happen!! It was built by the resilient hard-working people who lived here from 1620-1920, and the dwindling number of such individuals who have resided here since 1920. The free-riders are a drag on the economy and unfortunately they represent a growing percentage of the population. They should not be encouraged in their welfare demands lest they become everyman.

    Redistribution is not a philosophic argument–The laws of economics, and how successful nations grow and prosper, and then decline, provides the entire answer.

  36. bill greene Says:

    Ixm asks: “does too much inequality reduce the wealth and liberty of all?” I believe that “too much” inequality does not necessarily reduce the wealth and liberty of all. But “liberty” and “wealth” are two quite separate matters. Liberty is based on the laws of the land, a minimum of restrictions and regulations, etc, and is mostly a political matter. Wealth is gained by individuals who successfully use their economic freedom to make and save money.

    If those who amass huge fortunes do it within the laws of the land, without special privileges from politicians and regulators, in a free economy open to all, there is no problem with too much inequality that may result. The problem arises when selected individuals–ala hedge fund speculators and Goldman Sachs type manipulators gain an unfair advantage that does great harm as in the recent melt-down. It is essential, for a free economy to function properly, to maintain a level playing field. Special advantages, subsidies, bailouts, and privileges are the enemy of a free economy

    The more interesting problem I have, as an anti-distributionist free market conservative, is whether inheritances should not be taxed. I have no problem with innovative geniuses like Dave Thomas or Bill Gates amassing fortunes–Look at the jobs they created! But I do appreciate the desirability of a massive inheritance tax–anything over five to ten million should not be passed on to the kids of successful people. Each generation should, at least to some extent, stand on its own two feet. Those generations that get a windfall inheritance of mega-millions are usually non-productive citizens. They do not operate on a level playing field. No good can come from allowing an aristocracy of inherited wealth to wield undue influence based simply on a birth lottery.

  37. Allan Walstad Says:

    Elizabeth Warren? Seriously, Greg? Look, I thought the discussion was about redistribution. Infrastructure is something else. It’s kind of late to be changing the subject. Um, also, the reason there isn’t the physical basis for a Bill Gates in Africa is precisely because of the long-term lack of liberty, hence lack of productivity, wealth, and, ahem, infrastructure.

    Ixm: I’m at a complete loss as to how inequaity per se decreases “the liberty of all.”. But coercive redistribution does reduce liberty, which also by the way tends to reduce productivity and general prosperity.

    Bill, your first paragraph indulges in tendentious platitudes beyond my willingness to sort out at this point. Your second paragraph simply reasserts the propriety of coercive redistribution that I reject. Also, bridges and alms are two different things, and I believe the discussion was about coercively extracted alms. I’ll leave your third pgph for Rizzo if he’s interested. As for your last paragraph, again, feel free to address the needs of the “disadvantaged” with your own time, effort, and money. And by the way, how many billions are now spent on such assistance, and are their no poor people on the streets as a result?

  38. Allan Walstad Says:

    Bill Greene, I meant “straw-man-building” instead of “platitudes.”

    lxm, not Ixm, sorry. They look the same when I type them in, but they come out differently when the comment is posted.

  39. Greg Hill Says:

    Allan,

    “Elizabeth Warren? Seriously, Greg? Look, I thought the discussion was about redistribution. Infrastructure is something else. It’s kind of late to be changing the subject.”

    I realize you want to cling to the “I’ve got an absolute property right to everything I own and taking any of it through taxation is just like putting me in a slave labor camp for a couple of hours a day.” But I’m trying to encourage you to think about what, exactly, confers this absolute property right on all you possess.

    A lot of commentators above (don’t know if you’re in this group) argue that redistribution is wrong because individuals deserve the full rewards of their productive efforts. Elizabeth Warren’s point, like the point made by Bill Gates’s father, is that the payoffs to individual skill, effort, imagination, etc., depend very much on the surrounding infrastructure (in the broadest sense of the word). So, if Bill Gates’s fortune is derived, in part, from this infrastructue, then, one might argue, his claim on that wealth doesn’t rise to the absolute status you attribute to it.

    Now if this is too unsettling, you might consider the so-called total productivity factor (TPF), aka the Solow residual, which is a variable that “accounts for” the effects on total output that are not accounted for by the inputs of labor and capital. You might think of TPF as a very, very rough measure of the benefits we enjoy as participants in this particular economy, with its technical knowledge, its social capital, and, yes, its wide-ranging liberties.

  40. Allan Walstad Says:

    Sorry, Greg, I tire of your insistent straw-man building, tried to encourage you to stay on topic, already pointed out that infrastructure and redistribution are two rather different issues, note that the benefit we obtain (or would obtain) from living in a free economy does not imply some debt to the less successful, and don’t have much use for Solow. I think we’re done here.

