Economics Questions

Re: Redistribution of Wealth vs. Unemployment

Terrigan — Mon, 07 Feb 2011 16:42:07 GMT

Valject said:

His own argument says it doesn't matter who has the money; so why give it to person B in the first place? He's ignoring that B has a gain for no effort and A, for all efforts, has a loss.

And he's also conveniently ignoring the existence of the man, C, who has the gun and is going to take the money from A to give to B.

For redistribution to occur, force must be applied. Either by B, as a robber, or by some third party. Mr. Guv R. Mint.

Re: Redistribution of Wealth vs. Unemployment

Albert — Mon, 31 Jan 2011 20:45:26 GMT

Yes I agree, there is no justification for redistribution of wealth by force but lets get back to the original argument.

We are discussing the argument from the government that :

"It makes no difference to the economy if the owner of the money spends it or if it is given to person B to spend- both lead to stimulating the economy". ---so they say.

I and others also argued that whenever the government is the middle man in this redistribution it distorts the economy.

We can discuss how morally wrong it is to take from person A by force to give to person B on another thread but leaving out that argument- even if person A voluntarily gives some or all of his money to person B (like people give money to churches, or Haiti or the Boy Scouts...

( I guess the argument becomes does voluntary donations have negative effects on the free market.)

does it not also stimulate the economy?

I contend no, as long as you voluntarily contribute to your favorite causes you are not as visibly impacting the free markets, but it still distributes resources to inefficient and non productive recipients- even though it is within your right to do so.

And yes, they will use the money to buy things like food for homeless or tents for Haiti, but they would spend that money with less care than their own earned income.

Re: Redistribution of Wealth vs. Unemployment

Valject — Mon, 31 Jan 2011 19:51:40 GMT

Say I argue to someone that redistribution of wealth (a straight transfer of cash from Person A to Person B), ethics of the action aside, does no good. I say it's because Person A won't be able to spend that money to buy clothes for his children, and that may inevitably increase unemployment in the clothing sector of the market. Person A could also save that money in the bank and make it easier for others to take out loans.

What would I say if someone came back at me with, "Well, then Person B would have the money to invest or spend, so it equals out to the process being done, just by different people."

(His own argument says it doesn't matter who has the money; so why give it to person B in the first place? He's ignoring that B has a gain for no effort and A, for all efforts, has a loss.)

Re: Redistribution of Wealth vs. Unemployment

mahall — Mon, 31 Jan 2011 19:37:34 GMT

DD5:
confiscation vs. redistribution is not a mere ethical distinction between two sets of behaviors that essentially describe the same economic process, which I think is what you are alluding to. Nor is it a mere [superficial] semantical distinction.

The two types of action; confiscation and redistribution, are logically and praxelogocically distinct. The former must precede the latter.

Mises here says something similar:

Now in the market economy this alleged dualism of two independent

processes, that of production and that of distribution, does not exist. There

is only one process going on. Goods are not first produced and then

distributed. There is no such thing as an appropriation of portions out of a

stock of ownerless goods. The products come into existence as somebody’s

property. If one wants to distribute them, one must first confiscate them. It

is certainly very easy for the governmental apparatus of compulsion and

coercion to embark upon confiscation and expropriation. But this does not

prove that a durable system of economic affairs can be built upon such

confiscation and expropriation. (HA)

I see. Thank you for the HA reference.

I was alluding to the difference in redistribution between confiscation and voluntarism, minus the ethical distinction. It could be argued that voluntary charity, as opposed to wealth confiscating welfarism, is more well equipped at appropraiting it's aquired wealth (donations) to the true desires of the disfortunate. While the State will plead and allocate wealth to the greatest special interest groups in their political pursuits. A behavior which is removed from reality and the market.

Do you agree?

Re: Redistribution of Wealth vs. Unemployment

mahall — Mon, 31 Jan 2011 19:20:25 GMT

I won't be able to answer you to the full extent of your post. I don't think we have much disagreement anyhow. I'll just give you a quick reponse on this small portion.

Remrie Arrie:
Fortunately a free market isn't dictated by your Manual Labor to Income ratio.

I'm guessing this is directed at me. I'm not aware I had a such a ratio, heh. I was proposing to you that a wage isn't such a ratio. One does not deserve money directly proportional to a amount of labor put in unless that has been a contractually agreed. Rather a wage is paid on achievemens of labor, as Mises pointed out.

Remrie Arrie:
In a free market, efficiency in creating income is what creates wealth.

