Scott wrote the other day: "As for the estate tax, my thinking is that as long as the legacy is bequeathed in "chunks" that are distributed in a way that makes each of the beneficiaries as economically independent as possible the tax can be completely eliminated."
I answered: This is pure French Revolution/Counter Enlightenment egalitarianism. Of course people who have nothing will want the wealth to be distributed equally. Students who have low grades would like the smart kids' grades to be distributed equally too. Tough titty! Equality is unaittainable except through force, coercion or "social engineering," whatever you want to call nosy-parking, busybody interference in other peoples' business. There's a limit to the amount of intrusion us rednecks will tolerate and we have the Second Amendment to protect our privacy and property.Scott's new response: Actually it's pure pragmatism. [Note: I said nothing about "distributing the wealth equally."] You can give as little or as much as you like, up to a maximum that's about ten times the current maximum. I have an objective in mind, which is to make as many people as possible economically independent. You can do your own calculation, but basically this amounts to enough capital to produce an annual income in the neighborhood of $50,000. It has nothing to do with the Rousseauian notion of distributional benefit based on need, because the legacy is bequeathed to one's heirs. It places an upper limit on what you can bequeath to any one individual, but you can give it all away without any estate tax as long as you stay below that amount. That is considerably better than what we have today. How much capital is required to produce an annual income of $50,000? Probably a half million to a million dollars. That also is considerably better than the current law.
Overconcentration of capital is the bane of a capitalist system, for purely mathematical reasons. This has nothing to do with merit, and everything to do with the nature of capital.
Bottom line: it will work.
My new response: Well, this might not be Rousseauism but it is still pie-in-the-sky Fabianism/Keynesianism. Your argument makes the assumption that the heirs will invest their legacies wisely so as to produce an income. How many heirs will actually just fritter away their legacies and end up being bums and not "economically independent?"
"Overconcentration of capital is the bane of a capitalist system, for purely mathematical reasons." Where do you get these ideas? I'd much sooner have capital concentrated in the hands of visionary business tycoons who will create jobs than doled out piecemeal to all and sundry to fritter away. Scott wrote previously: "And you might as well eliminate corporate income tax too, the tradeoff being that we'd have both a ceiling and a floor to individual income. That last part would rankle the libertarians a bit, but the justification isn't that greed is bad, it's that too much individually hoarded wealth removes too much buying power from circulation."
I replied: That doesn't only rankle libertarians. It makes us conservative capitalist pigs see red. Buying power is only one part of the equation - demand. The other - supply - comes from us filthy capitalist pigs accumulating enough capital to invest in the "machinery" to manufacture the products to be bought.Scott's new response: The dynamic that creates recessions, depression, and inflation has to do with a mismatch between productivity and purchasing power. What this policy does is match your ability to buy with your ability to produce, so that one doesn't outstrip the other. It's "self governing" and would therefore do away with inflation/recession, etc.
Note that I suggested the upper limit may, in fact, not be necessary because S-curve functions (such as productivity) tend to create their own limit conditions. I'm open on that one, until there's more evidence.
What I want to avoid is this phenomenon of "morbit capital" where the hoarding of wealth becomes unhealthy or cancerous. I want to avoid the tumors.
My new response: "Hoarding of wealth?" How do you "hoard" wealth? You invest it. It gives you an income while it capitalizes businesses and creates jobs. I still think that you are trying to make a case for YOU to get an income of $50,00 a year without having to work for it. YOU want a guaranteed income and you are using big important-sounding phrases like "overconcentration of capital" to make it sound like bona fide economics when it's basically John "Imagine" Lennonism. You'd be right at home in the Peoples' Republic of San Francisco probably sitting on the Committee for Guaranteed Housing and Healthcare. Scott wrote previously: "If you can't possibly spend the income that's produced, you can't keep it. Personally, if I can't spend it I don't much care about keeping it. Again remember, there's no corporate income tax. Zero. Would that work for your business?"
My response was: I answered "no" before but I didn't go into detail. I can spend it faster than it comes in. How about you? "Scott's new answer: Again, I'm not even sure that the upper limit is necessary as long as we can establish a lower limit and can reach the "tipping point" (where 50% of the population makes enough from capital ownership to be independent of their labor). But there is an amount that's more than I can spend on myself or my assigns without being overtly gluttonous. Assuming that the overall progress of the economy eventually reaches a state where you can obtain any living condition you might want within a day, and as much information as you need within an hour, the remainder doesn't amount to much. This is, in general, more wealth than 99.9% of the current population commands, so setting that as a limit just doesn't seem like much of a hardship.
But again, I'm not sure limits are even necessary. Capital acquisition in the absence of undue influence on legislatures is probably self-limiting.
My new response: First "cancerous tumors" and now "overtly gluttonous." Do you know how many times I have had this conversation with liberals in San Francisco? This is exactly the way elitist Marxists talk. Wealth is evil and "cancerous" when it is owned by capitalist pigs but the elitists know how to use money better because they are so pure and altruistic. I had a hunch in the past that you are a Marxist but this discussion confirms it. I've known dozens of hippie "artists" and "poets" in the Haight-Ashbury who think just like you do. They just haven't read Plato's Republic and they don't have your fancy rhetoric.
"Assuming...you can obtain any living condition you might want within a day..." That's big assumption. "Imagine all the people...." Scott originally wrote: "It'd be strange, but it would work. The result would be a very different economy than the one we have now though. And there'd be the additional benefit that inflation would no longer occur. It would become a distant memory, like the millions of flies that buzzed all over the world's cities before the invention of the automobile.
