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Tag Archives: Wealth

More Thoughts On Forcing The Rich To Pay “Their Fair Share”

As mentioned previously, the quality of our decisions is largely dependent upon their underlying assumptions (see “Why Can’t We All Just Get Along“). If our assumptions are wrong, then any subsequent analysis will very likely be incorrect. This post examines assumptions about wealth, and suggests how popular notions based on incorrect assumptions can yield grossly incorrect conclusions.

A lot of folks today (based on sensational news reporting of the Occupy Wall Street “movement”) seem to think that it is morally wrong and unjust for some of our fellow citizens to have more income (or more wealth) than we average folks do. So let’s apply some engineering thinking and see just how upset we should be at the rich, and whether or not we should make them our slaves. You can do your own analysis, but here are some things for the Wall Street Occupiers to consider:

1. Do you understand the difference between income and wealth? Income is the flow of money to an individual based on their work (or from investments, which flow from prior work effort, or perhaps due to inheritance or luck). Income does not stay resident in a rich person’s home (assuming they don’t burn their money or stuff it under a mattress), it largely flows through them to other folks who provide goods and services. This is why average folks like to be located near wealthier folks; so they can be closer to the flow of money.

Income, if not squandered, can also accumulate through savings and investment in wealth (real estate, money in the bank, autos, jewelry, etc.). Wealth can also be inherited, or obtained by luck (Wow! I won the lottery!), but wealth is much more likely to be obtained by many years of sacrifice and hard work.

Okay, so if you want life to be “fair,” what would be a fair way of taking the extra wealth or income from those folks who have more than you or me? How do you account for the effort and risks they have applied to their lives? What if they were just lucky? (If you won the lottery, would you like the government to redistribute it to everyone else who was not as lucky as you?) If you have a student loan, should wealthy folks who paid for their loans also pay for yours?

2. Do you understand that rich and poor people, for the majority of cases, are not stuck in those positions? Rich people frequently lose their wealth through bad business decisions or bad luck, while poor people frequently obtain great wealth due to hard work or luck. The important point is that “rich” and “poor” are typically not static; they change dramatically with time. Someone rich (or poor ) today is often poor (or rich) tomorrow. So how do you define “rich”? Is it someone who today has more than you or me, or should we take into consideration how long they’ve had their wealth? After all, we should be careful to be completely fair before we make someone our slave.

3. With regard to forcibly taking money from the rich to give to ourselves (via the federal government), how do we justify this? As described previously (“Why PIzzanomics Is Immoral“), government services are no different than any other service. But if we decide that rich people should pay more than you and me, then why shouldn’t they always pay more? When a wealthy person hires a plumber, shouldn’t they pay two or three or more times as much for having their leak fixed? But if so, who should determine the added amount, and how much should it be?

The decision to make someone our slave should be carefully considered, because — at least for now — they aren’t completely our slave, because they can leave. And (although the government doesn’t publicize it) this is happening: millions of Americans are leaving, fed up with being slaves, and they’re taking their money, talent, and job-creating abilities with them.

So who do we get to make our slaves, once they have all gone?

-Ed Walker

 

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Where Is Eliot Ness?

Eliot Ness, the lawman best known for his major role (1927-1931) in taking down Chicago mega-gangster Al Capone, was known to be incorruptible, as were his hand-picked team members (known as “The Untouchables” because they could not be bribed). Ness also helped clean out the highly corrupt Cleveland city government, weeding out over two hundred crooked police officers and public officials.

So why is ET talking about Mr. Ness? Because integrity is essential, not only for upholding the law, but also for making good decisions.

IF THE INFORMATION WE USE TO MAKE DECISIONS IS CORRUPT
THEN OUR DECISIONS WILL BE WRONG

Engineers know this. We simply cannot do our work without accurate and reliable data. If it’s discovered that an engineer has falsified data, or engaged in any other deceptive behavior, they are (in my experience) always fired. Integrity is mandatory for an engineering professional.

One of the most important decisions we make is whom to elect to represent us in our federal and local governments. If politicians seeking office were subjected to an engineering design review, it would be a straightforward process; i.e. the “spinners” (liars) would be detected and rejected. Unfortunately, the method we use to select politicians is hugely corrupted by bad data, and here’s a major reason why:

You may be aware, in watching or reading the news, that politicians (or their allies in the media) often use exactly the same phrases. e.g., “taxing the rich,” “shared sacrifice,” “pay their fair share,” “balanced approach,” “drive the economy over a cliff,” “the extreme right wing,” etc. The reason these phrases sound like they are all part of a chorus is that, well, they are. “Talking points” (emotionally-laden and focus-group tested phrases) are distributed to all like-minded politicos and their friends, who repeat them at every opportunity. The idea is that the average person, upon hearing the same viewpoint expressed by many supposedly independent sources, will conclude that the viewpoint must be true.

