vruz:

vruz: a primer on economics for populists and the generally unaware public. but this is precisely an argument that favours democrats as they are demonstrably, historically better wealth redistributors. plus one will be hard pressed to critique an obama administration for not being colour-blind.

This is in response to that Peter Schiff quote. I have a problem with the phrase “better wealth redistributors.” What the hell does “better” mean? That they do it more? Government redistribution of wealth is stealing from one person to give to another. Muggers and scam artists do a great job of redistributing wealth. Bernie Madoff did nothing but redistribute wealth. This isn’t something to be proud of. Perhaps you are referring to the progressive income tax. The idea is that people with more money should pay proportionally more in taxes than people with less money. In many ways, this is using a wrong to correct a wrong.

In a free market, anyone who makes money truly earns money. Yes, even the rich movie stars earn their money. How can this be so? Poorer people paid 8 bucks to watch the movie, and did so by the millions. There’s no force that required anyone to watch the movie. Everyone voted with their dollars. Now, in an efficient free market, if the price for the movie is too much, a consumer can get their entertainment some other way, such as clicking the refresh button on their Tumblr dashboard all night. Watching videos on youtube or collegehumor all night also counts. The fact that we have these options seems to imply that as far as entertainment goes, we have a reasonably efficient free market. I say “reasonably,” because when you drill down into any part of the entertainment industry, there are usually quite a collection of laws that protect the industry incumbents and promote inefficiencies. Fortunately, there’s a lot that you can do for entertainment. Contrast this with health care, transportation, communication, etc, that are regulated to the point where efficient and free can only be used in a satirical context. In each of these industries, there are hundreds, if not thousands of regulations that were sold as “protecting the consumer” that only seem to make it harder for the existing businesses to fail or be replaced. These laws raise the barrier to entry, and the rich get richer, typically because nobody can rise to eliminate the inefficiencies.

There’s a second giant flaw that feeds this problem. The government controls the money supply (caveat: The Federal Reserve Banks are actually privately owned. However, they have legal authority granted by the government, which is enforced. Therefore they are government, even though they aren’t elected. Still, the Treasury is government, by any definition). The government has a policy of inflation. That is to say that they try to continually increase the money supply. Inflation is a transfer of wealth from those furthest down the money supply chain to those closest to the source. Those closest to the source include government employees, contractors, and the bankers. Inflation is also a transfer of wealth from savers and lenders to those in debt, but the banks take that into account when they set their interest rates. Since the banking system has a tremendous say in the inflation rate (again, due to government fiat), it’s usually more relevant to look at the first effect.

The redistribution of wealth philosophy seems to be intended to “fix” these problems. However, the problem is too difficult to analyze, and a cudgel is used where a scalpel might be useful. There are literally millions that benefit both from the government mandated inefficiencies and from the wealth redistribution—for example, anyone who works directly or indirectly for the government but makes less than $80,000 a year benefits from both the problems and the fix. There are people that are harmed by both the problems and the fix (those that manage to get rich by their own accord). Then, of course, there are those that are wronged by the problems, but helped by the fix (as intended). There are also those that are helped by the problems, but harmed by the fix (as intended). Since the first and third groups both benefit, and the fourth group “gets what they deserve,” the philosophy has broad appeal (also, the group that is helped by the fix vastly outnumbers the group that is harmed by the fix).

The correct course of action should be to fix the problems by removing the wrongs that created them, not pile on more wrongs. Redistribution of wealth is tyranny of the majority parading around as equality.