Sunday, October 07, 2007

Can't Be Right ALL the Time...

I'm used to hearing retarded opinions about Capitalism, so nothing much shocks me on that front anymore. But you kind of get thrown a curve when it's Warren Buffet - who at $52+billion in assets is probably the second-wealthiest person in the world at the moment - doing the spouting.

Here are some select quotes:

I personally think that society is responsible for a very significant percentage of what I've earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil... I work in a market system that happens to reward what I do very well - disproportionately well. Mike Tyson, too. If you can knock a guy out in 10 seconds and earn $10 million for it, this world will pay a lot for that. If you can bat 360, this world will pay a lot for that. If you're a marvelous teacher, this world won't pay a lot for it. If you are a terrific nurse, this world will not pay a lot for it. Now, am I going to try to come up with some comparable worth system that somehow (re)distributes that? No, I don't think you can do that. But I do think that when you're treated enormously well by this market system, where in effect the market system showers the ability to buy goods and services on you because of some peculiar talent - maybe your adenoids are a certain way, so you can sing and everybody will pay you enormous sums to be on television or whatever -I think society has a big claim on that.

Ah - and here we have the standard "it's all luck" fallacy. Or, more accurately, what I would call the George Lakoff Bromide - namely the idea that a progessive income tax system is justified because anyone in the upper income brackets is benefiting disproportionately from the system and therefore "deserves" to be taxed disproportionately.

It seems quite plausible on the surface. After all, Buffet is certainly correct that if you plunked him down in Bangladesh his particular talent wouldn't be worth a damn. But of course, he's missing the point (and apparently expecting us to as well) that any such country is bound to be ... oh, how to put it ... somewhat economically unsuccessful?

The part of this equation that's being left out is that Buffet's enormous wealth didn't come ex nihilo by the sheer force of will of the market-system philosophy. No - his wealth came in its entirety from making correct investment decisions. Buffet may think of that as a fortunate accident, but people who can do what Buffet does as well as he does are sine qua nons of a well-oiled market economy. The idea that so-called "planned" economies are anything but was convincingly advanced by Ludwig von Mises some time ago. Indeed, the whole problem with Socialist economies, according to Mises' line of argument, was that they cannot be effectively planned - and this is because they monkey with prices. If prices are an indicator of the real worth of something, then by regulating prices (i.e. telling everyone that something is worth what your imagination wants it to be rather than what consumers are actually willing to pay for it against what makes it worthwhile for people to produce it) you destroy vital economic information. What "planning" then takes place is ineffective at best (see Republics, Union of Soviet Socialist), since the planners now have no idea what the worth of things is. Contrast this with market economies, which Mises argues are (ironically, given the nomenclature) much better planned than Socialist economies just because (a) economic information is vastly more accurate and (b) the planners actually get rewarded or punished by the system according to the degree to which their plans succeed or don't. Buffet is the most successful known of such planners. More accurately, he's a kind of banker - directing the money supply to those places where it is most likely to grow. His wealth comes from being a highly effective planner - and the entire world economy is better as a result of it.

So sure, you could plunk Buffet down in Bangladesh and he would be useless, but that's because Bangladesh is useless. If it were a place worth living in, then people like Buffet, whose services are invaluable to the overall health of the economy, would be rewarded handsomely. Put more simply, we all get richer when the Buffets of the world are allowed to do thar thang, so his money is earned and he can, in my book, rest easy that it belongs to him and not me or anyone else. If Buffet thinks society has a "claim" in his wealth, I hereby renounce mine.

