Thanks to everyone who commented on Against Against Billionaire Philanthropy. For whatever reason, the comments there were exceptionally good. In particular, I’m happy that our usually-quiet leftists finally showed up with some strong (and interesting) pushback.
I usually highlight good comments with short responses, but it was hard for me to avoid debating some of these. I realize that’s complicated, because I can’t quote most long comments in their entirety, and I realize I have more of a platform than other commenters who may feel I misrepresented them or who just want to reply to me. I don’t have a great solution to this, but if you’re annoyed at how I featured/responded to your comment, please tell me, so I can calibrate how serious a problem this is for next time.
Matt Yglesias writes on Twitter:
I think this whole post from @slatestarcodex and, indeed, most of the dialogue on the subject of “billionaire philanthropy” actually misses the bulk of what it is billionaires do with their philanthropy.
In their great book “Billionaires and Stealth Politics” what Page, Seawright, and Lacomb find is that most billionaires don’t seek publicity for their activities & mostly donate to right-wing causes like regressive tax cuts & lower government spending.
Which is to say both sides of this debate are making clever arguments but mostly missing the big picture as to what billionaire philanthropy actually is — not complicated reputation laundering that helps people, but quiet lobbying for libertarian economics.
If we want to debate whether Bill Gates, personally, is Good or Bad it would probably be better to do it on those terms (he seems pretty good to me) rather than talk broadly about billionaires — he is very unusual.
I think Matt is misunderstanding the thesis of Billionaires And Stealth Politics.
(I haven’t read the book. But I’ve read the the original paper it was based on, plus some book reviews that confirm the book is saying the same thing as the paper)
Stealth Politics doesn’t argue that billionaires spend more on right-wing causes than on altruistic ones. It argues that on certain issues relating to wealth and inequality, billionaires spend more on right-wing causes than on left-wing ones. Its methodology is terrible in a bunch of ways, but I assume something like that is probably true, so whatever.
The key finding in the paper (also cited in reviews of the book) is that:
[From 2011 – 2012] most billionaires (65% of those who made partisan contributions) contributed primarily or exclusively to Republicans, and the bulk of their money (averaging $53,227) went to Republican rather than Democratic ($21,411) parties or candidates.
Okay. Over the same period (2011-2012), Bill Gates donated $6,070,000,000 to global health. That is 100,000 times as much as $53,227. Please don’t cite this book to show that “the big picture” is right-wing spending, and that altruistic spending is irrelevant by comparison.
But this is a cheap shot, and the book isn’t designed for these kinds of comparisons, so I want to try my own analysis to see how much billionaires spend on right-wing vs. altruistic causes.
I started with OpenSecrets.org’s list of the 100 top contributors to “federal candidates, parties, political action committees, 527 organizations, and Carey committees”. In order to make the list, you had to donate at least $1.7 million. Of the 100 people who donated at this level, 55 were Democrats and 45 Republicans. The Republican contributions totalled $346 million.
This doesn’t count various sneakier ways of influencing the political climate – for example, the Koch brothers didn’t even make the list! Koch-affiliated groups probably spent $400 million on the 2018 election (some sources say they “planned to” spend $900 million on the 2016 election, but I think they held back because they didn’t like Trump). “Koch-affiliated groups” are complicated, and although they’re not 100% funded by the Koch brothers – one of their groups boasts 90,000 donors! – we can probably round up here. This doesn’t mesh well with claims that the Koch foundation donated $196 million over ten years, but my guess is the lower claim is just what they did openly, so let’s stick with the higher one. I am nervous about how many Koch-like things there are that we don’t know about, and this is a possible source of error in this estimate, but the Kochs are clearly the biggest.
What about non-election-related spending, like think tanks and college professorships? I looked at this list of the top 50 think tanks and added up their budgets. Total budget for all conservative/libertarian think tanks is about $350 million per year. I don’t know how much of this is funded by billionaires, but let’s say all of it.
Add all these numbers up, and divide the election-related ones by two since there’s only an election every two years, and order of magnitude it looks like maybe the budget for conservative politics is around $1 billion per year.
Some basic sanity checks – this site says the 2018 election involved $5 billion of donations, of which $2.5 billion went to the Democrats, $2.0 billion to the Republicans, and $0.5 billion to third parties. If billionaires fund about 30% of the Republican war chest, that would match my estimates above. There’s also this Forbes article, whose author estimates “that if we combine the budgets of these and other conservative free-market think tanks…the entire U.S., Canadian and U.K. market of pro-free society [ie conservative/libertarian] groups is approximately $500 million”. That meshes well with my estimate of $350 million for the US alone.
I can’t emphasize enough that I’m just eyeballing these figures and I can’t find anyone who has done really good work on this question – but I think I have the order of magnitude right. So how does $1 billion for right-wing causes compare to the overall billionaire philanthropy budget?
I’m leaning pretty heavily on this Vox article, but it says that the top 50 billionaires gave $15 billion to charity in 2017 and $8 billion in 2018. If we average this out to about $11 billion/year, only 9% of billionaire philanthropy goes to right-wing causes.
This is actually way too generous to Yglesias, because the Vox article admits it’s only talking about the top 50 US billionaires (out of 500 or so), but I’m comparing it to everyone (billionaire or not) who donated to a think tank or gave $1.7 million+ to campaigns. Probably the real number is much lower.
And we don’t even need to bring in all of the top 50 billionaires! Bill Gates alone averaged $2.5 billion in donations during those two years. One person gave more to global health than every billionaire combined gave to right-wing causes.
So I think Matt is wrong when he says that right-wing causes are where the real money is, and genuinely good philanthropy is just a distraction. The truth is the opposite.
Some commenters agreed that I had demonstrated to their satisfaction that the Gates Foundations was really great, but were concerned I was overusing it as an example. m50d wants us to picture a very different kind of spending when we think of donations:
Imagine a community with a handful of rich people. Winston buys nice suits and fancy dinners, spreads his extra money around the town’s shops and businesses. Geoffrey puts all of his extra into an opera house (or a polo club, or a church he likes, or…). To my mind it’s absurd to say that Winston owes a larger (tax) contribution to the town’s community expenses than Geoffrey does – Winston’s spending already supports the rest of the town, whereas Geoffrey has directed his funds towards his own specific interests. (Which is fine and dandy with your own private money – but only once you’ve paid your share of taxes like everyone else).
Ultraximus agrees:
You could end up in a situation where more and more decide to donate their income towards their favored (but very specific) cause / charity, which in turn decreases tax revenues at a governmental level, which reduces the level of public goods, which in turn leads to lower morale among citizens, which in turns leads to higher amount of people taking advantage of donation deductions, which in turn… soon you end up in a situation where rich donors give large donations to their favored schools and universities to get an entrance for their children. And get a tax deduction for it! From Nordic POV, this kind of situation is simply unfathomable.
Is it unfair of me to keep saying Gates Gates Gates Gates Gates and not talk about the polo clubs, churches, and underhanded trades with colleges?
I think the most important defense is: this isn’t being graded on a curve. If one person saves ten million lives, and everyone else fritters away their money on stupid stuff, the end result is you’ve saved ten million lives.
This is the principle behind “hits-based investing”. Suppose I invest $100 in the Safe Fund, which buys shares in 100 companies guaranteed to go up at market rate. You invest $100 in the Crazy Fund, which invests in 100 crazy startups; 99 will crash and burn, and one will be the next Facebook. Using real-life returns from Facebook vs. the Dow Jones over the same period, the Safe Fund would net me $270, and the Crazy Fund would net you $40,000. If you argued “Yeah, but that one startup that did really well was an exception, the Crazy Fund still mostly failed”, you are missing the point of hits-based investing.
Likewise, if you argue “that one charitable foundation that did really well was an exception, billionaire foundations still mostly fail”, you are missing the point of hits-based giving. And if you use this as an excuse to weaken billionaire foundations in general, you will weaken the exceptional hits along with the many misses. If you decrease the amount of money available to billionaire charities by 37% (the natural consequence of removing tax-deductible status, assuming billionaires neither donate more to compensate, nor manage to evade your taxes), then a charity that saves 10 million lives will only be able to save 6.3 million lives, meaning your policy has killed 3.7 million people. The fact that you also sabotaged a bunch of idiots’ plans to spend money on their polo clubs seems kind of irrelevant.
I think that’s the most important defense. But a secondary defense, and one that I’m less confident in, is that actually a lot of billionaire charity spending is like the Gates Foundation.
One reason a lot of billionaire charity spending is like the Gates Foundation is because a lot of billionaire charity spending is the Gates Foundation. From eyeballing these two pages, the Gates Foundation looks like about 15% of US billionaire charitable spending. This is partly because Bill Gates is really rich, and partly because other billionaires like Warren Buffett donate to the Gates Foundation instead of setting up their own charities. I’m not just using the Gates Foundation as an example, I’m saying it’s a big chunk of what we’re talking about.
But even non-Gates billionaire charity seems pretty good. Moving down the list of largest charitable foundations, the second biggest in the US after Gates is the Howard Hughes Medical Institute, funded by the fortune of aviation tycoon Howard Hughes, which invests $825 million per year in medical research. Its homepage says that “as one measure of success, to date, 28 current or former HHMI scientists have been awarded a Nobel Prize”. That seems absurd to me – surely they must be cheating by giving $1 to every scientist in the world, or something like that? But if we’re going to critique billionaire philanthropy as useless, we should probably skip the people with 28 Nobel Prizes.
The third-largest billionaire foundation on the list is George Soros’ Open Society Foundation. They get a lot of flak for their US political activities, but according to their website, they also fight HIV and tuberculosis in Central Asia, provide prenatal vitamins to Roma in Hungary, help refugees in Jordan run small businesses, promote good nutrition in Liberia, help prosecute war crimes in the Congo, and build libraries in Haiti. Also, it did some amazing work propping up the social system in Eastern Europe after the collapse of communism, including giving $100 million to impoverished Russian scientists to keep doing science instead of going off and selling their nuclear secrets to rogue states. I am honestly pretty okay with this one too.
The next five foundations on the list are more questionable. Eli Lilly’s foundation mostly funds seminaries. The Ford Foundation used to do some amazing stuff, but is a recent victim of wokeness; the most heavily-advertised project on their site is about funding “social justice storytelling and the 21st-century arts infrastructure that supports it”. The Silicon Valley Community Foundations supposedly supports Silicon Valley communities, though for an organization that spends $1.3 billion per year, it’s surprisingly hard to find a single specific thing they’ve done. The Getty Foundation does art. The Robert Wood Johnson foundation does US health care, and it seems pretty good at it; I provisionally pronounce them okay.
Number 9 is the Hewlett Foundation, previously cited as briefly outspending the US government on climate change; it also helped make Creative Commons, secure nuclear weapons, save the rainforest, and spends about $100 million/year on global health.
Number 10 is the Kellogg Foundation, which mostly works on children’s health in the US (especially dental care for low-income individuals), but has also worked to fluoridate water in Latin America. I was kind of unimpressed by their Wikipedia page, but:
I retract my objection.
These seem like an even mix between really impressive Gates-like work, and things that are a little less important but still not absolutely useless. The next few dozen on the list look similar, with some highlights (the Moore Foundation helps fund PLOS, Jupyter, Julia, and R) and some lowlights (the George Kaiser Family Foundation has decided the best use of its $4.4 billion is to pay techies $10,000 each to move to Tulsa, Oklahoma). But overall a lot of this seems really good.
subb4k writes:
The Koch brothers are not quite on Hitler’s level, but they are definitely funding policies designed to hurt members of the outgroup which includes most of humanity. They’ll fund things that are likely to cause people to be hurt (from pollution, for example), rather than things actually likely to save people. I am ready to believe some of their donations fall under the traditional definition of charity/philanthropy, but those probably aren’t the ones people are mad about.
The hits-based giving model cuts both ways. If a small amount of spending goes to very good causes, it doesn’t matter how much poorly-targeted spending there is. But if a small amount of spending goes to very bad causes, it matters a lot, even if it’s only a tiny fraction of the whole. So is it possible that, even though right-wing spending is low in absolute number of dollars, it’s still very bad?
Although it would be hard for this to be more harmful than Gates’ ten million lives are helpful, it wouldn’t be impossible. If the Koch brothers’ spending on climate change denial makes the world significantly worse at fighting climate change, that could potentially cost ten million lives or more. One can (with a little more of a stretch) come up with ways other misguided political causes could do this.
I think in this case this worry probably doesn’t apply. It looks like the Kochs spend about $10 million per year on climate-denial related causes (remember, this is like 1% of what Gates spends on health). This is trivial in comparison to the amount of climate denial spending by corporations (even though corporate spending and billionaire spending may seem morally similar, they occupy different places in the tax code, which is what’s relevant for my argument). It’s also trivial in comparison to how much some billionaires spend supporting the fight against climate change, eg the Hewlett Foundation’s $600 million – although this is a dangerous argument, since the marginal dollar spent on climate denial might have more of an effect.
So this specific area is probably not so big a deal. But maybe the general concern is still valid. I personally doubt it’s true, but I can’t rule it out.
I think my answer is that, when I said the Gates Foundation etc saving ten million lives shouldn’t be collateral damage, I seriously meant it shouldn’t be collateral damage. If it’s important to stop the Koch brothers from lobbying against climate change, it’s worth a few extra moments’ thought to figure out some way to do this that doesn’t also prevent Bill Gates from fighting malaria. For example, have stricter rules saying political spending isn’t tax-deductible, but global health spending is. I realize it will be hard to figure out how to do this exactly right. But for ten million lives, please just do the hard thing.
This objection actually applies to a lot of the “this kind of billionaire philanthropy might be wasteful” or “this kind of billionaire philanthropy might be harmful” arguments. Even if you are right, I think it’s worth finding a way to separate the good from the bad, even if it’s hard, rather than throwing out baby and bathwater alike.
An Fírinne writes:
The thing about billionaire philanthropy is that people like Jeff Bezos and Bill Gates don’t care about people. Billionaire philanthropy is nothing but a PR stunt in order to get the public off their backs about wealth redistribution and to distract from how dreadfully they threat their employees.
Gates (along with 203 other billionaires) has signed a pledge promising to donate half his wealth. Isn’t donating half your wealth kind of a weird step in a plot to keep all of your wealth? Hedge fund billionaire Jeremy Grantham has pledged to donate 98% of his wealth to fight climate change. Isn’t that a pretty dramatic way to prevent your taxes from going up 10% or something?
More fundamentally, even if donating money to ward off redistribution would be a good move for billionaires as a class, you would have to solve a really hard coordination problem to make any individual billionaire do it. If you have $10 billion, and your motivations are entirely self-interested, you shouldn’t donate $1 billion unless that single donation makes the government 10% less likely to appropriate billionaires’ wealth. No single donation will make that much difference, so self-interested billionaires shouldn’t act this way.
fluorocarbon writes:
I don’t think this has to do with how they earn their money, but how they spend their money. Mark Zuckerberg didn’t just give $100 million to Newark schools, he gave the money on condition that the school district “welcome more independently run charter schools [and] close low-performing schools.”
A lot of people disagree about the best way to run public schools. In a democracy, these kinds of conflicts over public institutions should be resolved through voting—every citizen should have the same say. The argument against Zuckerberg is that he’s subverting this process. Because he has more money, he can tell the school district how it should be run.
Bill Gates, on the other hand, is spending money fighting malaria through the Gates Foundation. He’s not offering money to the CDC on condition that they have to run it the way Bill Gates wants.
There will always be some people who are negative about everything, loud on Twitter, and who hate billionaires. But the reason Mark Zuckerberg and Jeff Bezos are getting so much pushback for their giving but Bill Gates is not is because Zuckerberg and Bezos are (or at least seem to be) using their money to commandeer public democratic institutions. Even if good comes out of it on the whole in a utilitarian sense, there’s something a lot of people find unsettling and un-American about using money in this way.
And from Freddie deBoer:
I was utterly flabbergasted when you approvingly cited the Newark disaster. “How could he possibly think this helps his cause?” I wondered. Control of Newark’s school system naturally and by right belongs to the people of Newark. That’s what democracy requires. Zuckerberg’s explicit intent was to helicopter in and use his sacks of money to violate that sacred principle of local control. And it failed. It failed catastrophically. Because the people have the right to control their own local institutions.
I don’t really care about Mark Zuckerberg or donations like his – I would be happy to throw them under the bus if doing so would help expand my coalition against sabotaging Gates and Moskovitz and Tuna. I would happily support some clarification of tax laws saying donations like Zuckerberg’s aren’t okay, or aren’t tax-deductible. As long as it doesn’t do collateral damage to the important stuff, whatever.
But I’m still confused by this perspective. My understanding (backed by sources like this), is that Zuckerberg didn’t impose conditions for his donation. Cory Booker, Mayor of Newark, wanted to reform Newark schools. Someone connected him to Mark Zuckerberg, who thought Booker’s ideas were great. So Zuckerberg donated the money to Booker, an elected mayor democratically vested with the legitimate authority to reform schools the way he wanted, and Booker enacted the reforms he wanted to enact anyway.
It’s hard for me to see Zuckerberg as commandeering anything here. It’s true that if he hadn’t come around, Booker might have been forced to gnash his teeth and not do anything. And it’s true that Zuckerberg made the decision to donate to Newark instead of some other city whose mayor wanted some other plan. But giving a city slightly more ability to do the plan it had decided on (I say “slightly” more because this source says Zuckerberg’s gift was only 4% of the school system’s budget) seems really different from “commandeering it” or “sabotaging democracy” or anything like that.
Even if Zuckerberg had absolutely told Cory Booker to change all of his plans to Zuckerberg-approved ones or else he wasn’t going to donate, it still seems to me like the democratically elected mayor of a city has the right to decide that it is vs. isn’t worth it. I mean, what would be a better alternative? That every billionaire donation (and only billionaire donations, and no other policy) has to be approved by a popular referendum before it’s accepted? Or that you, a person who doesn’t live in Newark, gets to dictate that the city of Newark can never accept billionaire donations, even if everyone in it wants to, while using Orwellian language about how this is to “respect the will of the people of Newark”?
Weirdly, I can’t find any polls or even guesses about how much support Zuckerberg had among Newarkers, or how popular the school reforms were. Conventional wisdom is they were really unpopular. But conventional wisdom also says they failed, and the most recent studies really challenge that perspective, so I don’t know.
It’s hard for me to see this as a giant problem, but if it is, I think my preferred solution is that if governments don’t want billionaires’ help, they shouldn’t ask for it or accept it. Destroying the power of billionaires to offer help to anyone seems like overkill.
Hackworth writes:
On your point 4, you don’t really refute the argument. You’re just saying why it’s ok for large-scale philanthropy to be anti-democratic because you can point to what you perceive to be success stories of billionaire charity. You’re essentially saying that the end justifies the means or, less charming, might makes right. That doesn’t sit right with me, because it can easily be turned around on your position. So, street violence against peaceful protesters, or gerrymandering, or voter suppression is anti-democratic? Tough luck, we still do it because we can.
I probably did err in how I described this.
I think it’s good (as argued in the section being referred to) for some spending to remain outside the power of the government. I think “anti-democratic” means something more sinister than just “outside the power of the government”, and I don’t think billionaire spending qualifies.
That is: is me spending $2 on a slice of pizza anti-democratic? Is it just me saying “might makes right, I can do whatever I want with my own money, you can’t stop me” without even asking the government whether my pizza-buying is the will of the people? Am I committing a crime against the public?
If not, what is the difference between me spending $2 on a pizza, me giving $2 to a beggar, and a billionaire giving $2 million to the Save The Beggars Foundation, as far as democracy goes? None of them represent a significant amount of money compared to the government. None of them represent an authoritarian-level concentration of power – there are 500 billionaires, supporting a wide variety of causes. They’re all just people spending small (compared to government budgets) change on stuff they want, which is a known Okay Thing You Can Do In A Democracy.
Maybe Hackworth is referring only to the small percent of billionaire spending which is an attempt to influence the democratic process, like election donations or something? If so, I think it’s important to say that explicitly, since I don’t care about that kind of billionaire spending and am not really focusing on it. Also, because that mostly isn’t tax-deductible and so Reich’s argument doesn’t apply to it.
Or maybe he’s referring to the small percent of billionaire spending which eventually influences elections despite being tax-deductible, like donations to partisan think tanks? Again, don’t care much about this, and agree it’s less good than real charity and that we should try to discourage it. But I still don’t think it’s equivalent to voter suppression or whatever.
Like, what does it mean for something to be “anti-democratic”? Is founding a newspaper anti-democratic? Is it just “I’m the guy with the printing press, so my opinion matters more than yours, might makes right”? Is peaceful protest itself antidemocratic? “I have some free time and am good at organizing people, therefore I’m going to try to use shame and harassment to override the will of electorate who voted in the government I’m protesting”? Is all of this basically equivalent to beating people up in the streets?
I would counter that fighting for what you believe in isn’t anti-democratic, it’s the essence of democracy. Telling the government “Fuck you, you are wrong and bad and we’ll see which of the two of us is still standing at the end of this” is continuing the legacy of Martin Luther King, Gandhi, and other people who are considered paragons of democratic society. The whole point of democracy is that individuals are supposed to try to change government policy! The examples given above – voter suppression, gerrymandering, street violence – are bad not because they’re attempts by individuals to change government policy, but because they’re attempts to prevent individuals from changing government policy.
And I don’t think we can limit “trying to change government policy” to voting only. Putin’s Russia has elections. As far as I know they are “fair” in the sense of not lying about the vote count [EDIT: Apparently sometimes they do]. The [EDIT: other] difference between them and a true liberal democracy is that the democracy is more permissive of attempts to change the government outside of a once-per-several-years election. I think these other attempts are basically about coordination. You can oppose Putin in your heart, you just can’t coordinate large-scale effective opposition to Putin. Newspapers and protests help coordinate a bunch of powerless atomic individuals into a useful counterweight to government power.
One could defend billionaire foundations on the grounds that they do the same. For example, George Soros famously helped kickstart the Black Lives Matter matter movement. He did not create it out of thin air, and he is not a puppetmaster for it – it is composed of real and genuinely committed black people. But there’s a difference between those black people sitting around feeling committed at home vs. going out and effecting change, and Soros helped make that happen. Dustin Moskovitz and Cari Tuna’s animal advocacy work has done the same: there are lots of Californians who are against factory farming, but they couldn’t make anything happen until Moskovitz and Tuna solved the logistical work for them of getting a proposition on the ballot.
If billionaire foundations were evenly distributed across the political spectrum, they would have a nondistortionary effect of improving general coordination power and making it more possible to change the system. Since they’re not, they coordinate some parts better than others, which produces a genuine distortion. I agree this is bad. So it matters a lot whether you think a general increase in coordination power is worth the risk that the other side gets more of it than you do.
It sounds like Hackworth thinks the tradeoff is billionaire power vs. people power. I think there’s also state power, special interest power, corporate power, and (especially) Moloch. All of these actors are naturally well-coordinated and ordinary people’s success or failure in fighting them depends a lot on whether they can overcome their coordination handicap. This means I care more about coordination power, and think increasing it is good enough to be worth some distortion in the process. It’s still not as good as people donating to actually effective causes, but could be positive on net.
NocD writes:
It doesn’t address what I’d consider one of the prime arguments against Billionaire Philanthropy which is the tax subsidized nature of it. Charity is tax deductible and those deductions need to be accounted for somewhere. So we really get a system where a select few get to underwrite their personal causes with governmental resources, building up their personal influence and capacity to enact very political choices. Gates’ support of charter schools and Zuckerberg’s own particular thoughts when it comes to education are not neutral endeavors and the profile they get to build being labeled as “Billionaire Philanthropists” lets them launder ideas and spend influence while being indirectly supported by government backing.
First, a terminological quibble: I don’t like summarizing this as “using government resources”. If you claim a child tax credit, are you diverting government resources to raise your child? Sounds pretty corrupt. If I heard that a senator was using government money to raise their child, I’d want them indicted. This seems like a deliberately inflammatory misrepresentation of the real situation, which is that the government has specifically decided not to claim those resources, and given donors its blessing to keep them.
Putting the semantic dispute aside, I interpret the concern as: should charitable donations be tax-deductible or not?
This is a hard question because I don’t have a coherent philosophy of tax deductibility. Lots of things are tax deductible, including mortgage interest on your house, medical costs, home offices, taking business clients out to lunch, gambling losses, retirement savings, and some state and local taxes. Most of these cost the government more money than charitable tax deductions – according to this website, the charitable deduction isn’t even in the top ten.
If I had to weave all these together into a coherent narrative, I would guess that the government usually gives tax deductions when people are doing something sympathetic that results in them not getting to use the money anyway. For example, if you have to spend a lot of your money on catastrophic health problems, there’s a sense in which you never got to “enjoy” the money or spend it on what we usually consider personal consumption. Even if you spend your money on business expenses, that’s different from enjoying it and buying luxury goods with it. Retirement savings don’t get enjoyed immediately, plus we want to encourage people to save for retirement.
Charity donations seem to fit into this model. We want to encourage people to give to charity, plus money you give to charity isn’t being spent on personal enjoyment and consumption.
All of this seems kind of vague to me, but given that there are hundreds of other similar tax deductions, and charity is both an especially prosocial one and an especially cheap one in the grand scheme of things, I’m not sure why anybody would consider it their first target for attacking. If you hate the very idea of tax deductions because it’s “stealing from the government”, fine. If you point to the charitable activity tax deduction in particular, while ignoring a bunch of much costlier and less beneficial ones, then I’m confused.
hls2003 writes:
My natural inclination is to think that the people Scott is responding to are so wrong as to be nearly incomprehensible. But I feel like it is a failure of charitable imagination to simply accept the gulf is unbridgeable. So trying to put myself in their shoes, I think that Scott’s rebuttal does not engage with the idea of philanthropy as wartime propaganda.
Take someone like Tokyo Rose or Lord Haw-Haw. If one constructed a careful analysis of what they could be doing with their time – committing atrocities, fighting as a common soldier, or serving a shift in a munitions factory – it is clear that materially speaking, talking on the radio is probably the least physically damaging thing they could be doing against Allied soldiers. But yet they were despised as much or more than anyone in those other jobs, because their role in propagandizing for their evil regimes helped the Axis war effort by boosting Axis morale and damaging Allied morale. They were the pleasant face (or voice) hiding an evil regime. If one starts from the premise that the capitalist system (or whatever systemic bogeyman you blame) is the enemy, then billionaire philanthropists like Gates are capitalism’s Lord Haw-Haw. They hide the true nature of the regime, prolong the war, and sap the will of the people to fight. Or take Potemkin villages, for a non-WWII example. Presumably a Russian peasant was legitimately better off (temporarily) for living in a clean, idyllic Potemkin village than continuing in their base-state filthy squalor. But just analyzing whether a few people were slightly better off clearly misses the main point that the Potemkin villages were hiding the truth and preventing change. Philanthropic billionaires are the Potemkin village, hiding the true impact of the capitalist bogeyman.
While I don’t share the starting opinion of capitalism, it seems like – under this Conflict Theory rubric – Scott’s essay misses the point of the critics. Why get more angry at charity than extravagance? The same reason you hate Lord Haw-Haw more than an ordinary German soldier; the soldier is just doing what you expect, and is mostly neutral to the broader effort of wartime morale, while Lord Haw-Haw is an underhanded traitor eating away at the emotional war effort. And why ignore the good work that charity does? Because the “seen” charity is simply a prop masking and perpetuating the “unseen” squalor of the system. In either case, micro-analyzing on a purely material level (Tokyo Rose versus Tokyo factory worker, who makes more bombs?) doesn’t make sense because it omits the larger effects.
Ironically I think the lesson of “seen” and “unseen,” per Bastiat, is more commonly missed by the revolutionary Utopians. But if one starts with unrealized Utopia as a postulate, then even charity can be propaganda, and propagandists are plausibly reviled.
I find this one of the most sympathetic and comprehensible of the arguments I’ve read so far.
aashiq writes:
Accelerationists might say philanthropy is wrong because it is a bandaid that keeps the existing fundamentally flawed system chugging for longer than it would otherwise. I do not believe this, but I was hoping to see it addressed in this article. These people might argue that we should oppose philanthropy exactly because it makes the world better. By letting conditions naturally get worse as capitalism pursues its own inhuman ends, a necessary revolution becomes more likely. Thus, we should eliminate policies like tax deductability of charitable contributions.
I understand accelerationists want to make the world worse, because that could cause a communist revolution, which would make the world much better. But what if there were something even better than a communist revolution? Then holding a communist revolution might alleviate enough suffering to prevent us from doing that even better thing! I think the only ethical choice is to promote billionaire philanthropy, which will prevent a communist revolution, which will cause the even better thing to happen. I realize this will be controversial, but I think sometimes you have to be willing to do a good thing for the greater bad if that greater bad contributes to an even greater good.
Luispedro writes (based on the estimate that the Gates Foundation may have saved ten million people):
This means that if the combined effect of Reich et al. is a 1% probability of discouraging the next Bill Gates (i.e., one of the billionaires agrees with them that the “yachts and parties with paid supermodels” route is better than the evil “science and malaria cures” route), this still implies an death toll of 100,000 in expectation from their efforts.
We can do better! If the effect of me writing this blog post complaining about it is a 1% probability of discouraging the next Rob Reich, this implies I have saved 1,000 lives. And if the effect of you writing this comment is a 1% probability of encouraging the next me to write that article, you’ve saved 10 lives with this comment alone! Unless you’re a trauma surgeon or something, writing this comment is by far the most important thing you’ve ever done!
This is why I hate numbers like “ten million lives” and really hate Pascalian reasoning. I’m not saying it’s trivially wrong, just that I really hate it. It’s too crazy and too self-serving.
But I still wouldn’t recommend poking the thing that saves ten million lives with a stick to see if it breaks.
Gwern writes:
While we’re listing billionaire examples: to a greatly underappreciated extent, the whole Reproducibility Crisis and its very expensive replication efforts like the Many Labs projects, are bankrolled by a billionaire, John D. Arnold. You’d think the federal government would be more interested in this problem, but it’s not.
This is a really interesting example I didn’t know about, thanks.
Conrad Honcho writes:
Also, timely tweet/article.
“Only 22 percent of U.S. adults are on Twitter, and 80 percent of the tweets come from 10 percent of users. If you rely on Twitter for political information, you are being informed by ersatz pundits residing within 2.2 percent of the population.”
So I’m not sure how well a sampling of tweets about billionaire philanthropy represent public mood.
Many people objected to me using tweets to try to gauge public mood.
I may write another post soon defending my choice. But the short version is, all the time I hear people saying ridiculous things about what “everybody believes”. “Everybody believes veterans are evil murderers who deserve to be shamed, but I am going to be a bold contrarian and say we should support the troops” or whatever. I wish I could cite polls to tell these people they live in a fantasy world, but there aren’t polls available on everything. I don’t think Twitter perfectly matches public opinion, but it’s not infinitely different from it, so I think it represents a useful corrective to letting people claim anything they want.
georgioz writes:
If I am to steelman the critique of billionaires I think it really is about institutional integrity. As a comparison I calculated the total net worth of top 25 Putin’s oligarchs according to this list. The result is somewhere around 270 billion dollars. Which is a lot but comparable to the power of all american billionaires relative to the economy – these oligarchs could finance Russian government budget also for around 1 year. And yet Putin and his oligarchs have a very tight grip on the whole Russian state and they have much more power than the net worth numbers suggest.
So I’d explain the anti-billionaire philanthropy as just a gut feeling that it is a dangerous development. Maybe the danger lies in a fact that billionaires – at least as a class if not individuals – use the charity as a PR front in order to sway public opinion in their favor. Which is catastrophic as the concentration of power in their hand can pose a real threat to democracy prepping the stage for complete institutional takeover by more ruthless and ambitious among them. If this is the endgame then spending a few hundreds of billions of dollars on charity is nothing – not only monetarily but also compared to the damage caused longterm.
From this standpoint spending on philanthropy is much more dangerous than spending on yachts. Because buying yachts is what billionaires are supposed to do and it leaves them prone to mundane criticism in standard political struggle.
Or to use another example imagine you are Cato the Younger and you see Caesar spending his fortune to give bread and circus to the plebs of Rome. It is very hard to argue feeding the poor on the object level. But still Cato sees this as a ruse for the ultimate endgame of Caesar which is capture of the state at which point he will get his investment back with astronomical interest. Needles to say Cato was correct in his paranoia.
Good point. I guess I would be more worried about this if a completely repulsive billionaire known for never making the slightest attempt to do good in his life hadn’t just captured the state using a completely different method, but maybe this one might happen sometime too.
Viliam writes:
As a survivor of socialism, I can assure you that the sentiment is much deeper than that. Rich people giving gifts is a problem, but after that problem is solved, poor people giving gifts becomes a problem, too. Afterwards, simply “people doing something on their own” becomes a problem.
The actual problem is doing things without the government approval. As a former socialist once said: “Everything within the state, nothing outside the state, nothing against the state.” This is exactly how it worked in socialism of my childhood. Individual initiative was a bad thing, regardless of its actual aims. The only good thing was to do what you were told.
The journalists argue that rich people’s philanthropy is “against democracy”, but what they really mean is that it is “against the state” or rather “without the state”. This is why Scott’s argument that people actually trust billionaire philanthropy more than government spending, so in that sense it is kinda more democratic, isn’t going to convince anyone. It’s not about being more democratic in the sense of “plebs being happy about what happens”. It’s about someone acting on their own, which threatens those who identify with the state.
Erusian makes a similar point:
Not to be overly cynical, but I think there’s a simpler explanation here than any real principle. Certain people have a class interest in empowering the state and shrinking the private square. These people will oppose billionaire philanthropy because it complicates their narrative that concentration of wealth is inherently bad. Zuckerburg buying a huge mansion doesn’t disrupt their narrative. Zuckerburg curing cancer does, especially because that concentration of wealth is a necessary precondition for curing cancer. Likewise, due to their interest in growing government power they will very, very pointedly overlook any possible downsides to increased government power.
I wanted to highlight these because some people accused the anti-billionaire-philanthropy side of being overly fanatical conflict theorists. But it looks like there are some conflict theorists on both sides. I am skeptical of this. It’s hard for me to imagine people having “crush individual initiative” as their goal, and I imagine these same people would support other kinds of outside-the-state individual initiative (like anti-Trump protests).