  41. greghill1000 Says:

    Allan,

    No straw men, just one unanswered question: what, exactly, confers this absolute property right on all you possess?

  42. Allan Walstad Says:

    Never said it was absolute. But there are two basic ways for people to interact: coercively and non-coercively. Like other libertarians, I favor non-coercive interaction. Decisions must be made about how things in the world will be allocated, how they will be used. Freely transferrable property rights are most consistent with liberty. Freely transferrable property rights constitute an essential foundation of economic dynamism and productivity. I bought it from x who bought it from y who bought it from z and there’s little sense in worrying about who stole it from whom centuries ago, except as propaganda for coercive redistribution. Like other non-anarchist but fairly radical classical liberal libertarians, I allow for the possibility of coercive allocation of resources for the limited purposes of defending a free society and providing for essential general-use infrastructure that makes possible free movement and trade. But robbing A to pay B’s living expenses is something else entirely. Again, I suggest you help people in need directly and refrain from presuming to rob your fellow citizens.

  43. bill greene Says:

    Alan, I am somewhat confused by your posts because although we seem to agree on the major issues, you take extreme exception to most of what I write. Apparently I do not go far enough in denouncing all government help for the indigent. Even a deformed orphan with no relatives or neighbors to help him or her subsist would be abandoned by your standards — whereas I suggest the local officials should provide some support from town revenues. Without relying on philosophy or moral thinking I believe some such assistance is called for in the modern urbanized world. However, I agree that the vast bulk of our government assistance payments are unwarranted. The problem is simply a practical approach to making such minimal aid efficient and just.

  44. Allan Walstad Says:

    Bill, you are welcome to contribute charitably to help deformed orphans with no family or neighbors. My most recent response to you was in regard to your comment that begins with “There is a problem of logic…” I mention that because you posted a couple other comments after that one. A program of minimal aid, such as you favor, can surely be funded non-coercively. Once one yields to the idea of any coercive redistributionism, I don’t see how one avoids sliding down the slippery slope.

  45. bill greene Says:

    My point about using “logic” is that this debate will never be solved philosophically. I could argue that aid to others should be unlimited, or that it should outlawed. From a practical point of view some compromise, as in all social mattters , must be accepted. But Alan is right about the slippery slope! His point might be followed if we returned to former policies where all aid was local, and town officials decided who should get help and encouraged churces etc to provide it. My town avoided much expense by offering every applicant for aid a job sweeping the streets–the appplicants mostly moved on to more lenient towns!

  46. lxm Says:

    Allan Walstad says: ” I’m at a complete loss as to how inequaity per se decreases “the liberty of all.””

    The question is: can too much inequality reduce the wealth (not liberty) of all. I added ‘liberty’ without thinking previously, but maybe it is appropriate. I am sorry it gave Allan an easy way to dodge the real question.

    If one family owned all the assets in America, would America be better off? No. Not even if that family ran a benevolent dictatorship. So what about two families? three families? four families? Where is the limit for when too much inequality leads to worse economic outcomes for all? And perhaps even less liberty, as well.

    So you all believe that there is no such thing as too much inequality?

  47. Mario Rizzo Says:

    It all depends on why the inequality exists.

  48. bill greene Says:

    Mario quite correctly answers “It all depends on why the inequality exists.” If cronies on Wall Street and Washington cheat the system, the resulting inequality is harmful and unjust. That is why a level playing field, with equal opportunity for all, is a must have condittion in free societies. America is gradually but progressively losing that level field due to big government and the centralization of power in Washington. (There are some people at Goldman Sachs, JPMorgan, and Fannie Mae who should qualify for punitive taxes!)

    Another improper possible cause of inequality is inheritances. In a post above I suggested that: No good can come from allowing an aristocracy of inherited wealth to wield undue influence based simply on a birth lottery. Since successful people should be allowed to provide for their children, I would want a fairly high exemption from estate taxes–say 10-20 million–but for larger amounts I would support rather steep and progressive taxes. Each generation should have to stand on its own feet. We do not need an aristocracy that has built-in advantages over the average person.

    This is an example where moral philosophy is useless. No one has the wisdom to say how much inheritance should be taxed, or even decide whether such taxation has any basis of support. And it is a slippery slope–it would probably be unjust to outlaw all inheritances. But certainly, there is no justification to allow an infant to inherit 100 million dollars. After all, if the justification for inequality is that an individual earned great wealth honestly and fairly, operating on a level playing field, and following the rules, then inherited wealth would need a different justification.

  49. Allan Walstad Says:

    lxm, by far the most likely route by which one or a few families would come to control all property in the country would be first to get hold of political power. This is just another reason to limit political power. In a free market, it would be like all the molecules in the atmosphere happening to congregate in one hemisphere. Really, if this kind of childish scenario is the best you can do, you’re wasting people’s time here.