I suggest looking at this thread entitled Why Capitalism?, it has already been quoted once before in this thread.

http://mises.org/Community/forums/t/22196.aspx

Re: Redistribution of Wealth vs. Unemployment

DD5 — Mon, 31 Jan 2011 18:58:56 GMT

mahall:
So this brings me back to the OP ("a straight transfer of cash from Person A to Person B, ethics of the action aside, does no good.") Does this hold true in voluntary charitable organizations? And for what reasoning is it good outside of the statist argument? Stressing the voluntarism is key, but are there other aspects I am missing?

confiscation vs. redistribution is not a mere ethical distinction between two sets of behaviors that essentially describe the same economic process, which I think is what you are alluding to. Nor is it a mere [superficial] semantical distinction.

The two types of action; confiscation and redistribution, are logically and praxelogocically distinct. The former must precede the latter.

Mises here says something similar:

Now in the market economy this alleged dualism of two independent

processes, that of production and that of distribution, does not exist. There

is only one process going on. Goods are not first produced and then

distributed. There is no such thing as an appropriation of portions out of a

stock of ownerless goods. The products come into existence as somebody’s

property. If one wants to distribute them, one must first confiscate them. It

is certainly very easy for the governmental apparatus of compulsion and

coercion to embark upon confiscation and expropriation. But this does not

prove that a durable system of economic affairs can be built upon such

confiscation and expropriation. (HA)

Now in the market economy this alleged dualism of two independent

processes, that of production and that of distribution, does not exist. There

is only one process going on. Goods are not first produced and then

distributed. There is no such thing as an appropriation of portions out of a

stock of ownerless goods. The products come into existence as somebody’s

property. If one wants to distribute them, one must first confiscate them. It

is certainly very easy for the governmental apparatus of compulsion and

coercion to embark upon confiscation and expropriation. But this does not

prove that a durable system of economic affairs can be built upon such

confiscation and expropriation.

Re: Redistribution of Wealth vs. Unemployment

Remrie Arrie — Mon, 31 Jan 2011 18:42:45 GMT

(I apologize if this is too long, unlike my first post that you quoted I'm trying to cover all the angles of this topic)

At a glance there is the obvious tug-of-war between who feels like they're getting robbed by through taxation and/or tax breaks.

Fortunately a free market isn't dictated by your Manual Labor to Income ratio. In a free market, efficiency in creating income is what creates wealth. Because there are so many hours in a day a person can physically work like a builder or a farmer. As a truck driver there are only so many trucks I can drive (1) and how many miles I can drive in a day, ironically there are labor laws that -prevent- laborers from working harder to make more money by a single employer.

Because of that everyone has a fiduciary responsibility to themselves to be more efficient and cost effective as possible in the creation of wealth.
Otherwise a single farmer will be tilling the land with a single pickaxe working as hard as possible instead of tilling the land with tractors that cut the ground and plant seeds in 20 rows at once.

In a free market, allowing wealth as an incentive to being more efficient makes civilized society as a whole progress faster and more efficiently as these workers become entrepreneurs, learn to delegate (provide jobs or higher other free lance entrepreneurs who provide their own jobs at their own desired wage), and maximize production and lower costs as much as possible. Otherwise materials, resources, technology and food will not become more abundant at lower costs.

The richest who do this the most efficient way possible maximize jobs
The less employees are the more competitive the demanding wages are between the self employed who are hired by independent contract
The cheaper and easier access to resources and products the poor has which saves them money

The exception are people in service industries who do not provide tangible materials and resources, these are where you get many desk jobs that are not physically labor intensive but still require efficiency in order to turn a profit. Because everyone wants to make as much money as possible for their own wealth, it makes sense that most of the wealth will exist in a service industry that has to do with providing financial services and resources.... Banking.

Assuming banks were ethical respectable members of the community who don't break laws or manipulate them, just like Andrew Carnegie or Rockefeller or Ford or Firestone bring steel and oil, cars and tires to the public for cheap, our good friend Mr. Average Joe the banker's goal would be to make gold and silver readily (or some other form of money such as fiat currency or Tally sticks) to people in need of money. This person gets wealthy by helping both the poor and the rich create wealth through leverage! However, the banker has no obligation to teach people how to use debt properly to get rich, so people focused on instant gratification start using banks just as a credit card for doodads and liabilities that make them poorer.

Which raises the issue of the inherent lack of financial education for the poor other than the BARE basics which are traditionally taught that ironically keeps them poorer in modern society. "Get an education, get a safe secure job, keep it for 20 years, buy everything in cash, diversify your portfolio, etc...." Unfortunately these mantras reduce efficiency and make it much harder for someone to get rich because the focused more on being as efficient as possible in avoiding poverty rather than achieving wealth.