But talking points are not based on the search for truth, they are based on the search for votes, and are simply propaganda, sometimes blatant, sometimes subtle. To the extent that the intent is to make you believe something is true when the speaker knows it is not, they are lies. Unfortunately, they are very effective, and they are extremely destructive; not just because they are false and misleading, but because they very often appeal to our worst nature (e.g. encourage us to be envious of those who make more money than we do, a position that is neither logical or moral (see “Is The President’s Reason For Taxing The Wealthy Logical?“; “Is The President’s Reason For Taxing The Wealthy Moral?“)).

Can we clean this up? Are you today’s Eliot Ness? Are you an Untouchable, the man or woman who cannot be bribed, who will always tell the truth? When you hear a politician utter an emotionally-laden smear, will you speak up and challenge them? Will you change careers or come out of retirement and run against the liars, so we can rid them from our government?

Please step forward, we need you.

-Ed Walker

 

 

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Why Pizzanomics Is Immoral

In prior posts (“The Economy Is Not A Pizza Pie,” Part1 and Part2) we discussed why Pizzanomics is an economic fallacy. In this post we’ll examine why Pizzanomics is also immoral.

At first glance it may appear to be an appealing idea (if we are not wealthy) that we allow our government to forcibly take money from the rich and give it to those who are less fortunate. Let’s apply a little engineering thinking to see if this idea is valid.

First, why should our government treat one class of citizens differently than another class? In private business this issue does not exist. If anyone — rich, poor, or in between — goes to a store to purchase a loaf of bread, they are all charged the same price. We don’t even think about it, fair is fair. Everyone pays the same amount for the same item.

However, when it comes to federal income taxes (which in essence are payments for services that the federal government provides) somewhere along the line we have succumbed to the thesis that it is perfectly acceptable for wealthy folks to be forced to pay more tax than regular folks.

But why? Bill Gates, chairman of Microsoft and one of the wealthiest men on the planet, gets the same government services as anyone else. Although one of the essential services of the federal government is protection of the homeland, one does not find extra squadrons of fighter jets defensively circling Mr. Gates’ neighborhood, nor are there any Navy Seals assigned for his personal protection when he goes sailing. In other words, Mr. Gates gets (in general) the same benefits from the government as the average citizen, yet he pays enormously more taxes.

Therefore, why is it acceptable to charge rich folks more than average folks, when rich folks receive the same service? Perhaps the ten commandments are today considered quaint by some, but nestled amongst them is the admonishment for us to not covet our neighbor’s goods. Aren’t we displaying poor moral judgment when we allow our illogical envy of the wealthy to justify taking from them to give to ourselves?

If you were fortunate as a child, your parents bestowed upon you some of the pearls of humanity’s hard-earned wisdom in the form of children’s fables. These bedtime guides to good moral behavior, particularly a good work ethic (e.g. “The Little Red Hen,” “The Three Little Pigs”), provide a solid and essential foundation to ensure that a child grows up to be a mature, responsible, and happy adult. The reasons that such tales are essential is that they are what engineers call a calibration reference; that is, they provide a set of highly accurate rules about human nature that can be relied on to successfully guide personal, as well as societal, behavior.

Have Your Morals Been Calibrated?

Without a moral foundation, folks tend to become obsessive about material things. It has been firmly established, however, that material acquisitions — beyond having food to eat and a roof over one’s head — do not make one happy. On the contrary, an obsession with possession leads to deep unhappiness.

Some children, with nothing yet to show of great accomplishment, resort to distinguishing themselves by calling attention to their designer clothing or by “look at me” show-off behavior. Adults who flaunt their three hundred dollar sneakers, or who make it a habit to be conspicuously seated at fine dining establishments, are likewise exhibiting childish behavior.

Although most of us enjoy material things, the more mature among us do not use them as a proxy for our self-worth. To the contrary, true grown-ups feel a dash of pity (in addition to a dollop of annoyance) toward status-flashers, knowing that such antics are a sign that the flashers have likely accomplished little of real value in their lives. If they had, there would be no need to bring out the bling. They would instead frame a diploma, display pictures of their well-adjusted children, or discuss current events, art, science, and (quietly) their charitable endeavors.

Those folks who champion Pizzanomics, therefore, may be unwittingly exhibiting not only their lack of understanding of basic economics, but also giving us a glimpse into their immature and envy-riddled world view.

