Billionaires have a moral obligation to become tax exiles
I’ve always had a relatively high opinion of Richard Branson. What’s not to like? But I was a bit disturbed by this:
U.K. billionaire Richard Branson has mounted a swift online defence of his decision to live to his private Caribbean island retreat, claiming he was not quitting the U.K. for tax but for lifestyle reasons.
Over the weekend, a report in the U.K.’s Sunday Times highlighted the tax benefits for the 63-year-old billionaire in setting up home on Necker Island in the British Virgin Islands.
The U.K. has an income tax rate of 50 percent for the highest earners, while Necker has a zero rate of income tax. Moving to Necker will mean that he is no longer a British resident and, as such, no longer subject to income or capital gains tax. Branson can still spend up to 183 days in the U.K., however.
(Read more: Jump! Richard Branson Wants to Skydive From Space )
“After 40 years building companies & creating jobs in the UK, I now live on Necker working on building not-for-profits…I have not left Britain for tax reasons but for my love of the beautiful British Virgin Islands and in particular Necker Island , which I bought when I was 29 years old,” Branson wrote on his Virgin blog page on Sunday.
Of course I’m glad he moved, but disappointed by the motive. Branson had a moral obligation to leave the UK, even if he preferred London to BVI. To see why, let’s view the following facts from a utilitarian perspective:
1. Billionaires have way more money than they “need.” Of course so do average Americans, so let’s be more precise. Billionaires receive very little marginal utility from lifetime consumption levels above $100 million. Therefore, they should give at least 90% of their wealth to charity.
2. In countries like Britain and the United States, government spending (at the margin) tends to be very wasteful from a utilitarian perspective. Upwards of 90% of government spending goes towards special interest groups or towards programs of dubious value. Even programs that represent the core function of government, such as national defense, tend to have zero or even negative value at the margin. Only a small fraction of spending goes towards programs such as poverty reduction and medical research, where it is at least possible that government spending is as valuable as the spending of a well-run charity.
I do understand that there are legal roadblocks that make it difficult for people like Bill Gates to become tax exiles. However the basic principle is clear; if billionaires are able to successfully shield their wealth from the tax authorities, they should do so. Starving kids in Africa need the money much more that older Americans need a COLA in their Social Security benefits, and more than the military needs another $300 billion in fighter jets.
I presume this post will horrify big government liberals. And also those libertarians who are repulsed by utilitarian arguments that the rich have a moral obligation to give much of their wealth to the less fortunate. But I’m not in this business to please people.
PS. Recall that there is a big difference between “expenditure” and “consumption.” At the low interest rates that we see today the flow of consumption services over 25 years from a $50 million mansion is much less than $50 million. It’s actually pretty hard to consume $100 million. Think of all those fashionable townhouses in the West End of London that remain empty 95% of the time. Is that really a good use of our resources?
PPS. Now that government is back in business it’s time to reform immigration. Let the huddled masses in and encourage billionaires to get the hell out, and take their money with them.
PPPS. It’s wrong to claim the GOP got nothing out of the shutdown, they did get more government spending on boondoggles:
It also includes an increase in authorization for spending on construction on the lower Ohio River in Illinois and Kentucky. The bill increases it to $2.918 billion.
The Senate Conservatives Fund quickly called that language the “Kentucky Kickback,” and said Senate Minority Leader Mitch McConnell (R-Ky.) secured that as the price of his support for the bill. Taxpayers for Common Sense says the bill would increase total authorized spending by $1.2 billion.
Bastiat talked about “negative railroads.” I consider Senators to be “negative billionaires.”
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17. October 2013 at 16:35
> 1. Billionaires have way more money than they “need.” Of course so do average Americans, so let’s be more precise. Billionaires receive very little marginal utility from lifetime consumption levels above $100 million. Therefore, they should give at least 90% of their wealth to charity.
Correct me if I’m wrong, but doesn’t this show that Branson could just as well stay in the UK, just donate his entire income? I was under the impression that the charitable taxbreaks meant that if one did this, one pays none of those taxes you abhor.
17. October 2013 at 16:42
If we have a moral obligation to avoid money and hence avoid purchasing power taken from us, don’t we also have a moral obligation to avoid purchasing power taken from us and hence avoid central banking?
“Billionaires receive very little marginal utility from lifetime consumption levels above $100 million. Therefore, they should give at least 90% of their wealth to charity.”
This is a common fallacy which derives from a misunderstanding of the law of diminishing marginal utility, and this misunderstanding derives from viewing individuals as mere cells in a greater organism, instead of each person being an organism.
