Someone I know on Facebook, who turns out to be a fan of Bernie Sanders, the socialist running for the Democrat nomination in the US, defended this man’s idea of jacking up capital gains taxes (on all those evil capitalist exploiters). I contested the wisdom of this, and got this response. I haven’t edited for typos:
Top-down economics don’t work at all. Give a rich person $1,000 they don’t need to spend it. Give $1,000 to a middle class or a poor person and they will spend it because they have to.
So, the argument is that the State is entitled to use the violence-backed power it has to seize the wealth of supposedly less “needy” people and give it to persons presumed more likely to spend it. The presumption that the State is entitled to loot the wealth of persons who don’t “need” it is taken as self-evident, so deep have collectivist assumptions soaked in. An appallingly large number of people subscribe to this assumption and often don’t encounter a contrary view.
This nonsense also inverts the insight that to consume a service/product first entails producing it, which requires saving for that purpose by forgoing immediate consumption (resources have time value, which is why interest rates exist). The richer person’s wealth doesn’t simply vanish if he/she does not immediately spend it – that money is invested, and added to other factors of production (labour, mainly), which increases living standards in the longer term.
On a final note, it is worth pointing out that under the current tax system in countries such as the US (in my view, far too complicated), the rich pay a disproportionately high share of the total, which rather buggers the point made by people like Sanders.
This seems to be the old Keynesian fallacy that “savings” magically disappear from the economy and don’t get spent on buying things.
Don’t forget the intellectualist cover given to the primitive expropriation urge by economic theories of “marginal utility.”
He’s also wrong. The rich guy puts the $1000 in the bank, who lend it out, thus it gets spent. All this fool is claiming is that the people who know how to spend money the best are politicians, which is obviously laughably false.
Additionally, even if the rich guy really did completely remove that $1000 from circulation, say used the $1000 in paper money as kindling for a fire, still this is good for the economy, as it lowers prices for everyone else.
I think you missed the basic false premise on which this addle-brained thinking rests, contained in this phrase… ‘Give a rich person $1,000…’
The premise is that ‘rich people’ are given money taken from others who become poor as a consequence.
Those who believe this do not understand that $1 000 came from trading something which others wanted who thus got richer too by acquiring it.
Plus Government knows better how to destribute wealth than the market, so ‘take’ from undeserving A to give to deserving B.
The worry is the proportion of the voting public who believe this rubbish has passed into a majority, so we may expect a return to that ‘democratic’ socialism that did so well for Britain and other Countries post-war. The EU is on track and it seems the USA too… ironically China is becoming more free market than the West, and it still has a long way to go.
How can economics be more top-down than under socialism?
John B
It’s clear the 50% level of stupidity has been passed in the West. I would say that the vast majority of people (certainly those under 40) think that ‘Businesses steals money from poor people’ and ‘Governments create jobs’ describe everything they need to know about the economy.
The State broadcaster certainly thinks so.
Bernie is a Communist not a Socialist.
The 2nd and 3rd paragraphs of the post do a good job of rebutting the Sanders fan on the grounds of property rights and consequentialism, respectively.
The comments are spot on, too. Stuck-Record, in particular, does a good job of encapsulating the unspoken premises of the Sanders fan.
I think there is more to be said, though, that should appeal to a Sanders supporter; specifically, that the problem with capital-gains taxes, as with business taxes, and taxes on interest and dividend income, is that they are regressive: the rich find it easy to minimize them, but the working poor find them a big disincentive to save for retirement.
I think that the socialist is saying that if the government cuts taxes on the “rich person” by $1000, then it is “giving” him $1000, rather than allowing him to keep $1000 of his own money. This conforms to the central tenet of socialism, that everything belongs to the state.
Just very generally the notion that aggregate wealth (which I presume is what the Sanders fan is referring to) has anything to do with consumption patterns is intrinsically false, as wealth is determined by productive capacity. If the Sanders fan really cared about increasing wealth (which he obviously doesn’t; he cares about inequality) capital gains taxes could well do with reducing, in order to boost investment.
a rich person
This is fallacious part of the argument, “rich” can mean anything, and, when socialist policies are normally invoked, it does mean anything. Once they realise there simply aren’t enough “rich” people to raid to pay the “poor” people, they just redefine “rich” downwards. Eventually you start calling anyone above the basic job level as “rich” to cover the expenses.