I was leaning towards this position before, but I find some of these comments sympathetic and convincing. I think the potential argument against billionaire philanthropy is that a lot of billionaires use it for vapid, personal, or even sinister causes, and it’s weird that they can get a tax deduction on it. If people are getting their college to make a vanity building with their name on it, or promoting their own politics, it does seem disturbing that this is costing the government money that it could use for potentially-valuable government business. I am sympathetic to people who worry about this.
But I think a more quantitative look shows that the good in billionaire philanthropy outweighs the bad, and that as a whole it more than meets our (low, confusing) standards for things that should be tax deductible. I am sympathetic to arguments that we should more carefully word the tax deduction, to make sure it only applies to genuinely altruistic ventures and not to vanity projects or lobbying. But I think this needs to be done with the understanding that the valuable parts of billionaire philanthropy are extraordinarily valuable, that they are not acceptable collateral damage, and that protecting and promoting them should be one of the most important goals for any policy on this issue.
One additional comment which has probably not been sufficiently emphasized so far by the various commenters.
In evaluating the rewards to billionaires, I believe many people are ignoring the survivors bias. IOW, entrepreneurs invest massive amounts of time, ingenuity and assets, and they put these at risk for a potential payoff. After the competition plays itself out, we can, post hoc, identify winners via their wealth. But what is not observed are all the billions lost along the way by others. Most new entrepreneurial endeavors are spectacular failures, not successes, leading to massive losses.
Thus the net income of a potential entrepreneur is not measured in billions. It may not even be positive. It is entirely possible that the average programmer at Microsoft when considering salary, benefits and options made more than the average software entrepreneur. The point is that some entrepreneurs make big returns, while other lost big. The net prospective salary to an entrepreneur is the expected risk adjusted rate of return compared to alternative uses of their time and money.
There is little which keeps the average programmer from becoming an entrepreneur. They choose not to, as the expected payoffs adjusted for risk seems the safer and better bet for them.
To argue afterward that the winners of the entrepreneurial brass ring owe something additional to programmers is incorrect. The ledgers are already balanced.
We’ve already agreed that Bill Gates original value add was being well connected. His mother knew the right people. From observing CEOs – entrepreneurial and otherwise – I’d say they are much better at “soft skills”, salesmanship, charisma, and too often various levels of deception etc. – than the average programmer – but *not* especially good at programming, engineering, etc..
Given the number of programmers that join startups in the hopes of becoming extremely rich (via happening to join the next Facebook etc.) – and lose money (at least opportunity cost) out of the deal – I’d say the problem wasn’t risk aversion, but most programmers not being the sort of person some programmers refer to contemptuously (“Mangler,” “Sales Slime”, etc.)
Part of what’s at the bottom of this is the relative value of people who produce things [for other people’s use], and people who convince other people to do what they want [and to a thing person, produce nothing; whereas to a people person, produce organization etc.].
From where I sit precious few people seem interested in convincing other people to do things that would be good for those convinced. While they rarely have a goal of doing harm per se, they mostly care only about their own gain, and have AFAICT decreasing levels of ethical restraint, on average, the higher they climb in executive ranks. (The people they harm become less and less “like them”, and more and more like abstractions in some spreadsheet.) It’s easier to convince random strangers to buy stuff they don’t need, with money they do need, than to figure out what would actually help those strangers and make them aware of its availability. Even if the “Invisible Hand” of everyone pursuing their own self interest makes it all come out well in the end, many of the participants behave contemptibly in the process.
Dino,
“We’ve already agreed that Bill Gates original value add was being well connected.”
Not really disagreeing, but to add on, a lot of people have good connections. The outsized brass ring of entrepreneurial wealth is to incentivize and direct this in socially constructive directions, like creating the computer industry which we are all using at this very moment.
“Even if the “Invisible Hand” of everyone pursuing their own self interest makes it all come out well in the end, many of the participants behave contemptibly in the process.”
A properly functioning market requires rules and norms which channel self interest in positive sum directions. No market is perfect in this, but some are much better (generating less contemptible behaviors and more commendable ones) than others.
I’m late to the thread but I thought it still might be worth making an argument that I didn’t see when I scanned the comments. In my view, not even looking at the specific work they do, part of the great value of foundations and private fortunes lies in their anti-democratic nature — that they represent sources of funding that are outside majoritarian control. Democratic collectivism is still collectivism, the tyranny of the majority is a genuine form of tyranny. More democracy is worse, not better, as it becomes so all-encompassing that it infringes on the ability of minorities to organize, to speak, to fund research and advocacy, and to engage in any high-profile public actions that don’t meet majority approval. I found this bit of Scott’s commentary worrisome:
The tyrannical democratic majoritarian doesn’t only want to use government’s taxing and spending powers to support and advocate for causes the majority supports, they want to use the government’s power to take away or restrict the use of private resources that dissenting minorities might deploy (even when, as Scott notes, those resources represent only a tiny fraction of those available to the government). I believe it’s critically important that democratic majorities NOT do this. That they not try to use tax and regulatory power to shut-down/shut-up/defund/deplatform dissenting minorities whose messages they don’t like.
Scott also says:
Do people want to crush all individual initiative? No. First, they’d never put it that way because it sounds too obviously evil. But also, they don’t want to crush individual initiative that supports their causes, and I assume most are willing to tolerate small-scale, disorganized, ineffectual grumbling by opponents (as even Putin does). But would they like to use government power to crush larger-scale, well-funded, organized initiatives (like Koch-affiliated groups) that oppose their preferred policies? It sure sounds that way. And I find the tax-deduction argument very much a red-herring. For one thing, giving to non-profits that engage in political advocacy is already non-deductible. But would anti-Koch folks really drop their objections if the Koch brothers had to pay capital gains taxes on more of their donations so that their giving was reduced by 20% (the long-term capital gains tax rate)? Ha! No.
And yet almost all historical examples of a tyranny were dominated by an elite group that had means of rendering public opinion irrelevant. Either they openly made it illegal to question the king/priests/Party, or they had so many ways to manipulate public opinion that “the majority” would want whatever they told it to want anyway.
I don’t think we should fear majorities more than aristocracies, to the extent of artificially empowering potential aristocracies to put a check on the majority. That seems incredibly likely to backfire.
OK, but oligarchies given control of the state also do the same thing, and efforts to strip minorities of tools with which to influence the government aren’t only limited to the personal fortunes of billionaires.
Lots of other minorities get stripped of power and influence too, when you artificially empower one specific identity group (“rich guys in expensive suits”) to get a veto on what the government does.
And yet almost all historical examples of a tyranny were dominated by an elite group that had means of rendering public opinion irrelevant.
What would you say about the majority-elected Hindu-nationalist government of India and its treatment of minorities — not historically — but right now? Modi and the BJP were elected democratically, so it’s all good?
I don’t think we should fear majorities more than aristocracies, to the extent of artificially empowering potential aristocracies to put a check on the majority.
I don’t think it’s a contest over which we should fear more, and I am in no way suggesting that monarchy, aristocracy or oligarchy are good ideas. What I am arguing is that we should, of course, use democracy to elect leaders, but beyond that we should collectivize as a few resources and as little decision-making as possible while leaving as much scope as we can for independent action by individuals and groups of all kinds that exist in our (racially, ethically, politically, religiously) heterogeneous society. Majorities shouldn’t try to repress minorities by legally restricting them or by taxing away the resources they might need for independent action or advocacy.
Lots of other minorities get stripped of power and influence too, when you artificially empower one specific identity group…
Not confiscating wealth through taxation (or preventing it from being used for certain kinds of disfavored advocacy) is not ‘artificially empowerment’. No more than failing to tax away all Scott’s money (or failing to pass laws against disfavored ‘unhealthy’ foods) amounts to artificially empowering Scott’s ‘anti-democratic’ pizza habit. And if governments are stripping non-wealthy minorities of power and influence (by, for example, imposing complex legal requirements for raising and spending pooled money), it should stop doing those things, not go on to make the stripping of power and influence universal and therefore ‘fair’.
I wouldn’t say it’s good. At the same time, if you ask me to prescribe a rule for democracies as a whole across all the world forever, yes there will always be some specific cases where following the prescription leads to a bad outcome.
If you prescribe antidepressants for depressed people, some fraction of them will feel a glimmer of extra motivation and energy after two or three weeks on the drug, but still be miserable, and use that extra motivation and energy to kill themselves.
This is not a strong argument in favor of “don’t prescribe antidepressants,” it’s a strong argument in favor of “prescribe antidepressants but be wary of the known side effects a few weeks into the treatment regimen.”
…
One of the known side effects of majority rule is that if an ethno-nationalist demagogue gets into power in a country with weakly protected ethnic minorities, the demagogue may lead a large chunk of the majority ethnicity to prey on the minorities.
But exactly the same thing can happen in a country where a minority is empowered to control the government without majority support, or where the central government is weak and non-state actors or provincial governments are free to set their own agenda.
See for example segregation in the American South, or any country where the central government collapses and whichever militia is most brutal starts killing the ethnic groups it doesn’t like. Weakening the central government doesn’t necessarily make minorities safer.
Enacting brutal purges of ethnic minorities doesn’t really require the central government to be “strong” in the sense of “well-funded and has lots of jurisdictional powers.” It requires that the central government be controlled by the kind of people who like brutally purging ethnic minorities, and that a large chunk of the population be prepared to let them do that.
…
So keeping the central government weak is not a reliable defense of minorities. It is, rather, a defense of some minorities (the ones that have power to defend themselves) against others (the ones that don’t, but do have enough votes to be a relevant constituency in national politics).
Isn’t it?
Would billionaires exist in a state of nature?
The entire foundation layer of our society is an artificial construct designed to enable us to find some mode of living that is agreeable to us.
The way we choose to organize society is inherently artificial, and the decision to not make choices and simply let things unfold according to pre-defined artificial rules is itself a choice. Billionaires’ fortunes are no more natural and innate a consequence of the way the world works, than are steep progressive income taxes that demote the billionaires to mere centimillionaires.
So we cannot appeal to the state of nature and say “these people naturally have more power than these others, so we should let them have all of that power.” Because as a rule, they wouldn’t naturally have that power in a state of nature; they have that power because we decided collectively to honor certain principles that would give it to them.
And having made that decision, it behooves us to occasionally evaluate the consequences of our choice and figure out whether or not to engage in some fine-tuning of the “Zuckerberg OP nerf plz” kind.
Senpai noticed me! However…
This is hard to imagine, because you lack the lived experience of socialism. Under socialism, even spontaneous anti-Trump protests would be punished, because the proper thing to do would be to wait and join a government-organized anti-Trump protest.
Well, Trump becoming a president in a socialist country probably doesn’t make much sense… But an analogy would be an existing socialist politician falling out of favor of the Party, as a result of Party in-fighting. As soon as the power consolidates against a president, he would be formally accused of some crime, tortured to confess in a mock trial, and executed. And during that process, the administration would organize demonstrations against the traitor, and people who care about their careers would make sure they are seen there. But still, organizing your own demonstration, in a place and time of your choice, without the government approval, would result in a police action against you.
You know that there do exist socialists who do not think a police state would be a good idea, right?
You may think that’s unrealistic and that attempting to institute socialism will inevitably lead to police states, sure.
But that doesn’t impact a discussion of whether the socialists in question view “brutal totalitarian police state crushes individual initiative” as a terminal value, personally.
How charitable. Let’s try
Scott,
Small niggle: note that retirement savings are not tax-deductible. IRA and 401(k) contributions, which I assume is what you refer to, are tax-deferred: not only does the government eventually get the tax for them, it also gets the tax on any appreciation.
Also:
Give me a break; hyperbolic much? Are you seriously comparing Trump winning an election or (God willing) two to Caesar’s military takeover of the Roman Republic?
Depends what flavor. The situation you describe holds for standard 401ks or IRAs, but there’s a bit of a wrinkle in that both the principal and any appreciation end up being taxed as ordinary income, not as capital gains. Roth accounts are paid for with post-tax money but do not incur taxes at time of withdrawal, not even capital gains taxes on the appreciation. Neither one is deductible in the usual sense, though, you’re right about that.
…while this is not actually applicable here, something about this wording nonetheless meant I suddenly couldn’t help but think of Dylan Alvarez: ‘If they had wanted a bomb *removal* squad they should have said so.’
But, more seriously, some interesting stuff here (meaning the article as a whole). Thanks for sharing, as always!
There also might be an element of spite/bitterness of course, but perhaps its more understandable if you put it in specific context. I like to use the Space Program has an example. The old US Space Program was this great communal adventure that every american could participate in (via taxes)…I, at least, feel a twinge of sadness when I see SpaceX doing what we lack the political will to do.
Now most of these charities allow similar “participation” by donation and indeed this is one of the best things about charitable giving: you can put an otherwise useless talent (the ability to make money through stupid memes) to an admirable goal (curing cancer or whatever). However: The disparity in charities feels more stark (no idea if that’s actually true). Tiny ordinary donations are dwarfed by bill-gates-sized ones in a way that at least doesn’t FEEL as true for taxes.
Some of this might come from simply a fear of missing out. At least, I’ll say it does for me.
The particular example of “political spending” by the Kochs that you were discussing was expenditure supporting criticism of the current global warming orthodoxy. If the rules really prevent counting such expenditures as deductible, they should also prevent counting spending on the other side of that issue, which is enormously larger.
If not, what you really have is “government will subsidize expenditures supporting views the government approves of, but not views the government disapproves of,” which does not seem like either an attractive or a democratic policy.
This seems to be the chief purpose of quangos in the UK. From what I’ve seen, it works just as well as we’d imagine.
Probably has been pointed out before, but saying that the Kochs spend $10 million per year on climate change seems like an understatement to me. A more accurate number would be $400 million during the 2016 election, as supporting Republicans de facto means supporting inaction on climate change, and the Kochs are well aware of this.
But science (IPCC) shows that people will be better off if we are inactive on climate change, right? Letting the climate warm by 3.5C is less expensive than a carbon tax (generally considered the most efficient option) that would keep the temperature below that, according to them.
Global warming has the potential to make things worse in ways we can’t even put a price tag on, so I would hesitate to say “meh, we’ll just eat two hundred trillion dollars in global climate damage rather than pay the 250 trillion dollar costs of the carbon tax over then ext 100 years.”
There are costs that it’s hard to evaluate, associated with allowing very large permanent changes to happen. Sure, the insurance company may value your arm at $100,000, but that doesn’t mean it’s advantageous of you to sacrifice your arm for $110,000. It’s your arm; you might be willing to accept a cash price for it but you have no right to ask anyone else to do the same, nor would we all agree that it’d be wise to do so.
In this case, the costs of global warming measured in dollars may be a bit deceptive if they involve things like “most of Indian subcontinent becomes uninhabitable” or “giant hurricanes hitting coast every year make it impossible to build a seaport anywhere between the Chesapeake and the Yucatan.”
I might actually have “Crush Individual Initiative” as a central goal. It’s complicated and I’m conflicted about it myself but I think hls2003 and subb4k’s comments highlighted above fuse into something very like my concern. I believe our modern obsession with hustle and hard work might be really dangerous in the long term.
I really hate cynics, and I am on the whole in favor of charitable giving, and I understand in the balance it does way more good than harm if you can balance good and harm that way…I’ll just say it makes me uncomfortable: I am just not sure I want a future where are archetype for good behavior is stuff like curing cancer or reforming education…because most people simply cannot do that, even collectively as part of a team (an increasing number of people are not gonna get to be part of the team).
I realize no individual actor is out there consciously MAKING this our archetype for good behavior…I realize that this is not probably our archetype for good behavior yet…but we’re HEADING that way and it does worry me.
If we can pull off scott’s master plan the vast majority of us are going to be living in the mountains in cabins doing art, or whatever, and if everyone feels crappy because they’re not being excellent and curing cancer, no one’s actually going to run off and do that.
It doesn’t have to be the archetype for good behavior, just an archetype for it. Or perhaps more relevantly, the archetype of good behavior for someone with these kinds of resources. I don’t think there’s much of a worry of it becoming the only archetype for good behavior. People like the billionaire who cures cancer, and they like the fireman who goes into a burning building.
I agree that it is my hope. This is generally why I’m averse to balancing and weighing good behavior…but it feels like it’s becoming more and more common as a mode of analysis.
In the balance, the firefighter is inconsequential compared to the person that designs the riveting system that builds the legion of firefighting robots, and the dope that just wants to make synth music for his friends is not even on the same scale.
This sounds like typical-minding to me.
Yeah, there are indeed people with cartoony-evil goals.
I don;’t think it has to be cartoony evil. They’d just describe it in some better-sounding terms like “ensuring that one bad decision doesn’t put someone in the poorhouse” or “preventing the capitalists from taking advantage of the ignorance of the general public” or “preventing selfishness”.
“completely repulsive billionaire”
It’s sad the this is literally the most intelligent open forum on the internet and is still filled with ad hominem and blind adherence to leftist fantasies,
Taking it completely literally: he does have the lowest approval rating of any president in decades.
Would you prefer people pretend he isn’t repulsing people from supporting the GOP?
Taking it completely completely literally: he does exert a force which causes small metallic objects to be pushed away from him.
Two things to keep in mind. First, there’s a lot of people even on the right who don’t like Trump as a person. Second, consider the audience. The people who Scott is arguing against almost certainly hate Trump with a passion. This is a well-chosen example to resonate with them, even if it doesn’t resonate with the people who already agree with Scott.
It’s not ad hominem to say “I hate this guy”. It’s an expression of personal opinion, which a personal blog seems like a fine place to do.
(more formally, I think the argument is “assuming you and I think Trump is bad, that demonstrates bad things can happen without the process you’re describing”. If you don’t share the premise of my argument it’s not going to convince you, but that’s no different from the hundred other ways that you need shared premises to agree with the arguments I’m making)
It’s only ad hominem if you say it to their face.
So tell me, rather than pound on the table about blind adherence to leftist fantasies, or about how this is an ad hominem attack,* tell me…
You appear to be arguing that Donald Trump is not completely repulsive. Very well. Exactly what about Donald Trump do you find attractive?
Or did I misunderstand? Are you agreeing that he’s completely repulsive, but arguing that he’s not a billionaire?
“JCT reports separate estimates for the charitable deduction for education ($7.3 billion), the charitable deduction for health ($3.3 billion), and the charitable deduction except for education and health (31.3 billion).”
42 Billion dollars a year so rich people can LARP as the government?
I want every non profit exemption yanked, from churches, colleges and NGOs
it’s fine if people want to waste money on their belief systems but pay your F— taxes
Legally it’s pretty easy to differentiate the “charitable” political spending from real charity: the political spending all goes to “educational” charities that “educate” the public about some particular issue. That’s how you qualify it as a 501(c)(3) while still doing fundamentally political work. So you could e.g. make education not a charitable purpose under the tax code. Which I think I’d support because it comes with the bonus benefit of not subsidizing billionaires getting their kids into Harvard, and nothing in the “educational” category has benefits anywhere close to health charities. But politically this is tricky because so many private schools depend on their nonprofit status to survive. The ones that really need the nonprofit status are probably the worst of the bunch, so I wouldn’t mind seeing them go, but every single teacher, parent, alum, etc. will try to vote out anyone who kills their beloved school. So to get something that can actually pass through Congress, you probably need to narrow the definition of “education”. I’m not sure how to do that exactly, but the Department of Education has to do it when they decide what you can get Pell grants or student loans for attending, so I’d look to them for a starting place for a better definition.
I think Scott’s missing an important point in comparing the magnitude of billionaire political donations to billionaire charitable donations:
Leverage.
For example, the total spending on federal elections in 2016 was about 6.5 or 7 billion dollars. Given how many close races there were, how narrow the Senate majority was in the subsequent two years, it is reasonable to suppose that if a single multibillionaire had rolled up and spent a billion dollars on the election, he would have been able to decisively alter the outcome, barring truly stupid mishandling of how the money was spent. Assuming no equal and opposite multibillionaire rolled up to oppose his donations, at least.
Which means that this one man would be in a very strong position to dictate policy to the federal government for the next 2-4 years. All the more so if he could credibly promise to spend similar sums on the next election, and the next.
…
That is a very large effect. While charitable organizations like the Gates Foundation are no doubt profoundly impactful, they would be hard pressed to get a payoff as large as “turn the executive and legislative branches of the United States government into your personal satellite state” for a sum as relatively modest as $500 million a year.
Furthermore, the “just buy an election lol” strategy is extremely corrosive to institutions that most of us are relying on to safeguard our own interests- not least to safeguard our interests if those interests are endangered by billionaires! Who watches the watchmen, if the watchmen are paying their own watchers’ salary?
…
Now, I’m oversimplifying a bit to illustrate the point, I admit, but I think this resembles reality enough to explain a lot. If Bill Gates gives $10 billion to charity and the Koch Brothers give $1 billion to political donations, it is far from a foregone conclusion that Bill Gates is directly or indirectly impacting the world more than the Koch brothers are, or that the existence of Bill Gates’ donations justifies tolerating the existence of the Koch brothers’ donations.
With that said, this makes it clear that the real problem we’re addressing in this specific instance isn’t billionaire philanthropy, it’s campaign finance reform.
And if you agree with the Koch’s political values?
For you, maybe swap out the name Soros for Koch. Is it horrible that Soros can donate to political causes? Do you want to
confiscatetax away his wealth to prevent it and give that money to the Trump Administration to use instead, perhaps on funding a better border wall?For you, maybe swap out the name Soros for Koch. Is it horrible that Soros can donate to political causes? Do you want to confiscate tax away his wealth to prevent it and give that money to the Trump Administration to use instead, perhaps on funding a better border wall?
I suddenly have a whole new respect for this lefty position of “tax the billionaires out of existence and give the money to the government”.
False dichotomy.
Because see… we could do that. Or. Or!
We could switch to full public financing of campaigns. Lots of countries do this. Just let the money be apportioned, according to some kind of neutral process- there are hundreds of ways we could design such a process, and they might not be perfect but they could hardly fail to be more biased than privately funded campaign finance is.
It removes the unfair leverage that people with money can get by funding campaigns, and thus solves the problem, WITHOUT all the nonsense about “Har-har, taxing billionaires until they are merely multi-millionaires, what a preposterous idea, ho ho ho.”
The only ‘downside’ is that we’d have to introduce into America’s small-c constitution another acknowledgement that political parties are a thing… an acknowledgement that is approximately 225 years overdue.
The problem with only public financing of campaigns is that it takes the already massive incumbent advantage and ultimately increases it even more.
Who do you think will be writing the rules of the game? The politicians who are trying to get re-elected. Do you really think they won’t be bipartisan in ensuring it’s setup to their advantage as much as possible over time? Here’s what actual campaign finance reform bills look like, limiting campaign spending to below what a challenger would need to succeed..
Limitations on campaign financing work against challengers because incumbents have the advantages of years of previous name recognition in running for office and in the news as it covers them in office. Challengers need to spend extra money just to be competitive in getting people to even know they exist.
Incumbents are also uniquely able to do the sort of campaign spending that really matters: delivering taxpayer money to their constituents.
Bit late coming back to this, but…
What you’re telling me is that if we go to full public campaign finance, we’ll have the problem of “policy can happen, but only if it meets the approval of the incumbents.”
I’m actually seeing that as, in relative terms, an improvement. Because right now our problem is “policy can happen, but only if it meets the approval of the incumbents’ donors.”
Which is arguably worse. We can in principle decide to vote out the incumbent and the horse he rode in on if his policies become unpopular enough. We can’t vote his donors out.
…
Furthermore, I would argue that donors tend to exert selection pressure that favors radicals (that is, people with strong opinions that they are strongly committed to and that only a minority of the population supports). Because being radical in the interests of things your donor cares about, and that your constituents (the ones who actually voted for you) are OK with, you get great job security.
I would further argue that long-term incumbency, in the absence of donors, tends to exert selection pressure towards moderation. Because in the very long run, the best way to stay in power is the Joe Biden approach. You want to slowly change your policy platform, a little bit at a time, so that even after decades in office, your supporters are never quite unhappy enough with you to kick you out of office. Being a fanatic is not good job security, because of the risk that your name will be associated with something unpopular that displeases 11% of your constituents, and thus suddenly leaves you losing an election 49-51 when you’d expected to win 55-45.
Without the promise of campaign money as a reward for being a loyal fanatic, you can’t get back enough support to compensate for that.
…
A system of electing politician that makes challenging an incumbent easy has an… alarmingly interesting… failure mode. Namely, the risk that it will turn into a congress full of Paul Ryans and Alexandra Ocasio-Cortezes that spend all their time screaming at each other. Given the ability of the US electoral system to deadlock thanks to its bicameral legislature that maps Senate and House power to the electorate very differently, this is going to spend most of its time ending badly.
Strictly yes, but the US has had that ability intentionally hamstrung for the past decade or two at the federal level… And I would argue the results have been disastrous. Because it means the political party in the minority has no incentive to cooperate.
Suppose you can get credit with your constituents for ‘standing up to the enemy’ by obstructing a budget bill. But there’s no way to get credit with your constituents because said budget contains a $30 milion earmark for revitalizing parks and freeway interchanges in your district. Suddenly, you have basically no incentive to see that budget bill passed, even if the nation as a whole badly needs it.
Combine that with the fact that “your constituents” actually means “whatever relatively slim majority of your constituents actually voted for you,” and you have a recipe for disaster.
@Simon_Jester,
The issue I have with your analysis is that theoretically we’re supposed to have a Democratic-style Republic wherein the People rule via their representatives. In that system, the supposed primary ability of the People to make their displeasure known with their elected officials is to replace them with new ones who promise that this time they’ll do what the People who elected them want them to.
Obviously, I share some of your reservations about how well that system works out in reality (i.e. the People aren’t always the brightest, as defined by intelligence=people who agree most with me), but you seem to be proposing instead that we elect one group, then let them become oligarchy rulers for life. I’d contend that system also has a track record of working out even worse than our current one.
In terms of needing to not have as many challengers win vs. keeping incumbents, it would take a real stasisist (yes, I just totally made that word up) to desire to shift our current balance of 90%+ of Congressional incumbents typically winning re-election farther in the direction of the incumbents winning even more.
And I read it as “advocate of government by the East German secret police”, though I suppose that might not be far from the expected result here.
Considering the difference in spending between the two candidates in the latest USA presidential election, my intuition is that spending for elections is not nearly as important as it’s played up to be.
A particularly jaded and edgy version of me would even suspect that the reason the importance of said funding is played up by the candidates and their campaign staff is not because it would help them win, but because it’s profitable to have people donate money that you’ll spend on overpriced goods and service, that totally arent provided by a good buddy of yours.
I feel like this is a bit like saying “dropping tons of bombs on the enemy’s head doesn’t help you win wars, we know this because North Vietnam won the Vietnam War despite getting hit with a jillion tons of American bombs and America getting hit with approximately zero tons of North Vietnamese bombs.”
The logical reply is something like “well technically when you put it that way, but.” How you target your bombs matters. Whether you have a winnable war objective matters. Your opponent’s willingness to fight matters. A lot of other factors matter.
It may be possible to prove that there’s effectively no correlation between quantities of campaign spending and victories, I suppose. But this, specifically, itsn’t a counter-argument I trust; it generalizes too easily. The candidate who spent more money losing narrowly once doesn’t automatically mean that spending more money doesn’t work, any more than the Vietnam War proves “aerial bombing is useless” as opposed to “the US was doing it wrong in Vietname.”
I’m pretty sure this just isn’t true, on the grounds that if it was, everyone would do it (including non-billionaire orgs that can scrounge up large sums out of small donations, like the NRA, NAACP, etc) and the price of buying elections would quickly go up to a much higher level.
I agree this kind of thing is mysterious; see Why Is There So Little Money In Politics? for a better discussion.
Why would the really big money be partisan? Its far too easy to foment backlash and when you really have money to burn it’s just so much easier to buy candidates from both parties. Clinton deregulated Wall Street and passed NAFTA. Obama passed out $29 Trillion to Wall Street along with get out of jail free cards.
You can vote for stagnant wages, endless war, banker bailouts, unpayable debts, more money to billionaires, no hope, decreased life expectancy, and a heroin epidemic with or without a side of racism. Those are your choices and that is all they will be for the foreseeable future.
Three: Okay, this is above the post with ‘one’ and ‘two,’ but you get the idea.
The third point is basically this- that while billionaires may have differing political views on some issues that could conceivably motivate a bidding war, there may also be many other issues where they just aren’t that motivated to fight over things.
There may just not be any billionaires who happen to be so strongly in favor of the right to an abortion that they believe it’s worth spending half a billion dollars to get a pro-choice president or congress.
Remember that when I started talking about this, I was talking up campaign finance reform, not “billionaires having money” or “billionaires making charitable donations.” Even if only a handful of weird billionaires try to influence election outcomes, if this looks like a security loophole in our democracy it would probably be a good idea to close it, on general principles.
One: Some organizations do do this for the single issue they advocate; see gun rights and the NRA for an example. The NRA has effectively locked down one political party into a permanent holding pattern of never, ever, ever passing a gun control bill even if it has like 70-80% popular support. I doubt Republican politicians appreciate being backed into that particular corner, but that doesn’t mean they can afford to split from the NRA position.
Two: Supposing for the sake of argument that you’re right, large NGOs (like the NRA and NAACP) may find their ability limited because you can only get so much overall budget out of people; their capacity to increase their spending is not unlimited. If Americans as a whole are only willing to spend an average of $20 per person per year on shaping the outcome of elections, there will only be about $6 billion dollars available total to influence all elections.
Just as a man fleeing wolves in a forest doesn’t have to outrun the wolves, only his fellow runners, so then do billionaires not have to outbid each other to start having marked sway on the elections. In theory they might all start competing and outbidding one another, but regarding that, see my next comment.
I think you are misconstruing both the NRA and the NAACP. The NRA is powerful because it is aligned very strongly with that “20-30%” who happen to be the most passionate about the issue, but also the most well informed. Thus, the 70% polling drops below 50% when people get more and more things explained to them. The NAACP is powerful because there are a lot of minorities who have similar interests like poverty, inner city crime (as well as police relations), etc. These communities have reliable bloc voters as well.
That’s why billionaires can have been in favor of massive increases in immigration since the 70s, spent a lot trying to fund advocacy groups to that end, had the ears of every major house/senate Republican and Democrat, and kept getting beaten in the end. That issue worked the other way, the more you inform voters the less they would support (at least pre-Trump) the idea. There was a polling study back in the Obama years when they were floating various plans, and they would ask if someone supported immigration reform, over 50% did. If you asked whether immigration should be higher/lower neither would consistently win, most would say “no opinion/stay the same.” But if you asked them how many legal immigrants are allowed in each year, and how many total illegal immigrants were in the country, the average person would be way off. Often guessing 10% or so of the actual number. Then when you told them the real numbers, an anti-immigration consensus would emerge in the polling.
I’m a little iffy on your definition of “informed.”
Gun control and immigration are both issues where a lot of dueling studies and statements are made by both sides. Selectively informing people of SOME of the studies and some of the facts may make them “more informed than average,” while actively biasing them on the subject.
…
For example, if someone is entirely ignorant about immigration, and say “there are 44.5 million immigrants in America, which is a greater number than at any time in American history,” they may kneejerk with “wow, that is a lot, that is too many, something bad must surely be happening as a result even if I can’t put my finger on what it is.”
If you take the same entirely ignorant person and say “the percentage of immigrants living in America is 13.7%, which approaches, but is slightly lower than, the percentage of immigrants living in America in 1890,” you may get a rather different reaction to the same factoid. Most people don’t think the number of immigrants present in the United States in 1890 was a problem in and of itself, after all, and “13.7%” doesn’t carry the same sticker shock as “44.5 million.”
In both cases you have increased the voter’s access to information. You’ve even provided more or less the same information in both cases! But their opinion will not necessarily shift the same way in response to that information. The first voter is apt to become more anti-immigration. The second may remain pretty much unchanged on the subject or even shift slightly in favor of immigration.
…
The same goes for gun control. NRA supporters are likely to be very well armed with specific mechanical facts about firearms, just as AARP members are likely to be knowledgeable about old age, and for much the same reason. NRA supporters are likely to be interested in gun-related issues, to have read a bunch of studies forwarded to them by their NRA friends, and so on. By most metrics used in polling, this makes them very well informed voters.
But there gun control is an issue with a host of dueling studies. While not ALL the research militates in favor of gun control, a significant amount of it does. And NRA supporters will likely be either unfamiliar with, or dismissive of, that research. “More informed” here means “100% informed of all the reasons I’m right, and 0% informed of all the reasons I might be wrong.”
…
I could construct left-wing mirror images of this process if I cared to, or you can perform the exercise yourself, I’m sure. The point remains that being “better informed” on a highly contentious issue where the background radiation level of knowledge is ‘total ignorance’ is not always a sign of being more rational in pursuit of one’s own interests, or of the common good. It can simply be a sign of being more propagandized by one side or the other.
…
Long story short, I am suspicious of the argument that “the public is ignorant and that is why they support Action X which I am strongly opposed to.” There’s sort of an analogue to Chesterton’s Fence here. Sometimes it will be the right decision for a relatively small clique of voters and the donors/NGOs that support them to stonewall an action that 60%, 70%, or more of the public wants to see carried out. But on average over the long run, this is a recipe for aristocracy and for government that is so non-responsive that the public is forced to revolt to get what it needs.
About the only time I’m comfortable consistently backing a minority against a majority is if the majority is supporting the “Kill and Eat Members of This Minority” act or something, a blatantly predatory policy of some kind that violates the principle of “minority rights under majority rule.”
“commandeer” might be an exaggeration, but if it’s possible to predict which plans Zuckerberg might like better, you can get stochastic selection pressure out of this. In that world, politicians are subtly more inclined to believe in policies that will attract billionaire infusions, because the ones who do so get more money (and maybe influence) for developing their regions with, and the ones who don’t are more likely to get thrown out of office when their regions go into decline. They don’t have to consciously base their decisions on the billionaires’ opinions for this effect to happen. The 4% of the budget might contradict this, but to me that sounds like a highly nonlinear effect based on how close the reforms could have been to “failure for budgetary reasons” to start with. Do we have a good counterfactual for “Booker establishes broadly similar reforms but without the extra cash (and maybe influence) infusion”?