Yes, it is true that to one and the same person $100k would
be of higher marginal utility if all he had was $10k
than if he had $100 million. But it is a non-sequitur and
completely false to imply that the marginal utility of
$100k to this individual is increased if, when he has
$100 million, $100 is taken away and given to someone
else, who has only $10k. It is absurd to think that the
thousandth $100k in the hands of someone else is of greater
marginal utility to a person than the one-thousandth $100k
in his own hands.
And if it is not the marginal utility to this person, the one who has the $100 million, that is increased, then there is no universal, objective sense in which marginal utility could be increased as such by forced redistribution.
“In countries like Britain and the United States, government spending (at the margin) tends to be very wasteful from a utilitarian perspective.”
If the majority of people wanted to murder redheads, or steal from some other minority category, then from a utilitarian perspective, since murdering redheads and robbing from people would increase social welfare, we should seek to achieve these outcomes if the majority of people just so happened to want it.
17. October 2013 at 16:47
The biggest scam in the history of mankind:
https://www.youtube.com/watch?v=iFDe5kUUyT0
17. October 2013 at 16:51
Billionaires have a moral obligation to invest in new for-profit endeavors, as those are what’s called SUSTAINABLE, and raise people up for more than charity.
Invest it in African businesses? Sure.
I kinda get the malaria thing, but as Gates himself mentioned, it immediately means solving the next issue, starvation.
But frankly, I’m far more impressed with the Koch’s willingness to fund anti-crony politics.
As far as I can tell that’s got the best possible lift for America, which the world needs to emulate.
17. October 2013 at 17:08
I wonder how long it will take this blog to have a post showing how a cessation in further government borrowing would make it impossible for the Fed to continue to inflate the currency whilst retaining private ownership of the means of production.
Of course, I am assuming that he isn’t mad enough to advocate for the Fed to inflate over time by buying more and more shares from private companies.
Oh wait…
17. October 2013 at 17:12
Morgan:
“Billionaires have a moral obligation to invest in new for-profit endeavors, as those are what’s called SUSTAINABLE, and raise people up for more than charity.”
Isn’t it interesting how both you and Sumner have set the bar at a particular level of money income that just so happens to exceed your own?
From a poor African’s perspective, you might as well be a billionaire. Don’t you have a moral obligation to raise their standard of living through investment?
17. October 2013 at 17:22
Steve Landsburg makes a convincing case that the rich should save and keep all their money rather than give it to charity.
http://www.thebigquestions.com/2012/12/24/merry-christmas-2/
“If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer””because you produced a dollar’s worth of goods and didn’t consume them.”
“In this whole world, there is nobody more generous than the miser””the man who could deplete the world’s resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.”
I think Landsburg is right on this one. Someone who produces but does not consume is putting goods into the world without taking them back. This makes more available to everyone and not just to a favored cause.
17. October 2013 at 17:31
Uh oh…….
“Abe gets ready to start “naming and shaming”
“According to TV Tokyo (h/t ISI Group) Abe will begin pressuring business leaders directly to raise wages. The goal is to start with a corporate wage survey. How would a survey help? In Japan if the survey is published with the companies’ names shown, the strategy of “naming and shaming” just might work. Public image is critical to most Japanese firms and this just may push them to change the way they pay their employees.”
http://soberlook.com/2013/10/abe-gets-ready-to-start-naming-and.html
17. October 2013 at 17:46
“From a poor African’s perspective, you might as well be a billionaire. Don’t you have a moral obligation to raise their standard of living through investment?”
Not if it impoverishes you. Because then your utility may be compromised.
17. October 2013 at 17:53
gwern, Taxes inhibit your ability to accumulate wealth.
John, If you are both rich and a miser, then by definition you are giving away almost all of your wealth. (Perhaps after you die.) So I don’t see the distinction.
17. October 2013 at 17:55
Travis, I don’t know who wrote that Sober Look post, but he obviously has never studied the NIRA.
17. October 2013 at 17:56
Yet another reason to tax consumption instead of income.
17. October 2013 at 18:33
Scott,
Like Morgan, I think that it is better for the super rich to try to use their money to make more money rather than give it away. Also, when they die it would be better to put the money somewhere where it will continue to be invested rather than giving it to charity. It’s better philanthropy make it easier for businesses to raise/borrow money and hire more people than to just give handouts.
17. October 2013 at 18:42
Geoff,
Ludwig von Mises would always point out how average Americans are rich compared to average Africans and therefore if they favor redistribution, the poor in America should still be sending money to Africa. You’re taking this argument out of context. Mises would say, and I’m sure Morgan would agree in this argument, that the best thing for society would be to invest the money in the most profitable way possible and thereby do the most to improve “want satisfaction” as he puts it.