Eventually you get a $millionaire telling a plumber he has to give up more of his $250k, because that’s what “rich” is.
A predator is a predator, regardless of the victim or the excuse.
Socialism mixed with Keyesianism.
P. Straffa did that back in the 1940s.
The “demand” fallacy – and the (false) view that Keynes refuted Says law.
Spending is good – and all that tosh.
I even hear this from the Chinese rulers – yes I am the sad person who actually watches Chinese English language news (from time to time). I believe I am their only viewer.
Explain all this to Sanders supporters?
I would have done so when I was younger.
But no one is paying me to educate these people.
And I find them irritating.
Unless paid to educate them I am not going to talk to them.
I would have done (unpaid) when younger, but I have had enough now.
The lack of almost ANY economic understanding is both pathetic and horrifying. Even basics like supply and demand is beyond them.
the underlying belief, the ‘rich’ are going to keep earning as much as they can, FOREVER, just just so their earings can be stolen from them and given to those less inclined to work hard is insane.
Regardless of what is actually being said by Sanders et all, what is being HEARD is ‘more free ######’ – ###### being money, schooling ( another joke for the most part ), housing, food – pick one or more !
Astounding.
Sorry, ‘earnings’ NOT ‘earings’
Jerry, the Sanders supporter probably wants to steal their earrings, too!
Economic ignorance is endemic. It is a central feature of Marxism, socialism, and Keynesianism.
You can make all the logical arguments to the Sanders supporter you like, and it will have no effect. You can demonstrate conclusively that consumption doesn’t drive economic growth, that printing money doesn’t create wealth, that high taxes have significant disincentive effects, that taxing corporations is both meaningless and regressive because all such taxes ultimately pass through to consumers, and that trade makes everyone wealthier; none of it will matter. Because the central fixation of such people is the perception of inequality; they simply can’t stand it if someone has more than someone else, regardless of how it was acquired. At its core, theirs is the morality of theft. The economic inefficiency, indeed the economic destructiveness, of their nostrums is irrelevant. Better that we’re all equally poor than unequally rich. Despicable jackals, the lot of them.
When the prevailing worldview is that “share and share alike” should (should ideally, that is) be the overriding rule, naturally we’re going to get what we have, which is a blithering economic mess, and even worse, a condition worldwide where individual lives don’t matter in the grand scheme of things.
The only differences are in how much elasticity there is in the concept of “share and share alike,” or “equal shares for all,” and in how strongly this fundamental belief is held by the individual people. I think that can vary considerably from person to person, even given the prevailing Sharing worldview.
Laird,
“…[T]he central fixation of such people is the perception of inequality ….”
True. Everything else is irrelevant. And of course it is not theft, because it’s not right that A should have more than B in the first place. Taking from A, giving to B, is just putting things right.
The only theft occurs when A gets into the position of having more than B in the first place.
This is the theory.
They don’t see it as theft. They see it as the only way to achieve a world in which nobody is hurting, nobody need ever feel bad for himself or for anyone else. The only way to achieve a world in which everybody is safe.
Which is why, as in the prior discussion and here as well, you will never reach these people by logical argument.
. . .
There’s another factor, equally important, and it’s the Ego Trip. Of being one of the ones, or THE One, who will bring into being this heaven on earth. It’s the Messianic Complex, or at least the assurance of reaching Sainthood.
. . .
And getting away from theory altogether, “it’s so much nicer to be In than Out.” (Alan Drury, IIRC.)
And so much safer.
Laird wrote:
‘Because the central fixation of such people is the perception of inequality . . . ‘ Bingo.
Not to thread-jack or anything, but I saw a debate between ‘radical feminist’ Julie Bindel and ‘dangerous faggot’ Milo Yiannopolous at the Michigan Review last week. Ms Bindel made her position regarding the position of modern-day feminism quite clear in two revealing positions, to wit:
– all who disagree with her are ‘bell-ends’ – a term which she had to explain to the US audience, but with which she is so enamoured that she used it in every speech form imaginable – bell-endish, bell-endery, bell-end-like, and so forth. Any person with a diverging opinion, past, present or future, was simply dismissed with this baseline epithet.