Next post:

A Summary of Engineering Thinking Principles

-Ed Walker

 

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The Economy Is Not A Pizza Pie (Part 2)

In “The Economy Is Not A Pizza Pie (Part 1)” we discussed why being envious of the honestly-acquired wealth of others is not logical. This is an important concept to grasp, because once we cut loose the emotional anchor of envy, we are free to expend our energies on more productive pursuits. Among those pursuits would be the celebration of the success and wealth of others. Why? Because not only do we benefit from the products and services that are born from such success, the related boost to the economy gives us a better chance of finding and keeping a good job.

At the gut level, though, we already know this. Let’s try another thought experiment to prove the point.

Consider a man who has been out of work for some time and is traveling to seek a new job. He comes to a fork in the road, and sees by a sign that he can take the right road to Richville, or the left road to Poorville. He has heard that Richville has quite a few wealthy folks, where Poorville has very few.

Now, if it were true that money was a pizza pie and wealthy folks were mean, why would the job-seeker go to Richville? Why waste the time? Since all of the money in Richville would already have been consumed by those rotten rich people, why not try to find a job with the nice friendly folks in Poorville?

The answer is obvious: the man would take the road to Richvile because he instinctively knows Pizzanomics to be false. He knows that traveling to Richville gives him a much better chance to get a job. He knows that wealthy folks do not eat their money, they spend and invest it, and his chance of getting some of it is much better when he gets closer to the flow.

(If you care to debate the above, contrary viewpoints are welcome.)

Next post:

We’ve discussed why Pizzanomics doesn’t make economic sense. Next we’ll discuss why Pizzanomics is immoral.

Also, in upcoming posts we’ll summarize the Engineering Thinking principles learned to date, and show how to apply them to various everyday challenges. Because it’s a major pocketbook issue, we’ve been using the government’s effect on the economy for several examples, but the principles can be applied to any problem; in the past we’ve touched on relationships, psychics, scams, etc. If you have a particular topic that you think would benefit from Engineering Thinking, please let me know.

-Ed Walker

 

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The Economy Is Not A Pizza Pie (Part 1)

To properly analyze an issue, one must start with a foundation of well-established facts. This sounds obvious, but a major pitfall in any analysis is that we tend to begin with unquestioned assumptions. If those assumptions are wrong, then our analysis will also be wrong. Therefore in this post we’ll review some economic basics to be sure that we don’t harbor faulty assumptions.

President Obama promised that he would provide a tax reduction to ninety-five percent of us by increasing taxes on “the wealthy.” This promise means that the president believes in Pizzanomics. That is, he believes if someone gets a big slice of income then the rest of us have to settle for a small slice, and this injustice must be corrected by “spreading the wealth,” i.e. taxing those who have more and giving the proceeds to those who have less. But a little engineering analysis will demonstrate, in plain talk, just how wacky the pizza pie theory is.

We engineers love to see test data; i.e. empirical or historical evidence that supports or refutes a theory. Is it necessary to “spread the wealth” to compensate for unfairness in our economic system? Despite what you may have heard otherwise, there is abundant and substantial evidence that supports the fact that money is not a pizza pie, and wealthy people do not prevent less fortunate folks from getting their fair share.

But let’s ignore all of that economic history for the moment, and instead use a simple mental analysis. Engineers and scientists call such analyses “thought experiments,” where logic is used to determine reasonable expectations. These experiments do not require advanced degrees or high IQs, they only require a methodical mind and the avoidance of emotional blockages. Let’s apply such a thought experiment to Pizzanomics.

If a person has a big slice (a lot of money), the Theory of Pizzanomics (espoused by believers in big government) implies that the slice is lost forever. The greedy wealthy person will eat the slice and that’s that: done, finis, adios amigo, burp; nothing left for you and me.

In reality, however, money is not gobbled up; i.e. rich folks do not hide their money under the mattress. Nor do they have big parties on the weekend at their mansions, where they and their rich friends get together and sip champagne and throw their cash into a big pile and roll around in it, cackling at how superior they are to average folks. No, they don’t use their money for such idle and frivolous pursuits, because then it would be of no use to them. They have to spend their money to get mansions and champagne.

When a wealthy person spends money, it flows from them to carpenters, mechanics, chefs, gardeners, servers, importers, distributors, truck drivers, sales assistants, and on and on. As a kicker, wealthy people also invest, which increases the flow, leading to more jobs for everyone.

The bottom line is this: money is not a pizza pie; money is a river. Because government is inherently highly inefficient (as we have discussed previously), the river flows best when government is not in the middle, splashing around and muddying things up.

Now, it’s true that some wealthy folks may be greedy and direct the money flow illegally. When the rich engage in fraud, price-fixing, or other crimes to feather their nests, the government should step in and prosecute such crooks. Likewise, government officials should be fired, impeached, or prosecuted for funneling taxpayer funds (“earmarks”) to their wealthy patrons to buy votes and favors.