The “and maybe influence” part here is motivated by the social signaling of “someone powerful is backing this”; the mayor may have more direct political power, but billionaires often have more celebrity power, which can sway people toward “this is going to win, and I should be backing this so that I win alongside it”. That, in turn, is I think a more specific reason for expressing the anti-rich sentiment even in these cases, as counterinfluence: “introduce doubt into people who might otherwise just fall in line, by establishing that people who read articles like this may fight you / if you back another plan you may have more allies than you think”. Stepping back, my intuition is that you broadly underestimate how much social pressure for reciprocity (or not necessarily reciprocity, but something like cooperation or alignment) giving large gifts can return to the giver without any of the parties being able to individually, reliably do much about it, due to both hardwired instinct and recursive social-perception effects.
For what it’s worth, I say this as a sort-of-leftist who is uncomfortable with the hit-piece eat-the-rich sort of stuff I keep seeing slung around, but might also be motivated to think that they have a point.
You missed an opportunity to call this post Against Against Against Against Billionaire Philanthropy.
Or maybe he considered using that title but decided that he’s against it.
I was going to say that I thought the Kaiser Family Foundation did important work in healthcare policy. Turns out the George Kaiser Family Foundation is a completely different org from them.
I think this makes for a very clear example of the problem people have with billionaires. It’s not that they have money, it’s that the have way too much money. Similarly, if you found one newspaper no one think that is cause for alarm. If you’re Hearst, and own 30 large newspapers, and then start agitating for war with Spain, then yeah, that’s not the most democratic thing. Democracy doesn’t require all power to be centralized in the state, but neither do I think it’s compatible with an infinite amount of power outside the state.
In thinking about the difference in reception between yachts and philanthropy, most people have focused on the propaganda worth of the philanthropy. But I think a lot of my instinctive discomfort is that in doing philanthropy, they are trying to change to world. If a rich person spends a fortune on luxury goods its wasteful, but it doesn’t affect the world that I live in. If they try to change how schools are run, or how health care is provided, or what science we know that will affect my world. I agree that for the most part, at least in recent time, they’ve changed the world for the better. But it is still uncomfortable to see that much power wielded unaccountably. I don’t think it’s a coincidence that the least controversial philanthropists do a lot of their work outside the country, where they’re affecting someone else’s world.
This is how I feel about USFEDGOV.
Happy to poll questions on any of this for you for fun if you’re interested (can reach me at micsadow at gmail.com), but I’ll say that a priori, I’d expect Bezos’ donation to be far more popular nationally (most Americans love Amazon) than on twitter.
That being said, I think twitter is in many ways a better gauge for what matters (what people who care a lot about the issue think, and of center-left elite sentiment). There may be a lot of middle aged office workers, mechanics and cashiers who love Amazon, but Bezos is more likely to interact with regular Vox readers.
I feel like your Safe Fund vs. Crazy Fund analysis is flawed. I’m going to use the S&P 500 as a proxy for the Safe Fund here, and Peter Thiel as a proxy for the Crazy Fund.
Based roughly on data via Variety from Peter Thiel’s sales (since he seems to have been first in the door on Facebook in Summer 2004 from this Fortune timeline, he invested over $500k, and ended up with approximately 26 million shares of $FB. He sold roughly 24.5M shares (20M at IPO, 73% of what I assume is the remaining 6M shares in 2017) for $429M, and let’s be generous and say he still has another 1.5M shares today (worth ~$300M) from that investment. That’s around $725M, a tidy 1450x return on $500k.
The S&P 500, meanwhile, is only up 2.5x since Summer 2004.
So while I think you’re right that the Safe Fund’s $100 is now worth around $250-270, I think based on the data I scrounged up quick, the investment for the Crazy Fund (which basically is $1 in Facebook in Summer 2004) is going to realistically net you $1450, not $40000. And that involves being generous and assuming Thiel’s investments aren’t significantly greater than $500k, since, if his investments over time are $3M or more, then he basicallly… earned the same amount as the Safe fund over time.
If $500k gets you 26 million shares, that’s $0.019 a share (too lazy to verify). The current price is a convenient $190 a share, so you’d get a return of 10,000x, if you held all the way through.
That “if you held all the way through” is a pretty big if, and requires you to assume that 1% of startups go on to accrue a 10,000x gain over 15 years. I used the numbers Thiel got from selling because I’m working off of the results for the VC who *actually* got into Facebook before anyone else did. It seems unfair to have the Crazy Fund be “you magically hit on the 10000x option 1% of the time.”
I tried calculating this two different ways, and got answers that differed by 10x ($10k or $100k), which is confusing but means that I think Scott is within the correct range.
The key difference from how you’re calculating it is that Scott is assuming that you invest $1 in 2004 and you *hold it all* until now.
How I calculated $100k for the Crazy Fund:
* Thiel invested $500k in 2004 for a 10% stake in the company: http://whoownsfacebook.com/#Thiel
* A 10% stake in the company today would be worth $55B (FB’s market cap is $550B: https://finance.yahoo.com/quote/FB)
* $55B is ~100,000x $500k, so if you would have invested $1 in 2004, you would have $100,000 now
Sure. As I said in reply to the other commenter though, I think it’s kind of unfair to just assume the best possible outcome of investing in Facebook in order to get Crazy Fund’s numbers. I just feel like if you want to play in the space of “invest in FB like Peter Thiel did” as what the Crazy Fund does with one of its dollars, you should also cash out like Thiel did.
HHMI was a pretty widely acknowledged tax haven until after Hughes died. From the Wikipedia page:
“Despite its principles, in the early days it was generally viewed as a tax haven for Hughes’s huge personal fortune. Hughes was HHMI’s sole trustee and transferred his stock of Hughes Aircraft to the institute, in effect turning the large defense contractor into a tax-exempt charity. For many years the Institute grappled with maintaining its non-profit status; the Internal Revenue Service challenged its “charitable” status which made it tax exempt.”
Putin’s Russia has elections. As far as I know they are “fair” in the sense of not lying about the vote count.
That’s incorrect, vote counts are routinely manipulated in Russia elections. It depends on polling place, of course – in some central regions, like Moscow, there can be places that are actually counted honestly, in some places, like Chechnya, they probably don’t even bother to count at all, in the rest of places there are various degrees of count manipulation, ballot fraud and other trickery. The exact level of trickery and the level to which it changed the actual outcome (i.e. whether the result would be the same absent the trickery) is debated but it is pretty clear that yes, lying about the vote count is a common occurrence.
The vote manipulation is actually quite simple to prove, because when you look at percentages of people who “voted for Putin” in individual districts, you will find round values like 90% and 95% more often than values like 91% or 94%. Which is what you would expect if these values are made up by local people, but is statistically unlikely to happen naturally.
Yes. Here are some academic publications about this phenomenon:
https://projecteuclid.org/euclid.aoas/1458909907
https://rss.onlinelibrary.wiley.com/doi/full/10.1111/j.1740-9713.2016.00936.x
https://rss.onlinelibrary.wiley.com/doi/full/10.1111/j.1740-9713.2018.01141.x
You say: “It looks like the Kochs spend about $10 million per year on climate-denial related causes”, but clicking on the link leads to this:
“We define climate change denial as “anyone who is obstructing, delaying or trying to derail policy steps that are in line with the scientific consensus that says we need to take rapid steps to decarbonize the economy.”
Which is a bit of an odd definition and probably not what most people think of when they think of climate-deniers, and as such, it’s a little disingenuous. For example, you could agree that:
1. The climate has warmed and will continue to do so
2. This warming is the direct result of additional CO2 in the atmosphere added by burning fossil fuels
3. If left unchecked, this could have potentially catastrophic consequences for the planet
But if you think that perhaps carbon capture and sequester like what Petra Nova is doing is a better approach than taking “rapid steps to decarbonize the economy”, then you are labeled a climate denier by Greenpeace.
They also count 100% of the donations to organizations such as the Cato Institute or Reason Foundation as going to climate denialism despite the fact that Reason’s climate journalist, Ronald Bailey, has explicitly agreed with global warming and endorsed a carbon tax
So the estimate that $10m/yr going from the Koch Brothers to climate denialism is certainly an overestimate perhaps by two orders of magnitude.
Laying aside the absolutely idiotic term “climate denial” (nobody denies climate, it’s impossible) that means also anybody who opposes any policy aimed at addressing any climate issue would be automatically marked as “denial” regardless of the reason they oppose it – e.g. if I’m a communist and say there should not be carbon tax, there should be nationalization of industry and State Five-Year Plan for Combating AGW – I am now a “denialist” because I opposed carbon tax. Moreover, if I oppose specific carbon tax proposal because I think the tax is too low – by this metric, I will also be marked as “denialist”!
That’s insane, such numbers should be completely disregarded as it’s junk from which it is impossible to extract any real information.
They’re counting donations to Reason as material support for climate change denialism? Seriously?
If the Koch brothers have a consistent pattern of striving to get Republicans elected, and the official party line of the Republican Party (tweeted down by the president himself) is that climate change is a hoax created by scientists/globalists/the Chinese to destroy the American economy…
…Well, either the Koch brothers are spending an awful lot of money in exchange for not very much influence over the Republican Party, or they’re pretty content to see no action taken on climate change.
Even if they don’t specifically spend much money on the climate change denialists themselves, it doesn’t really make much difference in the long run as long as they’re working to put into office politicians who believe climate change denialists.
Being “pretty content to see no action taken” on certain problem by certain politicians is not the same as denying the existence of the issue altogether. For example, if I am a libertarian, I do not have a realistic chance of any elected official representing many of my views adequately. I have to support politicians that temporarily align with least harmful direction, or withdraw from any political participation at all. Does this mean I stopped being a libertarian because I supported a politician with some non-libertarian views? No, not at the least. Politics is not a buffet where you could pick opinions you want, conjure a politician that embodies those views and somehow get them elected. I don’t think even a billionaire could do that. So making conclusions like “if Kochs support Republican politicians, and some Republican politicians (not necessarily even ones Kochs support!) advocate no action on climate change, than all money spent by Kochs on politics is spent on “climate denial”” makes zero sense.
Well not for you, no…
I mean, seriously. Global warming is not a core issue that taps into the passions of Republican voters. It ties into the general narrative of hostility towards scientists, and to the idea that there is a foreign/cultural-Marxist conspiracy out to destroy America’s culture and economy by crippling it in various ways, but if the Republican elites had been saying “sigh, okay, we need to take global warming” for the last 10-20 years instead of adopting an aggressively denialist stance, there’s no reason to think that this would somehow have triggered a partisan revolt.
I mean, there may be some other entity donating to the Republicans on such a huge level that not even the Koch brothers have enough leverage to compel Republican politicians to at least get out of the way on global warming and not actively blame it on Chinese conspiracies while suppressing attempts to gather evidence.
But if so, I think it’s a pretty safe bet that this organization is either another billionaire, a large corporation, or in effect both.
These major campaign donors do have a very large impact on what kinds of political choices are presented to the American people. There wouldn’t be any point in them spending the money otherwise.
…
I’m not saying “the Koch brothers spend tons of money specifically on climate change denial.”
What I’m saying is “the Koch brothers spend money in a pattern that enforces climate change denial and lack of action on global warming.” Clearly they do not regard it as a serious concern, even if they regard it as a concern at all.
If they wanted to shift the balance of opinion in the Republican Party to be less absurdly, anti-scientifically hostile to the idea of climate change being a problem, they have ample resources with which to do so. Their decision to continue supporting climate change denialist factions, both directly and indirectly, is a very real problem.
Tt occurs to me after reading this second post that much of the debate here revolves around your utilitarian reasoning when it comes to, e.g, philanthropy and politics or the charitable tax deduction:
These are compelling arguments for someone concerned with getting the biggest altruistic bang for their mariginal buck. Given the relative cheapness of saving a life abroad in the modern world, it’s perfectly reasonable to support a system which allows for enormous concentrations of private wealth which can be spent at their owners whims: some ultra-rich spenders will almost certainly use their money for extremely good ends, consequentially speaking.
For the most part, though, I don’t think objectors to billionaire philanthropy are sympathetic to these kinds of arguments in the first place. My impression is that these critics are bothered by billionaire philanthropists because they think obligations of justice towards other citizens come before general altruistic results: even if a small fraction of philanthropy is going to prop-up Republican politicians and think tanks, that’s fundamentally offensive to a society of citizens who are supposed to relate to one another as political equals. Even if the charitable tax deduction saves millions of lives abroad (which may be questionable even on the consequentialist account), it’s still a grossly unfair deduction that makes some citizens subsidize the pet projects of other ones.
I think you tried to address this point in your response to Hackworth:
A $2 million donation to a foundation is different, as far as democracy goes — or I would say, as far as justice goes. First, that donation will likely be subsidized, no matter what other taxpayers think of the recipient of the money (the unfairness issue). Second, as simbalimsi wrote, a just society (at least according to your critics, though I might agree) would have no billionaires to begin with. The billionaire would be spending money they had no legitimate right to own in the first place.
Obviously consequentialism, utilitarianism,, justice, etc. are big issues, but I do think much of this discussion traces back to a deeper disagreement about whether good consequences trump other considerations about justice — maybe ones rooted in some sort of social contract that takes precedence in structuring moral relationships.
Related side point: If you’re going to sing the praises of the Gates Foundation, you could at least mention the Common Core, which it more or less shoved down the throats of millions of American schoolchildren with an intensive lobbying campaign. [I’m not necessarily opposed to the Common Core – but it’s a much more realistic example of how foundations really work our political system when they feel like it.]
Objection: despite economic equivalence, not taxing something in the first place is semantically distinct from subsidizing it.
I don’t know about the semantic distinction, but morally speaking (which is our domain here) I don’t think it’s a significant difference.
I was using “semantic” where others might have used “moral” because I don’t believe the word “moral” maps to any entity in the real world.
We wouldn’t have needed Common Core if the federal government was allowed to set reasonable minimum curriculum standards nationwide. I’m pretty sure most countries have that level of centralization, which would have made Common Core redundant.
As it was, a lot of the low-ranking states were running on dumbed-down curricula to keep their graduation rates high, which tended to mask how poorly prepared their students were from just about everyone concerned, including the districts, the students, and the colleges that brought the kids on only to find out they needed sixteen jillion remedial courses.
Pressuring most of the states to adopt Common Core at least gives us a common frame of reference for “how much teaching do the kids need?”
I’m happy to trust your analysis of Common Core. I’m not an education policy expert in the slightest and don’t have an opinion about it one way or the other.
I just meant to point out that Common Core was the product of an intense lobbying effort spearheaded by a private foundation (Gates) that wasn’t appointed to that role through any legitimate public process. [This earned Gates the label “unelected superintendent of America’s schools” by some in the education sector, which seemed basically correct during the Obama Administration].
I was pretty critical of the original post because I felt it missed on engaging the substance of the critiques it was reacting to, so I want to make a point of saying that this elaboration more than satisfies those complaints. Good stuff.
Always +1 on doing the hard thing.
Were we reading the same comments? There were a few gems, but most of the commentary on that post was some of the tritest, most facile drek I’ve read on here. Nine times out of ten it was just “billionaires bad” and then some rationalization following from that.
I had the same impression but with “anti-billionares just jelly”.
Well, I guess the important part is we’ve both found a way to feel superior…
This is a facile and dismissive argument. Many of the anti-billionaire-philanthropy arguments are effectively saying “letting billionaires do charity increases net public positive feelings towards billionaires,” and then you’re saying “well, that doesn’t matter, because the public voted for a billionaire they felt positively about” as if the two are unrelated?
I personally don’t actually think that’s a good explanation for how Trump got elected, but to dismiss it entirely without addressing the, to me, obvious argument is pretty weak.
Out of two discussions here and three on Reddit I only see one commenter briefly mention The Copenhagen Interpretation of Ethics? Maybe I’m being too cynical, but I suspect the human gut feeling of “you touched it, you bought it” gets kicked into overdrive whenever someone has enough financial influence to suddenly “touch” a problem with average-salary-decades of wealth.
I don’t have a problem with billionaire philanthropy. Best thing they could do with their fortunes.
But I do have a problem with Bill Gates. I mean, I believe that the way he ran Microsoft set back computing by maybe 20 years. The many underhand ways Microsoft used its power to hurt its competitors didn’t just hurt that opposition, it also damaged the use and development of computers.
* the interactions with DR-DOS (e.g. the AARD code)
* the deliberate introduction of incompatibilities in various file-formats (particularly Word)
* the hiding and obfuscation of interfaces; undocumented features.
* ‘embrace and extend‘ as a culture
(this is not an exhaustive list)
We’re left with a legacy of sub-optimal OS, program and even computer design because of Bill’s influence.
It feels like Bill Gates’ charitable contributions are an attempt to buy his way back into a net-positive moral standing.
While I don’t want to down-play that claim of 10 million lives saved, I think the extent of that cost is pretty significant, and on-going.
If malaria were to be eradicated through his funding, maybe it would be worth it. It’s not looking promising, though.
How many lives does a bad piece of word processing software cost?
It’s probably not 0, but does it get to 100?
I guess we’d have to get pretty deep into the weeds with QALYs to answer that question, but I think it might be important to your point.
My guess is it’s better measured in lost productivity for the people doing good things. That still sounds pretty hard to measure, though.
Yeah, the way I envision it is something like the 30 seconds extra you had to spend to import your CSV file into Excel, multiplied by millions of imported CSVs. And then you do that for every feature that should have been better in our alternate non-Microsoft history.
And I think I cherry-picked the easiest and most trivial thing in that list to work with, but still. You have to do a lot of that to even get to the equivalent of one life worth of negative value.
There are also a lot of secondary effects with various signs. If our hypothetical better Microsoft equivalent takes longer to get computers into households because they go for a less user-friendly Linux-esque model, that’s going to cut into the surplus of positive value they’ve built up from having better file format compatibility.
How do you compare it to the human suffering caused by the existence of iTunes?
Reported this comment for mentioning the horror that is
itunesThe military loves spreadsheets. “Whoops, we forgot to carry the one, so a division just landed in the middle of the desert with no water” is totally a thing that could happen.
Yes, it’s mostly as Nick says.
It’s basically equivalent to the broken window fallacy.
Obviously this lost productivity is unknowable, but it could be pretty significant. For the sake of argument, let us conservatively suppose it’s a half of what it easily could have been. Even within the narrow scope of this topic, that would matter a lot. We could have had twice as many billionaires, doing twice as much good.
One of the absolute joys of reading your stuff is that you consistently and ruthlessly show your work and are transparent about your assumptions.
I agree. Thanks, Scott! ^_^
It was mentioned in the post that some people might be concerned about rich people donating money to colleges in order to get their children accepted. This still strikes me as not cogent since most of the money they donated is benefitting other children. In this sense we are incentivizing wealth redistribution (even if t is going to billionaires to non-billionaires-but-still-well-off) which seems to move power away from billionaires.
Suppose some colleges were to have an explicit 2 tier system
– pay normal fees, get accepted on the standard ability etc. curve.
– pay really really high fees, get accepted and granted at least a C average, provided you are literate/numerate at some trivial level (let’s say grade 3).
To make this somewhat palatable, they justify the ultra high fees as helping all the students not paying those fees. (It’s even true – some of the extra is spent on keeping the standard fee a bit lower.)
Would we be happy about allowing the ultra-high-fee-payers to deduct the extra costs, beyond any normal deductions for educational costs?
If not, how is it different if we call the ultra high fee a “donation”?
Quick Fermi calculation:
Say there are 50 really good colleges with average 1,000 students per year. So 50K elite college students per class. Each one pays $30K per year, so $1.5 billion per year to educate all of them.
Suppose each year there are 1000 very rich people who want their kids to get into a really good college, and the fee is $1.5 million/kid/year. That would cover everyone else’s college education and make (good) colleges free. Each college would have to take 20 rich kids to make this work.
Honestly I think I am in favor of this. For some reason I find the “give them at least a C grade” more distasteful, but if that were a necessary part of the deal it still seems worth it.
>For some reason I find the “give them at least a C grade” more distasteful
I think the reason is that we have a rule and a ranking system that rich people are buying themselves out of. “Pay money so you don’t have to obey the law/play fair” is something we humans are intrinsically wired to dislike.
Yes but in this case this seems like a gut reaction which doesn’t accord to the effects of such a rule. For one, in the hypothetical we already granted that these students would be admitted (almost) without regard to their merit, so they are already getting a huge leg up. Plus, a C is still a bad grade so overall the difference between having the grade floor or not seems small compared to having privileged admissions or not.
While that’s true, as long as they’re doing it anyways, it seems like we’re better off making them pay through the nose for it.
Yes, but how is that different from us having a college admission system (itself kind of a ranking system) which the rich would be buying themselves out of?
>Yes, but how is that different from us having a college admission system (itself kind of a ranking system) which the rich would be buying themselves out of?
Now, speaking just for myself (and my intuitions might not be shared) buying a place in college is mildly unfair, because you get something – a college experience – that you didn’t deserve.
Buying a grade is very different, because that completely destroys the point of the grading system. They’re buying a rank/a degree/an accreditation that they don’t deserve. If we allowed people to straight up buy medical licenses, they would become worthless as a signal of who was medically competent.
Or to use another analogy, many video games have various marks of achievements, badges, medals, and so on. If the game is popular and social, then people who earn or stand to earn those achievements would strongly object to people being able to buy them for money, rather than effort.
This doesn’t answer whether it’s moral or effective or whatever, but it looks like in India they actually do, completely legally, sell off about 15% of college seats to rich people who would not have gotten in on merit: https://www.npr.org/2019/08/04/745182272/when-students-in-india-cant-earn-college-admission-on-merit-they-buy-their-way-i
Do they buy their grades as well?
One thing that shouldn’t have to be said, but almost always does is that billionaires are not avoiding taxes by donating. You don’t get more than $1 billion in tax relief for donating $1 billion, nor do you get $1 billion in tax relief. You get a lot less than $1 billion in tax relief (as certain people are happy to point out, top marginal tax rates are under 100%). The idea that billionaires are avoiding taxation with these donations, by paying 2-3 times more in total than they would via taxation, is absurd and to defend eliminating the charitable deduction you have to posit that government spending is at least 2-3x more effective than charitable or just hate the system.
+1
This is something that a whole lot of people, including well educated people who should know better, frequently get very very wrong.
> The idea that billionaires are avoiding taxation with these donations, by paying 2-3 times more in total than they would via taxation, is absurd
You bring up a good point that should get more emphasis, but I think you might be overstating the absurdity of the opposition. If a billionaire is donating straight cash, then yes, they are never actually coming out ahead. But if they donating art, or land, or something unique that’s hard to put an exact valuation on, it’s entirely possible that they might actually be coming out ahead as a result of their charitable donation.
Here for example is a paper about the potential abuse of donations of “conservation easements”: https://www.brookings.edu/wp-content/uploads/2017/05/looney_conservationeasements.pdf
I don’t think it’s absurd to speculate that some amount of “charitable giving” is actually tax fraud that is of direct financial benefit to the giver.
Its absolutely possible, but fairly unlikely that it is significant here. Most of the billionaires in the US have most of their wealth in stocks and or bonds in their companies, and these are generally easy to value. If you have a 40% marginal tax rate you have to get your hard to value art appraised at 2.5x its actual value just to break even on the deal. It is possible, and maybe even likely, that this happens regularly, but it is also not likely that it is a significant portion of all donations from this group.
> Its absolutely possible, but fairly unlikely that it is significant here.
I don’t feel confident in concluding that the numbers are insignificant. In just the case of the fraudulent land conservation easements that I linked, the DOJ filed a lawsuit accusing one group of perpetrators of facilitating $2 Billion dollars of fraudulent charitable donations: https://www.arnoldventures.org/stories/they-were-selling-charitable-tax-deductions-for-profit/.
On the smaller personal scales that I’m familiar with, I think it’s plausible that the average claimed donation value for used vehicles and clothing is more than 2.5x the market value. The Goodwill-type stores I donate to simply hand you a blank receipt, and you are expected to fill in the numbers yourself. I doubt that most people actually know the real value of their donation, and they are directly financially incentivized to put down a high value.
I have much less personal experience with it, but I would not be surprised to learn that a significant amount of donated art has a similar fraudulent markup. A 2008 article from the LA Times (https://www.latimes.com/local/la-me-irs2mar02-story.html) makes claims like “Half of the donations checked [by the IRS during audits] over the last 20 years had been appraised at nearly double their actual value” and “In 2004, for instance, the IRS’ appraisers checked only seven of the 108,554 tax returns with donations of art. They found that more than a third of the 184 objects claimed on those returns were overvalued — on average more than three times their true worth.” My personal knowledge is very limited, but the few people know who are donating significant amounts of art to museums are definitely pushing the legal limits.
So while I don’t know how much impact fraudulent valuations have on the total value of charitable giving, I’d like to see more evidence before concluding it’s insignificant. Where does your confidence come from?
On a separate note, it’s appears that much of the reporting on the conservation easement fraud is being funded by Arnold Ventures. John Arnold was one of the other philanthropist billionaires called out in the the recap as doing good unnoticed work.
At a 40% tax rate and a true value of $0 of the donated/eased land the people involved in this scheme avoided 800 million in taxes. This appears to be one of the largest tax evasion schemes in history if it goes through. You have to find 25 of these just to equal what Gates has pledged to donate.
Almost none of these are actually claimed, something like 1/3rd of people itemize their deductions, and the rest get nothing (tax wise) for their donations. The rich who are donating aren’t getting significant breaks for used clothes and cars unless they are sneaking by 10x their value to the IRS.
Again, people donating and appraising things at double are still coming out behind in terms of taxes in all likelihood. If appreciation of art is offsetting capital gains then the art has to be overvalued at 5-6x its actual value for the people to be gaining on net with the donation.
Small donations of clothing, etc., to Goodwill, Salvation Army, etc., are somewhat overvalued in TurboTax, sometimes in some bizarre ways. I suspect there’s an employee at Intuit whose job is to check tax court cases to see what’s the most someone got away with valuing a donation at, to adjust the values in TurboTax.
Incidentally, for those of you old enough to remember,
this is probably how the Clintons got away with valuing donated underwear at $1 each.Not really – apparently they were inflating the value of donated goods well beyond what TurboTax and the IRS normally allow. (I did not remember this correctly, and found out I was wrong when I checked it.)Billionaires are the least likely to get away with illegitimate tax claims. Conversely, they do better with legitimate deductions.
They can afford experts on their side, but their tax returns are also audited every year because that’s where the money is. Most people don’t get audited because they have simple tax returns and even if they’re wrong on something, it’s only going to net the IRS a few grand at best. Sure, they do a certain percentage to try and keep people honest with some chance of getting caught, but once you have a lot of money, you’re going to have your own personal team of auditors going through your taxes and related businesses with a fine toothed comb.
You exploit the shape of the demand curve. The art world is built on price discrimination, artificial scarcity, and secrecy. The suckers that pay list price are the ones that anchor the appraisal value for the works bought by the people that payed an order of magnitude or two less.
It goes something like this:
1. Be just the right amount of rich for it to be worth your time. Too poor and you can’t afford it, and too rich and it isn’t worth your time.
2. Sponsor an artist so that you (and a small handful of other sponsors) get their work super cheap or free.
3. Loan those works to museums (with a little cash to make it worth their time) so the arty press writes glowing reviews about how good it is and how you are such a spectacular patron of the arts.
4. The artist will put up a couple (but not too many!) works in a gallery for sale. The gallery will inflate the price slightly based on how well step 3 went, then leave them there until they manage to find the one person actually willing to pay that most (but still a fraction of sticker). After eventually making the sale, the art press is going to talk about how good a work it was and how it was a steal at twice the price. Reporting, of course, the sticker price. It is essential that nobody ever actually knows the real sale price.
5. Meanwhile, the artist has becomes a tortured genius and stopped working for a few years before changing style. The art press is going to talk about this a lot too.
6. Repeat steps 3-5 for a few decades. If the artist manages to off themself in the meantime it is about the best thing that could happen for you. It saves you a lot of hassle explaining why they aren’t more productive and it pumps the tortured genius points through the roof. Every time you repeat, the sticker price is inflated. The previous sale’s sticker price and the intervening glowing press being used to justify the sticker price increase, and the publicity widening the circle of people the gallery can draw on looking for the person willing to pay the most.
7. After you’ve gone as far as your going to go with this artist, put a work up for auction. The auction house is incredibly refined at finding the one person in the world that is willing to pay the most, and then pressuring them into paying way, way more than they intended to.
8. Donate your huge collection to a museum (with a little cash to make it worth their while) and a rider that prohibits them from ever selling the art. Every work will be appraised based on the price paid by that one sucker at auction.
There have only ever been a half a dozen works actually on the market (and the people that have them don’t want to sell because they “paid such a good price,” and the “appraisal just keeps going up!”), but you are appraising your hundreds of works based on the single highest sale it is practically possible to make in such a drastically restricted market. If your collection was actually on the market, the equilibrium price would be about that of toilet paper instead.
The gallery and auction house are paid by commission so are motivated to find the person willing to pay the highest price possible, and the art press loves the free cocktails you give them at art parties so are motivated to get invited to to next year’s showing. You, of course, get decades of great press and a huge financial incentive. The museum, meanwhile, gets just enough cold hard cash to make it worthwhile warehousing a shipping container load of dreck in perpetuity.
ETA: And as nkurz alludes to above, if—IF!—the IRS tries to check your appraisal this is the number they are going to come up with because they only have access to the public information like the sale price at auction and how much glowing press it has received, and what prestigious museums you’ve displayed the works at. This is already a stupidly inflated appraisal. But the IRS doesn’t check, so you can try your luck inflate the appraisal way over that.
Fair, but that’s clearly not what’s going on with the billionaires we’re talking about here.
Agree with your point generally.
As a light devil’s advocate though, I could see someone donating to their own charity for this purpose. They earmark the money for charity, sure, but they still largely get to use it how they wish. And there’s the added bonus of tax credit.
Well supposedly within acceptable government guidelines for charitable uses. They are not supposed to be able to spend it on hookers and booze, or a mansion for their kids. Arguably they do get to do some of these things and these deductions are exploited.
Notice how many family members of rich people seem to end up as executives running their charities on 6 figure salaries.
I would love to see similar analysis on non-profit spending from religious organizations. It’s similar, in the sense that many people decry the spending of non-profit status church’s on private jets, cars, and homes for the most sleazy preachers. If we removed the religious non-profit status and made them into normal 501(c) non-profits (with all the rules and regulations that come with that) would this result in a better channeling of money to those in need? Or like criticizing billionaires, it would just drop the total amount of money religious organizations receive/spend. including the money going to the needy. I’d also like to generally know how the total amount spent by these orgs on “bad” things like private jets compares to the total amount spent on “good” things like feeding the needy world wide.
I guess this really boils down to an effective altruism question, as even if churches spend some percentage of their money on “good” things, there’s probably much better organizations spending 100% of the money on those same things you could be donating to. And that don’t siphon it into the pockets of horrible human beings who exploit people’s hopes and fears.
Here’s a little hypothetical to hopefully clarify the tax deduction policy question a little.
1. One argument is we shouldn’t tax Chris for the money she donated to charity. She made life choices that helped a lot of people, just like Alex and Beth. (In fact, in this hypothetical, she helped the same people as Alex and Beth, just by a different path). Alex, Beth and Chris each could have had a billion dollars for their own use and for their heirs, but chose not to. Just as we don’t tax Alex and Beth for making the decision not to earn the money in the first place, we don’t tax Chris for earning it then giving it away.
2. The alternative argument is we would tax Alex and Beth if we could, but since they don’t have the money, it’s pointless. Just like Chris, they are consuming government resources (the taxes on the money they could have earned but didn’t) and diverting their resources for their own private ends. Unlike those two, though, we don’t have to let Chris get away with it.
I’m against educational bloat as much as the next guy, but one of the things the government does is to put up buildings on colleges, and I suspect the billionaire does it as or more efficiently, so this seems like a funny thing to object to. Maybe it is less efficient than centrally planning all the individuals college buildings, but this is still probably going to be generally useful.
Going to make this exact point. Who cares if the new CompSci building is called the “Randy M Memorial Building”, as long as it exists.
I’m pretty sure gambling losses aren’t really tax deductible, they’re only deductible against the gain. Which is as it should be…if I win $1000 at a slot machine then lose it all at the same slot machine, I don’t pay any taxes on the $1000. If I win $1000 then walk out of the casino and never come back, I do.
As a VITA tax prep volunteer, I confirm that’s the case. And as a fellow human, I confirm that’s how it should be.
I was reflecting on this topic since the original post, and I have two points I think could add to the discussion.
The first is that there’s no contradiction between being skeptical of the concentration of wealth and being in favor of the free market. Some commenters implied that the only reason that someone would hold negative opinions about the existence of billionaires is because they’re a socialist/communist/leftist. But this isn’t true; for example, the Economist, one of the most pro-market publications in print, published this article. I don’t have the time to find citations, but I remember both Adam Smith and Henry George (the land value tax guy (and a great example of nominative determinism)) having negative things to say about the concentration of wealth. Basically saying that millionaires are great, but billionaires are a sign of rent-seeking, monopoly, or political favors.
The second is I made a chart that I think better explains my point. When billionaires spend huge amounts of money, they are also expressing a kind of power. In a democracy, we believe that certain types of power should be shared by the people, regardless of wealth. So when billionaires try to spend money to express power in those particular ways, it’s (according to the argument) an illegitimate use of their money. This isn’t a new thing either. In the first democracy, Ancient Athens, the Athenians had a great fear of the concentration of wealth and the conversion of wealth into political power.
The axis of the chart is the expression of political power from spending huge amounts of money. Buying a yacht affects supply and demand for yachts, which is a small but non-zero amount of political power. Buying votes is a large amount of political power. Things to the left of the “line of acceptability” are usually considered valid ways for billionaires to spend money. Things to the right are often criticized or illegal. When a certain type of spending helps people, like charitable giving, people can accept it being further to the right than they would otherwise.
To explain the Vox, CityLab, etc. articles in terms of the chart, they’re saying certain things that billionaires do under the umbrella of charity are actually further to the right than they appear–and that billionaires sometimes call things charity in order to benefit from the fact that people tolerate charitable things more than they would otherwise. I do agree that the tweets are mostly dumb, but I think looking at it this way could explain why there are people who like the charity work of Bill Gates but not Mark Zuckerberg. (This can be true whether or not the media is misrepresenting the Newark schools thing, which it probably is.)
Some have interpreted Adam Smith as believing in the free market only because he thought a free market would eventually result in true equality.
Then he would have been wrong, as people can never be truly equal in outcomes because they clearly differ in goals, desires, values, age, skill, and contribution level*.
If on the other hand you mean equality of opportunity as implied in the word impartiality (the types of rules we would choose behind a Rawlsian veil) then I would agree.
