The American system is rigged to favor the rich
All across America there are millions of people who live in the underground economy, fearful of the government. Thousands of them are people who are unable to pay legal bills, and face jail time if caught:
More than a third of all states now allow borrowers who don’t pay their bills to be jailed, even when debtor’s prisons have been explicitly banned by state constitutions. A report by the American Civil Liberties Union found that people were imprisoned even when the cost of doing so exceeded the amount of debt they owed.
Sean Matthews, a homeless New Orleans construction worker, was incarcerated for five months for $498 of legal debt, while his jail time cost the city six times that much. Some debtors are even forced to pay for their jail time themselves, adding to their financial troubles.
In contrast, when wealthy people like Donald Trump go bankrupt, they are allowed to keep many of their assets and obviously don’t go to jail. Here are some other ways that the system in America is rigged to favor the rich:
1. The poor are often jailed for drug crimes, while people like Rush Limbaugh get off scot-free. Or go into “rehab.”
2. The government allows big banks to borrow money (via deposits) at T-bond interest rates, due to government promises to repay the debt if the bank fails. The poor borrow from loan sharks.
3. The government shovels vast sums of money into healthcare, as they pick up the tab for Medicare, Medicaid, the VA, and even much of the cost of “private” health insurance. But they don’t regulate costs, allowing medical suppliers like doctors and big pharma to earn large incomes (by international standards.)
4. In addition to the medical subsidies, they severely restrict entry in medicine, allowing American doctors to earn far more than doctors in other countries.
5. They also restrict entry in law, and as if that isn’t enough, they set up tort laws in such a way that lawyers can skim massive profits from routine class action lawsuits. Meanwhile, there are no barriers to entry into picking peaches in the hot Georgia sun. That’s a “free market” in labor. The American dream.
6. In my field (higher education) they heavily subsidize spending, allowing me to earn a higher salary and lower teaching load than in a free market.
7. They have patent laws that give monopolies to the inventor of a product. But not just major new products with social externalities like the internet, or semi-major ideas like social media, but slight tweaking of existing platforms such as social media. This allows vast profits to be earned in knowledge-oriented industries that are winner-take-all and near-zero marginal cost of production. These rules also funnel vast sums into the finance industries that funds high tech companies, and the investors who pick the winners.
8. People who own auto dealerships are protected from competition from direct sales from auto companies.
I’m sure there are many other ways the rich are favored, these are just a few off the top of my head. And note that while I oppose many of these government policies (although not the one that let Limbaugh off scot-free) the question of whether the policies are justified has no bearing on whether the system is rigged to favor the rich. The system may be rigged for justified reasons or unjustified reasons. Maybe we need strong patent laws. But it is most definitely rigged to favor the rich.
Many on the left favor superficial palliatives like higher minimum wages and taxes on capital, which would do little to solve the problem and indeed would do more harm than good. The term “radical” originally meant getting to the root of the problem. That’s what I favor, but clearly both Democratic and Republican politicians don’t agree with me. They both protect the rich.
Over at Econlog I did a post arguing that the rich really were highly productive. This was in response to Piketty’s claim that their wealth was mostly unmerited, as (he claimed) people like CEOs earn far more than they contribute to a company’s bottom line. I think this productivity claim is wrong; CEOs are very productive if we measure productivity in terms of a company’s bottom line. On the other hand the social productivity of many of the rich is far less than their private productivity. He may be right about “merit,” but for the wrong reason.
Oddly, this means that my critique of modern American capitalism is far more radical than Piketty’s.
Update: Tyler Cowen linked to an article on how the Dems are switching their views on the Ex-Im bank. And this is the party that supposedly worries about “inequality.”
And Krugman too?
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27. June 2014 at 06:37
“I’m sure there are many other ways the rich are favored, these are just a few off the top of my head. ”
How about banning unlicensed taxi services, but allowing Uber to become an $18 billion VC owned “tech” company?
27. June 2014 at 06:47
How about like limiting the number of licensed taxi services to enrich taxi owners.
27. June 2014 at 06:55
Excellent post, Scott.
27. June 2014 at 06:58
Scott,
Why do you say the American system? Are their systems that don’t favor those with wealth and/or political power?
27. June 2014 at 06:58
How about creating a monopoly that results in higher electricity prices, as well as licensing thuggery;
‘http://www.seattlepi.com/local/article/Seattle-City-Light-who-blew-whistle-on-whiskey-5583076.php#page-1
A modern version of ‘On The Waterfront’.
27. June 2014 at 07:02
dtoh,
…except that whole “American Dream” thing pretends it isn’t that way, here.
27. June 2014 at 07:02
A good post. But . . . .