I get that you are a fan of the work of Mises and Rothbard, but can’t you ever cite anything or at least read something from a non-Austrian perspective? Don’t be like Paul Krugman who says that anything written by people who disagree with them isn’t worth reading. There are lots of great economists who aren’t specifically Austrians: David Friedman, Steve Landsburg, Bryan Caplan, Thomas Sowell, Milton Friedman, Eugene Fama, Scott Sumner. Even if you don’t always agree with every point they make, all of these people often put forward arguments that boost the free market cause.
P.S. Whatever gold’s virtues as money are, it’s a shitty investment.
17. October 2013 at 19:35
Billionaires “should” do…whatever they want with their wealth. Just like we non-billionaires. In any event, most billionaires’ wealth, at least at the time they become billionaires is held as ownership of productive resources, not consumption goods or “money”. Why would you want to “force” someone who apparently has a comparative advantage in creating wealth (by definition) for all who exchange with him to stop doing this and divest? The Celtics won 8 straight NBA titles. Let’s say that there was some diminished marginal utility to them of another title. Is that a reason to tell them to disband and go play in Europe or go barnstorming. What about the lost utility of those other market participants who do not get to experience the next title?
17. October 2013 at 19:52
John:
I notice you did not actually address my arguments on their own merit, but instead chose to attack what you think is the group to which I allegedly belong.
“Ludwig von Mises would always point out how average Americans are rich compared to average Africans and therefore if they favor redistribution, the poor in America should still be sending money to Africa. You’re taking this argument out of context.”
Want satisfaction does not necessarily imply investment. Time preference is what constrains investment.
“Mises would say, and I’m sure Morgan would agree in this argument, that the best thing for society would be to invest the money in the most profitable way possible and thereby do the most to improve “want satisfaction” as he puts it.”
I’m taking that particular argument from Mises out of context? Or Morgan’s? If Morgan’s, then he didn’t say “society”. He said billionnaires.
“I get that you are a fan of the work of Mises and Rothbard, but can’t you ever cite anything or at least read something from a non-Austrian perspective?”
I get that you are not a fan of them, but can’t you cite anything or at least read something from an non anti-Austrian perspective?
I’m not “representing” Austrianism in anything I write. I write from my own perspective, and think it is fair to have my arguments addressed as such. I know you don’t have much to say in response to my previous post, or else you would have done that, so instead you attack an ideal instead, of what you think I am pushing.
But do try to take my arguments at face value, rather than straw manning me.
“Don’t be like Paul Krugman who says that anything written by people who disagree with them isn’t worth reading. There are lots of great economists who aren’t specifically Austrians: David Friedman, Steve Landsburg, Bryan Caplan, Thomas Sowell, Milton Friedman, Eugene Fama, Scott Sumner. Even if you don’t always agree with every point they make, all of these people often put forward arguments that boost the free market cause.”
Most of the people in that list are not pro-free market. They are pro mixed economy, and their arguments to the extent they are pro free market, contradict their other arguments, so I can’t take their sincerity seriously. I can only address that arguments themselves.
At any rate, I read far more non-Austrians than Austrians, by a factor of at least 20 books/papers to 1 book/paper. I mean it’s not even close. I spend almost all my education time reading anti-free market material.
I don’t accept a free market argument based on the name of someone who makes it. I base it on the argument itself.
The fact that I accept that economics should be grounded on action is not actually limited to Austrianism. It is part of a much wider philosophical framework that derives from introspection and logical deduction. I think this is necessary to understand economics. Observing historical data won’t tell us any principles or laws, only accidents of choices at the times and places they are made.
17. October 2013 at 19:52
Edward:
“Not if it impoverishes you. Because then your utility may be compromised.”
Since when did you become an anarcho-capitalist? lol
17. October 2013 at 19:54
Geoff,
You’re weird.
I spend half my day working on appified local govt. (GaaP) meant to allow pro-technologist elected officials from govts all over the world to fire most of the public employees, sell most of the govt. buildings and reduce their need to tax their betters.
And part of that is time is spent talking to billionaires who hopefully don’t have a better idea, to fund this thing.
17. October 2013 at 20:09
Geoff,
Going back to your original post, the marginal utility is not being changed. It is assumed to diminish with increasing amounts of wealth regardless of who the person happens to be. Yes, the person who has their money taken from them misses out on some utility, but the net amount is larger in the redistribution scenario. It does not seem like too big a leap to assume this is a good thing if you view all utility as being of equal value (i.e. it does not particularly matter that one person rather than another get utility).
You can justify all sorts of repugnant conclusions if you follow moral theories to their ultimate conclusions. Luckily, most people don’t.
