A response to the “Unanswerable” Question from MoveOn.org

This is my first, and probably last political post. I do have opinions, probably not hard to predict, but I believe I have very little to add to the discussion. I would not now, except that a  friend of mine posted the following link on Facebook, but in a form where Facebook does not provide for a comment.

The link proposes the “unanswerable” question of why, if “trickle-down” economics works, do the top 1% need even more wealth before they create jobs.

So as much as it pains me to post something from MoveOn.org, here it is again.

http://front.moveon.org/the-one-question-that-will-stump-all-your-republican-friends/#.T5P-xlM35-4.facebook

“Guaranteed to stump all your conservative friends!” claims MoveOn.org.  Well, maybe. More likely that no conservative will come up with an answer that MoveOn finds compelling, but that is hardly the same thing.  Personally, I think the question itself displays a characteristic misunderstanding about how wealth and power flow in a non-regulated economy. They try to flow the same way in a managed economy, but the pressures tend to mount up, distorting the aims of the managers.

Now I am no economist, no politician, and not even a radical believer in free markets always. But I do believe there is a “Tao,” a natural way that things tend to work , in almost all things. In woodworking, we would call it “going with the grain.” Whether in carpentry, pharmacology, farming, power production and use, or economics, trying to “brute-force” our way around the natural inclination of things is only done by application of massive infusions of power. Even then, it often results in unintended consequences, uneven results, or sometimes, catastrophic failure.

The assumption in the query cited is that the wealthy  (the 1% in the original, although it could just as well be – and often is – companies that manage 401k funds for people like me) are managers in the sense I described – they decide there should be 1100 jobs instead of 1000, so they decree that 100 jobs be created. If jobs remain at 1000, or only go up to 1030, or even drop to 990, well, the economic managers wish it to be so. Our political will can be to either reward or punish them to the degree that we are able.

Maybe that is the way MoveOn sees reality. It is probably the way they think government should behave. It is certainly the way inherent in their question.  But I do not think it is the “Tao” of economics.

I have said before that part of the genius of capitalism, democracy, and the vision of the American founders is the recognition of the fallen nature of humanity. No matter what we do, people simply *will* act in their own self-interest. Not every person, every the time, but such a notion has a far better track record at predicting behavior than do schemes that rely on an altruistic vision of the innate goodness of the brotherhood of the proletariat –or of the oligarchy, or of the divine anointing of kings.

These systems, including capitalism, recognize this, they say (in effect) “given this truth, how can I use it to produce the most well-ordered and prosperous society?”

So the policies which create jobs are not necessarily those which appeal to “fairness” or “equity” across society, which MoveOn may appeal to. Of course it does not follow that an unrestrained free market will either, and not being particularly visionary about such things, it would be a mistake for me to say what will produce more jobs. But I am quite sure that the things that will create more jobs are the things that suggest to the holders of capital, whether millionaires or 401k managers, that they will make more money, at an acceptable level of risk, if they expand and hire people.

“Fairness” as a driver of social activity, is a losing proposition. Producing self-interest, in the direction I want, is much more promising.

Fairness, or at least, evenness of economic strata,  is not even  automatically beneficial as a goal. An illustration:

Suppose 1 person has $1,000,000 and the other 99 have $1,000.

  1. I change policies, and the wealthy person now has only $1,200 – but the other 99 now have only $800. This distribution of wealth is FAR more even, but nobody is better off.
  2.  But suppose my new policies result in a state where 1 person has $800, 98 people have $1,500, but the 1 rich person now has $3,000,000. Obviously, this distribution is far less even. One person even has less. But the overall level of wealth has been increased significantly.

I think this second plan is far better. THEN, I would appeal to charitable impulses to help amend the lot of the 1 person at $800, or even provide something to make sure he remains at a safe level. But that is a different issue.

Again, I do not know which policies are more likely to result in “state #2” That is something worth hashing out. But from their question alone, I can tell that the MoveOn folks seem not to even understand this basic reality.

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7 responses to “A response to the “Unanswerable” Question from MoveOn.org

  1. To me, the genius of a free market is that those with huge appetites for power can pursue money and it’s acompaning power directly. If they play by the rules they don’t harm others too much. Whereas, in managed economies money is available primarily through the political system and those with huge appetities for power soon find the addiction of telling others what how to live.

    • Agreed -of course that does not mean a free market is without flaws -anything man creates has flaws. But we get on much better if we ackowledge our tendencies and make plans to deal with it, instead of just assuming that “group x” be they rich folk, poor folk, OWS folk, Ivy Legue or blue collar, or church folk or any other group will get it right, know that we will all screw it up, and make plans to deal with it.