    Bill, if you actually do believe in individual liberty, then you should realize that no further justification is required in order to permit someone to inherit $100 million. It belonged to the parents and the parents left it to their child (or to whomever they chose). ‘Nuff said. Furthermore, in a $14 trillion economy, $100 million is a drop in the bucket, not the basis for an “aristocracy.” And who gets the money if not the heir? The pols? We sure know they’ll spend it wisely, huh?

  50. sarahneda Says:

    There’s a problem of commonsense embedded within most of these posts: The want to solve an ordinary realistic problem by constructing an intellectual theory. Social studies isn’t like math–absolute rules and formulas don’t add up when dealing with people.

    Most people agree that it’s wrong to take money from others, but every society needs some funds to operate. So, we can’t say that ALL taxation is wrong. The social contract calls for some degree of cooperation and sharing of burdens. We need bridges and alms for the poor. So, it is all a matter of degree.

    Rizzo’s point in this original post is that he does not agree with those who would “bolster their case for intervention by the state under the banner of distributive justice, morality, religion or whatever is supposed to evoke some objectivity.” We all know that to create true equality would be unheard of and there is no “objectivity” to any efforts to do so. Rizzo goes on to list ten useful considerations that raise questions concerning the legitimacy of welfare programs but he avoids the real question–When is welfare, supported by taxation, essential, and to what degree should it be lessened?

    From a practical point of view some assistance is needed for the most poor citizens–if only to keep them off the streets. There has to be some sort of taxation to cover those costs. All we can do is make the system as efficient and just as possible–and a start would be to limit it to available funds without creating a deficit.

  51. bill greene Says:

    Sarahneda–you are so totally right-on!! What you say makes excellent sense–it is almost identical to what I wrote on the 29th!!!

  52. bill greene Says:

    Alan–you argue that if one believes in personal liberty, “no further justification is required in order to permit someone to inherit $100 million.” But, personal liberty is only designed to allow individuals to live their life freely, and reward themselves however they can manage including the amassing of great wealth. A free economy depends on such individual participation and it must be played on a level field. If any participant can gain great wealth without competing fairly with all others, his wealth will have been gained unfairly, and all others competing with him will be at a disadvantage.

    You basically ducked my point that if great inequality is justified only when the gain was accomplished on a level playing field, then any great inequality caused from inherited wealth is not justified.

    It gets back to M. Rizzo’s post above on Dec.31st that the jutification for income and wealth inequality “depends on why the inequality exists.” Another way of phrasing this is that Inequality from cheating the system (a la some Goldman Sachs, JPMorgan execs, Sen. Corzine, etc.) or circumventing the system, by being handed a fortune by dad, is unjustified.

    Further, your arguments that such inherited fortunes are a drop in the bucket, or would be wasted by the pols, are not on point and do not compute. Such arguments would justify shoplifting (as a drop in the bucket) and would prohibit every form of government fees, highway tolls, postage stamps, etc.

    I am an anti-tax and anti big-government fiscal conservative, but I recognize that in social affairs, there are very few absolute rules or principles. Your extreme position that no tax is justified is a violation of the principle that one can never say never, except in matters of moral integrity. By arguing against every tax, and every government expenditure, you weaken the well established truth that such horrors must be minimized.

    Newt reminded us of the danger of absolute demands when addressing illegal immigration. Even though every illegal immigrant has broken the law and should under our legal system be deported immediately, that just can’t be done. He allowed as to how some families have been here for generations, have businesses and families, but even logistically a deportation of all would be unfeasible. So, much as his opponents called for deportation of all illegals, I can agree with Newt that we should NEVER say all of them must be deported. Besides, we would have to raise TAXES to cover the costs of corraling and shipping them all the hell out of the country!

  53. Bill Stepp Says:

    Sarahneda:
    Yes, bridges are a good thing and alms for the poor are to, but both can be provided by private, non-State means.
    David Beito wrote a good book on Mutual Aid. There does not have to be taxation to cover the cost of this.
    There’s no such thing as a “social contract,” which is pure mysticism, pace Jean-Jacques. Voluntary action is cooperative by definition; state action is not.

  54. Bill Stepp Says:

    The title of David Beito’s book is From Mutual Aid to the Welfare State.

  55. Allan Walstad Says:

    Bill [Greene], first of all regarding the “drop in the bucket,” I was responding to the notion that allowing large inheritance creates an aristocracy. The fact that your example of $100 million is a drop in the bucket in a $15 trillion economy disposes of your point. Perhaps you have another point, but that one is gone. Your attempt to place a non-coercive gift from parent to child in the same category as shoplifting is plainly absurd.

