Saturday, January 10, 2009

On Redistribution and Scarcity

You may have seen an email about Nancy Pelosi proposing a tax on windfall profits that would also affect retirement accounts. According to the account, Ms. Pelosi didn't propose the tax, but billionaire Warren Buffet did, which is even worse because he rarely sells stock and therefore wouldn't be affected by the tax. The Democrats, however, are talking about merging 401K accounts into the Social Security system. Here's a quote from that article:
Should Sen. Barack Obama win the presidency, congressional Democrats might have stronger support for their “spreading the wealth” agenda. On Oct. 27, the American Thinker posted a video of an interview with Obama on public radio station WBEZ-FM from 2001.

In the interview, Obama said, “The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society.” The Constitution says only what “the states can’t do to you. Says what the Federal government can’t do to you,” and Obama added that the Warren Court wasn’t that radical.
Now the idea of redistribution implies scarcity. There's only a limited amount of resources, so if some have more than they need, others won't have enough. Interestingly enough, the idea of redistribution is also implied by protectionism. We need to keep out imports because there's only so many jobs. Scarcity, in fact, is at the core of the science of economics.

Given how central the concept of scarcity has become, it seems to me that we should be asking two questions about it: 1) Is it helpful? and more importantly, 2) is it true?

Let's talk first about whether the belief in scarcity is helpful. If there's just enough to go around, or not enough to go around, it becomes very easy to have the attitude: I'm going to get mine, and... you already know how the sentence ends. This attitude lurks under the surface of protectionism: let's keep our jobs here (don't people in other places deserve jobs too?). It's also behind redistributionism and socialism: they have more than their fair share (even if they have it because they've saved it?). I suggest to you that it's this attitude, and not any lack of government oversight, that turns economies into "dog eat dog" and "law of the jungle."

Next, is it true? It's well known that we grow enough food here in America to feed the world, and we even grow enough corn that some of it can be used as fuel. But that's not what I'm getting at here. What determines the amount of available resources more than anything is what counts as a resource. 200 years ago, petroleum wasn't a resource because we didn't know what to do with it. 100 years ago, coal tar wasn't a resource for the same reason. So it's really what we know that is the primary factor in the amount of resources. Well, what we know has no upper limit. Think about it.

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