“2. The government allows big banks to borrow money (via deposits) at T-bond interest rates, due to government promises to repay the debt if the bank fails. The poor borrow from loan sharks.” This doesn’t work. Rich *people*, as opposed to *banks*, don’t borrow at Treasury rates. If rich people get to borrow at lower rates, it is because they can put up collateral; but then they can do lots of other things that poor people can’t. You wouldn’t say: “Our system is rigged in favor of the rich, because only they can buy Lamborghinis”–that doesn’t amount to *rigging*. And as for the banks, *small* ones get the same deal as *big* ones.
“5. . . . [T]here are no barriers to entry into picking peaches in the hot Georgia sun. That’s a “free market” in labor.” Except for immigration barriers. Your point is that the people who get U.S. governmental protection from competition are mostly well-off; but that applies also to American farm workers, who are (somewhat) protected from the competition of Mexican farm workers, than whom they are better off.
27. June 2014 at 07:23
The only way this stuff gets unwound is by creating a true rentier class of SMB owners.
There are two obvious options:
1. GICYB – Create limits on the size of business that can hire from the GI pool. If it would get GICYB done, I’d say we could go even further and use that pool for slave reparations.
https://medium.com/@morganwarstler/in-support-of-reparations-7cde116f4eb1
I gotta say, I was a bit surprised how liberals responded to my legit Libertarian effort to hand $3.5T in economic gain to blacks over next 10 years. They hated it!
My suggestion was 3X size of Vox. What’s more mine, because of the way people all sort themselves into neighborhoods, has the added advantage of GUARANTEEING that blacks move up the economic ladder, and STAY UP IT.
2. Use the NGDP Futures market as the actual transmission mechanism, not just the prediction finder. That too is pretty elegant:
Only let owners of SMBs place bets in a game slightly rigged against the house.
Improve the odds of winning until SMB owners have enough riding in the market every month that the Fed can hit the level target.
—–
Scott, at this point I’m kind of amazed that you imagine it’s possible to have Big Business without Big Government.
If you KNEW it wasn’t possible, what would you choose?
I’d love to see GMU tackle this: Do the productivity gains economists think are made by large firms come with an even greater loss of productivity in the macro economy because the growing firm increases the size of the Federal government?
27. June 2014 at 07:24
“How about like limiting the number of licensed taxi services to enrich taxi owners.”
dtoh, fair point. But if I drive around Boston, NYC, SF with a yellow “TAXI” sign in the window, I might get arrested. Uber is the only ‘approved’ way to do what is otherwise explicitly illegal.
27. June 2014 at 07:32
Every system is designed to favor the “rich”. Name one that isn’t.
Most of the examples Scott have given are valid. The not-so-funny thing is that the “system”, as such, is a product of both major parties and is a hodge-podge of special interests that defies neat classification. I would perhaps prefer the term “elite” to “rich” but there tends to be a strong correlation between the two, even though some, (like Hillary Clinton) claim to be neither. The tort system is another example of an ostensibly egalitarian movement favoring an established group of elites (tort lawyers).
I have to take a small issue here as to the way the issue has been framed. The hypothesis “the system favors the rich” somewhat sidesteps what I think the bigger issue is—does the system enable the “rich” to perpetuate their status at the expense of the “non-rich” and does the system put up barriers to entry to the “non-rich” to enter the privileged domain of the “rich”. This is at the center of the Piketty debate.
Another important question is *how many* rich does “the system” allow? The more, the better, I’d say.
Every “system”, regardless of ideology, has had its elites and its rich. Wanna bet that Mr. Mugabe doesn’t have an enormously high wealth and income compared to the rest of Zimbabwe?
The only question is who and how many get to be top dog.
27. June 2014 at 07:35
Excellent post.
It’s never really made sense that so many who laud the virtues of free markets support so many restrictions on competition, such as licensing laws, intellectual property laws, etc.
I’d add,
9. High dollar policy that makes US workers more expensive than foreign competition, while insulating high earners through licensing laws, immigration restrictions, etc.
10. Steal money from your employer – likely jail. Steal money from your employees by withholding pay or benefits rightly earned – likely higher profits.
11. Right to work laws, which restrict freedom of contract between employees and employer (and allow non-union members to freeload on benefits).
27. June 2014 at 07:39
Some posters ask for a system that doesn’t favor the rich.
There are certainly countries that have versions of policies Scott mentioned that aren’t as favorable to the rich, such as restrictions on healthcare costs, more redistributive tax and spending, less protection for intellectual property, lower education costs.
27. June 2014 at 07:57
Steve and dtoh, good example.
dtoh, Our system favors the rich more than many other developed countries. That doesn’t mean our system is worse, just different.
Philo, Banks are owned by the rich. Regarding barriers to entry, I was just considering domestic barriers. You are correct that there are also international barriers from all jobs. But migration barriers are less tightly enforced than barriers that prevent nurses from doing what doctors do.
