Wealth Accumulation at the Top

A lot of the arguments in favor of lowering taxes, especially at the top end of income earners, say that these people invest the money to create jobs indirectly or start businesses to create jobs directly. It’s easy to see why these arguments are persuasive because they are true. Wealthy people do tend to invest money and sometimes also start businesses.

However, it’s not the whole story. After all, if this is such a net positive benefit for society, then why does wealth tend to accumulate at the top? One reason is that investors and business owners are in it to make a profit on their investment.

Let’s consider our economy as if it were a completely closed system. I realize this oversimplifies the case, but it makes it easier to see the point. Imagine a closed system in which 80% of the wealth is accumulated among a certain group of people that we will call the investor class (and we will group business owners here as well).

Now, let’s say this group invests 10% of their total wealth. Then let’s say this group as a whole sees a 5% net gain on their investments. I think these are both pretty reasonable figures, but even if we quibble over the numbers the end point is still the same.

So, in this scenario, this group is putting 8% of the total wealth back into the economy. For the very large group that only has 20% of the wealth, it is easy to see this as a great thing. But what happens over time? Due to compound interest, after 20 years that 8% turns into 21% total. This now means that the investor class which did own 80% of the wealth, now owns 93% of the wealth.

This is one reason why an economic solution considering the welfare of all citizens, cannot simply focus on giving tax breaks and relying on money going into the economy to fix everything. It may help for a time, but eventually the trend of wealth accumulation will win, as we have seen over the past several decades.

We may then turn to an argument that people deserve their incomes, and we should not be in the business of redistributing wealth. I’ll cover that topic in a later post.


Are Libertarians neutral?

There seems to be a popular, but mistaken, opinion that Libertarianism is somehow a neutral position—that it does not take a stance on a variety of issues.  Consider the following statement by Penn Jillette in his article ‘I don’t know, so I’m an atheist libertarian’:

And I don’t think anyone really knows how to help everyone. I don’t even know what’s best for me. Take my uncertainty about what’s best for me and multiply that by every combination of the over 300 million people in the United States and I have no idea what the government should do.

Since Jillette doesn’t know how the government should help people, he concludes that any philosophy attempting to dictate the government’s behavior in this area is problematic. So, he’s not going to advocate any specific governmental stance.

I sense we’ve just entered a cul-de-sac. Notice that this position is at once a denial that any approach is valid and is itself a recommended approach. Libertarians do not lack a moral, economic, or political stance. No, they advocate very specific stances. For this reason, the idea of purist laissez faire is a self-defeating and absurd principle.


So, where do we go from here?

First and foremost, let’s stop pretending that the debate is about the level of government intrusion. We aren’t ready for that yet. The debate is really about what goods should flourish. Government involvement is not itself virtuous or vicious; it is merely a means to an end. It requires context.

If we turn our attention back to Jillette’s article as whole, we should be able to recognize that his isn’t really an opinion based on not knowing, as he claims. Rather, it is based on his feeling that coercion is vicious. Thus, since government intrusion is coercion, it should not be allowed. This is a very different argument than saying, ‘I don’t know, so I’m not going to take a stance.’

Once we recognize that this is really the context of our disagreements, I think some real progress can be made. Of course we will disagree about the level of government involvement in public life when we are working from different conceptions of the good! That is where we should focus our discussion instead.

A Voting Paradox

Elizabeth Anscombe, in The Frustration of the Majority by the Majority’s Will, points out a clever paradox of voting. The issue is essentially that the majority of the people do not get what they want a majority of the time. Consider the following chart from Anscombe’s original article:


Voters A through K cast ‘yes’ or ‘no’ votes on 11 issues. Every issue passes by a margin of 6-5. But seven of the voters, A through G, voted ‘no’ on most issues (7/11). So, most people are not, in general, getting what they want.

This is meant to undermine the idea of democracy as ‘majority rule’. The majority may be ruling each specific issue, but that does not necessarily mean that most people will walk away from the process satisfied. This is not an unrealistic scenario. Let’s say the issues are tax increases and four people stand to benefit from many of these increases. This could explain the high rate of ‘yes’ votes from the four participants (H through K) benefitting from most of the outcomes.

