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?