27. June 2014 at 08:11
God I hate ideologues.
Sumner, instead of advocating for something that likely has no chance in hell of ever happening within our lifetimes, why not be pragmatic and work with what we have to deal with, and advocate for the poor and those sent to debtor’s prisons to have cable TV in their jail cells, or a prison that is more like a summer camp with lots of optional outdoor activities and really lax visitation rights?
Geez, it’s almost as if you believe in something that is right, and you will advocate for it regardless of the current laws.
27. June 2014 at 08:14
Good post by the way
27. June 2014 at 08:25
Scott,
What makes you think our system favors the rich more than many other developed countries.
27. June 2014 at 08:33
Steve,
Not to get off topic, but cars using the Uber service don’t have taxi signs unless they are actually licensed taxis.
27. June 2014 at 08:34
I find the new debtors prisons horrifying
27. June 2014 at 08:34
Me too
27. June 2014 at 08:37
MF,
There is a time to get up and fight all the way for what one believes in, and a time for incrementalism.
Short term, fighting to make the debtors prisons more comfortable and humane would not be inconsistent with fighting long term for their abolition.
27. June 2014 at 08:46
–They have patent laws that give monopolies to the inventor of a product.–
Most of the real inventors have their ideas confiscated by the company they work for. Who was really more important to innovation in the long run , Steve Jobs or Dennis Ritchie ? Who was the billionaire ?
27. June 2014 at 09:02
Edward:
It would be if the rate of your incremental improvements is dwarfed by the rate of deterioration.
Incrementalism only seems effective because, for whatever reason, the underlying is assumed constant.
But when the underlying itself is changing, and most importantly when the underlying is changing (for the worse) because of the incremantalism, in that the incrementalism is in a way sanctioning the increasingly worse outcomes, for example your suggestion that we implicitly accept debtor’s prisons by only focusing our actual actions on window dressing it and putting mke up on it, well, I think you should at least try to understand why there are non-incrementalist extremists out there.
I am an extremist because I don’t believe that incrementalism works. I mean, if you want to look at history, we’ve been dominated by incrementalist and gradualist philosophy in practise since at least the progressive era. And yet, government has significantly grown since and our economic liberties have significantly declined since. If gradualism worked, then why the failure?
The country was formed on the basis of radicalism and extremism, not gradualism. It turned out to result in the greatest growth in prosperity the world has ever seen.
Extremism is the only workable solution, but with the caveat that can never be exaggerated or over-emphasized: the extremism must be based on correct principles.
It is a high risk approach, don’t get me wrong. It could go horribly wrong if there is a gaping flaw in the philosophical underpinning. But I am not afraid. Fear should not be integrated into ANY social thought, because fear is the result of inconsistent beliefs about one’s sense of self and self worth. To erect societies on self-doubt and fear is exactly what allows the morally unscrupulous who are not afraid, to rise up from the cesspool of scared and frightened populations and exploit the rest of humanity. Exactly what is happening now and has been happening for a hundred years and more.
Incrementalism, IMO, is the bastard child, so to speak, of self-loathing and self-doubt that results in massive fear of acting upon extremist principles, lest another Third Reich or Communist Revolution rise up and oppress the world of man.
Extremism is dangerous, I’ll admit. But just like in finance, we cannot gain without taking risks. If you want the state to take the risks, such as NGDPLT, then you will subjecting humanity to the payoffs of violence and coercion, and I know the payoffs to that are NEVER good.
27. June 2014 at 09:04
Edward:
Saying every day that incrementalism should be the solution, for the short term, and leaving the radicalism for the long term, turns you into someone who is a preacher of incrementalism for the long term.
27. June 2014 at 09:08
“Not to get off topic, but cars using the Uber service don’t have taxi signs unless they are actually licensed taxis.”
Craigslist prostitutes don’t walk in the streets wearing lingerie, either, but they still get arrested for prostitution.
So will the police pose as “Uber Johns” in order to arrest unlicensed taxi operators? Or will the laws be liberalized? Or will Uber get a special exemption because of the people who funded it?
27. June 2014 at 09:30
This is all a straightforward implication of the Bartels type polysci literature, no? And that makes attacking root causes much harder, I would think. How do you make legislators less responsive to the preferences of the rich?
27. June 2014 at 10:11
“2. The government allows big banks to borrow money (via deposits) at T-bond interest rates, due to government promises to repay the debt if the bank fails. The poor borrow from loan sharks.”
Maybe this could be fixed by allowing anyone to hold deposits at fed.
27. June 2014 at 10:23
Scott:
This post reminds me of Dean Baker’s End of Loser Liberalism.