However, assuming no criminal behavior, why don’t rich folks have the right to choose the direction of the money flow? It’s their money, after all, not the government’s. Plus it is only theirs temporarily, until it flows through them to others. In other words, being wealthy does not stop a single dollar from flowing to a less fortunate person. In fact, the more wealthy people there are, the better; the river gets deeper and wider. This is why it is illogical for regular folks to be envious of wealthy folks, and also why it is illogical for wealthy folks to feel guilty about being wealthy.

Envy And Guilt About Honestly Acquired Wealth Are Illogical

(If you care to debate the above, contrary viewpoints are welcome.)

Next post:

The Economy Is Not A Pizza Pie (Part 2)

-Ed Walker

 

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Is The President’s Reason For Taxing The Wealthy Moral?

In the last post we examined the following assertion from a factual perspective. In this post we’ll review it within a moral framework. This will provide an example of how differing assumptions can lead to dramatically different conclusions.

Assertion: President Obama’s press secretary, Robert Gibbs, recently said that it was okay to tax wealthy citizens for the health care of others because, “The president believes that the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Assumption: The government should (should not) tax the wealthier portion of the population to provide benefits for the portion that is less wealthy.

Analysis:

  1. Paying taxes is not voluntary; i.e. all citizens are forced to pay taxes.
  2. If one believes that it is acceptable to use force to transfer money from a wealthier group of citizens to a less-wealthy group, then President Obama’s belief is moral.
  3. If one believes that using force as a means of wealth transfer is not acceptable, then the president’s belief is not moral.
  4. The morality of the belief is therefore dependent on the view of the one that holds the governing assumption.

Conclusion: The Assertion is conditionally true or false from a moral perspective, depending on the governing assumption. This is an example of why many arguments tend to go around in circles and be irresolvable, because the parties doing the arguing are starting with different baseline assumptions. Resolution of such arguments is dependent on digging deeper and challenging the assumptions, which engineers call a root cause analysis. In future posts we’ll see how this analysis method can be used to help break endless debates and come to some reasonable conclusions. But first we need to learn how to avoid emotional blockages.

Next Post:

Put On Your Emotional Armor

-Ed Walker

 

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Is The President’s Reason For Taxing The Wealthy Logical?

Assertion: President Obama’s press secretary, Robert Gibbs, recently said that it was okay to tax wealthy citizens for the health care of others because, “The president believes that the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Assumptions: The “richest 1%” of citizens will be determined by their income tax returns, and taxation will start on the year that the president’s tax plan takes effect.

Analysis:

  1. A powerful method of determining whether or not an assertion is factual is called proof by contradiction. For example, consider the assertion that “all swans are white.” To prove the falsity of the statement, all that is required is that you locate a single non-white swan. (Historical note: Europeans believed that all swans were white until the mid-1600s when sailors first visited Western Australia, an area where black swans are not uncommon.)
  2. In our analysis we will present three cases that contradict the assertion that it is acceptable to tax the wealthy because “the richest 1% of this country has had a pretty good run of it for many, many, many years.”

Case 1: Assume you are an entrepreneur who has worked very hard for the past twenty years, trying to perfect an idea you conceived. During that time you and your family have lived very modestly, and have taken great financial risks. Today, you are finally at a point where you can sell your idea and make millions. However, because you will now be one of “the richest 1% of this country” you will be heavily taxed to provide health care for others, even though you have not had “a pretty good run of it for many, many, many years.” Just the opposite; you and your family have had a very tough time of it for twenty years.

Case 2: Assume you are an average guy or gal whose salary has never been anywhere near a million dollars a year, but you like to dream and you sometimes buy one of those jumbo lottery tickets. One fantastic day you actually win a mega-jackpot, and now you are a millionaire. You, too, will now be heavily taxed, although during the past many, many, many years you have had just an average income.

Case 3: Assume you are a hard worker but, due to various misfortunes beyond your control, during the past several years you have had a very tough time making ends meet. To your surprise, you are informed that when your uncle recently passed away he bequeathed you a sizeable fortune, and you are now a multi-millionaire. Yep, same result. You will be heavily taxed even though your life has been anything but “a good run” up until now.

Conclusion: The assertion is factually false. The president’s belief is based on a logical fallacy, namely that “the richest 1%” is a specific group of folks who have made a lot of money over the past many years. To the contrary, the population is comprised of millions of individuals whose incomes can vary widely from year to year, including a great many who may be wealthy today, but in prior years were not.

Next Post:

We’ll review the president’s assertion from a moral perspective.

-Ed Walker

 

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