17. October 2013 at 20:43
Prof. Sumner,
I’ve read you say you favor more redistribution, do you favor it only on a global scale, or on a national level as well? I happen to agree that if Richard Branson spends his fortune of worthwhile endeavors, as he seems likely to, that it will be an improvement over what the British government would be likely to do with the money.
17. October 2013 at 20:46
Billionaires have a moral obligation to give 90% to charity? Why not give it to high return projects that won’t be funded otherwise, such as research into living forever, curing cancer, increasing intelligence, and going to Mars?
Elon Musk and Peter Thiel are pretty much funding the future on their own, while other billionaires sink their hundreds of millions into Newark city public schools…
17. October 2013 at 20:51
Geoff,
Its like this:
If you see a child drowning in a lake, but you cant swim, you shouldn’t jump in, because you might endanger yourself and even the child. But you should expend the minimum amount of effort that doesn’t cause you disutility- if there are other people, call for help.
If you can swim, and whats more you’re a fantastic swimmer, then you have an obligation to help, because you can and you’re not endangering your own life and utility.
Now lets change the scenario a little bit. Suppose the lake is an ocean with some sharks. Even a fantastic swimmer would not be required to jump in. But a steel nerved Navy SEAL, a veteran of combat between man and man and between human and animal….
Even Superman cant fly around 24-7 saving people. He’ll have a nervous breakdown. He has to be Clark Kent to have some time to unwind.
Are you starting to get the picture? In my version of utilitarianism, you are obligated to take care of yourself, (ethical egoism) first, THEN help others. (Unlike the depraved indifference most mindless absolutist libertarians have, i believe there are ACTIVE initiations of force, and PASSIVE. If a billionaire walks by a starving child on the street, and refuses to help him, and the child dies of hunger, you might argue that it was hunger that killed him. Not true. To choose to not feed a starving child at minimum disutility to yourself is a deliberate active choice and it approaches, (maybe not equals) murder.
17. October 2013 at 22:27
Scott, Branson does want to go to space, so it may just be possible for him to actually consume 100 million dollars.
About immigration and utilitarianism, that money is probably better spent on improving the prospects for seasteading and charter cities. People are generally very protective of their own territories. It is an animal impulse that we have not gotten over. But creating new jurisdictions is a win-win.
Morgan, I believe that dollar for dollar, the Koch’s money is better spent trying to encourage free market ideas in India. India’s elite is anglophone, but there is literally no active classical liberal party in India. libertarian ideas have to be masked under the rhetoric of decentralization. Getting the central government to move labour laws or environmental regulations to the state level will be a huge victory for libertarianism or utilitarianism.
17. October 2013 at 23:02
Scott,
I doubt you’re a real, honest-to-goodness utilitarian. But let’s see. According to classical utilitarianism, we have an obligation to act so as to maximize the greatest good of the greatest number. So Richard Branson’s duty is to make as much money as possible and give it to the poorest of the poor. Now suppose that Branson’s brother could make as much money as Richard if he became a businessman, but that Branson’s brother loves teaching and loathes business. That’s too bad because Branson’s brother’s disutility is insignificant when weighed against the increased utility of the poor who’d receive his gifts. Would you criticize him for not going into business? I hope not.
One problem with utilitarianism is that it gives insufficient weight to the idea that each of us should be able to choose our occupation, forms of recreation, place of residence, etc., without being obligated to maximize social utility. Besides if everyone is trying to maximize social utility rather than living a large part of their lives in pursuit of private aims, then it’s very unlikely that social utility would, in fact, be maximized.
Another problem with utilitarianism is that it’s concerned solely with consequences, and not at all with motives. In this regard, your criticism of Richard Branson for moving out of England for life style, rather than tax avoidance, reasons has no bite in a utilitarian calculus. If Branson’s move is the utility-maximizing alternative, it doesn’t really matter why he’s chosen to move.
I’m sure you know there’s a vast philosophical literature about the shortcomings of utilitarianism (a good starting point is J.J.C. Smart and Bernard Williams, “For and Against Utilitarianism”). Given your views about how the economy works, it would be interesting to see what your policy advice would be if had a different normative framework.
18. October 2013 at 02:21
Geoff it is true that it is impossible to scientifically compare utilities. It is also true only an extremely unreasonable person would not concede to the fact that a thousand dollars to a billionaire(or even just the average American) will give them much less utility than a thousand dollars to a poor African. I think Scott’s point is that at the billionaire level it is probably close to zero.
18. October 2013 at 02:39
Gwern, In the UK you get a charitable tax break worth much less than 100% of your donation. If you owe, say, £100,000 in taxes before donating, donating £10,000 will not reduce your tax bill to £90,000. And yet people still get mightily het up about the whole thing.