And here’s him on export import: http://www.cepr.net/index.php/blogs/beat-the-press/contrary-to-neil-irwin-qweq-are-not-all-crony-capitalists
and here: http://www.cepr.net/index.php/blogs/beat-the-press/the-inner-protectionist-comes-out-for-the-export-import-banks
27. June 2014 at 11:06
Scott,
It is clear to me that Krugman should be ignored. He offers nothing unique that is of value to any debate/discussion I can think of, and yes, even his views on trade theory are ridiculous, when near the zero lower bound. And I say this as a liberal.
Krugman is just a has-been, much like Stiglitz, John Taylor, and Martin Feldstein. These people don’t even have coherent perspectives.
27. June 2014 at 14:37
“Banks are owned by the rich.” That still doesn’t work. Middle-class people can and do own shares in banks. And ownership of banks is not wonderful for investors, whether rich or middle-class: they get only normal returns.
27. June 2014 at 14:38
Off topic: Jeffrey Frankel says emerging markets should target NGDP (and previously said developed markets too).
Scott, you have said earlier that for smaller economies an NGDP target might not be optimal due to the potential size of external shocks (see in this post my questions and your answers). Frankel suggests that NGDP is even better for emerging econmies than for developed ones, precisely because external shocks tend to be larger. I’d be interested in why you reach opposing conclusions. Perhaps I’m misunderstanding something.
27. June 2014 at 14:40
Steve,
In most jurisdictions there is a clear regulatory and legal distinction between taxi service and livery service. Drivers using Uber don’t provide a taxi service and are therefore not licensed for it. They do meet the regulatory requirements to provide livery service.
Taxi drivers are losing business to livery drivers who use Uber so the taxi drivers are arguing that drivers using Uber are really providing taxi services. This is a huge stretch IMHO, but the taxi owners are desperate and they haven’t been able to come up with any other argument.
27. June 2014 at 16:03
I assure you that someone is profiting from debtor’s prison!
American prosperity derives from entrepreneurial opportunity. That depends on the freedom to take a risk and fail (get wiped out) and low barriers to entry (limited regulatory capture). Those two things seem to be getting worse every year.
Things to do:
* decriminalize drug usage offenses (treatment and fines)
* sunset regulations
* 1% wealth tax
* no bailouts
Good post. I loved the Adam Smith lecture.
27. June 2014 at 17:00
Yet another checklist of bad features found in monopoly systems of law. So when do we consumers of Justice get a market choice in what law we’ll purchase?
27. June 2014 at 17:23
* 1% wealth tax
no.
27. June 2014 at 18:30
Greg:
When consistency again becomes a virtue.
28. June 2014 at 02:10
SSummner
Would making the fed funds market an open market meaning anyone can hold reserves or lend/borrow be a “market monetarist” proposal.
28. June 2014 at 05:19
Scott, way off-topic, but this is something that might interest you as a sports fan.
According to Nate Silver’s Soccer Power Index-based predictions, Brazil is 41% likely to win the World Cup (as of today, mostly due to the home crowd effect on refs).
http://fivethirtyeight.com/features/its-brazils-world-cup-to-lose/
Meanwhile, most bookmakers have Brazil as a 3:1 underdog (25%).
Assuming the “true” probability is somewhere in between (let’s say 2:1, or 33%), the expected value of a $1,000 bet on Brazil with 3:1 payouts would be:
WIN – LOSE = ($3,000 * .33) – ($1,000 * .67) = $320.
Using Nate’s assumptions, it would be $640.
Now, Nate’s prediction has come in for a lot of criticism, but I think his model has two big strengths over other models, like FIFA or ELO: (1) it accounts for lineup strengths in friendlies and tourneys, and (2) it considers match importance (some friendlies matter a lot, while some tourney matches carry no significance)
Anyway, kickoff vs. Chile is in 3 hours. If Brazil wins big, payouts will change a lot.
28. June 2014 at 05:58
Is monetary policy the best example? Favoring risk-aversion and loss-aversion of the wealthy,, re their relative wealth position, over pro-growth monetary policy (eg NGDPLT)?
28. June 2014 at 06:34
Danny, I’m willing to consider having the public be allowed to have deposits at the Fed, but ONLY if combined with 100% abolition of government deposit insurance.
Philo, Are stocks disproportionately owned by the rich?
Josh, I don’t like using monetary policy because money is neutral in the long run.
28. June 2014 at 07:10
Thanks John, I’m afraid I don’t follow soccer closely enough to comment.
28. June 2014 at 08:15
Excellent blogging.
28. June 2014 at 09:51
“when do we consumers of Justice get a market choice in what law we’ll purchase”
You have it already. It’s called moving to another country.
28. June 2014 at 10:26
Philippe:
The government does not own the land called the US.