      I think it is sort of like all this other open-ness we have been praising. Bad can be put to the service of good, but it has to know itself, first.

  2. Hi Eric – I have nominated your for the Sunshine Award for excelllence in blogging. Please go to my sight http:christiancopingwithsuicide.com and read about the award It is certainly well deserved. I do hope you will accept it.

  3. Just as we have come to expect, Eric has delivered another eloquently written post. He has done a good job of illustrating why our free enterprise system is far superior to the central planning of communist or socialist regimes. I would, however, respectfully take issue with a few of his assumptions.

    The issue at hand is not really a choice between a managed or unmanaged economy. The American economic system, like that of all nations, has always been managed to some degree. We began with a national bank, a system of taxation, and infrastructural development goals. Most importantly to this discussion, we have always had laws to restrict or encourage the behavior of corporations and individuals.

    Eric cites Western Christianity’s concept of the Fall of Man as an explanation for the self-interested behavior of individuals. He goes on to explain that it is this self-interested drive of individuals that propels a capitalist economy. While this is certainly a valid observation, I would point to another side of the equation. An understanding of the Fall of Man–the depravity of human inclinations–also instructs us on the hazards of laissez-faire (completely unfettered) economics. Just as we find a necessity for laws forbidding theft and murder, we also have a need for laws forbidding monopolies, fraud, pollution, and many other business or economic activities.

    While there are likely a few people at MoveOn.org who think that the solution to job creation and income inequality is a more centrally-planned economy, their question that Eric cites is much more narrow than that. It is simply about the incentives and disincentives associates with tax policy. Of course their question sheds little light and is based on a false premise. (The top 1% of American income earners don’t hold half of the nation’s wealth. They hold 42%.) But it does point to two of today’s most important considerations regarding public policy–the veracity of supply-side economics and fairness in taxation.

    Inspired by Eric’s blog, I have begun my own with a couple of short essays. Written a few months ago, they deal with each of these related subjects. I invite you to take a look and to offer your comments. The blog address is http://www.exploringpublicpolicy.com, or follow the links below.

    For supply-side economics go here: http://exploringpublicpolicy.com/category/economics/

    For a flat or more progressive income tax go here: http://exploringpublicpolicy.com/category/federal-tax-policy/

    Bruce Glass

    • Mr. Glass’ points of caution are well placed. I had intended to rule out any kind of blanket approval for a pure laissez-faire capitalism, but I may well have been too mild in my disapproval. Of course, a dictatorship by the financially successful is no more failsafe than is any other dictatorship.

      I also bow my head at the mild rebuke that I should not seem to tar all those who have political and economic positions to the left of mine with the same brush. There may indeed be those at MoveOn.org who are not fully on board with the assumptions behind “the Question,” although I would think it in general safe to assume a piece bearing their imprint could be assumed to speak for them. Dissenters may need to exercise their right to clarify their own position.

      Probably the place where I most need to clarify has to do with am I advocating, or criticizing any economic policy position at all. Frankly, I don’t feel qualified to do that, although I do have some overarching themes that tend to guide my thoughts. But my chief point was not about particulars – it was about what is “dog” and what is “tail” and which wags which.

      My suggestion is that it is inherently unfruitful to motivate economic activity of almost any kind by applying motivators (rewards or punishments) that are not intrinsically bound to that economic activity. Thus, appeals to “fairness” or “patriotism” are not likely to do much; not even when surrounded by sanctions or rewards. If one wants to move economic activity in a particular direction, then the shape of the land must change to make that activity the natural flow of capital.

      That natural flow will always prevail over societal approval or disapproval.
      To my reading, the framers of “the Question” were presuming that management of an economy flowed from fiat, either of government or of capital. I think that is an error which can consume much energy and produce much frustration.

      I look forward to reading your more complete thoughts!

      • Evidently you and I have a different take on MoveOn.org’s “assumptions behind ‘the question.'” I know next to nothing about that organization, except that they are a partisan, advocacy, fund raising organization, making them (in my mind) rather valueless as a source of enlightenment. I suppose it is possible that the framers of “the question” were thinking that public policy incentives might induce the rich to create jobs. You and I agree that employers will not hire more employees unless there is a profit in it, and rightfully so. Of course there can be no profit in it unless the demand for whatever goods or services the employer is producing warrants more employees. Employment is driven by demand–not the whims or altruism or even the wealth of employers. There is no effective incentive aside from profit.

        My take of MoveOn.org’s question is that it made no claim at all about job creation. I think they were merely mocking (however ineffectively) those who content that the key to job creation is another tax cut for the rich.

        Bruce

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