18. October 2013 at 03:52
Prakash, India’s a stumper. I spent a bunch of time there and I saw a lot of copies of Rand novels. But my partners couldn’t own their own airplanes, they had to create an airline that they owned. I was constantly being asked for my papers by guys with rifles.
18. October 2013 at 04:10
Could we get back the the first comment? I don’t know any tax law, but I was under the impression that a billionaire could easily donate whatever assets he would accrue a cap gain on and ditto for his income. Am I missing something? In reality billionaires evade taxes to hold more wealth IN THEIR OWN NAMES, preferring that even to trusts, charitable institutions, or corporations they personally control. Yes?
18. October 2013 at 05:20
Putting away the more philosophical arguments.. on a more practical level…all it takes is a couple of billionaires to say..hey I’m not going to pay 70%+ marginal takes rates to move the peak of Laffer curve to the left. I think the Laffer curve is the only real restriction on the size of government and the limit to the top progressive tax rate….you just run out of people to tax…
It wouldn’t surprise me if a group of the richest people on Earth used their money to buy an entire country…and they all became citizens…and paid no taxes…
I guess the philosophical argument comes down to what is better for mankind..the average charity or the average new venture/product or the average additional government “investment”…I have seen many in the first two categories…not too many that involve government especially on the federal level.
18. October 2013 at 05:27
Lawrence, I agree.
John, If you don’t consume your wealth, you have given it away. There is no third option.
gofx, You missed the point entirely. I don’t want them to divest, it’s the government that’s trying to stop them from accumulating more. I want them to build up as much wealth as possible, and give it away when they are old and about to die.
rbl, Ideally on a global level, but as long as we are a nationalist society then modest redistribution within the US is better than none. I wouldn’t say I favor “more” redistribution so much as “better”. We are spending enough on social programs, it needs to be more effectively targeted to low wage workers.
Jack, As long as they don’t consume the wealth, it’s charity as far as I’m concerned. When they die, give it to charity.
Prakash, I agree that as a practical matter we need to improve other countries, open immigration won’t happen until incomes get more equal.
Greg Hill, You said;
“Would you criticize him for not going into business? I hope not.”
Excellent point. No, but that’s because I don’t live up the the utilitarian ideal either, and I don’t criticize myself for it. But what I would say is that the world would have been a better place if he had gone into business and then given billions to suffering people. But no, I would not personally criticize him.
Like most people, I am somewhat selfish. But when judging public policies I still feel an obligation to point out which policy is best from a utilitarian perspective.
The title of the post was sort of half joking, meant to provoke people into thinking about the issues involved in taxing the rich, not as a serious guide to life. I don’t go around criticizing billionaires for living in the US.
You said;
“I’m sure you know there’s a vast philosophical literature about the shortcomings of utilitarianism”
Yes I am, and I don’t find it convincing, at least at the level of public policy.
Nick, See my reply to gofx.
18. October 2013 at 05:49
Sorry prof but I still don’t understand. If you needed to accumulate wealth over time and then one day give it away to the most deserving charity I would follow your logic. But the diminishing marginal utility part of your argument undermines this. Branson is not just instructed to give away the bulk of his wealth upon death, he should give it all away above 100 million (your number but I’d tend to agree). He can live in London, work really hard, and give away 100% of each additional dollar he now earns–and also give away all of his capital assets that appreciate in value. He’s just that rich. And to top it off he can give it to a charity he maintains control over.
Actually I think that the more modestly wealthy are the folks you mean to instruct to flee cap gains laws and build their meager fortunes into charitable powerhouses. But of course many of those people can only earn their full income in high tax jurisdictions . . .
18. October 2013 at 06:12
Geoff,
I have never cited anything from an anti-Austrian position. All I was saying was that all your comments are nearly direct quotes from Rothbard. Does some of your own thinking. Bob Murphy is a good Austrian economist and he thinks for himself rather than constantly quoting “Man, Economy, and State.” As someone who has read the books I recognize that you are constantly ripping them off and never putting out an original thought.
You’re a very strange troll and it’s better not to engage with you. At least read what people have to say before you make your lengthy responses.
18. October 2013 at 06:17
“Therefore, they [billionaires] should give at least 90% of their wealth to charity.” This looks like a complete *non sequitur*. Of course, they shouldn’t waste their wealth on their own personal consumption (or on anything else where it would be wasted), but that still leaves an enormous range of alternatives. Why think charitable giving is the best use of a billionaire’s wealth? Morgan Warstler seems closer to the truth: “Billionaires have a moral obligation to invest in new for-profit endeavors . . . .” (Similarly, Steve Landsburg, and many others.)