There is a real good book called Influencer (the power to change anything) (hyper-linked) that talks about a researcher in Africa trying to solve problems with poverty. This book is about trying to influence individual or groups of people, and it tells the real life story of this man being upset with the modern banking system in that part of Africa not helping people become wealthier, and the evils of the loan sharks charging outstanding interests that keep people in debt forever. So he creates a bank of his own that issues micro-loans of only a few dollars under the terms no less than 5 people (no matter how poor they are) co-sign the loan and provide a detailed business plan of how they are going to use the money, to make money, and repay their loan.

Despite issuing loans to people with no credit, no job, no work history, who are in poverty and have no money at all, the banker has a 95% success rate in loans being paid back! The people who take out the loans create their own business (many of them women), put their children through education, have residual wealth from their business, and in the end now have a higher standard of living with quality education and freedom to break away from abusive husbands and traditions that keep them in poverty; such as dowries.

And our good friend Mr. Banker increased competition, took money away from the greedy loan sharks, filled a market niche other bankers wouldn't, helped lift the community out of poverty, provides respectable jobs for ex militants, and creates a multi-billion dollar banking firm that makes him much wealthier than he otherwise had been. (Our Federal Reserve seriously needs to take some notes from this guy).

Taxes though are something that don't need to exist in a free market society that is efficient and effective at creating wealth and opportunities. Because the government can create companies and firms just like any other private individual assuming the business models are successful rather than rely on taxation to make up for lost profits (for the greater good). Profits from these government run businesses that are self sustainable as individual companies not dependent on taxes in order to exist can take the profits and put them in the public/state sector at will.

But to force this through taxation of the rich (which inevitably ALWAYS taxes the poor without fail) or give tax incentives to the rich is totally unnecessary. Because just like the Income Tax and all other taxes, they are always marketed as taxes against the rich, which really mean middle class who work a W2 or 1099 (self employed) job. And the tax incentives in business and investing give the rich an unfair advantage to accelerate their growth and makes it next to impossible for the poor to compete.

Taxes have always been throughout history, taxes on the upper and middle class who hold jobs and self employed small businesses like doctors and lawyers. The super rich don't get taxed the same way because they don't physically work a job or have direct financial responsibility to the taxes and other obligations their companies have. Income tax is a lot higher than taxes on capital gains and interest. The difference is the poor, middle, and upper class and small business are paying the highest taxes, the income taxes.

Unless you change the topic to raising taxes on capital gains, interest, and passive income (rents, royalties, residuals, dividends) etc. Then the idea of take from the rich and give to the poor will never work. And this still assumes that the government GIVES it to the poor after they took it from the rich.

One can also argue what Tom Woods always says that those kinds of taxes create welfare states where people are totally dependent on the state for their income and finances through unemployment benefits, health care, etc... the same attempt at redistributing wealth forces people to depend on the state and likewise lowers their standard of living because they eventually lose their ability to create wealth on their own. After all, bringing in $1 Billion dollars in tax revenue doesn't really help a society where 25 million are getting their fair $40 share. And even that $40 provided by the state, taken from the rich is taxed!!!!! Probably a decent 10% at least. Which makes their welfare check $36.00

Re: Redistribution of Wealth vs. Unemployment

mahall — Mon, 31 Jan 2011 18:03:51 GMT

DD5:
My intention was not to refute the concept of distribution which is perfectly valid in praxelogical terms. Simply by what is implied in the context of policies aimed at the elimination of income/wealth disparity via taxation.

Forgive me for my thickheadedness, I pose the question as means to learn something new.

You mention in your previous post that production and distribution are indivisible. Is distribution in the voluntary sense divisble from production? It is a transfer of wealth from A to B. Just how coercive redistribution transfers wealth from A to B.

Maybe it is production in that it produces the 'good' of psycological improvment? But in statist welfare-ism some people still get the 'feel-good' benefit of paying their taxes even if it is nonvoluntary.

So this brings me back to the OP ("a straight transfer of cash from Person A to Person B, ethics of the action aside, does no good.") Does this hold true in voluntary charitable organizations? And for what reasoning is it good outside of the statist argument? Stressing the voluntarism is key, but are there other aspects I am missing?

Re: Redistribution of Wealth vs. Unemployment

DD5 — Mon, 31 Jan 2011 17:43:53 GMT

mahall:
What about voluntary wealth distribution via charitable organizations? Could they be defined as production?