* I chose not to work for the last ten years. Why would I expect to make the same as someone who works 60 hours a week? The trade off was I got the freedom to surf whenever the waves were good and zero in salary, they got a large salary and no free time or juicy waves. I think I got the better part of the deal, but my guess is they do too.
Which some would that be? Smith doesn’t seem to have thought equality of outcome was a worthwhile aim, as I’ve never seen him advocating it orcited to supportit. Equality of opportunity he probably supported if only because he opposed restrictive practice. I can see a case but would be interested in who had actually put this together.
I don’t think we need to go to the extreme of true equality. One surprising thing about the free market is how astounding the wealth *inequality* is. The natural state seems to be a power law, with huge wealth inequalities even at the top.
If you’re thinking of efficiency, network effects, some markets as tournaments, and so on, that makes perfect sense. If you’re thinking (as most people do) that your income closely reflects your level of work and competence, then this is absurd.
So yeah, writing before free markets were common, I’d expect Adam Smith to have imagined something like “people are rewarded in rough proportion to their efforts and skills”, and thus to have imagined a much more equal outcome than we have.
Melted,
Does this mean you are not astounded by the inequality in contributions within a free market? The fascinating thing about Gates and so many of the other entrepreneurial billionaires isn’t the money they earned, it is the value they created which was orders of magnitude greater than their incomes.
Prosperity, and your ability to type on your computer and debate this online, was created by in part by the efforts of Gates and Jobs and Bezos and the Kochs and Waltons.
In a free market people are not paid in rough proportion to their skills and efforts. They are paid in proportion to their contribution to the subjective value of others adjusted for supply and demand. This includes a huge factor of risk, where the market sends signals of potential rewards for those who can create, invent and take the risks necessary to create massive value for fellow humans. Obviously skill and effort are an important part of it, as it usually takes skill and effort too, but it is possible to create the next big thing with a lot of luck, and markets don’t care how hard one worked, they just care that the value was created (or more accurately their rewards reflect that value was created adjusted for supply and demand)
I know this sounds perverse, but I strongly believe that billionaires are, on net a very good thing, that we will benefit widely if there are more of them, indeed we (humanity) would be better of if we had trillionaires. Their rewards (assuming they play by the rules) are a sign of immense value creation for fellow humans.
I may be misrepresenting, but I think the claim at least some people are making is that Bill Gates did not actually create all that value. He created a lot of value, or, more accurately, created a vehicle for other people to contribute to creating value. But some (a lot?) of that value was created by other employees of the company. Bill Gates provided the vehicle for that value creation, but didn’t actually create the value himself.
He didn’t create all the value, and he did not get rewarded with all the value, either. Countless people got part of the value, from the janitors to the programmers, to the marketing and HR employees, to the various vendors p, investors and so on. But in general, the consumer surplus was very big as large as the producer surplus.
The argument for a large upside (the brass ring of entrepreneurial creation) is the huge amounts of risk and investment and reinvestment necessary to create it. I get that socialists wish that the world worked by their premises. It doesn’t. There are few ideas that have been tried as often and failed as spectacularly and consistently as Marxism and its siblings.
Bill Gates created value by solving the immense coordination problem of getting all those programmers and engineers together to solve the “make computers people can use” problem. This is a monumental task worthy of billions of dollars.
>Does this mean you are not astounded by the inequality in contributions within a free market?
Not any more. As I said, for various reasons (network effects, tournament theory, some natural tendency towards power laws, luck, nth mover advantages, returns to scale, etc…), the divergence in contributions in a free market is often very high.
So, do most billionaires “deserve” their money? Yes, in the sense that they produced more added value than they earned. No, in the sense that they were not thousands of time more hardworking/skilled/risk-taking/etc… than others who got thousands of times less.
I think a lot of the disagreement in this area is people sliding between the two definitions of “deserve”.
Melted,
Some aren’t just sliding between definitions, they are imposing a definition which does not apply to the way the system actually works. Worse they are using a definition of fair or deserving which if it was applied to markets would cause them to crash. It is another classic example of the reverse naturalistic fallacy — what ought to be (in their minds) is.
That is what this discussion is really hitting upon. Some people just don’t like how markets work, and how they create billionaires in positive sum, prosperity enhancing voluntary actions. The stuff on what charity they give to is just a symptom of their underlying distaste of markets and entrepreneurial success.
My opinion on the matter is that markets are complex adaptive problem solving systems which reward people based upon value created as judged by those interacting with them and adjusted for supply and demand. Whether we want them to work this way or not is irrelevant to the fact that they do work this way. I would argue they probably have to work this way.
Agree this a big component. I think it also explains why billionaires who spend their money abroad (e.g. Gates) are less controversial than people who spend their money in the US (e.g. Bezos). One might expect that people would be more positive to Bezos because they have a better chance of benefitting, but your analysis would correctly predict that they are much more skeptical, because Bezos is influencing their polity while Gates isn’t.
Obviously the Koch network is fractal.
Thanks for this.
I missed the joke?
https://en.wikipedia.org/wiki/Koch_snowflake
1.26-D chess.
+1.26
Ha!
I recommend The Prize to anyone for a good journalistic account of the whole Zuckerberg-Newark imbroglio. I think you’ll find it even-handed.
Incidentally the true example of a billionaire rewriting public policy with essentially no public accountability and through the imposition of pure financial muscle is the spread of Common Core, which spread like lightning through the country with almost no time for the public to understand it or react to it. If you check the history a lot of it was just straight up “here’s money, now pass my platform.”
Despite being a raving right-winger, I’m pretty sympathetic to the argument that there’s something wrong with a billionaire parachuting in and saying to a government “If you enact my favored public policy, I’ll give you a billion dollars to cover the costs.”
Even with some level of democratic accountability, and prior support from within the government, that still smells a lot like bribery.
But – would it have been better for Zuckerberg to have had his foundation buy some disused school buildings, clean them up, hire some teachers, and offer to admit some number of Newark school kids to the Zuckerberg Achievement Academy instead? The effects would have been similar, for good or ill.
If he creates free private schools at which to implement his own version of schooling, public schools that teach the previous version will still exist. If public schools adopt it because of money from him, there’s nowhere else to go.
I’m curious what people think about the tax benefits given to churches. Does the same principle apply—that doing some good means we should accept the bad things they do and the philosophically objectionable practice of privileging religious groups over non-religious ones?
Also, there may be ways to change the tax code that could address some of the objections to billionaire philanthropy without doing away with it entirely. One proposal I’ve seen is that everyone should be able to deduct charitable contributions, even those who don’t itemize deductions.
I believe the idea here is that religious persecution has such an awful history that we should avoid doing anything remotely resembling it.
So to avoid persecuting religions, we should actively fund religions?
Persecutions against jews has been p horrible through history, but they still get taxed.
Dunno why the actual church should not be taxed, particularly in egregious cases like the Catholic Church where we are wasting so much money on prosecuting them for pedophilia cases, so we are giving a tax break to a criminal organization we are actively prosecuting.
Synagogues can take advantage of not being taxed in exactly the same way that churches can.
To be fair that tends to be a normal situation. Making an activity illegal means it cannot be taxed, so all criminals are making money tax-exempt.
The IRS taxes all income, including income from illegal sources. It goes in line 21 of the 1040.
I think you’ve got the reasoning for making churches tax-exempt backwards.
Churches weren’t originally exempted from taxes because they do such good work.
Churches were exempted from most taxes because the early U.S.A. made an explicit commitment to not having a state religion and not privileging one church above the others. And, given that people back then were not hugely different from modern people in terms of cleverness, it did not take long for someone to think up the idea that you don’t have to ban churches you don’t like; you can just impose taxes on them which are so high that they can’t function, and get the same effect.
Sort of the same way that you periodically get a person nowadays who suggests that, sure, maybe we can’t ban guns due to the Constitution, but if we just tax bullets at $1,000 each, it gets us to the same place.
The power to tax is the power to destroy. It therefore developed that the government couldn’t tax churches specifically. (Although it CAN hit churches with general taxes targeted at other things, in many cases. Being a church is not complete immunity to taxation.)
Donations to charity being tax-deductible is an outgrowth of churches being non-taxable, and charities being kind of like churches and having that status extended to them. It’s not a matter of the government wanting to encourage charity and churches being kind of like charities so they get non-taxable status extended to them.
Yeah, your comment goes to the history, but I’m asking about whether we should favor continuing this tax policy in the present day.
I mean, I don’t personally think so, but that’s because I’m a combination of Christian and libertarian.
I don’t like the leverage over churches which the tax code gives the government, and consider throwing non-church charitable organizations under the bus acceptable collateral damage.
But I’m generally an outlier.
Yes! But in reverse – churches shouldn’t be tax exempt except to the extent that they meet criteria for secular charitable organizations. My club that gets together to discuss movies they like is as deserving as your club that gets together to discuss gods they worship… and that would be not at all; our hobbies should be funded after taxes. (And FWIW, I believe this is how the law works in Canada. A church only counts as a tax deductible charity if it actually acts as one.)
Level playing field, FTW. Also, was one intent of the recent tax reform to have fewer people making charitable donations with before tax money, or was that just an unintended side effect of simplifying the system for many/taking away major deductions from some groups of political opponents?
My impression is that your movie club would also be tax-deductible, if you cared to file some paperwork that churches also need to file? If not, it should be.
Would be in the States. You’d have to list some kind of worthy purpose, but it’d be trivial to gloss it as education. The martial arts dojo I train with and sometimes teach for is a 501c(3), just like a church would be; on the paperwork it has something to do with Asian culture.
I’m not sure it works the same way in Canada, though.
Churches in the States do have much less paperwork than other charities, but otherwise, the treatment is pretty similar.
FWIW, fraternal societies, like the Masons or the Moose or what have you, are slightly worse off – they don’t pay taxes, but contributions to them are only tax deductible if earmarked to their charitable works rather than their other activities.
Would a local film museum be tax deductible in Canada? If so, what’s the difference between that your club, and which one does a Church resemble more?
I don’t think there’s any principled way to defend the tax status of churches – at least, not a way that’s compatible with how our society handles separation of church and state in general. But the tradition has been around a long time, it’s not causing all that much harm, and generally I don’t think it’s worth stirring up sh*t to get rid of it.
That seems like a pretty strong claim.
1) Most churches are organized for the betterment of the members, and are open to anyone who goes through their entrance procedures. Many also consider the betterment of others to be an important mission.
2) If you formed a town yoga studio or counseling group that accepted members free of charge and operated on donations, my guess is you could get charitable status for donations.
It’s true that Churches have lower filing requirements than similarly situated charitable organizations, and I don’t know enough to defend that, but I can see a case reasonably people might hold that they’re nonprofits with benevolent intentions.
I think it’s going to be hard to resolve this debate because Scott is seeing the alternative to billionaire philanthropy as either billionaires spending more on non-charity or the government spending more, while some leftists see the alternative as having a socialist society, where there are no billionaires and the government magically allocates all resources properly and also democratically.
This is Sowell’s constrained versus unconstrained visions. Scott is operating in the real world and thinking about the tax code, and the opponents are operating at the level of How Should An Ideal Society Be.
Excellent comment. A lot of comments seem to be people talking past each other for this reason.
Agreed, which takes the discussion deep into the rabbit hole of the secular faiths of Progressivism and Marxism.
This is one reason I’ve tried to ground my post in a concrete policy (non-)proposal, “don’t revoke philanthropy’s tax-deductible status”. I feel like that’s unrelated to whether you also start a revolution or something.
I think we’re conflating two kinds of opposition to billionaire philanthropy here. Yes, that’s why people who want to overthrow capitalism disapprove of billionaire philanthropy. But people who want to overthrow capitalism are few and far between, and I don’t think they’re central to the case against billionaire philanthropy.
Is hit-based investing actually good principle to judge anything ?
Imagine 3 hypothetical :
– in country A there are 100 billionaire, they collectively donate 50 billion dollars to 1000 different charity
– in country B there are 10000 millionaires, they collectively donate 10 billion dollars to 10000 different charity
In A, one charity successfully saves ten million people from malaria. In B, one charity develop super-desert-rice that save hundred million people from starvation. By hit based investing strategy that emphasized one “lucky find”, more widespread and random charity could very well save more people. Since one random hit could have enormous potential, Yang UBi and high tax could very well more productive than any charity.
This argument ignores that stochastic processes can be measured. Hit based investing says that the billionaires in country B are choosing more effective strategies, and without more information this is correct. It is possible that this is a “lucky find”, but it may also be unlucky that they only found one super-desert-rice level intervention.
However, I personally take one thing further than Scott, which is that I don’t trust Pascal-level numbers ever. This whole Gates saved 100 million lives thing mostly reminds me of Maoists who say like “Mao implemented universal healthcare in China, thats 300 million lives saved! Anyone who says Mao is evil is an ignorant fool”. This is a horrible argument from them, and it’s a horrible argument here. # of lives saved is not an easily measurable quantity, and since people generally have multiple possible deaths, “double-counting” is easy. Not to mention, how many of those possible deaths would even have existed had Gates helped them in another way?
(In general 100 million lives is such an absurdly large number that you can justify just about anything. Honestly, I don’t understand how someone who isn’t being dishonest could argue this, and not be prepared to murder to make sure donations to Gates stay tax-exempt. I think Scott is just being hyperbolic, and don’t actually think 100 million lives (no probabilistic discounting) are at stake, but repeating that number is a strange rhetorical move.)
One could simply not be an act utilitarian. Most people, in fact, seem to manage this.
I think you’re making a mistake here. Pascalian wagers are especially suspect when they hypothesize a tiny probability (usually pulled out of one’s rear) of a payoff of extreme magnitude (eg the existence of heaven or an AI apocalypse). But the Gates Foundation has already saved the lives! I think you’re argument about life-counting being difficult proves too much; my primary counter is that easily measurable != valuable and difficult to count != worthless. Even if your equivocating about “possible deaths” is true and they’ve only really saved 10% of their estimates…that’s 10 million lives. And in general I think defending policies that save more lives than I can comprehend (compared to alternative policies/uses of money) is a good idea. Though not good enough to start using symmetric weapons to defend.
As for Mao, net impact is important. I highly doubt that “300 million lives saved” accounts for the horrors of the cultural revolution/great leap forward.
> Imagine a community with a handful of rich people. Winston buys nice suits and fancy dinners, spreads his extra money around the town’s shops and businesses. Geoffrey puts all of his extra into an opera house (or a polo club, or a church he likes, or…). To my mind it’s absurd to say that Winston owes a larger (tax) contribution to the town’s community expenses than Geoffrey does – Winston’s spending already supports the rest of the town, whereas Geoffrey has directed his funds towards his own specific interests. (Which is fine and dandy with your own private money – but only once you’ve paid your share of taxes like everyone else).
That’s not true. Winston is simply driving up the price of suits for everyone else, or leading people to work as tailors who would otherwise work producing something that other, poorer people, want to buy, like bread.
But there’s no indication that bread is scarce in this town. You have assumed that. I believe that the number of poor people unable to afford bread in any modern western society is so small as to be meaningless (most absolute poverty seems to be not lack of money but allocation of money to the wrong things). In the UK the major cause of people having no money is actually the government not paying them on time (at least according to analysis of recipients of food from charities), not being unable to afford bread.
Assuming Winston wants bespoke suits, he may be driving the price up if supply is inelastic, but if Winston’s taste for bespoke suits means more suppliers start offering bespoke suits rather than just off-the-peg, then the price may well go down. Kind of like how more people buy TVs now than in 1950, but they’re a lot cheaper in real terms (and better to boot) despite the fact that more are being demanded and some people will pay premium prices for TVs.
They put it much more sympathetically than that.
As I brought up in the last thread, the idea is to subject individual initiative to either democratic will or the state in some way. There are specific plans for this, most of which end up at some worker’s cooperative or government board that people can submit ideas to.
The argument is that this would prevent ideas that might be profitable but bad for the community as well as ensuring the community gets to properly set conditions. For example, ensuring that the staff will be sufficiently diverse, that the company will meet certain environmental standards, etc etc. Also, that it would be more equitable to let anyone go before a government board than making people seek out secretive networks of venture capitalists. And lastly, that it meant the benefits would accrue to the democratic state rather than the investors. (Some also bring up the efficiency argument, such that the state/community can move more resources into ideas it likes than private individuals.)
You can see how this vision is not obviously evil. I would argue that any such system would crush individual initiative.* But to some extent, that is a feature and not a bug. Because it would not crush community initiative and socialists are (by and large) collectivists. So they wouldn’t say, “Grr, free will, we hate it.” They would say, “The rights of a community trump the rights of an individual.” There are other people in this thread making points in line with that.
They would subject protests to the same standards. Indeed, a feature of many socialist states was that unions could theoretically strike (a collective action) but individuals couldn’t protest (an individualistic action). Turns out Communism believes pretty deeply in the community.
I reject the label of conflict theorist, by the way. I think there are two kinds of socialists (an insight stolen from Orwell): those who hate the rich and those who love the poor. The former are basically in conflict and do things like declare the existence of entire classes of people immoral. The latter are interested in how policies might actually help or hinder the poor and can be convinced (and can even be correct, at times).
*Specifically, I bring up the unpopular nerdy kid in high school who might have a brilliant startup idea but not be a smooth talker. They usually insist something to the effect that the democratically elected board will be wise enough to recognize them despite being unpopular. I personally don’t have that faith.
Community initiative is often largely individual incentive, since many people are busy, lazy or otherwise not going to help. So such initiatives are often heavily dependent on 1 or a few people.
Ironically, the idea that you can suppress individualism and instead have a mass of people working with equal zeal towards a common goal is extremely fascist.
Like the Github conference that was infinitely postponed after being heavily criticized for lacking female speakers, almost exclusively by people unwilling or unable to put in the effort to gain the expertise to be able to speak and/or to do so?
A big issue with demanding adherence to many lofty goals is that the barriers become so high (and unrealistic) that many people just give up.
Steelmanning the position, socialism does not require equal outcomes. It is specifically opposed to capitalist exploitation. A CEO who is being paid many times the wage of the lowest paid worker is not necessarily exploiting their workers. It’s possible they are simply providing that much value through their leadership. The individual’s incentive (beyond social prestige etc) would be that if the company does well then they will be entitled to a healthy salary for their labor running the company. They just won’t be entitled to profits. In short, the argument is that Founders are paid too much, not that they shouldn’t be handsomely compensated. And many also add that the community is going to bear more of the risk: the Founder will have money, resources, guaranteed healthcare and housing, etc, and so will be freer to take those risks.
Of course, I’ve heard many arguments worse than this. Probably the most frustrating are those who discount the profit motive or believe it won’t exist under socialism.
You have it backward. Fascists basically agreed with the socialist critiques of bourgeois society. They just disagreed with Marxist concepts about workers and class conflict. They either believed the classes could be harmonized by a strong state (with Mussolini) or believed the real conflict was racial (with Hitler).
Channeling my inner socialist: If the community values women speakers, why should a conference be allowed to happen if they can’t meet that standard? They’d argue supporting equality is more important than the conference. Again, communal concerns like social justice trump things like your individualistic right to have a conference full of men.
They tend to point-blank deny this. They argue we’re actually taking too little from people who found companies and the Founders would do just as much if we made more demands on them. Also, because socialism integrates the entire economy, the additional difficulties would ideally be compensated by a supportive state and economy.
For example, they often argue entrepreneurialism will be even stronger under socialism than capitalism because capitalism limits who can be an entrepreneur and puts them under threat of starvation. In a socialist society where people can take risks without fear of health or starvation, more and more diverse people will start companies in a wider variety of areas.
I actually see their point. My main objection to this is that it relies on an efficiently functioning bureaucratic mechanism and I simply don’t believe that’s possible on the level they’d need. I also put more credence in the profit motive. And even where I see the benefits, I tend to think a mixed system could have the benefits of both without the disadvantages of completely eliminating capitalism.
(By the way, if there are any socialists reading this, feel free to correct me if I’m misrepresenting your positions here or this sounds completely off base. This is what I’ve gleaned from talking to socialists but maybe I’m out of step.)
So who gets the ‘profits’?
That depends on the flavor of socialism, but in general the workers decide using a democratic process. They can choose to invest in expanding the business, give themselves bonuses, give management a bonus, invest in the community, build up a cash reserve, etc.
For the most part, there are no profits in an ideal socialist system. Profits come from exploiting labor but exploitation doesn’t occur in a socialist system. How this looks in practice when the business makes more money than it spends varies from ‘our glorious leader Kim Jong Un’ to ‘the Ministry of [Insert Industry]’ to ‘local worker collectives’ to ‘the firm itself which has some form of democratic control’.
So then why do you say
It sounds like, definitionally, there is no profit motive under socialism.
All definitions according to Merrian-Webster:
Socialism, which uses its own jargon, is specifically opposed to number 5.
Socialism is also opposed to #2, unless you are stripping out wages and calling wages profit.
That socialism uses its own jargon is meaningless, profit motive has a meaning in capitalism that requires things like #5 for it to work. If a capitalist says that socialism won’t work because of its lack of profit motive then he is basically saying because of definition #5. Renaming profit motive does not refute that.
Socialism doesn’t oppose #2. At least not Marxist socialism. If A buys an apple for $1, then transports it to a village for $1, and sells it for $4 because that’s the market rate, that isn’t anti-socialist. The merchant did the labor of transporting and selling the apple and the money is the fruit of his labor. That’s #2.
I understand your theory. However, I am clarifying I did not necessarily mean #5 and use the term to refer to other definitions and to financial gain in general. As I made the statement, I hope this carries some weight. But I’ll leave it to any future readers to determine whether that sounds plausible.
Marxism relies on the labor theory of value that posits that all the value of a good comes from the labor within it (roughly speaking, minus commodity costs etc). Example
Companies A and B make identical widgits. Company A sells its widgits to company C for 10 cents each and B sells to D for 11 cents each. Company E notices this and goes to company A and buys all its widgits for 10.1 cents each and sells to company D for 10.9 cents each. Under the labor theory of value company E has appropriated value from the workers at company A to the amount equal to 0.8 cents per widget (minus any extra costs like longer shipping routes). This type of arbitrage is logically forbidden under Marxism.
Arbitrage is labor. Now, socialism does have the concept of unnecessary labor. Who says arbitrage is unnecessary labor? Some socialists, sure. But others might not.
Anyway, definition #2 doesn’t describe just arbitrage. It describes basically all forms of sale where the price is higher than the inputs. Which is all forms of desireable sale.
The example given is a clear violation of Marx. The discovery of the arbitrage position does not logically cost more time and effort or skill if the position is for 10 widgits or 10,000 widgits, and the differences between the two situations will be based on the ability to control capital (ie to be able to purchase 10 or 10,000 widgits). It is primarily a transfer from worker to capitalist.
No it doesn’t. From a Marx’s perspective all the value within the goods outside of the commodity inputs were from the labor of the workers, and all excess out to be paid out to the workers as wages. You have to redefine wages/profit to make it fit under Marx. Profit is excess of wage costs and the appropriate return to capital under capitalism, returns to capital are exploitative rent-seeking under Marxism.
@Baconbits,
Marx, in Das Kapital, posited not that value was determined by actual labour but by something he called (in the translation I read) “socially necessary labour time”. This meant something like: the minimum amount of labour time which is necessary to produce this product in the relevant market. I don’t think this is widely known. This goes some way to clearing up the example you posed with the ABCD companies.
In my reading of Kapital, in any case, the labour theory of value was also explicitly an equilibrium (ie long term) lower bound for the market price of a widget, rather than a determination of the exact market price. He did acknowledge that market prices will dip below and spike above the price suggested by labour theory value in the short term. I think it’s trivially obvious that in the long term a company wouldn’t bother to make widgets on which it was making a loss. Marx also assumed that competition would tend to force market prices down towards that lower limit determined by the labour theory of value in the long term. To what extent that has played out or not we can argue, but I think we have to credit him that he did know this was a dynamic and reactive system and not a prescriptive one.
@Erusian
But profits are a direct way to measure performance of the company, by the choice of the consumer to prefer that product over that from the competitor.
By adding a elitist, bureaucratic layer that decides who performs well, the ability for the consumer to reward good performance often gets diluted and distorted. Elites often become selfish, delusional and unrepresentative, like in most or all communist countries who refused to give sufficient reward to the leaders and workers of companies that satisfied consumer demand the best or withhold rewards from those that didn’t.
Social-democracy (aka a mixed social-capitalist model) seems to offer a far better balance between security and reward for risk-taking than an fully socialist model. Too much security and too little reward causes stagnation.
My perception is that it wasn’t actually the whole community who demanded way more female speakers, but a relatively small elite with disproportionate power. This delusional elite believes in falsehoods that make them demand the impossible, evident by the fact that leaders of the conference who agreed with their demand, were unable to satisfy them. Hence: no conference at all.
In a capitalist system, the market decides what is sensible. Reasonable demands get catered to and unreasonable demands do not, because even though capitalists would like to cater to the unreasonable demands, they can’t.
I think that many anti-capitalists refuse to accept that they are being unreasonable and do not accept the limitations of reality & believe that by changing the system, their unreasonable demands will be met. Even worse, many communist countries have shown that when the new system doesn’t change the laws of nature or the desires of mankind, the response is often to harm people in an attempt to make the system give the desired outcomes.
Firstly, I reject the claim that the values of these elites that call themselves socialist and democratic, but in practice tend to be anything but democratic, are communal values. These people typically forbid all the values that conflict with theirs. Their idea of democracy is the autocratic, reverse one: our ideology is the will of the people, no matter what actual voters want.
Secondly, I fundamentally reject the notion that we should have an absolute threshold of what is acceptable, rather than a relatively one, where we get close to the best that is possible within the limitations of reality.
In the former model, any delusions about reality (and those are very common) means that you either get nothing or an outcome far from optimal, within the restrictions that exist. The latter model gives you something much closer to the best possible.
Also, if demands of different people don’t inherently conflict, then why shouldn’t each group deserve to have others try to cater to their demands, including minority groups? If I want to have a conference that selects the best speakers and which doesn’t care that these are (coincidentally) mainly men and am willing to pay for it with the income from my labor, why would others get to prevent me from doing this? They can have their majority female conference if they can manage it.
If they don’t want the outgroup to have a conference because the niceness or even mere existence of that conference shows that they are being delusional, then aren’t they doing harm by trying to withhold that evidence from the people?
Except that we saw in practice that socialist systems that put an elite in charge of distributing profits, results in compensation being based on the approval of that small elite, rather than the masses. This means that making a mistake that turns the elite against you, wipes you out completely.
It also means that the goal of entrepreneurs becomes to satisfy the elite, even when that comes at the expense of satisfying the people.
Not just efficient, but also apolitical (as in not having a political view distinct from that of the populace). This is just not realistic.
The free market provides checks and balances for the inevitable inability for the government to represent the people accurately, just like the government provides checks and balances on the inevitable inability for private companies to perfectly serve consumers.
PS. Note that I don’t think that capitalism is perfect, but it is a good base system, which can be improved upon with socialist elements, but not by replacing it with a system based on socialism.
I’m going to invite any socialists to take up the mantle here.
I’ll restrict my comments to this: I too see there are issues with current society and disagree that capitalism is the perfect way to solve all of them. To give an example, I agree that Venture Capital is often prejudiced. Not so much against women and minorities (it tends to be very accommodating to women and minorities who check their other boxes) but against certain geographies, classes, and industries. (And this naturally bleeds into racism/sexism because who makes up a disproportionate share of the poor, low education people in Mississippi?)
I don’t think the government can outcompete Venture Capital. I do think the government could do a lot of good by providing an alternative targeted specifically at poor areas with the understanding they are stimulating business in a way that’s not as profitable as your average VC firm needs. I would absolutely support a government program that allowed people to go before community boards and get financing and community support if they met certain community requirements. It is a great idea on its own merits. But why does it have to replace the private alternative completely?
My experience is that socialists often cannot be less than total or less than revolutionary. It’s not enough to propose specific solutions to specific problems: the entire system must be rotten or must conform to a particular moral belief. A number of specific problems always add up to so much bother that it outweighs the benefits of the system (supposedly: they never show their math in a rigorous way.) And that’s where we part ways.
PS: It’s always a stark reminder this blog is run out of San Francisco when politics comes up. Here, I am apparently some sort of arch-rightist. The reality is that I’m not a rightist by national standards, something I can confirm with various data. But I guess I’d be a far-rightist in SF.
This seems like a perfect problem for private industry to solve. I think it’s a uniquely bad role for the government to play (essentially picking winners), but I’m perfectly willing to run an experiment and see.
You misunderstand the idea, I think. My suggestion would not be the local government running businesses: it would be offering small business loans and possibly other community resources. However, the company would have to be profitable on its own. Something akin to the SBA.
Additionally, I think you missed the part about these having lower returns or being riskier investments. There are probably less safe bets in a poor community. The government might still want to take on the risk because, even if the fund isn’t as profitable as safer investments, there are secondary benefits to making sure an area has employment, a native class of business owners, etc.
Anyway, capital funds and the like are heavily regulated in the US. Maybe in a world where we regulated capital firms and banks less then smaller alternatives could pop up. As it is, the regulatory burden is so large we have a few megabanks and the poorest communities have nothing.
Like, let’s say your friend has an idea for a grocery store. He goes to his church and community hall and all around. He asks everyone to put in $1,000 in exchange for a share in the store. He raises $1,000,000 from a thousand people. And then the SEC comes and arrests him. Want to do it legally? The lawyers are punishingly expensive.
It’s theoretically possible to have a libertarian solution of extreme deregulation. But realistically? Not going to happen. Do you really think putting fewer regulations on Wall Street (which is how your opponents will brand it) will be successful?
It’s weird how these comments are so different to my instinctive interpretation of the situation. I guess that’s what you mean by the leftists being silent. Honestly, I really love most of what you write, but I can often barely read the comments for seeing viewpoints I feel like I can barely reach common ground with.
But, lets give it a go boiling this down to a couple of talking points.
1. “Help, people criticise people who are helping less-than-perfectly more than people who are doing nothing”
Yup. I agree this sucks, but I think people are just always going to do that.
Partly for arbitrary reasons: people emotionally notice more when someone “on their side” does something wrong
Partly for realistic reasons: you can police your in-group. You have no leverage over your out-group.
It’s always a difficult line to walk to say, “hey, it’s pretty good that some billionaires do a lot, but I still want it to be better” without falling into “Gates is God” or “Gates is Satan”. But I don’t think there’s any better choice than trying to convey that middle ground. So, let’s avoid saying “this is terrible” when it’s already much better than it might be. But if we still think “it could be better”, I think it’s futile to hide that opinion because the conversation will always be public and a lot of other people will say that anyway.
2. “Hey, this rich people voluntarily paying for things is pretty great. Why don’t we fund roads like that? And the fire service? And the military?”
This is my potted summary of marxism for libertarians.
Imagine there’s no laws collecting taxes and paying for an army, or roads, or police, or fire service. You just rely on donations from rich people. It’s good that some people donate, rather than just indulging themselves with the money instead.
But the system as a whole sucks because it relies on a few people being generous (or self-interested) and they might change their minds at any time. If you instead collect a standard donation from everyone who can afford it, the whole system runs much more smoothly.
It used to be exactly like that! It wasn’t as effective.
So, it’s good that, in a situation where basic necessities aren’t provided in an organised way, that SOME people voluntarily do so. They are doing a good thing. But I don’t want to be too enthusiastic, because it would be so much better if they didn’t need to because everyone did, by default, because it was the law.
> Imagine there’s no laws collecting taxes
Awesome!
> But the system as a whole sucks
No it doesn’t. It’s true that some public goods might be underproduced. But with the government public goods are very much overproduced.
> It used to be exactly like that! It wasn’t as effective.
It used to be possible for people who really hate being taxed and conscripted to move to highlands. But yes, organized crime syndicates (such as governments) are more effective in violence than peaceful people who just want to be left alone, so all the land has gradually been subjugated. Not exactly a cause for celebration, though.
Imagine there’s no laws collecting taxes and paying for an army, or roads, or police, or fire service. You just rely on donations from rich people. It’s good that some people donate, rather than just indulging themselves with the money instead.
From the perspective of someone who (see comments above) is a “libertarian” or “market anarchist”, this is passing very close to the realm of “strawman” regarding libertarianism / market anarchism / anarchocapitalism. Not to mention the fact that you’re completely eliding the pretty significant (from my perspective!) differences between “libertarianism” and “anarchism”. Which is reasonable, I do the same thing for the other side of things. I know that to the people over in that part of the map, there are vast differences between “socialism” and “communism” and “democratic socialism” and “socialistic democracy” and the “People’s Front of Judea” and the “Judean People’s Front”, etc. But from my perspective, it’s all “people who want to take my stuff and tell me what to do”.
That said, “libertarianism”, qua, allows for a government and some forms of taxation. The various flavors of free market / capitalistic anarchism don’t. JSYK.
So, a better way to phrase your summary would be:
“Imagine there’s no laws collecting taxes and paying for an army, or roads, or police, or fire service. You just rely on voluntarily collected user fees rather than funds collected under the threat of imprisonment, or worse.”
Thing is, this system actually works, even now. In New Hampshire, for example, townships will often hold meetings wherein they discuss what someone considers a “need” for the township, like a new school, or repaving the main road through town, or whatever. They’ll hash it out, decide if they think it’s a good idea at all or not, take pledges (kinda like a Kickstarter campaign) and if they hit the threshhold, build the thing. I live in New Mexico, but I was in New Hampshire in May, visiting some friends, and was told about this very thing, regarding the building of a high school in a town that had decided they wanted one of their own instead of shipping their kids off to one in a different town. The school construction in question was managed by locals, and came in both under budget and before schedule.
So, given the existence of examples like that, compared to the rampant corruption, waste, and fraud perpetrated by various American governments of various levels (apologies if you aren’t American, but I am, and thus, it’s the example set I’m most familiar with) and without even getting into the Lovecraftian horrorshows created by say, the Russians, Chinese, Cambodians, North Koreans, Cuban, Venezuelans, etc, you have an enormous amount of skepticism to overcome in me that Leviathan can really do a better job here than free people acting voluntarily.
I don’t think your argument for some taxation versus no taxation is a valid response to this debate. We’ve already got taxation, with roads, fire departments, welfare, and very large governments. The debate is whether billionaires should be allowed to give to charity over and above the taxes they’re already paying.
