[ExI] The Dogs of Immortality

Lee Corbin lcorbin at rawbw.com
Wed Jul 16 00:04:30 UTC 2008


Gary writes

> Stathis Papaioannou replied to Kevin Freels as follows:
> 
>> Do you honestly believe that my standard of living is based on the taxes I
> pay? Are you kidding? It's just money. It moves around. People create things
> of value. This is what creates wealth. Taxation just moves it around
> differently. There is no net benefit.
> 
> But how the movement of money is organised does make a huge difference,
> otherwise all countries with similar amounts of natural resources would be
> equally wealthy.

I can't tell from this who said what, but I don't think of
the movement of money or its organization as being
the main factor. Activities that create wealth are what is
important.

> Actually, all else being equal, higher taxation decreases overall spending
> and increases total national savings, while lower taxation has the opposite
> effect. See:
> http://en.wikipedia.org/wiki/Fiscal_policy.

But higher taxation decreases *private* overall spending, i.e.,
the informed decisions made by people who earned the
money and exerted themselves (thereby creating wealth)
for the express purpose of having that money. It wouldn't
be so bad if that money were merely converted into paper
cash and burned. Unfortunately, the government spends
almost all of it to retard further wealth creation, destroy
the natural incentives of Peter and Paul both, and fund
extremely wasteful non-market orientation idiot projects.

> I agree that how the movement of money is organized does make a huge
> difference. I believe an expanding middle class fuels the economy, but when
> the rich get richer and the poor get poorer, the middle class shrinks and we
> head towards the kind of economies we see in the rest of the world where 3
> or 4% of the population own 95% of the wealth.

There is nothing *inherently* wrong with 1% of the people controlling
99.9% of the wealth.  What matters is whether any given individual
is richer or not. As societies become richer, wealth inequality grows
(everything else being equal).  For now, leave the non-industrialized
third world countries (who suffer from the unequal distribution of
capitalism and free markets) out of the equation. The Pareto curve
just gets a longer and longer right-hand tail, as the median and mode
move upwards.

Talk to me about a disappearing middle class when the wealth
distribution curve becomes bimodal.

Now this awful article you point to

> http://en.wikipedia.org/wiki/Fiscal_policy.

says all sorts of dumb things like

    Fiscal policy is used by governments to influence the level of
    aggregate demand in the economy, in an effort to achieve economic
    objectives of price stability, full employment and economic growth.
    Keynesian economics suggests that adjusting government spending and
    tax rates are the best ways to stimulate aggregate demand. This can
    be used in times of recession or low economic activity as an
    essential tool in providing the framework for strong economic growth
    and working toward full employment.

Any time you see the words "aggregate demand", stop reading and try
to find a good modern economics book (e.g. Mankiw, the most popular
one in use today, e.g., at Stanford).  That Keynesian BS did almost as
much damage to western economies in the last have of the 20th century
as organized socialism did in the first half of the 20th century.

If you "adjust government spending... to stimulate aggregate demand",
then all you are doing is distorting market signals and prices, and 
cause people to rush out and buy things that they otherwise wouldn't.
Sure you get a boom---for a while.  But malinvestment is malinvestment,
and very soon the price is paid.  Keynesian economists were shocked
in the 70s to discover that their policies, followed to the letter, had 
created stagflation. 

The only way out of a recession is for companies to pull back and refocus
their efforts to make real profit. The recession is a sign that they've been
working on the wrong things. But the Keynesians interfere with this 
natural process by pumping money into the economy so as to (temporarily)
prevent the natural layoffs and refocusing that's needed. So companies
continue their misguided policies, often also fooled by the inflation (that
the Keynesians create) into thinking their activity profitable when it's really
not.

> Thank god a few billionaires have realized that it's not how much you have
> that matters but how to maximize the good that can be done with it.

You cannot count on the good intentions of people to selflessly sacrifice
in order to "maximize the good". No such scheme has ever succeeded,
and none ever will.  Instead, you allow people the natural incentive of
investing their money in the most profitable activities they can, and
reward them by letting them keep the money that accrues from their
own wealth-producing efforts and wise decisions.

Lee




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