Telling people they have a choice to leave a violent territory does not mean the territory is not violent.
28. June 2014 at 10:45
Scott, you said “Oddly, this means that my critique of modern American capitalism is far more radical than Piketty’s.” I agree, but I don’t think it’s odd. As you said, “radical” originally meant getting to the root of the problem. But even with the more conventional usage, I don’t see anything radical about Piketty’s observation or his suggested remedy.
The fact is, most people don’t like the rich. They’re not rational about it. There are many aspects. Take earned versus unearned income. It’s OK for a highly skilled person to be highly paid, because he’s working now, and people assume he worked hard and made sacrifices in the past to acquire the skill. But if a person worked hard, made sacrifices, and took risks to accumulate capital, and now it gives him passive income, that’s somehow not OK, especially if it’s a lot.
And many concepts don’t seem to scale. If a person has a normal, modest retirement income, that’s OK. He earned it in his career. But if a person has a retirement income of $50M a year, that’s not OK. Most people don’t make anything close to that in a lifetime. This person makes that much every year, without working. It must be wrong. It doesn’t seem to matter what happened before.
Or take luck. As a commenter to your EconLog article said, in a way luck is the fairest. Again, most people seem to be OK with it as long as it’s not too much. But if a person gets a lot, whether it’s an inheritance or lottery winnings, it’s unfair, and somehow wrong.
Many people seem to have this notion that the rich got that way either through luck, or they did something wrong in the past. Either way it’s undeserved. This is particularly irrational coming from people in a first-world, developed country, who are themselves among the richest globally. But they’re not happy about those above them having so much more. It seems many people are just not OK with unequal outcomes or an unequal current state. I haven’t read the book, but from everything written about it, Piketty seems to have made an obvious observation, that there is wealth inequality, and he doesn’t like it. So he suggests the most obvious and superficial remedy, take some of it away from the rich. There’s nothing radical about this. It’s also not surprising the message is popular.
As somebody else said, if inheritance is the main cause of wealth inequality in Europe, maybe that’s a problem for Europe. But it’s not clear this is a problem for most of the world.
28. June 2014 at 10:46
Ao the government doesn’t own all the land in the US. So what. That is completely unimportant and irrelevant.
Stop violating and raping me with your aggressive comments, MF.
See I can spout emotive nonsense too.
28. June 2014 at 15:38
Philippe:
It is not completly unimportant nor is it irrelevant. It is actually what determines who the aggressor is in a situation of A and B where A wants to provide services to B and take B’s money.
If you can grasp that the government doesn’t own the land, it is the government that must cease and desist its activity towards the landowners in cases where the landowners do not agree to pay nor be given any governmental “services.”
You claimed that consumers do have choice in paying for protection services, because they can leave their own land, away from the local government thug’s advances.
Telling the landowners that they have a “choice” in what protections they purchase because they can get up and leave while the same government or crony friend takes the land, is about as muddle headed as me telling you that you have a “choice” in whether to accept a service from me if I give you the unmolested option of leaving your home for some other land away from my range of activity, while I take possession of your home, and then ridiculously tell you that if you stay, then that somehow proves you consent to paying me and consenting to my services.
If you can grasp that as landowner, you have the right to say no to my services AND continue living in your home and trading with others you want to trade with, then you telling me that you understand the government does not own my land or anyone else’s land, means you just implicitly accepted that the government is an unjust aggressor by continuing to demand payment from existing landowners who do not want such services and do not want to pay Obama for protection.
You are not being logically consistent. On the one hand, you (rightly) believe that I would be an aggressor against you if I demanded you pay me and demand that you accept my services or else you must move away and I take your home, and yet your brain is having a meltdown realizing that the government as non-owner of land is an aggressor for the exact same reason. It doesn’t matter if an aggressor gives you the “choice” of moving away while they take your home. It is still aggression because there is a threat of theft if the intended victim does not play along.
Philippe, I don’t know if you’re mooching off the taxpayer through government violence and thus you are trying to find some justification for it and thus your life, or if you’re just so intellectually messed up that basic freaking logic escapes you. Either way, you don’t even understand that it is aggression to make demands of people at the threat of violence if they don’t leave their own homes, who do hot consent to your advances.
28. June 2014 at 16:31
Prof. Sumner,
Krugman has a new post that you might find very interesting:
“Stagflation and the Fall of Macroeconomics”
http://krugman.blogs.nytimes.com/2014/06/28/stagflation-and-the-fall-of-macroeconomics/
28. June 2014 at 17:01
You really are a totally demented moron.
“You claimed that consumers do have choice in paying for protection services”
I said people can choose a different law by moving to another country.
“is about as muddle headed as me telling you”
You’re not the law.