I think the only policy being debated is the tax exempt status of charitable donations, so the comparison of money going to taxes and money going to charity is apt.
Man, this all sounds great. Maybe we can levy a tax of one warship on each billionaire and no one else has to have the Navy weighing down their tax bill?
Athens approves.
I see several problems with this, starting with the fact that your average billionaire would go broke paying for a modern warship.
So as a bonus we’re incentivising them to reverse cost disease? Result!
So it sucks all the time for everyone who is coerced into “donation” instead of taking the risk that it could sucks if charity declined (and, maybe, having the situation sucking would motivate people to start fixing it and donating).
Or, you avoid risking to take a certain loss in the future, by guarantying you take that loss ahead of time. Maybe the end result is the same. Maybe you’re worse off. But you’re never better off.
You’ve mentioned collateral damage several times. This brings up my personal pet peeve with pretty much any form of regulation: people just don’t look ahead when making rules. The term, no – the concept of second order effects is beyond many (most?) legislators and bureaucrats.
Or, to put it in more general terms – we’re still very far away from evidence-based government. Not to mention from having an actual theory of government – we don’t even have the absolutely most basic hints of empiricism, like trying to systematically track legislation effects.
So you end up with proposals that “sound good”, at least to part of the electorate. And… that’s it – no extra steps really needed.
A common refrain in the Reason comments section regarding obviously stupid policy proposals is “obvious consequences cannot later be decried as ‘unintended'”. Which is sadly clearly false, since it happens all the time and people keep letting them get away with it.
Any consequence is an unintended consequence if you’re hopeful enough.
For sure, I’d rather see a marginal dollar go to billionaire philanthropy than government spending. Most billionaires at least seem to have a decent level of interest in making sure their expenditures have a good impact. Less likely to spend on stratospherically idiotic policies like subsidizing the use of corn as automobile fuel. And even if they do spend it on political bribes or whatever, at least those bribes will be done more efficiently than paying the health spending of Nebraska in perpetuity.
First off, I would say that it is more than a little condescending to assume that billionaires have all the answers. They have quite an awful track record of throwing money at boondoggles and it isn’t obvious to me that it couldn’t be better managed.
https://newrepublic.com/article/120178/problem-international-development-and-plan-fix-it
Why are the people who already won at life allowed to be the people who decide how to fix what is wrong? Surely the problems they identify are not the problems that the people who need the most help would select.
Correct me if I’m wrong, but there seems to be substantial government involvement here? My experience is that government more often than not are more concerned than billionaires by public visibility of projects and of secondary objectives (like supporting national industry or exports, or political advantage). Perhaps there is a review of this somewhere? Fodder for an adversarial collaboration?
Mainly because they already have the resources and are willing to spend them. Second, because they (see above) have fewer ulterior motives. Thirdly, because winning in life implies talent, grit, and general resourcefulness (although you may argue that this is equally true for winners in politics and bureaucracy).
I’m not saying government has been outstanding in this field but I think that the ability for public oversight has the potential to make a better system then just letting billionaires with no oversight have complete control.
I concede neither of those points. Neither of us is inside the head of these billionaires and your hypothetical motive (they actually want to do good) is just as plausible as mine (they are complete sociopaths who just want another way to one up their friends).
Winning in life implies being born in the right situation, being ruthless in your pursuit of power, willing to do whatever it takes (including doing harm to others) to win. Not qualities that necessarily overlap with charity.
Why do you think that? The Industrial Revolution happened without public oversight. As did the discovery of vaccinations, or antibiotics. Or the internet.
And who is talking about giving billionaire complete control here? Empirically, free markets, where no one has control or oversight, tend to do better than the alternatives.
Lots of reasons. Billionaires aren’t immortal and realistically don’t personally oversee everything. The government has whole departments (GAO, OIG) who sole purpose is to convince the half of the country whose fundamental belief is that government is incompetent and corrupt that the government isn’t totally incompetent and corrupt. Because obviously wasting a few million dollars on poor people in Africa is much worse than throwing $29 trillion at Wall Street.
The great recession is a great example of what happens when you get high on your own supply and think markets function well with minimal oversight.
There is no such thing as a free market. e.g. Patents wouldn’t exist in a free market.
And even if you don’t agree with any of that, it is objectively true that it is better to have an industrial policy (complete with protectionism and state supported sectors) to industrialize. Just like most western countries did. Which is why forcing the developing world to kill their public sector and be ‘open’ via the IMF is especially crewel.
The great recession is a great example of the failure of a central bank to properly set monetary policy.
Is the second sentence supposed to be an argument in favor of the first?
No it is not “objectively true”. Come on.
Totally! Economies function much better when they’re organised by markets where there’s no one overseeing everything. Bill Gates could only save millions of lives from malaria because he could just buy anti-malarial medicines and rent space on ships and what not.
Telling a free marketer that billionaires don’t personally oversee everything is like telling a democrat (small ‘d’ deliberate) that a government might get voted out. That’s the *point*.
And yet Americans’ trust in government’s ability to handle both domestic and international problems has been falling for decades. I’m sure that you’ll just claim that this is just an amazing coincidence, that it’s not possible that a government agency could fail to achieve its goals of convincing people.
Funny then isn’t it that the GFC occurred after decades of tighter and tighter international regulation of financial markets, isn’t it?
But no, it’s never the regulators’ fault, isn’t it. As long as there’s one person on the planet who is pro-free market, anything that ever goes wrong in a tightly regulated market will be the fault of that person, absolutely never ever the fault of the people who lobbied for and passed the last bunch of regulations. Just like the fact that the government has whole departments set up to manipulate the public’s views has nothing to do with declining trust in government.
Why do you think that? I’m not an expert in public sector management but I have heard a few people argue that American regulations like requiring bureaucrats to go with the lowest cost bidder are far more costly than the corruption that they prevent. I don’t see how this is obvious at all.
And that’s not even commenting on the fact that you are comparing millions to trillions. You seriously think that wasting millions is *worse* than wasting trillions?
The free market link doesn’t work (was that meant to be intentional? 🙂 ). As for patents, I don’t believe in letting the perfect be the enemy of the good, as you might have guessed from my comment on corruption.
Funny then that Hong Kong managed to do so without that isn’t it? Or that Japan’s much-vaunted MITI had a number of failures, such as failing to develop a Japanese semiconductor industry despite shovelling an estimated US$19-$54 billion dollars at it? And Singapore and Germany also failed at that? Or how Japan’s MITI tried to stop Honda moving into cars. And if protectionism is so darn awesome, why is the USA, which basically is one huge market internally, so rich?
And why, if it’s better to have an industrial policy and protectionism and state supported sectors, are any countries poor? What country hasn’t tried an industrial policy (apart from Hong Kong)? India is notorious for its government interference and languished in poverty for decades. Ditto with numerous African countries.
Um, the sole power that the IMF has to enforce its views on the developing world is that the IMF has money so it can lend to governments that can’t borrow any more from private investors. If the IMF didn’t exist then governments in developing countries would have to kill a lot more of their public sectors. So the IMF is acting exactly the opposite to what you accuse then of.
Personally I think the IMF should be abolished. If developing governments can’t persuade private investors to lend more money to them then they should have to kill their public sector. I think that would do far more to encourage them to adopt pro-growth free market policies than the IMF does by ‘loaning’ them billions of taxpayers dollars at the cost of a few government officials having to sit in a room and appear to listen to a pro-market lecture from a bunch of NGO bureaucrats.
@Cliff
ROFLMAO Oh really? care to elaborate on just what changes to the fed funds rate and when would have prevented it?
@ReaperReader
broken link -> https://larspsyll.wordpress.com/2018/01/15/neoclassical-economics-is-great-if-it-wasnt-for-all-the-caveats/
Your comment takes mine out of context. I was commenting on why I think public oversight is better than singular oversight. Even if Bill Gates has set up a decent oversight system now (which is debatable) there is no guarantee it will outlast him. Ship space is entirely irrelevant.
Propaganda works. It doesn’t hurt that half the time the people in power want to demonstrate that government can’t work.
‘look how corrupt Medicare advantage is, stupid corrupt government!’
Yup I notice that the free market often fails to live up to its promises therefore I love all government, want government everywhere, and think it capable of messing with your mind. Would you like a match for that straw?
That link doesn’t say what you think it says. Please refer to this timeline of deregulation on wall street and point out any errors or at least how it mischaracterizes the situation.
I’ll even point you in the right direction: a valid critique of Dodd-Frank is that it added tons of useless compliance minutia as a barrier to entry while not doing much of anything to stop Wall Street from imploding again because the Obama administration and most of congress really should have CitiBank logos on their business cards.
Plenty of blame to go around here. But blaming regulators in general when some of the regulators have an ideological commitment to deregulate misses the mark. I can’t figure out why we haven’t lynched Robert Rubin and Larry Summers (democrats) and given Sheila Bair (republican) a medal (all of them regulators).
I thought it was rather obvious, (especially the millions to trillions) but /s.
Rather than select quoting the last bit. Hong Kong’s colonial legacy gave it a very particular advantage. Japan, and Germany have long been industrialized. What is good for industrialized countries isn’t necessarily good for countries trying to industrialize.
That’s about neoclassical economics, not free markets. And one of the faults of neoclassical economics is that it assumes perfectly efficient governments who can step in to fix market failures, of which neoclassical economics identities *many*.
The linked post asserts that:
>I think that modern neoclassical economics is in fine shape as long as it is understood as the ideological and substantive legitimating doctrine of the political theory of possessive individualism
But if we look at history, neoclassical economics’ ascendancy in economic teaching was followed by increasing government intervention. Neoclassical economics became the economic teaching mainstream about the 1900s and it generally takes a generation or so after that for the students who were taught under the new paradigm to reach power and start implementing their ideas. So, what do we see a generation or so into the 20th century? John Maynard Keynes, famous for his calls for government stabilisation, the USA New Deal, tariffs, quotas and all widespread in the 1930s, the Bretton Woods exchange rate system agreed in 1944, intervention after intervention. Which is quite consistent with the neoclassical picture of infinitely wise and good governments while markets are depicted as only functioning under a ridiculously narrow set of assumptions.
If you want economic theories that support free market policies you want theories like [public choice theory](https://en.wikipedia.org/wiki/Public_choice), which is about modelling how governments act in the real world as opposed to under the assumptions of neoclassical economics. If you want empirical evidence, it’s everywhere: obviously markets manage function in numerous situations outside those narrow assumptions of neoclassical economics.
(Note: I do think that neoclassical economics was a major improvement over classical economics, marginalism by itself was a huge improvement. But neoclassical economics was developed in the 1870s, so 150 years ago. Didn’t the blogger pause to think that perhaps there might have been some developments in economic theory over the last century and a half? Nah, neoclassical economics encourages pro-government blinkered thinking. I’m not claiming any special insight on my part, I just happened to have stumbled over some writings by far smarter people than me, otherwise I’m sure I’d have been another reflexively anti-market lot like your linked blogger.)
Um, what does this have to do with my comment? Markets work without *anyone* having oversight. Are you talking about Bill Gates overseeing his charitable endeavours? I don’t see this as being a big deal, I mean obviously it’s better that he spends his money more wisely than not, but Gate’s fortune is pretty tiny in the scheme of things. His fortune is about US$95b, meanwhile little old NZ’s GDP is US$200 billion, so NZ alone generates double Gate’s entire fortune each year – and if it wasn’t clear, GDP is a flow, wealth is a stock.
Oh, is the medicine sent by aircraft? Well substitute that if you like. One of the advantages of systems that work without anyone in oversight is that people can get anti-malarial medicine even if I am totally wrong about how it is actually delivered. Systems that require public oversight, or Bill Gates’ oversights, aren’t that robust to individual ignorance.
Nope, this is wrong. The Communists spent decades propagandising in Eastern Europe and the locals went capitalist the moment they could. In 17th century Jacobean England every Anglican church preached the divine right of Kings, and then there was a civil war and a bunch of English cut their king’s head off.
I think the correct line here is Abraham Lincoln’s: “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”
Doesn’t help either. The Soviets spent decades making sure that everyone in power was pro-government and the Soviet people still thought the Soviet government was corrupt and stupid. Probably because the Soviet government was both. See my previous point on propaganda, ineffectiveness of.
Well in my defence, firstly this is a pretty common outcome with people who only know neoclassical economics, and secondly you did just tell me that “propaganda works”, which is exactly what I’d expect someone who believes that government is capable of messing with my mind to say.
Trying out that propaganda thing, are you?
Please refer to this history of financial regulation in the USA.
Looking only at financial *deregulation* is like looking at only market failures, you’re obviously going to conclude that any failures are caused by deregulation/markets. If you want to get a true view of the situation, you at a minimum have to look at both regulation and deregulation. (I do not pretend that I have a true view of the particular situation of the GFC. But if you want to convince me that it was deregulation that was at fault, you’re going to have present some evidence that you at least attempted to approach this with a semblance of an open mind.)
Yeah, you’re still assuming that if a highly regulated market crashes it must be the fault of the free market types. Here’s an alternative view.
Ah, noble art of sarcasm, how neglected are you in these days. The proper use of sarcasm in an argument requires some skill. It’s not just a matter of saying something that you don’t believe, you need to pick something that if your opponent disagrees with it they will be undercutting their own argument but if they disagree with it they will look like a total ignoramus. See Scott doing this in part II. Otherwise you leave yourself open to someone who reads this and thinks things like “okay, the higher order terms can get confusing, but how can someone think that a million dollars is less than a trillion?”
And India and Pakistan and Nigeria and Bangladesh and Egypt and dozens more also had colonial legacies and industrial policies but didn’t have this take off.
The countries around the world which have taken off are the ones with relatively uncorrupt, not-too incompetent governments, private property and generally market-set prices. Industrial policies are a distraction.
What are you talking about? Japan’s workforce in agriculture fell from 17 million in 1950 to less than 6 million in 1990 (1990 date picked on basis that that was before the rise of retirements really hit Japan). That was some rapid industrialisation post WWII.
Well I suppose not necessarily, but empirically: relatively uncorrupt and vaguely competent government, protection of private property rights, prices mainly set by market processes, these seem to be good for both industrialising and industrialised countries. (And by the way, for the sake of pedantry, I am taking industrialisation as a synonym for wealthy, I think that on the whole the services sector is better for both the environment and workers rights.)
People who won at life can hire experts to tell them how to have a positive impact on the world.
People who lost at life tend to miss the big picture in favor of their immediate local problems and short-term solutions. Being under pressure doesn’t do any favors to your decision-making ability, nevermind the toxic culture that’s probably surrounding you from birth, now that your country/ethnic group/family is reduced to either fighting for resources to survive or festering in a ghetto.
There is a difference between identifying problems and finding solutions.
You could also hire an expert to help you find solutions.
Leaving aside the billionaire class, the numbers for which i’m less sure about, richer people donate more often to cultural and educational causes (art museum, symphony, university, etc.) whereas poorer people donate more to social and religious charities, which tend to more directly benefit the poor. So maybe they know how to have a positive impact, but it seems suspiciously self serving.
Do you have figures here? This feels wrong to me, although I can’t state why other than to note my relatively poor grandparents supported cancer charities, as did some of their siblings, not charities concentrated on local poverty, and I feel that given to a cause is a norm.This might reflect the more-embedded UK welfare system (assuming you’re writing from a US perspective) though.
A good (if somewhat old) summary is here, especially table 9
In summary,
-Households with income less than $100,000 gave $9.3 billion to basic needs, $2.7b to education, and $1.0b to arts
-Households with income greater than $1,000,000 gave $1.9b to basic needs, $12.9b to education, and $7.9b to arts.
Edit: actually table 25 is more clear, with income below $100k directing 41% of their donations towards helping the poor, and incomes over a million directing only 15%.
Wouldn’t we expect the people who won at life to have better decision making skills than the ones who didn’t?
This.
Profit is the means by which people who have demonstrated superior judgement in allocation of resources are given control of more resources; the net effect is control of resources in rough proportion to prudence in their allocation.
Yeah, your blind faith in the free market isn’t at all convincing. If you can’t figure out why some white guy born in Connecticut has billions to throw around on charity and why some smarter black guy from the Central African Republic doesn’t I’m not going to be able to explain it to you.
WRT being good at allocating resources, it doesn’t mean much that a billionaire’s more successful than a millet farmer from the Central African Republic, but it means quite a bit that he’s more successful than the million or so other white guys from Connecticut who are not billionaires.
And your assumption that being more successful than the other guys in Connecticut makes him superior at ending poverty and deprivation in Africa is the problem.
Not automatically superior, but if he’s self-made it’s about as good a filter as you’re likely to get, and if it’s inherited money then he’s at least no worse. As someone who’s worked for both, I can say that running a charity is in fact quite a bit like running a business.
If I’m saying this out of blind faith, then you should be able to point to evidence that it’s wrong… right?
Running a charity often, if not always treats the people as blank slates to be acted upon. From the article I linked to:
And government aid doesn’t?
Government aid hasn’t been amazing at this either. But at least government aid is partially accountable and subject to oversight. The solution recommended in the article is small incremental efforts that don’t scale easily. Exactly the last thing on earth someone who has had huge success in business would think of or be good at implementing.
That’s a very mixed blessing — requirements designed to ensure accountability and oversight often make government aid all the more clunky, sclerotic, and prone to viewing its subjects as interchangable blobs of need. And I’m not very sanguine about their track record for delivering accountability and oversight in the first place.
Now, I am halfway sympathetic to legibility concerns — the Seeing Like A State thesis applied to giving, basically — but the largest and least accountable players in the private aid biz are the major NGOs. Unless you’re prepared to level the same amount of criticism at the likes of the Red Cross as you do at the Gates Foundation, I don’t think this works as a criticism of billionaire philanthropy specifically.
That reminded me that I vaguely remembered there being a bit more to the link I had posted (I pulled it from memory a while ago) and sure enough there was a part two.
https://newrepublic.com/article/120318/development-ideas-work-pay-results-and-data-analysis
And yes he recommends a rethink of NGOs in general and trying to work with, rather than around local governments.
No. If Bill Gates gives 10 billion dollars to a charity then Bill Gates is the oversight, which is more oversight than the government generally gives because it is his money. Private oversight is significantly and consistently stronger than public, what you are saying is you just don’t like their style of oversight and prefer one with more lip service to you.
And what happens when bill gates dies? Presumably the org isn’t going to shut down. And now who has oversight? And when they leave? does the org need to wind down? If Bill gates magical oversight was the key to it working surely it is just a matter of time until it is overcome with corruption. Hypothetically, what if he designed it so that he was really the only thing between corruption. Do we trust that every billionaire took as much caution designing their charity?
The ability to form a limited liability corporation, or a charity that operates like one is not a god given right. Incorporation is a privilege granted by society which imposes costs upon it, and which must, as a consequence, be made available selectively to those who can prove that they have the ability to use it responsibly.
So as usual, the question isn’t no government vs total government takeover; it’s how much government.
You are just dodging, you claimed that we need the government running these things to get oversight which is clearly not true. The fact that Bill Gates’ oversight is impoerfect changes nothing as the government oversight is also imperfect and likely worse than Gates’ even accounting for your objections.
With Bill Gates it is entirely up to Bill Gates how much oversight there is. With the government we have GAO, OIG, ect. We can have a standardized and centralized database of past projects and their results rather than the status quo of:
I’m sorry, who would plausibly know better than the billionaires? Are you suggesting that the people suffering know the causes of their suffering and know how to alleviate it but are choosing not to on their own?
I’m suggesting they don’t have the resources available.
So then is there some room in your philosophy for someone who has the resources and notices that some people lack them, so decides to supply them the resources required?
Or is that something only people who work for a government agency are able to accomplish in your worldview?
I’m a big fan of the give directly charities, obviously they aren’t for every problem but I think they often get overlooked by people who want a massively scalable solution.
Europe was at one point as poor, or poorer, as Africa is now, as was China, Japan etc. These areas managed to become much richer than Africa without external aid from a massively wealthy external group which pretty much puts to bed the myth that you have to have external resources to go from poor to rich as a geographic area.
Yes, because we all know that the west developed with no aid… Colonialism, slavery, resource extraction.
I can’t imagine what is holding the rest of the world back.
By “the rest of the world” do you mean Africa? When did colonialism begin? 1800’s? I think by then Europe was pretty far beyond African development levels? Do you attribute the rise of China to colonialism and slavery? I’m a little at a loss for how you can attribute all past development to colonialism and slavery.
@User_Riott, trade was pretty unimportant for the industrial revolution. In 2014, Clark, O’Rourke and Taylor published a paper estimating that the impact of trade in the 1850s of 25%-30% of British national income – but that is for all trade, including with the USA and France. So colonialism would be even smaller. And they estimated that in the 1760s the welfare impact of cutting off all trade would be only 3-4% of national income. While 25-30% sounds large, GDP per capita in Britain had doubled between the 1760s and the 1850s.
Clark, O’Rourke and Taylor, 2014, The growing dependence of Britain on trade during the industrial revolution, Scandinavian Economic History Review (working paper publicly accessible at https://www.economics.ox.ac.uk/materials/papers/13258/clark-et-al-new-world.pdf)
User,
I would argue strongly that colonialism, slavery and such were headwinds against economic prosperity even for those doing the exploitation. Prosperity of the levels seen over the past two centuries can only be explained by positive sum games, not zero sum.
Who else should decide then? I’m sure Bill Gates makes his share of mistakes, but it’s also obvious that he makes better decisions about where to donate his money than the U.S. government would make on his behalf.
The way I think about this is similar to my view on public banking. Private banking has done more damage to society than anyone can really imagine, and since they seem to be able to get unlimited public bailouts I don’t understand why they aren’t all nationalized. Public banking hasn’t been a panacea either. But every once in a while you get a Bank of North Dakota that has a charter that limits its actions so that it doesn’t go for broke trying to chase credit default swaps and just does an exceptional job doing small fry stuff. Surely it’s possible to replicate that in other fields.
Hyperinflation by public banks has done some pretty impressive damage too.
Public banking is not central banking and central banks alone do not cause hyperinflation; you need to have debt denominated in a foreign currency and/or a severe decrease in domestic industrial/agricultural production.
Why can’t you just print a lot of money?
@User_Riott: nope. To have hyperinflation you just have to keep printing and printing money.
First off, I would say that it is more than a little condescending to assume that politicians and bureaucrats have all the answers. They have quite an awful track record of throwing money at boondoggles and it isn’t obvious to me that it couldn’t be better managed.
Why are the people who have already secured an easy and lazy time at life allowed to be the people who decide how to fix what is wrong? Surely the problems they identify are not the problems that the people who need the most help would select.
Did you?
Who’s assuming? Scott’s brought a lot of actual evidence to the table in this post and the previous one.
One thing I haven’t seen discussed is whether saving 10-11 million of poor people is a good idea in the first place?
So Bill Gates saved their lives. Great. Is he gonna give them jobs? Is he gonna ensure that they can live satisfying lives in the present day trading system/African countries’ own institutional set-up? And, if he can’t, then how is that not pouring 10-11M more people into a problematic situation where they are likely to end up doing bad things (ethnic cleansing and religious/tribal strife)?
If there’s a Chesterton’s fence for every tradition, shouldn’t the natural birth/death rates a country achieve independently itself be one?
Another thing about right wing donations. Please consider that the reason we need/might benefit from billionaires’ donations is the hit success of right wing donations.
Maybe people would be right wing regardless of right wing donors. That’s certainly true around things like bails and immigration where people can be less than optimally generous for various reasons. But the libertarian system preferred by the billionaires right wing donors is something with very little appeal to the general population. Most right wingers prefer a soft fascism (NOT Nazism, it’s not the same thing. Fascism is a cumul of nationalistic concerns with social ones – i.e. they’ll support workers – as long as said workers are part of the ingroup. True libertarians/capitalists won’t care about workers either way) rather than the libertarian ideal of free markets.
And, without the ideology of free markets, maybe billionaires charity would be less relevant b/c the government would be more efficient?
There was someone pointing out that the Rs have a sweet gig – Complain about the government then, when you’re in government, do a crappy job and, then, on the campaign trail, use your failures as proof the government doesn’t work and should be further defunded/destroyed. Rinse and repeat.
This is enabled by right wing billionaires donations.
Bill Gates save people’s life once. The Koch brothers ensure this life is one of grey misery at best.
Looking at the cross-section of countries, do you see a negative relationship between economic freedom and government efficiency?
How do you define economic freedom?
IMHO, the nordic countries (Norway excluded coz oil) have the best institutional set-up I’m aware of without being single city state (i.e. Singapore).
They’re not perfect but they’re better than anything else I’m aware of. It seems to me they’re pretty economically free, though the Koch brothers would disagree with me on that one.
I don’t think anyone is going to argue that the Scandinavian countries are not economically free, for all government spending is high in terms of GDP. The money that is not taxed is free of government control, so a Swedish billionaire (Google says there are just over 30 in dollar terms, based on Forbes I guess) is free to spend their money as they like., including on charity, once they’ve paid tax.
Note incidentally that Sweden with 31 billionaires for just under 10 million people has more billionaires per capita than the US (607 for 327 million) which might not be what you were expecting. Denmark seems to have 14 for c. 5.5 million people, also a higher per capita than the US. Finland has only 5 for 5.5 million though…
I doubt the Koch brothers would disagree with you. They are trying to implement Nordic policies in the U.S., such as private schools, de-regulation, elimination of licensing requirements, etc.
Also getting rid of the minimum wage and privatizing Social Security! No seriously, Sweden has no minimum wage and privatized its pension system in the 90s.
Just to be clear by “privatized”, you mean that the benefits are funded via taxation, the money given by the government to the nominally private unions, which require you to join the union to receive benefits.
Resulting in these massively powerful government-funded unions being able to set sector-wide wages.
This is called the Ghent system. And yes, one interesting facet of it is that it eliminates the need for a minimum wage and nominally “privatizes” social security. But to describe these libertarian economic proposals from the Koch Brothers “Nordic policies” is highly misleading.
The most interesting thing about Sweden and Nordic countries in general is that by and large their policies don’t like the ones any major force in US politics actually want. When there are resemblances, people use them justify their preferred policy, because largely everyone agrees these countries are well functioning societies. However in pretty much no case does the resemblance actually go that deep, and often the differences are pretty extensive.
Pretty sure i once saw a fun political compass with quadrant being an explanation for why Sweden is doing so well. The Authoritarian Right explanation was that it’s because it’s a white ethnostate. The Libertarian Right explanation that it’s because it’s a low regulation free-market economy. Then i think the Authoritarian Left explanation was because the country is socialist, and i forget the Libertarian Left explanation
Looking at ‘net change in # of lives’ is the wrong way to go about these evaluations. If we were talking about increasing the birth rate by millions, then sure, that could easily be a bad thing. But saving millions of people from suffering and dying from painful diseases? Saving millions of people from the grief of losing a child, or the grief + practical hardship of losing a parent or breadwinning spouse? You’ve got to muster strong evidence of terrible consequences to counterbalance that, and you haven’t even come close to doing so.
I honestly don’t see the difference as far as the system is concerned. Sure, not being born is less painful for everyone involved that living a crippled life and dying too soon but, from a God’s eye viewpoint, it’s much of a muchness – too many mouths, not enough to go around…
#thanoswasright… 🙂
Suffering is bad is surely a good rule to live by though?
Either a parent is going to lose a child or a child is going to lose a parent. You can’t “prevent” one of those from happening just by saving a life, since the person will die anyway at some point.
Obviously not all deaths are equivalent. Consider losing a parent prematurely, at a stage of life when you are extremely ill-equipped to cope with the loss, and robbing you of that relationship for the rest of your life — versus losing them to ‘old age’, at roughly the stage of life when you always expected to have to deal with this, and as an established adult with your own family and support structures. Likewise, think about the effect that losing a child often has on people.
(I’m going to step away after this, because there’s clearly an unbridgeable value gap between me and Frederic Mari (I had hoped I could safely assume common ground on ‘suffering is bad’, but apparently not), and (probably unfairly; yours is the kind of comment I’m sure I’ve made myself several times) I’m frustrated that you seem to have assumed I’m an idiot, rather than starting from the opposite assumption and looking for a sensible interpretation of my position.)
There was someone pointing out that the Rs have a sweet gig – Complain about the government then, when you’re in government, do a crappy job and, then, on the campaign trail, use your failures as proof the government doesn’t work and should be further defunded/destroyed. Rinse and repeat.
So, what’s the Ds excuse, then? They talk about how the government is great, and then when they’re in charge, do a crappy job.
(Full disclosure, I’m so libertarian that it’s almost certainly more accurate to call me an anarchist, but I’ve recently [within the last six months or so] gone back to labeling myself as a “libertarian” because it at least gives people some idea of what I’m aiming for, whereas the term “anarchist” has been so diluted as to be nearly semantically null.)
And then, on the flip side…
I was having a similar thought to yours, regarding the “lives saved” thing. I’m not sure simply “preventing these random poor people from dying” is really all that great, except insofar as “preventing them from dying slowly and miserably” appeals to my sense of aesthetics regarding preventing unnecessary suffering.
Though, advocating for ending their lives swiftly is probably a bit over-the-top supervillainy.
Then again, since I suspect that a lot of the systemic problems facing various portions of Africa have to do with the systems of governance the people there live under, and given our seemingly very different takes on what the ideal outcome there would be, you probably wouldn’t particularly care for my solution, which would be to divert the charitable giving from the task of “save some random lives” to “influence the reform of those governments to be more libertarian oriented”. Even though I think (of course I do 😉 ) that doing so would go a long way towards solving the underlying problems you mention, regarding jobs, infrastructure, etc.
These things aren’t separate, humans aren’t some creature that walks up to the economy and suckles at its teat, humans are the economy. It is easier to build infrastructure if chunks of your workforce aren’t failing to show up to work because they or a relative came down with malaria. Its easier to save for the future if you think you have a future, and if you aren’t losing large chunks of what savings you have to random, horrible, events. There are likely some exceptions here, but effective donations are probably creating downstream jobs automatically.
I consider human lives and souls to have intrinsic worth. Saving the lives of people is a good thing.
If the people involved think their lives are not worth living, they can do something about that, but in the general case, I think we should put a very high weight on saving the lives of human being compared to almost any other consideration.
Frankly, I find it a bit weird to see someone come out and just say “maybe it would be better if a whole lot of people just died”. That’s such a strange moral position to put your name on.
Yes, for a Mathusian population this would be true: saving lives only makes for more miserable lives and deaths later. But for some reason humans, for the past couple of hundred years, are not behaving as normal Malthusian populations (including not in nowadays Africa, I think?). If you artificially reduce child mortality, people react by bearing less children – because now they don’t need to overcompensate for potentially having no children left to take care for them in their old age. Start giving pensions, and again, people react by having less kids, for the same reason. People with less children (but with higher survival rate) start investing in them more, such as sending them to school instead of work, thereby incentivising even lower number of kids that a family will afford. In conclusion, pouring money into health care, especially child health, is likely to lower the population increase, just as it maybe has done elsewhere. This is how I as a total dilettante understand it now; maybe there’s some reason it doesn’t work like this in some populations?
Communal child care where the whole extended family is responsible for feeding the kids may hinder it, since this system incentivises everyone to have more kids (because having less kids yourself would only force you to spend your resources on raising your cousin’s kids, if they have more). So a good way to decrease birth rate would be to sever family ties somehow – by enhancing geographical mobility? But this sounds vaguely unethical…
Including in Africa. Check out Our World In Data – Fertility Rate. TFR in 2019 seems to be too large in Subsaharan Africa, but just compare it to 1979 and see how much progress there’s been (in Africa, not just everywhere else) in a couple generations. I’m not sure the progress there isn’t too little too late (even if they hit TFR 2 tomorrow there’d be continuing population explosion from “demographic momentum” from the existing age distribution), but it’s hopeful.
More religious populations tend to have higher TFR independently of child survival rate. But here “religious” is kind of a fuzzy category, and not a full exception; demographic transition occurs within religions too, occasionally (look at Iran!) very suddenly.
Maybe but it seems pretty unlikely. The Communists did their best to wreck the ideology of free markets and their governments were notoriously corrupt and inefficient. Free market ideology and government efficiency emperically go hand in hand.
Billionaires existing in the first place is a moral hazard. If the state was able to tax them like it taxes the blue/white collar workers many of them wouldn’t have been billionaires anyway. If their corruptly failing businesses were not bailed out by public funds and they were held responsible for their wrongdoings, many more of them wouldn’t stay billionaires. Inheriting of billions to next generation is also a moral hazard so many more of them wouldn’t be born billionaires.
And we’re discussing about if it is good or not how they spend to charity. That money doesn’t belong to them anyway!
This. I disagree with the content, but I think it expresses a common sentiment behind criticisms. Thank you for stating it so plainly.
Taxation existing in the first place is a moral hazard. If the state wasn’t able to tax anyone there wouldn’t have been bailouts anyway. If the corruptly failing governments were held responsible for their wrongdoings, many of them won’t be able to hold on to the power.
And we’re discussing about how to tax billionaires. That money absolutely belongs to them and to nobody else!
++
<3
I’m assuming you have a good basis for asserting that many billionaires are bailed out by public funds. Accepting this as accurate, I’d suggest therefore the moral hazard is not the existence of billionaires but of government with the power to allocate public funds in a way which creates billionaires. If we accept billionaires are evil, then a government that can create billionaires is a government than can do evil, which is a pretty clear moral hazard. The solution to the problem of billionaires is therefore not giving the government the power to do more evil by taking more money.
Another corollary of your concerns is that billionaire philanthropy must be a good thing, as it reduces the amount a billionaire’s heirs can inherit, thus reducing that moral hazard.
Also, stating money which legally does belong to someone does not belong to them is unhelpful if you’re not going to say who it does belong to. Especially since I fear your emotive statement here implies you believe the money belongs to the government who you’ve demonstrated are a major moral hazard.
It sounds like we have an argument along the lines of:
Alex: “X is bad, and the government should not enact policies that make more of X at the government’s expense.”
Bob: “If X is bad, and government policies can make more of X, then that means the government is capable of doing bad things, which means the solution is clearly not to trust more power to the government.”
I think there’s a hole there.
If you’re making a mistake, and I want you to stop making the mistake and do something- anything, really- else instead, then the fact that you making this mistake proves you fallible is beside the point. A specific mistake (the existence of many billionaires) has been, rightly or wrongly, identified as a problem.