My intention was not to refute the concept of distribution which is perfectly valid in praxelogical terms. Simply by what is implied in the context of policies aimed at the elimination of income/wealth disparity via taxation.

Re: Redistribution of Wealth vs. Unemployment

mahall — Mon, 31 Jan 2011 17:28:10 GMT

DD5:
The first mistake in your argument is that you are objecting to something that does not and cannot exist in the capitalistic market economy.

Redistribution of wealth implies that there is some process of distribution of wealth, distinct form the process of production, that occurs in the first place and can later be "redistributed", perhaps according to a more "just" method of distribution. But no such distinct process exists. In the capitalistic market economy, all wealth comes about as someone's private property. Production and "distribution" are one indivisible process that cannot be split up. There is but only one way to transfer wealth from A to B, and that is by confiscation. Not by redistribution.

What about voluntary wealth distribution via charitable organizations? Could they be defined as production?

Re: Redistribution of Wealth vs. Unemployment

mahall — Mon, 31 Jan 2011 17:22:29 GMT

Johnny Doe:
What if you say that the person that produces a good/service, deserves that good/service or the buying power it represents in a free market? Or a part of the good/service and/or buying power that he/she has voluntarily agreed upon with the other people involved in the production process.

"Wages are not paid for labor expended, but for the achievements of labor, which differ widely in quality and quantity." -Mises

"The laborer is an entrepreneur in so far as his wages are determined by the price the market allows for the kind of work he can perform. This price varies according to the change in conditions in the same way in which the price of every other factor of production varies." -Mises

"In the market economy the worker sells his services as other people sell their commodities. The employer is not the employees lord. He is simply the buyer of services which he must purchase at their market price." - Mises

These are all from Human Action. I feel your statement is on sold ground referencing the words of Mises.

Re: Redistribution of Wealth vs. Unemployment

DD5 — Mon, 31 Jan 2011 17:10:10 GMT

Brian Anderson:
Say I argue to someone that redistribution of wealth

The first mistake in your argument is that you are objecting to something that does not and cannot exist in the capitalistic market economy.

Redistribution of wealth implies that there is some process of distribution of wealth, distinct form the process of production, that occurs in the first place and can later be "redistributed", perhaps according to a more "just" method of distribution. But no such distinct process exists. In the capitalistic market economy, all wealth comes about as someone's private property. Production and "distribution" are one indivisible process that cannot be split up. There is but only one way to transfer wealth from A to B, and that is by confiscation. Not by redistribution.

Re: Redistribution of Wealth vs. Unemployment

Johnny Doe — Mon, 31 Jan 2011 16:21:49 GMT

mahall:

1. A person who deserves the money is the person who works for it

This is reminiscent of the labor theory of value. If you spent all day collecting a pile of sticks but there was not a demand for this resource, do you deserve money? I understand what you were implying but I wouldn't state it as plainly as you wrote it. It leaves you open for critism. You have to build up walls to protect yourself when arguing against economic egalitarians.

What if you say that the person that produces a good/service, deserves that good/service or the buying power it represents in a free market? Or a part of the good/service and/or buying power that he/she has voluntarily agreed upon with the other people involved in the production process.

Re: Redistribution of Wealth vs. Unemployment

Johnny Doe — Mon, 31 Jan 2011 16:13:31 GMT

Remrie Arrie:
7. Maybe government should take from the poor to give to the rich who produce goods and services that provide jobs, goods, and services for the low, working, and middle classes, and furthermore make the economy stronger and improves living standards. (assuming you just want to be a argumentative butt-hole in the conversation)

Doesn`t the system already do that in the sense that the billionaires etc in society hasn`t actually contributed an amount equal to their net worth/buying power, i.e. their buying power represents the produce of alot of other people?

Re: Redistribution of Wealth vs. Unemployment

Remrie Arrie — Mon, 31 Jan 2011 07:54:42 GMT

I appreciate the feedback. :)
In all honesty I am not an economist and I am not a debater, I prefer other methods of communication and influence.

With such a vague question in the original post I feel i cannot give much more than a vague response.
It is definitely a great question to use as an exercise to go all out on though for personal fun and learning experience.

I am still very new to the concepts, ideas, and community of the Mises Institute and the Austrian approaches in economics, so I have a lot more to grow in this direction for sure. Since watching virtually every clip on YouTube hosted on the MisesMedia account, I feel like things are finally making sense in a way nobody has explained to me before so I am very interested in learning more and applying the concepts taught.