In Arguing For a Redistributive Tax, Robert Reich Indicates Income Inequality Doesn’t Matter

Over at Alternet, Robert Reich attempts to make the case for a redistributive tax based upon technology.  There are a number of flaws within this text, but the biggest is he accidently undoes his case.

Mr. Reich states:

Imagine a small box – let’s call it an “iEverything” – capable of producing everything you could possibly desire, a modern day Aladdin’s lamp.

You simply tell it what you want, and – presto – the object of your desire arrives at your feet.

The iEverything also does whatever you want. It gives you a massage, fetches you your slippers, does your laundry and folds and irons it.

The iEverything will be the best machine ever invented.

The only problem is no one will be able to buy it. That’s because no one will have any means of earning money, since the iEverything will do it all.

If, indeed, a machine (or machines) are invented that can provide us with everything we want, and the profits go only to a select few, then Mr. Reich has unwittingly provided evidence that income inequality doesn’t, in fact, matter.  Such a world would gave incredible inequality, but it wouldn’t matter.

Do the Ends Justify the Memes?

This post started as an update to my earlier post, but then I decided it needs its own post as it is a decidedly different topic.

The scandal I referred to earlier is known as the Seralini Affair.  The long and short of it is French biologist Gilles-Eric Seralini published a paper purportedly showing a connection to GMO corn and tumor growth.  When Seralini et al. were questioned on their methods and the fact the experiment was non-duplicatible.  It turns out the mice they had used were known for having a naturally high incidence of tumors.  In other words, Seralini et al. chose a test subject that would more likely than not give them the results they desired.  It seems M. Seralini felt the threat of GMOs, whether real or imagined, was so great that he needed to guarantee the proper outcome.

Unfortunately, this sort of thing isn’t limited.  Just last year, Jonathan Gruber, the self-described architect of the Affordable Care and Patient Protection Act (AKA Obamacare) was caught on film talking about how ACA was passed:

“This bill was written in a tortured way to make sure C.B.O. did not score the [individual] mandate as taxes…Lack of transparency is a huge political advantage. And basically, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.”

Similar to the Seralini Affair, M. Gruber felt that the need to pass the ACA outweighed any benefit of debate on the issue, that its true nature had to be hidden.  And though this method, the discussion becomes more about memes rather than merit.

From a moralist point of view, such behavior is inexcusable.  From a realistic point of view, any idea should be able to stand or fall upon its merits.  If one needs to lie or cheat to implement their ideas or further their agenda, then the idea doesn’t begin with much merit.  It is in this area that markets really thrive.  Markets rigorously test ideas.  Those that have merit will stand.  Those without, fall.

The importance of Critical Thinking

Take a look at this meme


The author of this meme would have you believe that GMOs cause cancerous tumors.  The main problem with this is these mice are Sprague Dawley rats.  A noticeable feature of these rats is that they naturally have a high incidince of tumors.

The purpose of this post isn’t to argue one way or the other on GMOs.  Rather, it is to point out the importance of critical thinking.  A blind acceptance of this meme would have one arguing against GMOs not from a rational or scientific viewpoint, but from an ignorant viewpoint.

The simple lesson here is this: question everything.  Everyone has an agenda.  Question what you read in the news.  Question what you read on this blog.  If you question something and find out it is correct, then hey, that is a good thing.  But, by questioning, you can prevent yourself from becoming a “useful idiot.”

The Knowledge Problem

F. A. Hayek, in his Nobel speech, famously talked about what is frequently called “the knowledge problem.”  Essentially, Hayek argues that there is no way for a person, or group of people, to collect, analyze, and interpret all the information necessary to make economic choices for an entire group.  Hayek talks about the “knowledge of the particular circumstances of time and place.”  In other words, only I (or you, dear reader) have the information necessary to make decisions affecting you.  A central planner wouldn’t have the information needed.  Any decision he makes may help some, may hurt others.

The legislator (assuming he is acting not in his own self-interest but for some higher purpose) must rely upon averages. The average citizen, or the average laborer, or the average firm. The problem with this, of course, is that averages do not account for individual details; in fact, they deliberately factor them out.

Let’s assume we have a society where there are 10 people who wear size XL shirts and 10 who wear size M. The average shirt size, then, is size L. If some busybody came along and decreed some shirt legislation based upon average size, then all manufacturers would have to make size L shirts. For half the population, the shirt is too big. For the other half, it is too small.

This is why legislation often fails in its stated goals: it cannot take into account the “particular knowledge of time and place.” The legislation is either too much or too little, and thus it creates the very failures it was supposed to prevent.

Markets and Trust

Over at Cafe Hayek, Don Boudreaux quotes Steve Horwitz:

If we shouldn’t trust “strangers” to educate our children, why should we trust “strangers” to feed or clothe them either? Yet we do so every single day. Civilization is built on turning strangers into honorary kin through institutions that build trust. Education is no different. I’m not interested in forgoing the benefits of the division of labor in a world where contracts and reputation signal trust in strangers.

Steve’s point is brilliance in its simplicity.  Markets foster an enormous amount of trust among its participants.  In fact, trust is central toward market operations: remember that all market transactions are voluntary.  If one party doesn’t trust the other, no transaction will occur.

Markets also severely punish those who violate that trust.  Sure, there are legal actions that can take place, but the far worse is the judgement of the market.  If a firm is untrustworthy, they quickly find themselves facing bankruptcy and an irate customer base.

Immigration and Voting

Another fear of open borders immigration, especially by those on the Right, is that the immigrants (assuming they become citizens) will vote for someone other than their political party.

Aside from the fact that suggesting someone should be denied the right to improve their life because they might think differently from you is a pretty terrible reason, there is a larger issue here:

Isolating, demonizing, and criminalizing immigrants is certainly not the way to endear them to your cause.  Ironically, the actions taken, primarily by those on the Right, will drive them right into the arms of their political opponents.  In other words, this fear was created entirely by the Right and is driven entirely by the Right.  Not smart.

More Thoughts on Open Borders

A typical response by those who advocate closed (or, at least, tightly controlled) borders is this:

“Do you leave your front door unlocked?”

There are many things wrong with this statement, and people far smarter than I have dealt with it.  But I have two main problems with it:

1) It assumes the government owns the country. I reject that as a libertarian and a moralist.

2) It’s an inapt analogy.  I do lock my door to prevent someone from stealing what little stuff I own. That is because a good person would have no cause to enter my apartment unless I invite them in. Conversely, a good person would have many reasons to cross the border from Mexico to the US (or anywhere else). I can reasonably assume that a person who crosses my threshold wishes to cause me harm because he was not invited in. One cannot reasonably make the same assumption for national borders.