Stipulating for the sake of argument that the mistake is a real mistake, it is reasonable to suggest that the mistake be rectified. Even if this means that resources which would otherwise be invested in the mistake, are instead going to be invested in some other direction by the people responsible for the mistake. Because that’s exactly the point- I’m saying “I want you to stop doing Z, because I’m okay with you doing any of A through Y, but not Z.”
That’s a valid criticism, but to have total validity requires that the solution to the mistake not only ensures that mistake cannot be made again but that all similar mistakes can also be avoided. Since the non-abstract area of discussion here is government spending, I’m not sure either assumption can be fairly made in this case.
That’s based on the idea that it’s “not totally valid” to say “Charlie should stop doing horrifically stupid and flawed thing X, and do other things instead” on the grounds that hypothetically Charlie might find another thing to do that is bad, maybe even as bad as X is bad.
We’d never apply that mindset consistently to our own lives.
If I think my cousin has a drinking problem and I think I should advise him to stop drinking, I’m not going to silence myself for fear that he’ll develop a cocaine habit instead as a substitution thing. Sure, it might happen, but that doesn’t mean I’m somehow oblige to tolerate a grossly unsatisfactory present state of affairs.
It isn’t a reasonable standard to say “You can’t oppose this process unless you have a literally perfect alternative.”
The term “moral hazard” has a technical meaning, and you should probably avoid using it to mean “a bad thing.”
I was trying to figure out how billionares constitute an incentive to take additional risks because you are insured. Interestingly, though, a billionaire who makes reckless investments or business decisions because he (or she) is confident the government will bail him (or her) out, is taking advantage of a moral hazard.
I think this is a valid argument to make, but I also think it is not in alignment with the argument Scott tried to make. Scott’s argument was on the lines of GIVEN: billionaires exist and we won’t get rid of them. THEREFORE: don’t stop Gates from doing good.
From the conclusion of the original post
Whereas, you’re challenging the given and saying billionaires should be eliminated. It’s a valid argument but it’s not this argument. Saying billionaire philanthropy is evil is different from saying billionaires are evil. I think we want people to be aware of the difference and act accordingly.
I would love to see a coherent argument put together showing how Bill Gates topping out as a millionaire (instead of billionaire) saved 20,000 lives instead of the 10,000 lives he’s saved thus far in billionaire form. I don’t have a clue on how to put that together.
But billionaires don’t exist in the first place. Billionaires, in a well functioning market system only exist because someone worked out how to make new things in a way that was worth multiple times the income of the individual billionaire.
So you think that if average tax rates were higher we’d all be worse off?
And to the extent that your claim is true, many other people would be billionaires instead.
Well yes, if we look at the history of countries that don’t have billionaires, mortality is much higher. Particularly infant mortality.
Um, you seem kinda confused as to how prosperity happens. Countries where people’s property rights are insecure, where money doesn’t really belong to the people who earned it, tend to suck for everyone. Particularly the poor.
About
Actually, I do not think that is so insane, particularly at the small-community level. It’s not that much that everything has to be approved by referendum, which would totally clog the system, but that it’s enough to get the signatures of some 1% of the population* to force a question on the more contentious issues. This should apply to way more than billionaire donations, though!
*Here in Switzerland even for federal issues only 50.000 signatures (0.6% of the population) are required to force a referendum,
https://www.ch.ch/en/demokratie/political-rights/referendum/mandatory-referendums-and-optional-referendums-in-switzerlan/
and it works pretty well – instead of defining by law what is and what isn’t an important issue for a popular vote (or the threshold of referendum-able donations), just let the people decide that too. This encourages politicians to do stuff that people will already probably agree to, and most of the time nothing will need to be challenged.
After reading Myth of The Rational Voter, my impression was the only reason things don’t immediately go to shit in a democracy is that politicians have to balance giving the people what they want against getting terrible results from those policies and getting punished for that in the next election.
If you remove the slack that politicians have, voters will get more of the policies they want, which would be a disaster. How has Switzerland avoided rational irrationality? Is the model I got from Myth of The Rational Voter wrong?
The referendum is not the same as the initiative. The former can stop decisions from the government. The latter is the one that allows people to get “directly” whatever they want, which is what is needed for the crazier stuff.
The initiative needs in first place twice as many signatures, then it needs to pass several constitutional checks and whatnot, including reports by the Federal Council (the “president”) and the Parliament. This normally takes years and requires the supporters to have some serious legal and political backup. When the vote comes, it must be both a majority of the people at the federal level and in every Canton (the states, picture getting everyone and every state to agree on something in the US). But before that, the government can (and will) write a direct counter-proposal, which is put to vote together with the original one in a non-exclusive fashion (so that even if the original initiative passes, the government has the option to avoid it by making something more appealing/more sensible). And finally, the government has the right to write an indirect counter-proposal, that will enter into effect immediately if the original initiative is rejected, effectively forcing a choice between “crazy idea” and “government’s idea”. In all, one should have better made sure the initiative is worth all the hassle, and that people will vote for it.
Despite all that, most initiatives fail or are retracted in favour of the government’s counter-proposal, as you can see here
https://fr.wikipedia.org/wiki/Liste_des_initiatives_populaires_f%C3%A9d%C3%A9rales_en_Suisse
Every now and then something does get through. The earliest ones include forbidding absinthe, casinos, and killing animals without stunning them first (early XXth!). Now, admittedly, the country’s rolling with times, and we get the prohibition of minarets, and the infamous general migrant quotas that strained so much the relationship with the EU. But those two are the only debatably crazy initiatives that have been done in the last couple of decades, which seems to me way above where we put the sanity waterline for most similar countries.
The referendum is more an all-purpose system of checks and balances, that only ensures that nothing is enacted against the will of the people. I honestly cannot see the downside of this.
At the end of the day, the laws on referendums make it hard for the government to do something the people do not want; and the laws on initiatives make it hard for the people to do something the government does not want. The side effect is that Switzerland is quite conservative (in the literal, not necessarily political, sense), and when changes finally come around it’s (mostly) for them to stay. Seeing how fast governments can take stupid decisions for the sake of short-term career profit (hello UK!), I cannot complain about that.
Thank you, I’d never actually realised the more detailed mechanism by which Swiss direct democracy worked. That’s actually really enlightening!
I think Scott’s missing something in the Newark case.
Let’s say you’re a politician in Newark that opposes Cory Booker’s agenda. Booker is the mayor, so that’s a problem for you, but the mayor doesn’t have absolute power; he’s part of a pluralistic political system and he needs to negotiate with other politicians, including you, to make his agenda happen. So there’s a give and take between various Newark interest groups, and we call that democracy.
Now imagine Mark Zuckerberg gives Cory Booker a colossal sack of money, far bigger than the usual sacks of money that get passed around in Newark politics. All of a sudden Booker can do almost anything he wants, and no longer has to negotiate with other players in local politics. Any obstacle he runs into to, he can just throw money at. He’s the elected mayor, yes, but you are also an elected official in Newark, and now Booker has made you irrelevant.
I don’t know how closely the scenario I’ve described matches reality, and even if it does I don’t think it’s absolutely clear that democracy has been subverted, but hopefully looking at things this way helps clarify why some people see this as a subversion of democracy; even if Zuckerberg didn’t impose conditions on how the money should be spent, he effectively imposed a condition on who was going to be able to spend it.
There are two problems with this:
1) Mark Zuckerberg did not give money to Cory Booker, he gave it to the government of Newark (and also partially the state government I think?)
2) The “collossal sack of money” was 2% of Newark’s school budget over 5 years
From Scott’s link:
(Zuckerberg gave $100M of the $200M.) This doesn’t sound very anti-democratic to me.
2% of your budget can still represent a very large share of your discretionary budget, if the great majority of your budget is on things that you can’t just decide to stop doing and shift around for some other purpose. I don’t know what fraction of the Newark school budget was “non-discretionary” in the sense that it wasn’t really feasible to start or stop spending money on it on a whim, though.
I (mostly) agree, or at least I disagree with the claims below that “it’s only 2% of the money” makes it harmless – as long as it enables specific policies that some candidates and hold and some do not, it can definitely be used to influence policy in a non-democratic way.
However, my comment wanted to highlight that this can be very easily prevented if any small fraction of the people can force a binding vote on vetoing the donation (or whichever policy, for that matter). And it is not some crazy-utopian idea that does not scale beyond apartment buildings, a whole country is running on it!
What? If I’m an elected official in Newark and Booker can just throw money at any obstacle I put in his way, I’m making bank! I’ll be throwing every obstacle I can at Booker’s way! “Oh, I didn’t realise that paragraph 16.c.ix in my proposed regulation would interfere with your plans Mr Booker. Hmmm, it is an important one to my local community. … You’d fund my road safety campaign? Well there were a couple of tragedies last week, I could probably sell that. Mr Booker, you got yourself a deal. Now, have you looked at paragraph 22.d.xc, the third sub clause yet?”
That money ain’t gonna last long.
I’ll start by saying that I’m all for billionaire philantropy, for the perfectly pragmatic reason that I see no way of getting rid of billionaires and I’d rather they gave their money to good causes than not.
But:
I don’t know that “crush individual initiative” is my goal. It sounds impossible. And again, I’m capable of being pragmatic. But I’m certainly instinctively hostile to individual initiative. And to anti-Trump protests. I feel very strongly that people should sit down, shut up, and play their part in the system. I despise heroic narratives whether they’re populist or elitist.
And I didn’t always feel like that. When I was young, I was all for heroes. (and probably imagined myself to be one) But when my life fell apart, when it turned out that I was too broken to make it in a capitalist economy unaided, who do you think it was who picked me up and helped me to the point where I could have a somewhat normal life? Was it Bill Gates and all his money? Was it all these libertarians with their faith in the human spirit and certainty that there’s always a way as long as there’s no regulations blocking you? Or conversely, was it the rainbow-coloured Tumblr crowd who are always bragging about how compassionate they are? No, it was the government! It was the boring, unsexy system staffed by boring, unsexy civil servants who were willing to do the boring, unsexy work of helping me find a place in the world. No hero would have bothered with me, but the system did.
So yeah, I stand by the government. Even if I have to hold my nose because it’s currently headed by an idiot. It’s earned me.
The government isn’t asking you to help it crush individual initiative! I don’t think any the Founding Fathers, or whichever senators voted for whatever bill benefited you personally, would have endorsed that “people should sit down, shut up, and play their part in the system”. Your loyalty to the government doesn’t require you to follow orders it hasn’t given and doesn’t endorse!
I agree you owe some kind of loyalty here, but I think I would cash it out more as supporting similar welfare programs for others, or even going up an abstraction and supporting goodness/altruism itself.
While I agree mostly with your sentiment here, are you sure you aren’t underestimating the degree to which people really do have authoritarian values? I know that I’ve met people from many different backgrounds in my life who really do react angrily whenever people rock the boat in whatever context, for whatever reason. Admittedly, I don’t think I’ve met anybody who would go all the way to “crush individual initiative” but I’ve met enough people who would stand by “people should sit down, shut up, and play their part int he system”.
There are lots of people within and without the government that instinctively crush individual initiative or individual choice. On small scales, there are your busybodies: NIMBY-type bad neighbors that report you to the council when you put an unapproved addition on your home. Or there are those who want to institute sin-taxes on soda or ban vaping in public places. They just thrive on telling others what to do. You see them at poker tables: old nits that will fight tooth and nail to make sure some punitive rule is applied even if it is absurd given the situation. They walk among us!
Then there is moloch, which gives us things like this: This LA Musician Built $1,200 Tiny Houses for the Homeless. Then the City Seized Them.
+1
Crushing all individual initiative is of course impossible. But nobody needs that, really, to build a totalitarian state. You only need to suppress it enough so it’s inconsequential and ineffectual. If you want to, you can talk about politics with your parrot and hold the door for your neighbor occasionally. It’s not going to change anything, so it’s allowed. Initiative that can change anything – like public speech or public organizing – can be only tolerated if it is pre-approved by the government. And even then it is suspect, unless it was also conceived and completely controlled by the government. That’s how it worked in the Soviet Union.
Not a leftist, but, I’m pretty sure there were indeed multiple leftists in the comments making the argument that Scott says he didn’t see from them?
Sorry, what is the argument I said I didn’t see from leftists?
That billionaire charity is effectively propaganda that makes the rest of what billionaires do (or possibly their existence) appear OK, which, to the leftist, it is not. You quote hls2003 bringing up the argument as a hypothetical steelman, and in what you write about it you effectively state that you didn’t see actual leftists making this argument.
I don’t think I effectively stated it. I did find hls’ version convincing in a way I didn’t find other people’s.
I’ll delete the section before someone who actually gets offended about these kinds of things has the same interpretation you do, but only grudgingly.
I’m sad about that, because it seemed like a really interesting and valuable observation about how difficult it is to discuss disagreements effectively.
He made no bones about the position coming out of a moral judgement about whether or not the existence of billionaires is okay, and most Leftists are not usually that blatant. I’m not entirely sure why, one could certainly make an argument against someone having billions of dollars being morally ok.
jasmith,
But can they make an argument that billionaires are not morally OK, which does not throw the baby of widespread human prosperity and progress out with the bath water?
Human flourishing is an extremely difficult thing to create. I seriously doubt that it could have been accomplished (in part) without the incentives, signals and rewards of free markets. Billionaires are not a bug or negative externality of the prosperity machinery of the last two hundred years, they are an integral part of it.
Nobel prizes have a place in science. Elections have a place in democracy. Super Bowl victories have a place in sports. And billionaires have a place in entrepreneurial creation. Each of these is an example of positive sum, value creating rewards to incentivize constructive competition in various non zero sum aspects of society.
@Swami: The rebuttal to your argument is, do we need billionaires for widespread human prosperity? If there was suddenly a cap on wealth such that you could only be worth 500 million dollars and anything further was immediately appropriated by the government, would that have been such a dampening effect on innovators? I’m not worth anywhere near that kind of money; getting anywhere near that ballpark would be wondrous even if I couldn’t go any higher.
The general argument is two fold, first you need some incentive lined up, secondly you need a system which selects for people who can create better returns for large amounts of capital. The difference between a 10% return on $500 million and a 9% return over 40 years is about 7 billion dollars, or 14 times the initial stake. Who controls those sums of wealth matters a huge amount for how much wealth gets created.
@Oscar
There are a few problems with this. First the method by which you cap the wealth matters a lot. Nobody has billions of dollars in cash under the bed or even in a bank account. What they have is control of assets that have been valued by the market at billions of dollars. Forcing them to sell those assets and turn the proceeds over to the government would have significant effects on the value.
Let’s say the rule was “the government will seize any wealth over $500 million”. According to Business Insider, Jeff Bezos owned 16% of all Amazon stock prior to his divorce. $500 million divided by 16% is $3.1 billion. I can’t find a source that goes back far enough to show when exactly Amazon’s market cap was exactly 3.1 billion dollars. According to macrotrends, it was about $14 billion in April 2005. Let’s arbitrarily call it 2003. Amazon’s market cap is exactly $3.1 billion and Jeff Bezos gets a call from the government informing him that he has reached his wealth cap and must turn over any additional value to the government. I see a few different things happening.
One, Jeff Bezos sells a few amazon shares and buys a million dollars worth of cocaine. After recovering from the greater party ever, he is now worth only 499 million dollars and is free to continue growing amazon for a few more months.
Two, he simply decides to stop growing amazon. He no longer has any reason to make the company better or more valuable. We here in 2019 have the same amazon.com we had in 2003 because nobody has any incentive to improve it.
But it’s worse than that. Today, amazon stock has a total value of $920 billion. Even if we accept that amazon pays no net corporate taxes, and that they’re employees pay on net no taxes, the capital gains tax on this growth alone would be about $130 billion, or approximately Jeff Bezos’s current net worth.
So you can seize everybody’s wealth once, but it’s not at all clear to me that the process is sustainable. If you decide to go back in time and seize everyone’s wealth in 2003, it seems plausible that even the government comes out worse than if they didn’t.
TL;DR: It’s easy to say “there’s no good reason for anyone to have more than $500 million.” But it’s really hard to come up with a mechanism for this that doesn’t end terribly.
@Jake R
Because estimating the market cap of companies and the net worth of the people that own them is, basically, based on multiplying the marginal share price by the number of shares, the actual value if you try selling a whole bunch (such as to cover a brand new confiscatory tax) is going to be way less. These sorts of numbers are basically only good enough for the Forbes list. Trying to use it to implement any sort of policy would be mind blowingly insane.
The other option, that semi-avoids this problem and that I suspect the “billionaires are immoral” crowd would favor if given the choice, is for the government to just nationalize enough of Amazon for Jeff’s net worth to be below whatever threshold.
I doubt that the Department of Nationalizing Every Major Industry In the Country is going to do a very good operating those businesses though. Just as a for instance, do you really want a Trump appointee with a majority control of Facebook after nationalizing all Zuck’s class B shares?
@Another Throw
This is the short version of what I was trying to illustrate.
Writing Prompt: After recovering from 6 consecutive million dollar cocaine binges, Jeff Bezos is appointed Director of the Department of Nationalizing Every Major Industry in the Country.
[Phillip J. Fry with as fistfull of dollars.jpg]
Shut up and take my money!
ETA: Pun intended.
Speaking as a tentative member of the ‘every billionaire is a policy failure’ club, there are a lot of ways of making billionaires a lot more rare without destroying capitalism. A tax on wealth (money directly paid by rich people). Robust anti trust enforcement and IP reform (have more, smaller companies). Higher minimum wage and more worker’s rights in general (more of the rewards accruing to labor instead of capital). But even in the hypothetical hard cap at $500, Bezos converts some of his stock to non-voting, sells it, and gives the money to some entity he doesn’t control.
Hmm, some other considerations:
1. Liquidity. If all the US billionaires were to sell all of their assets above $500 million at once: who is going to buy it? If the back of my napkin is right, that would require liquidating $2.2 trillion dollars of stock, and basically nobody has that kind of money laying around. Especially when all the billionaires aren’t buying. So, a massive liquidity crisis would crush the world stocks markets to zero. No fun. But billionaires aren’t the only ones that own stock. Everybodies retirement accounts would evaporate. And (insofar as they are funded) every pension fund would be wiped out. And every bank. A lot of governments. Harvard’s endowment fund. This is starting to sound… bad.
2. Money supply. If the Federal government is really serious about being delivered $2.2 trillion, it is going to be hard to find that many dollar bills. The M2, the most expansive measure of the number of US dollars in the world is around $14 trillion. About 15% of which would need to be turned into the IRS. That sounds hard enough, but there is only about $1.75 trillion dollars in cash (plus about another $1.75 trillion in deposits with the federal reserve for a monetary base [the most restrictive measure on the money supply] of about $3.5 trillion.) The great recession was, by some accounts, all about a (compared to this) tiny reduction in the money supply because banks became slightly more discerning about who they lent money to. This is also sounding… bad.
The problem with a wealth tax is we can’t measure wealth. All we know is a rough approximation of a marginal share. Multiplying that price by more than a few handfuls of shares is literally only good enough for Forbes magazine. For large transactions—say between banks, share buybacks, corporate buyouts, etc—the price per share routinely diverges wildly from the marginal share price. How far and in what direction it diverges tells us nothing other than what the parties to that particular transaction think the shares are worth. There simply isn’t a mechanism to accurately measure wealth. There is a reason virtually everyone taxes transactions (with the obvious exception of land) instead. And land is mostly only an exception for historic reasons.
Amazon, for example, isn’t even close to a monopoly. They represent a single digit percent of US retail. There are other examples I might be inclined to agree with you on; e.g. Google, which I am inclined to think is well into the “exploit market position to raise prices” phase where the price being denominated in data rather than dollars. But antitrust reform really isn’t going to do much for you except for those two particular billionaires.
Eh. The downsides there are well trodden by others elsewhere. And, even waving away the downsides, I’m not sure it’ll do much.
And… what? Unless he is giving it to a charity, it is taxed at ~50% as a gift. And if it is a charity, he can’t use it for anything personally without reeeeeally annoying the IRS. They have rules about that sort of thing. And charities are also subject to an excise tax if they aren’t being charitable enough with their money so he couldn’t just let it sit there.
You also seem to be eliding over the fact that voting rights have value. Zuckerberg’s shares of Facebook are worth more than everybody else’s because they have 10x the voting power. Non-voting shares of Amazon would be worth less than other shares of Amazon because they can’t vote. This mostly just complicates the math somewhat. (I’m not actually positive that they’re even legal, but that’s neither here nor there.)
Oh, and if he finds a state without a rule against perpituities and puts it into a perpetual trust and (after paying the 50% tax) pays himself a huge salary as a trustee (on which he then needs to turn around and pay ~40% income tax on)… that law is going to change in about a week.
Some further considerations for a wealth tax:
Suppose today is December 31 and Jeff Bezos, as CEO, knows some materially non-public information about Amazon. Say, “holy shit, we lost 90% of our revenue last quarter, and we’re three weeks away from bankruptcy.” This would imply that the current value per share of Amazon is way closer to $0 than the current price of $2000. Further suppose the next shareholder meeting is scheduled for February where this information will be made public.
What does he put on his Schedule 735B, Declaration Of Wealth For High Net Worth Individuals?
What does MacKenzie Bezos put on her form, seeing as she does not know this materially non-public information?
Now, if your answer is “the final price on the last trading day of the tax year, duh” MacKenzie is going to owe a truck load of taxes on wealth she no longer has. And in fact, if she didn’t sell enough shares before the shareholder meeting she wont be able to pay it.
If you answer is “the value on the last business day of the tax year, duh.” How is MacKenzie supposed to know it?
ETA: Another hypothetical.
Suppose I’m Mark Zuckerberg, and I really hate that penis-headed son-of-a-bitch Jeff Bezos. I put up my Facebook shares as collateral, and borrow $200 billion from Goldman Sachs, and buy $200 billion dollars worth of Amazon stock in the last 15 seconds of trading on December 31st. The ensuing liquidity crisis pushes the price through the moon, and, as far as the law is concerned, Jeff is worth $300 quadrillion dollars, and he has 3 months to come up with $6 quadrillion to pay his 2% wealth tax.
The moral of the story is that we really can’t measure wealth.
Wealth accounting A wealth tax would only ever be marginal; I don’t see how the calculation of total wealth is a real problem. You could argue from a philosophical point of view that a person’s total wealth should be equal to the cash they are able to get for it on short notice, but that seems like a silly requirement to me. Would it allay your concerns if the tax on stocks was paid as a fraction of the stock?
Antitrust Amazon has double digit market share in online retail and cloud computing services. They operate the largest online marketplace (US), and integrate data amongst their various branches. They didn’t make a profit for decades, which is a pretty big red flag for predatory pricing. They are also currently being investigated by the EU. I wouldn’t say they’re free and clear.
Taxes A higher tax burden for the wealthy is not a downside in the view of many. Also note that the gift tax at 40% is about the same as the top marginal rate 37% + surcharge (which is more than the capital gains tax, but again, more feature than bug).
Voting shares Voting has value, and claims on profits have value. If you can disaggregate them and sell them on the market I don’t see what the problem is.
MacKenzie is going to owe a truck load of taxes on wealth she no longer has
If only there was some way for MacKenzie to hedge against the downside risk of the future value of her stock! But seriously, holding stock is always a bet that the value of the stock will increase. A wealth tax doesn’t change that, except to the extent that any demands for liquidity makes you more risk averse. You seem to think it’s unfair to owe tax and then see the value of the taxed asset depreciate, but I honestly don’t see the problem.
@Baconbits, That holds iff you consider that larger amounts of wealth are always better. I know that this is by far the majority position, but I find it very hard to trust the values assigned by the system we have.
What always gets me is that saving the life of a malaria exposed child is valued at about about three thousand dollars by the current marketplace. I know this is true, because if someone (the AMF) says, ‘I will save the life of a child if you give me $3000, somebody does. This is significantly less than, for example, a single ticket to the superbowl. I am equally certain, that if you said to someone with a superbowl ticket, ‘give me your ticket or I’ll kill you’, 99.9% of people would make that trade. And because of that I just find it impossible to accept arguments which are based in comparing amounts of money against one another as a substitute for comparing the moral value of things.
Wealth Accounting:
No. I’ll quote myself:
Paying a wealth tax in stock is indistinguishable from nationalizing industry at the limit. And even piecemeal, it only takes a few years until the government owns enough of it to be problematic.
Antitrust: I don’t feel like looking at all of those segments, but taking cloud computing as an example, AWS receives less than a third of customer spending on cloud, and have several large competitors. I’m still not seeing a problem. Not making a profit is not a red flag. They have been earning money hand over fist. They have been reinvesting it in the business, which is, like, literally what you’re supposed to do. Being the subject of an investigated is weak evidence having done anything wrong. Or even suspect. It is much stronger evidence that members of Congress keep writing letters demanding regulators do something, because what are we paying you for.
Taxes: I’m not sure what you’re responding to.
Voting shares: I was mostly just mentioning it in passing. I don’t know if I was going anywhere with that.
Tell that to people that are underwater on their property taxes and see how that goes. Especially if the house burned down before they got that tax bill. Even more especially if the house burned down while they were out of town and didn’t even know it until after the deadline to file a grievance. And the entire reason they didn’t know sooner is because the Fire Marshall was legally prohibited from telling them sooner.
I think you’ll get a very vehement disagreement from basically everybody.
But that was only one thrust of the hypothetical.
ETA: I also think you underestimate the impact of risk aversion.
The whole beauty of the corporate structure is that you’re potential losses are strictly limited to how much you actually invest. A wealth tax changes that. You’re potential losses become effectively unbounded. The people that are actually willing to do short trades, or derivatives in general, is much smaller than the people willing to own stocks precisely because your loss potential is unbounded. The disincentive that unbounded losses creates is HUGE.
ETA: ETA: Also, one of the most straightforward hedges is to be both short and long against an asset, but this is really only possible because shorts have bound gains and unbound losses, while longs have bound losses and unbound gains. If longs have unbound losses as well it doesn’t work. Soo…. you need to be way smarter than me to figure out how to hedge in this scenario (if it is even possible). Diversification isn’t a panacea.
@Another Throw
Nothing to say about the wisdom of wealth taxes, but laying out why “wealth” is a more ill-defined measure than I thought was interesting. Thanks!
I think you’re making this a lot more complicated than it needs to be. If I will owe 1% of the value of my stock as valued on Dec. 31st, then I can sell 1% of my stock on Dec 31st, and I have less than infinite downside risk. In fact I have the exact same risk as a wealth tax-less world. If I want to be fancy, I can make a futures contract agreeing to sell 1% of my stock at the whatever the price is on Dec 31st on April 15th. That’s it, you’re fully hedged.
As for people running hypothetical pump and dump schemes on their rivals… If you can decide to drive up the price of a stock there is a lot more lucrative mischief you can play than raising someone’s tax bill. Which is why it’s illegal, why Jordan Belfort went to prison, and why Margot Robie became a household name.
Oscar,
“do we need billionaires for widespread human prosperity?”
Yes, I am absolutely convinced that we do, and that in a properly functioning market the more billionaires the better. Heck, as I stated elsewhere, we should hope for future trillionaires.
The reason is that in a free market entrepreneurs and investors are paid as an incentive to create value for others. Consumer value and producer value in economics are the yin and yang of economics, they are two necessary sides to one coin. Creating something like a novel software company, an efficient global delivery and retail system or a computer hardware company is an extremely risky endeavor which requires massive investment, delays in consumption, thought, knowledge, understanding, insight, focus on consumer needs, failure, learning and so on. The up side must be immense to make the risk and investment and to attract enough talent to solve the problems.
“If there was suddenly a cap on wealth such that you could only be worth 500 million dollars and anything further was immediately appropriated by the government, would that have been such a dampening effect on innovators?”
This would stifle large scale, longer term investments and risks to the extreme and would lead to the collapse of any investment where the upside was greater than a half a billion dollars. This is in effect a cap on consumer focused value creation, as one would be crazy to invest in anything big. I don’t think you understand how much is at risk and how much is invested in building companies like Amazon, Apple, Microsoft and such. (I designed products for a very large company and am quite familiar with what is involved)
“I’m not worth anywhere near that kind of money; getting anywhere near that ballpark would be wondrous even if I couldn’t go any higher.”
Implicit in your comment is the belief that billionaires are bad. There is no justification for this belief. A billionaire within a functioning market is someone who has been rewarded for creating massive value to others. Billionaires are the equivalent of Nobel prize winners. They are the ones who didn’t just try to create value for others, they clearly succeeded in doing so. Their profit is the signal and reward for doing so.
Someone should do a study comparing Twitter Opinion against Public Opinion on things we do have good polling data on…
I tried this with Trump, and I got about 40% positive, 60% negative, which mostly matches his approval vs. disapproval rating. But I knew the rating beforehand and a lot of tweets were hard to code, so I don’t place too much stock on this.
What about conducting your own ‘cheap’ Mturk polls?
For context: https://projects.fivethirtyeight.com/trump-approval-ratings/
Epistemic status: undercooked, but I’d bet that Twitter better reflects the wider public on an issue the more polarized it gets in general. More representative on elections than primaries, primaries than policy, etc.
This is not obvious to me. What’s your rationale?
I agree with Dan L.
Twitter selects for loudness, or extreme attitudes. It will only represent the populace on issues with which the populace also has extreme attitudes, i.e. Trump. On the other hand, only extremists are going to bother going to twitter to…get mad about charity. The public doesn’t really give it much thought.
ETA:
The public does not have extreme views on Star Wars. Twitter is a place for extreme views, so only extreme opinions on Star Wars are on twitter. Therefore, opinions on Star Wars expressed on twitter do not reflect the opinions of the public.
The public does have extreme views on Trump. Therefore, the extreme views expressed on Twitter reflect the extreme opinions the public has on Trump.
I think this is a fundamental misunderstanding of Eurasian and Villiam. Is not their critique of the anti-philanthropists that their definition of “democratic decision making” both over and under inclusive in self-serving ways?
It is under-inclusive because, have not these billionaires been voted for dozens, thousands, millions, and billions of times in the form of people voluntarily sending them money?
It is over-inclusive because it incorporates obviously anti-democratic portions of the government, like the civil service, are not democratically chosen, and over time have been consistently shown to not respond as such.
Once these two problems are exposed, there is little wiggle room left for the critics. The first part requires anti-philanthropists to focus on only 1-2 days a year as when voters are wise. The second part exposes that they don’t give voters on those 1-2 days a year a real choice.
To be for as an anti-philanthropist #1, you need a much more open plebesite system, and a reduced social service (or one with almost none of the powers they have), for #2 you need to distinguish why civil servants are wiser than philanthropists.
Whilst I agree with this point, I think it relies on understanding democracy as voting and response to that, which is probably the mainstream interpretation but is not the only one. For socialist thinkers democracy is also (and it seems more prominently) the actions of the government of the people, which is much to my regret probably an equally-valid usage. This is why democratic socialism is different from social democracy (the latter interpreting democracy as the mandate to make social change not the motor of social change).
So from the point of view of the democratic socialist personal transactions outside of government are undemocratic, as they are not within the scope of the government of the people. Note I am not sure if undemocratic here has the stigma attached to it as the mainstream definition would have. Equally, the government’s bureaucracy is working for the people and is therefore democratic.
I’m unsure whether this failure to clarify the democratic socialist definition of democracy by its proponents is disingenuous, an attempt to appropriate the legitimacy of the mainstream understanding of democracy for their own arguments, or whether it is the common issue of different groups assuming everyone uses the same terminology as them. Charitably we should assume the latter, but the debate over billionaire philanthropy only makes sense if we remember there’s two definitions of democracy at play here (at least…).
@Clutzy
Buying from someone is not approval of their political beliefs or a vote to put them in power.
It’s not a vote to put them into political power, but it IS an agreement to transfer power over some amount of money to the seller. Said power means they can turn around and spend it on any of the same things you could have spent it on. If enough people make similar agreements, it represents popular agreement that the seller is a billionaire with power over a very large amount of money.
It’s an “agreement” to transfer money (i.e. power), but its not evidence of approval of their power, and not synonymous with a vote for power.
If a king says “Give me your food or be exiled into the taiga”, and lots of peasants give the king food, you could also say that the peasants are “agreeing” to give the king food in exchange for not being exiled.
The difference between this and approval should be obvious: a vote is freely chosen, but material exchange relies on economic coercion.
How so?
Because of the inherent threat of violence in the property rights they are exchanging.
In my example, this is evident by what happens if a peasant both refuses to give food also refuses to be exiled into the taiga.
Your example of the peasant is not a typical example of material exchange and certainly not representative. I don’t think it is an example of material exchange at all, since the king is just demanding something without providing anything material in return. I get that there is coercion in that example, but the most similar case in the present day appears to be taxation.
What you are saying is that people are “economically coerced” to pay for their food, because if they steal it they will get in trouble?
But most people would never dream of stealing the food, so I don’t think it’s accurate to say they are coerced or their material exchange relies on coercion. Even in the absence of a state neighbors will exchange material goods without feeling any coercion. I don’t think many people feel put out that they can’t steal things from their neighbors.
Suppose the State determines that Bob is deserving of Welfare Item A. The State gives Welfare Item A to Bob and says, “If anyone tries to steal Welfare Item A from Bob, then we will arrest you and put you in jail.” Does that mean that the State’s welfare scheme relies on economic coercion?
In fact, we could even see that if the king says, “Take this food. You won’t be exiled into the taiga whether you take it or not, but if you take it, afterward, no one else is allowed to steal it from you,” that’s apparently economic coercion? It seems like the king’s threat in your example really has basically nothing to do with the claim of coercion.
@Cliff
Getting to live in his kingdom (on his land) is the material exchange.
The typical “neighbor” doesn’t have a 1000:1 power disparity over you, so the question doesn’t arise very often. But still, the exchange is predicated on the underlying threat of coercion, in case you don’t respect his property rights. That the threat doesn’t manifest itself often isn’t evidence that the threat isn’t there (any peasant with half a mind would give the king food rather than be exiled).
@Controls Freak
Yes and yes. Which is why we should rely on votes, not units of wealth, to gauge public approval. Even in a welfare state.
I mean, this doesn’t really seem to follow. Both votes and wealth follow dynamics which are constrained by law (and thus “coercive”). Those dynamics are rather different, and each are quite complex. I don’t see how we’ve structured any argument that implies that one is a better judge of where power should be. (Note that you skipped a step in identifying “where political power should be” with “public opinion”.) I especially don’t see how, “Laws against stealing are economic coercion,” is a critical step in the reasoning chain.