Why you think being defined as a landowner by the law somehow gives you the right to break the law and make up your own personal laws as you please is a genuine mystery. Did it say that in the legal contract when you bought your house?
What you are is a guy who wants to play football with others, but who thinks that he also has a personal right to ignore all the rules of the game. That’s all that you are.
Gene Callahan has a series of posts on anarcho-capitalism, property, government and taxes which you should read. He was an anarcho-capitalist for a while but then realized that it didn’t make any sense.
For example:
http://gene-callahan.blogspot.co.uk/2014/06/my-gift-to-you-may-be-qualified.html
28. June 2014 at 21:47
Scott –
Rigged to favor the rich or simply rigged to favor many interest groups, some of which contain rich people?
-Unions enjoy legal privileges which corporations do not share.
-Public sector jobs increase pay of low productivity workers on a grand scale – in addition to providing direct extraordinarily gainful employment for some of them.
-Trillions in various gov’t assistance programs targeted directly to groups other than the rich.
29. June 2014 at 00:45
Philippe,
No offence, but Gene Callahan isn’t quite what I’d call an insightful thinker.
In my opinion, this is a much better takedown of extreme libertarian posturing
http://www.demos.org/blog/10/28/13/libertarians-are-huge-fans-economic-coercion
29. June 2014 at 04:00
Daniel,
Callahan has made similar arguments to Breunig, regarding property and coercion.
29. June 2014 at 04:06
for instance: http://gene-callahan.blogspot.co.uk/2010/05/confessions-of-recovering-ideologue.html
29. June 2014 at 04:24
Absolutezero, Yes, people can be rather irrational about these things.
Alexei, Yes, many non-rich groups are also subsidized. But on a per capita basis the rich gain much more.
29. June 2014 at 04:29
Travis, Good post by Krugman, but I don’t understand his claim that it’s hard for non-new classical stuff to get published.
29. June 2014 at 05:30
“Alexei, Yes, many non-rich groups are also subsidized. But on a per capita basis the rich gain much more.”
Are you claiming that on a per capita basis “the rich” are subsidized much more if one nets those “subsidies” with taxes paid?
29. June 2014 at 06:12
As someone who worked for many Fortune 500 firms in a 35 year career, I can attest that most CEOs subtract value from their companies, rather than add value. They are frequently clueless about the sources of competitive advantage for their own companies. Often, they foster company cultures that are hugely political and divorced from the companies’ success. I was lucky enough to work for one CEO, Fred Hassan, who bucked this trend. Corporate boards of directors are completely ineffective in selecting and retaining CEOs.
29. June 2014 at 06:45
Daniel:
That “takedown” is anything but. Even the yokel commenters show the article is BS.
A person who has 5 known options, 2 of which are non-violence initiating (pay rent, or be homeless) while the other 3 are violence initiating (steal, or trespass, or kill), is not being “coerced” if his intended victims successfully defend themselves and their property, leaving him with the first two non-violence initiating options. There is instead an absence of introducing coercion.
Oh, and whatever Callahan’s errors or flawed arguments, his writing is light years ahead of your sorry posts.
29. June 2014 at 07:11
Predictably, Major_Moron is too stupid to understand what people are talking about.
29. June 2014 at 07:30
Philippe:
I see you’re back to being immature and flinging childish insults once again. Are your demons getting drunk again?
“You claimed that consumers do have choice in paying for protection services”
“I said people can choose a different law by moving to another country.”
I already explained that this is a non-answer, for the same reason someone telling you that you must accept their services and you must pay for those services, at the threat of violence against you if you don’t leave your home and have it taken over by that very same person, is a non-answer. It is a non-answer because your “solution” sanctions the initial threat of violence, when libertarians are addressing the legitimacy of that, and all other, uses of violence. You are not proving consumers have a choice in who they can pay for protection services, because your answer is nothing but a repetition that consumers ought not have any choice IN THE US. You are implicitly claiming that in the US, there ought to be a monopoly and no consumer choice. Pay X and only X, accept the “protection” of X and only X for final arbitration, or else you will be forced to leave your home and to move to some other land.
What libertarians are claiming is justified, which you have not even considered but only tip toed around it, is for individual consumers to have choice of who they pay for protection without being forced to leave their home, meaning, for there to be choice within US territory, which you have already admitted the government does not own, so you have no rational grounds for dismissing this liberty. You just have naked violence, the same violence that would take place if some other non-owner of your land demanded that you accept their services and demand that you pay for them, or else you must leave and they take possession of your home.
There is no difference between those with badges and those without badges doing the above. It is coercive and violent no matter what the non-owner calls himself or his actions.
“is about as muddle headed as me telling you”
“You’re not the law.”