    Level playing field? It looks like you are trying to sneak in an argument dressed as a definition. To address the substantive point: I deny that there’s anything unfair or unreasonable about people being able to give their property freely to others. If you were serious about attacking this aspect of liberty as a violation of “level playing field,” then you would not be allowing for any significant inheritance at all. In my opinion, coercive intervention in the marketplace on behalf of some or against others is what would violate the condition of a “level playing field,” to the extent that the phrase has a useful meaning. Your attempt to lump inheritance into the same category with crony capitalistic government meddling is again completely absurd.

    [You] “Your extreme position that no tax is justified….By arguing against every tax, and every government expenditure…”

    [Me, 48 hrs ago on this thread] “Like other non-anarchist but fairly radical classical liberal libertarians, I allow for the possibility of coercive allocation of resources for the limited purposes of defending a free society and providing for essential general-use infrastructure that makes possible free movement and trade. But robbing A to pay B’s living expenses is something else entirely.”

    See your straw-man?

    I am not even going to touch the whole non-sequitur paragraph on Newt and immigration.

  56. bill greene Says:

    Alan, The Newt example on immigration is not a non- sequitor at all–it actually illustrates the danger of taking an all-or-nothing-at-all approach on social issues. Much as we would like to have absolute clear cut answers on socio-political issues, some gray area in the middle is frequently called for.

    For example, you write: “I deny that there’s anything unfair or unreasonable about people being able to give their property freely to others. If you were serious about attacking this aspect of liberty as a violation of “level playing field,” then you would not be allowing for any significant inheritance at all.” Now in a way you’re right– it is entirley reasonable that people might want to give property to their children–I plan to–in order to make their lives more comfortable. But it is destructive to the need to provide a level playing field for subsequent generations. So what do we do?? In your second sentence you seem to agree with me when you, perhaps inadvertantly, use the word “substantial.”

    An absolutist would say that if a level playing field is important to maintaining equality of opportunity, then there should be no inheritances–nada–zero. But you suggest that the level playing field could be approximately maintained by just disallowing “significant” inheritances– That is the type of realistic compromise that I proposed– say limiting inheritance estates to 5-10 million–that preserves a parent’s right to provide some comfort for their children without creating an extremely wealthy aristocracy of inherited privilege.

    Newt’s immigration suggestion called for a similar compromise–we obviously should crack down on illegal immigrants, but let’s face it–there’s no way we can deport the 10 million or more such people–something will have to give. Demanding they all go is counterproductive to real solution.

    Our world is full of such half-way solutions: I am against abortions–it’s murder. But there are a few justifiable reasons for abortion. I am against the “collateral” damage of bombing civilians, but in war it can’t wholly be avoided. I am against war but there are times it also can’t be avoided. I am against divorce–marriage should be till death do you part–but there are many divorces well justified. I am against taxes and for community based support of the indigent, but there may always be a need for some organized relief system. I am against the growing illegitimacy of our children ( but can it be banned?). I would like to limit the growth of single parent families, although I was reared in one. In a perfect world, people who have not maintained their health insurance coverage should suffer the consequences, but can we really just stand by and let them die?

    These are all tough moral choices and philosophical and moral approaches rarely help. Their resolution requires an accomodation based on compromise, logic, common sense, and a thorough knowledge of what is practical and will do less harm than good. That is why they call Politics “The art of compromise.”

    Granted, our politicians compromise with principle far too much, but even when Solomon ruled so wisely, there were taxes.

  57. Allan Walstad Says:

    Bill, larding your commentary with references to “absolutism,” “common sense,” “compromise” etc does not make your weak arguments stronger, either for your own positions or against your largely straw-man depictions of mine. I have addressed your arguments for coercive redistribution, don’t see anything new here, and therefore rest happily.

  58. Greg Hill Says:

    Allan,

    If it looks to you like everyone is turning your arguments into “straw men,” you might want to reconsider your arguments, or at least try to express them more clearly. And when you end with things like “I have addressed your arguments,” “rest happily,” or “I think we’re done here,” some readers may wonder where you’ve acquired such self-assurance, while others may just think you’ve got a mouse in your pocket.

  59. bill greene Says:

    Only a closed mind can RIP

  60. Mark Pennington Says:

    @Gregg Hill – I would like to see the data on the claim about average incomes for the bottom 99% in France being higher than in the US. What is the source/ are they using the same measure for the comparison.

    The last data I am aware of which compare median incomes in France, the US and other countries published by the OECD in 2010 had US median income at PPP of $31,000 and French median income at PPP $19,000. The French work fewer hours but even factoring this in and granting the figures I am quoting are for median incomes it is hard to see where the claim that the ‘bottom 99%’ in France do better than in the US comes from.

  61. Greg Hill Says:

    Mark, I’m in Costa Rica for the next three weeks, but you can find the data by googling Uwe Rhinehart (sp?), or looking for his post on this subject sometime in the last couple of months on the Economist’s View.

    Pura Vida, Greg


  62. [...] The Just Distribution of Income and Wealth (thinkmarkets.wordpress.com) [...]


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