Pat replied: Yes, it would be very strange and different! "It" would work only if everyone worked. Then comes the definition of work (which they won't do unless motivated by hunger.)"Scott's latest comment: Actually it would probably work even if no one worked, eventually. Capital is simply that much more productive than labor. It's something of a vanity to feel that your human labor is "necessary," but it's a vanity we'll have to lose within the next century or so. Know-how and insight are worth a lot more than labor for the same reason than an automobile is worth a lot more than a jackass. It's just that we haven't realized that state or condition yet. It's inevitable that we will, however. It's in the nature of capital vs. labor.
Note that we will still need wisdom and learning. The competition will be to achieve recognition and relevance, and those will be the rewards. People just won't need money. They'll have more burning needs. We are fast approaching this condition, much faster than people realize.
My new response: "Capital is simply that much more productive than labor." More high-flown rhetoric. Capital doesn't produce anything except hopefully a good return on your investment. People produce - whether by their hands, their minds or their machines. Manual labor is not the only kind of work. Know-how and insight are also work and we may be approaching a point where robots do all the manufacturing but it isn't anytime soon. And, even with robotization, we will still need human workers to fix the machines.
Have you read E.M Forster's, "The Machine Stops" in which the world is humming along perfectly being run by The Machine and humans simply apply themselves to learning, thinking and having fun? That Utopia comes to and end when they realize that no-one bothered to train technicians to supervise and maintain The Machine. Finally I asked Scott: "Scott, are you maybe playing devil's advocate or just mulling over your latest economic theory or just pulling my leg?"Scott replies: It's not really very recent thinking. I discussed this on the phone with Louis O. Kelso back in 1981, so I've been thinking about it for quite awhile.
It seems rational to me that people would want to optimize happiness and longevity, rather than income. Income is purely instrumental, and to the extent that it doesn't contribute to those other goals any additional effort that goes into attaining it is simply wasted. Enlightened self interest would suggest that at some point we stop seeking financial wealth, and start seeking happiness and longevity directly. Those will prove to be a function of freinds, a sense of purpose, the social and environmental context, and spirituality (maybe), but there's probably an optimum income beyond which it just doesn't make much sense to aspire.
You could call this a "Stage II Society" to go along with Liberalism 3.x. I think this tradeoff will become increasingly obvious as things go on.
My new reply: "...optimum income beyond which it just doesn't make much sense to aspire?" No, you're right - this kind of thinking isn't new. It's about 300 years old. It's called Rousseauism and it was updated 150 years ago by Marx and fiddled with and toned down by the Fabians and Keynes. Excuse me if my answers seem flippant and dismissive. That's because I am losing patience.Scott's new comment: Patrick & All,
I just read through the comment section, and my impression is that the thing people seem most worried about is the potential loss of personal integrity if people are no longer challenged by financial lack. I submit that you might be right, but we just don't know. We don't have enough data because we've never lived in a society where most of the population was well off. I would note, however, that Alaska has a fairly generous distributional system based on its oil wealth, and the fact that its population is small. Alaskans don't seem especially morally challenged.
There have also been societies where the members did not have to work, and the jury is out on whether they were morally handicapped. The Spartans didn't "do labor," because they were able to slough those tasks onto the Helots. This is morally repugnant, of course, but suppose the Helots had simply been computer-operated machines? There would not have been any immorality about the fact that Spartans didn't labor in the fields, or do craft work.
Also, the Spartans were about as far from a self-indulgent society as it's possible to get. I would not have wanted to live in such a culture, but they weren't wimps or Teddy-Kennedy softies.
Anyway, we've never had a purely capitalistic system, where capital-based productivity was broadly distributed and became the basis of the economy. Let's give it a try before we decide it's inappropriate.
My new response: I don't think we're worried about "the potential loss of personal integrity if people are no longer challenged by financial lack." What we're concerned with is the gall of some academic thinking that he is entitled to tell us what to do with our time and money. You're right to say that we've never had a "purely capitalistic system" because interfering busybodies keep poking their noses in other peoples' business. Let's give real capitalism a chance.
Alaskans get about $2,000 per person per year from oil income. It's hard to be "morally challenged" on such a little amount unless you count an annual winter vacation in Hawaii as immoral. And I think you might. I'm wondering if you not so much a Marxist but a puritanical Platonist.
The Spartans had slaves. I would call THAT self-indulgent.
I can't believe how far apart our thinking is on this subject and I doubt if I will ever be able to change your mind. Your Marxist assumptions are too deep - like the assumption that other people are entitled to poke their noses into private business and interfere with private wealth. So, I will not debate you on this topic any further. Our disagreement has less to do with differing theories of economics and more to do with our different concepts of private property and individual sovereignty. Maybe you're not a real Marxist but you sure are a Fabianist/Keynesianist and Keynesian "economics" have long been discredited.
I'm still convinced that these "economic theories" of yours spring from your own fairly penurious financial predicament. You are trying to make a case for your elite class of academics to be paid by "redistributing" the wealth of us capitalist pigs so you can sit around and think. Nothing wrong with that. If that's what you want, then get a job in a think-tank but don't go spouting off high-flown phrases that sound a lot like Marxist envy, disgruntlement and resentment disguised as some fancy "economic theory."
Now I really must attend to my business raking in all that "filthy lucre."
The Alliance