Neither are you, and yet you are calling for your laws to be imposed on me and my land, whereas I am not calling for my laws to be imposed on you or your land. If you want to pay the psycho Obama and his baby murdering thugs for “protection”, then go ahead, I won’t stop you and I won’t call up anyone to stop you.
All the libertarian asks, calls for, advocates, what have you, is that you afford them the same courtesy and respect for their persons and property. Libertarians don’t want you to not have the option to seek the protection services of anyone you want. If you want baby killing sociopaths as your protector, then fine, libertarians will have no libertarian right to stop you. They just want the same choice, which means they want to be able to choose superior protection in the marketplace, without you or your sociopaths taking that passive, non-violent choice as an affront to you or your liberty, because it isn’t.
Libertarianism is an ethic that respects, and protects, ALL non-violent choices and actions, including the choice of who gets their home, who gets their money, and who is to protect them.
“Why you think being defined as a landowner by the law somehow gives you the right to break the law and make up your own personal laws as you please is a genuine mystery. Did it say that in the legal contract when you bought your house?”
I do not define ownership in accordance with what Obama believes, or what Congress believes. Such laws are anti-libertarian. Eminant domain laws, zoning laws, controlled rent, final arbitration, etc, etc.
I define ownership in accordance with homesteading and free trade.
Breaking the state’s laws is not unethical, unjust or immoral if such laws are themselves unethical, unjust and immoral, in accordance with the individual’s right to self-determination.
You asked me what gives me the right to make up my own personal laws. Well, what the hell gives you the right to impose your personal laws (which you communicate to me as “state law”) on my person and property? You do know that ANY laws you have decided are binding on people, regardless of the source of your ideas about laws, becomes your personal laws, right? If you believe in a law, if you believe that law is just, if you believe it is a law that should apply, then guess what? THAT IS PERSONAL LAW.
What, did you believe in the fallacy that if other individuals agree with that personal law of yours, that it is no longer a personal law of yours? Nonsense. If only you believe in a particular law, or if you and 300 million people agree with a particular law, that law is a personal law, because individuals have chosen in their own minds that the law is just and should be enforced.
Libertarian law is this and only this: The ONLY just and ethical use of force, that applies to EVERYONE, including those psychos with badges and who believe they are above the laws that apply to everyone else, is that the only just use of force is to stop and defend against initiations of force against the individual’s person or homesteaded/traded for property.
That’s it. That is all libertarianism is. It is a prohibition against introductions of force, coercion, violence, against homesteading and free trade.
“What you are is a guy who wants to play football with others, but who thinks that he also has a personal right to ignore all the rules of the game. That’s all that you are.”
If the football coach wanted to impose the game of football on those who do not want to participate in the game of football, and demanded in the offices of Wal-Mart or Microsoft that the employees must immediately start running the 40 all morning, and then during the afternoon to do blitzes, then yes, yes I would refuse to follow the rules of football, has and yes most others would rightly believe this coach is mentally deranged.
But strap on a badge on the coach, and have him holding a piece of paper that shows the signatures of “elected representatives” sanctioning his behavior, then according to YOUR personal law ethics, of “if the state does it then it is moral and just”, it would be just, ethical, and enforceable, and if any of the company owners or employees choose not to engage in running the 40 on the factory floors, then they would have to “leave the country” and “choose another” set of laws arbitrarily and coercively imposed somewhere else.
“Gene Callahan has a series of posts on anarcho-capitalism, property, government and taxes which you should read. He was an anarcho-capitalist for a while but then realized that it didn’t make any sense.”
According to his writings, I do not accept Callahan to be a credible enough source. Too many errors.
Also, you have not even shown you understand what he wrote in that blogpost. Merely Googling for a counter-argument, and then posting it here, I will ignore. I want YOUR ideas and arguments. If I wanted to know what Callahan believed, I would ask him.
29. June 2014 at 07:31
Daniel:
That is also not a substantive argument.
29. June 2014 at 07:46
One does not attempt to train squirrels to fetch.
29. June 2014 at 09:23
Scott — Piketty is writing the “epistle to the economists” and is therefore soft-pedalling his case.
Of course you’re more radical than his soft-pedalled argument. Any decent person is. A system which is rigged to perpetuate and increase the power of the rich while making the poor suffer — such as ours is — is simply evil and must be changed.
There are, of course, still indecent people out there like “AbsoluteZero” who make facile arguments in favor of allowing rich thieves to rule over us like lords. This is one problem.
The bigger problem is the problem described by Bartels and the political scientists: the question of how we change a system which is only responsive to rich elites. (And we have gotten to the point where they openly steal elections, as in 2000.)
The answer seems to lie in 1789 France, 1832 England, and 1917 Russia. Organize, and threaten the rich elites and their lackeys with death and the violent overthrow of the system if they don’t peacefully reform. If they back down and peacefully reform, we get the nice result, 1832 England. If they don’t, we get the other result.