I agree that this is an intriguing paradox that ought to make us seriously consider how a democracy is really supposed to work, but what has arisen to prevent such frustration of wills may be even worse. Consider how Congressional voting is done in the United States today. On most issues that are controversial, the two main parties form strict voting blocks. They stand together completely in order to throw as much weight behind an issue as possible. In this scenario, the majority should always carry the vote (of course, to make this completely successful, there must be an alignment of House, Senate, and President). We then see scenarios like the following:

Here, we have the majority’s will being satisfied, but at the total expense of the slight minority. We have 60% of the voting population fulfilling their will completely, while an entire 40% of the voting population’s will is thwarted completely. This seems altogether worse than the first scenario! This is our present situation—there is no compromise and both parties fight for complete control at the expense of nearly half the country.

Is freedom the ultimate good?

I want to propose something for Libertarians to consider. But first, let’s consider a hypothetical scenario.

Imagine you are observing a society of painters. According to the people in this society, the greatest good is to paint. It doesn’t matter if other people like what you create because painting is good for its own sake. The government recognizes this good and acts to protect it in a minimalist way. If anyone’s ability to paint is inhibited, the government has a duty to protect the individual’s right to paint.

This situation is fairly analogous to the Libertarian position, except replace painting as the greatest good with individual freedom. The duty to protect against infringement seems obvious enough. But let’s consider a further point. Should the government also ensure an environment where the greatest good can flourish? For example, what if no one in the imaginary society has access to paint or brushes or easels? Should the government provide those resources?

It all depends on whether the good is painting itself or the right to paint. If painting itself is the good, then we should ensure the flourishing of the good itself. If it is the right to paint that is the good, then it is sufficient to only ensure no individual’s painting is specifically inhibited.

Where freedom is concerned, there are conditions which must be met in order to allow the flourishing of free choices. These include life, as well as general mental and physical health. Imagine your ability to really make free choices without these conditions.

So, what is the ultimate good? Is it the right to make free choices or is the good embodied in the act of making free choices? If it is the act, then the government should be responsible for ensuring the conditions necessary for that act to flourish. This means they are at least responsible for some basic amount of healthcare, shelter, nourishment, and the like. It doesn’t have to be excessive, but enough to allow people to survive and freely choose the type of life they want.

Perhaps, though, you might try and argue that the mere right is the good, rather than the act. I think a brief thought experiment can show this position to be untenable. Imagine a futuristic society that is run by robots. This isn’t too difficult since it is a very minimal administrative duty. They only provide enforcement against those who inhibit the freedom of others, like a police force. But a plague unexpectedly devastates the society. The human citizens all either die or are hospitalized and delirious. If you think the mere presence of the right to make free choices is sufficient for the good being present, then you think this society is an example of the good flourishing. After all, there is not a single person whose ability to make free choices is inhibited by the choices of another. But surely this is absurd! No free choices are actually being made. How can this be an embodiment of the good?

I consider this to be a fundamental flaw for a strict Libertarian philosophy. It views freedom as the ultimate good, but does not recognize a further duty for the government to ensure the necessary conditions for making free choices are met.

A Republican debate is no place for an atheist.

During the October 18th debate, the Republican presidential candidates were asked about the role religion should play when assessing a candidate.[i]

Newt Gingrich, who is certainly no paragon of Christian virtue, had this to say:

How can you have judgment if you have no faith? How can I trust you with power if you don’t pray? Who you pray to, how you pray, how you come close to god is between you and god. But the notion that you are endowed by your creator sets a certain boundary on what we mean by American.


For a man presenting himself as the Party’s thought leader, this is utterly stupid. Let’s look at a few of the absurdities that follow from this:

  • You have to have faith in order to have judgment: The only thing this can mean is that people by themselves have no ability to judge. They must hand this judgment over to a god or goddess. This ironically means that he does not have judgment even though he does have faith, which contradicts the original idea.
  • You have to pray in order to have power, but who you pray to doesn’t matter: Gingrich, as a Christian, believes he has the one true god, which means everyone else is just talking to a wall. So, he thinks, if this quote is to be believed, that you can be trusted with power if you talk to a wall for advice. On the other hand, if you use reason and evidence to make decisions, you’re less equipped because you don’t talk to a wall.
  • Any religion is better than no religion: Again, this is ridiculous when compared against Gingrich being a Christian. Does he seriously want to say that believing the Ganges River flowed out of the penis of a god makes you a better leader than being an atheist? Or how about believing that Mohammed rode to heaven on a winged horse? Would a Gingrich prefer a Muslim to an atheist? I wonder…
  • To be an American, you must believe in a creator: I think Gingrich is seriously confused here. Being an American is some status conferred upon you by the United States of America. If he would like to say otherwise, I might suggest that Gingrich isn’t as loyal to the Constitution as he claims.