– I paraphrase – but she said words to the effect that ‘I haven’t bothered to bring any statistics or studies to cite – but don’t believe any statistics or studies that Milo cites, because they are all wrong/suspect/discredited/authored by bell-ends.’ And this before the debate had even started, before anyone had cited anything.
There you have it – all that matters to her is her perception of the world. Anyone who thinks differently, and any data that disagrees with the perception, are simply dismissed.
Sanders – and Trump, for that matter – depend entirely on voters with this approach to the world. I believe, what I believe – don’t disturb me with data.
llater,
llamas
JnC wrote:
“The only differences are in how much elasticity there is in the concept of “share and share alike,” or “equal shares for all,” and in how strongly this fundamental belief is held by the individual people. I think that can vary considerably from person to person, even given the prevailing Sharing worldview.”
Eric Blair wrote:
“Comrades!” he cried. “You do not imagine, I hope, that we pigs are doing this in a spirit of selfishness and privilege? Many of us actually dislike milk and apples. I dislike them myself. Our sole object in taking these things is to preserve our health. Milk and apples (this has been proved by Science, comrades) contain substances absolutely necessary to the well-being of a pig. We pigs are brainworkers. The whole management and organisation of this farm depend on us. Day and night we are watching over your welfare. It is for your sake that we drink that milk and eat those apples. Do you know what would happen if we pigs failed in our duty? Jones would come back! Yes, Jones would come back! Surely, comrades,” cried Squealer almost pleadingly, skipping from side to side and whisking his tail, “surely there is no one among you who wants to see Jones come back?”
llater,
llamas
The zenith of this approach is the (albeit surely intended to be self-mocking) Bird Man of Bognor contest, stuff the data, I can fly.
To all of you who claim that “saved” money recirculates via bank loans, I say-
Lies, all lies.
I have proof, you hoarders, proof I tell you. http://i.kinja-img.com/gawker-media/image/upload/s–JMX7gP9P–/17kdjxvdqvygyjpg.jpg
Regarding data, another problem is that data about wealth and income distribution are easily manipulated to create false impressions. Many of the kind of people we’re talking about are unable to understand how they’ve been manipulated even when you explain it to them. It’s a numeracy problem.
This Reddit thread is like an alternate universe. Example: “It really should be hard to find any believers in trickle down economics after decades of them being proved wrong by reality, economists and studies.”
Regarding data, another problem is that data about wealth and income distribution are easily manipulated to create false impressions. Many of the kind of people we’re talking about are unable to understand how they’ve been manipulated even when you explain it to them. It’s a numeracy problem.
I think this is somewhat unfair. The “data” problem is a much bigger problem than most people seem to recognize. From time to time I review the actual “studies” that get held up by various journalists, bloggers and activists in support of their opinions. I have only a modest background in statistics, but enough to discern the almost unbelievable elasticity and variations of statistical methods.
The fact is that we have for some time had a data-industrial complex. Data can be, and is, regularly produced by all ideological sides to support their principles. “Data” is not even the right word. Already 80 years ago Bertrand Russell observed that as empirical method progressed, less and less was found to be data and more and more was found to be inference. What people today routinely refer to as “data” are in fact largely inferences from highly complex and assumption-laden statistical operations (or in some cases, depending on the desired outcome, very simple and assumption-laden statistical operations).
So it is not a mere issue of innumeracy. You have numerate people on every side–Paul Krugman, Jonathan Gruber, e.g., AEI, e.g.–urging completely contradictory propositions they say are supported by the science. But this is logically not possible, so the answer must, and on inspection does, lie in the nature of the so-called “data.”
“Fair shares” – the “morality” of a pack of savages.
Paul: “I am the sad person who actually watches Chinese English language news (from time to time). I believe I am their only viewer.”
I occasionally listen to CRI on my shortwave radio. Very strong signal. They must be very keen on being heard in Europe.
Confession: When in Portugal in the late 1980s, I occasionally got Radio Tirana’s English language rants against the world, denouncing the Soviets and the Chinese for deviationism but mostly slagging off the West. One starry winter night, I did wonder if I genuinely was the only person listening for at least 1,000 miles.
I tried to picture the presenter in the studio, a drab, peely formica bunker with diodes, and an Enver Hoxha poster over some hack spouting out Marxist drivel. I bet he now works for the BBC, thinks nothing much has changed and is grateful for the pay rise.