Tuesday, August 28, 2018

A Synthesis of Right and Left: Markets and Wealth Redistribution

I'm putting a copy of something I posted on social media here for safe keeping.

[I]Recently, I sought to introduce some samples of conservative thinking to a community that would rather insult and denigrate than listen.

Let me tell you what I really think.

Here is an issue where traditional Republicans and Democrats each have a portion of the truth, and each mix it with a measure of fiction or fantasy. This is not a compromise "centrist" position. It may, if adopted, represent a compromise between traditional Republicans and Democrats, but it is no compromise with the truth.

From the right:

Price is the best mechanism for efficiently allocating and goods and services. It works a whole lot better than thousands of words of regulations by arrogant people who think that they have the wisdom to control complex systems.

Institutions of control and regulation inevitably attract those who will seek to use that power for their own benefit. Plus, this is easy to do - since the average voter cannot even be bothered to know their representative's name, let alone the rules embedded in a complex regulatory framework. Bureaucracies are slow to respond to change, and often stifle change since change disrupts the system that the regulatory framework has established. Not only does it fail to innovate, it often prohibits innovation as a way of protecting the power and authority of those who have wormed their way into the regulatory system.

Price, on the other hand, has the power to respond instantly to change, and to respond to ways that conform to people's interests. If a particular commodity becomes scarce, price goes up, telling people to immediately give up their more frivolous uses of that commodity so as to preserve it for more important uses. It not only encourages innovation, but encourages it where it is needed most since that is the innovation that will bring the greatest reward. It will seek replacements for or additional ways to obtain those things that (currently) have the most highly valued uses.

From the left:

The power of price to efficiently allocate resources is inversely proportional to the magnitude of wealth inequality in a society. Wealth inequality is what allows those with a lot of money to "bid" goods and services away from those who need it to sustain a minimum quality of life, so that they can use it for trivial purposes - entertainment, or simply to waste because it is too much effort to conserve.

Imagine that food becomes the scarce commodity. Under a price system, the price goes up. This immediately signals people to quit using food for trivial uses and to conserve it for its more valued uses. However, if there is wealth inequality, the poor are forced to give up food even for its most valued uses (sustaining life) well before the wealthy have to consider giving up its use for trivial purposes (decorations, reduced waste).


So, the wise position is that of price allocation with wealth redistribution. This position rejects the practice setting up massive bureaucracies that, at worst, attract malevolent people who will seek to use its power to their own ends and, at first, put decision making in the hands of arrogant bureaucrats who think they have the capacity to control what they (as humans) lack the ability to understand. Instead, it lets the market do what the market does best.

However, we combine this with a system of wealth redistribution - high taxes on the wealthy and some way to give it to those in need.
Some on the conservative side say that this will ruin innovation and will result in there being no wealth to distribute - because why would somebody want to do anything that makes money when that money is simply taken and handed to somebody else?

Well, we know that there are a lot of innovators who like to accumulate wealth precisely because they can do some good with it. They put their wealth to good use - helping those who need it most. Warren Buffett and Bill and Melinda Gates provide good examples.

If such a system removes the incentives to innovate from those who only want to create a corporate fiefdom where they can act as corporate dukes and duchesses ruling over peasant serfs and servants - that is not such a bad thing. In fact, I see it as a plus.
Leave the innovating to those with a desire to do good.

One possible example would be an estate tax that leaves a person a moderate amount to take care of their own concerns (say, $10 million) and requires that the rest go either (1) to a charity that serves those in the greatest need, or (2) to the government as an estate tax, would serve this purpose.

I would rather that people selected option (1). Personally, if I had $100 billion, I would give it to the Bill and Melinda Gates Foundation long before I would approve of the government "taxing" it away so that legislators can hand it out to those who give them the most campaign contributions.

And that is what I really think.[/I]


Thayne said...

I like your proposal, but don't regulations perform two valuable services?:

1. They protect those not directly party to any given transaction but are, nonetheless, affected by it. For example, the producer of a good may employ slave labor. Buying that good encourages slavery and harms the enslaved. Or the production of the good may release an inordinate amount of green house gasses. Buying the good promotes global warming, which affects all of us.

2. They protect purchasers against their own ignorance. For example, even a diligent consumer may not know that a product is unsafe. Or that it is ineffective (which has minor consequences for some products but dire ones for things like medicines). An advocate of free markets might say that the market will punish companies that sell dangerous products, forcing them to lose sales/profits or even going out of business. Perhaps (but perhaps not), but even so, this only happens after damage has been inflicted.

Surely there is some role for regulation in your model, yes?

MiggsEye said...

Hello, Alonzo. I've recently discovered your writings on Desirism and am eating and drinking them up. Thank you for the nourishment.

I'm curious, in relation to this balanced right/left system you propose, how would the health care system (and its current problem with rising costs) be handled? And regulations that serve to protect the public (i.e. environmental, workplace safety, campaign finance, and banking & investment just to name a few)—how would those be handled in this balanced system?