But, while it would be *best* if billionaires used their wealth productively, all this talk about “moral obligation” seems too heavy-handed.
18. October 2013 at 07:54
Unless British tax law is significantly different from US tax law, Gwern is correct. If Branson were to donate $1 billion to charity and write it off, he would owe no taxes on that $1 billion in earnings just like he owes no taxes from his island retreat. The difference is that on his island, he also owes no taxes on the amount he doesn’t donate to charity. This last part is more morally questionable…
18. October 2013 at 08:06
Upwards of 90% of government spending goes towards special interest groups or towards programs of dubious value.
Really? Roughly 60% of govt spending is on entitlements, which include SS, medicare and medicaid. So SS counts as spending on a special interest group? That’s absurd. Even if you don’t like the program, it’s a perfectly reasonable risk-pooling and resource-shifting program. And it most certainly aleviates poverty for seniors. It may not be optimal policy, depending on your preferences, but it is at least not mostly wasteful. I’m sure that if I spent enough time going back and forth on this issue, we could reach a reasonable statement on the utility of SS spending. The problem is that I imagine you really do approach the issue of govt spending believing in some sense that “Upwards of 90% of government spending goes towards special interest groups or towards programs of dubious value.
” and its hard to imagine a productive conversation under those circumstances.
18. October 2013 at 09:14
I wonder how efficient an average dying billionaire is at distributing money. His best interest is to be remembered, not to do what is best.
Specifically, we see charities that are very inefficient in their asset allocation, because the percentage of their funds dedicated to get publicity is far higher than those that most third parties consider efficient charities. Those charities are precisely those that have the lowest marginal utility.
There’s also the possibility of the billionaire turning their fortune into a delayed political contribution. The marginal utility of that is very hard to measure, but unless we go back to ‘what is good for GM is good for America’, we really have no reason of thinking that this would provide any better marginal utility than just dumping the money in the treasury.
18. October 2013 at 09:20
[…] Sumner, “Billionaires have a moral obligation to become tax exiles“, The Money Illusion, 17 October […]
18. October 2013 at 09:48
So if we limited government to a small, defense-minded military, scientific research, and charity for those unable to work, would that mean that all billionaires would have a moral obligation to give all their money to the government upon their death?
If the marginal dollar on those expenditures earns a higher return than a market index, would that mean all billionaires would have a moral obligation to immediately give all their money to the government?
18. October 2013 at 10:15
As a Liberal (more of the moderate, centrist, kind) I can respect your argument and agree with a few points, but find it a bit too idealistic. Charity is incredibly wasteful too, most of which do nott serve the less fortunate: opera, art museums, brand new college buildings, conservation, etc. In fact, one could probably almost make the same argument that most charitable “spending goes towards special interest groups or towards programs of dubious value.”
18. October 2013 at 12:38
I realize this post is tongue-in-cheek, but I notice that it implicitly assumes the starve the beast strategy many Republicans used to subscribe to. That is, it assumes a drop in government revenue leads to a dollar for dollar drop in government spending. It’s also possible that when a billionaire leaves the country the deficit increases, at least in the short term. Then future interest payments are higher.
18. October 2013 at 12:53
I agree with the general thrust of your post, but I do have a couple points I take issue with:
1.) Most billionaires would much prefer voluntarily giving money to a charity of their choice than having money coercively confiscated from them to be spent on wasteful programs. Still, though, if billionaires were expected to give all their wealth above $100 million to charity (even if it is not forced), we would still likely see fewer making above this amount because the incentive is still lessened.
2.) Oftentimes investments or spending decisions made by billionaires in their own self interest are far more efficient than charity. The investments often contribute to long run innovation that does more good than charity would.
My point here is that, even from a utilitarian perspective, I don’t think expecting billionaire to voluntarily give all their money to charity makes a lot of sense.
Although, I’ll also say that a lot of libertarians I know would actually agree with you on the moral obligation rich people have to contribute. Their problem, oftentimes, is with the coercive nature of taxes.
18. October 2013 at 14:27
Scott,
I understand your libertarian leanings, but isn’t this statement a bit extreme: “Upwards of 90% of government spending goes towards special interest groups or towards programs of dubious value.”
18. October 2013 at 17:41
Edward:
“If you see a child drowning in a lake, but you cant swim, you shouldn’t jump in, because you might endanger yourself and even the child. But you should expend the minimum amount of effort that doesn’t cause you disutility- if there are other people, call for help.”
Forcing someone to jump in is necessarily against their utility. Your prior argument for “not compromising utility” is necessarily a call for anarcho-capitalism, for it is only in anarcho-capitalism that the individual is not forced to compromise their utility by others.