Disclaimer: I like voting a lot, and think it’s an important component of a political system, but this really hasn’t been argued well here, and I think there is a much better route for arguing the importance of voting. I mostly commented here just to discover that Guy in TN thinks that literally any system which prohibits stealing (even his most perfect socialist system) is “economic coercion”.
And if a king says “give me your food and I will organise schools to educate your children”, how is that different to voting for a politician who says “If I’ll get in I’ll set up a public education system funded by your taxes”?
Sure. The nurse vaccinates my children because she gets paid, I pay because I love my children and don’t want them to die young. And I pay taxes for public vaccination programmes because I want herd immunity to further protect my children.
The important thing about material exchange is that it makes both sides better off. And the more the economic coercion on both sides the better off both sides are. I gain far more from vaccinations and the nurse gains far more from being able to buy food than either of us do from being able to buy a ticket for the latest Avengers movie or something like that.
@Controls Freak
The major difference, is that people’s individual opinions are one of the few examples of a true non-commodified good, meaning no one can buy you out of having one. Assuming we have strong laws against voter fraud, voting is the most pure way to express this opinion, due to there being no physical good tied to it (unlike gauging preferences via money).
Yes this is true. Believing otherwise is perhaps the #1 false belief that trips people up on this board more than anything. Realize this, and you’ll be miles ahead of the pack.
@ReaperReader
Right, this is my point. Taxation and payments to a landowner are basically identical as far as coercion-levels go.
I’m not opposed to economic coercion, since the foundations of civilization seems to be built on it. But recognizing its existence does undercut any claims that a given economic distribution can be taken as evidence of approval or consent.
.
I’m curious. Do you think that any system which prohibits raping is “sexual coercion”? I suppose this language can be consistent. Basically saying that every public law is coercion (agreeing with the libertarians you seem to hate; nevertheless, the qualifiers are a bit strange), but that sometimes we use public coercion to counter private coercion. Of course, in your framework, the private property thing that you hate is actually, itself, a correction to private coercion (stealing), and it makes significantly less sense to say that we need to use public coercion to counter public coercion.
Yes all laws rely on human coercion to be enforced.
Well yeah, but they tend to exclude property law and contract law for some reason. Still, the thrust of their argument, “the law is involuntary”, is true, its just that they fail to extend such reasoning to private law, e.g. a landowner managing control of his property.
If its all coercion, there’s no point to think of it as “countering” or “counter-countering”. There’s no way out. The only economic question left how this power is distributed. Which leads to:
I didn’t think I needed a robust defense of why political power distributed evenly in the hands of the public (aka democracy) was superior to any alternatives. If you’re of a different mindset, that feels like a conversation for another day.
And importantly, so we don’t stray too far off topic of voting systems, votes differ from material goods in that they are equally distributed and cannot be transferred.
You’ll never get down to “zero coercion”, since holding onto your body is a physical object in itself, but each person having an opinion is as close to the concept of “freely chosen” as you’ll ever humanly get. Tying this opinion to a rivalrous good only serves to obscure the opinion->expression pipeline.
Okay, so you’re trying to say that everything is coercion and therefore nothing is coercion, so anything is justified and nothing can be called out on the basis of coercion. I think that’s just a corruption of the language. Clearly there are all kinds of pressures or influences that a person can face, but some are improper and others are not.
It’s pretty unhelpful to say that my neighbor offering to trade me a chicken for a hammer is coercing me because he would get mad and attack me if I stole his chicken. That really has nothing to do with the exchange at all.
Coercion is “the practice of persuading someone to do something by using force or threats.” I do not believe that offering to trade with you qualifies. They have not forced or threatened you to do anything.
I’ve noticed your modus operandi seems to be to re-define words to suit you and then to pretend you haven’t done that, so it takes a long back and forth to figure out what you are trying to say. I strongly dislike this and will consider not engaging with you in the future, since I do not think you are arguing in good faith.
In fact voting is a relatively poor way to determine preference, because the vote has no impact on the voter one way or another. The only reason to vote is to feel good about yourself, so voters do not take into consideration the costs and benefits of their choices.
When preferences have to be backed up with money (or otherwise have some cost), they become much clearer. Hence you get people giving really strong opinions about things that will happen, but these people typically back down when offered a bet on whether those things will actually happen. People will say they want to go to the gym, but then they never do it. Etc. “Revealed preferences”
No. My position is that because we live in an interconnected world, nothing is purely “non-coercive” or “voluntary”, full stop. Your actions effect me, and vice versa. The extent that something is “freely chosen” is a spectrum based on how robust your options are. In this regard, voting has an advantage over exchanging material goods, in that it’s much more difficult for someone else to restrict your ability to vote, compared to restricting your access to capital.
If “freely chosen” has any meaning at all, the opinions you have, the thoughts you think manifest as a vote, reach the highest possible echelons of “freedom” humanly available in our deterministic world. Short of outright murder, no one else can control the thoughts in your head.
I don’t base my moral system on the presence or absence of coercion. We were talking about the narrow point of whether market exchanges are a good proxy for approval. I posit that, when gauging approval, you need to minimize coercion as much as possible, otherwise your measure will be inaccurate.
You are right, it doesn’t. Because the coercion isn’t in the exchange, its in the ownership that underlies the exchange. For an analogy, think of slave markets. I posit that a “free market” in slavery contain lots of coercion, despite the property being voluntarily exchanged between the buyers and sellers.
Not here to make friends, bye
@Control_freaks: How does economic coercion reduce the impact of consent? If I, coerced by the love of my children, agree to pay the nurse £120 per chicken pox vaccine shot, but don’t agree to pay a Christian Scientist £12 to pray for my kids’ health, isn’t that important evidence about my beliefs of the merits of vaccinations versus prayer?
And if the nurse will take £30 an hour to jab kids with vaccines, but won’t take 30 Venezuelan boliviars, doesn’t that say something about which she thinks will buy more food for her kids?
Overall, the higher the degree of economic coercion, the more informative consent is. If I’m rich, and the £120 a shot I spent on chicken pox vaccines was that I bought the premium theatre tickets instead of the VIP tickets, well, what does it really tell you about my values? But if I had to spend 6 weeks eating beans and rice to pay for each shot, darn it I must have really valued those shots.
@Guy in TN
Unfortunately, we’ve created a problem for a system which counts the votes of whole humans. The number of whole humans relies on sexual coercion. You seemed to think this type of thing was a deal-breaker.
I mean, that was literally the genesis of the conversation. You then shifted the goalposts. As I said, I personally like democracy, but your arguments for it aren’t working. In fact, it looks like you’re creating major problems for it.
Philosophers have written entire books exploring what we mean when we talk about coercion. There are some difficulties outstanding for various positions, but this ain’t it. If Elon Musk goes to Mars, he hasn’t coerced you into not being the first person on Mars. Sure, he’s prevented it, but there’s not an element of coercion involved.
@ReaperReader
Unless you only had £119, and were forced by economic coercion to not get the vaccine. Then we have no information at all regarding your thoughts on the merits of vaccination vs. prayer.
@Controls Freak
Is your contention that property doesn’t rely on coercion, or that coercion doesn’t mater for gauging approval? Its obvious you object very strongly to my posts, but I can’t find any substantive disagreement in your comments.
@ReaperReader
I mean, it might be true that the more coercion you put on someone, the more informative their decision is, regarding the choices given.
If a murderer puts a gun to someone’s head and said “your money or your life”, and they give the money, I have learned that person values life>money.
However, this tells us nothing about how the person feels about the man pointing the gun in the first place. This type of exchange-centered analysis can only analyze power distributions as they currently exist, not how they could be otherwise.
To the king example: Given that the king owns all the land, we have learned that the peasants who give him food, prefer that to being exiled. That is valuable information, I suppose. But it’s not the same thing as asking them “do you agree that the king should own all the land?”
Here’s where the “revealed preferences” argument really show its sinister status-quo justifying teeth: All it can argue, is that if the peasants didn’t like the king owning the kingdom, they should just buy it from him. If they fail to do so, that must be evidence that they really like living under a despot.
My contention is that you made the claim that coercion (as defined by you) was an obvious distinction between voting and material exchange. The problem is that when we actually look at your definition of coercion, it also applies to votes! (Hell, just saying that laws against ballot-stuffing are coercion is enough.)
Furthermore, I contend that where we went wrong was when we threw away everything we know about the word “coercion” in order to apply a silly little definition you’ve chosen just so you could try to tilt at libertarian windmills. You’re trying to claim that every material exchange is coerced because of background coercion in property rights, but this results in every sexual exchange being coerced due to background coercion in rape laws and every vote being coerced due to background coercion in ballot-stuffing prohibitions.
You’ve even occasionally put forth an even sillier definition where basically all action anywhere is coercive, because it theoretically restricts someone else’s options.
No. I laid out a robust attack on your regular use of the term “coercion” in a way contrary to common/scholarly use. You use this uncommon definition to sneak in technicalities that allow you to attack private property while ignoring how those same technicalities would impact things you like. I’m merely making this game visible to all involved.
@Guy in TN: the discussion is about material exchange, not guys holding guns to heads. If the guy holding a gun to my head was suddenly transported, with his gun, to the Delta Quadrant, I’d be better off. If the nurse offering to inject my kids with the chicken pox vaacine was similarly transported with her vaccines, I’d be worse off. The two situations are different.
As for the case where I only have £119, whatever I spend my money on then still tells you what I value.
@ReaperReader
Right. Likewise, if the king and his kingdom were suddenly transported away, leaving the peasant alone in the taiga, he would be worse off than if he stayed and gave the king all his food.
So, by method of revealed preferences, we know that given that the nurse has control over the vaccines, you choose to exchange with her over not. Likewise, given that the king has control of the kingdom, the peasant prefers giving up his food over exile. This tells us information of a kind: what people prefer given a set distribution.
But, if you want to ask the question: “well, should the king have control of the kingdom?” or “do I approve of the nurse having control of the vaccines?” revealed preferences cannot get you the answer.
Sure, among the subset of things that cost <£119. But for things above, we now know nothing. I mean, I get that by setting a cost you are able quantify the magnitude at an individual level, but you lose a lot in the process by restricting your analysis in this way. Humans have evolved a number of ways to gauge interpersonal utility beyond revealed preferences.
It is certainly agreeing to give them political power. Not recognizing that is a huge blindspot.
A system in which some people have more “votes” than others is not a democracy.
“Agreeing” is doing a lot of heavy lifting here. I didn’t agree that billionaires should exist. And the only reason I am forced to trade with them, instead of just taking the resources myself, is because they threaten the use of force if I don’t.
So, if you want to swallow this pill and say “yeah, but this is still agreement“, I can turn around and justify any status quo system on grounds of “agreement”, by evidence of people participating in it (slavery, communism, ect).
But the democracy the critics reference isn’t a democracy. Its just an appeal to democracy. That is why I say the argument is flawed in two ways. They wrap themselves in trusting people, but also distrust them greatly.
Can’t say I understand what your trying to say here.
The anti-billionaire philanthropy critics cited (I also think most billionaire philanthropies are bad for much different reasons) are not logically consistent. They allege philanthropy is anti-democratic, but are also anti-democratic in their implementation of government itself.
Each member of Congress seems to have many more votes (and thus much more power) than I do. Including the ones I didn’t vote for, and the ~98% that I couldn’t even in principle vote for, not being from their states/districts.
Fun fact: the Silicon Valley Community Foundation actually donated about $60K to MIRI in a 2014 fundraiser.
I’d be interested to see someone explore this line of reasoning more, actually. I do find it kinda plausible that there’s a fairly large class of people such that the posts they make on social media are the most impactful thing (positive or negative) they will ever do, and I wish people would stop making so many crummy social media posts.
—
I’m glad gwern made positive note of John Arnold, who appears to me to be a super chill guy. No joke, if the US was about to transition to dictatorship and I was in charge of choosing the dictator, John Arnold is my current favorite. Think he’d be a total Marcus Aurelius type.
He’s also criticized aspects of the tax system as they relate to philanthropy. Though I’m not sure you guys actually disagree, since Arnold’s criticism is focused on the fact that billionaires put money on donor-advised funds that don’t end up actually donating. Maybe Arnold’s suggestions are a policy change that everyone can agree on? Like I said, Marcus Aurelius.
I appreciate your perspective and analysis, and it’s extremely valuable within a particular framework, but you’re not going to understand why people dislike billionaire philanthropy unless you look at a different framing.
If you believe each person is entitled to the money they’re born with, then everything you say is completely valid. You think, “Let’s try to incentivize Billionaire’s to spend responsibly, and use taxation as an incentive, and consider the pragmatic merits of various policies.”
But it’s also possible to look at the world and see how some people are bewilderingly unimaginatively advantaged over others, and say, “If this policy leads to this conclusion, then this policy is wrong.”
It reminds me of Fredrick Douglas talking about how slaves were treated at Christmas (from here:
+1
I may be misunderstanding, but isn’t this either the hls2003 point that Scott addressed, or simply a description of an emotional response without any argument for using it to guide policy?
(Personally I agree that the status quo is staggeringly unfair, and I don’t believe that ‘each person is entitled to the money they’re born with’ in any sense that rules out egalitarian redistribution and reform, but neither of those positions imply that the good kinds of billionaire charity should be discouraged.)
Couple things. First, the hls2003 comment teeters on the edge of strawman.
(emphasis mine)
It’s not that “Billionaires” are the enemy. It’s not even an organized class of people, just an arbitrary cutoff at a certain number of powers of the number of fingers we have. Certainly some billionaires can and do great things. It’s that the *system* is structured in a way that billionaires win; hard working people lose.
Now, the system isn’t a “boogeyman” because it’s not a man. Other systems of oppression have existed and continue to exist- slavery, apartheid, rule of Kings, tyrants, etc. And the thing is, they don’t seem fucked up unless you’re outside of them.
It’s not that every single slave-owner was the enemy. It’s that slavery as an institution was so normalized that they didn’t see how fucked up it was.
I wouldn’t say it’s just an emotional response, just a perspective or world-view. We might expect an emotional foundation present in a subject that relates to ethics.
Does it inform policy? Well, not directly, because there really isn’t a great alternative to the paradigm of modern capitalism. Turns out markets work for 90% of our problems. Believing each person is entitled to the wealth they accrue at the hands of industrial system/inheritance is like the centrifugal force. It’s a useful fiction, but it’s important to consider the problem in other reference frames.
Strawman?
IDK. Slicing with Occam’s Razor, it seems plausible that underlying issue here is that some people are simply morally offended by the mere existence of billionaires. Anything (like high-profile philanthropy) that makes this morally repulsive thing seem good is adding insult to injury. I don’t think that’s far-fetched at all. I also don’t think it’s far-fetched to say that a lot of the weak arguments Scott was picking apart are simply window dressing for the underlying moral position.
Thanks for the interesting and thought-provoking analogy! That’s golden.
Funny then that millions of poor people from around the world are desperate to immigrate to the system.
Apart from capitalism, where people outside the system are the ones risking their lives to get into it.
People used to sell themselves into slavery, too. And people used to flock to rich civilizations that had slavery.
People used to crown a king. And people used to flock to rich civilizations that had monarchies.
@AG: really? When did people sell themselves into slavery? Wikipedia is skeptical about this.
Yeah people can be bastards. But you don’t see people voluntarily migrating to situations where they personally are worse off. Captured Africans being sold into slavery were known to try to commit suicide.
Meanwhile illegal immigrants flock into capitalist countries despite having good cause to expect that they will be the bottom of the social heap.
Quite right, and they still do. The UK, the Netherlands, Denmark, Sweden, Canada, Australia, NZ, etc are all constitutional monarchies. I’m a NZer and I think a constitutional monarchy is quite capable of being a good thing – and that there’s many cases of republics collapsing into misery and horror.
And even if you disagree with me, do you seriously believe that the Dutch or the Swedes are living in conditions equivalent to slavery?
I don’t really see the point of this statement.
People seem to intrinsically know that if you are an average joe, its more important what your neighbors are like than what you are like. Only outliers break the mold. People have known this forever. That is why people set up communities to try and benefit themselves and their progeny. If this wasn’t true we’d all drink and shoot up and die at 15 in a drunken, drugged, sex act and humanity would cease to exist.
All these people are doing is identifying places that had progenitors that were wiser than those of the place they currently live and choosing that they prefer the fruits of the wiser path for themselves and their progeny. However, this doesn’t mean they actually know why that path was wiser, because they are choosing it merely based on current material wealth. Otherwise people would immigrate to poor(ish but not the poorest) countries with the best methods for increasing future wealth for them and their descendants as well as rich countries; UNLESS every poor country today also has an inherent flaw, which makes little sense in your context as well.
That’s now called “human flourishing”.
Really? I can only assume that this is well documented, since drinking contests and betting can surely occur for no other reason in all of human culture. By this argument, any kind of allowance or charity towards slaves becomes an act of oppression.
To the matter at hand: Gates is only saving ten million lives (and countless others from disease and poverty) in order to denigrate them further, and to keep Africa in its place at the bottom of the food chain. Helping people to survive is simply a tool of the oppressor.
It is an …interesting sentiment.
More seriously: this feels similar to the capitalism-is-evil and billionaires-as-propagandists arguments. Ideologically, we (i.e. the person making this argument) knows that the difference in living standards between countries is caused by the oppressive policies of imperialism and capitalism. Helping suffering people makes them more accepting of such policies, i.e. hindering New Economic World Orders and New Deals which would eradicate differences, and maybe preventing the Glorious Revolution.
I’m not sure why this isn’t an argument against all charity, and perhaps it is? Or perhaps it is the sentiment of the giver, surely, when I give a buck to beggar in the street it is because I am charitable and sympathetic, when a slave owner allows marriage or Gates gives to malaria, they are evil scheming bastards who protects an oppressive and repulsive system.
It seems like you’re arguing with a sentiment, which I doubt is going to be fruitful. It seems clear to me that a sentiment is going to be right about some issues and wrong about other issues.
To clarify though, you don’t have to think that capitalism is evil or that billionaires are propagandists. You just have to look at things from a different worldview/perspective. And you can even employ multiple perspectives on an issue at the same time.
When a parent is investing in a child’s education, that’s a beautiful thing, but it’s also something we’re programmed to do by our biology in order to preserve our genes. Seeing it on one level doesn’t diminish the other.
Hopefully, people don’t think I was trying to equivocate charitable giving to slavery. The only point here was that it’s something that makes perfect sense “in the system” and is totally weird “outside the system.” The example doesn’t work unless you understand how the institution of slavery made perfect sense to the people in it.
I don’t get this. Why is charitable giving totally weird outside of the system? Why do you think slavery “made perfect sense to the people in it”? Slavery was ubiquitous throughout human history but I don’t know that anyone had any illusions about what it was.
Here are some (completely naked) arguments to justify slavery from the BBC. Of course, this is all after the liberal scientific enlightenment where we could even ask such questions.
You’ll see a lot of appeals to “naturalness,” “cultural consensus,” and pragmatic justifications. These seem very similar to the justifications people would use to justify the inequalities under capitalism today.
The situation itself is what’s weird, where 80% of people have virtually no wealth and rely on super-mega-benefactors for basic sustenance and health. If you read history, you’ll likely encounter this sense. When Kepler was studying, astronomy was considered a much lesser science to biblical studies, so he only pursued it because he was a failed student. And he was only funded because some rich guy’s fiat. Within his culture, it makes sense, but we might be upset if all scientific progress was at the feet of the political climate today.
Well, I don’t see any evidence to support that those arguments were actually made, but the only context in which I have read anything like those arguments was in a very limited time frame when slavery was under severe attack from abolitionists in the U.S. and of course slavery was illegal in many states and countries.
The fact that those with an economic interest had to search for such justifications shows that it was not the case that
Quite the opposite. Of course throughout most of human history no justification was necessary. It was a routine part of everyday life that was well understood.
Why is it weird that 80% of people have no wealth? That’s been the norm forever. That number is probably lower than ever. In fact it looks like the real number is about 40% so maybe you think what’s weird is that so many people are so wealthy? I don’t think anyone relies on super-mega-benefactors, what are you thinking of?
I fail to see what your point is in all this.
But people in it didn’t find that it made perfect sense. Numerous slaves sought to escape, right back to Roman times. Look up the history of Spartacus some time.
But that says nothing about why it’s wrong, unless you take as an axiom that inequality is inherently wrong. Which is a very nontrivial statement and not at all widely agreed upon.
Yes, of course. The same thing is true for utilitarianism or any other framework. A utilitarian will look at the (standard) trolly problem and say, “How can you possibly justify non-involvement, when you can save x people by just pulling a lever?”
It’s a non-trivial sentiment and not at all widely agreed upon. But people should be familiar with utilitarianism and why it corresponds to some people’s intuitions.
I see where this is coming from a bit, but why focus on the philanthropy at all? If “billionaires exist” is offensive to you, and indeed it is to me a bit, there are plenty of steps you could take to rectify things that don’t interfere with the single least objectionable part of this level of wealth concentration.
@If you believe each person is entitled to the money they’re born with, then everything you say is completely valid
And.also if you believe that people are entitled to the money they earn by the deals they make.
@But it’s also possible to look at the world and see how some people are bewilderingly unimaginatively advantaged over others, and say, “If this policy leads to this conclusion, then this policy is wrong.”
Only if you have a very limited understanding of history. This policy, in the countries that have adopted it, has led to the disappearance of peace time famines, and vaccines and winter heating and the spread of shoe wearing and the decline of childhood mortality from something like 50% to 1%, and the civil rights movement and hormonal contraceptives and national parks and the like.
As for Frederick Douglass, let’s quote from later on in his autobiography, after his escape to freedom and New Bedford :
So, according to Frederick Douglass’s own words, the capitalist USA without slavery was far wealthier and better for blacks than the bit of the USA with slavery.
This is a very valuable perspective. My issue, such as it is, with philanthropy by the ultra-wealthy is that they essentially have a better prestige exchange rate from a utility perspective. If people’s perception of charity is viewed on a spectrum from 100% naive (“look how munificent this nobleman/woman is!”) to 100% cynical (“This person is converting material wealth into social prestige, with some nebulous gain/loss in ability to command labor power from society as a whole”), then billionaires need to pay less in terms of marginal utility to acquire prestige from non-100% cynical people. In this view, billionaires can “buy” prestige from all non-100% cynics through charity. Because different kinds of social prestige don’t seem perfectly fungible (i.e., piety, battlefield valor, and being able to read Attic Greek all return different amounts of respect in different social settings), and because charity in-and-of-itself is quite prestigious, billionaires can essentially “buy-in-bulk” with regard to this kind of high-quality prestige at “regressive” rates, as the magnitude of a donation (to an extent) increases its prestige all its own.
For the record, I am still very pro-billionaires-doing-this with their wealth, as opposed to less socially beneficial forms of signaling.
My natural inclination is to steelman because that side resonates with me, even though I can’t explain why.
I think the majority of the opposition has a simple philosophy: billionaires shouldn’t exist, and charity is how billionaires brag really hard, more so than buying yachts. When I see an expensive car roll down the street, I shrug, “materialist fool, you wasted your money.” Likewise, some people when they hear about billionaire charity, their gut says, “You asshole, how dare you.” And then they rationalize their disgust.
This default revulsion seems like it would check out across cultures and time. I’m sure the hoi poloi were revolted by excessive potlatching, despite benefiting from said potlatching. If you give a lot of money to you friends or relatives, they will accept it gladly, but they will also resent you, because the act of giving gives you power.
Chesterson’s fence would maybe say that the default revulsion may have a purpose, so we should reason really hard before defeating it. But yeah, saving 11 million lives sits there on the balance sheet.
Or maybe it’s a simpler explanation: they’re not giving to us, and so we’re rationalizing why that’s bad. “How did we let them accumulate so much money in the first place, now they’re just pissing it away!”
Specifically with Bill Gates, why didn’t he double the salaries of everybody who worked for him or helped him acquire that wealth? Or why not have given it as bonuses to all of his former employees? Walking through the CEO’s mind, it’s usually, “Well, if I raise their salaries, I can’t ever reduce them later, and they’ll get spoiled,” or it’s subtle coordination with other CEOs, to keep the labor costs down across the industry. (sometimes not-so-subtle, with anti-poaching agreements)
“Specifically with Bill Gates, why didn’t he double the salaries of everybody who worked for him or helped him acquire that wealth? Or why not have given it as bonuses to all of his former employees? Walking through the CEO’s mind, it’s usually, “Well, if I raise their salaries, I can’t ever reduce them later, and they’ll get spoiled,” or it’s subtle coordination with other CEOs, to keep the labor costs down across the industry. (sometimes not-so-subtle, with anti-poaching agreements)”
Why is it better to give the money to programmers in Washington than to poor people in Africa?
I agree there are two competing considerations – first, the capitalist consideration of making sure the people who produced the good are incentivized to continue producing it, and second, the utilitarian consideration of making sure the money goes where it would do the most good.
But the first consideration gives the money to Gates and the second one to the Africans. I don’t think you can sort of mentally average these two systems and give the money to programmers who are sort of needy (compared to Gates) and sort of in the vicinity of the success of the company (compared to non-Microsoft-employees).
Shouldn’t the question be asked the other way around? As it stands, there’s more than the hint of a suggestion that poor people in Africa have some special moral value that programmers in Washington lack. That requires an explanation, I think.
One thing we can say for the programmers in Washington is that they were directly involved in producing the value that Gates in now spreading around via his charitable work. As such they have a claim to a share in the value produced, and while it’s not like Gates didn’t do anything, it isn’t immediately clear that the extent of his involvement in its production justifies the disparity between his personal wealth and that of his employees.
What of the poor people in Africa? What claim to that wealth do they have?
Without inteding this to be a judgement of anyone living anywhere under any circumstances, I feel it nevertheless necessary to point out that we have a number of terms for people consuming value they did not produce, none of them particularly flattering. The fundamental Marxist critique of capitalism as exploitation is that the capitalist – through ownership of the means of production – unfairly appropriates the value produced by the workers. I don’t consider it a particularly appropriate critique as directed against capitalism, but it could just as well be applied against propertied, rent-collecting classes in earlier economic systems, like feudalism or slave-holding. It isn’t glaringly obvious what the nobles or slave-owners contributed to value produced, other than taking the lion’s share off the top.
Now, it is certainly possible that Bill Gates has the moral sentiment that it is really bad for certain things to happen to people in Africa – and that your moral sentiments align with his. Having such moral sentiments, he may choose to use some of his personal wealth to help (but, as shown at length in the article linked to by User_Riottt, good intentions may not be enough).
In itself, acting upon your moral sentiments is not objectionable. However, we can object to a moral system whereby one exploits a particular group of value-producing people, in order to allow people who don’t produce value – or produce very little – to consume more than they would be able to, were they restricted to consuming only the equivalent of what they had produced. The fact that this particular group is poor, rather than rich (as with the nobility, say) doesn’t seem like a particularly persuasive differentiator, unless we can somehow make the case that poor people have special moral standing, simply by dint of being poor.
Which remains to be shown.
Huh? At the risk of being overly stereotype here, surely it is worse to starve and suffer from malaria and AIDS, than to be paid $150K instead of $200K?
But I suspect there is a deep sentiment among many that capitalism is evil, and especially billionaires result from ruthless exploitation of workers (cf. Jeff Bezos) and sneaky tax evasion schemes. Charity is simply a way of spending ill-gotten fortune to glorify yourself. Again, I worry about stereotyping, but e.g. AOC appears to be immensely popular, and she apparently thinks tax credits is something NY could spend on the poor instead.
It must be really annoying that often billionaires appear to be quite effective in doing good, and do extremely much better than comparable government institutions. So there’s another reason to fight billionaire involvement, it exposes government programs (which many people prefer for ideological reasons) as ineffective or outright fraudulent at achieving their stated goals.
I worry that the most convincing arguments seem to come from people who don’t actually hold them, probably because they are uncharitable to people against billionaire charity.
Certainly. At the same time, wouldn’t it be a stretch (to put it mildly) to say that Washington programmers are somehow to blame for people in Africa suffering from malaria and AIDS?
Not to put too fine a point on it: if there were no programmers in Washington, ever, the people in Africa would be suffering much the same privations, because those come with the place, as it were. Conversely, if there was no suffering in Africa – or even no such continent – the programmers in Washington would have had to perform much the same work and likely have produced much the same value. Africa isn’t a key market for Microsoft, all things considered.
The existences of the African poor and the Washington programmers are (almost) entirely independent from one another. There is no readily apparent reason why a programmer in Washington is responsible for what happens to someone in Africa. If we are to postulate such a reason, we must also justify why that doesn’t apply in reverse – that is: why the resident of Africa is not responsible for the well-being of the Washington programmer. Is it because the programmer is earning more? How about if the programmer stops working altogether, so that he is earning nothing whatsoever? Do we then require the African poor to send him money?
We can, however, make a fairly strong case that Bill Gates has an obligation towards Washington programmers – they made him rich.
Faza,
I disagree that a strong case can be made that the programmers deserve anything other than what they agreed to in exchange for their efforts. Certainly Gates could have paid higher wages per programmer, but that would have changed which programmers got each job, as the higher wages would have attracted entirely different people to the job openings. It would also have led to different job conditions and requirements and such.
It is incorrect to assume a change in pay leads longer term to the same people making more. In general it leads to entirely different people making what they competitively attract.
Markets are complex dynamic systems, and this needs to be included in our analysis of how they react to changes.
My take on the issue is that the brass ring of creating and building a company which delivers computer software to billions of people was the incentive and the reward of becoming a multi billionaire. Countless people sought the brass ring, and one got it.
My guess is he could probably do as much good by investing the money in new creative endeavors or technologies. But he seems to disagree, and he earned the choice when he got the brass ring.
Swami,
I’m not necessarily interested in arguing that Bill Gates doesn’t deserve his wealth and even less so in arguing that he isn’t entitled to dispose of it as he sees fit.
(Whether what he spends it on affects his tax bill is another matter.)
What I’m pushing back against is the notion that it is somehow obvious that spending in on the kind of charitable work he does is morally superior to sharing it out amongst the people who worked at Microsoft.
It is not self-evident at all.
Faza,
So it is not obvious to you that giving money to those most in need and starving and suffering from diarrhea and intestinal worms is better than giving it to those already in the global one percent? (Which programmers in Seattle clearly are)
Your argument seems to hinge on some unrequited reciprocity owed between the owners of Microsoft and the employees. I do not see that there is anything owed.
How does the programmers assisting him in becoming rich create any obligation? What is your case exactly? Certainly the programmers can have had no expectation that Gates would share any of his remaining wealth with them after their profit-sharing and stock-options.
Presumably the calculus here is simply that Gates owns the money and has no obligations to anyone and is trying to do the most good with the money that he can.
Once you go down the road of ownership by association there’s no end to it. I mean why the programmers and not the financiers and lawyers who assisted gates (for money)? Why not the guys how built the Microsoft campus? They guys who built the roads the Microsoft employees used to get to work? Why not the government for providing property rights? And on and on.
Its a very weak case, and there is a much stronger case that Bill Gates made a ton of other people money. Gates’ net worth, while wildy impressive, is way, way below the total revenue of Microsoft for its existence and nearly all of that money was paid out to employees, contractors, suppliers etc.
No, it’s not. Why is it obvious to you? Honest question.
It is self-evident that Bill Gates couldn’t have built the company he did without all the people that worked for him. Leaving aside that the sheer amount of work exceeds the capabilities of a single individual, if he didn’t need them, he wouldn’t have employed them (company complexities omitted for simplicity).
It is somewhat likely that Microsoft’s employees couldn’t have built the company without Bill Gates. Not certain, because Microsoft ended up buying 86-DOS for the IBM PC deal, so it clearly could have existed independently – and did. Bill’s big contribution appears to be that his mom knew the CEO of IBM (slightly uncharitable, I’ll admit, but sometimes that’s all it takes). If Tim Paterson’s mom knew John Opel, we may have never heard of Bill Gates.
From the foregoing, we see that both Gates and his employees were necessary to get where Microsoft is today – in a very direct fashion (the analogies in your last paragraph are completely off-base, sorry). Gates couldn’t have made the sales he did – and hence built up the company – if someone didn’t first make whatever it was he was selling. The developers, on the other hand, would probably not have been able to sell their work as successfully as Gates et al. were able (e.g. because their parents weren’t as well connected).
The entire enterprise has all the hallmarks of a joint venture between those who can make something valuable and those that are able to extract value for it. I don’t know if this was the case with Microsoft, but the present-day startup practice of paying employees in stock options makes this explicit. Even with purely salaried workers, this relationship persists, albeit the security of payment does make up for some reduction in one’s share compared to someone dependent purely on profit.
If we accept the joint nature of the venture, then joint participation in the fruits of the venture follows therefrom. Because we are talking about ethics here, rather than legal issues, it’s no good looking at what the legal arrangements for sharing those fruits actually were (getting paid a salary is a form of participation, for example), but rather at what the equitable arrangement ought to have been, given the relative contributions of the parties.
Generally, if one party to a deal knowingly persuades the other to accept terms that are detrimental to them, they’d be considered to have done a morally deplorable thing (such as lying). Even if they didn’t knowingly lie, but took advantage of the other party’s lack of knowledge/competence in order to secure superior terms for themselves, they are typically considered to be morally in the wrong.
Again, it’s not an analysis I intend to perform. I have no interest in taking Bill’s money away. All I’m saying is that such an analysis may be performed and it may be the case that the employees were underpaid compared to how necessary they were for Microsoft’s success (this holds true even if we assume that individual workers are fungible; it doesn’t matter whether Alice or Bob does the job, whoever did it has contributed some portion of the value of the product).
Bill Gates’ moral obligation towards the workers of Microsoft arises if and when he took more than his fair share of the proceeds, compared to the actual value created.
It’s worth stressing that there is no necessary relationship between actual contribution and actual proceeds. Slave-owners took most of the proceeds, but did little if any work.
Faza,
The argument is that there is more value to save a thousand people’s lives who are incapable (for whatever reason) of saving it themselves, than there is in giving ten people better rims on their new new BMW’s. I could give a more empirical argument on why virtually everyone agrees with this (and rightly so) but it is so obviously self evident that I can’t help but think you are just being argumentative in disagreeing.
As to your argument that there is some contractual level of fairness in renegotiating the terms afterward, I again disagree completely. Certainly Gates could have offered even more profit sharing upside to prospective employees, but this would have come either at the expense of lower base salary and high risk (odds were that the venture would fail) or would have been at the cost of higher total compensation. But higher compensation would have brought in a different caliber of programmer, one who could have used his or her skills better elsewhere (thus it would be inefficient to pay them so much, as they could add more value other places in the economy).