So, there you have it. Gingrich admits to not having any judgment. He admits that he does not respect the Constitutional requirements for citizenship or the spirit of Article VI. He believes that talking to a wall is more important than talking to advisors. And he thinks that following any ridiculous belief system is a pre-requisite for power.

Clearly, he does not think much of me or my fellow non-believers.


[i] This topic surfaced because a pastor associated with Rick Perry called Mormonism a cult and warned voters not to think of Mitt Romney as a true Christian. The great irony of this was that the candidates probably agreed with the Pastor, but were all too ashamed to admit it to Romney’s face!

It’s ecology, stupid.

Kudzu covering a house

Consider the kudzu plant. It’s a beautiful plant, really, until you realize its nature. If you drive through Eastern Tennessee, you’ll surely notice its distinct features. On any hillside where it is allowed to take root, every other form of life is covered by the kudzu, choked to death and deprived of the resources it needs to survive. The kudzu has become like an unstoppable plague in certain areas. Sunlight, water, and nutrients in the soil are used to further its own growth. The survival of anything else depends on what is left.

Now consider our economic landscape. Is it the gentle meadow of textbook examples with cooperative interactions or is it the domination by the few, like the kudzu? How are resources divided among our citizens? An analogy may help. If the total wealth of the United States was represented by a tank containing 1,000 gallons of water, how much do you think would be given to the poorest 40% or about 120 million people? They would have 3 gallons of water total to divide amongst themselves or 0.000000025 gallons per person. It is hard to imagine this is a just distribution of goods.

This level of disparity is what exists with our current level of regulation. Yet, many economic plans propose that we deregulate and let the economy fix itself. But what might this approach require? You would need balancing mechanisms. Market forces would need the ability to stabilize, to change, to retaliate, and much more. Such things happen quite nicely in the meadows of textbooks. But is the patch of grass or even the sturdy shrub able to alter the course of kudzu? The picture sold to us about a self-policing economy is built upon the idea of the meadow. And yet, we are already so much like a hill in Tennessee. Why should we think further deregulation will not take us closer and closer toward the same ultimate end? The lucky few will thrive amazingly well, while everything else may, if it’s lucky, survive on what remains.

The Imaginary Middle Class

One of the constant refrains of politicians is that “We have to help the middle class.” They intend for this to refer to the average voter, but this concept is actually illusory.

The majority of people will incorrectly say they belong to the middle class.

What does ‘middle’ mean? It is generally used to describe something that is equally distant from two extremes or limits. In many cases, asking where the middle is will be roughly equivalent to asking for an average. Take height, for example. A person of average height will be roughly in the middle of the very tall and very short fully grown people in the world. But imagine if a select number of people were 25 feet tall. Would the person of average height now be correctly described as “in the middle?” No, they would clearly belong more to the group of people in a decidedly lower range of heights.

Now, what does the picture of wealth in this country look like? Is it more similar to the first or second height example? If you know anything about wealth distribution (and many Americans do not), you’ll recognize the landscape looks more like the second. This means that people who think of themselves as having an average income are actually not anywhere near the middle. There are a few people around there, sure, but this idea that most Americans are middle class simply ignores the disparity that exists. The overwhelming majority of us share more in common with the so-called lower class than with the true upper class. I would even guess that the Vice Presidents of most major companies are closer by far to people on welfare than the true upper class.

Why do people think they belong to a middle class?