Don’t worry so much about it. Most people are practising anarcho-capitalists, because most people respect each other’s private property rights, and do not force others to pay them for “protection”, i.e. taxes, and most do not force other people to abide by other people’s economic activities, i.e. “regulation”, other than defense against initiation of force against person or property.
The difference between you and me is that whereas I practise what I preach, you don’t. You practise what I preach, and I preach what you practise.
“Are you starting to get the picture? In my version of utilitarianism, you are obligated to take care of yourself, (ethical egoism) first, THEN help others.”
That’s anarcho-capitalism. You can’t have any statism in your ideal here.
“(Unlike the depraved indifference most mindless absolutist libertarians have, i believe there are ACTIVE initiations of force, and PASSIVE. If a billionaire walks by a starving child on the street, and refuses to help him, and the child dies of hunger, you might argue that it was hunger that killed him. Not true. To choose to not feed a starving child at minimum disutility to yourself is a deliberate active choice and it approaches, (maybe not equals) murder.”
Then you are a murderer, because you have the ability to save the lives of those who are starving, and you can easily find out who needs money through charity organizations.
So according to you, I have the right to kidnap you and throw you into a cage, in order to defend starving children from you murdering them.
18. October 2013 at 17:47
Nicholas Wagner:
“Going back to your original post, the marginal utility is not being changed. It is assumed to diminish with increasing amounts of wealth regardless of who the person happens to be. Yes, the person who has their money taken from them misses out on some utility, but the net amount is larger in the redistribution scenario.”
There is no such thing as “net” utility. You cannot add utility of different people. There is still the individual who loses utility, and no amount of other people gaining utility can change that. Saying “net utility increased” is merely a denial of the individual concerned losing utility.
According to you, if 10 men voted to rape and kill a woman, then we could argue that while the woman lost utility, the 10 men gained utility, and hence the net utility from the 10 rapists is higher than the lost utility of the rape victim.
You have to stop viewing individual humans as but cells of a larger organism that doesn’t actually exist.
“:It does not seem like too big a leap to assume this is a good thing if you view all utility as being of equal value (i.e. it does not particularly matter that one person rather than another get utility).”
It’s a good thing for 10 men to get what they want from a single woman, regardless of the woman’s choice for her own body?
“You can justify all sorts of repugnant conclusions if you follow moral theories to their ultimate conclusions. Luckily, most people don’t.”
Only those who are inconsistent.
Repugnant conclusions of all moral theories put into practise eventually manifest themselves.
18. October 2013 at 17:49
rob:
“Geoff it is true that it is impossible to scientifically compare utilities. It is also true only an extremely unreasonable person would not concede to the fact that a thousand dollars to a billionaire(or even just the average American) will give them much less utility than a thousand dollars to a poor African. I think Scott’s point is that at the billionaire level it is probably close to zero.”
It is precisely an unreasonable person who would conclude that one cannot scientifically compare utilities in one sentence, and then in the very next sentence compare utilities.
18. October 2013 at 17:49
Nick, You are still missing the point. If they give money away, it limits their ability to build a bigger fortune. A fortune that they could give away later. What if Buffett had given away his fortune 25 years ago? The people now benefiting from his charity would have gotten much less.
Philo, Anything other than consumption is charity.
Randomize, That would only be true if the UK had a consumption tax.
mpowell, You said;
“So SS counts as spending on a special interest group? That’s absurd. Even if you don’t like the program, it’s a perfectly reasonable risk-pooling and resource-shifting program. And it most certainly aleviates poverty for seniors. It may not be optimal policy, depending on your preferences, but it is at least not mostly wasteful.”
Of course it’s a special interest group, everyone seems to think it’s one of the most powerful special interest groups in DC.
I never said it was wasteful. And it’s not a poverty program.
Also note that I said “at the margin.” Sure, the military has some value, as does the space program, as does Social Security, education, Medicare and Medicaid. But does anyone doubt they have almost no value at the margin? So the marginal donation from a billionaire is much better off going to starving kids in Africa than the US or UK government.
Bob, I agree that lots of billionaires do not make wise donations. But I think on average they do much better than the US government, as rent seeking and pork barrel politics is not an issue. Do billionaires contribute money to subsidize sugar producers in Louisiana? I doubt it?
myb6, You said;
If the marginal dollar on those expenditures earns a higher return than a market index, would that mean all billionaires would have a moral obligation to immediately give all their money to the government?”
Hard to say. What are the alternatives? Maybe they should donate money to the government of Bangladesh, not the government of the UK. Or perhaps directly to the Bengali people.