@Faza, when I was a kid, my life was saved by what was about $50 worth of antibiotics. I created absolutely none of that value. How much of my future earnings do I owe to the various people involved in getting me those antibiotics?
Please give the argument, because saying it is “obviously self evident” seems to me like an attempt to shut down a question that one doesn’t have a good answer to.
As for “virtually everyone agree[ing] with this”:
– Tao Te Ching, 2, Moss Roberts translation
A moral realist cannot bring public support as evidence for the morality of some act, because the public could be immoral. (A common enough accusation.)
A moral relativist cannot hope to convince by bringing up public support, because the public perception of what is moral could change tomorrow. Indeed, questioning the moral consensus of the day is exactly how one effects such a change. That’s what the whole Culture War is about, after all.
Re Gates and Microsoft employees:
I’m not talking about renegotiation, but rather what a fair distribution of the fruits of labour, based on individual contributions, ought to have been.
The argument is two people work together to make something and Alice contributes 90% of the necessary work, while Bob contributes only 10%, splitting the profits 50/50 does not prima facie appear fair. A 90/10 split does appear fair, even if Alice needed Bob for the project to succeed – Bob needed Alice just as much, if not more so.
I’m not saying that the division of the fruits of labour between Microsoft executives and employees was inequitable, only that such an analysis can be performed in hindsight and that if the executives took more than their fair share, restoring equity would involve paying some of what they took to those who they took it from.
Bringing employment specifics into the equation is a parochial take. The issue of fair division of fruits when more than one person works towards a common goal exists in much the same form regardless of arrangements. If you want to argue against the concept, you would do best to not bring up the specifics of the Microsoft case, but rather address the central point.
As to how this relates to the central issue: it does not at first glance appear moral to do charitable work by giving away something that doesn’t belong to you. If you steal money from someone’s bank account and then use it to save lives in Africa, your act will not be praiseworthy, even if the person you stole it from would not have done as much good with it. To deny people agency is to treat them like things. If you have been shown to treat one person as a means towards your end, who’s to say you won’t do that to anyone (everyone) else. My approach to such people is to avoid when possible, resist with great force when unavoidable.
ReaperReader,
That is an excellent question. The value must obviously lie somewhere between 0 and 100%. Where do you think it lies?
My take, so as not to dodge the question, is that obligations come in two flavours: individual and communitarian (tribal). Individual obligations ought to be self-explanatory, but just to be on the same page, they are obligations that a (specific) person acquires with regards to (specific) person(s), as a result of some thing that happened between the two.
Thus, if your life was saved in a more direct fashion – for example, you were rescued from drowning – you would have an individual obligation, of some sort, towards your rescuer. If, for example, you had at some future time refused to help your one-time rescuer, despite being fully able to do so, you would have defaulted on this obligation. It should go without saying that there are limits to such obligations, even something as big as having your life saved.
Communitarian obligations are such that one acquires through being a member of a community (nation/state/tribe/church) in return for participation in the rights, privileges and entitlements of the community. Here the calculus of benefits is somewhat more obscure, because there exists no direct link between any particular obligation and any particular right.
It’s worth noting that this may occur without consciously deciding to fulfill a particular obligation or exercise a particular right. Simply by participating in community norms you are upholding community ethics, because the ethics are baked into the norms.
Your case is a typical example of community norms in play. Your parents (?) paid $50 for antibiotics and they got $50 worth of antibiotics. The obligation (to pay) was discharged and the benefit (antibiotics) was acquired.
You’ll observe that antibiotics manufacturers are already aware that antibiotics can and do save lives. This assumption is baked into the price at which antibiotics are sold. You, in particular, having survived an otherwise fatal illness has nothing to do with it, because your parents would not be entitled to a refund if you had nevertheless died.
Community obligations – unlike individual ones – average out, which is one of the advantages of doing things in groups. It doesn’t matter all that much how the balance shakes out for individual members, because we recognise that a lot of the eventual outcomes are due to luck. However, by observing our obligations to other people (the community) in good times, we are securing the benefit of their favour in bad ones (hopefully, I shall never require disability benefits, but I am content to pay insurance contributions, just in case I ever do).
Two points about community norms:
1. It is possible for community norms to be inequitable, if a person or group is entitled to lesser obligations or greater benefits than other members of the community. If, for example, we exempt all nobility and clergy from paying taxes towards common benefits (roads, the army, etc.), the community norm that makes it so is inequitable.
2. Community norms don’t apply outside the community. The way one acquires community benefits is by fulfilling community obligations. We wouldn’t normally consider taxing non-resident non-citizens – nor would such people typically agree to be taxed, but that also means that those people don’t get the benefits of being residents and/or citizens (they don’t get to vote, for example). Similarly, if one wants the benefits that come from being part of the community, one must become a member in good standing, quite possibly with the initial hurdle of needing to convince the community to accept them as a member. There is no pre-existing obligation for a community to accept any particular person.
Bringing it back to the central issue: I can accept an obligation towards other people (poor residents of Africa, say) if, and only if:
1. I owe them something personally, because they’ve done something for me in the past,
2. We are equal co-members of a community, in which case my obligation is towards the community rather than the individual members.
Everything over and above is my good-will, not fulfilling some manner of obligation.
I do not accept a general obligation that is based solely on any particular characteristics that they and I happen to have, because I fundamentally object to a morality that follows the following pattern:
1. Black people have obligations (service) towards white people, because black people are black and white people are white,
2. Peasants have obligations (service) towards nobles, because peasants are peasants and nobles are nobles,
3. Women have obligations (obedience) towards men, because women are women and men are men.
4. Rich people have obligations (charity) towards poor people, because rich people are rich and poor people are poor.
If this list seems objectionable, do note that in all four cases the obligation arises solely because of membership in a group. The inevitable infernce is that the group being served is in some way morally superior to the subservient group and that’s a premise I reject with full force.
I am not convinced by appeals to outcomes either, because agency comes with responsibility for one’s choices. I consider agency to be central issue in all moral discussions, partly due to the fact that it’s hard to question the morality of non-agents (dinosaur-killing asteroids aren’t moral or immoral, they just are) and partly for more fundamental reasons, that are tangental to what we’re discussing here.
A bad outcome for one person may impose a personal (individual) obligation on another, when it was caused by the actions of that person – if I wronged you, I should make amends. We can also imagine a mutual assistance compact between two people, where a bad outcome for one gives rise to obligation of assistance from the other.
What I’m not seeing any support for is the idea that a bad outcome for someone, somewhere creates an obligation of assitance from someone else, far away, who has neither a personal nor community connection with the person having the bad outcome.
If such an obligation exists, I’d very much like to know, because my life has inexplicably not been filled with strangers rushing to my aid whenever I was going through a rough patch (and some were pretty darn rough).
On the other hand, based on the conversation we’ve had so far, it seems that the idea that some groups are simply better and more deserving than others is “obviously self-evident” and I’m just part of the wrong group.
You’ll forgive me for rejecting this approach. I can see no rational, ethical or political reason to accept it.
And what difference do you see between this and the case of Microsoft employees? The analysis would seem to be identical (mutatis mutandis). I can spell it out if you wish but it seems obvious.
I don’t see any ethical or philosophical basis whatsoever for your idea that profits should be allocated according to the percentage of labor done by each participant, nor that it is possible to calculate this percentage after the fact, nor that it would be fair to go back and break the agreement between the parties and re-allocate the profits according to this formula. I see no justification for this whatsoever in anything you have said or anything I have ever read or heard, anywhere.
Faza,
The reason I did not spell out the argument on saving a thousand lives as opposed to giving ten people better rims on their new BMW was that I suspected you were just being pointlessly argumentative, hence it would be a waste of time. The argument is that
1). The ten people (who are already in the global top 1%) are capable of creating value themselves and thus need less help.
2). The thousand lives saved is of much higher utility than than the ten people getting flashier automotive status symbols. Theory of Marginal value.
This can be demonstrated by Rawlsian choice, as virtually everyone would choose to enter a society where they would rather get voluntary assistance from others during a crisis or when at risk of death than they would where the same value was redirected to them when least in need of assistance. IOW, would we join a group where those benefitting the most and most in need get charitable assistance as a heuristic, vs those benefitting the least. If you would choose to enter a society where voluntary charity goes primarily to those least in need, then feel free to do so. I suspect you will be joining a set of one.
“I’m not talking about renegotiation, but rather what a fair distribution of the fruits of labour, based on individual contributions, ought to have been.
The argument is two people work together to make something and Alice contributes 90% of the necessary work, while Bob contributes only 10%, splitting the profits 50/50 does not prima facie appear fair. A 90/10 split does appear fair, even if Alice needed Bob for the project to succeed – Bob needed Alice just as much, if not more so.”
You do not understand the concept of value in economics. Full stop. Economics is based upon mutually voluntary interactions where two or more individuals agree to interact in an exchange. I will give you this for that. They each subjectively evaluate the costs and benefits and if they judge it to be worthwhile and better than alternatives (what they can do with their time or goods or with other voluntary exchanges) then they capitalize on the offer. In the case of employment, it is someone offering an employee X dollars for a task. The price of this in a free market is in no way based upon what the absolute true value of the product is (whatever the heck that is) it is based upon the supply and demand of employers and employees competing for labor and jobs. What I was paid as an employee was based upon the supply and demand of my skills. It had almost nothing to do with the value I produced or failed to produce (after all an employee can destroy value if they build products that are never sold, or sold at a loss). I say “almost” because in the long run, if value is not produced, then it undermines the incentive to employ the person at all.
Certainly if someone wants to employ or be employed on terms relating to a set proportion of the final sale price, then they can do so. This is common in commissioned sales. And of course the commission rate is set based upon supply and demand. Note again the risk that comes with working on a commission or share of profits arrangement though, as many businesses and products and services fail. Most people are unwilling to accept excessive risk and variability in income. Reasonably so.
Honestly, your take on how markets work is not just incorrect, it would be logistically absurd to build it your way, as it would just invite endless argumentation on who added what value or how much work was contributed. This is especially true of your suggestion that it is based on the “necessary work,” as it neglects skill, risk, efficiency, investment, conscientiousness, scarcity and so on.
“I’m not saying that the division of the fruits of labour between Microsoft executives and employees was inequitable, only that such an analysis can be performed in hindsight and that if the executives took more than their fair share, restoring equity would involve paying some of what they took to those who they took it from.”
They didn’t take anything from anyone. They exchanged a salary (and profit sharing in the case of Microsoft) in exchange for set activities. Fair is defined in a market as voluntarily agreed to without coercion or undo limitations on competitive entry.
“..it does not at first glance appear moral to do charitable work by giving away something that doesn’t belong to you. If you steal money from someone’s bank account and then use it to save lives in Africa, your act will not be praiseworthy, even if the person you stole it from would not have done as much good with it.”
But they did not steal from the employees, they made a fair offer according to how markets work that was voluntarily accepted. Both sides benefitted as hoped. Your issue is that you do not understand how markets work and/or that you are rejecting how they do work and overlaying a poorly thought out, naive version of economics and applying that to create some kind of odd retroactive justice.
As for your comments to Reaper, you shift the discussion from voluntary charity to obligation. There is no obligation in a market to renegotiate employment contracts after the fact (up or down), and for good reason. There is also no obligation on an entrepreneur to give his profit to starving people. It is simply a choice, and honestly I am not even sure it is the best choice. My guess is that a good entrepreneur might be able to produce more good by reinvesting profits into new technologies, products, services and ventures. My guess is smart phones and computers and software have done several orders of magnitude more value for more people (especially the most in need) than charity. But it is the rightful owners choice — that is how property rights work.
“This can be demonstrated by Rawlsian choice, as virtually everyone would choose to enter a society where they would rather get voluntary assistance from others during a crisis or when at risk of death than they would where the same value was redirected to them when least in need of assistance.”
Nothing can be demonstrated by Rawlsian choice because it already presupposes a commitment to utilitarian values. I, for one, would certainly rather live in Faza’s world where input has some relation to output as opposed to a world where the impossible moral work of determining the “most deserving” was handwaved away until it had reached the most remote shores of our collective imagination.
Mere,
“Nothing can be demonstrated by Rawlsian choice because it already presupposes a commitment to utilitarian values.”
No it doesn’t. The point of the veil is to eliminate partiality (aka privilege) from determining one’s social structure or rules. Behind a veil, the logical selfish choice is to choose a society with highest average or median outcomes. The interesting thing about Rawlsian choice is that it actually tends to find stable solutions to cooperative dilemmas that attract egoists, altruists and utilitarians.
“I, for one, would certainly rather live in Faza’s world where input has some relation to output”
Market economies certainly have this relationship. Workers are routinely paid piece meal, based on commissions, per hour, on tips and so on. Salary reviews and raises are routinely based on objective performance standards. Heck, hiring standards even contemplate this by subjectively trying to bring in people most likely to meet the productive requirements. Other jobs include a profit sharing component (pretty sure this is a major part of Microsoft’s packages).
A world where all/most salaries were set completely or even mostly based upon final long term contribution to profits would be FUBAR. They are too uncertain. The people working for all those software companies (or software divisions within a larger company) which failed would owe money to their employer. Who would want to feed their children and pay a mortgage this way? Or were you biasing the system by only using it on the upside and after the fact? Yeah, I thought so.
Point is, in a free market, people can (and do!) choose the type of pay structure they prefer and companies can offer the pay structure and amount that best attracts and retains the necessary employees or contractors (or vendors). Where supply meets demand is what we see in the real world. My guess is that you just wish that it looked differently than it does. You can imagine a fantasy world where pay is different. Of course there is no guarantee that your fantasy world is viable.
“…as opposed to a world where the impossible moral work of determining the “most deserving” was handwaved away…”
It isn’t waved away. The most deserving is chosen by the owner of the property in question. That would be Mr and Mrs Gates in this case.
If you would rather live in a world where ten people in the global one percent get better rims on their status symbols than 1000 starving children get saved from premature death, please feel free to join Faza. But can I ask one more favor? Please make sure you two don’t try to force your odd version of morality on the rest of us.
“The point of the veil is to eliminate partiality (aka privilege) from determining one’s social structure or rules. Behind a veil, the logical selfish choice is to choose a society with highest average or median outcomes. The interesting thing about Rawlsian choice is that it actually tends to find stable solutions to cooperative dilemmas that attract egoists, altruists and utilitarians.”
Again, this presupposes your highest good to is maximize some incommensurable concept of “utils” or some such, and is outright rejected as a shared rational framework by virtue ethicists and a variety of other competing moral frameworks.
The rest of your comment seems to very confusedly waver between the claim that obviously maximizing utility is the highest good, and also, some sort of paean to market forces? I actually… don’t even disagree with anything you’re saying about the market (other than maybe the implicit presupposition that the market is rational), but I’m not sure how market libertarianism gels with your Rawlsian utilitarianism, except in this one particular case where a market decision by one particular billionaire seems to have been a utilitarian one.
Thanks Mere,
“Again, this presupposes your highest good to is maximize some incommensurable concept of “utils” or some such, and is outright rejected as a shared rational framework by virtue ethicists and a variety of other competing moral frameworks.”
I see nothing in a Rawlsian framework which precludes choosing one’s preferred “shared rational framework.” The point is one can choose what type of society one wants to live in, but then one has to also live with the consequences. You can even choose to live in the society with the lowest expected utility, if that kind of thing floats your boat.
The other “handwaiving” comments were a repudiation of your suggestion that markets do not have outputs relative or proportionate to inputs. This is clearly not true at all.
>As it stands, there’s more than the hint of a suggestion that poor people in Africa have some special moral value that programmers in Washington lack. That requires an explanation, I think.
It’s much cheaper to help many more poor Africans than Washington programmers. MUCH cheaper, as in five or six orders of magnitude. Why do much less when you can do much more?
It’s an interesting question and one to which the answer isn’t obvious.
Assume for a moment that the number of Quality-Adjusted Life Years is our relevant measure. We might observe that people living in prosperous places (Washington) tend to both live longer and have a higher quality of life than people in poor places (such as some parts of Africa).
It may be cheaper to improve the quality of life for someone who has a low quality of life to begin with, but even a comparitively large increase may not translate into a big increase in the number of QALYs if that person dies young. Similarly, a small comparitive increase in a person’s long-term quality of life may translate into a greater increase in the number of QALYs, because the effect persists over a much longer period.
Moreover, the cost of quality of life improvements depends to an extent on the immediate environment. Living in a peaceful region, for example, generally tends to make small improvements easier to obtain than if the region you live in is torn by constant wars.
We cannot simply assume that any particular intervention is better just because it intuitively seems to be.
According to happiness research, people in the U.S. report higher happiness and life satisfaction than people in Africa, on average, and that additional income does less to improve their happiness and life satisfaction from that level. Given that the effect of additional income on happiness appears to drop off fairly quickly after $70k/yr or so, a successful programmer is further along that scale and it is more difficult to improve their lives by giving them more money, while patients dying of Malaria report extreme pain and suffering.
Therefore, intuition appears to line up nicely with all available evidence. Is your idiosyncratic intuition in the opposite direction strong enough to countervail all available evidence?
@Faza
You are assuming a particular theory of entitlement, where people who help create value deserve the entirety of the value they help create. Turn to your question back at you: How can you justify this, without somehow making the case that value-creators have some sort of special moral standing, by dint of being value-creators?
From reading your posts, I suspect your argument is: You don’t. Instead, you probably justify these people receiving 100% of the value they create on utilitarian grounds, in that rewarding value creation encourages people to create more value, which can assist with increasing utility.
But here’s the thing: they don’t have to receive 100% of the value they create, in order to maintain the incentive to create value. We know this, because all of the good Bill Gates did happened in a world that contains the U.S. tax code.
Think of it as a Laffer Curve for utility: Taking none of the billionaires wealth means that welfare spending ceases (very bad utility outcome), but taking all of it kills the goose that lays the golden eggs, leaving you in the same place as if you took none at all.
So, to wrap it up, those of us who argue for a forced transfer of wealth from the rich to the poor, don’t have to make the argument that the poor have some special moral standing. We’re just making a standard-issue utility argument for our theory of entitlement, in the exact same way you are.
The moral obligation to help the poor in Africa isn’t one that is incurred due to some harm you’ve caused, but rather one imposed by the dictates of the utilitarian goal of making the world a better place.
Obviously I am not Faza, but it really doesn’t read to me like they are postulating any kind of utilitarian or consequentialist justification at all.
Perhaps this isn’t his position, on second reading.
Nevertheless, I’m sure the argument will inevitably be deployed by someone at some point, in what is going to surely be a massive and contentious comment section. So I want to get it out there preemptively.
Consider that Art Laffer was way off in his predictions about the Laffer curve and that most other economists would put the top tax rate closer to 70% to maximise government revenues which wouldn’t be expected to decrease growth.
https://www.wsj.com/articles/SB10001424052702303425504577353843997820160
http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html
The revenue-maximizing rate most definitely would decrease growth. No way around that.
I don’t, because it’s an ill-formed question. Value-creators don’t have special moral standing. They have special practical standing: because they created value, they have value to consume. If they hadn’t, they wouldn’t. Morality doesn’t enter into it at all, because you physically can’t consume what you ain’t got.
However, value creation isn’t the only way you can obtain value to consume. You can also be given it, without any contribution to its creation.
Demanding that you be given it does seem to imply that you have some special moral standing, because the obligation to give it to you or not is a moral question.
That only works if you accept the utilitarian goal (and framework), which is itself a moral question.
Even if you do, it does not follow that you are permitted/obligated to do so with other people’s money. Thus, if Bill Gates owes his co-workers something, he cannot use those particular resources to further the utilitarian goal without defaulting on his obligation – thus wronging his co-workers and acting immoraly.
In general, intentionally wronging a faultless party is considered immoral, even if undertaken with the best purposes in mind. “The end justifies the means” is not usually considered an ethically praiseworthy stance.
Cliff,
Bear in mind that growth must be baked into any revenue-maximising rate, because growth translates into additional revenue in future periods. You’re not maximising revenue at any particular point in time, but over a period (for example, the length of the government’s term).
It’s not in the research he is referring to. Indeed, those studies estimate the revenue-maximizing tax at a moment in time.
I’m not aware of any studies attempting to estimate tax revenue out indefinitely into the future and then discount the stream back to NPV, and if there is one I imagine it’s fairly useless, since that would be extremely dependent on assumptions.
Cliff,
All budget planning I’m aware of always estimates tax revenue based on some assumed level of growth over the fiscal year.
Is it done differently where you live?
@Faza
We do have taxation though. So the “create value” -> “own value” pipeline is clearly not an insurmountable force of nature. By using our laws, we can determine who is assigned property in new wealth that is created. There is no default option: It’s a political question all the way down, so whatever choice we make needs to be justified on some sort of ethical or moral grounds.
This is just normal government taxation behavior though, right? Seems difficult to point to folk-morality as grounds to delegitimize something that goes in in every country in the world.
@Faza (TCM)
“Moment in time” as Cliff has used it roughly means “during the current fiscal year”, and even then it tends to overstate how responsive revenue is to a change in tax rates (i.e., revenue is lower than projected after tax hikes & higher after tax cuts); behavioral responses to variation in the tax rate are just underaccounted for, let alone effects on growth. Trying to extend the same sort of projection to an indefinite horizon for marginal tax rates very different from the current level will compound the annual errors so as to massively overstate the NPV-maximizing marginal rate.
use facebook to go around WSJs paywall
It’s still ‘pro growth,’ according to them (using the insane rational expectations assumption), even when the extra revenue is pointlessly used to cause deflation by paying off the imaginary national debt that hasn’t existed since we left the gold standard.
Insane rational expectations assumption = Every joe six pack sees that we are decreasing the national debt and knows that means his future tax bill will be lower and therefore he can safely decrease his savings rate and increase his consumption.*
*=implicit assumption every time you invoke free markets.
User_Riottt,
I hope you can see that is a facile analysis that would not be accepted by most economists, as it does not even attempt to be scientifically rigorous.
While marginal rates were higher in the post-war period, total tax burden was roughly the same, so maximizing tax revenue is not comparable in any way shape or form to that previous experience. Obviously not to even mention the many, many confounding factors.
By definition, the higher the tax rate, the larger the deadweight loss. It would be absolutely shocking if maximizing tax revenue would not decrease growth. I can’t imagine that any significant number of economists would believe that such a thing could be possible. It’s hard to overemphasize how different that situation would be from the status quo. You would literally have many thousands of high-income individuals renouncing their citizenship.
Again, that is why I linked to two sources, the 2nd one is a list of various economists and their thoughts on revenue maximising tax.
I wish, but no. ‘Honey, let’s pack up the kids and move to Zimbabwe because our taxes are too high.’ Does not actually happen and only partially because highly paid people are not nearly as indispensable as they think they are. Relocating the entire business just isn’t feasible most of the time.
The trouble with the Marxist analysis is that it ignores the question of where the means of production come from, and who worked out how to use them in a more useful way.
Would you say that a teacher consumes value that she did not produce, because she gets paid merely for rearranging pre-existing neurons in her students’ heads? No, passing on information is valuable.
Would you say that Florey and Chain and the other scientists who worked out how to extract and refine penicillin consumed value that they did not produce (as they personally produced tiny amounts of the drug)? No, creating information has value.
Does the police negotiator who talks an armed hostage taker into putting down his gun add value? Yes, inter-people skills are valuable. Did the people who negotiated the Good Friday peace settlement in Northern Ireland add value? Political skills are valuable.
And in line with these, the entrepreneur who spots the opportunity to create a better means of production adds value.
Do they add as much value as they are paid? Much less, most of the benefits of any production goes to other people, the people who buy the cheaper products, who learn the mathematics, who didn’t die of a gunshot or a nail bomb or an infected shaving cut.
Were they paid value in proportion to their contribution? How on earth could we calculate that?
This comment is the reason “Highlights” threads exist. It is one of the best comments I’ve ever read.
ReaperReader,
No disagreement there. I fully concur that entrepreneurs add value and this is one of many reasons why I’m not so much a non-Marxist as an anti-Marxist.
However, it doesn’t follow from “the entrepreneur adds value” that “the amount the entrepreneur receives is proportional to his contribution”. Indeed, given that “buy cheap, sell dear” is the most basic entrepreneurial strategy, one might expect that the entrepreneur will try to maximise his personal take at the expense of the other participants.
The means by which this can be achieved are not prima facie always moral. Consider the price-gouging monopolist – are they acting morally, simply because they can inflate the prices? How about the speculator, who creates a market shortage, only to benefit by selling at prices much inflated relative to what they would have been in his absence?
I find it difficult to see how we might justify such cases other than by adopting “might makes right” as our guiding principle.
No… no it’s not.
Depending on how they got their monopoly, that might have been moral, or not. Pricing a product is not generally a moral issue. Prices are typically set at a profit-maximizing level which is neither moral nor amoral.
Speculators generally reduce price fluctuations. They increase prices by buying when prices are low, and reduce prices by selling when prices are high. Economic analysis shows that they provide significant value to market participants, so I see no moral problem with speculators.
@Fama, yes, certainly an entrepreneur can add negative value. An entrepreneur can lobby the government for laws such as tariffs or subsidies or anti-trust investigations against their competitors, or seek to increase their profits by adding lead to petrol.
But that’s no different to anyone else who is capable of adding value. The teacher can lobby for job protections that make it incredibly time-consuming to get rid of incompetent or abusive teachers, or she can teach her students that a p score less than 0.05 is the sign of a valid study.
A scientist can discover that lead makes petrol run better, or they can teach their doctoral students how to p-hack.
Someone with great interpersonal skills can use them to scam people out of money. Or to rise to the head of government and from there embark upon a genocide and a war that killed millions upon millions. Someone with great political skills can use them to stay in power while pursuing disastrous economic policies.
That doesn’t mean that we would be better off without teachers or scientists or politicians or entrepreneurs. Instead we have an obligation to be informed citizens and to strive to be aware of the harms that we ourselves might be doing.
I have some personal knowledge that relates here: My aunt’s husband’s brother (I know, hang with me a sec) was told by his parents to get a job or move out when he was in his early 20s. He happened to find a janitorial position at Microsoft, employee 300 or so, and retired on his stock options in his 30s a millionaire. How much more exactly was Gates supposed to do than make the janitors millionaires?? I assume the board of directors has more to say about payroll budget and stock options for employees today than the CEO does, but in the early days Bill seems to have taken care of folks.
Business school anecdote here:
Microsoft has historically kept relatively huge amounts of cash reserves. Like, bizarrely huge, to the point where they were passing up meaningful amounts of money by not investing it in short-term financial instruments.
There was lots of speculation about what, exactly, the deal was with them, because it didn’t make much sense and Microsoft was clearly not run by dumb people, so they must be playing 4-dimensional money chess or something.
Eventually, someone pinned Bill Gates down on the question, and his answer was basically that he knew all these tech companies that went out of business suddenly, went bankrupt, and left all their employees broke and unemployed without warning. And that’s scary and awful and he really didn’t want to do that to the people at Microsoft, who were all his friends and long-time colleagues, so as soon as he was able, and as long as he was calling the shots, he made sure that Microsoft had a month’s worth of payroll squirrelled away.
Thus, in the absolute worst-case scenario, where nothing was left of his company but a smoking crater, and they’re selling the office furniture, he can still hand everyone their last paycheck on the way out the door. It was his emergency “don’t screw over my own people” fund.
That increased my respect for Mr. Gates.
That’s a cool enough story that I’d like to be able to repeat it with confidence – can anyone find confirmation?
Largely because this was impossible for most of his life. Bill Gates did not take a salary of a billion dollars a year and roll around on a bed naked in it before having it steam cleaned and then sent to Africa. Gates’ wealth, and the wealth of most billionaires, was tied to the equity he owned in the company. For him to pay out the first billion he made he would have to sell that stock, lose control in the company, and lose the following gains that the stock made.
Almost all of the donations that Gates has made are in the form of shares of Microsoft stock, and they only exist as wealth as long as Microsoft exists in a certain way. If the government decided to strip 100% of Gates is wealth away and sell off the stock and give away the money they would effectively destroy a large amount of the wealth that existed with Gates holding it.
Couldn’t one still ask why he didn’t give more of that equity in equity-packages to Microsoft employees?
Because that equity directly impacted his ownership and control of the company?
Microsoft was Bill Gates’s company because he owned such a large percentage of its equity. He became very rich because that company became worth a lot of money, and therefore the large percentage of it he owned was worth a lot of money.
If he gave away a lot of the equity early, he wouldn’t own enough of it to exercise the same level of control over it.
He can’t eat his cake and still have it, to.
Didn’t Mark Zuckerberg do something like this at Facebook by making his shares Class B shares?
Plus if I’m not mistaken Bill Gates had a ~45% stake at the time Microsoft IPO’ed so he definitely had some slack in how much equity he could’ve given Microsoft employees without losing control of the company.
How much slack is “some slack”?
45% stake means it’s hard but possible for him to get overruled about something he really cares about.
Every bit that he lowers his personal stake makes it easier for him to get overruled or forced out of company decisions. What’s the amount that you think is sufficiently generous that you would have no complaints about it?
40% stake? 35% stake? 30% stake?
And that IPO raised $61 million, which isn’t couch cushion money, but isn’t billionaire money, either. How much more risk to his control of Microsoft should he have taken on, in order to be appropriately generous?
This isn’t me being tricksy; it’s really the sort of question you have to consider. Shares of stock, for Bill Gates, were not money. They were ownership of Microsoft and ability to control it. Yes, they’re worth money, but so was his car, and so was his house, and so were his neckties.
He could have given away more shares of Microsoft, but he was using those. He could have given away his car, too. Should he have?
Should everybody with valuable assets sell them and give the money to the less fortunate? Maybe that would be morally praiseworthy, but it doesn’t seem to be the expected social norm.
Jesus answered, “If you want to be perfect, go, sell your possessions and give to the poor, and you will have treasure in heaven. Then come, follow me.”
— Matthew 19:21
But I agree that nobody takes that verse literally in practice.
@Derelict
Perhaps they don’t want to be perfect 😛
Sure you can ask. In general the answer I would give is that Microsoft is currently worth over $1 trillion dollars (market cap as of now) and Gates at his peak was worth ~100 billion, so even allowing for $50 billion in consumption+donations and giving him no credit for any other income, ~ 85% of stock value went to people other than Bill Gates. Even adding in Paul Allen only does a little more (~20 billion net worth at death).
Revenue wise the gap is slightly larger, with google saying that it passed the $1 trillion mark in 2016 and over the past 3 years has made ~200 billion more.
I think there’s two much focus on irrelevant details here. Bill Gates could simply cut everyone who contributed a check for the amount he considers them to have been underpaid relative to the value they brought. No need to dilute the stock position or anything, simply take some of the money he would have spent on charity and direct it elsewhere.
There is no actual technical difficulty here, other than determining who – if anyone – has been underpaid and how much.
What I find more interesting is how much pushback there is against the idea that this angle may be even brought up for considration.
I think the issue is that Gates and most people here do not believe that anyone has been underpaid. If they did, that would actually be an extremely difficult technical problem, probably insoluble.
It’s not that surprising that you’re getting push back. If morally, employees should be paid for the value that they actually created, not according to the deal they negotiated, then that goes both ways. If the company makes a loss then morally the employees would have to pay their share.
It’s a side point, but this whole argument seems a bit unreal because companies like Microsoft are famous for sharing their wealth widely with technical staff, via stock options. Why start with the programmers? These companies have dramatically unequal pay and benefits. Programmers are near the top and contractors at the bottom.
The push to get better conditions for Amazon warehouse workers seems better targeted.
I would count most of Bill Gates’ wealth as ill-gotten wealth obtained through coercion. If there was no such thing as intellectual property laws covering operating systems, he never would have been able to make his money and everyone else would have been a lot better off. There’s also indirect use of coercion through Bill Gates lobbying for other intellectual property laws, favorable taxation, and generally laws favoring himself. Bill Gates giving this ill-gotten money to Africans is stealing the money from Peter to pay Paul using government force, and I don’t accept this just because Paul is poorer.
Furthermore, the idea that all human beings count equally is a bizarre belief that the general population doesn’t share, and I wouldn’t want to live in a world where the general population did share it. And even rationalists don’t completely follow through on the implications of that belief, since doing so is impossible.
Can you at least admit that you don’t know nearly enough about Microsoft to say this with any confidence at all?
I’m inclined to agree with Jiro. They (Microsoft) did a lot of perfectly legal deals that resulted in 3rd parties paying for things they didn’t need. They pushed out so much flaky software that the standard of what was acceptable fell to their level. Their complete inattention to security was certainly what the market was willing to accept at the time – but quite expensive to a lot of people in the long run, and reminds me a lot of a quack knowingly selling medicines that just happen to have dangerous ingredients the purchaser doesn’t know to ask about.
Basically Microsoft, like many other perfectly legal enterprises, did anything they could get away with, regardless of side effects, and left other people paying for the results. Legal != moral, and all kinds of bad things would happen if the law did attempt to enforce morality. But referring to Gates’ wealth as ill-gotten seems a reasonable way of expressing the moral dimension.
I’d have more trouble with specifically attributing them all to coercion – that was a factor, but not the only factor. (People did manage to produce alternatives in spite of Windows… and folks who don’t need to accept “cheapest possible” – either in up front cost or required technical know how – continue to use them.) But IMO if Windows had never existed, a lot of modern software would be more reliable, easier to use, and far less prone to malware – and no one even imagines Microsoft paying compensation for those externalities.
Why do you merely count the people who worked for Microsoft? Why not the people who sold food to Microsoft employees? Or electricity? Or hardware? Or insurance? And how about the people who fed his employees? The nurses who administered childhood vaccines that statistically saved the lives of some of the people who were eventually employed, etc, etc.
But on the other hand, all the people who worked for Microsoft also gained from using Microsoft products. As did those of us who never did. Should I pay Microsoft some extra for all the times I’ve walked into a new job and not had to work out how to use a new spreadsheet program?
And of course the benefits that Microsoft has brought to my life are trivial next to the ones brought by the companies that provide clean drinking water, antibiotics and childhood vaccines. How much money should I pay to big Pharmac?
All this gets too hard to calculate. Microsoft made their contracts as they were, as did pharmaceutical shareholders and employees and same for sewage engineers. We don’t have some obligation to obsessively try to make the eventual outcomes match up with the final result.