Studies have shown a remarkably poor estimation of how wealth is distributed in this country, as shown in the following figure from this article:

Actual wealth distribution plotted against the estimated and ideal distributions.[i]

In short, your thoughts about where you actually stand in the world are probably wrong. And the more discrete your measurements, the more stark this picture becomes. The grey bar represents the wealth controlled by the top 20% of the country. But even if we took the top 1%, that bar would be around 40%. I’m not sure if people realize just how astounding that is, so I’ll repeat it. Nearly half of the total wealth in this country belongs to 1% of its citizens.

So, let me ask you. Are you in the middle? No, you’re probably over there on the far left. Hell, your bar might be so small that it doesn’t even show. You are not in the middle of anything where wealth is concerned, and conservative plans that claim to help the middle class ironically do just the opposite—they ensure almost no one appropriately meets that description.

Maybe you don’t believe me and you think that your measly bar on the left will grow to control more wealth if the truly wealthy stimulate the economy. You might be interested to know that in the 1970s, the top 1% controlled a smaller portion of the total wealth (around 20%). So what happened? Among other things, here’s what happened after that, according to the study:

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s (Wolff, 2007).

Concentrating wealth into the hands of the already wealthy did nothing to “grow the middle class.” It did exactly what you would expect it to do; it made them even wealthier and all the people who thought of themselves as middle class moved further away from the true middle.


You are not in the middle class. Your neighbor is not in the middle class. Your teachers and friends are not in the middle class. Multi-millionaires are middle class. You are an insignificant blip on the radar of the wealthy, and proposals to concentrate wealth even further will only ensure you stay that way.

[i] Note: In the “Actual” line, the bottom two quintiles are not visible because the lowest quintile owns just 0.1% of all wealth, and the second-lowest quintile owns 0.2%. Source: Norton & Ariely, 2010.

Aristotle, Justice, and Flutes

How do we decide on a just distribution of goods? Following Michael Sandel, I find Aristotle’s conception of justice to be helpful in modern debates. Aristotle, in Politics, said that we cannot dissociate justice from other considerations, like function or purpose, when it comes to distributive rights. Consider what he says about a just distribution of flutes:

When a number of flute players are equal in their art, there is no reason why those of them who are better born should have better flutes given to them; for they will not play any better on the flute, and the superior instrument should be reserved for him who is the superior artist.

The distribution of the superior flutes should not, according to Aristotle, be done according to nobility of birth, wealth, or any such consideration. Rather, it should be done according to skill. The person who will make the best flute music should have the best flute. Why is this? It is because that is the purpose of flutes. They are meant to be played well to make beautiful music.

If that is not clear, consider another example. Let’s say we have a number of goods to distribute, one of which is a hard hat. Among the people to whom the goods are being distributed, there is one man who works in a construction site. The others all work in an office. Isn’t it clear that the man who works at a construction site should receive the hard hat? He is the only one who will put it to its intended use and allow it to serve its proper function.

This will be a helpful framework to answer many pressing questions. For example, how should a society distribute marriages? Well, we can better understand that question by determining the purpose of marriage in society. If the purpose of marriage is simply to have children, then it’s not clear why there should be homosexual marriage. If, however, the purpose of marriage is much broader, then we should say the just distribution of marriages will include homosexual couples.

What is a person?

During the Iowa Straw Poll, Mitt Romney made an interesting claim that corporations are people. His reasoning was that a corporation being a person follows from it benefiting people. He has also made this claim on the basis that a corporation consists of people. Let’s explore these two claims and see that they are poorly reasoned.

Argument from Benefit

1. Something that benefits persons is itself a person.

2. A corporation benefits persons.

3. Therefore, a corporation is a person.

Premise (1) is actually quite ridiculous. I can think of several counterexamples. Is good weather a person? Perhaps you will object and say that he was actually making the argument based on the money from corporations going to people. Very well then. Is the lottery a person? It should be quite clear that several things benefit people, monetarily or otherwise, and are not themselves a person.

Argument from Composition

4. A whole is the same as its components.

5. A corporation consists of persons.

6. Therefore, a corporation is a person.

The astute reader may notice that (4) is actually the fallacy of composition, rendering the conclusion false. Consider, for example, that this argument would lead you to conclude that you are a cell since you are made entirely of cells.


Obviously neither argument is particularly persuasive for conceding that a corporation should be considered a person. This goes to show the elementary mistakes in reasoning made in our political discourse, even at the highest level.

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