Not my favorite conclusion, but it is the one compelled by history.
29. June 2014 at 11:59
Daniel:
That is also not a substantive argument.
You got nothing. As usual. You’re getting boring.
29. June 2014 at 18:24
Vivian, You asked:
“Are you claiming that on a per capita basis “the rich” are subsidized much more if one nets those “subsidies” with taxes paid?”
Yup, with no taxes and no copyright protection Bill Gates would be dramatically poorer. But I don’t like the term “subsidy.” I’m claiming the rich are protected, not subsidized.
David, Everything is relative. Compared to Japanese CEOs (paid much less) our CEOs are highly productive.
29. June 2014 at 20:42
Scott,
“Protected” is very different than subsidized…. and they are both very different from “rigged.”
29. June 2014 at 22:20
“Protected” is very different than subsidized…. and they are both very different from “rigged.”
Exactly right. I’m having a very hard time pinning down what Scott’s bottom line is here. Scott, you explicitly used the term “subsidized” and when quoted back to you, you claim not to like the word. I think we we also need to be explicit about the term “rich” which by now, due to Obama’s definition, is generally understood as a married couple earning more than $250K or a single person earning more than $200K *in any given year*.
30. June 2014 at 02:17
Any properly functioning system for unequally allocating scarce resources will be ‘rigged’ in favor of those ‘rich’ in the things it’s supposed to unequally allocate those resources toward (even if it’s ‘marginal productivity’). And who ever is ‘rich’ in the things that get you resources in a capitalist system will end up just being plain rich. Saying the US system ‘protects’ bill gates with patents, thus ‘protecting the rich’ is an abusive circularity. He got rich from his patents in the first place…
Now you might think ‘reward those who can create valuable patents’ is bad policy, and we should instead have a policy of ‘reward those with high productivity in a patent-free environment’. But those ‘rich’ in productivity in that environment will become just plain rich then … And then the system will once again be rigged to favor them.
30. June 2014 at 04:36
dtoh, Protected and subsidized are both examples of “rigged.”
Vivian, Yes, My list included both subsidies and protection from competition. But even so, that doesn’t affect anything I said. Even if they are subsidized less than the poor (unlikely) it wouldn’t change the fact that the system is rigged to favor the rich.
Nick, You seem to assume that the term “rigged” means the system is unwise. I specifically said that the protections may be justified, but that doesn’t change the fact that the system is rigged to favor the rich. Even if you convinced me that right at this moment we live in the best of all possible worlds, I’d still claim the system was rigged to favor the rich. But in that case I’d also say the rigging was justified.
And not all systems are rigged to favor the rich. Pol Pot’s Cambodia was not.
30. June 2014 at 06:55
Scott,
Does police protection of private property meet your definition of a rigged system.
30. June 2014 at 07:49
Pol Pot was not much of a capitalist, and his system was highly unstable. But I take your point about making a ‘policy-judgement-free’ argument. I just think that argument proves too much: if you build a stable capital-based system for allocating scares resources, over time it is trivial to say that the economic system favors the rich. The rich got rich by being favored by the system…
When you speak about any large proposed policy change there’s a fine chance it won’t ‘favor the rich’ on its face just because it is in fact a change from the status quo. But that doesn’t mean it won’t spawn new rich it favors, or alter the gap between the rich and poor, or median, or mode, or whatever, in the future.
30. June 2014 at 08:00
dtoh:
Would allowing the strongest people to decide, based on their might alone, who among the non-owners of a private property have the rightful claim to exclusively possesing it, be a non-rigged system?
Would having a required secret police force with monopoly powers who will have to be willing to kill people who dissent and secretly use their “personal” property for productive, “private” use, all to ensure that people do not start using their homes for productive, and hence “private” use without permission, be a non-rigged system?
30. June 2014 at 08:46
I think, to a large degree, the rich get rich by being first to exploit a resource (including knowledge). Although being first does not guarantee lasting success.
30. June 2014 at 16:11
dtoh, Yes, any government policy is “rigging.” See my next answer.
Nick, The first step is to become clear in our thinking. The current ideological debate largely misses the point. As your example implies, it’s not about capitalism vs. socialism, it’s about what type of capitalism. Once we recognize that many of these policies favor the rich, we consider their merit. In some cases (such as drug legalization), a pro-poor policy change is a no-brainer. Other cases like intellectual property rights are more tricky. But even there, I’d favor modest changes.
The left is wrong in thinking the problem is “capitalism.”
Some on the right get defensive when this particular capitalism is attacked, another mistake.
1. July 2014 at 04:54
Great post Scott. You at your most Midwestern.
17. April 2015 at 16:14
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