I renounce it even with regard to people like Mike Tyson. I mean, sure, Buffet's on to something here. There's something grotesque about someone like Mike Tyson being a millionaire (well, actually his dumb ass is massively in debt, but he was a millionaire once upon a time) just for hitting people. I nevertheless don't begrudge him his earnings - because every dollar of those earnings was given to him freely by people who parted with it willingly so that he could entertain them. Either that, or they came from sponsors willing to pay to have his fights televised - thereby bringing them to many, many more people than can stand around a dusty barroom in Bangladesh - so that they could advertise hoping to sell more products, increase their profits, and thereby employ more people, etc. Mike Tyson himself may be a worthless human being on some etherial moral level - but he provides the public with two things it really needs: (a) entertainment and (b) product information. If companies can't get people's attention on their own, they can turn to people like Mike Tyson to help them get their message out. He provides them, in other words, with a valuable service - and thanks to our capitalist economy, they are forced to pay him what that service is actually valued at.

So even though I don't personally like Mike Tyson, I don't begrudge him his wealth either. Like Buffet, he earned it by supplying people with something they want and are willing to pay for. And that's the golden rule of Capitalism, really. People are rewarded for providing utility. It is the ONLY economic system that can truly make that claim. All other systems reward people primarily for having the right connections, or spouting the "correct" opinions. Only Capitalism throws economic reward after economic utility. Which is to say, only Capitalism is based on sound economic good sense.

The reason why teachers and nurses aren't rewarded as well as we might like them to be is because, in some important sense, anyone can be a teacher or a nurse. Their skills are easily allocated because there are so many people with those skills to allocate. There aren't many people with Buffet's skills, and so what we do with his talent is a more precious decision than where any given nurse ends up living and working. It is proper that he should earn what he does.

Here's Buffet again getting stumped on the inheritance tax:

[Abolishing the tax is like] choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics

Weeeelll, sort of. To be more accurate, it's like giving the sons of the current Olympic team access to better training facilities. This gives them a huge advantage, granted, but it hardly guarantees that they will qualify. So it is with inherited wealth, too. Some people go on to do brilliant things with it, of course, but a great many others just piss it away.

What's really galling about this, though, and where the analogy goes wrong, in fact, is the tacit assumption that there are only so many positions "at the top" to be doled out. That's feldercarb. There are as many positions "at the top" as there are people doing things that the market system rewards. Wealth expands with time - something Buffet, as a star investor, should be well aware of. Dollar Cost Averaging is, after all, the first thing they teach you in Investing 101 - and Buffet himself has been a huge proponent of something very similar. So he knows better, actually. I expect to hear this kind of "limited money pool" crap from dyed-in-the-wool Soclialists (synonmyous with "economics moron"); I didn't really expect to hear such a pedestrian fallacy from an expert like Buffet.

But there you have it. I'm more and more convinced every day that voting Democrat is simply a genetic disorder. Shouldn't blame the people who do it, really - it's not their fault. Even if they're otherwise intelligent and can apply their thinking skills to solving real-world problems (like Buffet can in spades) something short-circuits when it comes time to pull the levers at the voting booth, and you find people who really ought to know better making the most elementary logic mistakes.

I'm not saying the Republicans are any better, mind you. They're bad in their own ways, but not in any consistent way. Really, the Republican Party is a ragtag fleet of people who, all other things being equal, wouldn't choose to travel together, but all have their reasons for wanting to resist Socialism, and so they pool their resources. Colonials fleeing Cylons indeed.

The Democratic Party, however, is a reliable logical fallacy machine. It isn't just that they're wrong, it's that they're consistently wrong, and in predictable ways. You can tell them until you're blue in the face that the way to fight poverty is to create more wealth, but somehow no matter what you say they walk away from the discussion convinced as ever that taxing productive people (i.e. those who create the wealth) is a good solution. You can tell them till your're blue in the fact that there is no fixed limit on wealth (there's as much of it "out there" as we're willing to work to create), but somehow no matter what you say they walk away from the discussion convinced as ever that there's only so much money in the world and that we have to divide it "fairly" (and - astoundingly - that "fairly" somehow means paying people whether they work and contribute to wealth creation or not).

Nothing helps. And so it's gotta be some sort of congenital defect. Or maybe a virus. I mean, if even the Warren Buffets of the world can be infected...


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