Shaun, That doesn’t conflict with anything I said in this post. I never claimed billionaires donated wisely, I said they had a moral obligation to donate wisely. However Gates and Buffett seem to be using their money wisely, and there are many other examples.
I’m not sure I’d consider things like art museums to be wasteful, it’s a judgment call. Probably at the margin they are wasteful.
Negation, I still believe in starve the beast, I’ve never seen any persuasive evidence against the theory. However I’m much less anti-government than many on the right, I favor redistribution, carbon taxes, universal healthcare, etc.
John, I actually agree to some extent. I don’t think a 100% MTR is reasonable, and the same applies to charity. I obviously oversimplified a bit. Let’s say that all billionaires should give at least 90% of their wealth to charity. That still allows the superbillionaires to consume considerably more than the mere billionaires.
Ivan, See my other responses. I should have worded it a bit more carefully. I mentioned “at the margin” but didn’t repeat the phrase. See what I said to others.
18. October 2013 at 17:52
John:
“I have never cited anything from an anti-Austrian position.”
I never cited anything from a pro-Austrian position on this thread. I cited zero Austrian authors.
“All I was saying was that all your comments are nearly direct quotes from Rothbard.”
All I am saying is that all your comments are nearly direct anti-Rothbard quotes.
“Does some of your own thinking.”
Do some of your own thinking.
“Bob Murphy is a good Austrian economist and he thinks for himself rather than constantly quoting “Man, Economy, and State.””
He quotes MES more than I do. I didn’t quote MES anywhere in this thread. You’re delusional.
“As someone who has read the books I recognize that you are constantly ripping them off and never putting out an original thought.”
As someone who reads anti-Austrian books, I recognize that you are constantly ripping them off and never putting out an original thought.
“You’re a very strange troll and it’s better not to engage with you. At least read what people have to say before you make your lengthy responses.”
You’re a very strange troll and it’s better not to engage with you. At least read what people have to say before you make your lengthy responses.
18. October 2013 at 18:24
Geoff,
I never said anything anti-Austrian or anti-Rothbard. I think Mises and Rothbard are both extremely fine economists and that their deductive approach is the best way to think about economic problems. You seem determined to pick fights were they aren’t there.
18. October 2013 at 20:44
Forgive me if I’ve read this wrong, I’m not an economist and I’ve been drinking. If I was President, I would immediately nominate Scott for the FOMC, but I have always found his ideas about wealth hubs questionable.
In order to make the argument that hubs of such wealth are benefiting everybody by keeping that wealth, it needs to be demonstrated that investments are made with the capital and those investments are greater than the sum of otherwise made consumption and subsequent consumption and/or investments from those who receive the consumption revenues.
If all the wealthy were Elon Musk, there would be no question, but we live in a world where it certainly appears that a lot of the money of the incredibly rich would do more for the economy if it was distributed to people who are looking to buy things immediately
18. October 2013 at 22:53
The more I think about it, the less a fan of democracy I become. Most voters are like jealous little kids on the playground watching someone with a cool toy that he isn’t using. Except in democracy, the parents aren’t around to tell the kids that stealing is wrong.
It’s not really our decision or the British people’s decision about what Richard Branson should do with his money. The fact that the government can make a legal claim on his money doesn’t mean that it is morally right or that good for the economy (the two tend to be the same thing).
Wealthy people benefitted others (except in cases or rent seeking or government work) by making the money. What they want to do with it once they’ve earned it should be up to them.
19. October 2013 at 06:56
wufwugy, I don’t follow your argument at all. Exactly what is the problem you see? Are you saying that society needs more consumption and less investment? Why?
19. October 2013 at 12:45
“Philo, Anything other than consumption is charity.” That’s not the standard definition, according to which an action, to be “charitable,” must be *intended to benefit someone else*. Saving for one’s own retirement is–for the moment, at least–non-consumption, but it is not charity. (Even the aim of benefiting one’s own family disqualifies an action: dying with positive net worth, leaving one’s assets to his spouse or children, is not charity.)
20. October 2013 at 06:11
Philo, I meant lifetime consumption. Anything you don’t consume in your life is essentially some sort of charity, although admittedly it may not be useful charity. All these issues are much easier to discuss from a lifetime perspective
20. October 2013 at 15:48
John:
Excuse me, but you started the fight here. You evaded my argument, and instead chose to pick a fight against Austrians.
21. October 2013 at 06:50
@Morgan Warstler
Historically, increases in government efficiency don’t result in less government. The efficiency increases usually just result in them doing more stuff.
Correct me if I am wrong.
30. May 2015 at 23:56
ssumner,
if so and so had given their money away 25 years ago, people now benefiting their charity would be getting much less, and because so and so didn’t give their money 25 years ago, some people suffered and died.